Cadi Development Pty Ltd v Lee; Lee v Cadi Development Pty Ltd [2025] NSWCATCD 208;

Principles governing loss arising from defective and incomplete work

1. The ordinary, natural and probable consequence of a breach of statutory warranties under HBA s 18B as to compliance with approved plans (and laws, codes or standards), due care and skill and fitness for purpose is remediation to achieve compliance, due care and fitness by doing of the remediation work or paying to have it done by others. As the High Court said in Bellgrove v Eldridge (1954) 90 CLR 613, [1954] HCA 36 at 617, cited with approval by the High Court in Tabcorp Holdings Ltd v Bowen Investments PL (2009) 236 CLR 272, [2009] HCA 8 at [15]:

"In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building on her land which is substantially in accordance with the contract."

1. This is applicable unless disproportionate on the principles discussed below.
2. Under HBA s 48O(1)(c) the owner is required to specify action by the builder that is grounded in proof by the owner of, not only the defect, but also the manner of remediation: Catapult Constructions PL v Denison [2018] NSWCATAP 158 at [46]- [61] and the authority there cited. In my view as I set out in Marr v JCK Building Solutions PL [2018] NCATCCD, unreported, 4 December 2018, HB 16/43946 at [46]-[54] and in subsequent decisions, an element of the manner of remediation in certain circumstances may inherently require inspection, properly defined so as to be sufficiently specific, to establish the need for and required scope of remediation.
3. In Bellgrove v Eldridge (1954) 90 CLR 613, [1954] HCA 36, the High Court said that the scope of remedial works must not be disproportionate to the defect. The High Court has also stated that there is a high bar for unreasonableness or disproportion once a breach is established: Tabcorp Holdings Ltd v Bowen Investments PL (2009) 236 CLR 272, [2009] HCA 8 at [13]- [20]; see also Walker Group Constructions PL v Tzaneros Investments PL [2017] NSWCA 27 at [186]; Barwick v Shetab [2017] NSWCATAP 127 at [87]- [88].
4. The analysis in the paragraphs in the Tabcorp decision, and the authority there reviewed, also makes it clear in these passages that reinstatement, provided it is not extravagantly disproportionate, is the appropriate measure of relief.
5. Reinstatement means what the builder was obliged to build, namely, contract works with a certain standard of regulatory compliance, amenity and presentation which includes not being at risk of emergent problems returning or growing. It also means that the form and finish of remediation and rectification produces an outcome that matches other components of the contracted works in form and finish and makes the works of the originally-intended quality and integrity.
6. There is a co-ordinate focus on the conduct of the owner in assessing the form of relief. In ordinary principles of contract law imported into construction contracts, an owner's claim for monetary compensation requires the owner to act reasonably in relation to the claimed monetary loss in order for the claimed loss to be recoverable: cp HBA s 18BA(1), (5). This includes giving the builder a reasonable opportunity to remediate or complete, or to minimise damages by remediating what it can and will do: cp HBA s 18BA(1), (3)(b), (5). The owner may be justified in a reasonable loss of confidence in the willingness and ability of the builder to do the remediation and completion.
7. The evidential onus is on the builder to prove that the owner acted unreasonably: Owners SP 76674 v Di Blasio Constructions PL [2014] NSWSC 1067 at [42]- [48], adopted in Owners SP 78465 v MD Constructions PL [2016] NSWSC 162 at [26]- [30] and GPM Constructions PL v Baker [2018] NSWCATAP 119 at [38]. This is consistent with the orthodox principles at general law: TCN Channel 9 PL v Hayden Enterprises PL (1989) 16 NSWLR 130 at 158; principles summarised in Downer EDI Rail PL v John Holland PL [2018] NSWSC 326 at [585] and authority there cited.
8. If the owner has acted reasonably then, since the builder is a wrongdoer, it will not defeat the owner's claim that the builder can suggest other and more beneficial alternative methods of remediation: Unity Insurance Brokers PL v Rocco Pezzano PL [1998] HCA 38; (1998) 192 CLR 603 at 654; Karakominakis v Big Country Developments PL [2000] NSWCA 313 at [187].

