The Owners Strata Plan 64757 v Sydney Remedial Builders Pty Ltd

[2023] NSWSC 1127

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

The Owners Strata Plan 64757 v Sydney Remedial Builders Pty Ltd [2023] NSWSC 1127

Hearing dates:

12 September 2023

Date of orders:

18 September 2023

Decision date:

18 September 2023

Jurisdiction:

Equity - Technology and Construction List

Before:

Rees J

Decision:

Proceedings dismissed with costs.

Catchwords:

BUILDING AND CONSTRUCTION — builder retained to repair defects caused by original builder — whether proceedings for breach of statutory warranty commenced within 7 years after completion of work — s18E, Home Building Act1989 (NSW) — date of completion of work — s3B, Home Building Act — legislative history – distinction between completion and practical completion – meaning of “completion” — interaction between s3B(2) and (3).

REFEREE — separate question — whether to adopt report — error of law in application of section 3B — failed to consider when contractor last attended site to carry out work under section 3B(3)(b) — final date on which contractor attended site was earlier than date of practical completion under section 3B(2) — the earliest date applies — proceedings out of time.

Legislation Cited:

Home Building Act 1989 (NSW) ss 3B, 18E

Uniform Civil Procedure Rules 2005 NSW r 24.24(a)

Cases Cited:

Abrahams v Degan [2009] NSWDC 315

Bailey v Owners Corporation of Strata Plan 62666 [2011] NSWCA 293

Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784

Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184; (2013) 29 BCL 329

Howell v Talevski [2021] NSWSC 1133

Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612

Peter Holmes Investments Pty Ltd v S&C Nicola Pty Ltd (No 2) [2022] NSWSC 1215

Stevenson v Ashton [2019] NSWSC 1689

Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549

The Owners – Strata Plan 64757 v MJA Group Pty Ltd (2011) 81 NSWLR 426; [2011] NSWCA 236

The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1916

Vero Insurance Ltd v Kasem [2011] NSWCA 381; (2011) 86 ACSR 607

Vero Insurance Ltd v Nicejade Pty Ltd [2010] NSWSC 556

Texts Cited:

Damien Cremean et al, Brooking on Building Contracts (LexisNexis Butterworths, 6th ed, 2020)

Phillip Bambagiotti, Building Disputes & the Home Building Act 1989 (NSW) (Thomson Reuters, 2012)

Category:

Procedural rulings

Parties:

The Owners – Strata Plan 64757 (Plaintiff)
Sydney Remedial Builders Pty Ltd (Defendant)

Representation:

Counsel:
Mr IG Robert SC / Ms B Anderson (Plaintiff)
Mr WG Muddle SC / Mr JJ Young (Defendant)

Solicitors:
ITC Law (Plaintiff)
McLean & Associates (Defendant)

File Number(s):

2019/83317

Judgment

1. HER HONOUR: The plaintiff, The Owners – Strata Plan 64757, seeks damages in respect of defective building works under section 48MA of Home Building Act 1989 (NSW). The defendant builder, Sydney Remedial Builders Pty Ltd, was retained to remedy building defects caused by the original builder. The parties have reached agreement as to quantum.

2. The only issue is whether these proceedings, commenced on 15 March 2019, are within time. That question was referred to architect Dr Phillip Briggs for separate determination. Dr Briggs concluded that the date of practical completion of the works was 16 March 2012. Thus, the proceedings were commenced within the time required by section 18E of the Home Building Act, being before 16 March 2019.

3. The plaintiff now urges the adoption of the referee’s report under rule 20.24(a) of the Uniform Civil Procedure Rules 2005 (NSW), while the builder asks the Court to reject the report and determine the question for itself.

Adoption of referee reports

4. There was no dispute as to the principles in respect of adoption of a referee’s report. I gratefully adopt McDougall J’s summary of the authorities and principles in Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [6]-[8]. As Parker J distilled these principles further in Peter Holmes Investments Pty Ltd v S&C Nicola Pty Ltd (No 2) [2022] NSWSC 1215 at [17]:

Generally speaking, the Court is reluctant to allow an application concerning the adoption of a referee’s report to become a forum for rearguing factual issues which have been heard and determined by the referee. The reference proceedings are supposed to be an alternative to judicial determination, rather than a warm-up round. Therefore, the Court will usually intervene only if satisfied that the referee has made an error of law, or has taken an incorrect approach to the task, or has made a manifest error of fact.

5. Where Dr Briggs focused on the date of practical completion, the plaintiff called in aid Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549. At first instance, Giles J’s adopted a referee’s report as to the date of practical completion, where this involved findings of fact which should generally not be re-agitated in the Court: extracted at 553-4 of Court of Appeal’s judgment; upheld on appeal at 564 (per Gleeson CJ).

Section 3B, Home Building Act

6. For its part, the builder contended that the referee’s task was governed by section 3B of the Home Building Act. The referee was said to have misconstrued section 3B, elided “completion” and “practical completion,” and failed to address the builder’s submissions made squarely on this point together with the evidence said to support those submissions.

