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[2026] NSWDC 190
District Court of NSW
2026-06-12
Newlinds SC DCJ
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Medium Neutral Citation: Bond Mayhew Pty Limited ATF Mayhew Cooper Crawford Superannuation Fund v Kerry Spicer [2025/00140171]; Kerry Spicer v Bond Mayhew Pty Limited ATF Mayhew Cooper Crawford Superannuation fund [2025/00027953] [2026] NSWDC 190
General information, not legal advice.
Original judgment source is linked above.
Hearing dates: 1, 2, 3, 4 and 5 June 2026
Date of orders: 12 June 2026
Decision date: 12 June 2026
Jurisdiction: Civil
Before: Newlinds SC DCJ
Decision: Direct the parties to seek to agree as to appropriate orders in both sets of proceedings consistent with these reasons.
[Full orders at [137] to [143]]
Catchwords: BUILDING AND CONSTRUCTION — Contract — Damages — Delay — Defects — Claim for consequential pure economic loss — Proper construction of cl 17.2 of standard form contract requiring builder to give notice claim for extension of time — Champion Homes considered and applied the facts the parties did not agree to liquidated damages is irrelevant to the proper construction of cl 17.2
CONTRACTS — Assessment of damages for breach of contract — Prima facie position — Bellgrove v Eldrige discussed — Provisos identified — Breach — Damages — Proof — Defects — Proper construction of Australian Standards and proper construction of s 18B(1)(c) warranties — Decision of Court of Appeal in Owners SP 92450 v JKN Para 1 Pty Limited considered — Approach to damages for breach of statutory warranties no different to approach for any other breach
Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) s 13
Home Building Act 1989 (NSW) s 18B(1)(c)
Cases Cited: 85 Princess Pty Ltd v Fleming [2025] NSWCA 261
85 Princess Pty Ltd v Fleming [2025] NSWSC 407
Allan v Renfay Projects Pty Ltd [2025] NSWDC 357
Bellgrove v Eldridge [1954] HCA 36, (1954) 90 CLR 613
Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38
Building Insurers’ Guarantee Corporation v The Owners - Strata Plan No. 57504 [2010] NSWCA 23
Champion Homes Sales Pty Limited v DCT Projects Pty Limited [2015] NSWSC 616
DCT Projects Pty Limited v Champion Homes Sales Pty Limited [2016] NSWCA 117
Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145
Metricon Homes Pty Ltd v Softley (2016) 499 VR 746; [2016] VSCA 60
Owners SP 92450 v JKN Para 1 Pty Limited [2023] NSWCA 114
The Owners - Strata Plan No 77475 v Walker Group Constructions Pty Ltd & Anor [2016] NSWSC 1127
The Owners - Strata Plan 100533 v Roxy Pacific Killara Pty Ltd [2025] NSWCATCD 174
Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5
Robinson v Harman (1848) 1 Exch 850
Stone v Chappel (2017) 128 SASR 165; [2017] SASCFC 72
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8
Troulis v Vamvoukakis [1998] NSWCA 237
Texts Cited: Australian Standard AS 3740:2021 -Waterproofing of domestic wet areas
Building Code of Australia
Category: Principal judgment
Parties: Bond Mayhew Pty Limited (Owner)
Kerry Spicer (Builder)
Representation: Counsel:
J Courtenay (Owner)
A Greinke and M Hazan (Builder)
Solicitors:
Harrington Lawyers (Owner)
Chamberlains (Builder)
File Number(s): 2025/00140171; 2025/00027953
Publication restriction: Nil
On 7 May 2022, the parties entered into a written contract with the Owner, being the standard form of the Housing Industry Association (‘HIA’) NSW Cost Plus Contract for building works to be carried out at the property (‘the Contract’).
By the second half of 2024, the parties were in dispute as to what was or was not payable by the Owner to the Builder. This dispute culminated in the Builder purporting to terminate the Contract on 12 September 2024. Subsequently, another builder completed the renovation work.
On 17 October 2024, the Builder issued a payment claim under s 13 Building and Construction Industry Security of Payment Act 1999 (NSW) (‘SOPA’), claiming an outstanding amount and obtained an adjudication in his favour in the sum of $268,440.50 including GST. A certificate of that determination was filed in this Court, and by operation of SOPA became a judgment on 28 January 2025 in proceedings number 2025/00027953. The amount of the SOPA judgment entered on 28 January 2025 was $307,856.88, being the total of the amount determined by the adjudicator, interest, as well as adjudication and Court filing fees.
Execution of that judgement was stayed by Order of this Court on 30 October 2025, pending resolution of the principal proceedings.
In the principal proceedings, the Owner seeks damages from the Builder on a series of bases, each of which if established, will be destructive in whole or in part, of the SOPA judgement. This is because SOPA creates a “pay now, argue later" system of interim payments without prejudice to the party's ability to subsequently litigate to a final basis their obligations and liabilities to one to the other, arising out of the building work the subject of a relevant contract.
In other words, if the Owner is successful in whole or in part in claiming damages, based on the alleged breaches by the Builder of the Contract, the inevitable consequence will be that the amount of the SOPA judgment will be reduced, potentially to nothing. Potentially, this could result in a judgement in favour of the Owner in the principal proceedings.
What all that means is in substance, the Owner is the Plaintiff, and what happens to the judgement will abide and be consistent with the outcome of the principal proceedings.
The following facts are uncontested.
The Contract is dated 7 May 2024 and is in the form of the September 2020 edition of the standard HIA NSW Cost Plus Contract. It provided for payment of cost plus a 20% Builder's fee plus GST (cl 15.2). Practical completion was 52 weeks after commencement (cl 12, Sch 1 item 5), subject to extensions of time under cl 17 for variations, weather, supply, delays, anything done or not done by the Owner, and the industry shutdown.
