Defences to statutory warranty claims under the Home Building Act 1989 (NSW): a discussion of the decision in The Owners – Strata Plan 83572 v Jackson Teece Chesterman Willis Pty Ltd & Ors [2019] NSWSC 942

Some of the most common claims brought under the Home Building Act 1989 (NSW) (Act) are claims for breaches of the statutory warranties available to property owners under s18B.

Those statutory warranties are implied into every contract for residential construction work in NSW and cannot be avoided by a party undertaking construction work.

Defences to those statutory warranties are available under s18F of the Act. One example of when a defence will be invoked is in circumstances where instructions to carry out works were provided by a party to a contract which was contrary to the written advice of the person doing the work (s18F(1)(a)).

The decision in The Owners – Strata Plan 83572 v Jackson Teece Chesterman Willis Pty Ltd & Ors [2019] NSWSC 942

A builder, who was directed by the project manager of a residential apartment development to complete remedial works that were contrary to his recommendations, was found not to have breached the statutory warranties in section 18B of the Act, and in making out a complete defence pursuant to section 18F(1)(a) of the Act also secured indemnity costs.

Facts & issues

The plaintiff was the owners’ corporation of a development known as “Bellevue on Bellevue” at Hunter Street and Bellevue Streets in Newcastle (Development). The Development comprised a commercial suite in the former Bellevue Hotel and an adjoining, seven-storey residential apartment complex.

In about October 2008, James Hardie “ExoTec” façade panels were installed on the exterior of the apartment complex. The panels are a compressed fibre cement sheet product installed with expressed joints.

The owners’ corporation was registered in April 2010. By this time, construction was almost complete; however, the building was leaking on all levels of the apartment complex. The leaking was allegedly caused by the failure of the original builders to properly install the Exo Tec panels and install head flashings in windows.

The fourth and fifth defendants (Mr and Mrs Neumann), a family building partnership, were engaged by the project manager, Cyre Group, to carry out various tasks necessary to obtain a final occupation certificate. They were also instructed to apply sealant to the expressed joints in the façade as a method of adding weather protection.

Having inspected the façade and the requirements for installation of the Exo Tec panels, Mr Neumann recommended that header flashings should be installed above all the windows in order to seal the building properly. He put his advice in a brief email to the project manager.

Nevertheless, Mr Neumann was instructed to only apply sealant to the façade joints. This decision was made despite Mr Neumann’s warning. There was also separate advice to the project manager from the project architect that the proper solution to the problem was to rectify the installation issues and that applying sealant to the joints may be only a short-term solution.

Issues considered

Stevenson J was asked to consider whether the remedial work completed by Mr Neumann on the façade was in a breach of the implied warranties in section 18B of the Act, including that the work is done with due care and skill.

The plaintiff retained a coatings expert, who gave evidence that the paint system on the building had failed for reasons associated with installation problems with the façade. He also asserted there were issues with the methodology used in installing the sealant that could have contributed to areas of the sealant failing.

The expert, however, produced only half a dozen photographic examples of sealant separation and was not able to provide any evidence that the sealant separation had played any role in water penetration of the building.

The plaintiff’s building expert also failed to provide evidence of any nexus between the work done by Mr Neumann and alleged defects in the building.

Further, his Honour noted that there had been no maintenance of the façade since the installation, contrary to James Hardie’s recommendations regarding ongoing maintenance of ExoTec panelling.

In addition, the plaintiff had not actually established any damage suffered by the Owners Corporation related to a breach of any warranties by Mr Neumann.

Ultimately, his Honour was satisfied that Mr Neumann’s written recommendation that proper, exhaustive remedial works be undertaken in lieu of the temporary sealant measures that were settled on was satisfactory to make out a defence to the plaintiff’s claim under section 18F(1)(a) of the Act.

Decision

The proceedings were dismissed, with indemnity costs awarded to the fourth and fifth defendants.

Key takeaways

Builders engaged to complete residential work under the Act should ensure that, if they are directed to perform work contrary to their recommendations or opinions, they record their advice in writing to the principal prior to undertaking the work.

The decision further stresses the importance of parties and their experts establishing the causal link between alleged breaches of statutory warranties and any loss said to have been suffered.

We’re here to help

Should you or your business need advice regarding statutory warranties or matters generally arising under the Home Building Act, please do not hesitate to contact our office for a consultation.