The Owners – Strata Plan No 64757 v Sydney Remedial Builders Pty Ltd [2024] NSWCA 85

Andrew Hales  |  Karen Hanigan  |  Jenny Lin

Key takeout

• In determining the date of completion of residential building work, the court will consider the application of section 3B of the Home Building Act 1989 (NSW) (HB Act) and will give the wording of the building contract its ordinary meaning.  This includes looking at whether the contract provided for ‘completion’ or ‘practical completion’, which are distinct and separate terms, and are vital to understand in determining when time begins to run for the statutory warranty period under the HB Act. 

• A contract that provides for practical completion, but not completion, will not satisfy the requirements of section 3B(1), such that the date completion occurred must be determined under sections 3B(2) and 3B(3).

Facts

On 4 November 2008 the owners and the builder entered into a building contract.  At this time, the HB Act provided that proceedings for a breach of a statutory warranty must be commenced within 7 years after the completion of the work (section 18E).

In 2011 the Act was amended to include section 3B, which has a retrospective operation.  Section 3B provides that completion of residential building work occurs either:

• on the date that the work is complete within the meaning of the contract (section 3B(1)); or
• if the contract does not provide for when work is complete, ‘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 (section 3B(2)).

Section 3B(3) of the HB Act provides for a presumption that practical completion occurs on the earliest of whichever of the dates set out at section 3B(3)(a)-(d) can be established for the work (unless an earlier date for practical completion can be established).

The contract did not define when works were complete, but provided for when works reached practical completion, adopting substantially the same wording as section 3B(2).

On 16 March 2019 the owners commenced proceedings against the builder seeking damages for defective building work pursuant to the HB Act.  The builder argued that the proceedings were commenced more than 7 years after completion of the work and were out of time.

Primary decision – proceedings out of time

The primary judge, Rees J, found that the contract did not identify when the work was complete as the relevant clauses only provided for practical completion.  Her Honour therefore considered sections 3B(2) and 3B(3) to identify the date upon which practical completion occurred.  Her Honour found, applying section 3B(3)(b), that the builder was likely last on site on 3 March 2012, although it was possible the builder returned to site on 8 March 2012.  After that date, any further work carried out was additional work beyond the scope of the contract.  Her Honour therefore found that the proceedings were out of time and dismissed the proceedings.

The owners applied for leave to appeal and argued that the contract should be regarded as identifying a date for ‘completion’ of the work for the purposes of section 3B(1), rather than ‘practical completion’ under sections 3B(2) and (3), which only address circumstances where the contract is silent on the method of determining practical completion.

Decision  

The Court of Appeal upheld the primary judge’s decision and confirmed that the proceedings were commenced more than 7 years after completion of the work and were out of time.  Leave to appeal was refused and the owners were ordered to pay the builder’s costs of the application.

Rees J correctly identified that section 3B draws a distinction between the terms ‘completion’ and ‘practical completion’.  The owners’ submissions conflated the two terms.

The contract definition of ‘practical completion’ was substantially equivalent to the wording of section 3B(2).  There was no basis for concluding that the parties were to be regarded as having made provision for the different concept of ‘completion’.  To the contrary, when the building contract refers to ‘practical completion’, the words should be given their ordinary meaning, as opposed to ‘completion’.