Case Study – Algebra Tip Pty Ltd v D&M Group (Vic) Pty

This month we successfully represented our client in an interesting matter about whether a ‘rooming house’ is domestic building works within the meaning of the Domestic Building Contracts Act 1995 (DBCA). For this case, we needed to carefully consider the zoning of where the property was built, the purpose of the permit, whether the works were excluded under s6 of the DBC Act (ie, was it for ‘business purposes’) and whether the design differed from traditional shared accommodation design.

Algebra Tip Pty Ltd v D&M Group (Vic) Pty [2021] VCAT 652 (22 June 2021) (Acting Deputy President S. Kirton)

The facts of Algebra Tip Pty Ltd v D&M Group (Vic) Pty involved our client, the Applicant, entering into a building contract with the Respondent for the design and construction of a single level 9 bedroom class 1b rooming house. The contract included a number of documents such as planning permission documents, building permit documents, architectural and engineering drawings and specifications. One of the planning permit documents was a letter dated 13 March 2019 from the Greater Shepparton City Council which noted that because the land is liable to flooding, the minimum floor level of the proposed dwelling “must be 112.10m AHD or in accordance with BCA 2016 Part 3.1.2.3(b) whichever is the greater.”

Construction of the Project commenced on or around 17 June 2019 and continued until September 2019. The Applicant made a number of progress payments, totaling $239,200.

A dispute arose between the Applicant and the Respondent when the Respondent breached the contract in that:
– The Respondent constructed the finished floor level 600mm lower than the approved building plans;
– The Respondent failed to rectify other defects as identified by the engaged building consultant, Mr Catanzaro;
– The Respondent failed to appropriately fence the site; and
– The Respondent failed to proceed with or complete the works.

By reason of the abovementioned breaches, the Applicant was entitled to terminate the contract. Acting Deputy President S. Kirton was satisfied that the Applicant validly terminated the contact pursuant to clause 44.10 which provided that if the contract is terminated by the principal, the rights and liabilities of the parties shall be the same as they would have been at common law had the defaulting party repudiated the contract and the other party elected to treat the contract as at an end and recover damages.

The Tribunal had to consider whether the work was domestic building work within the meaning of the Domestic Building Contracts Act 1995 (DBCA) because the building is described as a rooming house. It was found by Acting Deputy President S. Kirton that the works fall within the meaning of s5(1)(e) of the DBCA that is, it is a building being built on land zoned for residential purposes (ss(i)) and for which a building permit was required (ss(ii)). It was also found that the work was not excluded by s6 of the DBCA, giving discussion as to whether the phrase “for business purposes” mean in the context of a building used as a rooming house, where residential accommodation is rented to tenants. The design used by the Applicant differed from a ‘traditional shared accommodation design’ in the sense that each of the nine rooms in the building has its own ensuite bathroom and kitchenette. This ‘micro-apartment’ design would attract long-term tenants; and its design was not limited to having it operate as a rooming house allowing the building to be rented to a single tenant if desired.

Acting Deputy President S. Kirton was satisfied that the work subject of the respondent’s contract comprises a building that is designed and intended to be used as a residential premises and therefore is not captured by the s6(1)(c) exclusion.

As a result, it was found that the work falls within the meaning of s3 of the DBCA as it is work referred to in section 5 and is not excluded from the operation of the Act by section 6. As such, Acting Deputy President S. Kirton found in favour of our client, and found that the Applicant had suffered loss and damage of $392,222.84 plus liquidated damages of $61,320 making a total of $453,542.84.

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