Builders and developers responding to claims brought against them in the NSW Civil and Administrative Tribunal (NCAT) for alleged defective building work need to ensure that, if they are ultimately found liable or they otherwise admit liability, they be given the opportunity of rectifying the defective work, under their own management and control, as opposed to the costlier alternative of being ordered to pay damages based on quantum evidence presented by the applicant at the hearing (typically infused with contingency and supervision costs, allowance for profit and overheads, etc). The circumstances in which NCAT will make such orders under section 48MA of the Home Building Act 1989 (HB Act) – permitting the builder or developer to rectify the defective work – must always be kept in focus. The recent decision of Galdona v Peacock  NSWCATAP 64 provides some guidance on when the Tribunal may, or may not, make such orders.
Galdona v Peacock  NSWCATAP 64
In the decision at first instance, the member found the Builder liable for substandard and defective building work, and determined that the appropriate remedy was for the defective work to be replaced. The member ordered the Builder to pay the Applicant the costs of the replacement works based on quantum evidence lead by the Applicant.
The Builder appealed the decision to the Internal Appeal Panel of NCAT (Panel), constituted by two Senior Members of the Tribunal. The Builder contended that the member made two errors. Firstly, the member failed to give reasons for deciding that replacement of the defective work was preferred over rectification of the defective work. Secondly, the Builder contended, the member failed to have regard to a relevant consideration, namely, whether the rectification or replacement work could have been carried out by the Builder as contemplated by s48MA of the HB Act.
In addressing the first ground of appeal, the Panel reviewed the available transcripts, which the Panel acknowledged did not record the entirety of the proceedings. The Panel cited various extracts from the transcripts, including observations of the member (at para.):
The work generally is of a poor standard
These issues show very poor attention to detail and finish by the contractor
I have severe reservations as to the contractor’s ability to rectify the work with due care and skill
On the strength of these fairly critical observations from the member, the Panel was of the view that adequate reasons had been provided – regarding the quality of the work – to justify why the replacement of the defective work was preferred over rectification.
Section 48MA of the Home Building Act 1989
The Builder’s second ground appeal focused on s48MA of the HB Act. Section 48MA provides:
A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
Section 48MA was introduced into the HB Act by amendments set out in the Home Building Amendment Bill 2014. The Home Building Amendment Bill 2014 commenced on 15 January 2015 (except in respect of some provisions which commenced on 1 March 2015, not relevant to the subject proceedings). In many respects, the introduction of s48MA was a further development or elaboration of the Tribunal’s power set out in s48O(1)(c)(i) of the HB Act, which provides the Tribunal with power to order a party to “do any specified work or perform any specified service or any obligation arising under this Act …”
The Builder argued that the member failed to have regard to the appropriateness of making a rectification order under s48MA. The Panel, after reviewing the oral reasons given at judgment, summarised the member’s reasons for not making a “rectification order” in the circumstances:
- the relationship between the parties had broken down.
- the Builder did not acknowledge the poor standard of the work carried out.
- the member had “severe reservations as to the contractor’s ability to rectify the work with due care and skill”.
However, the Panel went on to find that while the member “did consider a work order which he was entitled to make” pursuant to section 48O(1)(c)(i) of the HB Act, “he did not refer to the requirements of section 48MA of the Home Building Act.”. . That was a relevant consideration, which was not addressed by the member. On that basis, the Builder’s second ground of appeal was prima facie made good.