1. For its case in deceit, misrepresentation and equitable estoppel the builder was required, on authority to which the builder referred in its submissions, to establish on the balance of probabilities that the owners when entering into the PIA did not have the intent to perform the promises and obligations in the PIA. For such a serious allegation to be made out, the decision-maker must have a sense of actual persuasion: Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 362, [1938] HCA 34.
2. The builder's case on deceit, misrepresentation and estoppel required that the later refusal by the owners to perform the PIA inferred an intent of the owners, at the time of entering into the PIA, not to perform the PIA. Such a conclusion is not impelled by logic; it must have a further factual basis in the evidence from which to draw the inference. That was not present here. In contrast, the owners denied the relevant intent and paid money under the terms of the PIA until, after legal advice that was followed by these proceedings, they considered that they were not bound to do so.
3. Further, if the owners' signature without more on the PIA constituted a sufficient representation, the builder was not relevantly induced by, and did not relevantly or reasonably rely on, that representation so as to make it actionable. Rather, in response the builder proceeded to perform works that it was already contractually bound to do; if the owners resiled from the representation, the builder suffered no relevant detriment because it remained bound to perform what it was already bound to perform for the original consideration under the original contract. If its reliance was that it did not perform its obligations under the original contract, that was not legally reasonable reliance - it would reward a contract-breaker who used the situation of impending breach to increase the consideration for what it was already bound to do.
4. The builder's claim on these bases fails.
5. There was no contest, and I find, that the Tribunal has jurisdiction to hear and determine an estoppel defence and has jurisdiction to hear a waiver defence (to the extent that such a defence is equitable, as opposed to being a common law defence): Steak Plains Olive Farm PL v Australian Executor Trustees Ltd [2015] NSWSC 289 at [67], [73]-[82]. However, the builder sought to use equitable estoppel as one of its bases for a claim for relief, for which the Tribunal does not have jurisdiction, because it has not had such equitable jurisdiction conferred on it, just as the District Court is not a court of general equitable jurisdiction (in contrast to the Supreme Court).
6. Contrary to the builder's closing submission, HBA s 48K confers jurisdiction to hear and determine (within the limitations as to time and amount) "a building claim" as defined in s 48A(1) but that definition in itself is not a source of jurisdiction, nor are the powers in s 48O or cross-referred to in that provision being powers under the Fair Trading Act 1987 (NSW).
7. If the builder's estoppel case was in common law estoppel as an ingredient in its claim based on the original contract varied by the PIA, that is not using estoppel as a separate basis of claim, only as a means of proof within its contract claim, so would be within jurisdiction. To establish such an estoppel, the builder was required to show that the owners were estopped - by their alleged representation reasonably relied on by the builder that the PIA was a binding variation to the original contract - from relying on the existing contract and from denying that the contract as varied by the PIA was the contract able to be enforced by the builder. That in itself is problematic since arguably there is no representation of fact but, rather, of fact and legal rights. In any event, it is not established on the facts for the same reasons as given in dealing with the other contentions just canvassed.
8. Turning to the contract basis for the enforcement of the PIA, the builder was required to show that it gave fresh consideration for the extra payment; cp the definition of "supply" in HBA s 3 and Sch 1 para 1. It did not do so simply by promising to continue to carry out and complete the works, which was its existing contractual obligation. It did not do so simply by promising not to go into liquidation and thereby forestall having to carry out its existing contractual obligation.
