When you discover a building defect on your property, your first reaction may be to pursue an action against the builder contracted to complete the work. But what if your builder goes into liquidation and you can no longer bring an action? When your builder goes into liquidation, you become eligible to access the Home Building Compensation Fund (HBCF). However, compensation provided from the HCBF is capped at $340,000. What if your loss is double that?

A decision by the Court of Appeal in the ACT reaffirmed that certifiers may also be liable for building defects. They have a duty of care to ensure that building works, at the completion of each stage, meet the required standard.

A successful case against a certifier is rare

In the case of Asset Building Certifiers Pty Ltd v Hyblewski [2020] ACTA 21, the Court held that the appellant who was the certifier of the building was responsible for building defects which he failed to recognise during inspections.

Construction started on the block of land purchased by the respondent in 2012. On 9 November 2012, the appellant issued a certificate at the “pre-slab” stage inspection and a second at the “pre-sheet” stage in February 2013. However, at both stages of construction, the works were defective.

Once the building was complete, a dispute arose over various defects resulting in the owner suing the certifier in the Supreme Court of the ACT.

The Court held that there was an implied term in the contract between the owner and the certifier which required the certifier to carry out the work with due care and skill. The Court found that the certifier had breached this obligation by issuing the certificates and failing to identify the various defects.

The key is to identify a causal connection

The key issue that arose in the Hyblewski case was whether there was a causal connection between the certifier’s breach and the owner’s loss. This meant that the actions of the certifier in failing to recognise the defects during the course of construction must have caused the owner’s loss.

The certifier argued that there was no causal link, as the builder’s defective work already existed at the time the certificates were issued. This argument was unsuccessful as the Court found that had the certifier issued a written notice to the builder rather than issue certificates, the builder most likely would have fixed the defects. Therefore, the Court found that the defects were caused by the certifier’s breach of duty.

When assessing the causal link between an action and the damages, the Court will consider what the various parties (such as the certifier, the owner and the builder) would have done had the certifier exercised reasonable care and skill. The Court will also look at whether the owner would have suffered the loss and damage as a result.

In some circumstances, certifiers can be found liable for defective building work (in addition to the builder). In this instance, the Court found that there was a causal link, as the certifier is responsible for assessing a builder’s work for compliance and allowing work to either continue or stop.

The owner’s vulnerability may determine the existence of a duty

There have been cases in NSW where the courts have been reluctant to find that principal certifying authorities owe a duty to take reasonable care when issuing occupation certificates. In Chan v Acres [2015] NSWSC 1885. the Supreme Court of NSW placed significant weight on the need to establish actual reliance and the owner’s vulnerability, to the extent that an absence of vulnerability may be determinative against the existence of a duty.

In Chan v Acres, an owner builder renovated his property and obtained an occupation certificate. The renovation contained structural defects. The property was sold to the plaintiffs who sued the certifying authority, the vendor and the structural engineer. At the first instance, the Supreme Court held that the plaintiffs were vulnerable because it was reasonably foreseeable to the certifying authority that a purchaser would suffer loss if defects were not identified and rectified before sale.

The certifying authority appealed and the appeal was allowed because the Court of Appeal found that the plaintiffs failed to establish the relationship of “vulnerability” and “reliance” between themselves and the certifying authority. The Court held that the plaintiffs could have protected themselves by negotiating the terms in the contract of sale with the vendor.

It was also noted that the role of a certificate is to show suitability of a building for occupation and this “does not require that all of the building work… has been carried out in accordance with approved plans and specifications, and in a proper and workmanlike manner.”

Pursuing an action for building defects

A defect in construction law refers to work that has not been performed in accordance with the standards and requirements of the particular contract.

Matters that will be taken into consideration in determining if there is a defect may include:

  • the quality of any work and the standard of workmanship;
  • whether design directives have been followed and correct materials have been used; and
  • whether the works have been performed in accordance with contractual specifications and drawings.

If you believe that defective building work has occurred on your property, you should act quickly. Knowing your rights and the relevant time limitations in pursuing a claim for defective work will empower you to take the appropriate steps to have the work rectified.

If you need more information, assistance, or advice on how to proceed please call us on (02) 9963 9800 or via our contact form. To learn more about how Etheringtons Solicitors can assist you, please visit our blog here.