7. It is convenient to consider the relevant provisions of the Home Building Act, both when the building contract was executed on 4 November 2008 and as subsequently amended. Part 2C of the Home Building Act implies statutory warranties in contracts to do residential building work. When the building contract was executed, section 18E of the Home Building Act provided: (emphasis added)

18E   Proceedings for breach of warranties

(1)   Proceedings for a breach of a statutory warranty must be commenced within 7 years after:

(a)   the completion of the work to which it relates …

8. The date of completion of the work was also important for Part 6 of the Home Building Act, which established the home warranty insurance scheme. By section 92(1) of the Home Building Act, a person is prohibited from carrying out residential building work under a contract unless “a contract of insurance that complies with this Act is in force in relation to that work.” The contract of insurance had to comply with any requirements of (then) Home Building Regulation 2004: section 102(3) to (7). Section 103B(2) of Home Building Act then provided for a minimum period of cover to be provided by a home warranty insurance policy, including: (emphasis added)

103B   Period of cover

…

(2)   A contract of insurance must provide insurance cover … for a period of not less than:

(a)   in the case of loss arising from a structural defect … 6 years after the completion of the work … or

(b)   in the case of loss arising otherwise than from any such structural defect – 2 years after the completion of the work …

9. The Home Building Act did not then define when the work was complete. The Home Building Act did, however, provide for regulations to be made with respect to requirements for home warranty insurance, including in respect of “when work is complete”: section 103C(2)(h). Clause 61 of the Home Building Regulations 2004 provided: (emphasis added)

61   Period of cover

(1)    For the purposes of determining the period of cover to be provided by an insurance contract in relation to residential building work, work is taken to be complete:

(a)    on the date that the work is completed within the meaning of the contract under which the work was done, or

(b)    if the contract does not provide for when work is completed or there is no contract, on the date of the final inspection of the work by the applicable principal certifying authority, or

(c)    in any other case, on the latest date that the contractor attends the site to complete the work or hand over possession to the owner or if the contractor does not do so, on the latest date the contractor attends the site to carry out work.

…

(3)    For the purposes of determining the period of cover to be provided by an insurance contract in relation to owner-builder work under an owner-builder permit, the work is taken to be complete:

(a)    on the date of the final inspection of the work by the applicable principal certifying authority, or

(b)    if there is no final inspection by the principal certifying authority, on the date that is 6 months after the issue of the permit for the owner-builder work.

10. The fact that the Home Building Act did not define or explain the concept of “completion,” whilst the Home Building Regulation did, led to some consternation: see Abrahams v Degan [2009] NSWDC 315 at [10]-[17] (per Elkaim SC DCJ); Vero Insurance Ltd v Nicejade Pty Ltd [2010] NSWSC 556 at [15]-[23] (per Barrett J).

11. In Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612, Ward J (as the President then was) observed obiter “I would have been inclined to consider that practical completion was a relatively clear signpost that the building works, as such, had reached completion”: at [51]. In Vero Insurance Ltd v Kasem [2011] NSWCA 381; (2011) 86 ACSR 607, Campbell JA (Young and Meagher JJA agreeing) clarified, “a “relatively clear signpost” is not decisive, and even ascertainment of a date by which the works had been completed allows the possibility that the date at which the works were completed was some time earlier”: at [65] (emphasis in original).

12. In a decision involving the plaintiff and its original builder, the question of completion was described as one of fact: The Owners – Strata Plan 64757 v MJA Group Pty Ltd (2011) 81 NSWLR 426; [2011] NSWCA 236 at [47] (per Young JA, Allsop P and Macfarlan JA agreeing).

13. These matters were clarified in 2011, when the Home Building Act was amended by the Home Building Amendment Act 2011 (NSW) to include section 3B: (emphasis added)

3B Date of completion of residential building work

…

(1)   The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done.

(2)   If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.

(3)    It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work—

(a)    the date on which the contractor handed over possession of the work to the owner,

(b)    the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion),

(c)    the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work,

(d)    (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work.

(4)    If residential building work comprises the construction of 2 or more buildings each of which is reasonably capable of being used and occupied separately, practical completion of the individual buildings can occur at different times (so that practical completion of any one building does not require practical completion of all the buildings).

(5) This section applies for the purposes of determining when completion of residential building work occurs for the purposes of any provision of this Act, the regulations or a contract of insurance under Part 6.

14. It will be immediately observed that section 3B applies both to determine when completion of residential building work occurs for the purposes of the home warranty insurance scheme and in the Home Building Act more broadly: sub-section (5). In addition, whilst section 3B bears some resemblance to clause 61 of the Home Building Regulations 2004, it is also materially different, reflecting deliberate drafting choices by the legislature. Specifically, section 3B now deploys a defined term “practical completion.” Further, rather than completion occurring “on the latest date” described in clause 61 of the Home Building Regulations 2004, section 3B(3) requires the identification of “the earliest” date on which practical completion can be established. That is, the legislature has imposed greater precision on identifying when residential building work is complete, with that date being, generally, sooner rather than later.

