Case studies - Home building

​The following case studies reflect decisions made by the former Consumer, Trader and Tenancy Tribunal, which became the Consumer and Commercial Division of NCAT from 1 January 2014.

These case studies should not be viewed as precedents.  They are provided as a general guide only and should not be treated as legal advice or relied upon as such.  All Tribunal matters are determined on the merits of the individual case and the supporting evidence.

Bathroom renovation 

Home building disputes can get very emotional with large amounts of money involved. Conciliation can help people involved in a home building dispute avoid a potentially long and costly hearing.

A couple were renovating their bathroom and to save on costs they bought their own tiles. A tiler was paid $4,000 to lay the tiles, but the finished job was a mess as the tiles were laid crooked. When they confronted the tiler about the quality of work, he offered to come back to fix up any crooked tiles. The owners refused as they were worried the tiler would make it worse. Instead they lodged a claim at the Tribunal seeking $9,000 compensation for the cost of the tiles and labour.

On the day of the hearing, both parties appeared and were asked to attempt conciliation. The conciliation started out badly as the tiler was angry he was not allowed to come back and fix the job. He explained that the tiles they had purchased were extremely difficult to lay and that he did not have enough money to pay them $9,000 compensation.

Everyone agreed that the tiling job had to be re-done and that it would not be a good idea for the same tiler to return to the job. They could not agree, however, about when and how the money would be paid. With the help of some suggestions by the Tribunal conciliator, the tiler agreed to pay $6,500 compensation to the owners by instalments. Their agreement was then made into a binding Tribunal order.

This dispute resolved because the conciliation process allowed the parties to reach a mutually acceptable agreement so that the tiler could afford to pay the owners the compensation. Had the matter gone to hearing, a money order could have sent the tiler bankrupt resulting in the owners receiving no payment.

Conclave of experts 

In cases where the amount in dispute is above $30,000 and where both parties have expert witnesses, the Tribunal may order that the experts meet in a conclave to clarify the issues in dispute with a view to resolving the dispute, or narrowing the issues in dispute.

An application was lodged concerning defective work in a new house, estimated to cost over $100,000 to rectify.  Both parties submitted evidence regarding the extent of the defects and the projected costs to rectify the defective work. Although the defects were well documented, there was considerable difference of opinion regarding liability and the cause of each defect. Both parties had engaged building experts to provide a written report.

At the Directions Hearing, the Tribunal ordered that a conclave of the experts be held. The conclave was conducted on-site and was facilitated by a Tribunal Member with expertise in home building matters. Together the experts reviewed the documentation and examined each defect. The experts agreed on how to deal with many of the issues in dispute including the quality and aesthetics of the floor tiling, damage to the bathroom fixtures and uneven front stairs. However the cause of the wall cracking could not be agreed upon and the issue remained unresolved. The experts then prepared a joint Scott Schedule and signed the Memorandum of Outcome.

At the next Tribunal hearing, the joint Scott Schedule and Memorandum was used to make binding orders on the issues that were agreed upon during the conclave. This then allowed the Tribunal Member to focus on the remaining issues in dispute.

Door installation 

When the Tribunal awards compensation for breach of contract, the underlying principle is that the aggrieved party should, as far as possible, be put in the position they would have been in had the contract been performed.

A home owner engaged a builder to supply and install a number of doors to his beachfront home, including three internal bedroom doors, three exterior door handles and three bi-fold doors with roller mechanisms. As soon as the work was completed the owner was unhappy with the operation of the doors and the quality of workmanship. The new bedroom doors had large gaps around them, the exterior door handles showed signs of corrosion shortly after being fitted, and the bi-fold doors failed to operate properly despite the builder attempting a number of times to fix them.

The owner applied to the Tribunal for compensation claiming the installation of the doors was not performed in a proper and workman-like manner, and that the bi-fold doors and exterior door handles supplied were not fit for the purpose for which they were sold.

At the hearing the owner gave evidence from a number of independent consultants supporting his claim, together with quotes for the rectification of the work. In response, the builder contended that the three bedroom doors were not symmetrical as the existing door jambs were not square. He considered the gaps around the doors to be only a cosmetic issue. The builder also alleged that, because the owner lived in close proximity to the sea, environmental factors were the probable cause of the continued failure of the operation of the bi-fold doors and corrosion of the exterior door handles.