9. However, the builder relied upon the creation of different obligations for both parties under the PIA. These variations were said to provide: a "practical benefit" to the owners to complete the works thereby "relieving the owners from engaging an alternative builder"; a practical benefit to the owners and/or a detriment to the builder from the increase in delay costs payable by the builder from $500pw to $700pw from a later start date of 28 February 2023 until all documents required for the council to issue an occupation certificate (OC) were lodged, instead of the contract practical completion date of 31 March 2022; a practical benefit to the owners and/or a detriment to the builder from the builder's promise to carry out without fee landscape management services together with any additional work required to obtain an OC.
10. While consideration need not be adequate, it must be legally sufficient as the conventional authority cited by the builder acknowledges. However, at least in the context of contracts for work or supply of goods or services that remain in part executory (to be performed by both parties), there is English CA authority, referred to with approval in Australia in an elaborated form, that the obtaining, by a party promising extra payment for existing obligations of the other party, of a "practical benefit" to or the avoidance of detriment by the paying party can amount to sufficient consideration, as can continued performance by the other party where (absent the extra payment) it could be viewed by the other party as better not to continue to perform the contract: Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 esp at 15-16; Musumeci v Winadell PL (1994) 34 NSWLR 723 at 738-747, referred to with approval in Tinyow v Lee [2006] NSWCA 80 at [61] and DPP (Vic) v Le [2007] HCA 52, 232 CLR 562 at [43]; Zhao v Ausin Group (Australia) PL [2020] FCA 1658 at [9] (refusing a summary order as arguable on the facts). The elaborated form of the qualification is found in Musumeci at 747.
11. One must examine the builder's contentions in the light of that qualification on the available evidence pointed to by the parties.
12. For reasons already given, promising to continue to perform what the builder was already contractually liable to perform, and not going into insolvent administration, was not legally sufficient unless the qualification described in the preceding paragraph applies. The builder did not point to sufficient evidence to establish that, at the time when the PIA was entered into, avoiding having to find another builder and securing the builder's promise (if it was performed) of completing the works was a "practical benefit" to the owners and that the builder's performance (if it occurred) was capable of being viewed by the owners in that way taking into account what the owners paid extra to the builder, compared with suing the builder and finding another builder.
13. It was not sufficient simply to point to the owners saying that they did not want to engage another builder and to the evidence of the builder's financial circumstances. The builder did not point to sufficient evidence to establish the cost to the owners of completing the works with another builder, compared with the balance of unpaid contract price plus the extra PIA payment, and taking into account an assessment of whether that extra cost with another builder was likely to be recovered in litigation against the existing builder.
14. Similarly, the builder did not point to sufficient evidence to what it gave up and that going on with the extra payment was better than not performing the balance of the contract and suffering the consequences.
15. The alleged extra benefit to the owners, for the owners' effective extension of time before the right to delay damages arose, was said to be the higher rate of delay damages. However, at the point when the PIA was entered into, that question of benefit was speculative. It was not established by the builder that the higher rate after a much later start date to an uncertain later date, compared with the original contract delay damages provision - the damages under which were already very sizeable at date of entry into the PIA, being 2 September 2022 (22 weeks at $500pw totalling $11,000) - was an extra benefit (whatever its size) to the owners or a detriment to the builder.
16. As to providing landscape management services, the PIA was silent on express mention of this topic apart from reference in the attachment to the PIA called the Drawdown Schedule, as set out below.
17. Clause 8 in the PIA as executed stated:

