Defective or Incomplete? Why the distinction matters
The condition, workmanship and progress of construction or trade work can cause issues during and after a project or job.
Often there is a fine line between what is actually defective work and incomplete work.
In some cases, the distinction may not be important, but in others, it may have legal and financial consequences.
The following is a brief overview of defective work and incomplete work, why the distinction between them matters, and how characterising work as either may impact a party’s position.
What is defective work?
Defective work is construction or trade work that does not comply or conform with the contract, including other contractual documents such as plans, designs and specifications.
It is typically work performed, but not performed properly or in a workmanlike manner.
Defective residential work
In New South Wales, residential work may also be defective if it does not comply or conform with one (1) or more of the statutory warranties implied by section 18B of the Home Building Act 1989 (NSW) (HB Act), including that the work be performed in accordance with applicable standards, and the law, codes, and conditions of any relevant development consent or complying development certificate.
Claim for defective work
If work is found to be non-compliant or non-conforming with the contract, or a statutory warranty if it is residential work, then it would likely be defective, and the responsible contractor in breach of the contract and/or a statutory warranty.
The owner would usually be entitled to damages (compensation) from the responsible contractor, including the cost of necessary and reasonable rectification work, and other costs including for alternative accommodation and vacating the property for the period of time that rectification work is to be performed. (1)
However, damages for defective work will usually not be awarded if: (2)
The contract is still on foot (not ended or terminated);
The work has not been delivered to the owner;
The responsible contractor still has possession of the work;
Any applicable defects liability period has not expired;
In the context of a claim for defective residential work or specialist work (3) performed in New South Wales, rectification by the responsible contractor is determined to be the preferred outcome.
What is incomplete work?
Incomplete work generally refers to construction or trade work a contractor was required to perform, but did not perform.
An example of incomplete work is a failure to install a major building element such as windows or a roof. (4)
Work is incomplete if not commenced under a progress stage at the time the contract ends (terminated) or when the contractor ceases work.
Before practical completion, and while the contract is on foot (not terminated), the contractor is entitled to perform and complete any incomplete work under the contract.
Claim for incomplete work
Where an owner has terminated the contract due to the contractor’s serious breach, the owner would usually be entitled to damages (compensation) from the responsible contractor for the increased cost of completing the incomplete work (5) calculated as:
The amount the owner is to pay another (third party) contractor to complete the incomplete work;
LESS the amount the owner would have had to pay the responsible contractor to complete that incomplete work.
However, damages for the increased cost of completing the incomplete work will usually not be awarded to an owner if the contractor terminates the contract due to the owner’s serious breach. This is because the owner’s own breach and conduct caused the contract to end and therefore cannot claim for a future loss they caused.
Why the distinction matters
What is defective work and incomplete work can have an impact on:
Liability;
Available outcomes;
The calculation of loss and damages (compensation).
Identifying work as defective or incomplete can be complicated, with even potentially a degree of overlap between them.
Incomplete work may also be defective
For example, in the context of a contract where work is done and paid for in stages, work may be defective if the contractor has been paid for a particular work however did not complete it during that stage and later no longer can, due to termination of the contract.
The owner would usually be entitled to damages (compensation) from the responsible contractor for the costs of completing the incomplete work that had been paid for before termination of the contract (6), instead of the increased cost of completing that paid incomplete work.
In summary
Understanding the difference, and how particular construction or trade work is characterised may be crucial to a party’s position.
If you are facing a dispute regarding the condition, workmanship or progress of work, or wondering how to frame or defend a claim relating to the nature or characteristics of performed or incomplete work, it is important to seek legal advice to clarify your rights, responsibilities, and appropriate next steps.
Sources
Bellgrove v Eldridge (1954) 90 CLR 613, [1954] HCA 36; Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185.
Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248; Section 48MA of the HB Act.
Including plumbing and drainage work (other than roof plumbing work), electrical wiring work, gasfitting work, and refrigeration work or air-conditioning work; Schedule 1 to the HB Act.
Clements v Murphy [2018] NSWCATAP 152.
DB Homes Australia Pty Ltd v Kes [2019] NSWCATAP 221.
Intelligent Building Pty Ltd v Ibrahim [2023] NSWCATAP 170.
Disclaimer
The above information is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the above information is accurate at the date it is received or that it will continue to be accurate in the future.
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