What is the difference between defective and incomplete works?

What is the difference between defective and incomplete works?

How to work out whether works are defective or incomplete?

 

Introduction:

  1. Often at the completion of building works there are defective or incomplete works which need to be remedied or completed.
  2. If it is Domestic building work then it refers to work associated with the construction, renovation, improvement or maintenance of a home (see sections 5 and 6 of the Domestic Building Contracts Act 1995).
  3. A builder is a person registered in the class of Domestic Builder (Unlimited) are responsible for carrying out, or managing or arranging the carrying out of all components of domestic building work for the construction, renovation, improvement or maintenance of a home (class 1, 2, and 4 buildings, and associated class 10 buildings, as classified in the Building Code of Australia).
    1. A builder must not enter a major domestic building contract unless they are registered as a building practitioner under the Building Act 1993. If the value of the work is $16,000 or over, the works must be covered by domestic building insurance.
    2. And they must not enter into a contract or carry out the work unless they have been authorised to carry out that work by the registered building surveyor who issued the building permit for the work (when a permit is required).

What is a defect?

  1. The builder’s obligation is, of course, to carry out the work in accordance with the contract design.
    1. The contract will normally include a term, express or implied, that the work be carried out in a proper and workmanlike or a good and tradesmanlike manner using materials of the appropriate or best quality.
    2. Any departure from the contractual standard is a defect and a breach of contract.
  2. To put it simply, a defect, or defective work, is work that is not in conformity with the contract or a work that does not meet a requisite Australian standard.
    1. It is important to note that work that does not conform to the contract will be defective even if the contractor is not guilty of any personal fault in providing that work.
    2. However where the work that has been completed is in accordance with the contract specifications and/or drawings but is not adequate for an intended purpose, it will not be considered to be defective work.
  3. A building contract obliges the contractor to deliver up the works in a proper contractual condition at the date of practical completion.
    1. Defects which have occurred prior to that date must be rectified by the contractor except for defects which are excepted from the definition of practical completion.
  4. The period between practical completion and final completion is called the defects liability period or the maintenance period.
    1. Again, the rights and obligations of the parties with respect to defects during the period will depend on the terms of the contract.
    2. Failure to rectify the defects amounts to a breach of contract and will warrant the withholding of a final certificate.
    3. Where the defect does not fall within the terms of the maintenance clause or is not observed or notified within the time stipulated in the clause, the proprietor’s right is to monetary compensation, unless there is some provision in the contract other than the maintenance clause entitling the proprietor to require the contractor to rectify.

Consequences of a defect

  1. If a work is defective then generally, although not always, there will be a breach of the contract.
  2. In particular, in relation to domestic building works, the builder will be in default under the warranties in section 8 of the Domestic Building Contracts Act 1995.
  3. These warranties form part of all domestic building works contracts and, among other things, the builder warrants that all work carried out will be conducted in a proper and workmanlike manner and will be in accordance with the plans and specifications outlined in the contract.
  4. Unless there are specific contractual provisions to the contrary, the defective work will entitle the owner of the property to rectify the defective work and claim damages against the Builder or sub-contractor responsible for the defective work.

Incomplete Works:

  1. In contrast to defective work, an incomplete work is simply a work that is incomplete. Often the issue of incomplete work arises when a building contract is terminated prior to the completion of the building works and works remain incomplete at the time of termination.
  2. If the dispute over the incomplete work goes to VCAT then likely the VCAT Member will be required to determine whether the work is a defect or incomplete work, usually with support from expert evidence provided by experts engaged by the parties.

Consequences of incomplete work

  1. If the incomplete works arise out of termination of the contract prior to completion, then the circumstances of the termination will also be important in relation to incomplete work as, if the contract was terminated by the builder then the owner will be able to seek damages for any costs associated with completing the works, however if the owner terminated the contract then no such claim can be made: Torua Pty Ltd v Sariklis [2012] VCAT 144.
  2. It is also important to note that, as stated by Senior Member Riegler in Peterson Homes Pty Ltd v Paalep [2010] VCAT 1599, there may be circumstances where the amount of incomplete (and/or defective) work is so significant that it may “lead to the conclusion that a builder was unwilling to perform its contractual obligations”.
    1. If these circumstances apply to you, it is essential to seek advice from experienced construction lawyers.

What can you do if your property has incomplete or defective works?

  1. If you believe that some of the work completed by your builder is defective, then the essential first step is to obtain advice from an experienced construction lawyer or building expert who can advise you as to the damages that you may be able to claim.
  2. The initial step is to contact the builder and direct them to return to the site to rectify the work.
    1. If the builder fails or refuses to do so, then the next step is to engage an experienced construction lawyer to attempt to get the builder to rectify the work, or alternatively to negotiate for the builder to pay money in compensation of rectification costs or an adjustment in the contract price.
  3. If the builder continues to refuse to rectify the works and the negotiations for monetary payment in compensation fail, then the next stage is to issue proceedings at the DBDRV for mediation and if that fails then in VCAT.
  4. In general, the damages recoverable for defective work is the difference between the contract price of the work and the cost of rectifying the work and making the work conform to the contract.
  5. Further, it is advisable that you obtain an expert witness report who can provide their expert opinion as to whether the works are defective and what works are incomplete and provide an estimate of the cost for rectifying the works.
  6. If there are incomplete works due to the contract being terminated prior to completion, it is important to note that the builder may be entitled to payment for the works performed. If you withhold payment that the builder is rightfully entitled to for works performed then the builder may be able to take action against you to recover any monies remaining where the incomplete works are measured against the works the builder completed.
  7. Finally, it is important to note that a cheap price for building works often doesn’t prove as cheap as it may initially seem and as stated by Deputy President Macnamara in Mechea v HGF [1995] VICCAT 56: “where parties agree to carry out building works for too cheap a price, in the long run an exorbitant expense is likely to be imposed all around”.

 

Daniel Epstein of Counsel

By Daniel Epstein

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Posted in: Beginners Guide • Building and Construction • Civil Law • VCAT

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