When construction defects arise, owners must decide whether or not to permit the original builder to fix it. Of concern, is whether they are acting unreasonably by not allowing them to do so. The Court explored this issue in The Owners – Strata Plan No 76674 v Di Blasio Constructions Pty Ltd [2014] NSWSC 1067. Here, the Court found that the builder does have the initial right to fix defects if there is an opportunity to do so by the owner. An inadequate response from the builder will result in them losing this right. We examine the guiding principles this case provides on the right to fix construction defects.

Facts of the Case

In this case, the owners of a strata development owners corporation made a claim against the building contractors Di Blasio Constructions (Di Blasio). The claim was due to a breach of the Home Building Act 1989 (NSW) section 18B warranties. The warranties included the obligation on the builder to do work with ‘due care and skill’.

The work by Di Blasio Constructions resulted in various significant construction defects which continued to emerge over time. These defects included defects to the roof and guttering, fire safety defects and defects relating to waterproofing bathrooms and exterior planter boxes, among others.

The owners corporation engaged an expert to identify all the defects and the work required to remediate it. They then provided this to Di Blasio. However, the builder was reluctant to prepare a scope of works consistent with the expert’s opinion and continuously failed to provide appropriate remedies from 2008 – 2013.

In taking the proceedings to court, Di Blasio presented an affidavit which contained an offer to carry out rectification work for $1.00, which was unacknowledged by owners corporation. Di Blasio then argued that the owners corporation’s failure to consider this offer was a failure to mitigate its loss. Furthermore, they claimed that the owners corporation had acted unreasonably in doing so since they were ‘ready, willing and able’ to enter into that contract.

Legal Principles

The court identified several principles in coming to its decision, both in contract law itself and specifically concerning building contracts. They are summarised accordingly:

Contracts in General

  • A plaintiff who suffers a loss due to a breach of contract is required to act reasonably so as to recover the loss. That is, a plaintiff will not be entitled to recover losses if they are shown to have acted unreasonably. The plaintiff will usually have to make reasonable attempts to mitigate the loss;
  • A plaintiff whose property is damaged as a consequence of the defendant’s breach is entitled to recover the costs of reinstating the property so it corresponds to the contract;
  • It is for the defendant to prove the plaintiff acted unreasonably; and
  • Court proceedings are relevant to the obligation to not act unreasonably.

Building Contracts

  • The owner must give the builder a reasonable opportunity to rectify any defects, even if this is not explicitly stated in the contract. This opportunity is to allow the builder to minimise damages.
  • One relevant factor for ‘reasonableness’ is the attempts the builder has made to repair the defects in the past and whether the owner has lost confidence in the willingness and ability of the builder to do the work.

Court’s Decision

The Court found in favour of the owners corporation. Di Blasio had argued that the Owners Corporation acted unreasonably because:

  1. It did not pursue discussions concerning the scope of works to be done; and
  2. It did not accept their offer of a $1.00 rectification contract.

The Court rejected those arguments and found that the owner had acted reasonably because:

  1. It took the reasonable step of engaging an expert in identifying the defects;
  2. It took the reasonable position that the builder should prepare a scope of works to remedy the defects identified, and that subsequently the builder’s response was inadequate;
  3. The expert’s report was reasonable and correctly identified the defects, which the builder was reluctant to accept; and
  4. It took the reasonable view that it could no longer have confidence in the builder and that it wanted someone else to undertake the rectification work.

What Should You Do If Construction Defects Arise?

This case confirmed that where defects are found, building owners do have an obligation to allow the original building contractor an opportunity to fix these defects. This opportunity will allow the builder to minimise the damages and costs it will have to pay.

However, the contractors can lose this right if the owner can show that they acted reasonably in their conduct and that they have lost confidence in the builder’s willingness and ability to do the work.

Where defects arise, building owners should ensure that they have consulted with the builder and given them chances to rectify the issue. For building contractors, be aware that you can lose your right to rectify a defect and minimise damages should your response be inadequate.

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If you have any further questions about construction defects and your rights concerning them, LegalVision is more than happy to assist. Get in touch with our qualified construction lawyers today on 1300 544 755.

Lianne Tan

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