15. The reason for the enactment of section 3B was explained in the second reading speech (New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 13 October 2011 at 6186 (Second Reading Speech for Home Building Amendment Bill 2011), 6187): (emphasis added)

The term "completion" has a very important legislative role as it triggers the commencement of the statutory warranty and home warranty insurance time periods. Currently, the Home Building Regulation defines "completion" in relation to home warranty insurance. However, the legislation does not provide a definition of when work is complete in relation to statutory warranties. As a result, the courts and the Consumer, Trader and Tenancy Tribunal have come to varying conclusions about when completion occurs and, therefore, when statutory warranty periods cease. Providing a statutory definition of when completion occurs for the purposes of both statutory warranties and home warranty insurance will remove confusion, help reduce litigation and provide consistency in the legislation. The bill provides a definition of "completion" for both these purposes, based on the regulation's definition. It also improves the current definition to better reflect the practical realities of building.

In the first instance, the bill defines "completion" as occurring in accordance with the completion provisions in the contract for residential building work. In cases where the contract does not provide a definition of completion, or there is no contract for the work, completion occurs on the practical completion of the work. The bill defines "practical completion" as taking place when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.

The amendment to "completion" also deals with residential building work that is completed in stages by providing that separate buildings can be regarded as being practically complete in their own right prior to completion of the entire project. This responds to concerns that, in multi building projects such as large strata complexes, an argument may be mounted that completion does not occur until every single aspect of the project is completed, even though some elements may not prevent homeowners moving in and effectively occupying dwellings. For instance, whether or not a swimming pool in a strata complex is completed should not have a bearing on whether a unit in that complex is complete in the context of statutory warranties on the unit.

16. The amendment has retrospective effect. Section 106 of Schedule 4 of the Home Building Act provides: (emphasis added)

106   Purpose and operation of amendments

The amendments made by the amending Act are made for the purpose of the avoidance of doubt and accordingly (except as otherwise provided by this Part) those amendments extend to—

(a)     residential building work commenced or completed before the commencement of the amendment, and

(b)     a contract of insurance entered into before the commencement of the amendment, and

(c)     a loss or liability that arose before the commencement of the amendment, and

(d)    the notification of a loss before the commencement of the amendment.

17. Where section 3B was added to address a concern that the courts and tribunals had come to varying conclusions about when completion occurred, and where “completion” is now defined by the statute, care must be taken in relying on statements made in earlier cases on this subject, referred to at [10]-[12].

18. In achieving its stated aim of removing confusion and providing consistency, section 3B prescribes steps to ascertain when residential building work is complete and thereby define, with some precision, the commencement of the statutory warranty period, the commencement of the period of cover under the home warranty insurance scheme, the time within which proceedings must be commenced for breach of a statutory warranty and the time by which any claim must be made under a home warranty insurance policy.

19. In doing so, section 3B draws a distinction between “completion” and “practical completion.” The choice of the word “completion” in section 3B(1) is perhaps curious. Typically, building contracts contemplate two stages of completion: practical completion and final completion. Practical completion marks the point in time when possession of the works is handed back to the owner, liquidated damages cease to run and the defects liability period begins; the works are generally able to be used for the purpose contemplated by the agreement: Damien Cremean et al, Brooking on Building Contracts (LexisNexis Butterworths, 6^th ed, 2020) at [8.23]. Generally, “final completion” is the stage of the work where everything which is required under the contract is finally completed, so that the contractor is discharged from all contractual obligations: Halsbury’s Laws of Australia (LexisNexis Butterworths, Online Service updated at 7 December 2021) at [65-925]. Commonly, building contracts provide for a final certificate to be issued at this point, being after the expiry of the defects liability period, rectification of all defects known or directed during this period, and compliance with the builder’s other obligations under the contract: Brooking on Building Contracts at [8.28].

20. But section 3B(1) refers to “completion” rather than “final completion,” where “final completion” is a term well understood in the building industry and could readily have been used if that had been the intention of the legislature. “Completion” is not “practical completion,” which is separately dealt with in section 3B(2) and (3). As Bathurst CJ observed in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184; (2013) 29 BCL 329 in another context, when construing a building contract, “Nor do I think the word completion can be read as meaning practical completion … The work completion seems to me to be unambiguous and there is no justification for reading it down to require something less than what was in fact agreed to”: at [58] (Macfarlan and Meagher JJA agreeing).