The Tribunal Member found it was the responsibility of the builder to recognise and report the issue about the door jambs at the time of installation so as to avoid the inevitable defect, cosmetic or otherwise, which would arise upon completion of the work. The Member was satisfied the owner had contracted for properly fitted doors which were symmetrically consistent but instead had received a product which was defective and not fit for the intended purpose. Similarly, the Member was satisfied the owner’s request for external door handles that were resistant to the potential corrosive effects of the local environment had not been met. The Member was also satisfied the bi-fold doors were not fit for the purpose for which they were sold as they had failed immediately after installation. The builder’s numerous failed attempts to rectify the doors also led the Member to be satisfied that the doors were defective.

The Tribunal Member found in favour of the home owner and made orders that the builder pay compensation to have the doors rectified so they operated as required under the contract.

Disappearance of builder 

Home warranty insurance provides cover for loss caused by defective or incomplete work in the event of the death, disappearance or insolvency of a contractor or owner builder.

A man purchased a house from two owner builders and subsequently obtained orders from the Tribunal for defective work. He could not however enforce the judgment as the owner builders could not be located. He lodged a claim with his home warranty insurer on the grounds that the owner builders had ‘disappeared’. However, the insurance claim was denied on the basis that the owner builders were found to be living overseas.

The home owner lodged a further application to the Tribunal challenging the insurer’s decision. He asked the Tribunal to determine, as a preliminary matter, whether the owner builders had ‘disappeared’ within the meaning of the home building legislation.

At the hearing, the Tribunal agreed with the home owner’s submission that the Home Building Regulation 2004 [clause 52(3)] and the Interpretation Act 1987 [section 12(1)], could be read together as meaning that “after due search and inquiry, the contractor, supplier or owner builder cannot be found in New South Wales”.

The insurer then appealed the Tribunal’s decision to the NSW District Court. Before both the Tribunal and the Court the central issue was whether, for the purposes of clause 52 of the Home Building Regulation 2004, the owner-builders had “disappeared” so as to allow recourse to the insurance policy.

Ultimately his Honour found no intention in the home building legislation to exclude the operation of section 12 of the Interpretation Act 1987. In reaching his decision, the Judge had regard to the protection of home buyers from undue expense in pursuing and enforcing their rights under the legislation.

The appeal was dismissed and the Tribunal’s decision was affirmed.

Driveway damages 

Section 18B of the Home Building Act sets out the warranties as to residential building work, which include that the building materials used are reasonably fit for the specified purpose or result.

The owners corporation of a strata scheme engaged a paving company to repair the common property driveway with a new waterproofing membrane and surface. Shortly after work was completed, residents reported small cracks and bubbles forming in the driveway surface along the edge of the retaining walls. Several months later after heavy rain there was further puckering and sections of the driveway surface were beginning to lift away. The paving company carried out rectification works on two occasions, including scraping damaged areas, patching and repainting of the driveway, but the problems with the driveway surface persisted.

The owners corporation contacted NSW Fair Trading for assistance. A Fair Trading Inspector attended the premises and found that the waterproof membrane had failed to bond to the concrete surface. The inspector’s report indicated that although the manufacturer’s documentation advised that the product was ‘suitable in trafficable areas’, in this instance the product used was not reasonably fit for the specified purpose. The owners corporation then lodged an application to the Tribunal seeking orders for an amount of money for the removal of the damaged driveway and for a new driveway surface to be installed.

At the Tribunal hearing, the owners corporation stated that it relied upon the contractor’s professional opinion when choosing the driveway surface product. The owners corporation tendered the inspector’s report and produced witness statements from several residents and photographs depicting the condition of the defective surface areas.

The respondent company claimed that the damage was caused by water ingress between the substrate and the waterproof membrane, and alleged that the owners corporation had failed to disclose past water ingress issues. The respondent blamed inadequate waterproofing of the surrounding garden retaining walls and cracks in the concrete slab. The company tendered letters from the product manufacturer and an expert’s report in support of their case.

case. The Tribunal Member accepted that the owners corporation had relied on the company’s expertise for their choice of product and application. The Member found that both the Fair Trading Inspector’s report and expert’s report indicated the chosen membrane product was not suitable for the intended use. The Member also found that the company had failed to properly investigate the condition of the existing substrate, moisture content, traffic usage and other external forces, and had used a material which was not suitable for the intended purpose. This was in breach of the warranties set out in section 18B of the Home Building Act 1989. Orders were made for the company to pay $30,000 in damages to the owners corporation.

Electrical repairs 

Under the Home Building Act 1989, the Tribunal can determine building claims and has power to make orders requiring one party to pay a sum of money to another party.

