NCAT update: what is a major defect?

Two recent decisions of the NCAT Appeal Panel serve as a timely reminder about the definition of a “major defect” and what evidence is required to prove its existence.

In Vella v Mir, decided on 31 January 2019, the Appeal Panel helpfully explained the sequence of the analysis required in assessing a warranty claim under section 18E of the Home Building Act 1989 (NSW) (the Act):

1. When does the statutory warranty period start? Generally, this is the date on which the work was completed as per sections 18E(1) and 3B of the Act.

2. If a statutory warranty has previously been enforced, does s18E(2) of the Act apply to exclude claims for other deficiencies?

3. Are each of the claimed defects in a major element of a building?

Section 18E(4) of the Act generally defines a ‘major element’ to be:

a. an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it, or

b. a fire safety system, or

c. waterproofing, or

d. any other element that is prescribed by the regulations as a major element of a building.

4. Are each of the claimed defects in a major element a major defect?

Section 18E(4) of the Act generally defines a major defect as one that causes or is likely to cause –

a. the inability to inhabit or use the building (or part of the building) for its intended purpose, or

b. the destruction of the building or any part of the building, or

c. a threat of collapse of the building or any part of the building,

or otherwise be a defect prescribed by the regulations as a major defect or a product used in contravention of the Building Products (Safety) Act 2017.

5. Has the application been made in time by reference to the:

a. date on which the statutory warranty period commenced;

b. date on which the statutory warranty period will end (or the date on which it ended); and

c. date on which the application to the Tribunal was lodged?

In analysing the defects, the panel noted that expert evidence is relevant to whether a claimed defect is a defect in a major element of a building, and whether it is a major defect, but it is not determinative of the issue. 

Ashton v Stevenson a case decided by the NCAT Appeal Panel late last month, also dealt with the definition of a “major defect” under section 18E of the Act.

The case highlighted the effect of the 2014 amendments, which require proof that a defect is a serious problem which impacts upon habitability and the use of the building and to its potential destruction or collapse to be classed as a “major” defect.

In applying the analysis in Vella, the Panel stressed that:

1. the consequences of a major defect must be shown to have or to probably have a proven consequence for the habitation or use or integrity of the building

2. evidence to prove the existence of the major defect would need to show more than an inconvenience, and could not be satisfied by speculation or assumption

3. evidence from the occupants or users of the building would be necessary to establish these major defect elements of the claim, rather than merely the evidence of an expert.

The Appeal Panel found that a number of the defects claimed in this case were not in fact major defects.  One example was rainwater entry from a balcony floor.  This issue was found to relate to the major element of “water proofing”, but was nonetheless held not to be a major defect, because evidence relating to the factors in section 18E(4) – inability to inhabit, destruction or collapse of part or all of the building - was scant.

The decision emphasises that when asserting the existence of a major defect, it is important to adduce evidence of each of the elements identified in section 18E(4), some of which are not matters for expert evidence.

Author: Sharon Levy

Further contact: David Creais