O’Rourke v Beechwood Homes (NSW) Pty Ltd [2022] NSWCATCD 116

Andrew Hales  |  Anique Mawa  |  Nicole Sawick

Key takeout

The approval of plans by a local authority does not absolve a builder from responsibility to ensure adequate provision is made for the dispersal of stormwater.

In determining claims related to defective residential building work, s 48MA of the Home Building Act 1989 (NSW) (HBA) requires courts and tribunals to have regard to the principle that rectification of defective work by the responsible party is the preferred outcome.

This decision considers appropriate remedies for defective building work where a certain rectification method is not a reasonable course to adopt. In this case, where the building had already been constructed, it was not a reasonable to require the builder to raise the floor level to ensure the building was not subject to stormwater penetration.  The appropriate remedy, to place the owner as far as possible in the position he would have been in had the builder fulfilled its contractual obligations, was to undertake mitigating solutions proposed by an expert.

Facts

In May 2018, the applicant (owner) engaged the respondent (builder) to design and construct a house on his property, located across the road from a lagoon. The contract required the builder to provide hydraulic stormwater details from an engineering firm and to construct a hydraulic stormwater drainage system in accordance with those details. The builder obtained conceptual plans for the stormwater system from an engineering firm which were reviewed by the local council when granting the construction certificate for the property.

In February 2020, the house was damaged by flooding during a major storm event.

The owner commenced proceedings in the NSW Civil and Administrative Tribunal against the builder for breach of the statutory warranty implied into the contract by section 18B(1)(a) of the HBA, arguing that the work related to the stormwater system was not carried out with due care and skill. The owner sought an order for rectification of the stormwater system or alternatively, compensation for the builder’s breach of the statutory warranties. The builder argued that it could avoid responsibility for the insufficiency of the stormwater system because the local council approved the stormwater management plan.

Decision

The Tribunal was persuaded by the expert evidence tendered by the owner, which revealed that the property was at risk of stormwater flooding and that there were fundamental design and construction flaws in the ‘minor stormwater system’ and ‘major stormwater system’. Accordingly, by failing to provide an adequately designed stormwater system the builder had breached the warranty in section 18B(1)(a) of the HBA to carry out work with due care and skill.

The builder relied on evidence from its engineers that they were not engaged to provide ‘construction certified’ or ‘work as executed’ plans, and that it was the local council who deemed the conceptual plans fit for construction by virtue of issuing the construction certificate. The Tribunal was not satisfied that the local council’s approval of the stormwater plan detracted from the builder’s responsibility to ensure appropriate stormwater provision was made. 

Remedies

Having regard to s 48 of the HBA, the Tribunal determined the builder should carry out the remedial work identified by the owner’s expert in relation to the minor system.    

In relation to the major system, the owner’s engineering expert observed that due to the location of the property, the floor level of the building should have been raised by the builder to prevent the risk of stormwater flooding, in line with good industry practice. The expert also noted that this was the appropriate course of rectification, but it was ‘clearly too late to raise the floor level’ and suggested a range of remedial measures which could mitigate the risk of the property being flooded in the future.

The Tribunal cited the principle in Bellgrove v Eldrige [1954] HCA 36; (1954) 90 CLR 613 that damages for building defects will be awarded by reference to the costs of rectification provided the rectification is necessary and the reasonable course to adopt. The Tribunal agreed with the owner’s expert that although raising the floor level was the required rectification to flood-proof the house, it was ‘not a reasonable course to adopt’ and was therefore not the appropriate remedy. The Tribunal determined the appropriate remedy was to order the builder to undertake the mitigating measures suggested by the owner’s expert.