21. As to what, then, is required by section 3B(1), I consider that the building contract must provide when the work is complete, either by a date, a timeframe, or when the work meets a particular description or has been certified as such. It is probably further down the construction pathway than practical completion but not necessarily final completion. However, ultimately the matter is one of contractual choice. The question will simply be whether the building contract clearly identifies when the work can be said to be complete. A simple example of such a clause was in Howell v Talevski [2021] NSWSC 1133, where clause 8 of the General Conditions provided, “The work will be complete when the contractor has finished the work in accordance with the contract documents and any variations, it is free of apparent defects … and all rubbish and surplus material has been removed from the site.” Simpler and more complex contractual provisions no doubt abound. If the building contract provides when the work is complete, then completion occurs on the date provided by the contract: section 3B(1). That is, the question of whether work is complete is a matter of construction of the building contract itself, not of section 3B(1): Howell v Talevski at [36] (per Stevenson J).

17. If the contract does not provide when the work is complete (or there is no contract) then completion occurs on “practical completion” as defined by section 3B(2), being “when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.” It has been suggested that the statutory definition of “practical completion” may complicate matters where the work in question is repair work, as it was in this case: Bambagiotti, Building Disputes & the Home Building Act 1989 (NSW) (Thomson Reuters, 2012) at [HBA.3B.10]. The point at which “the work [is] reasonably capable of being used for its intended purpose” in this context may be more difficult to identify than, say, for the construction of a new dwelling.

18. In identifying when “practical completion” has occurred, further assistance is provided by the presumptions in section 3B(3), where practical completion occurs “on the earliest” of whichever of the dates set out in section 3B(3)(a) to (d) can be established.

19. As to the interaction between section 3B(2) and 3B(3), the bracketed text in the chapeau to section 3B(3) indicates that, if the date of practical completion established by applying the definition in section 3B(2) is earlier in time than the date for practical completion established by the presumptions in section 3B(3), then that earlier date prevails. Likewise, if the date of practical completion established by the presumptions in section 3B(3) is earlier than the date of practical completion established by section 3B(2), then the date for practical completion established by the presumptions prevails.

20. Whether under section 3B(2) or (3), it is the statute and not the building contract which identifies when “practical completion” has occurred for the purposes of the commencement of statutory warranties and home warranty insurance time periods. The difference in language between section 3B(1), on the one hand, and sections 3B(2) and (3), on the other, makes this plain. Of course, the contractual provisions may produce the same result as the statute, where the definition of “practical completion” in section 3B(2) is common in building contracts. Ordinarily, practical completion occurs at a contractually defined point where the works are generally able to be used for the purpose contemplated by the agreement: Brooking on Building Contracts at [8.23].

21. Section 3B has been applied in this manner where the building contract provided for when work was complete (Howell v Talevski at [36] (per Stevenson J)), where the contract did not so provide (The Owners – Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1916 at [85]-[87] (per Stevenson J)) and where there was no written contract at all (Stevenson v Ashton [2019] NSWSC 1689 at [101]-[102] (per Harrison AsJ)).

Building contract

27. Turning then to the building contract in this case, the plaintiff and the builder executed a NSW Residential Building Contract for Renovations & Additions. Clause 2.1 provided:

The builder must carry out and complete the building works in accordance with this contract.

28. Clause 1.1 defined “building works” as “the building works to be carried out, completed and handed over to the owner in accordance with this contract as shown in the contract documents and including variations.”

29. Clause 26 concerned practical completion, which was defined as “when the building works are complete except for minor omissions and defects that do not prevent the building works from being reasonably capable of being used for their usual purpose”: clause 1.1. The definition is broadly equivalent to the definition in section 3B(2) of the Home Building Act.

30. Clause 26 set out a detailed regime:

Clause 26.   Practical Completion

26.1   The builder must give the owner a notice of practical completion at least 5 working days prior to practical completion being reached.

26.2   The notice of practical completion is to:

(a)   state the builder’s assessment of the date of practical completion;

(b)   state the date and time for the owner to meet the builder on the site to carry out an inspection of the building works; and

(c)   have attached the builder’s final progress claim.

26.3   The owner must meet the builder on the site for the inspection at the date and time stated by the builder in the notice of practical completion or at a date and time otherwise agreed with the builder and either:

(a)   pay the amount of the final progress claim; or

(b)   if the owner believes that the building works have not reached practical completion give the builder a written notice detailing anything to be done to reach practical completion.

26.4   If the owner pays the amount of the final progress claim under sub-clause 26.3(a) the date of practical completion stated in the notice of practical completion is deemed to be the date of practical completion.

26.5   If the owner gives the builder a notice under sub-clause 26.3(b) of work to be completed:

(a)   the builder must carry out any work required for practical completion and give the owner a further notice of practical completion; or

(b)   if the builder does not agree that there is any further work to be carried out to reach practical completion, the builder must give the owner written notice:

(i)   rejecting the owner’s notice; and

(ii)   referring the matter to dispute resolution.

