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In a typical residential defects claim in NCAT, a homeowner will make a claim against their builder that it did not complete construction works in accordance with the construction contract and/or in accordance with statutory warranties under the Home Building Act 1989 (NSW) due to allegations the construction works are defective.

Generally, the homeowner will engage an expert to provide an expert report which amplifies the type of works which would be classified as defective and the value to rectify the alleged defects. The builder will then engage an expert to provide a response to the homeowner’s expert report which downplays both the works classified as defective and the value to rectify the alleged defect.

In these circumstances, there will typically be a large disparity between the value of the alleged rectification works by the homeowner and the builder. Accordingly, this makes it more difficult to settle the matter due to this large disparity leading to unnecessarily time consuming cases and increased legal costs.

Under section 48O of the HBA, NCAT is empowered to make orders which it considers to be appropriate which includes work orders. A work order is essentially an order by NCAT that the builder is required to perform certain construction works to a property – usually rectification works for alleged defective works under a construction contract. It should also be noted that sub-section 48O (2) of the HBA makes it clear that NCAT may make orders even if neither party seeks it, including work orders.

Amendments to the HBA under section 48MA now state that when determining a building case in NCAT for claims for defective work, the Member is to have regard to the principle that rectification of alleged defective works is the preferred outcome. This essentially means a Member of NCAT must prioritise ordering work orders above any other orders, including any momentary claims by the homeowner. It should be noted there is no criteria under the HBA, it is up to the discretion of the member.

Work orders can be beneficial for builders for the following reasons:

  1. Monetary claims by homeowners tend to amplify the type of works that are classified as defective and the value to rectify alleged defects. Furthermore, a monetary claim may also include the new builder’s margin and typically a new builder completing rectification works charge a premium as they may have to provide a warranty for some of the previous builder’s construction works.
  2. If the builder is able to complete rectification works under a work order, the builder may be able to have the previous subcontractors complete the works under the warranty provisions of the contract or even as a favour at little to no cost to the builder.
  3. Even if the builder is required engage new subcontractors to complete the works, this tends to be a cheaper alternative than having a new builder complete the rectification works and being sent the bill.

A further clause under the HBA which benefits the builder is sub-section 92(5) of the HBA which states a builder will not generally be required to take out further home warranty insurance where the original contract works were insured.

The downsides for a builder being given a work order are as follows:

  1. There may have been a breakdown in the relationship between the builder and homeowner to the point where it is unrepairable making it difficult for the builder to return to site.
  2. The homeowner may have moved into the property and the builder will have to rectify the property whilst the homeowner’s belongings are in the property.
  3. The builder may have to undertake works within the scope of works ordered by NCAT which are costly.
  4. The homeowner may be able to renew the claim in NCAT is they are unhappy with the rectification works.

Recent cases

In NCAT Proceedings Economos v P & T Athos Constructions Pty Ltd [2016] NSWCATCD 89, the homeowner claimed a monetary sum for defective works against the builder. Neither the builder nor the homeowner sought a work order under the HBA. Accordingly, member Goldstein did not make a work order due to the reluctance on both sides to seek a work order. This decision indicates NCAT appears unlikely to order a work order when neither party seeks it, despite the preference for it under the HBA.

In NCAT Proceedings Porthaze Pty Limited v Friend [2016] NSWCATCD 31, the homeowner made a claim for defective works and sought a work order from the builder. The builder provided evidence that it would rather pay a monetary sum for rectification rather than a work order due to “persistent hostile and rude comments and constant interruptions, criticisms and directions by the owners.” Member Goldstein stated at paragraph 39:

“The principle that rectification of the defective work by the responsible party is the preferred outcome, not the mandatory outcome.”

Member Goldstein considered the principles under section 48MA of the HBA for the preference of a work order, but balanced this against the evidence. Accordingly, Goldstein made an order for the builder to pay a monetary sum for the rectification of the alleged defective works rather than a work order.

NCAT are obligated to favour work orders in building defect claims under the HBA. Work orders can be very much in favour of the builder rather than the homeowner. However, NCAT appears reluctant to enforce work orders if neither party apply for them or when the homeowner seeks a work order, but the builder does not want it and can provide sufficient evidence to support their reluctance.

 
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