Absolute Tiling Solutions Pty Limited was contracted by Built Holdings Pty Limited to supply materials and do tiling work at Shaun Bonett's property under two contracts. Whilst engaged in that work, Mr Bonett requested Absolute do some work additional to that contracted with Built, and further agreements were entered into between Absolute and Mr Bonett in respect of the additional work.
Absolute has not been paid for that work and commenced proceedings against Mr Bonett. Mr Bonett alleged that Absolute is not entitled to claim under the contract because of certain provisions of the Home Building Act 1989 (NSW), which Absolute, for the purposes of these proceedings, has accepted.
In the result, Absolute claims it is entitled to a fair and reasonable value of the work under the principle of quantum meruit. Mr Bonett says Absolute is not entitled to that remedy. In addition, he also asserts a number of defects in the work, which have been narrowed to now comprise five aspects of the work, and also he maintains a claim in conversion in respect of some materials. It is not yet apparent that there is any issue about the quantum of any particular claim, but the principal issues in the proceedings appear to be:
1. Is the plaintiff able to maintain the quantum meruit claim for a fair and reasonable sum for the work;
2. Are there defects arising from the work of Absolute in respect of the main kitchen marble benchtops, the cabana marble benchtops and table, the marble floor tiles in the ground floor guest toilet, the floor tiles in bathroom 1, and the swimming pool tiles; and
3. Did Absolute convert to its own use any tiles owned by Mr Bonett.
The trial has commenced, affidavits read and exhibits tendered. The oral evidence arising from cross‑examination of witnesses is yet to occur.
In respect of issue (2), the defects, Absolute says all but the final claimed defect, that is, the swimming pool tiles, are statute-barred. This issue arises as follows.
Mr Bonett claims, in his defects claim, that Absolute has breached certain warranties implied by s 18B of the Home Building Act, in particular the warranty that the work will be done with due care and skill in s 18B(1)(a).
Section 18E says that proceedings for breach of a statutory warranty, and it appears to be undisputed that the reference to a "statutory warranty" is a reference to the warranties implied pursuant to s 18B, must be commenced before the end of the "warranty period". The warranty period is two years in respect of defects other than major defects. A major defect is defined to be a defect that causes, or is likely to cause, either a part of the building to be uninhabitable or unable to be used for its intended purpose, or to cause destruction or threat of collapse of a part of the building. So far as appears, Mr Bonett does not assert his tiling and marble complaints constitute major defects. Thus, his proceedings for a breach of a statutory warranty, that is, his defect claim, "must be commenced" within two years from the date of "completion of the work to which it relates", according to s 18E.
Absolute says that completion of the work to which Mr Bonett's defects claim relates, apart from the swimming pool tiles, was completed, at the latest, by the end of May 2018, more than two years before the date Absolute asserts the proceedings were commenced.
There is no reference to a limitation defence in the defence to cross‑claim. Absolute seeks leave to amend to plead a defence in reliance on s 18E. Mr Bonett resists the application on the grounds of unexplained substantial delay, wasted costs and unfair prejudice.
On the application, Absolute tendered an expert report of Steve Alexander, the plaintiff's defects expert. Both parties in submissions occasionally referred to other evidence in the trial without objection.
Absolute says, first, that it clearly raised the limitation issue four months ago when it served Mr Alexander's report. It is not in contest that Mr Alexander in his report repeatedly refers to the two-year warranty period, the distinction between major and minor defects, and s 18E of the Home Building Act.
In a joint report prepared in July 2021 by Mr Alexander and the defendant's expert, Neil Wallace, there are repeated references to "Minor defect; notified outside warranty period" in the section containing Mr Alexander's comments. Mr Wallace did not address this subject.
Secondly, Absolute asserts that there is no real prejudice since the evidence on the matter has already been prepared and admitted.
Thirdly, Absolute refers to the cross‑claim of Mr Bonett, which does not, in terms, refer to the benchtops, to the ground floor guest toilet, or bathroom 1 tiles, but states in para 16, "Further particulars to be provided in the course of evidence and subsequent to any building report". No further particulars were provided, although Absolute regarded the expert report of Mr Wallace, served 19 February 2021, as identifying the particular breach as alleged. Absolute submitted that this indicated that the strictness of pleading had not been a characteristic of the proceedings.
