Key Takeaways

This decision in this NSW Court of Appeal case considers the distinction between the terms ‘practical completion’ and ‘completion’ of the building work when bringing a breach of statutory warranty claim. It relates to section 3B of the Home Building Act 1989 (NSW) (Act).

The outcome confirms the severe consequences of failing to commence proceedings strictly within the limitation period from completion under section 18E of the Act.

Any party who seeks to claim damages for defective building work should commence proceedings promptly and before any relevant time limitations.

Facts in this Case

The Owners – Strata Plan No 64757 (Owners) engaged Sydney Remedial Builders Pty Ltd (Builder) to remedy defective building works at the Owners’ property (Contract).  

The parties referred the question of completion of the works to a referee who determined that, pursuant to the Contract, the date of practical completion of the building works was 16 March 2012.

On 15 March 2019, the Owners commenced proceedings against the Builder seeking damages, the quantum of which was not disputed. 

The First Instance Proceedings

The sole issue in the first instance hearing was whether the proceedings had been brought within the seven year limitation period after ‘completion’ of the work, as required by section 18E of the Act in force at the relevant time.

(It should be noted that section 18E of the Act at the date of writing (September 2024) provides significantly reduced limitation periods of six years for any breach that results in a major defect and two years in any other case).

Section 3B of the Act allows ‘completion’ to be defined by the parties:

1. The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done.
2. If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defect that do not prevent the work from being reasonably capable of being used for its intended purpose.

The Owners submitted that Rees J should adopt the referee’s report, whereas the Builder submitted that her Honour should determine the question herself.

Her Honour concluded that ‘practical completion’ of the works was presumed to have been achieved by reference to section 3B(3)(b) on 8 March 2012, being the date the contractor last attended site to carry out work. It was said to be irrelevant that the Builder achieved ‘practical completion’ under the Contract on 16 March 2012 because section 3B(1) of the Act did not contemplate ‘practical completion’ but instead, ‘completion’.  

On this basis, her Honour dismissed the Owners’ claim as being out of time.

Leave Application to NSW Court of Appeal

The Owners sought leave to appeal the primary judge’s decision to the NSW Court of Appeal, which stated that her Honour had erred in distinguishing the concepts of practical completion and completion for the purpose of section 3B(1) of the Act. 

The NSW Court of Appeal refused leave to appeal, finding that:

• The concepts of practical completion and completion are different. Section 3B draws a distinction between those terms, and
• These words should be understood as bearing their unique and ordinary meaning, as opposed to conflating both terms as meaning ‘completion’.  

In principle, the parties could choose another word to define something which amounted to ‘completion’ for the purposes of section 3B(1), however the Court held that this was removed from the facts of this case.

Further information / assistance regarding the issues raised in this article is available from the author, Patrick Kaluski, Partner, Joshua Murgatroyd, Associate and James Davis, Lawyer, or your usual Moray & Agnew contact.