Defective domestic building works but no written major domestic building contract – Do you still have an obligation to pay the builder?

1. To always ensure you have an enforceable major domestic building contract for domestic building works over the value of $10,000.00; and

2. That properly briefing experts and obtaining the relevant expert evidence is paramount in VCAT Building and Property List proceedings for claims for restitution.

What was the case about?

The Applicant, an elderly Greek lady not fluent in English engaged the Respondent builder to carry out external masonry wall repair works required under a building order obtained from Council as well as additional renovation works to her home in Richmond. The works were quoted at $48,550.00.

The Applicant paid the Builder $25,000.00 before becoming aware of various issues with the building works and subsequently issued a claim for damages in the sum of $77,226.00 plus legal fees for breach of contract and statutory warranties under section 8 of the Domestic Building Contracts Act 1995 (Vic) (“the Act”). In response, the Builder issued a counter-claim for the outstanding payment of $23,550.00 from the Applicant.

Whilst the Tribunal confirmed the building works were the subject of a major domestic building contract, it found that the contract was unenforceable pursuant to s31(2) of the Act. Accordingly, the Builder could not sue on the contract for the balance of the payment. However, the Tribunal has jurisdiction under s53(2)(b)(iii) of the Act to order payment of a sum of money by way of restitution to the Builder for work already performed. Any such sum must account for the value of the works done minus any cost of rectifying any defects in the works.

In reliance on the  principles discussed in the High Court decision of Mann v Paterson [2019] HCA 32, the Tribunal found that the Builder was entitled to be remunerated for the reasonable value of work carried out by it and in respect to which the Applicant had obtained a benefit (that is on a quantum meruit basis).

The Builder obtained expert evidence which assessed the value of the work performed in its entirety to be $90,000.00. However, the expert was not briefed appropriately to take into account the fact that the builder subcontracted much of the work and therefore the report could not be relied upon for the purposes of assessing the reasonable value of the works by the Builder. The Tribunal had to rely on the initial quote provided by the Builder when considering the value of the works performed by it.

The Applicant, through her legal representatives obtained expert evidence which set out the reasonable costs to rectify the issues of which she complained, however, failed to brief an expert and obtain evidence in respect to:-

1. the reasonable value of the work performed by the Builder;
2. the existence of defects and the extent of same;
3. a proposed scope of works to rectify the defects; and
4. the cost of carrying out the scope of rectification works.

As a result, the Applicant was ordered to pay the Builder the sum of $21,511.14 being the payment outstanding to the builder minus the cost of rectifying some minor defects mutually agreed upon between the parties throughout the course of the hearing.

There is a legal obligation to pay a builder for the reasonable value of works performed therefore it is imperative that sufficient expert evidence is obtained which sets out the value of works performed, and the benefit received.

An expert can only prepare a report based on the instructions given by the legal representative of the party. If there is an omission from the information or incorrect assumption within those instructions, the evidence of the expert becomes of no assistance to the Tribunal because it does not accord with the facts presented in evidence.

It is important to engage the right legal representative who is knowledgeable in the area to ensure the necessary evidence is obtained in disputes regarding defective domestic building work and that if you are claiming building defects that you have a solid case to pursue the builder and recoup the costs of rectifying works.

If you need advice or assistance in relation to domestic building disputes, please contact the Tisher Liner FC Law Owners Corporation and Building Defects Team. Phillip Leaman, Principal will be happy to assist you to maximise the outcome you can achieve. They can be contacted on 03 8600 9333 or via [email protected].