Statutory warranty claims on contracts made prior to 1st February 2012

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Appeal Panel rules on controversy over statutory warranty limitation periods

In Gregorio v Cheale [2018] NSWCATAP 118 the Appeal Panel revisited the issue of whether a seven year limitation period applied to statutory warranty claims where the contract was made before 1 February 2012 and confirmed that it does.

The appeal concerned a defective works claim by successors in title to an owner builder.

In particular whether the purchasers had 2, 6 or 7 years to claim damages for defective work against the vendors.

Initially, NCAT determined that the time limit was either 2 or 6 years and dismissed the claims for defects other than those it determined were major defects.

Issue

The issue in the appeal was whether the 2014 Amending Act operated retrospectively to reduce the limitation period for commencing breach of statutory warranty claims arising in connection with contracts entered into prior to 1 February 2012.

Facts

The work in dispute was carried out by the Cheales under an owner builder permit obtained in April 2008. The works were completed in February 2014. In December 2014 Mr and Mrs Gregorio bought the property.

The Gregorios, as successors in title to the owner builder, took the benefit of the statutory warranties contained within s18B of the Home Building Act 1989. Defects emerged after sale and, on 31 March 2016, the Gregorios filed an application for damages at NCAT.

Amending Acts 2011 & 2014

The Act was amended twice between the start of the works and the filing of the application by the Home Building Amendment Act 2011 and 2014.

Before the 2011 amendments successors in title had 7 years to enforce statutory warranties for all types of defects. Time started to run on completion of the work.

The 2011 Act wrought many changes of which two are pertinent to this matter. First the concept of ‘structural ‘ and ‘other’ defects was introduced. Second the 7 year time period was reduced to 6 years for structural defects and just 2 years for others.

The 2014 Amending Act tweaked this further by redefining ‘structural’ defects to ‘major’ defects. The 6 year period for major defects was retained as was 2 years for all other defects. Time still started to run on completion of the work.

Effect of the 2014 Act

The Cheales argued that the 2014 Act had another effect—that any proceedings issued after the commencement of the 2014 Act were restricted to 2 or 6 year periods. The Cheales were successful in having all of the Gregorios claims not characterised as ‘major’ defects dismissed.

Appeal Panel reasoning

The Gregorios appealed the limitation point. Not in issue in the appeal was when the relevant limitation period, in relation to completion of owner builder work, started to run.

The Appeal Panel undertook a comprehensive analysis of the various iterations of the Act and the savings and transitional provisions in Schedule 4 of the Act and delivered a lengthy decision.

In summary, the Appeal Panel determined that following the 2011 Amending Act the 7 year period was expressly preserved by clause 109 resulting in two limitation periods.

Further, that the 7 year period was a substantive right and it could only be removed if there was a clear intention expressed in the legislature. The 2014 Amending Act did not expressly remove this right and it did not repeal clause 109.

More information in our July Newsletter »


Do you need advice regarding rectifying defective building works?   

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 disputesbody corporate issues and strata building problems.

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