26.6   If the owner does not pay the amount of the final progress claim under sub-clause 26.3(a) or give the builder a notice under sub-clause 26.3(b):

(a)   the amount of the final progress claim is deemed to be a debt due and owing from the owner to the builder;

(b)   the date of practical completion stated in the notice of practical completion is deemed to be the date of practical completion; and

(c)   the owner acknowledges the building works have reached practical completion.

26.7   On the owner paying the final progress claim, the builder must give the keys to the building works to the owner.

31. Clause 29 provided for a defects liability period of 13 weeks to commence on the date of practical completion. The owner was entitled to give the builder one list of defects in the building works that appeared after the date of practical completion before the end of the defects liability period, which the builder was obliged to rectify. The contract did not specify when the builder was required to complete defect rectification work. The contract did not contain any provisions in respect of completion or final completion.

32. The plaintiff submitted that section 3B(1) applied where there was a mechanism in the contract to determine when the work was complete, being a staggered process that involved a notice of practical completion, inspection, payment or dispute and then a defects liability period following which the contract was discharged by performance. As such, the referee did not need to consider the statutory ‘cascading formula’ to determine completion, as the contract provided for this.

33. The mechanism referred to by the plaintiff is how the builder discharges all of its obligations under the contract. A building contract may impose a diverse range of obligations on a builder that are distinct from completion of the work, such as procuring occupancy certificates from a council. Section 3B(1) requires the contract, properly construed, to identify “the date that the work is complete”. A contract need not have a clause entitled “completion” to identify this date, as long as the contractual provisions otherwise reveal it. Here, the contract does not address completion of the residential building work, as opposed to practical completion, to enable the date of completion to be ascertained absent waiting for events to unfold until nothing remains to be done. I do not consider that, properly construed, the building contract provides for when the work is complete within the meaning of section 3B(1).

34. As such, the date of completion of residential building work falls to be determined by the application of section 3B(2) and (3). Whilst the date for practical completion identified by the application of the sub-clauses might be the same as the date of practical completion produced by the regime in clause 26, it is the statutory definition and presumptions which determine the date, not the contract. Where the builder asserted that the claim brought by the plaintiff was lodged more than seven years after the date on which the work was completed, the builder bore the onus of proof in relation to the facts required to establish that the date on which the building work was completed was more than seven years before commencement of these proceedings: Bailey v Owners Corporation of Strata Plan 62666 [2011] NSWCA 293 at [2], [5] (per Basten JA).

35. Before passing from this subject, I note that the referee concluded that the building contract was varied in 2010, with the addition of substantial further work in Variation One and Variation Two. The builder accepts that this finding was available to the referee.

36. In addition, on 5 October 2011, the strata manager executed two Strata Works Agreements with the builder (referred to as SWA1 and SWA2), in respect of sliding door repairs and lower carpark subsidence repair. The builder rendered invoices in respect of this work on 4 and 7 November 2011 and was paid by the strata manager on 23 November 2011. Work continued under the building contract, as varied, until early 2012, to which I will return at [43].

Referee’s report

37. It is next convenient to consider how the referee approached the separate question. Dr Briggs described the task correctly, albeit with some imprecision of language which is neither here nor there if the referee ultimately attended to “The proper application of s.3B of the Home Building Act to each of” the building contract, the variations and SWA1 and SWA2: at [10].

38. The referee set out the relevant provisions of the Home Building Act and then turned to the building contract, stating at [20]:

Clause 3B(1) of the Act identifies the date when the works are complete, as “the date when the works are complete under the contract.” The mechanism for determination of when the work is complete is set out below by reference to Clause 26 of the contract.

The referee then set out section 3B(2) and (3) of the Home Building Act. There is an immediate problem with the referee’s summary of how sections 3B(2) and (3) operate: the statute determines the date for practical completion, not the building contract.

39. Dr Briggs set out clause 26 of the building contract, noting at [27]:

Clause 26 of the contract sets out the requirements for practical completion, which for all practical purposes represents completion of the works under this form of the contract.

Again, for the purposes of section 18E, the date of practical completion is as prescribed by the statute. Unless the building contract deals with completion of the work, contractual provisions in respect of practical completion do not determine that question.

40. The referee then set out the parties’ submissions, which were in substance the same as the submissions made on this application. In particular, the builder submitted that work under SWA1 and SWA2 was completed when invoices were rendered, and paid, in November 2011: at [54]. Practical completion under the building contract, as varied, may have occurred on 3 March 2012 and prior to 8 March 2012, when the builder last attended the site to replace five ceiling tiles: at [56]. Although the builder had provided a certificate of practical completion under the contract, certifying that the date of practical completion was 16 March 2012, this could not stand in the face of section 3B(2) and (3) “which is tiered to recognise completion at the earliest of a series of alternatives” and where there were several alternatives earlier than 16 March 2012: at [59].

