Licence to add defects confirmed on appeal

Last year, we looked at a decision which revisited the Onerati principle post section 18E(2) in a successor in title context. That decision went on appeal, which has recently been decided here.

To recap, in the Court below, the plaintiff owner sought to amend its claim to add:

  • a claim against the builder for breach of the statutory duty under section 37 of the Design and Building Practitioners Act (NSW) 2020
  • further defects to the breach of statutory warranty claim.

The defendant builder opposed the application to add the further defects to the statutory warranty claim on the basis that:

  • each new defect represented a new cause of action
  • each new cause of action was in pursuit of a further claim for a breach of the statutory warranties
  • the limitation period for bringing a claim pursuant to the statutory warranties had passed since the commencement of the proceedings.

The grounds for appeal were that the primary judge:

  • erred in law by concluding that there are no separate causes of action for each alleged breach of warranty contained in section 18B of the Home Building Act (NSW) 1989 (HBA) where the plaintiff is relying on rights conferred by section 18C or section 18D
  • ought to have concluded that a plaintiff relying on the rights conferred by section 18C or section 18D of the HBA has separate causes of action for each alleged breach of statutory warranty
  • should have concluded that the amendments sought by the plaintiff to introduce new claims under the HBA were statute barred by operation of sections 18E(1)(a)-(b) of the HBA and dismissed the application accordingly.

Consideration

The plaintiff was the beneficiary of a statutory warranty under the HBA. The HBA expressly provides at section 18BA(1) that a breach of a statutory warranty implied in a contract constitutes a breach of the contract.

The primary judge was correct in concluding that the amendments did not introduce any new cause of action. However, it was stated that this view should not have been reached on the basis of the rule in Onerati as that case did not address the situation of a late amendment.

In determining whether the amendments amounted to a new cause of action, the Court adopted the approach in Conquer v Boot, which was applied in Onerati and Honeywood v Munnings. This principle is that there is a single obligation to complete the building and therefore the cause of action for different damages arising out of a breach of the contract is the same.

Acknowledging that the facts were different in Onerati, the Court turned to whether the new defects were considered allegations of material fact or merely particulars. In doing so, it analysed sections 18D(2) and 18E(2) of the HBA.

Amendments to sections 18D(2) and 18E(2) of the HBA in 2006 and 2010 did not create a position where a different cause of action for each defect arises from a breach of a statutory warranty. Specifically, the amendments do not abrogate the singleness of the cause of action principle applied in Onerati and Honeywood v Munnings.

Although the amendments affected the ability of a plaintiff to sue, they did not alter the fact that the nature of the claim is the building that has not been provided following the terms of the implied contract.

Outcome

The Court dismissed the appeal, finding that:

  • the plaintiff's claim was best characterised as a claim for breach of contract
  • in a conventional case, there is a single cause of action when a defective structure is provided, regardless of how many ways the defect manifests itself
  • an amendment that does nothing more than introduce further departures from the building as promised will not represent a new cause of action as it breaches the same contractual promise.

If you have any questions about this article or how the decision may impact you, please get in touch with partner Christine Jones.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.