The scope of work the subject of the Contract was described in the architectural plans and specifications, and the Development Application conditions of consent, identified in Sch 5 and 6 of the Contract. Excluded from that scope was the supply and installation of the swimming pool (Sch 4, engaging cl 9).
During the build the Owners directed more than 19 revisions to the architects' plans (revisions B to U), and otherwise significantly varied the scope of work the subject of the Contract. In total, 38 written variations were issued by the Builder, 29 of which (variations 2 to 31) were accepted in writing by the Owner in 2023.
Prior to 14 May 2024, the Builder had not made any claim for an extension of the time for achieving practical completion, pursuant to the provisions of cl 17 of the Contract or at all.
On 14 May 2024, the Builder provided a number of purported claims for an extension of time in the form prepared by the HIA (Exhibit ‘J’). They all bear the date 14 May 2024.
Those claims fall into two categories. The first category claims extensions of time for periods long past. For example, the first variation is dated 14 May 2024, and claims an extension of 37 days, with an anticipated finishing date of 22 April 2024. The second claims 4 days, with an anticipated finishing date of 28 June 2023. The third claims 1 day, with an anticipated finishing date of 14 November 2022. That is, they each claim the extension of time after the estimated time of the extension had long since passed.
The second category claim a period of delay with an anticipated finishing date in the future. Each claim is dated 14 May 2024 with the first claim being an extension of time of 2 weeks, with an anticipated finishing date of 24 May 2024, the second with an anticipated finishing date of 31 May 2024, the third with an anticipated finishing date of 31 July 2024, the fourth claims an anticipated finishing date of 31 May 2024, and the final claim is for 1 week with an anticipated finishing date of 31 May 2024.
I will return to the form of these notices so as to resolve the issue of whether they are notices for the purposes of cl 17 in due course.
On 2 September 2024, the Owner issued a "Notice of Substantial Breach" purportedly under cl 24 of the Contract. The Builder denied the alleged breaches.
On 12 September 2024, the Builder suspended the works pursuant to cll 22.1 and 22.2 of the Contract and on 1 October 2024 purported to terminate the Contract, by reason of the Owners failure to pay an invoice dated 26 August 2024 in the sum of $193,120.37. Without having given the requisite notice as required by cl 17 of the Contract.
On 20 November 2024, the Builder issued a payment claim, pursuant to SOPA. The Owner responded with a payment schedule on 27 November 2024, after which the Builder lodged an adjudication application in accordance with SOPA.
On 10 January 2025, the adjudicator issued a determination in favour of the Builder for $268,440.50 (inc GST) plus interest, with the Owner to pay the adjudicator's fees. The Owner failed to pay the adjudicated sum.
On 22 January 2025, the Builder registered the certificate as a judgment of this Court and issued a writ for levy of property. On 4 April 2025, the writ was registered over the title of the property.
The Owner sought a stay of execution of the SOPA judgment and writ pending termination of these proceedings. Orders were made staying the SOPA judgment until resolution of the principal proceedings.
The Owners claim has been refined and substantially narrowed since commencement. There have also been a series of concessions made by the Builder which have reduced the area of contest. The issues that remained by the time of final submissions can be grouped into the following categories:
the delay claim,
the defective works claim, and,
the overpayment claim (albeit, this category has itself largely evaporated).
The case can be conveniently resolved by reference to those categories. If the Owners are successful in whole or in part on any aspect of the claim, there will then be, what I anticipate some complicated but not insoluble arithmetic required to work out the actual end result, being effectively a final account between the parties. In the first instance, at the invitation of the parties, I will refer to them to see if they can reach agreement consistent with my reasons.
To flesh out the various claims a little more before dealing with them. The delay claim is an allegation by the Owners that the Builder failed to complete the works within 52 weeks of commencement as required by the Contract, and that there was no valid extension of time notice as required by cl 17 of the Contract. Notwithstanding that there were many agreed variations to the works, and many days of wet weather, the Builder breached the Contract by not completing the works within the 52-week period. The Contract did not provide for liquidated damages, so the Owners seek to prove their damages by positing a counterfactual. The Owners submit that if the building works had been completed approximately 1 year earlier then they in fact were, the Owners would have commenced their short-term rental accommodation business 1 year earlier, and thus as a consequence of that breach, the Owner has suffered economic loss.
The proper legal approach to and proof of damages in this aspect of the case are complex and difficult.
As far as the defective works claim is concerned, the parties have both retained experts, who prepared written reports, and following a conclave, a joint report.
The parties schedule helpfully sets out their competing positions as to the alleged defects and the cost to rectify/damages occasioned by any proved defect. Given the costs of the claimed rectification are all agreed, the only issues for me to determine are whether there is a defect as alleged, and if so, what is the appropriate measure of damages, if any, for each defect. Individually, no one claim is substantial. Some of them are extremely minor, in the order of hundreds of dollars. Others are of some moment, up to around $30,000, but it needs to be said, in total they are out of proportion to the costs incurred by both parties in this exercise. I heard from the various experts who gave evidence concurrently and will in due course determine that aspect of the case by reference to the schedule on a line-by-line basis.
As to the overpayments claim, this aspect of the claim has evolved and narrowed, potentially to resolution. It started with the Owners, with the assistance of an expert, reviewing the various invoices issued by the Builder the subject of the claim, and/or for which there has already been payment, identifying various anomalies, alleging double counting, and lack of proof of asserted claims. These matters have been responded to by the Builder and some more information provided. A number of concessions have been made by the Builder and a number of complaints withdrawn by the Owner. Again, a very helpful and comprehensive schedule has been prepared by the parties, for which I am grateful. By the conclusion of oral submissions, after I ruled on the evidentiary status of four invoices, this aspect of the case appeared to have disappeared.
At Sch 1, Item 5, the Contract provides that the building works must reach the stage of practical completion not more than 52 weeks after the building period commences, subject to cl 17.