41. The referee then turned to consider the builder’s argument that Variation One and Variation Two were separate contracts rather than variations. The referee rejected this submission at [64] in a passage which spanned several pages, during which the referee moved to the subject of practical completion. Whilst I accept the builder’s submission that the referee’s report is a little confusing as a consequence, nothing turns on this as long as the referee ultimately addressed the correct question. At the eighth and ninth bullet points, Dr Briggs stated:

•   The builder issued a certificate of practical completion on or about 3 April 2012, nominating the date for practical completion at 16 March 2012.

•   I find that the date of practical completion, as determined by the builder, in accordance with the Building Contract and the Act was 16 March [2012].

42. The referee then considered the certificate of practical completion and contemporaneous documents against the regime prescribed in clause 26 of the building contract: a notice of practical completion had been issued (albeit, I note, after the final inspection, not before), a site inspection had taken place and a final invoice had been paid. The fact that the certificate of practical completion did not strictly comply with the building contract was found to be an “error of form to have no practical consequence”: fourteenth bullet point. Dr Briggs concluded in his final bullet point:

I find that the Notice of Practical Completion issued by Sydney Remedial Builders was not issued in error, despite its title, and that it was intended to identify the date on which the builder considered that practical completion of its contracted work including the variations to the contract was achieved.

43. In doing so, the referee answered the question as to when the work under the building contract was completed by reference to the requirements of clause 26, and how that clause had been performed by the parties, rather than by reference to the statutory definition in section 3B(2) and (3) of the Home Building Act. That is, the referee made an error of law or took an incorrect approach to the task: Peter Holmes at [17].

44. I would not, however, refuse to adopt the report on this account alone, where the contractual definition of practical completion was relevantly the same as the statutory definition in section 3B(2). As such, the referee’s findings of fact as to when practical completion occurred under the contractual regime is unlikely to be materially different if he had asked the right question. The results of his work in this regard can stand as, effectively, an answer to the question posed by section 3B(2). Indeed, I did not understand the defendant to cavil with this finding of fact as to the date of practical completion. What the referee did not do, however, was proceed to address the evidence relied upon by the defendant said to satisfy the presumptions in section 3B(3) and then consider “the earliest” of any date or dates thereby established.

45. The defendant had submitted that, while it bore the onus of proving that the works were complete before 16 March 2012, given the evidence which the defendant had adduced, the plaintiff was said to have an evidentiary onus to establish the contrary. Where the plaintiff had not called relevant witnesses, it was submitted that a Jones v Dunkel inference should be drawn and a referee would be comfortably satisfied that the last date that the defendant attended the site to carry out any works was between 3 and 7 March 2019 such that the proceedings were out of time. The referee rejected this submission at [65]-[66]:

65.   The Defendant’s submission in relation to a shift in the onus of proof from the Plaintiff to the Respondent is rejected because the Defendant has not established a date for completion prior to 16 March 2012. The Defendant contended for a series of contracts each of which it claimed were completed on different dates. There have been no submissions on how or under what regime completion of the assumed contracts, if there were any, should be determined.

66.   In my view the Defendant has constructed its case on the foundation of assumptions of a series of contracts. Those assumptions have not been proved by any evidence but are a mere speculation upon which the Defendant’s analysis has been based.

46. I do not accept the plaintiff’s submission that the referee was here turning his mind to the requirements of section 3B(3) and whether those requirements had been satisfied in this case. So far as the report reveals, the referee considered only whether the works had reached practical completion in accordance with the regime provided by clause 26. The referee did not turn his mind to whether an earlier date of practical completion was established by the presumptions in section 3B(3). The report did not address the factual question of when the builder ceased to work on site, despite evidence and submissions being advanced on that question by both parties. While the referee correctly noted that the defendant contended that none of the relevant work remained to be done as at 5 March 2012 or at latest 8 March 2012, the report did not engage with the submissions nor make any relevant factual finding. Rather, the report focused exclusively on when practical completion was achieved under the terms of the contract.

47. In the result, the referee found that the date of completion was 16 April 2012, which I take to be a reference to 16 March 2012: at [67]. For reasons already given, this conclusion was reached by applying the wrong test, being clause 26 of the contract rather than section 3B(2). I consider that this conclusion can stand where the statutory and contractual definition of practical completion was the same.

48. What cannot stand, however, is the referee’s conclusion that the proceedings were commenced within time (at [68]), where the referee did not also consider whether the presumptions in section 3B(3) had been established and then consider “the earliest” of any date or dates thereby established. In these circumstances, a proper exercise of the Court’s discretion requires that the Court consider and determine that matter for itself.

Date of completion of residential building work

49. The parties agreed that, if the Court rejected some or all of the referee’s report, then the Court would proceed to determine the separate question. This may be readily done where the evidence is essentially contemporaneous documents.

50. The plaintiff’s solicitor, James Clancy, described the background to the building contract, the contractual material, invoices and later identification of defects in the builder’s works which led to the commencement of these proceedings. Mr Clancy also observed that the plaintiff had entered into a contract with Cornerstone Building Consultancy Pty Ltd. It was not in dispute that David Roberts of Cornerstone was the plaintiff’s representative and, essentially, supervised the builder’s work. Mr Roberts did not give evidence.

