Appeal Panel revisits limitation periods for defective building work
Defective building work and the Home Building Act 1989 (HBA).
In Hutchings v Hope [2019] NSWCATAP 59, the Appeal Panel clarified whether the two-year limitation period found in section 18E of the Home Building Act 1989 (HBA) altered the six-year limitation period for breach of contract found in section 14 (1) of the Limitation Act 1969 (NSW).
Claims for breach of the statutory warranties implied by section 18B of the HBA can be made for periods of 2 or 6 years after completion of the work. The section 18E limitation period is six years for major defects but just two years for all other defects, known as non-major or minor defects.
However, it is not uncommon for the wording of the implied statutory warranties to be repeated either verbatim or substantially in standard building contracts. The effect is that the statutory warranties become express terms of those contracts.
First instance
A builder, Mr Hope, sued homeowners Mr & Mrs Hutchings for unpaid monies and the homeowners sued the builder for overcharges and defective work.
The contract set out, expressly, warranties that were equivalent to the statutory warranties contained in the HBA.
The Tribunal at first instance rejected the claim for non-major defects on the basis that they were outside the two-year time limit for those defects contained in the HBA, even though the claim was expressed as a simple claim for breach of an express term of the contract to which a 6-year limitation would normally apply.
The Appeal Panel
The homeowners appealed. The question for the Appeal Panel, in circumstances where the breach of contract complained of related to non-major defects, was whether the two-year non-major defects limitation period took precedence over the 6-year breach of contract limitation period.
The Appeal Panel, constituted by President Justice Armstrong and Principal Member Harrowell said that the first instance approach was wrong, and said:
“[54] Both parties agreed that the HB Act did not operate to limit a right of action by an original contracting party under an express provision in the contract in this way. That is, a right of action for breach of an express term, not being a claim for claim for breach of statutory warranty under s18E, could be brought within 6 years from when the cause of action accrues, whether or not the express warranty is wholly or partly in the same terms as the statutory warranty implied by s 18B.
[55] This concession appears properly made.”
The practical effect of this decision is that homeowners who have (a) contracted directly with a builder, and (b) under a contract which expressly sets out the statutory warranties, now have the certainty of claiming damages for minor defects for up to 6 years in a court of competent jurisdiction.
The Civil Liability Act 2002 applies to contractual claims but not to statutory warranty claims. So, in theory, a builder may be able to invoke the apportionment provisions in defence of contractual claims for damages for minor defects.
However, in practice, distinguishing between minor and major defects, and therefore claims in breach of contract or s18B may not be that easy, leading to arguments as to what claims the apportionment provisions apply.
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Clare Peacock is an experienced construction lawyer working on Sydney’s Northern Beaches. Clare provides practical, cost-effective building approval advice to property owners, builders and strata managers. Services include residential building disputes, body corporate issues and strata building problems.