JUDICIAL REMEDIES FOR

CONSTRUCTION DEFECTS:
COMMON LAW, EQUITY OR STATUTE?

A paper based on talks to the Society of

Construction Law New Zealand
in Auckland on 17th March, Christchurch on
22nd March and Wellington on 23rd March 2016

Philip Britton

May 2016

200

www.scl.org.uk
 JUDICIAL REMEDIES FOR
CONSTRUCTION DEFECTS:
COMMON LAW, EQUITY OR STATUTE?

Philip Britton1

Introduction: a residential scenario

The topic for the talks from which this paper derives emerged out of time
spent recently as a consultant in a professional team representing some
unhappy UK homebuyers. Theirs was part of a large multi-unit development
on a brownfield site, combining blocks of flats with detached houses, in an
outer suburb of south London. Their homes had been completed not long
before by a high profile national developer of homes with its own in-house
construction arm – ‘vertically integrated’, in the jargon.

The claimants were all trying to get rectification work done on their homes;
those in the blocks were also concerned about ‘the common property’.
Simplifying the story, the individual houses had problems with the design and
construction of their pitched roofs; in the blocks, the main defects were
inadequate noise separation and structural insulation – between walls and
floors and between rooms and units (‘Even in the winter, we can smell what
the people next door are cooking’, some said). There were frequent
breakdowns of the district heating and hot water system, run for the shared
benefit of housing built by three developers on the same site, the biomass
boiler being located in part of the site not owned by our claimants’ developer;2
and the car park spaces did not match the approved plans.

Additional problems emerged when the clients took our advice to commission
a chartered building surveyor to do a Civil Procedure Rules-compliant survey,
which disclosed inadequate fire-stopping in the ducts bringing services
between floors and to and from each unit in the blocks. This added new
worries: about residents’ survivability if there was a fire; about the impact on
everyone’s home and contents insurance; and about the position of short-term
subtenants. Some of the flats had been rented out by their owners (in law long
leaseholders from the developer, which retained the freehold and thus started
out as head landlord of each flat). Any owner who ‘wanted out’ might find
that buyers got cold feet (or could not get mortgage funding), or expected a

1 Thanks go to the Society of Construction Law NZ for the original invitation to offer the
talks which led to the paper, and for its consent to publish the paper elsewhere; and to
colleagues in Australasia, Suffolk and London for their contributions to the paper’s
content. Any errors or omissions remain solely the author’s responsibility. Small
sections of the paper come from the author’s ‘Make the Developer Get the Job Right’,
SCL (UK) Paper D154 (March 2013): www.scl.org.uk.
2 It was hard to find anyone willing to engage with this new technology and report on its
failings, potentially also being available as an expert witness in court.

1
discount on the purchase price, once they knew that there were construction
problems and an ongoing dispute.

Most of the defects, as may be obvious, were examples of non-compliance

with our externally applied, and mandatory, top-level Building Regulations3 –
the equivalent in England of what elsewhere may be called ‘the building
code’; so much so, that this paper uses ‘defect’ in that specific sense. They
made up a collection of common enough problems. Most would not be too
difficult to remedy, though the total bill was going to be substantial. But for
each of our clients – most were first-time homebuyers, many with young
families – their cumulative impact, combined with failed attempts over many
months to get any action, turned what may have started as only a nuisance into
an ongoing nightmare.

Their target was the developer, from whom they had all bought off-plan. This
company was (mercifully) still in existence and still the freeholder when the
problems fully came to light. So the owners’ main right of action, had they
launched court proceedings, would have been for breach of contract, based on
a combination of express and implied terms in the construction part of their
purchase contracts. All the contracts were of course in essence identical, for
flats and houses respectively. They had been drafted by or on behalf of the
developer, though entered into at different times and completed as individual
homes became ready for occupation. We were – at least at the start – far away
from anyone’s limitation period expiring, six years after each purchase, though
in the final stages of negotiation had to secure a series of short-term standstill
agreements from the developer, under which it gave a formal concession not
to raise a limitation defence against our clients.

If any of the homeowners had not been first buyers, their legal position would
have been far less straightforward. English law imposes no statutorily
transmissible warranties of build quality in such a situation: it does not copy
New Zealand or most Australian jurisdictions, where such rules are part of a
comprehensive consumer protection regime. 4 In England & Wales, the
Defective Premises Act (DPA) 1972 does offer a modest minimum level of
protection for the current owner, not directly hinging on proof of fault but
apparently sounding only in damages; but this was unlikely to be available
against the full range of defects discovered in south London.5

3 The Building Regulations for England & Wales 2010 (SI 2010/2214, as amended).
Welsh Ministers, with effect from 31 December 2011, have the power to make building
regulations for Wales: The Welsh Ministers (Transfer of Functions) (No 2) Order 2009
(SI 2009/3019).
4 Eg the Building Amendment Act 2013 (NZ), inserting Part 4A into the Building Act
2004 (NZ), or the Domestic Building Contracts Act 1995 (Vic), Home Building Act
1989 (NSW) or Domestic Building Contracts Act 2000 (Qld), all as amended. For an
overview, see Julian Bailey, Construction Law (London, Informa, 2011) chapter 19 (2nd
edition forthcoming, 2016).
5 On the scope of the DPA 1972 against a design and build main contractor, including its
application to ‘the common property’ in a block of flats, and on the Act’s ‘habitability’
test, see Rendlesham Estates Ltd v Barr [2014] EWHC 3968 (TCC), [2015] 1 WLR
3663, 157 Con LR 147, [2015] TCLR 1, [2015] BLR 37, paras [29]-[82] (Edwards-
Stuart J).

2
To get from non-compliance with ‘the building code’ to a breach of contract,
and hence liability, might seem an easy and obvious step, as long as expert
evidence supports the claimants’ case – as ours did. After all, in each
purchase contract the developer expressly undertook to ‘construct the Property
in accordance with planning permission, building regulations approval and the
drawings and specification’ and ‘in a good and workmanlike manner and to
the standards required by the NHBC [the National House-Building Council, its
chosen third-party warranty provider]’.6 But more than five years went by
between a representative of the developer admitting at a meeting with us and
the clients that the problems ought to be fixed and the final settlement. This
delay obviously prolonged the clients’ discomfort and unhappiness, without
much increasing the modest compensation they eventually received from the
developer as the equivalent of ‘general damages’.7 To my naïve amazement,
the developer in the end agreed to do almost all the work requested, but still
resisted ever formally admitting liability.