51. The builder’s director, Simon Bennett, said that Mark Nicholson was the site supervisor and Rob Knapp was the foreman, but neither still worked for the builder. The building works manager, Konrad Coope, described office procedures in respect of progress claims and invoicing.

52. Dealing, firstly, with SWA1 and SWA2, both contracts were between the builder and the strata manager, that is, not with the plaintiff. Both contracts provided for when work was complete, in similar terms to Howell v Talevski. Clause 4 of each contract provided:

4.   Completion of work

The work will be complete when:

•   It is finished in accordance with the contract;

•   It is free from apparent defects; and

•   All rubbish and surplus material are removed from the site.

53. As such, the date of completion of residential building work occurred on the date that the work was complete within the meaning of these contracts. This work was both invoiced and paid in November 2011, where clause 3 provided, “The owner must pay the Contract Price … on satisfactory completion of the work.” The fact that the invoices were paid by the strata manager is evidence that the strata manager had formed the view that the work had been satisfactorily completed. The contemporaneous records do not suggest that there was any apparent defect in the work, nor that rubbish and surplus material remained on the site. Assuming for the moment that the plaintiff is entitled to bring a claim for defective building work performed under these contracts, I find that this work was complete on 23 November 2011. These proceedings are out of time insofar as damages is sought for defective building work performed under SWA1 and SWA2.

53. Turning to the building contract between the plaintiff and builder, as varied, section 3B(1) does not apply, where the building contract did not provide for when work was complete. The question is when practical completion occurred as defined in section 3B(2) or in accordance with the presumptions in section 3B(3), whichever date is earlier. The referee effectively determined when practical completion occurred as defined in section 3B(2), where the statutory definition is the same as the contractual definition. The date was 16 March 2012. Section 3B(3)(b) is the only presumption which may be relevant here, being “the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion).”

54. The defendant relied on contemporaneous records from 8 December 2011 on. Mr Roberts was then pressing the owners corporation for final instructions on remaining issues, where it was his understanding that “very little work remains outstanding at the property.” Mr Roberts spoke to Mr Nicholson and confirmed by email, “You will provide me with a list of any outstanding issues you are aware of at the property ASAP. I have asked the Owners to do the same so we can deal with any outstanding issues promptly to allow your final invoice to be processed.” The strata manager emailed all lot owners, requesting that they advise the strata manager by 16 December 2011 of any works that they were not satisfied with so that this could be brought to the attention of Cornerstone and the builders.

55. Various lot owners notified items of outstanding work. On 23 January 2012, Cornerstone inspected the completion of outstanding work and additional items raised by lot owners. On 24 January 2012, Cornerstone wrote to the owners corporation, setting out each of the issues identified by lot owners and concluded, “The defective or incomplete work raised by the various Owners has now been completed with the exception of one sliding door latch at Unit 11.” The latch was currently “on order.” The builder had confirmed that the latch would be installed as soon as it was delivered to their office and access was arranged to fit the latch. Cornerstone concluded that the contracted work had generally been completed in accordance with the scope of works. Cornerstone enclosed the builder’s final invoice with an approval for payment to be forwarded to the insurer, unless provided with written instruction and “reasonable grounds not to do so” by 31 January 2012.

56. On 3 February 2012, the strata manager circulated an email to members of the executive committee of the owners corporation in respect of further matters raised by lot owners and discussed that morning with Mr Roberts and Mr Nicholson including:

Palmers Accountants

They reported water ingress this morning and although their description was vague we understand that water is coming in on the northern wall. We discussed this with David Roberts who reported it to Sydney Remedial Builders. No further news at this stage.

Unit 6 – water penetration

We have discussed this problem with the property manager of Unit 6 and Mark Nicholson from Sydney Remedial Builders. The leak is coming down the wall on the street side. It is unclear what is causing this problem. Mark Nicholson said he will organise for someone to have a look at it and he advised if the problem was part of the work Sydney Remedial will fix it. If it’s only a minor thing they’ll fix it regardless of whether it was part of their job. If it’s neither of these scenarios Sydney Remedial will get back to us.

In addition, a matter of rattling driveway grates was raised, which the owners corporation had previously decided to deal with as part of building maintenance.

58. According to Cornerstone’s later invoice, on 13 February 2012, Cornerstone checked the repair of the leak at the accountants’ offices. Presumably, the builder had attended to this item. On 15 February 2022, Cornerstone provided a progress claim by the builder to the insurer for payment, noting “According to our records an amount of $4,126.88 remains owing on the contracted work which will be invoiced and forwarded to you once several issues raised by the Owners Corporation have been addressed.”

