High Court decision on oral requests for variations
October 15, 2019
The High Court has clarified the interpretation of section 38 of the Domestic Building Contracts Act 1995 (“the Act”). That legislation regulates the variation of building works when requested by the client.
Traditionally section 38 of the Act has been regarded as requiring the builder to give a variation notice to a client which is then signed by the client. The only exception is when the cost of the variation is less than 2% and the variation will not cause a delay. HIA has traditionally advised members to always get the client to sign a variation document before carrying out a variation.
The High Court decision states however that the legislation requirement that the client “give the builder a notice outlining the variation” requires the client to give a written notice to the builder. The High Court also decided that subsection 38(5) of the Act prohibits a builder from giving effect to a variation requested by the client unless they have given a written notice. In that situation, the builder’s only legal right to be paid requires them to convince VCAT that exceptional circumstances exist or that the builder would suffer a significant or exceptional hardship, and that it would not be unfair to the building owner.
So this means that if a client requests a variation without putting that request in writing then the builder should expect that the client cannot be compelled to pay for the variation unless the builder is willing to go through the DBDRV and VCAT process and hope that VCAT will agree that they should be paid.
The simple message here is as follows - If the client is not willing to put pen to paper to request a variation then you cannot expect to be paid for that variation AND you should not agree to perform the variation until the client first makes a request in writing and you then get them to sign a variation document.
For further information on this issue, please call 1300 650 620 to speak to a HIA Workplace Adviser.