This extent of this delay was perhaps the result of what seemed an odd
approach to costs discipline on the developer’s side. The eventual settlement
was different only in detail from what we had proposed years before, but the
developer would now have to bear all its accumulated professional fees and
expenses (which could have reached six figures) as well as most of the
claimants’. So the commercial imperatives which we expected would operate
on the defendant – in our favour – seemed absent. Perhaps it or its lawyers
hoped that, if the to-and-fro of e-mails could be spun out long enough, the
claimants would lose heart or run out of money. Or that they would be unable
to continue to rely on a team of professionals (a law firm, a chartered building
surveyor and eventually a barrister to). The law firm and barrister were
funded by conditional fee arrangements with the clients (the lawyers thus
sharing the clients’ risk in the outcome); and the clients were protected against
potential costs liability to the other side by After-The-Event (ATE) insurance:
both devices in effect swept away under post-Jackson changes. 8 Adequate

6 To be a builder or developer registered with the NHBC now requires adherence to the
Consumer Code for Home Builders, with non-mandatory good practice guidance (2nd
ed, 2010): www.consumercodeforhomebuilders.com. This was the industry’s response
to the threat of intervention from the Office of Fair Trading, following its report
Homebuilding in the UK: a market study (OFT1020, 2008:
www.gov.uk/government/organisations/office-of-fair-trading). However, the Code does
not augment any of the rights enjoyed by a would-be off-plan buyer; nor does it
significantly curtail the freedoms of the developer in drafting such contracts. It contains
no provisions, positive or negative, about the first buyer’s rights against third parties, but
it does make clear that a successor to the first buyer can rely on the Code against the
builder, though only within the standard two years from the start of warranty cover for
the home. The Code does not at present have official approval, by the OFT or by its
successor body the Trading Standards Institute.
7 Awards of ‘general damages’ to compensate for the non-pecuniary aspects of living in a
property needing remedial work are to be ‘not excessive, but modest’ and ‘may not be
very substantial’: Lord Denning MR and Oliver LJ in Perry v Sidney Phillips & Son
[1982] 1 WLR 1297 (EWCA), pages 1303A and 1305F.
8 Under Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (in
effect for proceedings started on or after 1 April 2013), neither a percentage uplift for
success within a conditional fee arrangement nor an ATE premium are now recoverable
from a losing defendant. A new ‘Damages-Based Agreement’ has been introduced,

3
access to justice for homeowners depends on their finding skilled professional
input, as well as on the permissible funding arrangements for this help and on
the long shadow of an eventual costs award at trial; but these vital issues lie
beyond the scope of this paper.

Had legal proceedings actually started, and if adjudication had been available
under Part II of the Housing Grants, Construction and Regeneration Act 1996
(as amended) (HGCRA), its short default timescales would have guaranteed a
quick and presumptively enforceable interim outcome, the referring party
having limited exposure in costs and fees. That ‘quick and dirty’ possibility
being unavailable as of right in this ‘residential’ situation in the UK9 – unlike
New Zealand – traditional litigation would have been the alternative, starting
in all likelihood before the Technology and Construction Court (TCC) in
London. There, judicial involvement would right away have imposed much
tighter timetables and budgetary discipline on both sides; but at that point the
costs committed to the dispute would have raised the stakes for our side
significantly, as would the court fees paid up front.10 It was obviously wiser to
aim for a negotiated solution, at the same time encouraging the other side to
believe that we had stomach for a fight in court, backed by our ATE insurer.
Creating strong incentives to settle contractual disputes is of course a
fundamental, and intended, aim of our system of civil procedure, as it is
almost universally in the common law family of legal systems.

As a newcomer to this kind of case, I found it an instructive experience, but

not a positive one: it suggested how badly the law works on the ground for
consumers as claimants; how hard it is to mobilise and motivate a disparate
group of first-time homeowners (with needs for funding and decision-making
machinery via an ‘action group’ with a well drafted constitution); and how
strongly time and money favour a defendant. But the rectification work did in
the end get done. Though our clients hated the process, they were content –
we could not say ‘happy’ – with the outcome. It is hard to be sure that they
would not have done better by getting an investigative TV programme or
journalist involved, as some of them were eager to do.

Contrasts with commercial projects

In all of this, there are striking contrasts with the larger ticket projects with
which most practitioners are familiar and whose disputes dominate the
specialist law reports. In a commercial project, the provisions of the main
contract will provide mechanisms for dealing with shoddy, incomplete or non-
compliant work by the main contractor: powers will be given to the employer,
contract administrator or project manager to instruct additional or better
quality work – usually at the contractor’s risk. This may include a potential

under which the solicitor can be paid out of a percentage of the damages awarded to the
client, but uptake appears to have been limited.
9 HGCRA 1996 s 106; see Philip Britton, ‘Adjudication and the “Residential Occupier
Exception”: Time for a Rethink?’, SCL (UK) Paper 193 (May 2015): www.scl.org.uk.
10 Under the Civil Proceedings Fees Order 2008 (SI 2008/1053), the civil court fee in
England & Wales for starting a money claim for over £300,000 was £1,350; the
equivalent fee (but for a claim of over £200,000) became £10,000 under the Civil
Proceedings and Family Proceedings Fees (Amendment) Order 2015 (SI 2015/576).

4
liability in liquidated damages if a contractually binding final (or sectional)
completion date is missed, unless of course inadequate instructions or design
information for which the employer is responsible are the cause of the
problem. The contract’s own regime for defects may in effect replace
altogether the possibility of legal action for breach of contract, at least for
defects reasonably discovered while the contract is still ‘live’.

When handover takes place – what in England we often call ‘practical

completion’ (a term with no single meaning across all projects, but often
marked by a certificate from the contract administrator or equivalent) – this
event may trigger the start of a time-limited defects correction period. Getting
to one aspect of the central theme of this paper, the contract is likely to
provide (or the courts will so interpret it) that the employer must give notice of
any defects to the contractor, often via the contract administrator or
equivalent, if there is one.11 After that, the employer may have a choice: he
can either require the contractor to come back and rectify them, or can deduct
the cost of that work from whatever he otherwise owes. To call on the
contractor usually also means that this party too has a choice: to dispute
responsibility for the alleged defects; to do the work newly requested within a
defined period; or to fail to respond altogether (or in time), risking being put
on the back foot by a deduction from the employer.

An example is clause 2.30 of the 2005 edition of the JCT Intermediate

Building Contract, which sets up a Rectification Period structure along exactly
these lines.12 If the employer opts not to have the contractor back, how should
a figure be put on what the contract calls ‘an appropriate deduction’ for
defects? The JCT form says nothing precise about valuation, so in that
situation the courts have to fill the gap, in the context of the contract as a
whole and the common law of damages. This the TCC did in Mul v Hutton
Construction in relation to a £4m+ residential extension and refurbishment
project in Kent. 13 After construction was complete, the employer Ms Mul
started legal action for £1m+ against the builders, alleging defects; the
meaning of clause 2.30 was a central issue. Could she deduct what it would
reasonably cost her to make good the outstanding defects by engaging third
parties? Or was her entitlement only what it would have cost the main
contractor to do the extra work – significantly less, if responsibility for this
could be shifted on to subcontractors? Akenhead J in the end accepted that
either of these might be appropriate, but so might how the additional work
would be priced under the contract itself. There was no single correct answer.

11 On the obligation to give notice, see Pearce & High Ltd v Baxter (1999) 66 Con LR 111,
[1999] BLR 101, (1999) 1 TCLR 157 (EWCA), quoted in Mul v Hutton Construction:
note 13.
12 Joint Contracts Tribunal, Intermediate Building Contract (now in a 2011 edition). The
more widely used JCT Standard Building Contract with Quantities (SBC/Q) 2011
contains a clear obligation in clause 2.38 to give notice to the Contractor about defects,
but similarly uses the phrase ‘appropriate deduction’ without further explanation. JCT
contracts are obtainable from www.jctltd.co.uk.
13 Mul v Hutton Construction Ltd [2014] EWHC 1797 (TCC); the judgment also refers to
mitigation arguments and mentions Woodlands Oak: note 28.

