Catchwords

Domestic Building Contracts Act 1995 (Vic) – schedule of progress payments – major domestic building contract

Significance

The decision demonstrates that if the parties to a major domestic building contract agree to a progress payment regime that departs from the prescribed method in the Domestic Building Contracts Act 1995 (Vic) (Act), they must demonstrate a clear understanding that they are departing from the legal protections in the Act.

Facts

Imerva Corporation Pty Ltd (builder) entered into a building contract with Anton and Jaga Kuna (owners) to demolish an existing house and build two attached townhouses on the owners' land in Brighton, Victoria. The contract was a major domestic building contract as defined by the Act.

The parties agreed under the contract to use a method of scheduling progress payments which departed from the method set out in section 40 of the Act. However, the owners did not sign the warning required under the Act in the form prescribed by regulation 12 of the Domestic Building Contracts Regulations 2007 (Vic) (Regulations). Rather, they placed their initials at the foot of each page of the contract including on the page that contained the warning. The owner paid the first seven progress claims in accordance with the new method.

In or around October 2013, a dispute arose between the parties due to alleged defects in the works, and the owners failed to pay the next three progress claims and subsequently purported to terminate the contract. The builder sued to recover the unpaid progress claims and associated amounts while the owners counterclaimed for the return of excess progress payments, additional costs to complete, rectification costs and incomplete works costs. 

The builder submitted that the owners were estopped from disputing the method of scheduling progress payments because the builder would attract criminal sanction for receiving amounts in addition to those allowed under the Act. The builder appealed against the trial judge's findings that:

  • the owners' initials placed at the foot of the page failed to comply with the Regulations, meaning that the method of scheduling progress payments set out in section 40 of the Act applied, and not the contractual process; and
  • estoppel is not available to prevent owners from relying upon a builder’s contravention of the Act.

Decision

The Court of Appeal (Tate, Kyrou and McLeish JJA) unanimously dismissed the appeal. The court found that the warning required by the Regulations must be signed in a manner that demonstrates clearly that owners understand that the legal protection afforded by the Act regarding the method of scheduling progress payments no longer applied. Whilst this did not require a signature on the dotted line, the place of signing must enable the necessary inference to be confidently drawn. The court also agreed with the trial judge's conclusion that estoppel is not available