Clause 1.1 includes the following definitions:
“Practical completion” means when the building works are complete except for minor omissions and defects that do not prevent the building works from being reasonably capable of being used for their usual purpose, and,
“Building works” is defined in a way that includes both the initial scope of work under the Contract and variations (in turn, defined as omissions, additions or changes to the building works or a change in the manner of carrying out the building works).
The commencement of the building period started on 4 October 2022, and so the building works were to be completed by 3 October 2023, subject to cl 17.
Clause 17 is in the following terms:
Clause 17.1: "the builder is entitled to a reasonable extension of the building period if the building works are delayed by the builder suspending the building works under cl 22 or from a cause beyond the sole control of the builder including but not limited to” various matters. Those matters include, among others “a variation or request for variation by the owner.”
Clause 17.2: “The builder is to give the owner written notice of an entitlement to an extension of time detailing both:
(a) the cause of the delay, and, (b) the extension of time,
within 10 working days after becoming aware of both the cause and the extent of the delay.”
(a) disputing the extension of time; and
(b) detailing the reasons why the extension of time is disputed.”
A near-identical provision was considered by Ball J in Champion Homes Sales Pty Limited v DCT Projects Pty Limited [2015] NSWSC 616 (‘Champion Homes’) at [153]-[184]. His Honour concluded:
At [155]-[160], what appear to be the equivalent of cl 17 meant that the Builder could not rely on what is apparently known as the 'prevention principle'. At [160], the Contract provided "a clear mechanism by which extensions of time are to be granted",
At [163], if the Builder gave a notice within 10 working days of becoming aware of both the cause and extent of delay, it was entitled to the claimed extension unless the Owner gave a written notice setting out the matters in the equivalent of cl 17.3. The Builder bears the onus of proving its entitlement to an extension of time, whilst the Owner bears the onus of proving it gave a notice in accordance with cl 17.3,
At [171]-[172], in respect of one extension of time claim the Builder must have been aware well before it gave notice, and accordingly had not satisfied the requirements of the equivalent of cl 17 and was not entitled to a claimed extension,
At [177], the notice requirement in the equivalent to cl 17.2 applies only to delays from "a cause beyond the sole control of the Builder" and not to suspensions pursuant to the equivalent to cl 22.
Leaving that decision aside, cl 17 ought in my opinion be construed as requiring a valid notice under cl 17.1 as a condition precedent to any variation to the stipulated time for practical completion. That is so because cl 17.2 is in mandatory and prescriptive terms, and forms part of the mechanism by which the Owners are permitted to rationally assess the existence and extent of a claimed delay. The clear purpose of cl 17 is to provide certainty, transparency, and to bring to a head any disputes before they become entrenched.
Clause 28 provides for liquidated damages in a sum specified in Item 10 of Sch 1. That item has been marked "N/A". I do not think the parties ought be taken by that to have excluded the Owners’ right to claim unliquidated damages. That would be inconsistent with a contractual time stipulation existing at all. It would produce an absurd result that the parties agreed on a time for performance, but at the same time agreed that there be no damages payable for breach.
The Builder accepts that in circumstances where liquidated damages are nominated and agreed, cl 17 must be construed in accordance with Champion Homes, which means in essence that it is construed strictly, and unless the Builder gave a requisite notice, regardless of whether an extension was justified, or indeed was necessitated by an act or omission of the Owner, then the Builder remains contractually obliged to finish the job by the nominated date of practical completion.
To put it another way, the notion of ‘the prevention principle’, which apparently is a term of art amongst those who practice in the area of building disputes, does not apply. I pause to note that the ‘prevention principle’ seems to be some sort of amalgamation of various legal principles, ranging from estoppel, waiver, and variation to contract.
The fact is the Owners did ask for, and there was agreement about a whole raft of variations, all of which to my mind would have obviously adversely affected the time to be taken to complete the job. However, the fact that variations were agreed, and that it must have been obvious to the parties at the time that the date of practical completion would not be achieved, is of no moment unless the Builder issues a cl 17 notice. It may also be accepted that there were rain delays, but again they are of no moment, absent a valid notice under cl 17.2. Whilst this might appear to work unfairly to a Builder in these circumstances, it is nothing other than the consequence of the operation of the terms of the Contract entered into, which undoubtedly were designed to promote certainty and transparency between the parties.
On behalf of the Builder, Mr Greinke and Mr Hazan submitted that because there is no liquidated damages provided for in the Contract, so that the effect of a breach by a Builder of the practical completion provision entitles the Owners to prove actual damages is a distinguishing feature so that Champion Homes is not determinative of this issue. The submission is that upon proper analysis, cl 17.2 only has work to do if there is an amount of liquidated damaged claimed.
I do not accept this submission. Firstly, the clause reads perfectly sensibly so as to produce the same meaning, regardless of whether liquidated damages are nominated or not. Nowhere in the words of the Contract, nor the context or apparent purpose of the provision, can there be found any suggestion that the provision only relates to agreed liquidated damages. True it is that the amount of those damages is left blank in the printed form, but that is simply to allow the parties to agree as to the amount, if they agree to stipulate liquidated damages. Where that amount is left blank, or as is sometimes the case noted, as “N/A", the only sensible construction of the Contract is that, if the builder breaches the time provisions, rather than claiming the agreed liquidated damages, the Owner would be entitled to such damages it can prove. After all, liquidated damages are no more than a method of agreed proof of damage, intended to be a genuine estimate by parties of expected damages in the future, so as to avoid the need for complex and costly methods of proof in Courts of Law.
Moreover, if absent liquidated damages being agreed, cl 17.2 is left with no work to do. That would mean that the parties have provided no mechanism for extensions of time in a contract which contemplates agreed variations and weather induced delays. I think that is highly improbable and entirely uncommercial. In my opinion, properly construed, cl 17 excludes all of the many and varied legal principles captured by the notion of the ‘prevention principle’, regardless of whether liquidated damaged are agreed or not.
