Residential Building Works – Date of Completion, Contractual Construction v Statutory Construction

The Home Building Act 1989 (NSW) (“the Act”) provides a legislative framework for residential building works completed in NSW, providing various statutory warranties and statutory timeframes with respect to these works. 

However, the date of which these timeframes begin to ‘run’ can be a matter of conjecture. 

Section 3B of the Act provides that:-

  1. The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done.

  1. If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.

  1. It is to be presumed (unless an earlier date for practical completion can be established) that practical completion of residential building work occurred on the earliest of whichever of the following dates can be established for the work—

    1. the date on which the contractor handed over possession of the work to the owner,

    2. the date on which the contractor last attended the site to carry out work (other than work to remedy any defect that does not affect practical completion),

    3. the date of issue of an occupation certificate under the Environmental Planning and Assessment Act 1979 that authorises commencement of the use or occupation of the work,

    4. (in the case of owner-builder work) the date that is 18 months after the issue of the owner-builder permit for the work. 

The conjecture lies around the contract’s construction and how the completion of works is/has been defined. 

The Owners Strata Plan 64757 v Sydney Remedial Builders Pty Ltd [2023] NSWSC 1127

Facts

The Owners Strata Plan 64757 (“the Plaintiff”), engaged Sydney Remedial Builders Pty Ltd (“the Defendant”), to complete the rectification of defective works caused by the original builder. However, the Defendants works were also subject to defects, and as such, on 15 March 2019, the Plaintiff commenced proceedings under section 48MA of the Act. 

The question arose as to whether proceedings were commenced within the relevant statutory warranty period as defined in section 18E of the Act. 

This question was referred to a referee, being Dr Phillip Briggs, who determined that “completion” of the works had been achieved on 16 March 2012, and as such, the proceedings, commenced on 15 March 2019, had been commenced in time, in accordance with section 18E of the Act. 

Critical Issue

What is the meaning of “completion” under the Home Building Act 1989 (NSW). 

Court Proceedings

The Supreme Court of NSW was called upon to consider this issue, with Justice Rees presiding over the proceedings.  

Justice Rees considered section 3B of the Act (as stated above), and noted at paragraph [21-22], that Completion:-

"is probably further down the construction pathway than practical completion but not necessarily final completion. However, ultimately, the matter is one of contractual choice. The question will simply be whether the building contract clearly identifies when the work can be said to be complete.

If the building contract provides when the work is complete, then completion occurs on the date provided by the contract: section 3B(1). That is, the question of whether work is complete is a matter of construction of the building contract itself, not of section 3B(1)

If the contract does not provide when the work is complete (or there is no contract) then completion occurs on “practical completion” as defined by section 3B(2), being “when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose.”

In light of the above, Justice Rees found that the referee, Dr Briggs, had made his findings by reference to the requirements of clause 26 of the residential building works contract (Clause 26. Practical Completion), which outlined the requirements to achieve Practical Completion, differing from that of Completion, and not in reference to clause 3B (2) of the Act. Justice Rees also found that Dr Briggs did not consider the application of an earlier date of Practical Completion in accordance with clause 3B (3) of the Act. 

As such, Justice Rees determined that Dr Briggs had, subsequently applied the ‘wrong test’, by applying the contractual definition of Practical Completion, rather than that as found in section 3B (2).

Justice Rees applied the Statutory Test of Practical Completion, as opposed to applying clause 26 of the Contract, and found that Practical Completion has been achieved on either 3 or 8 March 2012 and as such, proceedings were commenced outside of the Statutory Warranty Period. 

Key Takeaway

Section 3B of the Act is crucial to determining ‘Completion” with respect to Residential Building works and the subsequent Statutory Warranty periods which apply. 

Should the Contract expressly define “Completion” of Residential Building Works, then the date of same will be in accordance with the Contract.

Should the Contract not expressly define “Completion”, then clause 3B (2) and subsequently clause 3B (3) of the Act will be considered when determining the date of “Completion”.

Article by Zac Thomas