The Owners – Strata Plan 87003 v Raysons Constructions Pty Ltd [2025] NSWSC 66

Andrew Hales |  Harkiran Kaur  |  Brooke Srour

Key takeouts

• In circumstances where a breach of statutory warranty under section 18B of the Home Building Act 1989 (NSW) (HB Act) becomes apparent within the last 6 months of the warranty period, s18E(1)(e) of the HB Act provides that proceedings may be commenced within a further 6 months after the end of the warranty period.
  
• To obtain the benefit of section 18E(1)(e), the party relying on the entitlement must show that it first became aware (or ought reasonably to have become aware) of the breach of warranty within the last 6 months of the warranty period.
  
• It is essential to distinguish between a defect and a breach of warranty. A defect is a physical thing and a breach of warranty is a legal conclusion about the way in which residential building work has been performed.
  
• The specific breach of warranty being claimed must have become apparent within the last 6 months of the warranty period and not earlier. Earlier awareness of a defect will not necessarily disentitle a party from the benefit of section 18E(1)(e).
  
• Awareness of the breach of warranty can be ascertained by the court on the basis of subjective awareness (a party’s actual knowledge of the breach of warranty) or objective awareness (the party ought reasonably to have been aware of the breach). 

Facts

In November 2020, The Owners – Strata Plan 87003 (owners) commenced proceedings in the NSW Civil and Administrative Tribunal (NCAT) seeking damages, alternatively a work order, against Raysons Constructions Pty Ltd (builder) for breaches of the statutory warranties in section 18B of the HB Act.

The 6-year warranty period for major defects specified by section 18E of the Act expired in July 2020. The owners claimed all defects were major defects such that they could rely on the extension of time to commence proceedings after the 6-year warranty period expired. The owners had commenced proceedings 4 months after the expiry of the warranty period. The builder argued that the proceedings had been commenced out of time and therefore NCAT did not have jurisdiction.

At first instance, NCAT determined that some of the owners’ claims were made in time and ordered the builder to perform rectification works, on the basis that whilst the owners were aware of the defects as early as 2014, the owners were not aware that the defects amounted to breaches of statutory warranty. The builder appealed NCAT’s findings. The appeal panel accepted the builder’s submissions that the owners were out of time. The appeal panel stated that NCAT at first instance could not reasonably conclude that the owners being aware the building was suffering from water ingress problems did not amount to breaches of statutory warranty.

The owners appealed to the Supreme Court of NSW

Decision

The court allowed the appeal, agreeing with the owners that the appeal panel’s failure to properly construe section 18E(1)(e) led to a manifest legal error and set aside the orders made by the appeal panel. This had the effect of the proceedings reverting back to the appeal panel for a factual determination of the timing of the owners’ awareness of the alleged breaches of warranty.

Whilst the court was not asked to and could not make a determination of fact regarding whether the owners had awareness of the breach within the time stipulated by section 18E(1)(e), the court nonetheless provided useful commentary as to how section 18E(1)(e) operates.

Central to the issues arising in the appeal was what is meant by ‘becomes aware (or ought reasonably to have become aware) of the breach‘. In answering this, the court stated that it is essential to distinguish between a defect and a breach of warranty. A defect is manifested in the structure of the building, whereas a breach of warranty is a conclusion involving one or more of the statutory warranties implied by section 18B of the HB Act.

There was evidence of complaints of certain defects and issues between 2014 and 2020, including emails between the strata committee and the strata manager and notices provided to the builder of those defects.

The builder contended that in light of the awareness of defects in the building as reflected in the evidence, the tribunal should have found that the owners were first aware, or ought reasonably to have been first aware, of the breaches of statutory warranties before the last 6 months of the warranty period.

The court found that it does not follow from an awareness of a defect that there is an awareness of a breach of warranty.

The court also rejected the idea that any awareness of a breach of warranty before January 2020 would invalidate all of the owners’ claims. Instead, each breach must be considered individually to determine if it was or should have been known before the final 6 months of the warranty period. This interpretation aims to avoid unfairness and ensure that claims manifesting at the end of the warranty period can still be pursued.

The court confirmed that the onus rested with the owners to establish the facts which enable them to fall within the additional 6-month window to sue pursuant to section 18E(1)(e).

The court found that it is necessary to consider the entirety of the knowledge obtained in the first 5.5-year period and then determine whether nonetheless a plaintiff was not aware and ought not reasonably have been aware of the breaches of statutory warranty which it seeks to advance in proceedings commenced after the 6-year warranty period, but within the 6 month window for which section 18E(1)(e) makes provision.