5
Other legal structures may be in place to deal with the possibility of defects.
The employer may have credit, in the form of a retention (or money in an
escrow account) held back from what he otherwise owes the contractor; the
JCT contract in Mul v Hutton Construction also included a retention. This
may be enough to fund the works necessary following discovery of defects, if
the contractor fails to respond or becomes insolvent. Or there may be a bond
in place or a parent company guarantee. And there might be collateral
warranties on top – direct contractual links between consultants or other
project parties and the employer or the first owner of the building, potentially
assignable with the building itself and with a PI insurer behind the warranty-
giver, though usually requiring proof of fault (want of ‘skill and care’) in order
to make good a claim.

Similarities and differences

In our south London development, as in most residential construct-and-sell
situations, not one of the provisions or devices just outlined was in place for
our clients; as we have seen, not even a statutory security of payment regime.
Our buyers were in effect construction employers, but all they had was what
their contracts with the developer contained, plus any implied terms which
they could successfully assert. The common law of contract, and what
remedies could be sought under it, therefore had to be their central concern, as
in this paper. And on the psychological front, our claimants were living with
the defects day-to-day, in ways which a legal entity owning a commercial
building or piece of infrastructure never has to do.

There are, however, two features shared between most commercial or

infrastructure projects and our claimants’ home purchases:
1. Main contractors rely heavily on subcontractors to do much of the
work of construction on the ground. This has long been true in the
UK for specialised services like heating and ventilation or m&e,
but is now increasingly generalised across all aspects of a project;
in general terms the main contractor will be as responsible to the
employer for the work of a subcontractor (in law an ‘independent
contractor’) to undertake part or all of a project as if the main
contractor and its own employees had undertaken the same work.14
2. Most people assume that the main remedy for defects, at least in a
contractual context, is that the builder (or developer) comes back
on site and, to put it crudely, ‘gets the work right’. As we have
seen, this is often (at least part of) what the contract itself may
provide.

In our south London example, each purchase contract said nothing about the
use of subcontractors. It did spell out the developer’s build quality

14 The right to perform contractual obligations via a subcontractor may be limited or

excluded by the terms of the main contract (hence, some standard forms require
permission from the employer or contract administrator) or where the nature of the
contract requires performance personally by the original contracting party (eg if this
party’s skill or special knowledge is relied on): Julian Bailey, note 4, 20.08ff.

6
obligations, at least in relation to each dwelling;15 but made no provision for
the available remedies if the developer was in breach of these, save for the
possibility in years 1 and 2 after completion of using the Resolution Service
offered by the NHBC, the third-party provider of the Buildmark warranty.

The NHBC’s Buildmark played almost no part in our south London story,
though each of our claimants had the benefit of such a policy, promised by the
developer in every purchase contract. Our advice was that its scope of cover
was so limited (and would still be so today) that making a claim was not
worthwhile, especially for those defects in the blocks which were outside
individual units and in ‘the common property’. Its very restrictive rules on
reimbursing the costs of experts – often needed to establish whether there is an
arguable claim or not – were equally unhelpful. We were also aware that the
incidental costs or losses for which the policy would respond were far more
limited than those which the claimants could expect a court to award them as
‘special damages’, if the case got that far; less also therefore than might be
secured by negotiation with the developer. Unlike the present law in almost
the whole of Australasia, there is no statutory requirement for such a policy for
any construction project, residential or other, in any part of the UK.16

Sue the statutory certifier?

In south London, we had as our primary potential defendant a developer which
was still alive and kicking. As a result, none of our clients, let alone any of the
professional team, even raised for discussion the possibility of taking action
against the Building Control Body involved. To put it neutrally, this BCB
could not have done the best job of inspecting the project at various stages. It
had given a certificate at practical completion whose terms would have
encouraged a lay person to believe that all was well with build quality and that
the result complied with relevant mandatory construction standards:
misleading, if not actually incorrect.

15 The developer argued at one point that it owed no build quality obligations at all in
relation to ‘the common property’ of each block, but it is unlikely that this would have
succeeded in court: see Liverpool City Council v Irwin [1977] AC 239 (UKHL) and
Rendlesham Estates v Barr, note 5, paras [71]-[72].
16 A form of insurance-based defects cover may in fact be required in the UK in situations
where the purchase of a newly built or newly converted dwelling is funded by a
mortgage offered by a member of the Council of Mortgage Lenders, whose Handbooks
prohibit the release of funds unless there is warranty cover in place from an approved
provider. The NHBC’s Buildmark provides the lion’s share of warranties in such
circumstances. However, if there is no warranty, most lenders will accept instead a
Professional Consultant’s Certificate speaking to the build quality of the dwelling. On
these, see Philip Britton, ‘Professional Consultants’ Certificates: The View from the
Courts’ (2014) 30 Const LJ 337. Mortgages for home purchases or improvements –
including funding for home purchases obtained via the developer – are since 21 March
2016 subject to the Mortgage Credit Directive: Directive 2014/17/EU of the European
Parliament and of the Council of 4 February 2014 on credit agreements for consumers
relating to residential immovable property and amending Directives 2008/48/EC and
2013/36/EU and Regulation (EU) 1093/2010 (OJ L 60/34, 28 February 2014). This has
also brought with it regulation by the Financial Conduct Authority: www.fca.org.uk.

7
To consider legal action against a certifier could make sense in several
situations:
o Where the claimant has no claim in contract against anyone; or
o Where under the relevant limitation rules, a contract claim may be
‘timed out’, but a tort claim may have a later starting-point or
longer period; or
o Where the party against whom a contract claim could be mounted
has disappeared or could not satisfy a judgment against it.

In our case the target would have been Building Control Services Ltd, a
private sector company and a subsidiary of our biggest home warranty
provider the NHBC, in this role exercising statutory powers as an Approved
Inspector. This would almost certainly be a tort claim, requiring proof of
negligence, but in English law a non-starter: a building certifier exercising
statutory powers normally owes no duty of care towards an owner of a
building with defects, at least in relation to the cost of making the building
comply.17

Starting down that tort road would seem more natural in the New Zealand
context, especially for homeowners. 67 Edinburgh Crescent, Waikiwi,
Invercargill is the bungalow where the defective foundations claim originated
which took its first owner Mr Hamlin and the Invercargill City Council to the
Privy Council and back in the 1990s.18 His victory marked out tort law in
New Zealand as more tender to homeowner claimants than English law in
relation to the liability in negligence of (a) ‘builders’ (meant generically) for
their defective work; and (b) certifiers for failing to prevent a ‘builder’ from
doing defective work. Our reading of New Zealand law after its Supreme
Court judgment in Sunset Terraces is that territorial authorities (New
Zealand’s public sector BCBs) appear now to owe common law duties of care
in relation to all types of construction project within the statutory certification
regime.19 But statutory reform of joint and several liability, or a cap on BCBs’
potential liability, might blunt the value of this to claimants.20

Where a claimant can successfully sue a certifying body, the central part of the
‘special damages’ the court will award usually represents the cost of making
the building compliant. Similar principles appear to apply in English law
under the DPA, as well as in both English and New Zealand law in the more

17 Murphy v Brentwood DC [1991] 1 AC 398 (UKHL). For a fuller discussion of the

evolution of tort law in relation to building defects, including in both England & Wales
and New Zealand, see Philip Britton, ‘The State, the Building Code and the Courts’, SCL
(UK) Paper D152A (December 2013): www.scl.org.uk.
18 Invercargill City Council v Hamlin [1996] AC 624, [1996] 1 NZLR 513, 78 BLR 78, 50
Con LR 105 (UKPC). Australian law has in recent times grown much closer to England
than it is to New Zealand in these areas: Brookfield Australia Investments Ltd v The
Owners - Strata Plan No 61288 [2014] HCA 36, though this may leave the majority
judgments imposing a duty of care in Bryan v Maloney (1995) 182 CLR 609 (HCA)
intact.
19 Sunset Terraces/Byron Avenue [2010] NZSC 158, [2011] 2 NZLR 289.
20 New Zealand Law Commission, Liability of Multiple Defendants (NZLC R132, June
2014): www.lawcom.govt.nz.