"8a. The Contractor [builder] agrees to carry out additional works as required by the 'Final Occupation Certificate' that are not part of the Quotation. The cost of such additional works has not been included in the Quotation, the Contract or this Agreement; a new quotation will be sent to the Owner separately.

b. The Owner will pay the Contractor when actual costs are incurred due to the additional works, and the Contractor is to provide supporting invoices from any suppliers or subcontractors when making a claim."

1. The commitment to give a new quote to undertake further work not part of the original quoted scope of works as required to obtain the OC may (if not seen, for example, as illusory) constitute sufficient consideration in principle, even if no additional work turned out actually to be required to obtain the final OC or the owners chose not to accept the builder's quote to do that extra work and engaged other contractors.
2. There was text, inserted by Mrs Tang, in a spreadsheet (called the Drawdown Schedule) attached to the PIA, which stated:

"stage OC application

obtaining stage OC

CADI (no profit margin and no co-ordination fee) (quotation later) for:

Landscape

Fence

Full OC Application

obtaining full OC".

A total of $25,000 in four staged payments corresponded to this text, out of a total of $220,000 that was said in PIA cll 2 to 4 to be the amount still to be paid by the owners including the claimed price increase of $80,473.80.

1. Under item 23 of the original quotation, the builder's scope of works included "Co-ordinate ALL authority and consultants for OC issue". Accordingly, the only work in respect of obtaining the OC which was outside the original quotation and contract were actual works that were not specified in the original quotation or were specifically excluded in the original quotation. "Fence" was a specific exclusion from the quotation. Certain "Landscape" items were specified in item 22 of the quotation.
2. However, the description in the Drawdown Schedule expressly included, without limitation, "landscape" and "fence". These items therefore, without limitation came within the four staged payments described below within "stage OC application".
3. PIA cl 6 said that the owners would only pay the series of amounts in the Drawdown Schedule "subject to actual construction progress and when there is solid evidence that the subjected Works are fully and satisfactorily completed". PIA cl 7 stated that the $25,000 was the retention amount which was to be released in four stages: $5,000 on submission to the certifier of the staged OC application; $10,000 on issue by the certifier of the staged OC; $5,000 on submission to the council of the final OC application; $5,000 on issue of the final OC by the certifier.
4. PIA cl 5 contained warranties by the builder, relevantly: not to seek any additional payments for finishing the works which led to the successful issue of a staged occupation certificate, unless it was a variation directed by the owners or was expressly excluded in the original quotation; not to seek additional payments for further cost increases, or items overlooked by the builder, or builder errors.
5. Taking cl 8 with the quoted text in the Drawdown Schedule and the other PIA provisions just described, the scope of the obligation and benefit in the PIA was uncertain and therefore void, or at least there was not clear consideration by the builder for the extra payment above the existing contract price.
6. On the one hand the owners were committed by the PIA to pay the entire $220,000 in the staged increments on satisfactory completion of particular stages, including the "stage OC application" (comprising $25,000 of the $220,000 as a retention fund progressively disbursed during that stage). That payment covered, without limitation in the Drawdown Schedule, "landscape" and "fence". It varied from an earlier draft where cl 4 specifically excluded "landscape" and "fence" from being within the $220,000 which was said to include the works that led to a successful issue of the final OC, and said that the owner would pay to the builder the costs of "landscape" and "fence" based on a further quotation at the latter stage of the works.
7. On the other hand the builder was obliged by cl 8 to quote for the additional works as required for issue of the final OC but there was no obligation on the owners to accept the quotation and the owners could obtain the work from other contractors. If the additional works required for the issue of the final OC included "landscape" and "fence", those works were already covered by the existing payments, on the executed version of the PIA. Yet, cl 8 said expressly that prices quoted under cl 8 were additional amounts not included in the original quotation, the existing contract or the PIA and the builder was forbidden under cl 5 for charging "any additional payment from the Owner for any costs regarding the Works". The builder could not invoke the exception in cl 5 that allowed additional charge for variations or exclusions to resolve the fundamental inconsistency because "landscape" and "fence" in the Drawdown Schedule were not so limited.
8. Such uncertainty and absence of consideration could not be read down under cl 13 so as to save relevant parts of the PIA because it undercut the entire obligation and pricing structure of the PIA as executed.
9. A further fundamental uncertainty was whether any quotation under cl 8 for an additional amount as a variation or exclusion that was required by the final OC was permitted, by reason of the words in the Drawdown Schedule, to include margin or co-ordination.