Mr Bonett raised the matters earlier referred to, namely, the lack of an explanation for the substantial delay, the wasted costs, an unfair prejudice, and also the effect on the Court's case management. Inherent in his submission of prejudice and wasted costs was the claimed need for an adjournment if the amendment was allowed. Mr Bonett submitted that Mr Wallace had not dealt with whether the defects were minor or major, or with the date of completion of the works, and thus the cross-claimant was prejudiced by not having put on evidence relating to those matters.
An issue also arose in Mr Bonett's submission as to whether the warranty period specified in s 18E had a substantive effect on the content of the warranty, as well as the effect of precluding claims made after the period.
Mr Bonett disputed a wider effect of the provision, relying on the New South Wales Civil and Administrative Tribunal decision of The Sydney Building Company Limited v Sinac. [1] Mr Bonett relied on Sinac to submit that s 3B of the Home Building Act, and the "date of practical completion" informs the date of "completion of the work to which it relates" in s 18E, and therefore it was submitted that the "warranty period" could not inform the content of the warranty.
Mr Bonett also referred to r 14.14 of the Uniform Civil Procedure Rules 2005, that matters which may take a party by surprise must be specifically pleaded, including a "statute of limitation" defence, and maintained that what is included in the evidence are not pleadings.
Mr Bonett also sought to draw a distinction between the particulars foreshadowed in para 16 of the cross‑claim, which were, in substance, provided by Mr Wallace's report, and a limitation defence, which could not be provided by the expert report of Mr Alexander, particularly since Mr Alexander was not instructed to comment on the limitation point.
Mr Bonett also submitted that a proper explanation is not a subsidiary point, and is commonly done by affidavit, referring to Hannaford v Commonwealth Bank of Australia [2014] NSWCA 297 at [21].
Mr Bonett also referred to Matteo Gotti's evidence in an affidavit read by Absolute that some work was carried out in about October 2018, [2] and that the cross‑claim was filed on 22 June 2020.
In reply, Absolute submitted, first, that whether the warranty period in s 18E was merely procedural or substantive, was seriously arguable and should not preclude leave.
Secondly, Absolute said that only the asserted defective pool tiling was the subject of the cross‑claim if the cross‑claim did not embrace the contents of Mr Wallace's report. So either the residual defect claims were made in May 2021 by the service of that report, or they remain outside the ambit of the claim.
Thirdly, Absolute queried the need for further evidence on this limitations issue and referred to the date of the completion of the work to which the defects relate, including Mr Bonett's evidence in para 25 of his affidavit dated 19 February 2021, that "As far as I am aware, Absolute completed the tiling work...in or about July 2018".
Absolute also referred to some matters in the statement of claim and defence, indicating that the completion date of May 2018 may not have been in issue.
Finally, Absolute opposed any adjournment at least until the conclusion of the three‑day period estimated for the trial.
[2]
Analysis
One aspect of Absolute's proposed limitation period defence is that the defects claim was not commenced until the service of Mr Wallace's report. This submission may be misconceived. The present cross‑claim proceedings were commenced on 22 June 2020, and if the cross‑claim includes a claim for the defects asserted, that is the "date of commencement". It may be that the cross‑claim did not initially embrace the current defects, but that may be immaterial. If Mr Wallace's report operated to amend the cross‑claim by adding defects of the asserted breaches, or adding breaches, amendments have effect from when the proceedings were commenced, according to s 65 of the Civil Procedure Act 2005.
Of course, if Mr Wallace's report did not operate to expand the terms of the cross‑claim, then some of the defects claimed are not within the pleading; in particular, those that do not involve the swimming pool tiles or sealing of tiles. The marble benchtops and any other claimed defects in the tiles fall outside the allegations in para 16 of the cross‑claim unless Mr Wallace's report expands those allegations.