8
straightforward breach of contract case. Here ‘expectation damages’ are the
norm,21 as long as rectification is reasonable (more precisely, not shown to be
unreasonable) in the light of its cost and its relationship to the seriousness and
impact of the breach.22 Subject to that qualification, damages for rectification
seem to be the default remedy, as they are too in cases where the claimant’s
land or buildings have been damaged by tortious activity (private nuisance, or
withdrawal of support) on a neighbour’s land. However, the defendant may
persuade the court that the loss of capital value is a more appropriate measure.
In this context, in Dodd Properties v Canterbury City Council, Donaldson LJ
said:
‘If he [the claimant] reasonably intends to sell the property in its
damaged state, clearly the diminution in capital value is the true measure
of damage. If he reasonably intends to continue to occupy it and to
repair the damage, clearly the cost of repairs is the true measure. And
there may be in-between situations.’23

So the court may have to choose between these two measures; however, in
almost every case there will still be a fight about the correct figures for
whichever measure of damages the court adopts. That may include a debate
about which technical solution is the right one, if the two parties propose
alternative schemes for rectification. If rectification has already been
undertaken, there may be an argument about its reasonableness, including
whether the claimant justifiably relied on experts to determine what work to
undertake.24

If a certifier is the defendant and rectification the chosen measure, there will
be no suggestion that the certifier should be allowed to organise this extra
work – let alone be required to do so via, at the limit, a mandatory injunction.
After all, it seems that you cannot get a quia timet (anticipatory) injunction to
prevent some actionable form of harm resulting from a not-yet-committed tort
of negligence.25 Why then should you be able to get an injunction requiring

21 Matthew Bell, ‘After Tabcorp, for whom does the Bellgrove toll? Cementing the
expectation measure as the “ruling principle” for the calculation of contract damages’
(2009) 33 Melbourne University Law Review 684.
22 Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 (UKHL), where
complete reconstruction of a swimming pool shallower than the specification, but still
deep enough for ordinary use, was held to be unreasonable, and the loss of capital value
was zero; but the claimant kept a modest award of damages for ‘loss of amenity’ – the
diminution in the pleasure the pool could provide, one of the aims of the contract,
represented by its shallower-than-intended depth.
23 Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433 (EWCA) at 456H,
relied on by Judith Prakash J in Afro-Asia Shipping Co (Pte) Ltd v Da Zhong Investment
Pte Ltd [2003] SGHC 286, [2004] 2 SLR 117. In Jones v Shire of Perth [1971] WAR 56
(WASC), the court held that it was disproportionate to require the defendant to build a
new retaining wall costing A$10,000, when the damage done from withdrawing support
amounted only to A$2000. And in Pantalone v Alaouie (1989) 18 NSWLR 119 the
court refused to award the rebuilding cost of an investment property.
24 See Cyril Chern, The Law of Construction Disputes (London, Informa, 2010), pages 243-
246.
25 By contrast, such an injunction is readily available to prevent the commission of a
nominate tort other than negligence against the real property rights of the claimant (eg
trespass to land or nuisance), if this party can mobilise in time and show ‘a clear and

9
someone to remedy that negligence, beyond paying you after-the-event
compensation? Further, a certifier’s primary statutory obligation is to inspect
and certify, not to build. For all these reasons, if rectification is the accepted
aim, buying this on the open market is the only remedy the law supports,
considering this fair to both claimant and certifier. Despite what Donaldson
LJ suggests above, the successful claimant does not have to undertake to
spend his damages on rectifying the building, nor in fact to do so. 26 In
Invercargill, Mr Hamlin chose to spend his winnings on rectification, the
present owner of no. 67 reporting that the house’s strengthened foundations
would now withstand one of the major earthquakes common in the South
Island.27

Remedies against a builder or developer

Introduction
Leaving aside, therefore, any thought of legal action against a certifier, our
dispute in south London was a contract claim by employer/buyers against
developer. Does this legal label change how rectification work could or
should get done? Must the claimant give the builder or developer a chance to
come back and rectify the defects? Always, or only in some circumstances?
If so, what does ‘giving a chance’ entail, and what are the consequences of
failing to do this? Or will the court ever require the developer to come back,
if the claimant argues that this is the best remedy?

Give the builder/developer a chance?

It is obviously simplest, and must usually be cheapest all round, for the builder
or developer to come back, assuming that both sides can agree on what is
wrong and what now needs doing. But is there any legal force behind what
may just be common sense? If there is, it surely relates to the rules for the
assessment of damages. It could reflect an idea that perhaps the claimant
would be exaggerating his or her loss by not giving the builder at least a
chance to do the rectification work. In this way it goes both to the
reasonableness of the damages claimed and to mitigation. By behaving
unreasonably, the claimant may as a result forfeit the right to the full cost of
employing a third party. This would certainly be true if there is a written or
printed contract which actually spells this out: that the builder should be
notified of any defects and be given a chance to remedy these.

present danger’: CIP Properties (AIPT) Ltd v Transport for London [2012] EWHC 259
(Ch), [2012] BLR 202, paras [27]-[29] (Sir Andrew Morritt Ch).
26 In Ruxley v Forsyth, note 22, the claimant attempted – unsuccessfully – to get
reinstatement damages for his pool by offering an undertaking to the House of Lords that
he would use such damages to rebuild the pool to the proper depth. Lord Jauncey said:
‘Intention, or lack of it, to reinstate can have relevance only to reasonableness and hence
to the extent of the loss which has been sustained. Once that loss has been established
intention as to the subsequent use of the damages ceases to be relevant.’
27 Conversation between the author and the owner (21 March 2016), confirming that Mr
Hamlin had had the whole timber-framed house jacked up while new foundations were
inserted. For a profile and photo of Noel Hamlin, see ‘Looking back on forty years of
service’, The Invercargill Eye 17 March 2016: www.fairfaxmedia.newspaperdirect.com.

10
One version of such arguments about damages goes back to a scenario
mentioned earlier: where a building has defects for which a construction
employer’s main contractor is legally responsible, but where the work in
question was actually done by subcontractors. In such a situation, the main
contractor can ideally pass any liability ‘down the line’, via an indemnity
clause in the sub-contract, designed to be ‘back-to-back’ with the obligations
in the main contract. This seemed to be the case in our South London example
too, though whether the subcontractors were still around we never found out –
and never needed to find out, once the developer accepted responsibility for
doing rectification work.

Where it will cost the developer in the end nothing to get the work done, does
the employer have to allow the developer back, instead being awarded only
nominal damages, or none at all? Such an argument gains support from a
recent decision of the Court of Appeal in London – but one whose scope and
value as a precedent remain unclear. Woodlands Oak v Conwell from 2011
concerns a cost-plus contract, agreed orally between the Conwells, a married
couple, and a small local construction company. 28 The law report is not
precise about the project, beyond noting that about £250,000 of work was
involved. The site of the project was (or was going to be) the Conwells’
home, near England’s south coast. It was close to Hambledon, the Hampshire
village known as ‘The Cradle of Cricket’. In the eighteenth century England’s
best known club was there, though its lead was quickly overtaken once the
MCC came into being in 1787.

