Work orders vs money orders – to and from the preferred outcome

Litigants in breach of statutory warranty claims must be aware of the overarching principle, established in section 48MA of the Home Building Act 1989 (NSW) (Act), that the NSW Civil and Administrative Tribunal (Tribunal) must have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.

Unsurprisingly, owners by and large seek money orders, whereas builders seek work orders. For a money order, the Tribunal must be satisfied that the making of a work order would be inappropriate. Harding v Horticultural Holdings Pty Ltd [2022] NSWCATCD 22 adds to the decisions which have given guidance on the application of that principle.

Background

The builder quoted for the installation of a kitchen at the owners home. On 28 October 2020, the builder issued an invoice to the owners for (among other things) a "solid timber kitchen". The invoice was the sole contract document in evidence.

The builder had neither a licence, nor appropriate insurance cover, to carry out the works. The whole of the installation work for the kitchen was undertaken by a licensed subcontractor.

The owners alleged that the builder had breached section 18B of the Act in that the work was not carried out with due care and skill or in accordance with the plans and specifications set out in the contract (as evidenced by the invoice). In particular, the owners alleged that the kitchen installed was not a "solid timber" kitchen as the timber used was not of furniture-grade quality. The materials were said to be damaged during manufacture and the installation and the paint finish was poor.

The owners sought a money order for the removal and replacement of the kitchen. The builder preferred a work order.

General considerations under section 48MA

The Tribunal emphasised that section 48MA of the Act sets out the preferred outcome of the proceedings, which is not a mandatory outcome. The Tribunal affirmed the reasoning in the decision of Galdona v Peacock1 which suggested that a money order should be made in place of a work order where, non-exhaustively:

  • the relationship between the parties has broken down
  • the builder has not acknowledged a poor standard of work
  • there are reservations as to the ability of the builder to rectify the work with due care and skill.

The Tribunal traversed recent case law which suggests that section 48MA is a preference and not a right of the builder2, and that the purpose of the section is to prevent owners' unreasonable refusal of builders carrying out rectification work.3

Nature and extent of the defects alleged

Although the experts for both the owners and the builder agreed that the builder's work was poor in quality and finish, it was:

  • the builder's position that the phrase "solid timber" was ambiguous and included milled timber and engineered wood including plywood and particle board, whereas
  • the owners' expert was of the view that the phrase "solid timber" required timber in several components of the cabinetry, including drawers, end panels, kickboards, and loose shelves to be selected furniture-grade solid timber and referred to a higher quality product, that would result in a higher building cost.

The Tribunal preferred the owner's expert on this issue, finding a breach of section 18B(1)(a) of the Act and that replacement of the MDF construction with solid timber was warranted.

Application of section 48MA

The Tribunal preferred the owners' position that a money order should be made over a work order, for the following reasons:

  • the same unlicensed subcontractor which carried out the defective work in question would be carrying out the rectification work
  • the builder had failed to rectify defects, despite accepting that there were matters that needed to be repaired or replaced
  • the builder did not show any acknowledgment that the work was defective and proposed that the same subcontractor would be engaged to carry out the rectification work, despite both experts' opinions that the work was of poor quality
  • there was no evidence to suggest that the subcontractor acknowledged the defective work or that the subcontractor would carry out the rectification work in a manner differently to the defective work.

The Tribunal determined that in those circumstances it would not be appropriate to make a work order, as there was no evidence to persuade the Tribunal that if the subcontractor removed and replaced the subject kitchen, the outcome would be any better in terms of the quality of the work.

Conclusion

Owners and builders are reminded that section 48MA of the Act is the preferred outcome and not a mandatory outcome.

Builders seeking a work order should consider the decision as guidance towards steps they may take, in a dispute context, which will assist in persuading the Tribunal toward the preferred outcome.

The full decision can be read here.

Footnotes

1 [2017] NSWCATAP 64
2 Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [32]
3 See paragraph [14].

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.