On the construction of cl 17 I prefer, that then leaves the question of whether the bundle of purported extension of time notices, issued on 14 May 2024, are “notices of an entitlement to an extension of time…" as required by cl 17.2. This is in respect of the specific variations all of which were served on the Owners on 15 May 2024 (Exhibit ‘J’). I should record that all the notices served on 15 May 2024 were disputed within 5 working days.
On behalf of the Owner, Mr Courtenay contends that these notices were given outside the time prescribed for extension of time notices, and therefore are not notices with any contractual effect, for the following reasons:
The first three notices, for variations 2, 4 and 5, had "anticipated finishing dates", well over 10 working days prior to service, and in respect of work that had been completed well beforehand. The Builder must have been aware of the cause and extent of delay well before the 10-working day period.
Notices 4 to 8, for variations 9, 10, 14, 19 and 25, had anticipated finishing dates after 14 May 2024. However, on their face, some of them refer to delays long past, for example “set out, planning and coordinate”. None of them state when the Builder became aware of the cause and extension of the delay, and there is no evidence from the Builder as to those matters. Generally, the delays seem to relate to variations in June 2023. Mr Courtenay says the Builder has not established that he served the notices on becoming aware of the cause and extent of the delay, given each variation seems to have been contemplated in a set of proposed variations generated as at 16 June 2023.
The Builders answer to this part of the claim is that the Owners claim is “seriously defective", the evidence in support of it being said to be “unsatisfactory, incomplete, irrelevant and/or inadmissible”. The Builder contends that the Owners claim for delay damages ignores that the Builder was entitled to a reasonable extension of time to the date of practical completion, and fails to address that it directed a multiplicity of revisions to the plans, and substantial variations of the scope of works they had required the Builder to undertake, and that knowing the Builder was acting in accordance with those variations, and was building in accordance with them, rather than strictly in accordance with the Contract.
All of that may be accepted. There is no doubt that during this project there were a large number of what appear to be significant variations to the Contract, requested by the Owners, and acted upon by the Builder. It is clear that each of those variations would have not just added to the cost of works, but more importantly, would have extended the time taken.
The variations themselves were communicated by the Owners to the Builder, who acted upon them. The Builder’s architect (through his secretary) was well aware that there had been a number of wet days caused by a significant rainfall event in the area during the building project, and that those days were being recorded and calculated on a schedule. All of that may be accepted however fundamentally, the issue for the Builder to confront and overcome here, is that I can identify no basis for any finding that at any stage the Builder gave anything that fits within what is required by cl 17.2 as a notice. The Builder’s submission to the effect that it is “entitled to reasonable extensions of time, in all those circumstances”, fails to grapple with the strict regime agreed to by cl 17 to achieve such an extension.
I see no reason not to apply by analogy Ball J’s reasoning in Champion Homes, to which I have referred. I can identify no difference in principle between the clause in the contract His Honour had under consideration and cl 17 of this Contract. I have already explained why I reject the Builder’s submissions that in circumstances where the Contract does not provide for liquidated damages, the ‘prevention principle’ can apply, so as to override the clear words of the Contract. I find that the various purported extensions in the claim, all issued on 14 May 2025, were not notices for the purpose of cl 17.2 and therefore have no legal effect. This is because the notices for periods long past are obviously outside the time period of 10 days required by cl 17.2. The same applies to the later notices, the particulars of the reason for the claimed delays in those documents, so far as they can be understood, all relate to past events. They have not therefore been demonstrated to have been given within 10 working days of the Builder becoming aware of the cause and extent of the delay (DCT Projects Pty Limited v Champion Homes Sales Pty Limited [2016] NSWCA 117 at [76]). In any event the documents provide insufficient detail as to the cause.
For those reasons, I am satisfied that the Builder breached the contractual provision to complete the Contract within 52 weeks of the start date. The delay in completion became close enough to one year.
The Owners claim for damages said to have been caused by this delay is fraught with difficulty both as to legal theory and proof of assumptions, to make good the quantum of damages claimed.
The starting point is the corporate structure. The Owner is controlled by Dr Cooper and Ms Crawford. It is the trustee of a self-managed superannuation fund controlled by, and for the benefit of, Dr Cooper and Mrs Crawford. At all material times the Owner has been the legal owner of the property. The property is held by the Owner for the benefit of the beneficiaries of the superannuation trust.
The intention of Dr Cooper and Ms Crawford at the time of the Contract, was that the renovation work would develop the property into a property, capable of being rented on a short-term basis for profit. I am satisfied that the Builder was aware of that intention, and therefore as a matter of legal theory, any lost profit to the Owner as a result of delays to the starting date of that business endeavour would be consequential pure economic loss, within the contemplation of the parties at the time the contract was entered into and thus recoverable: Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145.
In rough terms, the delay in completing the contract within the 52 week period was close enough to one year.
In the year after the building work was in fact completed by another Builder, and a certificate of occupancy obtained, it took a considerable amount of time for the business to commence. This was explained by furniture being purchased, and marketing materials produced and the like. Once the property was placed on the market it took many months before the first booking was received and paid for. At the end of approximately one year from the occupation certificate being issued, the total of income received in relation to the property was not much more than $10,000.
None of this of course is unusual with short term holiday accommodation type businesses. Nor does it mean the business was doomed to failure. It takes time for such a business to build up, and it may be expected that the first year or so of operation will be a “wind up" period. At some point thereafter, the business will reach its full potential whatever that may be.
Another level of complexity here is that the Owner has not operated the contemplated business at all, rather pursuant to a management arrangement, this has been done by a related company - again controlled by Dr Cooper and Ms Crawford. The arrangement is that the management company will pass the ‘net profits’ from the business less a 10% management fee, back to the Owner. Even that is not quite as simple as it may sound, because at the same time, Dr Cooper and Ms Crawford have injected funds by way of loans into the management company for promotional and other start-up costs. That money is to be repaid to them from future profits by the management company, as and when they think appropriate. At that point of course, the net profit passed up to the Owner will be reduced because of repayment of the loans.