A woman recently purchased a home, and engaged an electrician to repair some electrical wiring as recommended in the pre-purchase inspection report. After the repairs were carried out, the home owner disputed the amount invoiced by the electrician. She thought she had been overcharged and refused to pay the invoice until the dispute was resolved.

After obtaining two quotes from other electricians, the home owner lodged an application to the Tribunal for orders that she should only have to pay an amount based on those quotes.  During the hearing, the home owner gave evidence that the electrician told her the work would only take one day and he was engaged on a 'do and charge' basis. Instead the work took two days to complete, and she believed this was because the electrician did not carry out the work diligently and often stopped work to talk on his mobile phone.

The electrician claimed that he told the home owner the work would take 'one to two days' but that he would try to complete it in one day. However, the electrical wiring in the house was in poor condition and the work required was extensive. He also claimed that his charges for work and materials were in accordance with industry rates.

After considering the evidence of the home owner and electrician, the Tribunal Member found he was satisfied that the electrician failed to be diligent as claimed by the home owner, and that the electrician's evidence regarding his calculations of the cost of materials were accepted. In relation to the other lower quotes obtained by the home owner, the Tribunal Member stated that those contractors may not have appreciated the condition of the wiring and the amount of work required. Final orders were made for the home owner to pay the electrician the full amount of the invoice.

Incomplete building work 

A building dispute before the Tribunal may include a claim by the home owner for damages for incomplete work and then a cross claim by the builder to recover costs on a ‘quantum meruit’ basis for works performed.

A home owner engaged an unlicensed builder to partially demolish and rebuild an existing bathroom and kitchen in her city apartment for $22,000.  The building contract was to be paid in two stages.  Half-way through construction the builder demanded payment for stage two, but the home owner and builder disagreed as to whether stage one was completed or not.  Shortly afterwards the home owner received a text message from the builder saying that he was stopping construction and returning the keys.  On this basis she changed the locks to her apartment.

As the matter concerned an unlicensed builder, the parties were not required to attempt alternative dispute resolution with NSW Fair Trading, and the home owner lodged an application directly to the Tribunal seeking $8,700 for the incomplete works.  The builder also lodged a cross-application to the Tribunal seeking compensation for the building work already done on a quantum meruit basis.

At the Tribunal, the parties were unable to conciliate and the matter proceeded to hearing.  The home owner gave evidence that the builder had verbally promised to complete construction within 2 weeks, but that issues started to arise right from the beginning of construction.  This included the builder failing to comply with the apartment building’s rules regarding noise and being responsible for two false fire alarms which resulted in fines issued to the home owner by the NSW Fire Brigade.  The builder told the Tribunal that he did not ever agree to completing the work within two weeks.  He also gave evidence that he was fully qualified, although unlicensed, that his work was satisfactory and any minor defects were immediately rectified by his tradesperson.

After hearing the evidence of both parties, the Tribunal found that the contract between the parties was partially written and partially oral, and that the contract did not comply with the Home Building Act 1989. The Tribunal also had issues with the builder’s licence status, the form of the contract, the failure to provide a cooling-off period, and failure to provide home warranty insurance.  The Tribunal was not persuaded that the builder agreed to a two week completion time, but noted that where no completion time was stated in the contact, the Act implied a term that the work would be done with ‘due diligence’ and completed within a reasonable time.

The Tribunal also found that the work was not executed diligently and within a reasonable time.  As a consequence, the Tribunal declined to exercise the discretion to allow a quantum meruit claim and dismissed the builder’s application.

The Tribunal held that the finding above, in combination with the text message from the builder about returning the keys, evidenced an intention by the builder not to be bound by the express or implied terms of the contract.  The Tribunal found that the builder had repudiated the contract and that the home owner had accepted that repudiation.  In those circumstances the Tribunal held that the home owner was entitled to recover damages for completion costs.

Kitchen renovation 

The majority of home building applications are matters where the amount in dispute is $30,000 or less and relate to home renovations. Many of these disputes can be resolved through the Tribunal's conciliation process and the negotiated agreement is turned into a binding order by the Tribunal.

A young couple renovated their kitchen, replacing all the cupboards and upgrading the bench tops to marble. They were very pleased with the work and paid the contractor the full amount on completion. Soon afterwards they noticed a crack in the marble bench top.

The couple approached the contractor who inspected the bench top. He told them that the crack must have been caused by one of the home owners dropping something heavy on the bench causing it to crack. The contractor then refused to take any further action.