Anyone familiar with the controls on domestic construction contracts in much

of Australasia would point out that for a builder to enter into a cost-plus
contract of that value with consumers for a domestic building project might
itself be illegal (ie leading to a fine, if not a criminal conviction, and
potentially to disciplinary consequences too). 29 More broadly, so would
almost any other type of construction contract for significant works in that
situation, if made only orally and hence not in the prescribed written form.
Not so under English law, which lays down no formal requirements for a
construction contract between builder or developer and residential consumer
and has no statutory registration or licensing system for developers or builders.
Here, freedom of contract often trumps consumer protection in our field.30

28 Woodlands Oak Ltd v Conwell [2011] EWCA Civ 254, [2011] BLR 365.
29 See note 4. Some regimes (as in Western Australia) put restrictions on the use of cost-
plus contracts; others (eg Victoria) require specific written warnings if the price may
change; yet others (eg NZ) merely require that a method of fixing the price be laid down.
The consequences of failing to observe the relevant substantive or procedural
requirements are equally varied.
30 General consumer protection rules may be relevant, notably the EU-derived Consumer
Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI
2013/3134). However, these do not apply to a contract to the extent that it is for the
creation of immovable property or of rights in immovable property; for rental of
accommodation for residential purposes; for the construction of new buildings; or for the
construction of substantially new buildings by the conversion of existing buildings.
Even where the rules do apply, there is little chance the trader will comply if neither
party is aware of them, or suffer any negative effects from failing to do so.

11
When the work was complete and the Conwells were already in the house, the
builders sent in their final bill. The Conwells raised issues about the
underfloor heating, the roof and a lintel over one window, as well as some
smaller ‘snagging’ items. Because the project was, like our new homes in
south London, ‘residential’ in character, it escaped entirely from the UK
security of payment regime. 31 The builders were thus free to sue the
Conwells, for the balance allegedly owing, in the Southampton County Court.
The trial took six days – the long period partly explained by easy-to-imagine
arguments about the terms of the contract and even who its parties were, as
well as about the existence of the claimed defects, the cost of the work already
done and the extra costs to the Conwells of moving out for six months while
the major defects were rectified.

The first instance judge found for the defendant Conwells on the main defects
they were asserting – so what they owed the builders was reduced by that
amount. But he refused to allow the couple anything for the smaller
‘snagging’ items, saying that they had failed to mitigate their loss. This was
because they had given the builder no chance to come back and sort the
problems via one of its subcontractors, which would have been at no cost
either to the Conwells or to the builder.

On appeal, the Conwells argued that this part of the judgment was wrong in
law, as their contract contained no provisions at all about the builder coming
back to remedy snagging. Sir Anthony May, with whom the other two judges
agreed, stood behind what the first instance judge had said: on the facts, it
would have been reasonable to give the builder a chance to deal with the
snagging items. This finding could therefore not be overturned on appeal.
What Sir Anthony did say, however, was that, as a matter of law, to give the
contractor no opportunity to rectify defects is not necessarily failing to
mitigate the employer’s losses. But on the facts it may be, as it was here.

Where does this leave construction employers like the Conwells? One thing is
clear: if the contract expressly requires the builder to be given a chance to
come back – not the case for the Conwells or for our clients in south London –
then failing to do so may put a cap on the damages available of whatever it
would have cost the builder to do the extra work, which may be zero.

More fundamentally, though, why should the builder’s primary liability to the
employer for defective work ever be cancelled out by the secondary liability to
him of one of his subcontractors for the same defects? If such a mitigation
argument is available at all, it should surely only operate if the builder is in
fact able to pass on legal responsibility, as well as the cost, to a subcontractor
still in existence – conditions that will not always be satisfied. Worse still,
they may turn out not to be satisfied when it is too late – after the court has
fixed, once and for all, the amount the employer gains in damages. This
judicial process (or an adjudication, if available instead) may take place, as it
did in the Conwells’ case, without the subcontractors playing any part in it.

31 See note 9.

12
Commentators have been scratching their heads over Woodlands Oak v
Conwell. 32 They think it unfortunate that the Court of Appeal treated the
‘snagging’ part of the first instance judge’s views as not open to challenge – a
challenge which the Conwells failed to mount, though the key finding of fact
below seemed to be based on a clearly inaccurate statement of the law. We
are also not much further on in understanding when the common law expects a
well advised construction employer to go through the motions of giving the
builder a chance to remedy defects; what this chance ought to consist of; and
for how long.

A later case in the TCC at least suggests some situations where, unless the
contract says otherwise, the employer does not have to give the builder a
second chance. Here from Mul v Hutton Construction in 2014 are three
examples from Akenhead J:
1. Where the defects are so fundamental and widespread that no
reasonable employer could be expected to have that contractor
back on site;
2. Where there has been fraudulent behaviour on the part of the
contractor relating to the works; or
3. Where the contractor has made it clear that it is not prepared to
return to put right alleged defects.33

Require the builder/developer to come back?

Even where the contract does not so provide, can a construction employer ask
a court to require a builder or developer to come back and rectify defects?
This takes us back to our south London clients, who in a typical sequence of
events had become completely distrustful of the developer, following its
broken promises of action. In talking to us, they started out wanting the
developer or its workmen nowhere near their homes. As already explained,
for reasons derived from Woodlands Oak, we advised them to swallow their
antipathy. We thought that any settlement would necessarily involve the
developer taking responsibility for rectification work – actually a desirable
outcome. On the other hand, if the case had gone to court, would a judge have
been willing, if asked, to insist on this?

There is no rule (as was once thought) that a court will never actively require
construction work to be undertaken, by mandatory injunction or by order for
specific performance. An obligation to achieve a specific result – the essence
of every construction contract – poses fewer potential problems of
enforcement than a general obligation to keep a business running.34

32 Notably James Bowling, ‘No Argument for Nil Cost – the Reasonable Cost of Cure and
the Decision of the Court of Appeal in Woodlands Oak v Conwell’ TECBAR Review,
Winter 2015: www.tecbar.org.
33 Mul v Hutton, note 13, para [25].
34 See Lord Hoffmann’s speech – with which all other Law Lords concurred – in Co-
operative Insurance Services v Argyll Stores (Holdings) Ltd [1998] AC 1 (UKHL).

13
A recent example from the Chancery Division in London about car parking on
the perimeter of Heathrow Airport illustrates the point. In Airport Industrial
GP v Heathrow Airport, Morgan J was willing to enforce a landowner’s
obligation in a lease to undertake construction of a fixed number of new car
park places, and to make an order for specific performance in these terms.35
This was so, even though legal action had been begun well in advance of the
deadline by which these new spaces had to be ready. But the court realised
that it was probably already too late for design and construction to be
organised fast enough to meet the deadline. The judge took the view that
where a breach was almost certain, there was no need for the court to wait.
There was a further twist: the key defendant was clearly at fault in not having
yet mobilised so as to deliver the new parking places in time, but the court said
that it would approve an order drawn up by the parties giving extra time
beyond the deadline, as long as enough temporary car parking spaces could be
found elsewhere and as long as this defendant paid damages for being late.