In simple terms, the involvement of the management company means that the profit loss to the Owner itself is not the net income from the business, but at most, must be the net profit of the business less 10%. At some point, those net profits will be reduced when the directors’ loans are repaid.
I raised during the hearing with Mr Courtenay, counsel for the Owner, why the proper measure of damages would not simply be the loss of the of one year's income being the ‘wind up’ year, where close to no money was received by the Owner at all.
His submission was that was not the proper measure of damages, but rather the best method of damages would be to make findings as to the totality of the net income to be earned by the Owner over the expected life of the business, and then divide those by whatever percentage of that period is one year. I accept that is a logical way to calculate such loss, if the many and varied assumptions involved can be established. Another way of doing it would be to select the last year of the business and proceed on the basis that year’s profit has been lost.
That then brings me to the evidence, or the lack thereof. Firstly, there is no evidence from which I could make a sensible finding as to how long the short-term accommodation business may have operated. It is important to emphasise at this point, that both Dr Cooper and Ms Crawford are approaching the statutory age by which superannuation needs to be drawn down to avoid adverse tax treatment, and therefore it seems reasonable to conclude that at some point, they would make an economic decision driven by the tax treatment of superannuation funds, to sell the property and distribute the proceeds of sale to themselves, by way of capital through the superannuation fund.
However, all that is speculation by me, as despite Dr Cooper and Ms Crawford both giving evidence, they gave no evidence as to what their plans might be let alone what they were as at the date of breach of the Contract. Moreover, applying some common sense to these things, I think it is reasonable to assume that as they get older, Dr Cooper and Ms Crawford will become less enthusiastic about running an AirBnB-type operation, with all the work and stress that involves, and the business might in a natural way start to wind down at some point. However, I would be guessing to try and identify when that might be.
Another imponderable is that at some point the management company will start repaying the debt it owes to Dr Cooper and Ms Crawford. I do not know how much that debt is, nor when it might be repaid.
Finally, there is also no evidence of any satisfactory type by which I can make any assessment as to what might be the average income from the business over any particular period.
The only evidence going to this point is a report of Mr David Bird of Kohler Bird Valuers, wherein he concludes that it could be expected that the rental income for the property could be calculated at an average daily rate of $1,400 per day against a 30% occupancy rate, meaning that in his opinion the loss for each year would be $152,280, being $1,400 per day multiplied by 30% of 52 weeks.
Mr Bird's report was objected to, but I admitted it into evidence subject to weight, making it clear that I would take into account the various bases of the objection when determining if I was prepared to give it any weight. After hearing full submissions in the context of all the evidence, he was not cross-examined.
In my opinion, Mr Bird’s report is flawed in a number of important respects. First, he uses a valuation methodology of identifying comparable properties available for short-term rental in the area. In doing so, he identifies that there really is no comparable property to the River House. It is much more expensive than the next most expensive property. It is fitted out in a very luxurious and desirable way, no doubt to justify that higher rent. However, as a matter of market theory, Mr Bird has not engaged with what would undoubtedly be a difficult question of determining whether the market for short-term rental properties in the Coffs Harbour area would be prepared to pay $1,400 per night, even if the subject property is much nicer and more desirable than other properties available for rent. Second, the $1,400 figure comes from the amount that other properties are being advertised for and does not appear, to have any relation to any fact or opinion by Mr Bird based on what is actually being paid by the market. Third, the 30% assumed occupancy rate is not explained or supported by any information in the report. It appears entirely arbitrary. To the extent there is any information about occupancy rates, it demonstrates that occupancy rates in the area fall as daily rates rise. Fourth, in light of the serious difficulties the Owners have had renting the property in the first year - even accepting that there is to be expected a “wind up” period for the business to get going, Mr Bird's opinion seems to be detached from reality, which is no criticism of him, because he was not told any of the details of the Owner's actual experience in running the business. To put it bluntly, the reality is that trading of the business to date is entirely inconsistent and dramatically less than Mr Bird’s opinion. Fifth, Mr Bird records that in the Ballina Shire Council and the Clarence Shire Council, both of which are just to the north of the Coffs Harbour Council area, local government regulations have made it not possible to rent properties on a short-term basis for more than 60 days per year. Mr Bird has not engaged in any assessment of what is an obvious risk to the business of that restriction or a similar restriction coming into force in the Coffs Harbour area, thus dramatically reducing its income earning potential as a short-term rental property. Sixth, Mr Bird's opinion is only directed to income, and does not purport to assess what costs might be expected to be incurred by an Owner before arriving at a net profit for the business. Finally, Mr Bird’s report has not be updated to have regard to what has actually occurred at the property in the six months since it was written.
For all those reasons, but most importantly what I consider to be the real disconnect between the lived experience of the Owners and Mr Bird's conclusion, together with a lack of identification of a logical reasoning process to take him from his assumptions to his conclusion, and the significant doubts I have as to the reliability of most of his assumptions, I put his opinion to one side.
That all being said, I am satisfied on the balance of probabilities that the delay of one year brought about by the breach of contract of the Builder that I have identified, has caused some damage to the Owner. I am also satisfied that it was open to the Owner to prove the matter in a more effective and compelling way, for example by calling expert evidence as to the marketability of the property as a short-term rental, and the type of income and expenses that might be expected from running such an operation, together with the anticipated lifespan of the business and so on, but there is no such evidence.
I am required to do the best I can with the evidence I have albeit I need to be fair to the Builder to not stray into the area of speculation which I fear I am being invited to do (see for example, Troulis v Vamvoukakis [1998] NSWCA 237 at 13 and 14, and the various cases referred to).
A notional calculation could be something like this. The total net income to the Owner (after deducting 10% from the monies withheld by the management company), over say a 10-year life of business is say $500,000, from which there should be deducted a significant reduction for the “vicissitudes of business" of say 40% and a further discount for the fact that a large portion of the damages will result in a present-day payment to the Owner of monies which it would have otherwise received long into the future.
