Negligence claims in domestic building disputes

An earlier article by Dundas Lawyers Gold Coast Pty Ltd looked at the need for domestic building contracts to confirm with the provisions of either section 13 or 14 (as the case may be) of Schedule 1B to the Queensland Building and Construction Commission Act (Qld) 1991 (QBCC Act) in order for a party to be able to enforce the contract.  In summary, if a domestic building contract does not comply with the requirements of the QBCC Act, it is not enforceable.

While non-compliance more commonly creates difficulties for a builder trying to recover money claimed for building work performed, homeowners can also encounter difficulties when confronted with incomplete or defective building work performed under a non-compliant contract, as illustrated in the case of Cerda v Jacob [2020] QCATA 57 (Cerda).  

Background to the Cerda case

In Cerda the contract had been reduced to writing and signed by the parties, but it had not been dated.

The Queensland Civil and Administrative Tribunal (QCAT) at first instance found that:

• elements of the scope of works performed were defective;
• other elements of the scope of works had not been performed at all; and
• remediation of the defective works and the costs associated therein were necessary and reasonable.

QCAT noted that a failure of a regulated contract to comply with the necessary requirements of Schedule 1B to the QBCC Act, such as it not being dated, meant that it was void and unenforceable by either party.  For the homeowners, this meant protections afforded under a regulated domestic building contract such as statutory warranties were unavailable.

Assessment of damages in Cerda

In respect of the defective and incomplete works, the homeowners’ rights fell not under the contract, but had to be assessed based upon claims in tort (i.e. civil wrongs) for negligence in accordance with the Civil Liability Act (Qld) 2003 (CLA) and the relevant principles relating to breach of duty and restitution.

Where a builder is in breach of a contract, the quantum of damages is the cost of bringing the works into conformity with the contract, being the difference between the contract price of the works and the reasonable cost of making the works conform to the contract.  In tort negligence claims, the claimant is entitled to damages to put them back into the position they would have been but for the commission of the negligent act, the measure being the cost of the work necessary to remedy the defects.

Had there been a QBCC Act compliant contract, certain warranties would have been implied into it, including that the building works would have been carried out in an appropriate and skilful way with reasonable care and skill.  Under the CLA, the duties owed to the homeowners could be expressed in terms similar to the warranties implied by the operation of the QBCC Act.

The Appeal Tribunal affirmed the findings of the QCAT at first instance that the works performed were not carried out in an appropriate and skilful way with reasonable care and skill.  In other words, they had been negligently performed and were defective.

In those circumstances the measure of the damages to be allowed to the homeowners was the cost of bringing the works into conformity had they been carried out in an appropriate and skilful way.  This was different to the measure or assessment of damages under contract, which would have been the cost to achieve conformity with what was required under the terms of the contract.  This meant that as there was no enforceable contract, the homeowners were not entitled to damages for the costs incurred in getting a third party to complete the incomplete work as this was completion works, rather than rectification works.  Accordingly, that element of the homeowners’ claim was disallowed.

Takeaways

For many people, entering into a domestic building contract will be one of the most significant commercial transaction of their lives.  Taking independent legal advice about its ramifications before entering into it is a comparatively small but prudent investment.

Links and further references

Cases

Cerda v Jacob [2020] QCATA 57

Legislation

Civil Liability Act (Qld) 2003

Queensland Building and Construction Commission Act (Qld) 1991

Related insights

Building disputes and arbitration clauses

Implications of non-compliance with the Queensland Building and Construction Commission Act (Qld) 1991

Termination for incomplete construction work

Further information about domestic building contracts

If you need assistance regarding domestic building contracts, please telephone me for an obligation free and confidential discussion.

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.