Darren Ryan SACKS v Bouwen Projects Pty Ltd (previously known as Indoor and Outdoor Constructions Pty Ltd)

Catchwords: CONTRACTS – construction – remedies – damages – mitigation of loss – whether the Plaintiffs refused the Defendant access to the Property to carry out rectification works – whether the Plaintiffs’ conduct was unreasonable in the circumstances such that some or all of the claimed loss should be disregarded
BUILDING AND CONSTRUCTION – contract – defects – rectification of defective works
EVIDENCE – parol evidence rule

Legislation Cited: Home Building Act 1989 (NSW), ss 18B, 18BA, 18E.
Civil Procedure Act 2005 (NSW), s 100.

Cases Cited: 85 Princess Pty Ltd v Fleming [2025] NSWCA 261
Arsalan v Rixon (2021) 274 CLR 606; [2021] HCA 40
Bagnall v National Tobacco Corporation of Australia Ltd (1934) 34 SR (NSW) 421
Bellgrove v Eldridge (1954) 90 CLR 613; [1954] HCA 36
Ceerose Pty Ltd v The Owners – Strata Plan No 89074 [2025] NSWCA 235
Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17; (2024) 98 ALJR 719
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55
Goss v Lord Nugent (1833) 5 B & Ad 58; 110 ER 713
Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348; [1937] HCA 90
Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190
Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313; (2000) 10 BPR 18,235
Lodge Holes Colliery Company Ltd v Wednesbury Corporation [1908] AC 323
Maurtray Pty Limited v Pillemer Pty Limited [2022] NSWSC 1181
Munce v Vinidex Tube Makers Pty Ltd [1974] 2 NSWLR 235
Neville’s Bus Service Pty Ltd v Total Group Constructions Pty Ltd [2024] NSWSC 215
Parkview Constructions Pty Ltd v Owners – Strata Plan No 90018 [2023] NSWCA 66
Stone v Chappel (2017) 128 SASR 165; [2017] SASFC 72
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8
The Owners – Strata Plan 76674 v Di Blasio Constructions Pty Ltd [2014] NSWSC 1067
The Owners – Strata Plan No 89074 v Ceerose Pty Ltd [2024] NSWSC 1494

Texts Cited: Julian Bailey, Construction Law: Volume II (1st ed, 2011, Routledge)

Category: Principal judgment

Parties: Darren Ryan Sacks (First Plaintiff)
Gemma Rene Cappe (Second Plaintiff)
Bouwen Projects Pty Ltd (previously known as Indoor and Outdoor Constructions Pty Ltd) (Defendant)

Representation: Counsel:
M. Sheldon (First and Second Plaintiff)
J. Hyde (Defendant)
Solicitors:
Lazarus Legal (First and Second Plaintiff)
Wilkinson Building and Construction Lawyers Pty Ltd (Defendant)

File Number(s): 2024/283742

Publication restriction: Nil.

JUDGMENT

Introduction

1. The Plaintiffs, Mr Sacks and Ms Cappe, own a property at Howe Street, Dover Heights (“Property”). They are husband and wife. In about July 2015, they engaged Bevan Boss Design Pty Ltd to prepare a design and specification for the renovation of the Property (“Bevan Boss Design”). They intended to live in the renovated home with their family.

2. The Defendant is a builder. On about 2 April 2017, the Plaintiffs entered a contract with the Defendant for the construction of a three-storey dwelling at the Property for the sum of $2.8 million (“Contract”). The Bevan Boss Design became the contract drawings and specifications (“Contractual Drawings and Specifications”) and was incorporated into the Contract. The Contract also contained a “Job Break Down” sheet which broke up costs into broad categories.

3. The Plaintiffs took possession of the Property towards the end of September 2018.

4. In these proceedings, the Plaintiffs claim that the Defendant’s construction of the Property caused defects and seek damages for breach of contract. Several of the defects alleged by the Plaintiff were conceded by the Defendant. However, the Defendant submitted that the Plaintiffs failed to mitigate their loss primarily because, it said, they failed to allow the Defendant to return to the Property to rectify defects. Further, with respect to some of the alleged defects, the Parties were in dispute as to the scope of rectification works required. The Parties were also in dispute as to the cost of those rectification works. The Plaintiffs, in final submissions, quantified their damages at approximately $500,000.