That notional calculation would lead me to the conclusion that the Owner's damages occasioned as a result of the Builder's delay in completion might be determined at between $20,000 and $30,000.
I am sorry to say that each and every one of the assumptions in that notional exercise, is a guess by me and cannot be justified by evidence.
Another way of assessing damages is to simply allow the loss of year 1, which is something around $10,000. However, that figure is the income only. There is direct no evidence of expenses. The best evidence from which an inference can be drawn is the Owner’s bank statement. That is that in the first year the Owner received $2,227.40 by way of what looks like net profit from the management company. It is this amount I propose to allow. It is the only measure of damages that is able to be assessed in a sensible way short of guesswork in the context of the paucity of evidence.
In my opinion, the written claims for extension of time, dated 14 May 2024, do not have any contractual force.
I am satisfied that the Builder breached the Contract by not achieving practical completion within 52 weeks of the commencement date.
That means that the Owner is entitled to damages for consequential economic loss caused by that delay. I am satisfied that it was within the contemplation of the parties to the contract, at the time it was made, that the property was planned to be used to produce income from short-term rentals. Accordingly, the pure economic loss claimed is as a matter of legal theory, recoverable by way of damages.
However, the evidence in support of this claim is, to say the least, sparse, and has left me in a position of having to speculate, to the point of guess work, about a number of very important assumptions, whichever methodology is applied to calculate those damages
Accepting that the first year of the business was a “wind up” period. I conclude that in the absence of any evidence as to how long the business would have operated, and what it might generate by way of net profits less 10% when it becomes fully productive, the only sensible and fair method of assessing damages, which is grounded in evidence, is to accept that the Owners lost the income it would have otherwise earned from that first year which, and while I think this assessment is generous to the Owners, I consider that to be $2,227.40.
For those reasons, in relation to the aspect of the case based on delay, I find in favour of the Owners and award them $2,227.40.
For many years, if not forever, there has been a difficult question in the law of contract concerning how damages for individual breaches of a building contract by a Builder which might generally be described as minor defects or technical breaches are to be assessed.
The simple starting point, which masks much complexity is what was said by Parke B in *Robinson v Harman (*1848) 1 Exch 850 at 855, that is that damages for breach of contract at common law are assessed so far as money can achieve it by placing the wronged party into a position as if the contract had been performed.
In the context of building disputes is the well-known judgement of the High Court of Australia in Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 (‘Bellgrove’) at 617, which held that the loss to an owner occasioned as a result of a breach by a builder is not established by measuring competing values of the building as erected, with what it would have been if done so in accordance with the contract. Rather, prima facie damages are to be measured by ascertaining the amount required to rectify the defects and so give the Owner the equivalent of a building on the land which is substantially in accordance with the Contract.
Bellgrove*,* makes it clear that is a prima facie position and recognises an important qualification to what is sometimes said to be a rule, which is that the work claimed to be necessary to produce conformity with the contract must be seen to be a “reasonable course to adopt", although that qualification was itself qualified by a statement at 618 and 619, that the question of unreasonableness will only be satisfied by “fairly exceptional circumstances". The other qualification in that case which is often overlooked is that the notional exercise is to put the building “substantially” in accordance with the Contract. I think it is important to notice that the High Court did not say “precisely” in accordance with the Contract.
So much was confirmed by the High Court more recently in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 (‘Tabcorp’) at 285 and 288.
Tabcorp at 287, used as an example of unreasonableness to be “merely using a technical breach to secure an uncovenanted profit", other examples include where the cost of the proposed rectification has been found to be out of all proportion to the benefits to be obtained.
The onus of proof of establishing loss lies with the owner, however the builder has an onus of displacing the prima facie position identified in Bellgrove for assessing damages as the cost of reinstatement. Whether that is evidentiary or real onus remaining to be determined, see for example: Building Insurers’ Guarantee Corporation v The Owners - Strata Plan No 57504 [2010] NSWCA 23 at [79]; The Owners - Strata Plan No 77475 v Walker Group Constructions Pty Ltd & Anor [2016] NSWSC 1127 (Bergin CJ in Eq); Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) 166 FCR 494; [2008] FCAFC 38 at 502 to 503 (Finkelstein and Gordon JJ), [115] (Rares J, although in dissent on the facts); Metricon Homes Pty Ltd v Softley (2016) 499 VR 746; [2016] VSCA 60 at [246]; and Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 at [102], [106], [115] and [119] (Kirk JA and Griffiths AJA).
The South Australian Court of Appeal in Stone v Chappel (2017) 128 SASR 165; [2017] SASCFC 72 (‘Stone’), the following principles were identified so as to assist with assessing by reference to the provisions in Bellgrove whether alleged rectification work the cost of which was the subject of a claim is reasonable not, at 182:
“(1) the degree of departure from the contractual stipulation;
(2) the adverse effect of the departure on the functional utility, amenity and aesthetic appearance of the building;
(3) the reasons, objectively ascertained and commonly known, for which the innocent party made the stipulation which was breached;
(4) the practical feasibility of rectifying the work, including the effects on third parties of attempting to do so;
(5) whether or not the innocent party intends to carry out the rectification work;
(6) the absolute cost of the rectification work and the disproportion between that cost and
• the value of the building and contract price;
• the diminution in commercial value of the building;
• the effect of the departure on the functional utility, amenity and aesthetic appearance of the building;
(7) the nature of the wrongdoer's fault for the defect; and
(8) the public interest in reducing economic waste.”
This appears to have been applied with approval by Brereton J in the Supreme Court of New South Wales as recently as 85 Princess Pty Ltd v Fleming [2025] NSWSC 407.