In an off-plan new home situation, the remedy of an order for specific

performance is commonplace and virtually automatic in relation to the
contract’s ‘transfer’ aspects. In this respect it is a contract for the sale of (or
transfer of an interest in) land, and – so the theory goes – every piece of land
has some unique features which cannot be replicated by buying a different
piece on the open market.36 This makes an award of damages an inadequate
remedy in case of breach. So specific performance can be expected to be
available against a developer if it unjustifiably fails or refuses to sell a
completed unit or house to its intending buyer, following an exchange of
contracts.

But could this remedy also be available in relation to the same contract’s
‘construct’ elements? If so, it would ensure that work left incomplete actually
gets finished, or that work already complete but in some significant way
defective does get put right, and by (or on behalf of) the party primarily
responsible in law.

As with most remedies in English law which derive from now distant
equitable origins, such an order against a developer will not be even semi-
automatic; it will be available only where the court considers that an award of
damages on any of the accepted bases would not be adequate. Assessing
whether this is so brings in a judicial discretion, exercised according to ‘settled
practice’ deriving from case law: another hallmark of this kind of remedy.
When then might a court be persuaded to make an order requiring rectification
work from a builder or developer? There appears to be little relevant case law;
but many claimants in breach of contract cases against builders or developers
request specific performance in tandem with a claim for damages. We
certainly would have done so for our south London clients, if we had formally

35 Airport Industrial GP Ltd v Heathrow Airport Ltd [2015] EWHC 3753 (Ch).
36 Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 (UKHL) at 478G-H (Lord
Diplock). There are suggestions – not yet reflected in English case law – that a purely
investment transaction in relation to the purchase of a flat in a block might find the court
unwilling to grant specific performance to the purchaser, if other flats in the same block
could still be purchased instead: Janet O’Sullivan in John McGhee (General Editor),
Snell’s Equity (London, Sweet & Maxwell, 33rd ed, 2015) para 17-008.

14
started legal proceedings, just as we would have included a separate claim
under the Defective Premises Act.37

Our thinking was that with multiple claimants and with virtually the same
defects in individual dwellings and in each block’s ‘common property’, it
would make no sense for each claimant to be given an individually quantified
award of damages applicable only to the defects within his or her own home.
Those in blocks of flats might have gained an additional amount for their share
of responsibility under their lease for rectifying defects in ‘the common
property’, but what if the tenants had no liability for these costs? Even if the
developer did not raise this ‘no loss’ argument (which could apply equally to a
residents’ management company making a similar claim), individual claimants
might get in relation to ‘the common property’ only the proportion of that
global repair bill as their dwellings represented in relation to the total number
in each block (in fact, fewer than half). For these reasons, damages looked in
general an unattractive goal.

But, even in a ‘construct-and-transfer’ context, to argue for an alternative to

damages will be an uphill task. And in our case we settled, perhaps helped by
the fact that if any aspect of a block fails to comply with the fire-stopping
principles in ‘the building code’, then the whole block fails. The only
example so far found in reported case law where specific performance was
granted in relation to post-completion defects arose out of a repairing covenant
in a lease, not a purely construction contract.38 Is this significant? We suggest
not, since most defect cases, whatever the cause of action, will settle ahead of
trial; and many which do get before a judge will involve a developer or builder
who is happy to agree to do whatever rectification work the court orders, in
preference to paying damages, the claimants being equally content with that
outcome. In such a setting, whether an order for specific performance could
or should be made will not be a live issue: the court is not likely to object on
its own motion to a form of order agreed between the parties.

One key which should open the door to specific performance is where the
construction site is not, no longer, or not completely, owned by the claimant,
nor one to which he has reliable access. This meets one of the settled
conditions for the grant of specific performance in a construction context:
‘... the defendant is in possession of the land so that the claimant
cannot employ another person to build without committing a
trespass.’39

37 On the DPA, see note 5 and its linked main text.

38 Jeune v Queens Cross Properties Ltd [1974] Ch 97 (Ch), considered in CIS v Argyll
Stores: note 34.
39 Snell’s Equity, note 36, para 17-017; Morgan J makes the same point in Airport
Industrial v Heathrow, note 35, para [115]. As this suggests, if the developer has parted
with the freehold of a block before a defects claim is made, it may be able to resist any
court-imposed obligation to do further work on ‘the common property’. In such a
scenario, the way forward for flat owners is very unclear, unless the head landlord for the
time being owes obligations to the tenants about the original construction of the block
(very unusual).

15
In such a situation, to require the defendant to act is to make available an
effective remedy where there may otherwise be none. By contrast, where the
claimant owns, or has access to, the site of the works in question, damages
appear adequate, as the court will (or would in theory) award enough for the
claimant to fund the additional construction (or rectification) work by
employing a new builder. However, in our south London case, we were
anxious about the risk of being unsuccessful in court in applying for an order
of specific performance and instead gaining the ‘wrong’ remedy (damages for
loss of capital value, likely to be far short of what was necessary to undertake
remedial work). This was another reason for hesitating to start legal action.

Where an order for specific performance, or its first cousin a mandatory

injunction, is in the frame, the court will want to know that the order asked for
does not expose the builder or developer unfairly to what the House of Lords
has called the ‘heavy-handed’ sanctions for contempt of court: an unlimited
fine (supported by the right to seize assets of the defendant via sequestration)
or committal to prison. 40 So the terms of a proposed order requiring the
defendant to undertake further work must be framed with adequate precision:
but this should be no more demanding than what the parties themselves would
expect if they were agreeing the terms of a settlement.

Beyond defining what work now has to be carried out, such a settlement
agreement should contain adequate arrangements for the work’s timing and
duration; for temporary decanting of residents (if necessary), access to
individual flats and their security; for independent verification of the work and
a method of dispute resolution. If well drafted, it should virtually guarantee
that the work gets done, in good time and in good order, which in turn will
remove any ‘blight’ presently affecting the insurability, marketability, sale
price or rental value of the flats.

The potential impact of standard forms

A standard form for ‘construct-and-transfer’ contracts for new homes might be
expected to address the sorts of defects issues we have identified; but no such
forms exist, at least in the UK. The standard conditions of sale for residential
property, which were incorporated into our clients’ south London contracts, do
not address build quality issues at all, since they assume that construction is
already complete and adopt a caveat emptor (let the buyer beware) starting-
point.

By contrast, standard forms for projects where the construction employer is in

a real sense the promoter of his own residential project, already owning the
site or building, do rather better. Amongst UK standard forms, the JCT
Building Contract for a Home Owner/Occupier (2010), approved by the Plain
English Campaign, provides in its clause 7(b) that ‘No later than three months
after the consultant certifies that all the work has finished, the consultant will
give the contractor a list of any faults which have arisen and which the
contractor is responsible for’. Clause 7(c) adds: ‘When the contractor has put
right all the faults on the list to the consultant’s reasonable satisfaction, the

40 Lord Hoffmann in CIS v Argyll Stores: note 34.

16
consultant will issue a certificate to confirm this’ 41 So this form makes no
express provision for the consumer to bring in a third party. However, if the
builder fails to respond to notification of ‘faults’, a court is likely to treat an
owner who knows that the building has defects which will get worse if
untreated (like those which compromise weathertightness) yet does not
organise at least protective works, as failing to mitigate.