59. On 1 March 2022, the strata manager followed up the builder in respect of the issues discussed with Mr Nicholson on 3 February 2020:

We spoke with Mark [Nicholson] yesterday who gave me an update that the problem within Unit 6 is due to the box gutters but we haven’t received anything in writing as yet.

… The driveway grates and the problem with Palmers Chartered Accountants is something we believe should definitely be resolved by Sydney Remedial Builders. If you do not have resources right now to address provide a quote to remedy Unit 6 and you believe this work has nothing to do with you then we would appreciate even a 2 line email on your letterhead advising the owners corp so they can consider their options.

60. On 2 March 2012, Cornerstone “Check[ed] ceiling tiles in Accountants have been changed and that there are no more leaks in rail. Chase[d] Builder re: replacing 5 additional tiles.” Mr Nicholson also replied to the strata manager:

?   Palmer Chartered Accountants – the leak has been repaired and the remaining ceiling panels are to be replaced on Saturday 03/03/12.

?   Driveway grates – Metal gates will be removed and we will glue on rubber strips to the underside of the grates. We will replace grates with timber as a temporary measure. Once the rubber strips are secure we will re-fit to drain. Works to be carried out Saturday 03/03/12.

?   Unit 6 – We believe water is entering the unit due to the box gutter overflowing in heavy down pours. The current gutters are under sized and the falls are incorrect. We can attempt to increase the height of the back edge of the gutter by installing a new metal flashing glued and secured hard up to the underside of the roof sheets to the full length of Unit 6. As these works are outside the current scope of works an additional cost of $880.00 + GST will be required if additional works are undertaken.

That is, the builder was going to carry out the remaining works on 3 March 201. A quotation was provided for the work requested in respect of Unit 6, where the works were “outside the current scope of works.”

61. On Monday, 5 March 2012, the strata manager emailed Mr Nicholson again, advising that he may receive a call about the leak into Unit 6, “apparently he has a similar leak in his unit.” On 8 March 2012, Cornerstone inspected the leak at Unit 6. According to Cornerstone’s invoice, 2.75 hours was spent on “Site visit to inspect moisture ingress to Unit 6. Check replacement of ceiling tiles in Accountants Office.”

62. On 13 March 2012, Cornerstone reported to the strata manager on the result of their inspection on 8 March 2012. It is not clear from Cornerstone’s email whether the builder was present at the inspection, although it is possible. Cornerstone reported, “The Builder advised that he has water tested this door opening for significant periods on previous occasions as has found that no moisture ingress occurs around the door opening.” Cornerstone considered that the water was tracking from the box gutter above the door, “We have previously noted that the box gutter design and detailing is not ideal.” Cornerstone suggested a meeting with the builder to try and identify the potential entry points “and allow the Builder to cost and address the same.” That is, Cornerstone was also of the view that the further work in respect of Unit 6 was outside the builder’s scope of works.

63. On 14 March 2012, the strata manager emailed Cornerstone and the builder, asking for a site meeting with the builder to determine how best to repair the leak at Unit 6, “From what we understand the leak … is quite severe.” Cornerstone later invoiced the owners corporation for two hours spent on 16 March 2019, “Inspect roof over Unit 6 with Builder.” This inspection, however, clearly related to potential additional work to be done by the builder on Unit 6 under a separate quotation rather than under the building contract, as varied. On 20 March 2012, the builder provided a quotation in respect of Unit 6.

64. On 3 April 2012, the builder emailed its final invoice to Cornerstone “as Mark has advised all works now complete.” The invoice stated, “FINAL CLAIM: All works now completed as per original contract, Variation 1 and [2] and all extra works” The builder also attached a Certification of Practical Completion, certifying that the date of practical completion of the remedial works was 16 March 2012.

65. The builder was likely last on the site on 3 March 2012, when Mr Nicholson replaced five ceiling tiles in the accountants’ offices and attended to the driveway grates. It is possible that the builder returned to the site on 8 March 2012, when Cornerstone inspected the accountants’ offices. It is apparent from the contemporaneous records that any further work in respect of Unit 6 was then regarded by Cornerstone, the builder and the strata manager as additional work beyond the scope of the building contract.

66. According to the contemporaneous documents, the date on which the builder last attended the site to carry out work, other than work to remedy any defect that did not affect practical completion, was either 3 or 8 March 2012. Either date is earlier than the date of practical completion later certified by the builder, being 16 March 2012, with which the referee agreed. Using either 3 or 8 March 2012, these proceedings were commenced more than seven years after the completion of the work and are out of time.

ORDERS

67. For these reasons, I make the following orders:

1. Pursuant to rule 20.24(a) of the Uniform Civil Procedure Rules 2005, adopt the referee’s report dated 5 April 2023 save for paragraphs 67 and 68.

2. Otherwise dismiss these proceedings with costs.

3. Direct the parties to notify any errors or omissions within seven days.

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Amendments

19 September 2023 - Amendment to representation in the coversheet.

19 September 2023 - Typo in coversheet