On appeal, the Court of Appeal was slightly less enthusiastic in its endorsement, in 85 Princess Pty Ltd v Fleming [2025] NSWCA 261, Ball JA said the criteria identified in Stone as no more than a useful checklist that should not be applied mechanically, and that the ultimate question remains whether in all the circumstances of the case it would be reasonable to undertake the work necessary to achieve compliance with contractual specification. His Honour also doubted the public interest criteria identified in Stone.
The reason I raise all of this as a preliminary discussion is because some of the defects claimed by the Owner can fairly be described as “de minimis", and certainly fall into the category of defects about which it is tolerably obvious that the Owner will not rectify, because they are not causing any detriment to the quality or use of the building. The result in Bellgrove itself cannot be overlooked. The defect found was using secondhand bricks, as opposed to new bricks for internal rendered walls. It was held to not be reasonable to assess damages by the cost of tearing the whole building down so as to replace the internal walls with new bricks.
At the risk of being criticised for citing myself, I have previously said that there will be no damages available in circumstances where there is no sensible basis to connect any damage to the Owner to the defects, because what has been built is not functioning in any way below how it would function, if none of the alleged failures existed: Allan v Renfay Projects Pty Ltd [2025] NSWDC 357. I concluded by saying at [107]:
"I do not think, on any sensible analysis of the law of damages, that in those circumstances the Plaintiff would be entitled to recover the cost of a full replacement of the box gutter. An element of common sense must always be applied in this area of the law.”
I do not see any reason to depart from that statement, which I consider is consistent with the authorities I have referred to.
It is true that it is for the Builder to demonstrate unreasonableness, but that does not mean it needs to tender evidence. Often the unreasonableness of what is proposed, will be self-evident.
By reference to the very useful schedule prepared by the parties, I deal with each defect that remains an issue by reference to the numbering and description in that table:
At this point, may I again mention the two expert builders who gave evidence both in written reports, a joint report following a conclave, and finally in concurrent evidence before me. They are, Mr Melick who gave evidence on behalf the Owner, and Mr Winton who gave evidence on behalf of the Builder.
I was impressed by both of them. They made my role in deciding what are a series of relatively small, but complicated issues much easier than it otherwise would have been. They have also reduced significantly, the time and cost involved in hearing the matter.
Despite a number of criticisms that were made by both counsel in relation to each of these experts and their evidence, I was impressed by both to the extent that I found them both to be honest, and as best I could tell, reliable. However, at certain points, and this particular defect is the first of them, their evidence was diametrically in conflict. In a real sense, the relevant evidence for the purpose of this alleged defect is not expert at all, but is rather direct observation.
The issue here is whether a metal angle required for waterproofing abuts the adjoining glass panel and terminates at the top of the tiles. Mr Melick says it does not, and produces a photograph showing what appears to be a void, and Mr Winton, whilst acknowledging that the void observable in the photograph exists, says that he has looked into that hole and shone a torch into it, and that in fact, there is no non-compliance.
Considerable time was spent in cross-examination and submissions made on this alleged defect. Having considered all of the evidence and submissions, and carefully assessed the competing expert evidence, I am left in a state of not being satisfied in one way or the other, whether this defect has been made out.
As the onus of proving the defect itself remains with the Owner, I do not allow this claim.
This alleged defect concerns whether a waterproof angle made of aluminium was installed at all, and if it was, whether it is flush with the tile surface. Mr Melick says it was installed, Mr Winton says it was. Again, these are photographs, which are not determinative. The photographs identify something, which to my mind is not flush. However, that may well be because there has been glued over the top of a metal strip, and when the metal strip was removed for the inspection, a lot of the glue was left there making it difficult to assess. Nonetheless, Mr Melick says whatever is there, it was not flush. The next question is whether the waterproof angle is there at all. On balance, I prefer Mr Winton’s evidence here. He gave evidence of a very direct inspection. Moreover, the original claim sems to have been limited to if the floor was flush or not, rather than if the angle was there at all. As to it being flush or not, I prefer Mr Melick’s evidence. I am satisfied the angle is there but is not flush.
My conclusion is, I allow this defect, but am not satisfied that to rectify it, it would be reasonable to tear up and replace the whole of the bathroom floor. I consider this defect can be fixed by silicone, or some other less destructive method.
These two complaints relate, respectively, to the tile floor outside the shower, and the tile floor in the shower, both to the effect that the falls do not comply with the Australian Standard AS 3740:2021- Waterproofing of domestic wet areas. As a matter of fact, it is accepted they have less fall than is referred to in the standards.
Owners SP 92450 v JKN Para 1 Pty Limited [2023] NSWCA 114 (‘JKN’) is an authority for the proposition that non-compliance with the Standard amounts to a breach of the law, and that is a breach of the s 18B(1)(c) Home Building Act 1989 (NSW). The Owner relies on JKN and in particular what the court said at [106] to [109], and contends that it is authority that there is no exception to the prima facie position established in Bellgrove, if the defect is the consequence of a failure to comply with the statutory warranty found in s 18B(1)(c) of the Home Building Act, that is, that the work does not comply with any law. The argument is that the Standards form part of the Building Code of Australia, which needs to be complied with, pursuant to various environmental laws, and therefore the defect is of such a character. The submission is that said defects produce a strict liability to pay damages to rebuild, regardless of any.
I consider the decision in JKN ought be understood as turning on its own facts. In that case the defect was a failure to use non-combustible material with the obvious dangers involved. The ratio of that case was nothing more than in all the circumstances of that particular defect, it had not been shown to be unreasonable for the owners to seek damages, so as to take out the flammable material and replace it with non-flammable material. I do not accept that JKN stands for the proposition that the exception to the Bellgrove prima facie positions do not apply to breaches of statutory warranties.
This then takes me to a very difficult question of construction of the Australian Standards as they applied at the time, in particular, AS 3740-2010. As is so often the case, standards drafted by engineers and builders do not survive close analysis by lawyers judging the intended meaning by reference to orthodox principles of construing written laws.
