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Failure to be appropriately licensed to carry out works may result in a serious breach, entitling termination and damages
In this edition, we look at a recent decision in the Tribunal, where a builder was found to be in serious breach of a contract where it failed to ensure that it and its subcontractors were appropriately licensed to carry out the works.
This decision serves as a reminder to builders to ensure that they are only performing works which they are authorised to carry out under the Home Building Act 1989 (NSW)(Act).
Background
In December 2020, the owner entered into a contract (Contract) with the builder to carry out works at the property. The Contract was partly in writing and partly oral. The written component of the Contract comprised text messages. The Contract price was $108,000.
The owner alleged that in March 2021, the parties entered into an additional written contract for additional works.
The Tribunal found that the total price of the two contracts was $143,200, and that the owner had paid $120,000 to the builder in respect of those contracts.
At all material times, the builder held a licence under the Act which authorised him to carry out painting and decorating works only. The scope of work under the Contracts exceeded that authority.
In May 2021, the owner discovered the builder’s licence position. The owner requested that the builder stop work at the property.
The builder admitted that the owner told him to stop work and claimed that the owner unlawfully terminated the Contract. The builder claimed that the owner’s conduct constituted a repudiation of the Contract. The builder claimed that he accepted the repudiation and terminated the Contract.
The owner claimed that the builder had repudiated the contract by agreeing to carry out work under the Contract for which he held no licence under the Act.
According to section 12 of the Act, in so far as it related to the builder, “an individual must not do any residential building work, or specialist work, except as the holder of a contractor licence authorising its holder to contract to do that work.”
The owner’s claim was primarily for a return of the consideration which she had paid to the builder. The builder claimed for unpaid works.
The written elements of the Contract were in Mandarin, and the requirements of the Act concerning the nature and form of contracts were not followed. The parties’ translations of the Contract differed in some respects.
Tribunal’s findings as to the builder’s repudiation
The Tribunal found that the builder had was in serious breach of the Contract, which was sufficient enough to entitle the owner to terminate.
Although the requirement for the builder to be appropriately licensed was not an express term of the Contract, it was implied by virtue of the statutory warranties contained in section 18B(1) of the Act, specifically the warranty that “work will be done in accordance with, and will comply with, this or any other law”.
In this regard, the Act at section 21(1)(a) authorised the builder only to contract to do any residential building work that was described in his contractor licence when it was issued, namely decorating and painting. Further, section 12 establishes an offence under the Act do work outside of the authority conferred by the licence.
The owner was found to be entitled to damages to rectify any defective work carried out by the builder before 7 May and also damages for the cost to complete work not then completed by the builder.
Takeaway
Straying from your licence category is not only an offence under the Act, but has severe consequences under your contract, even if it is not an express term that an appropriate authority is held.
In this regard, it is not enough to have a licence, the scope of the authority and the scope of the work must align.
Authors: Christine Jones & Nicholas Achurch
In the media
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Report pinpoints Aussie neighbourhoods worst hit by mortgage stress More than 1.8 million households are currently in mortgage stress, the report claimed, and that number will spiral with more Reserve Bank rate hikes likely on the way. The Otivo Mortgage Stress Report predicted borrowers in Victoria, New South Wales and Queensland will be hardest hit, as interest rates rise and property values slide. More…
‘Zombie’ houses could be making Australia’s rental nightmare worse. And there could be one next door to you And they are widespread – last year’s census revealed there were more than 1 million unoccupied dwellings, although that was during a time when much of the country was in lockdown and borders had been closed for more than a year. More…
Construction watchdog ABCC, which the government is closing, is still starting court cases The doomed construction watchdog, the Australian Building and Construction Commission (ABCC), is launching fresh court actions even after the government announced plans to shut it down. More…
Metricon Queensland GM quits as company restructures Troubled construction giant Metricon has suffered another blow, as staff prepare for a virtual town hall meeting this week about the company’s future. More…
Published – articles, papers, reports
Construction safety blitz on both sides of the border WorkSafe Victoria and SafeWork NSW are teaming up to help employers and tradies in Mildura and Buronga reduce the risks of falls, crystalline silica dust and other construction safety hazards. Read more here.
Australian Building and Construction Commission – Industry Update August 2022 The ABCC has released their monthly industry update, with this month’s edition focussing on significant changes to the building code, removal of WRMP requirements, and the litigious matters that the Commission is involved in. Read the August 2022 edition here.
Cases
YTO Construction Pty Ltd v Bhatt [2022] NSWDC 348CONSUMER LAW – misleading or deceptive conduct – whether representations were misleading or deceptive – whether representations made to an adjudicator were also made to the plaintiff – whether the representations were made in trade or commerce – whether defendant made the representations – whether defendant was involved in making the representations – whether plaintiff suffered loss or damage because of the representations
Rengasamy v Chief Commissioner of State Revenue [2022] NSWCATAD 272TAXES AND DUTIES — First Home Owner Grant (New Homes) — substantially renovated home
Wong v Novakovic [2022] NSWSC 1072CONTRACTS – Unjust contracts – Contracts Review Act 1980 (NSW) – Whether contract unjust in the circumstances at the time the contract was made – Contract not unjust in the relevant sense despite cross claimant having been under some pressure to sign it. POSSESSION – Leave to issue writ of possession –Leave granted.
Sillitoe v Commissioner for Fair Trading [2022] NSWCATAD 263HOME Building Act – whether evidence establishes a wide range of building construction work experience – whether experience relevant industry experience – Individual contractor licence – General building work – whether evidence that work performed can be verified by witnesses who are not supervisors
O’Loughlin v Commissioner for Fair Trading [2022] NSWCATAD 281ADMINISTRATIVE LAW – administrative review – licensing – endorsed contractor licence – restoration of authority – whether failure to renew due to inadvertence – whether just and equitable to allow restoration of authority – whether Applicant meets requirements for issue of licence – application of Instrument –qualifications
Life Structures Pty Ltd v Burton [2022] NSWCATAP 272BUILDING AND CONSTRUCTION – Whether s 18G of the Home Building Act 1989 (NSW) operated to render void or read down a contractual provision
Legislation
NSW Protection of the Environment Operations (Clean Air) Amendment Regulation 2022 (2022-468) – published LW 19 August 2022 Environmental Planning and Assessment Amendment (Avoided Land) Regulation 2022 (2022-460) – published LW 17 August 2022 Electricity Infrastructure Investment Amendment (Governance and Fees) Regulation 2022 (2022-465) – published LW 19 August 2022 Environmental Planning and Assessment Amendment (Housing Supply) Regulation 2022 (2022-448) – published LW 12 August 2022 Protection of the Environment Operations (General) Regulation 2022 (2022-449) – published LW 12 August 2022 Workers’ Compensation (Dust Diseases) Amendment (Scheduled Diseases) Regulation 2022 (2022-455) – published LW 12 August 2022
Environmental Planning Instruments Nambucca Local Environmental Plan 2010 (Amendment No 27) (2022-471)–published LW 19 August 2022 Parkes Local Environmental Plan 2012 (Amendment No 8) (2022-472) — published LW 19 August 2022 State Environmental Planning Policy (Biodiversity and Conservation) Amendment (Strategic Conservation Planning) 2022 (2022-461) — published LW 17 August 2022 Wollongong Local Environmental Plan 2009 (Amendment No 52) (2022-473) — published LW 19 August 2022
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