The more recent RIBA Domestic Building Contract 2014, endorsed by,
amongst others, consumer champions the HomeOwners Alliance, provides for
a post-completion Defects Fixing Period, for which the default period is a
year.42 Under clause 10, there is no requirement on the employer or contract
administrator to serve notice of defects on the Contractor, so it looks as if at
Stage 1 the Contractor has both a right and a duty to investigate and then
rectify defects (for which the Customer must grant reasonable access under
clause 2.1.3). The Customer has a right to engage a third party – at the
Contractor’s cost – only at Stage 2, where the Contractor has been served with
a notice by the project architect or contract administrator and then fails to act
‘promptly’. This is not further defined, but it ought to mean that the
Contractor does not have the whole of the defects period to play with; and
that, having started rectification work, it must complete it with reasonable
speed. So the consumer has no choice at Stage 1: he cannot engage a
replacement builder and claim this cost as damages. At Stage 2, the
Contractor cannot object that the consumer has engaged a third party, so the
fact that subcontractors could have been in the frame (at no cost to anyone)
will be irrelevant and no Woodlands Oak argument will be available against
the consumer.43

Some of the owner-builder standard forms in New Zealand contain similar

procedures for post-completion defects. Hence the Cost and Margin Building
Contract of 2015 from the Certified Builders Association of NZ (CBANZ)
contains a defects correction period. This adopts a more detailed definition of
‘defect’ than most and extends the length of the period from 45 days to a year
if the contract falls under the statutory residential regime.44 Clause 17.3 deals
neatly with the situation in Woodlands Oak:
‘The Owner must give the Builder a reasonable opportunity to rectify
any defects that are notified in accordance with [the provisions above]
and shall not engage anyone else to do so unless and until a reasonable
time has elapsed and the Owner has given the Builder at least 20
Working Days notice of the Owner’s intention to engage someone else,
or the Builder has permanently and unequivocally abandoned the
Project’.

41 Joint Contracts Tribunal, Building Contract for a Home Owner/Occupier who has
appointed a consultant to oversee the work (2010), obtainable from www.jctltd.co.uk.
42 Royal Institution of British Architects, Domestic Building Contract 2014, obtainable
from www.ribacontracts.com.
43 Sarah Lupton, Guide to RIBA Domestic and Concise Building Contracts 2014 (London,
RIBA Publishing, 2015) para 5.46ff.
44 CBANZ, Cost and Margin Building Contract (2015); obtainable from
www.certified.co.nz.

17
Failure to comply with these procedures may also invalidate the owner’s third-
party warranty which comes with use of this form on residential projects.

Consumers as claimants
We must now take into account a potential extra factor: all our south London
claimants were individual consumers (‘natural persons’) acting on their own
account, contracting with a trader (the developer) operating in its normal
sphere of business activity. Their purchases were therefore Business-to-
Consumer (B2C) contracts. This fact alone may transform the remedies
situation; alternatively (or additionally), an off-plan ‘construct-and-transfer’
contract may trigger the application of a special residential building contracts
regime, containing its own rules about remedies.

General consumer law

In New Zealand, the Consumer Guarantees Act 1993 (as amended) imposes
statutory guarantees on a trade supplier of goods or services to a consumer (as
defined). However, its section 2 definition of ‘goods’ in part (c) excludes ‘a
whole building, or part of a building’, but the supply of components for later
inclusion in a building by another party may still attract the statutory
guarantees. 45 In relation to services (which in a construction context must
include workmanship, though probably not the supply of materials or
components), section 32 gives the consumer the right – subject to limitations
and exceptions – to ask the trade supplier of services which fail to meet any of
the statutory guarantees to remedy the defect. If the consumer asks the trader
to do so and the trader refuses, or fails to do within a reasonable time, the
consumer then has the right to have the work done by another supplier and
recover the reasonable cost from the original supplier, as well as potentially
cancelling the contract (if the failure is one of substantial character) and/or
asking for damages.

Along similar lines, the UK now has equivalent provisions in its Consumer
Rights Act (CRA) 2015 sections 51-52, imposing mandatory obligations on a
trader which supplies services to a consumer: with reasonable care and skill,
for a reasonable price and within a reasonable time. Section 55 of the CRA
gives the consumer the oddly named ‘right to repeat performance’ in relation
to the supply of services: ‘a right to require the trader to perform the service
again, to the extent necessary to complete its performance in conformity with
the contract’. Section 54 preserves any other remedies a consumer may have
in case of breach (including specific performance); section 56 specifically also
provides for a right to a price reduction – which might be a complete refund –
if the trader refuses or fails within a reasonable time to carry out ‘repeat
performance’ when asked to do so. Part 2 of the CRA also reorganises and

45 In Carter Holt Harvey Ltd v Minister of Education [2015] NZCA 321, paras [138]-[144],
the court refused to strike out the argument that Carter Holt Harvey might owe a duty
under the CGA to the Minister, having supplied ‘shadowclad’ sheets later installed by
building contractors in more than a thousand new schools (and not adequately
weathertight). The defendant’s attempts to strike out aspects of the case, which also
includes product liability claims in tort, have now moved upwards to the Supreme Court.

18
restates the law of unfair contract terms as it applies to B2C contracts; and
section 50 provides in outline that many pre-contractual representations made
by or on behalf of a trader to a consumer with whom a contract is made to
supply services are now treated as terms of that contract.

Special remedies in domestic building cases

As one of its reactions to the scale of the ‘leaky homes’ disaster which started
to manifest itself in New Zealand in the 1990s, when newly built timber
framed homes proved to be structurally compromised and unhealthy because
of their lack of weathertightness, New Zealand’s Building Act 2004 revamped
the building consent procedure. 46 Inserted by further legislation in 2013,
sections 362L and following of the 2004 Act give the client in relation to
construction work on ‘a household unit’ specific remedies for breach of any of
the statutory warranties newly imposed. However, what in English law would
be classed as a ‘construct-and-sell’ contract (like our off-plan sales in south
London) may in New Zealand be classed as a pure sale contract, so the new
statutory regime would not apply, though its mandatory warranties are in the
frame where a building is sold on commercially.

Where the new regime clearly bites (eg on construction to the order of the
site’s owner), section 362M expressly empowers the client to require the
building contractor to remedy a defect, making clear that if the building
contractor does not do what is necessary within a reasonable time, the client
can then employ a third party to do rectification and recover the cost of doing
so from the original builder. So for cases within the 2004 statute, Woodlands
Oak v Conwell seems to be excluded. And the client’s right to damages at
common law for other not-too-remote damage or loss is preserved. Special
rules (and a reverse burden of proof) apply to defects notified to the builder
within one year of completion; and all these rights are available to the
subsequent owner of the unit within the overall applicable limitation period.47
The new law applies to contracts signed on or after 1 January 2015; 48 the
implied terms give each side power to refer a dispute to mediation; and
consumers can assert their rights via adjudication under the amended
Construction Contracts Act 2002. It will take some time for case law on the
new rules to appear.

In Victoria, the specialist Civil and Administrative Tribunal (VCAT), via its
Building and Property List, has clear statutory power to make a rectification

46 For more background, see Britton, ‘The State, the Building Code and the Courts’: note
17.
47 Where, as in New Zealand and many Australian jurisdictions, claims relating to building
work have their own fixed limitation period (in NZ, under the current text of the
Building Act 2004, s 393), it may be vital to know whether a claim has that special
period applicable to it or the normal period otherwise applicable to civil claims. In
Carter Holt Harvey v Minister of Education, note 45, the court took the view, para [174],
that ‘claims against product manufacturers and suppliers for building materials were not
intended to be covered’ by this special limitation regime, so the general Limitation Act
2010 (NZ) applied instead and permitted the claims now to be pursued, to the industry’s
consternation.
48 For the detail, see the Building (Residential Consumer Rights and Remedies)
Regulations 2014 (NZ) (2014/361).

