The decision in The Owners – Strata Plan No 102171 v Ceerose Pty Ltd; Zone Q Milsons Point Development Pty Ltd v Ceerose Pty Ltd; Ceerose Pty Ltd v Southern Cross Climate Control Pty Ltd [2025] NSWCATCD 137 is a significant development in understanding the evidentiary obligations of an applicant when seeking a work order under section 48O of the Home Building Act 1989 (NSW) (HBA).
In the principal proceedings, the owners corporation sought work orders under section 48O of the HBA against the builder and developer in respect of alleged breaches of the statutory warranties implied by section 18B of the HBA.
The Tribunal confirmed that the burden rests solely on the applicant to establish not only the existence of a defect, but also the appropriate method of rectification. At paragraph [75], the Tribunal held that an applicant must prove the rectification methodology necessary to achieve compliance with the contractual obligations, including the statutory warranties implied by the HBA. The applicable test, set out at paragraph [77], is “what is necessary to achieve compliance with the contract (relevantly, the statutory warranties implied into the contract) and a reasonable course to adopt.”
Importantly, the Tribunal held that establishing the existence of a defect alone is insufficient to justify the making of a work order under section 48O. At paragraph [149], the Tribunal emphasised that any work order must be clear, certain and unambiguous so that the party subject to the order understands precisely what is required to comply. The Tribunal further observed at paragraphs [151] and [152] that certainty is particularly important in future renewal proceedings, where it may later be necessary to determine whether the ordered works have in fact been completed.
Consistent with that approach, the Tribunal rejected the owners corporation’s proposal that the builder simply be ordered to engage an appropriately qualified consultant to prepare a regulated design under the Design and Building Practitioners Act 2020 (NSW). As no regulated design had been produced in evidence as part of the scope of works for the work order, the Tribunal found at paragraph [157] that such an order would be speculative and contingent upon future documentation that had not yet been prepared or tendered.
Although the Tribunal accepted that several defect items existed in principle, work orders were not made in circumstances where the owners corporation had failed to produce regulated designs in the scope of rectification works. The decision therefore confirms that, where expert evidence establishes that regulated designs are required before rectification works can be undertaken, those designs must form part of the applicant’s evidence if enforceable work orders are to be obtained.
The decision is particularly noteworthy because it substantially increases the evidentiary burden on owners corporations seeking work orders. It is not sufficient to establish that defects exist and that further design work is required before rectification can occur. Instead, applicants must effectively prove each stage of the proposed rectification process before the Tribunal will make a work order.
The practical consequence of this approach is likely to be increased costs for owners corporations. Preparing regulated designs as part of the applicant’s evidence inevitably requires significant upfront expenditure. For many schemes, this may present a considerable financial hurdle before rectification orders can even be pursued.
The decision also raises practical concerns regarding the preparation of regulated designs. In many cases, the final design solution can only be satisfactorily developed once a contractor has a detailed understanding of the condition of the existing works and the issues encountered during the rectification process. Requiring complete regulated designs at the outset may therefore prove challenging in circumstances where the appropriate methodology cannot be fully determined until further investigations or preliminary works have been undertaken.
While the decision provides greater certainty as to the detail required in the scope of works for a work order to be made under 48O of the HBA, it also establishes a demanding evidentiary standard for applicants. Owners corporations will now need to ensure that comprehensive regulated design documentation accompanies their expert evidence wherever such designs are required, failing which they may establish the existence of defects but nonetheless be unable to obtain the work orders necessary to rectify them.
