Deshmukh v Distinctive Building Services Pty Ltd [2024] WASAT 62

Tom French |  Penny Bond |  Alicia Harries

Key takeout

Under the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (BSCRA Act):

• a contractual right to liquidated damages is unnecessary for a home owner to be awarded compensation for a builder’s failure to complete works by the date for completion under a home building work contract; and
• owners may be compensated if a reasonable person in the position of the builder would have realised that the loss was sufficiently likely to result from the builder’s breach of the home building work contract.

Facts

On 25 October 2021, the owners (owners) entered into a home building work contract (HWBC) with Distinctive Building Services Pty Ltd (builder) for the construction of a dwelling (contract).

The contract:

• contained a completion date of 10 January 2023 (finish date); and
• did not contain any provision for liquidated damages if the builder failed to reach completion by the finish date.

The property was not completed by the finish date and the owners made a complaint to the Building Commissioner under the BSCRA Act. The Building Commissioner referred the complaint to the State Administrative Tribunal (SAT).

In the SAT proceedings, the owners sought compensation under the BSCRA Act for the builder’s failure to complete by the finish date. Specifically, the owners sought:

• the costs of rental accommodation from the finish date to the anticipated completion date;
• the costs of water charges and local government rates;
• the interest paid on the mortgage loan from the finish date to the anticipated completion date; and
• their legal and transcript costs.

Legislative framework

The BSCRA Act is a statutory warranty regime. It enables a complaint to be made to the Building Commissioner by:

1. a person whose interests are being, or have been, adversely affected by the carrying out of a regulated building service (for example, an owner or an affected third party); or
2. an owner or builder under a HBWC in respect to a breach of that contract (amongst other things).

Where a person is a party to a HBWC, they may be entitled to a HBWC remedy order (as was the case in this decision).

The Building Commissioner will refer complaints to SAT if the estimated value of the remedy sought exceeds $100,000.

Decision  

Section 43(1)(a) of the BSCRA Act empowers the SAT to make a HBWC remedy order if it is satisfied the order is justified. Senior Member Aitken considered that, to be satisfied the order was justified, he was required to consider:

• Whether there was a valid home building work contract between the parties?
• What were the relevant terms of the contract?
• Whether the builder had breached the contract?
• Whether the owners had suffered loss, damage or detriment that could be addressed by a HBWC remedy order?

Each of these questions was answered in the affirmative.

The SAT then considered what compensation the owners were entitled to under the BSCRA Act for the builder’s failure to reach completion by the finish date.

As the contract did not contain a liquidated damages clause, the Senior Member concluded that the principles governing the measure of damages for breach of contract applied to compensation under a HBWC remedy order. Namely:

• The compensation should place the owners in the same situation as if the contract had been performed.
• If the owners establish expenditures which would not have been sustained but for the breach (eg the cost of rental accommodation), those losses would be recoverable subject to the principle of remoteness.  
• Whether, on the information available to the builder at the time the contract was made, a reasonable person in the builder’s position would have realised such a loss was likely to result from the breach of contract.

The rental accommodation costs were recoverable in accordance with these principles. The owners planned to reside in the under construction property and would not have incurred these rental costs but for the builder’s breach.

The water charges and local government rates, or the mortgage interest repayments, were not compensable because the owners would have incurred these costs regardless of the builder’s breach.

The SAT ordered the builder pay:

• $42,805 as compensation for the costs of rental accommodation; and
• $10,704.85 for the owners’ legal costs.