19
order in a domestic construction case, but in practice rarely does so.49 This is
for the good reason that such an order risks yoking together for a further
period the residential construction employer and a builder, developer or
construction professional, between whom trust may have definitively broken
down. It is the builder who is often eager for the tribunal to allow (require)
him to do the additional work necessary, as this will cost him – or so he thinks
– far less than paying damages at the level of estimates the claimant will have
produced from in-the-wings new builders.

But the tribunal will understandably hesitate to override a claimant who

reasonably says: ‘I Am Not Having That Man Back In My House.’ This is
illustrated by Stiff v Barton from 2005, where Senior Member RJ Young held
significant defects in a new home to be the responsibility of the builders, with
the project’s third-party warranty provider as an additional defendant. But the
Tribunal awarded the homeowner applicants damages (A$99,648: about a
third of what they claimed), refusing the builders’ request to be ordered to
come back and do the necessary rectification work:
‘After an eighteen-day hearing in which the longest and hardest
evidentiary battles were in relation to issues of credit between the
owners and builders, I consider it is safe to say that neither party has
much confidence in the other. Therefore, under the policy [warranty] it
would be reasonable for the owners to refuse the builders access.
Therefore, I consider it would be wrong of me and it would tend to
undermine confidence of the parties in the Tribunal process if I made
such an order [for rectification work] in the face of the owners’ refusal
to allow the builders access.’50

Conclusions
As the discussion above sought to show, the general topic of ‘Judicial
Remedies for Construction Defects’ has significant mileage in it, especially in
situations untouched by any well known standard form contract. Where the
contractual context gives the courts a free hand, and where statute does not
intervene, the question of what remedy is appropriate and how to assess
quantum (if a damages claim is successful) can be real issues whose outcome
is not always clear. These uncertainties impact specially hard on consumers in
relation to defects in homes bought off-plan.

49 Domestic Building Contracts Act 1995 (Vic) s 53. For closely similar powers given to
the Home Building Division of the Consumer, Trader and Tenancy Tribunal (CTTT) in
NSW in relation to ‘building claims’, as defined, see the Home Building Act 1989
(NSW) s 48O, which echoes the powers given to an Inspector under s 48E; in 2014 the
CTTT became part of the NSW Civil and Administrative Tribunal (NCAT). In
Queensland, QCAT has similar powers under the Queensland Building Services
Authority Act 1991 (Qld) s 77(2). Western Australia has the Building Services
(Complaint Resolution and Administration) Act 2011, which empowers the Building
Commissioner to investigate any complaint relating to domestic building work, then
potentially referring the complaint to the State Administrative Tribunal.
50 Stiff v Barton (Domestic Building) [2005] VCAT 821, para [7.1]. The VCAT finding
that the builders were liable was overturned on appeal, but the tribunal’s approach to the
question of remedy was not challenged: Barton v Stiff [2006] VSC 307.

20
In an English context – that is, without the protective impact of any of the
Australasian statutory regimes51 – four drafting lessons seem to emerge:
1. Ensure that the build quality obligations of the builder or
developer (including compliance with all mandatory external
standards) are clearly laid down;
2. Copying the best standard form provisions, but also complying
with the CRA, make clear what opportunity the builder or
developer should be given to come back to do rectification work,
the conditions under which that is to take place (time-limits,
procedures and machinery, and any special provisions for ‘the
common property’, if necessary) and the consumer’s safety-net
alternative remedies if the other party defaults;
3. Make these rights and remedies available to the current owner or
lessee of the building:
(a) by ensuring at the least the possibility of a chain of
assignments of the right to sue on the original construction
contract from its employer to the present claimant; 52 or,
better still,
(b) by expressly opting in to the Contracts (Rights of Third
Parties) Act 1999 in relation to the relevant terms of the
construction contract, for the benefit of future acquirers
(including long-term lessees) of the building or a unit within
it;53 and finally
4. Do not agree to abandon any rights at common law against the
builder or developer by accepting that the consumer’s rights under
a third-party insurance-type warranty replace all other rights and
remedies.54

In the real world, a consumer buying a new home off-plan may have no real
chance of achieving any of these aims. There are two overlapping reasons:

51 See note 4.
52 Assignment only works with an unbroken chain of assignments from the original
contracting party to the present claimant; and there can be uncertainties about what rights
have been – or could be – transferred, or whether the assignee’s rights are limited to only
those losses which the first assignor could have claimed: see Technotrade Ltd v
Larkstore Ltd [2006] EWCA Civ 1079, [2006] 1 WLR 2926, with its curious sequel
Starglade Properties Ltd v Nash [2010] EWCA Civ 1314.
53 On the 1999 Act – which does not apply in Scotland and only to a limited extent in
Northern Ireland – and its application to construction, see Steven Walker QC and John
Hughes-D’Aeth, ‘Giving Rights to Third Parties: Topical Issues’, SCL (UK) Paper 198
(May 2016): www.scl.org.uk. Note that s 1(5) of the I999 Act expressly preserves the
right of the third party to all the remedies (including specific performance) which the
original contracting party could have requested. For Australasian equivalents, see
Contracts (Privity) Act 1982 (NZ), as amended; or the comparable statutory changes in
Australia under the Insurance Contracts Act 1984 (Cth) s 48, Property Law Act 1969
(WA) s 11 and Property Law Act 1974 (Qld) s 55, discussed by Mason CJ and Wilson J
in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107
(HCA).
54 As happened in Robinson v PE Jones (Contractors) Ltd [2011] EWCA Civ 9, the court
agreeing with the first instance judge that such a provision was not unfair.

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few conveyancers, especially those recommended by developers to would-be
buyers, have much awareness of post-completion defect issues and how to
protect a later acquirer of the home; and even a well advised buyer may find
that a developer’s standard terms are not open to any meaningful negotiation.55
As a result, the buyer may have to settle for the limited protection offered by
an insurance backed third party warranty, especially if the developer is no
longer in existence when a claim arises. If there is no warranty but the home
was bought with a mortgage and had a Professional Consultant’s Certificate at
completion, the homeowner will be in the unattractive Last Chance Saloon:
with the possibility – at best – of suing the consultant (in reality his PI insurer)
in tort for a negligent certificate, relied on by the buyer in making the
purchase.56

Philip Britton LLB BCL is a Visiting Professor and former Director,

Centre of Construction Law & Dispute Resolution, Dickson Poon School of
Law, King’s College London; also a Senior Fellow, Melbourne Law Masters.
He is a consultant to the law firm Fairweather Law (Aldeburgh, Suffolk). E-
mail philip.britton@marshwinds.co.uk.

© 2016 Philip Britton and the Society of Construction Law 2016

The views expressed by the author in this paper are his alone, and do not necessarily
represent the views of the Society of Construction Law or the editors. Neither the
author, the Society, nor the editors can accept any liability in respect of any use to
which this paper or any information or views expressed in it may be put, whether
arising through negligence or otherwise.

55 The absence of negotiation might increase the chances of the consumer successfully
arguing (now under the CRA 2015, which makes this easier) that specific terms in the
contract are unfair, but some judges seem to take the view that a clause in use widely is
unlikely to be unfair in law: see West v Ian Finlay & Associates [2014] EWCA Civ 316,
[2014] BLR 324, 153 Con LR 1.
56 See note 16.

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is to promote the study and understanding of
construction law amongst all those involved
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