10. In so far as the builder sought to submit that management by it of landscaping without fee was consideration for the PIA, without any reference to what was required to obtain the staged or final OC, that was not expressly the subject of the PIA. If such management without fee was said to provide collateral consideration for the PIA, that was not the subject of propositions clearly put in the points of claim and defence for the builder and the evidence of the builder. In cross-examination it was contested by the owners on the basis that they were entitled separately to engage the builder's sub-contractors outside of the contract works scope and without payment to the builder. There was no evidence to the contrary that gave the builder exclusivity over sub-contractor's services on this site. The builder did not call the landscaping sub-contractor. The only quotation referred to, after a break to obtain instructions, was an oral quotation for $8,140 on 26 March 2023 that well post-dated the entry into the PIA.
11. In brief, if the parties later engaged in separate transactions regarding landscaping, that does not impact the fundamental uncertainty in the PIA already described nor the absence of consideration for the PIA.
12. Economic duress: The refinement of consideration in the Williams v Roffey line of authority is said in those authorities not to apply in situations of economic duress or fraud. While economic duress or pressure focuses on the effect of the activity on the person making a decision and need not be the only factor in the person's decision, whether or not the pressure is illegitimate derives from the conduct and knowledge of the person who engages in the pressure - the categories of illegitimacy are not closed and extend beyond coercion or unconscionable conduct: Crescendo Management PL v Westpac Banking Corp (1988) 19 NSWLR 40 at 45-46.
13. Here, the builder pointed to the fact that the owners faced a choice and had a reasonable, if unpalatable, choice: to engage an alternative builder, or not, in the face of the builder saying that it could not proceed because of cost increases. That is a not uncommon even if an unpalatable choice in commercial situations; a variant of it led to the High Court finding that there was no unconscionable conduct under an earlier version of the unconscionability provisions in ACC v C G Berbatis Holdings PL [2003] HCA 18; (2003) 214 CLR 51. The builder in effect contended that the evidence did not show that the builder refused to perform a legal obligation in order to obtain a benefit to which it was not legally entitled.
14. While that may have force if there was not a further dimension to the evidence, here the owners' extensive cross-examination of the builder's financial position in mid-2022, referred to earlier, showed that, at the relevant time the builder stopped work and its director was speaking of the cost of materials and labour and the dire financial position of the builder, including in his affidavit that in about August 2022 the builder could not continue with "any" of its building projects and the works ceased unless the equivalent of the PIA was signed, the director accepted in cross-examination (consistent with the documents shown to him) the following matters: first, that there was no objective supporting evidence of the labour and material cost increases; secondly, a finance company would have satisfied itself of the builder's ability to repay before financing the acquisition by the builder, driven by the director's partner, of a Porsche Taycan valued at $133,823.99 (which the partner referred to on social media as her "New Toy"); thirdly, the director continued to pay himself director's fees of $45,000pa; fourthly, the builder funded personal and family member liabilities in the two-month mid-2022 period covered by the summonsed documents of at least $182,864.70; fifthly, the builder kept building at cost several projects for the directors' family members. It was not suggested that any of these matters were known to the owners.
15. The foregoing matters destroyed the legitimacy of the conduct of the builder in putting to the owners the stark commercial choice. It also destroyed the alleged reasonableness of the choice put to the owners in the face of large chunks of discretionary expenditure prioritised over performing an existing contractual obligation. It made what in other circumstances may have been unpalatable but not unusual commercial pressure into illegitimate economic duress.
16. There was no doubt that the stark choice which constituted illegitimate economic duress was a cause of the owners' entry into the PIA. The PIA was presented, and apparently accepted, as the means to avoid the stark alternative of finding another builder and suing the present builder for what could be a "dry well", with the attendant delays and costs and risks of the alternative approach, including extended periods of rent while still paying the mortgage. Obtaining legal advice on the choice as presented and in the owners' state of ignorance about the builder's activities when the choice was presented would have made little difference and was not a necessary link in the chain of causation to the owners' decision.
17. Accordingly, even if there was consideration for the PIA, the PIA was void or voidable (and was avoided at the latest by the owners bringing their cross-application) for economic duress. It cannot be said as the builder contended that, if the PIA was voidable, such avoidance should not occur because the builder finished the works in the original contract. In that respect, the builder was doing only what it was already contractually obliged to do.
18. The builder's claims therefore fail entirely and the builder's application will be dismissed for the above reasons.
19. It is not necessary to determine the other bases of claim by the owners. In particular, the claim under s 20 of the Australian Consumer Law NSW (ACL NSW) is not necessary to be developed owing to my reasons, below, for not acceding to the claim against the builder's director for involvement in that alleged contravention.

