The writing is on the wall – NSW Supreme Court decides whether a residential building contract is enforceable if it lacks necessary signatures.

The New South Wales Supreme Court recently refused an application for leave to appeal in the matter of Dyjecinska v Step-Up Renovations (NSW) Pty Ltd [2024] NSWSC 159. The appeal was sought by a homeowner following decisions in the New South Wales Civil and Administrative Tribunal (NCAT) regarding a building dispute as to whether damages were recoverable for a contract that was not signed and dated, as required by section 7(1) of the Home Building Act 1989 (NSW) (Act).

Background

Ms. Dyjecinska contracted with Step-Up Renovations to perform renovations at her home over the summer school holidays of 2020/2021. Relevantly, access to her property required access through a school next door to her house so the construction period window was confined to the period before school recommenced. Despite having negotiated and prepared a written Master Builders standard form contract, the builder failed to sign or date the agreement before providing it to the homeowner– a breach of section 7(1) of the Act. With even further impropriety the builder, concerned with delays and the short construction period, commenced works without receiving a signed contract in return.

Despite five requests from the builder, the homeowner failed to provide the builder with the signed contract in return. In February, the homeowner suspended the works due to alleged defects and further refused the builder access to the property to attend to the defects. The builder relied on this repudiation to terminate the contract and pursue the homeowner for damages for the amount of the outstanding invoices.

Original Proceedings

The key consideration in the original proceedings was whether section 7(1) and section 10(1) of the Act prevented the builder from pursuing damages for breach of contract due to the contract not being signed. The homeowner had submitted in NCAT that as the contract was not signed it was not wholly in writing, and further as it had not been provided to her then section 10(1) would apply to prevent the builder from seeking damages for a breach of the contract. 

Section 7(1) of the Act sets out the necessary requirements for the form of building contracts, requiring that a contract must be in writing, dated and signed by the parties. Section 10(1)(b) states that if a contract is not in writing, or does not contain a description of the works, then the builder is not entitled to damages for breach of the contract. 

Also considered was section 7B, which requires a contractor to give the other party a copy of the signed contract within 5 days of the agreement being formed, and section 10(1)(c), which states that anyone who contracts in contravention of any other provision of the Act that is prescribed for the purposes of section 10(1) is not entitled to damages. 

The NCAT decisions found in favour of the builder who was successful in arguing a breach of the contract and damages as remedy. The Supreme Court decided that there were no valid grounds to appeal the decision of the NCAT members. However, it elected to discuss the submissions as a matter of law.

Supreme Court Decision

The Supreme Court considered as the central issue whether an unsigned and undated document that is accepted (other than by signing) constitutes a contract in writing for section 10(1)(b), and whether it was otherwise unenforceable under section 10(1)(c). In coming to its decision the Court considered the actual wording of the legislation, and the second reading speech for the amendment that led to the current wording of section 10. 

In 2001, section 10 of the Act was amended to remove a blanket unenforceability clause, with the intention being that a builder should not be prevented from enforcement of a contract for a failure of a minor contravention of the Act. The Supreme Court looked to this and to the reasoning in Hayward v Timilty [2009] NSWDC 54, which determined that a failure to comply with one of the other factors listed in section 7 did not necessarily make a contract unenforceable, to determine that the homeowner’s submissions were not tenable, and refused leave to appeal.

The case serves as a reminder of the importance for building contractors to closely adhere to the contracting requirements outlined in regulatory legislation. While the builder was successful in litigation, the issue could have been avoided had the builder simply followed the requirements under the Act and not commenced work until contracts had been signed. While the builder successfully enforced its right to payment, the process to a positive result spanned three years and three successive matters before NCAT and the Court. 

The case, while providing clarity to the provisions for enforceability of contracts in New South Wales under the Act, also serves as a reminder of the importance of fundamental contracting procedures and the dangers that arise in not according to statutory requirements for building contracts. This warning should be heeded by builders in Queensland equally, as sections 13(5) and 14(10) of Schedule 1B of the Queensland Building and Construction Commission Act 1991 (QLD) have similar provisions that are nonetheless more restrictive, and there is certainly no guarantee that a Queensland court would come to a similar conclusion.

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