This same question was considered by a member of NCAT, a Judge of this Court on appeal, the Court of Appeal and again by a Senior Member of NCAT on remittal in The Owners - Strata Plan 100533 v Roxy Pacific Killara Pty Ltd [2025] NSWCATCD 174.
Ultimately, Senior Member Charles at [55] to [60], in a well-reasoned and persuasive analysis, determined that the particular standard being relied upon here by the owner was not mandatory but rather was “performance-based", to ensure that the floor worked in a way so there was no ponding of surface water. The rejected submission, that the fall ratios were mandatory, rather than recommended, was said to be a "triumph of form over substance". That is because to accept that submission would be to treat non‑compliance with the ratios as defects requiring rectification, where the departure causes no appreciable defect, hazard, loss or damage. I should observe that on those findings, even if a breach was identified, the same result would have been reached by a proper and sensible application of the provisos to the prima facie position in Bellgrove*.*
Be that as it may, if Senior Member Charles is correct, the standard is not breached simply by non-compliance per se, but rather is breached if the bathroom floor does not perform up to an expected standard.
In this case, I am satisfied that there is no pooling and that the floor works perfectly well, notwithstanding it does not meet the relevant standard. I do not see any reason to doubt the correction of Senior Member Charles’ analysis and conclusion.
Accordingly, I am not satisfied that any breach has been made out.
I should say in passing that in that same decision, Senior Member Charles, after referring to Bellgrove and Tabcorp said this:
“[59] In summary, the authorities establish that any rectification work which is necessary to produce conformity with a building contract must be a reasonable course to adopt and must not be so extreme or so far outweigh the severity of the defects such that the full rectification works would be unreasonable.
[60] In my determination, there is no proportionality or reality inherent in findings which require substantial rectification of floor falls … which, at most, marginally fail to meet the floor fall ratio referred to in the Standard and do not result in any observable defect or risk of loss or damage."
The alleged breach, 4.1(e) turns on the proper construction of the Australian Standards and whether the shower is a stepdown shower for the purpose of cll 3.1 and 3.2 of those standards, or an unenclosed shall for the purpose of cll 3.1 and 3.5.
The fact is, the shower has no stepdown, and both the specifications and plans did not require a stepdown. Accordingly, I do not think it falls within the definition of a stepdown shower which is:
“[F]or set downs less than 15 mm…"
I do not think that a floor that has no stepdown at all can be sensibly described as a stepdown of less than 15 mm.
That then means that it should be dealt with as an unenclosed shower:
“The relevant standard for "unenclosed showers" provides:
A Type I unenclosed shower has a service that will restrict splashing during use
A water stop shall be placed under the device and across the opening of the shower of a Type I shower screen."
The drafting of the standard is not as clear as it might be. In my opinion, there is compliance with what is required for an unenclosed shower, there is in place a shower screen which would reduce splashing. I think the better construction of this standard is that it is performance-based; the performance requiring a restriction in splashing from a shower during use. It is obvious, because the shower is not enclosed that there will be some splashing. What is required is a reduction in that splashing. There is no evidence that splashing is occurring at an unacceptable level when the shower is used and accordingly, I do not consider there to be any breach here.
I am not satisfied there is any breach made out here.
6(a), I allow this claim to the extent that has been agreed as set out in the schedule.
6(b), (c) and (d) follow my rulings in relation to 4.1(b)(c) and (d).
A considerable time was spent on this alleged defect in both evidence and submissions. The alleged defect here is very different to the defects in the other bathrooms. Clearly, water is not properly running to a drain, it is pooling in certain areas. It is suggested on behalf of the Builder that it can be rectified by grinding down the drain so it is at a lower level. On the other hand on behalf of the Owner, Mr Winton says, that whilst it would be possible to carry out the work in that way, there is a real risk that a of a mistake necessitating the replacement of the entire floor.
I do not consider it is fair to ask the Owner, who after all is not in breach of contract to take that risk, and therefore I allow this defect. I am satisfied that for it to be rectified; a full replacement of the tiled floor will be necessary. To put it in the words of the author, I am not satisfied that the method of rectification by which the Owner seeks damages is unreasonable.
I therefore allow this claim in full.
As I have previously mentioned, the parties are to be commended for their cooperation and hard work in seeking to resolve this aspect of the claim up to and including the time when they were making final submissions.
By the conclusion of those submissions, it seemed that all aspects of this claim had either fallen away, in that the Owner had abandoned matters, or other matters had been conceded by the Builder.
In those circumstances, I propose to defer making any findings in relation to this part of the case unless and until the parties tell me that there is a need to do so and isolate the particular issues.
There is now a series of complicated, but not insoluble tasks for the parties. The first is to seek to agree as to the quantification of the various defects that I have allowed. If there is no such agreement the matter will need to be relisted for further hearing, limited to the evidence already tendered.
There needs to be a recalculation of the amount of the determination by the assessor to take into account the various findings I have made, and the concessions made by the Builder, which will have consequential impacts on interest, and which may elicit a question as to liability for the costs of the determination.
There is also the real possibility that I may have, by oversight, not decided something. In that case, the parties can bring that to my attention, and I will attempt to determine such matters in chambers.
I anticipate there may also be the need for me to rule on the question of costs depending on the ultimate result. If that be the case, there may well need to be further evidence and submissions.
If the parties can agree on all those matters, I direct them to bring in short minutes of order finalising the proceedings.
If there is a failure to agree on all matters, whatever remains in dispute will need to be decided by me. That will need to happen expeditiously and before the detail escapes me.
In the short term, I will list the matter for directions at 9:30 AM on Friday 26 June 2026 to determine what direction it shall take from there.
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Title formatting updated.
[2025] NSWCATCD 174
[2009] HCA 8
(1954) 90 CLR 613
(2008) 166 FCR 494
(2016) 499 VR 746
(2017) 128 SASR 165
(2009) 236 CLR 272