The couple took their complaint to their local Fair Trading Centre, and with the aid of an inspector from NSW Fair Trading's Home Building Service, they attempted to resolve the dispute but without success. They were then advised to lodge a claim with the Tribunal seeking an order that the contractor repair the bench top.

Both parties attended the Tribunal and, together with a Tribunal Conciliator they discussed the problems with the bench top. The home owners provided photographs and a report from the bench top supplier which showed that the crack could not have been caused by a falling object, but would have occurred during the installation process. The contractor then admitted that there had been problems during the installation of the cupboards which could have contributed to the crack in the marble. Both parties came to an agreement that the contractor would replace the bench top at no cost. The couple agreed to make arrangements for the contractor to have access to the house to undertake the rectification work. The conciliated agreement was then turned into a binding order by the Tribunal.

Painting 

Under the Home Building Act 1989 a home owner can seek compensation for rectification of defective residential building work where the tradesperson has failed to carry out work in a proper and workmanlike manner.

A couple engaged a painter to paint the outside of their weatherboard house. After the work was completed, the home owners noticed deep gouging on the surface of some weatherboards, and in some areas the paint was blistering and peeling as a result of the weatherboards not being properly prepared before painting. The home owners contacted the painter about the problems but were unable to resolve these issues.

The home owners lodged an application to the Tribunal seeking compensation for rectification of the painting and for replacement of some of the damaged weatherboards. Following the first hearing the parties were requested to negotiate a settlement and provide each other with relevant documents, such as quotes for rectification and any other documents they had that would assist in resolving the dispute. A further directions hearing was held, however the parties were unable to resolve the matter and it was set down for a formal hearing.

At the hearing, the home owners produced copies of the contract, and an expert building report written by a building consultant whose report detailed poor surface preparation, paint blistering and uncontrolled brush marks. The report included a number of photos as evidence to illustrate the problems. The home owners advised the Tribunal Member that they had decided not to proceed with the removal of the damaged weatherboards as part of their claim.

The painter provided evidence in response to the home owners’ evidence and also suggested that some of the damage to the weatherboards may have been caused by the home owners who had used a high pressure jet washer to remove flaking paint prior to the engagement of the painter.

The Tribunal Member reviewed the evidence and found in favour of the home owners’. However, whilst the home owners had claimed the full cost of engaging their building consultant, the Member found that the painter should not have to bear the full cost of engaging the expert.

Orders were made for the painter to pay the home owners the sum of $9,950 for rectification work and some of the cost of engaging the building expert.

Renovating without a contract 

The provisions under the Home Building Act 1989, that residential building work over $1,000 should be undertaken with a contract in writing, are there to provide protection to both consumers and traders in the event something goes wrong.

Home owners wanted to renovate their kitchen and approached an acquaintance, who was a licensed builder, to carry out the building work. There was no formal agreement between the parties for the building works. When the builder completed the installation of the kitchen, the builder was asked to stay on and carry out further renovations to the bathroom. At the completion of the works the home owners were presented with a $17,000 invoice. The home owners were unhappy with the amount invoiced and refused to pay the builder. They commenced proceedings in the Local Court seeking orders not to pay the $17,000 invoice, and an additional order for $1,800 to carry out rectification works. The proceedings were then transferred to the Tribunal for determination.

At the Tribunal hearing the home owners contended the builder was a friend and that no hourly payment figure had been discussed as the builder had stated he preferred a barter system. In contrast, the builder stated they were not ‘friends’ and that the work was completed under a building contract with an hourly rate of $55 for labour. The builder also stated that after he presented the invoice to the home owners, they told him that they did not have enough money to pay but would attempt to borrow the amount.

As there was little evidence of any social interaction between the parties, the Tribunal Member was not satisfied that the parties were ‘friends’ as claimed by the home owners, and therefore their claim of ‘mate’s rates’ and ‘a barter system’ was not accepted. On the other hand, the builder’s account of how the contract was formed was also not satisfactory. While the Tribunal Member did not accept $55 per hour as a term of the contract, the Tribunal allowed the builder the invoiced amount claimed. However, the Member noted that as a licensed builder, he should have been aware of the provisions of the Home Building Act 1998 in particular the requirements in relation to having a contract in writing, insurance and having any variations to the original contract in writing. Therefore the builder’s case had to be made on a ‘quantum meruit’ basis, which is payment of the reasonable value of services performed.

