The danger of termination of construction contracts for delay
A recent decision of the Appeal Board of the NSW Civil and Administrative Court, Patel v Redmyre Group Limited  NSWCATAP 132, demonstrated the serious consequences of an invalid attempt to terminate a construction contract for delay.
In the above case in which the author appeared as counsel for the builder at first instance and on appeal, the owners claimed to terminate a construction contract for the builder’s failure to move the work forward with diligence. required.
In the first instance, the Contracting Parties provided proof that the Builder had not completed the work on the date specified in the contract. However, the Owners had not provided sufficient evidence as to the speed of progress of the works on the site and instead relied on the failure of the Builder to achieve practical completion.
In this case, the Owners have excluded the Builder from the site after having issued a justification notice and a termination notice aimed at terminating the contract.
On appeal, the Appeal Board confirmed that the decision of lead member Blakce SC and cited with approval the principles of Hometeam Constructions Pty Ltd v McCauley  NSWCA 303 and, in doing so, confirmed that the onus was clearly on the owners to prove that the builder had failed to exercise due diligence. Applying the principles in Hometeam, the Tribunal concluded and the Appeal Board agreed that it was not sufficient that the Owners simply prove that the Builder had not achieved practical completion by the date specified in the contract of construction.
The Appeal Panel also noted the need for a show cause notice to strictly adhere to the contractual requirements of a show cause notice. In this case, the owners requested a project schedule to confirm when the work would be completed in circumstances where the contract between the parties did not provide for such a schedule.
Due to the invalid termination, the Appeal Board ruled that the owners did not have the right to claim a faulty and incomplete wok by applying the principles set out in Bitannia Pty Ltd v Parkline Constructions Pty Ltd.  NSWSC 1302 by White J.
The decision is a timely reminder that:
- Homeowners seeking to terminate construction contracts in accordance with its terms should ensure that any contractual notices issued to terminate the contract strictly comply with the terms of the contract and do not exceed the terms of the contract.
- Homeowners should carefully consider the issues before terminating a construction contract and in particular terminating a construction contract because the builder has delayed the work.
Source: Patel v Redmyre Group Limited  NSWCATAP 132, May 14, 2021.