Jandson Pty Ltd v James [2021] NSWCATAP 274

Andrew Hales, Adriaan van der Merwe, Jack McFadden

Key takeouts

Statutory limitation periods do not commence on the issue of an occupation certificate under the terms of the standard form Housing Industry Association (HIA) contract. They commence upon practical completion, which may be earlier depending on whether the scope of work includes all work required for an occupation certificate.

Facts

James (owner) entered into a contract with Jandson Pty Ltd (builder) under the standard form HIA conditions to construct a residential building in March 2009.  Practical completion was reached on 8 July 2010, and a final occupation certificate was issued on 20 October 2010.  The owner subsequently complained about alleged breaches of the statutory warranties under the Home Building Act (HBA), due to water penetration in various locations.  The builder attended on a number of occasions to rectify this issue, however, the water penetration continued.

In July 2017 the owner’s solicitor wrote to the builder alleging breaches of statutory warranties and proposing that the builder undertake the scope of works outlined in the owner’s expert’s draft report.  At an on-site meeting, the builder rejected this solution, and in an email of August 2017 sent from the builder to the owner’s solicitor the builder proposed an alternative scope to rectify the water penetration (builder’s letter).  The builder commenced the works outlined in its letter but did not complete them.

In June 2019, the owners commenced proceedings in the NSW Civil and Administrative Tribunal claiming that the works were defective.  The owner claimed that the proceedings were brought within the 7 year statutory limitation period as the builder’s letter constituted a separate contract.  The Tribunal found in favour of the owner and ordered the builder to carry out the works specified in the owner’s expert report.  The builder appealed the decision on grounds which included that the Tribunal made errors of law in relation to contract formation, consideration and the completion date.

Decision

The Appeal Panel upheld the appeal finding that the owner’s application to the Tribunal was out of time as the parties did not enter into a new contract or vary their original contract and the relevant building works were completed under the contract before the final occupation certificate was issued.

The owner’s draft expert report was considered to be an offer, it was expressly rejected in the builder’s letter, which the Appeal Panel found to constitute a counter offer.  Additionally, there was no evidence that the owner was aware of the builder’s counter offer, as this was sent to the owner’s solicitor and the evidence did not support a conclusion that the owner’s solicitor had accepted the offer or that he was authorised to do so.

The Appeal Panel did not need to determine the adequacy of consideration but nevertheless did so.   The Appeal Panel found that the consideration was good, as it was sufficiently clear that had the builder agreed to undertake the scope of works proposed by the owner, and the owner would not have sued.

The date in the final occupation certificate was not the date when the building works were completed and from which the statutory period ran.  Based on section 3B(1) of the HBA, the statutory period commenced on completion of the building works within the meaning of the HIA contract. This meant when practical completion was achieved.  Based on the interpretation of the HIA contract, the statutory period should have commenced when the works reached practical completion, being 8 July 2010.