An earlier "date of commencement" ‑ that is, at the date of filing the cross‑claim ‑ does not, however, destroy the utility of a limitation defence, since Absolute asserts that the relevant work was completed more than two years prior to the commencement of proceedings, that is, more than two years prior to the filing of the cross‑claim. In circumstances where the issue was clearly raised in Mr Alexander's report, it seems to me unjust that Mr Bonett should be allowed to use Mr Wallace's report to overcome defects or omissions in his cross‑claim, but Absolute is unable to do the same with Mr Alexander's report to remedy an omission in its defence to cross‑claim.
Mr Alexander's report did not merely supply evidence for the limitation defence - indeed it might be doubted whether an expert can say much of relevance on that matter, save perhaps whether a defect is major or not - it specified in terms plain enough of the inability of Mr Bonett to raise these matters after two years.
It was submitted that Mr Bonett did not have any obligation to alert Absolute of the need for a pleading of the limitation defence. That matter may not be so clear under current rules of procedure. Section 56(3) of Civil Procedure Act requires a party (and subs (4) requires a legal representative) to assist the Court to further the overriding purpose of facilitating a just, quick and cheap resolution of the real issues in the proceedings. When an issue is plainly identified in correspondence, in this case by service of an expert report , then a party in doubt about whether an issue is to be maintained ordinarily should seek clarification about the matter. To rely on what might be called a technical argument, which in the present case could just as easily be used against Mr Bonett if Absolute were so minded, when the correspondence indicates otherwise, seems not to be within the terms or spirit of s 56.
Further, the bright line distinction sought to be drawn between pleadings and particulars by Mr Bonett was not so apparent here, where the breach or breaches alleged in the cross‑claim were not identified with sufficient particularity to avoid the surprise as r 14.14 of the Uniform Civil Procedure Rules requires.
I was not persuaded by the Sinac decision as to the connection between the date of practical completion in s 3B and the date of completion of the relevant work in s 18E. On a brief review, the Court of Appeal decisions and that of The Owners - Strata Plan No 74602 v Brookfield Australia Investments Ltd [3] referred to in [39] and [43] and discussed further in paras [44] to [49] of Sinac, indicate the opposite, namely that the date in s 3B and the date in s 18E are quite distinct. The other argument advanced, the context of the "warranty period" being in s 18E, has more force in suggesting that it does not import substantive features into the statutory warranty in s 18B. The matter remains arguable, but it is not especially significant on the question of whether leave should be granted.
There has been no express explanation of the failure to plead the limitation period, but the inference is obvious: that it was not regarded as necessary because the issues were identified by the expert reports, or that it was overlooked. I do not see the absence of an explanatory affidavit here as a weighty factor.
The real issue is whether an adjournment is needed to avoid prejudice and the extent of wasted costs that would result.
As to the first matter of prejudice, the relevant factual issues on the limitation issue are, simply stated - the date of commencement and the date of completion of the relevant work. The first can hardly be in issue, although Absolute has foreshadowed an argument about that, weak or otherwise. And the second has already been the subject of evidence from Mr Bonett. There is substantial documentary material in evidence that deals with the timing of the works. I do not understand there to be any issue that the defects are not major defects, although it is the case that Mr Wallace has not expressly stated as much.
In these circumstances, I would need to be persuaded that an adjournment is necessary. I would allow Mr Bonett to make an application in respect of that, if there are other weighty matters necessitating an adjournment that I have overlooked.
As to the second matter, that of wasted costs, an adjournment might be necessary, in any event, in the proceedings because of the significant underestimation of the length of hearing. An appropriate adjournment could be fashioned, if needed, without significantly adding to costs.
[3]
Conclusion
For these reasons, I propose to grant leave to Absolute to file an amended defence to cross‑claim relying on s 18E of the Home Building Act. I will allow the parties an opportunity to get instructions and to speak to each other before continuing, in the event that a party wishes to apply for an adjournment at this stage of the proceedings.
Absolute should, at the conclusion of that period, confirm whether it wishes to rely on the draft amended defence to cross‑claim in its present form or identify any changes to that document in respect of the limitation defence it has been given leave to plead.
Absolute should pay for the costs thrown away by reason of the amendment, but otherwise I reserve the costs of the application.
[4]
Endnotes
[2019] NSWCATAP 43.
See [20f].
[2015] NSWSC 1916.
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Decision last updated: 10 September 2021