Section 18B of the Home Building Act 1989 (NSW) (HBA) imposes statutory warranties in relation to residential building works which are implied into all contracts for residential building works (Statutory Warranties). Section 18F of the HBA provides a statutory defence to an action for a breach of a Statutory Warranty (Section 18F Defence). Whilst providing protection to builders, the Section 18F Defence maintains a burden on builders to discharge their duty to homeowners before being able to enjoy that statutory protection.
The Section 18F Defence requires a builder to prove each of the elements set out in the relevant subsections. In short, if a builder has not followed the process contemplated by Section 18F throughout the course of any project and a dispute arises, it is unlikely the builder will be able to employ the Section 18F Defence.
What are Statutory Warranties?
In summary, Section 18B defines the Statutory Warranties that are incorporated into every residential building Contract. They are:
- work will be done with due care and skill and in accordance with the plans and specifications set out in the contract;
- all materials supplied by the holder or person will be good and suitable for the purpose for which they are used;
- all work with comply with the law;
- work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time;
- if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling; and
- the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.
Defences to claims arising from breach of warranties
Section 18F of the HBA provides that in proceedings by any homeowner against a builder for a breach of a Statutory Warranty, the builder may defend the claim made against it if the builder can prove that:
- the instructions given by the person for whom the work is being completed, is contrary to the advice of the defendant builder, such advice by the defendant being advice given in writing before the work was done; or
- the defendant reasonably relied on instructions given by a person who is a relevant professional acting for the person for whom the work was contracted to be done and who is independent of the defendant, being instructions given in writing before the work was done or confirmed in writing after the work was done.
Defence under Section 18F(1)(a)
The key elements required to prove the defence under section 18F(1)(a) of the HBA are as follows:
- the person for whom the residential building work is being done gives instructions to the defendant;
- the defendant provides advice regarding those instructions in writing to the person for whom the residential building work is being done;
- notwithstanding the written advice of the defendant, the person for whom the residential building work is being done, confirms the instructions.
For example, a builder is engaged by a homeowner to carry out works and the homeowner directs the builder to perform works in a way in which the builder believes may not be in accordance with the National Construction Code (NCC) or any other legislative requirement. The builder provides written advice to the homeowner in relation to that proposed works to be undertaken stating that the works are not compliant. The homeowner then instructs the builder to perform works contrary to the builder’s written advice and the builder proceeds to build in accordance with the homeowner’s instructions. In this scenario, if the homeowner later pursues the builder for breach of statutory warranty on the basis that the works do not comply with the NCC, the builder may be able to rely upon the 18F(1)(a) defence if it can prove it satisfied the above elements.
Craftsman Restoration & Renovation Pty Ltd v Boland [2008] NSWSC 660 gave insight into the importance of to whom the advice by the builder should be given and the requirement of the advice being in writing. In this case, it was held that Section 18F(1)(a) was not applicable for two main reasons including that the advice was not in writing and the advice was not given to the owner, rather it was given to the architect.
Defence under Section 18F(1)(b)
The key elements required to be established in the defence under section 18F(1)(b) of the HBA include:
- instructions are given by a relevant professional independent of the defendant;
- the relevant professional is acting for the developer/owner;
- the instructions were given before the work was done or confirmed in writing after the work was done; and
- builder relied on written instructions.
It is common for a homeowner to employ an architect or engineer to administer a residential building works contract. Throughout the course of the project, the architect or engineer will then give instructions to the builder. If a builder relies on instructions which cause defective works and the homeowner subsequently makes a claim against the builder, the builder may be able to plead the 18F(1)(b) defence if the builder can prove the above elements.
Relevant Professional
A relevant professional is defined under Section 18F as a person who represents themselves as:
- an architect, registered design practitioner or registered principal design practitioner, engineer or surveyor, or
- represents themselves to have expert or specialised qualifications or knowledge in respect of residential building workor any particular aspect of residential building work, or
- represents themselves to be engaged in a profession or to possess a qualification that is recognised by the regulations as qualifying a person as a relevant professional.
Independent Professionals
Section 18F(2) provides that a relevant professional is independent of the builder if the relevant professional was not engaged by the builder to provide any service or do any work for the builder in connection with the residential building work concerned.
For example, a homeowner may engage a specific engineer or architect of their choice and instruct the builder to work or take instruction from these professionals in connection with the residential building work concerned. In this instance the engineer or architect would satisfy the concept of independent professional.
Section 18F (3) provides that a relevant professional is not independent if the professional was:
- engaged on the basis of a recommendation or referral of the defendant to act for the person for whom the work was contracted to be done, or
- within 3 years before the relevant instructions were given, a close associateof the defendant.
Instructions given before the work was done or confirmed in writing after the work was done
As is the case generally with the 18F defence, instructions and advice relied upon by a builder must be in writing. It is simple enough to understand what this element requires, however it is important to understand what constitutes an instruction. Importantly, a contract drawing does not constitute an instruction. In RBV Builders Pty Limited v Chedra [2021][1] (and later affirmed in BlueSky Property Builders Australia Pty Ltd v Dey [2023][2]) the NCAT Appeal Panel construed an “instruction” from a relevant professional to be something that occurs after the contract has been signed and something that occurs in the context of performing the work under the contract.
In coming to this decision, the Appeal Panel cited the decision in Catapult Constructions Pty Ltd v Denison [2018] [3] which found that:
…What is clear is that for a [section 18F] defence to succeed there must be, prior to carrying out the work, an enquiry by the builder as to the adequacy of the design and a written instruction to proceed from the consultant. This approach reflects the approach of the common law in relation to negligent design and obligations upon builders to warn if what is proposed is questionable or unbuildable….
The issue that arises here is that a builder may not always be able to detect non-compliances in construction plans where those construction plans relate to specialised areas of construction. For example, many contracts for residential building works are construct only and the builder is provided with engineering plans for the structure, hydraulics etc. Whilst a builder will be fully capable of assessing compliance and buildability of architectural and other construction details, when it comes to engineering plans, a builder will not likely be able to assess compliance but rather will need to rely on the plans.
A solution for a residential builder is to engage an engineer itself to check the owner’s engineering design. Thereafter it can make an enquiry of the owner’s engineer if it finds an issue. The Builder can then seek instructions from the owner’s engineer for the resolution of that issue.
Key Takeaway
The regime set out in 18F is prescriptive. In order for builders to take advantage of the Section 18F Defence, builders must comply strictly with the regime contemplated by the Section 18F Defence so as to ensure that all elements of the defence are able to be proven if a dispute arises.
It is imperative that builders maintain written records of all advice given to homeowners and any subsequent instructions to proceed. Further, in light of the current state of the law, it is essential for builders to raise any buildability/compliance issues with relevant professionals in writing, and to maintain records of subsequent instructions to proceed as well as sign offs by the relevant professionals after the work is completed.
If you would like to discuss this article with us, please contact Brett Vincent, Partner, or Ibrahim Khalil, Paralegal on (02) 9261 5900.
[1] RBV Builders Pty Limited v Chedra [2021][1] NSWCATAP 56
[2] BlueSky Property Builders Australia Pty Ltd v Dey [2023][2] NSWCATAP 153
[3] Catapult Constructions Pty Ltd v Denison [2018] NSWCATAP 158 at [26]