1. Only the following items were pressed.
2. Refund of overpayments beyond original contract price: The owners are entitled to recover monies paid under the ineffective PIA that exceed the original contract price, totalling $38,621.80. As I have found, there was no consideration for such payments which were also made under economic duress.
3. Delay damages or rental: Delay damages were initially claimed under the original contract provision for them at $500pw (Sch 2 para 3(a)) for the period from contract date for practical completion to date of actual completion.
4. There were agreed facts, or facts otherwise objectively established, that: work under the original contract Sch 2 para 5 with cll 10 and 11 was to commence by 19 July 2021 and achieve practical completion within 255 days; work actually commenced about 13 September 2021; practical completion should have been achieved by 27 September 2022; practical completion was not achieved until 27 November 2023. The agreed facts took into account some limited delays totalling 39 business days between March and May 2022 due to inclement weather.
5. Liquidated damages for delay were calculated by the owners at $30,500, without challenge to the calculation itself.
6. Alternatively, and as first preference, the owners were obliged by the delayed completion to extend their rental for the same delay period, calculated by the owners at $32,470. There was no challenge to the calculation itself or the underpinning rental obligation.
7. The owners are entitled to establish actual loss, being in this case rent paid, in lieu of contractual delay damages.
8. The builder claimed further delays by the owners, for the first time after issue of the cross-application. The builder's director accepted in cross-examination that as an experienced builder he understood the need to engage the contractual process (with notice and substantiation) to claim extensions of time and that this had not been done for these alleged delays, in contrast to the claimed weather delays. There was no objective substantiation of the alleged further delays in evidence. Ms Tang explained the time lapse in her reply affidavit by reference to communications with the builder. I reject the builder's contention.
9. Completion and remediation of stormwater kerb outlet and driveway cross-over: The builder's director accepted in cross-examination that the builder was liable to undertake these works, had been requested to do so and had not as yet done so. The assessed cost put forward by the owners, reflecting an independent quotation, was not disputed and in any event was the best available evidence, compared with the builder's lower estimate that was not substantiated. The owners are entitled to a money order on this claim for $13,624.71 including GST.
10. Other defects: Mr Lee said in cross-examination that he had fixed other defects.
11. Mitigation: The builder did not articulate in its points of defence such a defence, as is required: Lichaa v Boutros [2021] NSWCA 322 at [35] and authority there cited. It in any event is not made out on the facts. The owners requested the builder to return to rectify and complete, and did not engage an alternative builder.
12. Claim against the builder's director: This claim - of involvement in the builder's alleged contravention of ACL NSW s 20 - was not sufficiently explored in cross-examination of the director to be the subject of a claim able to be pressed to determination. There were no references in written submissions to transcript on the topic, in contrast to detailed transcript references on other topics. There was extensive cross-examination, as already said, on elements of the builder's conduct, engaged in by the director, that were common to several of the owners' claims, including economic duress and unconscionability. However, the distinctive elements of unconscionability and the directors' awareness of them were not specifically investigated.
13. Conclusion on owners' claim: The owners have succeeded in establishing their entitlement to a money order for $84,716.51 against the builder. I cannot see a contract rate of interest for sums owed to the owner, only for late payments to the builder under cl 20(f). I have made provision in the orders for any submission on interest, including relevant calculations.

(1) Dismiss the application in 2024/00013492.

(2) In 2024/00066991, order that Cadi Developments PL pay Chung Chi Lee and Wai Fan Tang $84,716.51 on or before 16 January 2026.

(3) In respect of costs and any submission on interest including calculations:

(a) Any application for interest and/or costs with supporting further evidence and submissions are to be filed and served on or before 2 February 2026.

(b) Any further evidence and submissions in response are to be filed and served on or before 23 February 2026.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.