Insight - Construction & Infrastructure

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All States and Territories now have Security of Payment Acts     

Until recently South Australia, Tasmania and the Australian Capital Territory had not adopted security of payment legislation. This has changed with the recent enactment of such legislation in those jurisdictions.

The Building and Construction Industry Security of Payment Act 2009 (SA) was assented to on 10 December. It has not yet come into effect.
The Building and Construction Industry Security of Payment Act 2009 (Tas) was assented to on 17 December and came into effect on that date (but only applies to contracts entered into after that date).

The Building and Construction Industry (Security of Payment) Act 2009 (ACT) comes into effect on 1 July 2010.

NSW Government to back home warranty insurance

On 8 November, the NSW Government announced changes to the home warranty insurance scheme in New South Wales. The changes, which take effect from 1 July 2010, involve the Government underwriting and capitalising the scheme.

The new scheme will be:

• underwritten and capitalised by the Government;
• funded by home warranty insurance premiums;
• managed by Treasury through the Self Insurance Corporation; and
• operated by the private sector (by way of a competitive tender) for the provision of services in relation to the issue of insurance certificates, collection of premiums and claims handling.

The changes have arisen because of the announcements earlier this year by Lumley General and CGU Insurance of their exit from the market. The advice to the Government was that this contraction and current market conditions were likely lead to further insurers exiting the market in the near future.

NSW Home Building Act statutory warranties - who is a successor in title?

The Owners Strata Plan 61424 & Anor v Reed Constructions Pty Limited [2009] NSWSC 692

The Supreme Court of New South Wales has decided in The Owners Strata Plan 61424 & Anor v Reed Constructions Pty Limited [2009] NSWSC 69 that a person has the benefit of the statutory warranties relating to residential building work under the Home Building Act 1989 (NSW) (HB Act) even where they are a successor in title of the landowner rather than such a successor to the principal under the building contract.

Facts

The plaintiffs, the Owners Strata Plan 61424 (Owners Corporation) and the Building Insurers' Guarantee Corporation, brought a claim against the defendant, Reed Constructions Pty Limited (Reed), alleging that certain residential building works failed to conform to particular warranties available under Part 2C of the HB Act. Within Part 2C, section 18B sets out a number of warranties by the holder of a home building licence which are implied in contracts for residential building work.

PRC Pty Ltd (PRC) was the landowner and upon completion of the building works PRC owned all the dwellings. PRC was not a party to the building contract. Another company, Wallis Street Developments Pty Ltd had contracted Reed to undertake the building works. After completion, the land was subdivided by the registration of Strata Plan 61424.

Issue

Section 18D of the HB Act provides for an extension of the statutory warranties, enabling a person who is a successor in title to someone who is entitled to the benefit of a statutory warranty under the HB Act to have the same rights as the predecessor in title. The Court was asked to determine whether the Owners Corporation, being a successor in title of PRC, was entitled to enforce the statutory warranties against Reed.

Decision

Justice Einstein held that the “person entitled to the benefit of a statutory warranty”, as that phrase is used in section 18D, includes a “developer” on whose behalf residential building work is done. A “developer” is defined in section 3A of the HB Act as the person who owns the dwellings.

As PRC was a “developer”, Einstein J held that the Owners Corporation was entitled to the benefit of the statutory warranties under section 18D as a successor in title to PRC.