After considering the evidence of the parties, the Tribunal Member made orders that, after an off-set of the amount allowed to the builder, the builder was to pay the home owners $3,400.

Solar panels 

The Tribunal can award compensation for breach of contract where the goods supplied are not in accordance with the contract.

A couple wanted to install solar panels on their home and arranged for a consultation with a solar supply and installation company. The sales consultant recommended the installation of 16 solar panels providing a 3.2kw energy capacity with a high quality German-made inverter. Happy with the recommendations, the couple signed the contract paperwork and made full upfront payment.

On the day of installation, the home owners discovered that only 14 solar panels and a different brand inverter had been provided. They complained to the installers who left without connecting the solar panels to the electricity grid. The home owners were unable to resolve these issues with the supplier and they lodged an application to the Tribunal seeking a refund of the two panels not supplied, $440 for the grid connection and a replacement inverter of the type originally specified.

At the hearing, the home owners produced a chronology of events, copies of the contract, various documents relating to the connection, payment receipts and product information about the inverters. They also asked that their application be amended as the company had since paid for the grid connection, and they were now claiming the difference in value between the two inverters and compensation for the two panels not supplied.

The respondent solar company produce a summary of events, a copy of the contract, documents about the pricing structure of the solar panels, copies of correspondence, a tax invoice and a written statement from the sales consultant. The respondent company said that, although the contract was for 16 panels, there was an error made by the sales consultant about the number of panels required and the required output. The company conceded that it had supplied a different inverter.

The Tribunal Member reviewed the contract between the parties  and found that the home owners were entitled to 16 solar panels with an output of at least 3.2kw,and that the respondent company had supplied goods other than those it ought to have supplied under the contract. The Member considered the quantum of the claim and, based on the parties’ evidence, made an order for the respondent company to pay $2,500 to the home owners.

Unlicensed builder 

Some consumers unknowingly do business with unlicensed builders. Consumers can bring a dispute with an unlicensed builder to the Tribunal, but the Tribunal can only make orders for the payment of money to enable the work to be rectified by a licensed builder.

Water was leaking from the upstairs balcony of a home into the dining room below. The home owners engaged a local builder to repair the cracks in the ceiling caused by the water damage and to repair the balcony to prevent further water leaks. The builder did the work, but the home owners found that the ceiling still leaked and new cracks had appeared.

In accordance with the Home Building Act 1989 all home building disputes must first be referred to Fair Trading to attempt to resolve the dispute. In the course of this process it was found that the owners had used an unlicensed builder.

The owners then lodged an application to the Tribunal seeking orders for the payment of $6000 based on quotations received to rectify the work received from two other builders. When the matter came before the Tribunal, the parties agreed during conciliation that the unlicensed builder would rectify the work.

However the Tribunal cannot make orders for an unlicensed builder to carry out work. Orders were made instead for the unlicensed builder to pay the home owners the $6000 sought so they could engage a licensed builder to do the work.

Variations to contract 

Section 18B(a) of the Home Building Act 1989 requires a builder to perform works in accordance with the plans and specifications set out in the building contract.

Home owners entered into a contract with a builder to construct a project home.  Before signing the contract, the parties agreed to a number of variations, including $2,630 for non-standard balustrades for the verandas.  At the end of construction, overall the owners were happy with their new home, except for the balustrades which they did not like and which were different to what they had chosen.

After the parties had attempted to resolve their dispute through NSW Fair Trading’s Home Building Service, the owners lodged an application to the Tribunal seeking a refund of the variation amount.

During the Tribunal hearing, the home owners claimed that the balustrade did not look as good as they had hoped, and the design meant that cleaning would be more difficult.  They conceded it would be unreasonable to ask for the balustrades to be replaced, so they were only asking for a reimbursement of the money paid for the variation.  The builder agreed that the balustrades were different to those agreed.  He explained that the supplier had changed during construction and he had thought the balustrades ordered were the same as provided by the old supplier.  He did not realise they were different until the practical completion report was prepared.  The builder also argued that, as there was no loss of amenity, the homeowner should not be entitled to a refund.

The Tribunal found that the builder was in breach of section 18B(a) of the Home Building Act 1989 by failing to build the balustrades in accordance with the plans and specifications set out in the contract. The loss suffered by the home owners was considered, and the Tribunal determined that, as the balustrades could be used, that there was no loss of amenity.  In addition, there was no evidence that the installed balustrades damaged or decreased the value of the property.  The Tribunal, however, awarded a sum of money to the home owners to compensate them for their disappointment. ​

2014-09-25