Stewart V Sherridon Pty Ltd [2024] VCC 1023 concerned a case as to whether special conditions in a major domestic building contract entitling the builder to unilaterally vary the contract or building plans trump the requirements for variations under sections 37 or 38 of the Domestic Building Contracts Act 1995 (Vic) (DBC Act).
The Victorian County Court held that they do not; the builder was still required to comply with sections 37 or 38 of the DBC Act (as the case may be) to effect a valid variation, notwithstanding any special condition to the contrary.
Background
Mr and Mrs Stewart (Owners) entered into a major domestic building contract (Contract) with Sherridon Pty Ltd (builder) for the construction of a residence, including a garage. The Contract included preliminary plans which showed the garage abutting the western boundary of the property without eaves.
The Contract included a special condition whereby the builder reserved the right to amend the siting of the building works at its sole discretion, subject to the provision of services, council requirements and developer requirements.¹
The builder completed the building works in accordance with a set of varied plans whereby the structure was re-sited by approximately 1 metre as against the preliminary plans (Variation). The varied plans were ultimately accepted by the Owners.
Proceedings
On 26 July 2022, the Owners’ brought proceedings in the County Court of Victoria against the builder claiming, amongst other things, that the Variation was void by reason of non-compliance with the requirements set out by section 37 of the DBC Act² and seeking damages, costs and other relief.³
The builder’s position was that it had not committed any non-compliance with the terms of section 37 of the DBC Act as the Owners signed and dispatched the varied plans to the builder and failed to notify the builder or the building surveyor that they did not agree to the residence being constructed in accordance with the varied plans.4
The builder also claimed that if it was held that it had failed to comply with section 37 of the DBC Act, there were exceptional circumstances and / or the builder would suffer significant or exceptional hardship if it were not entitled to recover moneys in respect of the Variation.
Decision
In AMO Rifat Holdings Pty Ltd v Dib [2024] VCAT 419 (AMO v Dib), the Victorian Civil and Administrative Tribunal (VCAT) held that special conditions purporting to give the builder wide discretion to direct a variation did not oust section 38 of the DBC Act, which continued to prescribe the process that must be followed before a variation that may arise pursuant to the special condition can be claimed.5
The Court agreed with the reasoning of AMO v Dib and stated that the determining factor on this point was whether or not the builder can be regarded as having complied with the requirements of section 37 of the DBC Act,6 notwithstanding any special condition in the Contract to the contrary.
The Court held that there was no valid variation within the meaning of section 37 of the DBC Act because the builder had failed to comply with the notice requirements of section 37(1) of the DBC Act7 as the Variation was constituted solely by the revised or working drawings and the movement on lines representing walls within those drawings, and not in writing and in English as was required by the Contract.8
Implications
The decision stresses the importance of builders complying with the requirements of section 37 of the DBC Act when seeking to give effect to variations under a major domestic building contract. The decision is also relevant for owners who, similarly, should comply with the requirements of section 38 of the DBC Act as well.
A failure to comply with the notice requirements of the contract will likely render a variation invalid for the purposes of sections 37 and 38 of the DBC Act.
HWL Ebsworth has expertise in advising on construction contracts and the DBC Act. Please contact Alan Chiang of our Construction and Infrastructure team to discuss any aspects of the above.
This article was written by Alan Chiang, Partner and Con Koutsantony, Senior Associate.
1 Stewart V Sherridon Pty Ltd [2024] VCC 1023, [22].
2 [2024] VCC 1023, [46].
3 [2024] VCC 1023, [49].
4 [2024] VCC 1023, [57].
5 AMO Rifat Holdings Pty Ltd v Dib [2024] VCAT 419, [71].
6 [2024] VCC 1023, [115].
7 [2024] VCC 1023, [123].
8 [2024] VCC 1023, [121].
