12 June 2019

Must an owner allow a builder to return to site to rectify defects?

Case update: is it always unreasonable for owners not to allow the builder back to rectify?

The recent case of The Owners – Strata Plan 89041 v Galyan Pty Ltd tells us it’s not…

In May, the NSW Supreme Court considered the issue of whether an owners corporation had acted unreasonably in not allowing a builder to return to site to rectify defects.

The defendant builder submitted that the owners corporation had acted unreasonably in not allowing it to return to the site to rectify the defects and on this basis, should pay the costs of the proceedings.

Relevant Principles

The relevant principles were summarised during submissions on behalf of the owners corporation:

a plaintiff is not entitled to recover losses attributable to its own unreasonable conduct.
in cases involving building contracts, the owner is required to give the builder an opportunity to minimise the damages it must pay by rectifying the defects, except where its refusal to give the builder that opportunity is reasonable or where the builder has repudiated the contract by refusing to conduct any repairs.
the question of what is reasonable depends on all the circumstances of the particular case – one relevant factor is what attempts the builder has made to repair the defects in the past and whether, in the light of the builder’s conduct, the owner has reasonably lost confidence in the willingness and ability of the builder to do the work.
it is for the defendant to prove that the plaintiff has acted unreasonably – it is not for the plaintiff to prove that it acted reasonably.
once a defendant puts in issue the reasonableness of the plaintiff’s conduct, all circumstances relevant to an objective assessment of the plaintiff’s position become examinable.

Course of events

In considering the reasonableness of the owners corporation in not allowing the builder to return to rectify the defects, the court considered a number of relevant factors in the chronology of the dispute, including:

The owners corporation made a complaint to the NSW Department of Fair Trading regarding the defects. A rectification order was made, however not all works were undertaken pursuant to the order.
The owners corporation further corresponded with the builder seeking the defects be rectified with no satisfactory response.
The owners corporation subsequently commenced proceedings when expiration of the two year defect liability period was approaching.
The builder was excluded from the site and informed that it was not permitted to return to the site to continue to rectify the outstanding defects.
The owners corporation subsequently offered to allow the builder back on site to rectify the defects on the basis that a scope of works could be agreed and that the works would be completed under a contract with the appropriate insurances in place.
No scope of works responsive to the offer was ever provided to the owners corporation by the builder.

Further factors for consideration

The court also considered whether the owners corporation had reasonably lost confidence in the willingness and ability of the builder to perform the rectification work. In determining this issue, the court heard evidence from members of the executive committee relating to matters such as:

the failure by the builder’s representative to provide a scope of work and other requested information;
the poor quality, to their observation, of the rectification work that the builder’s representatives had performed to date;
the failure by the builder’s representative to attend the property and individual units at appointed times to carry out work; and
the builder’s representative’s conduct in entering on the property without permission or authority.

In addition, the builder, through its solicitor, had adopted an unnecessarily aggressive approach to the owners corporation with respect to the dispute.

The court’s determination

The court found that the builder had not shown that it was unreasonable of the owners corporation not to allow the builder back on site to rectify the defects to the building.

The builder was required to pay the owners corporation’s costs of the proceedings.

Takeaway

Whilst the preferred option of the courts, consistent with the Home Building Act, is to allow the builder back on site to rectify, in some circumstances it will be considered reasonable not to follow that course.

Builders must be careful to ensure that, in their dealings with an owners corporation or home owner over alleged defective work, they do not act in a way that gives the owners corporation or home owner a defensible reason to refuse the builder access to rectify.

Conversely, owners corporations and home owners must appreciate that in most situations they do not have a right to refuse to allow the original builder back on site.