In our previous article titled Demanding payment without sufficient home warranty insurance, we discussed the consequences for a licenced contractor who did not obtain sufficient home warranty insurance for building works. In this article, we discuss the exception to the rule. Pursuant to s 94 of the Home Building Act 1989 (NSW) (the “Act”), a court or tribunal may award damages if it considers it to be just and equitable to do so on a quantum meruit basis. Quantum meruit refers to the reasonable value of services provided.
In the case of Pender v Robwenphi Pty Ltd & Anor [2008] NSWSC 1144, the home owner had engaged the first defendant to undertake electrical work at his premises. The defendant did not obtain home warranty insurance for the works done and the plaintiff subsequently refused to pay for the works. The matter was heard before the CTTT which found in favour of the defendant. The plaintiff appealed to the Supreme Court of New South Wales.
The Court exercised its discretion pursuant to s 94 and found in favour of the defendant, considering it just and equitable that it recover monies on a quantum meruit basis for the work done despite its failure to obtain the required contract of insurance. The court held that the CTTT did have regard to relevant matters in the exercise of its discretion.
Those included:
- that the plaintiff would stand to gain the benefit of the work without paying for it should the defendant’s claim be refused;
- that the failure to have a contract of insurance in place had no measurable impact on the resale value of the property;
- the first defendant was unaware of the requirements to obtain home warranty insurance because it practiced principally in industrial and commercial electrical work; and
- there was no conduct on the part of the defendant that was dishonest.
Tips
- If you anticipate doing construction work outside your usual area of practice, seek advice about the law in that area first; and
- Remember that home warranty insurance is necessary in the home building industry.
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This article is not legal advice and should not be relied upon as legal advice. All articles found on this website are intended to provide informative information, nevertheless, in many instances legislation and case law has been simplified and/or paraphrased. If you would like personal legal advice based on your current circumstances, you should contact MurdockCheng Legal Practice for a free consultation.