The Contract

5. In their submissions, the Parties emphasised several clauses in the Contract.

6. Clause 1(a) of the Contract required the “Builder” (being the Defendant) to execute and complete the required works (being the works set out in Schedule 3). Schedule 3(a) of the Contract contained a “description of the Work to be completed by the Builder …” which was “as per plans supplied by Bevan Boss Designs and as per Job Break Down”. At Schedule 3(b), a box was ticked indicating that certain work shown in the Contractual Drawings and Specifications was “excluded from the Contract Work and therefore the Contract Sum”. The works excluded were “PC Items (TBA)”.

7. Clause 3(d) of the Contract was an “entire agreement” clause. Clause 1(c)(i) required that work done under the Contract comply with:

(a) the Building Code of Australia; (b) all other relevant codes, standards and specification that the work was required to comply with on any law.

8. Pursuant to s 18B of the Home Building Act 1989 (NSW) (“HBA”), by law, certain warranties were implied into the Contract. However, the Plaintiffs’ case is that express warranties were contained in the Contract (apart from their statutory implication) such that any relevant time limits for actions for the breach of the statutory warranties had no application.

9. The express warranties relied upon by the Plaintiffs contained some slight modifications from those implied under the HBA. For example, in cl 1(b)(ii) of the Contract, the Defendant gave a warranty by the written terms of the Contract that all material supplied by the Defendant would be good and suitable for the purpose for which they are used, whereas the corresponding warranty in s 18B(1)(b) provides a warranty from “the holder [of a contractor licence] or person [person required to hold a contractor licence]”. The express warranty in cl 1(b)(vi) as to fitness for purpose expressly referred to the purpose stated in the Contract at Schedule 2 compared to the warranty implied by s 18B(1)(f) of the H**BA.

10. The Plaintiffs relied on the following parts of the Bevan Boss Design specifications incorporated into the Contract:

(a) clause 17 which provided that “Materials, unless otherwise specified, shall be new and of the best quality of the respective kind specified and all subject to approval, by the Principal [Plaintiffs]”. (b) clause 28 which provided that “The Builder is fully responsible for ensuring that the works are watertight and shall carry out all works in a professional and tradesman like manner and to a quality as required by the Building Codes and Standards. Lack of detail for each and every junction will not be an excuse for leaks or other defects occurring” (emphasis added). (c) clause 44 which provided that “any ‘flat’ roof/slab/planter waterproofing to be Wolfin, or equal approved, ‘torch on’ system. If an alternate system is proposed, Principal [owners] to approve prior to commencement …”

11. Although the Defendant referred to cll 24 and 25 of the Contract, in final submissions its submissions were confined to allegations concerning clause 25. Clause 25(b) of the Contract provided a mechanism by which the Plaintiffs could notify defects and imposed, in certain circumstances, obligations on the parties. I address clause 25 further below.

Issues

12. At the hearing of the proceedings, the issues pressed by the Parties narrowed from those raised on the pleadings. Ultimately, the following matters require determination:

(a) Did the Contract require Wolfin waterproofing to be used by the Defendant? (b) What were the defects in the Defendant’s building work – that is, in what way did the Defendant breach the Contract? Has the Defendant made good any limitation defence with respect to specific defects? (c) What is the scope, and cost, of the rectification of any defects found? I will deal with this issue at the same time as dealing with issue (b). (d) Did the Defendant establish that the Plaintiffs failed to mitigate their loss such that they cannot recover some, or all, of the loss claimed? Did the Plaintiffs unreasonably refuse the Defendant access to the Property to carry out rectification work.

The Witnesses

The Plaintiffs – Lay Evidence

13. The Plaintiffs relied on three affidavits of Ms Cappe and two affidavits of Mr Sacks together with exhibits to their affidavits containing a substantial documentary record of their dealings with the Defendant. The affidavits traverse many issues. However, with respect to the issues ultimately joined by the Parties at trial and identified above, each gave evidence concerning:

(a) whether the Parties agreed to vary the waterproofing membrane from that specified in the Contract; (b) whether the Plaintiffs refused the Defendant access to the Property to carry out rectification works.

14. Each Plaintiff was cross-examined. I regarded them as truthful witnesses, although I considered that Ms Cappe tended to advocate the position of the Plaintiffs rather than directly answer questions in cross-examination. Nevertheless, allowing for the difficulties inherent in giving evidence, I do not make any adverse credit finding in this regard. Mr Sacks gave his evidence forthrightly without prevarication and I have no hesitation in accepting his evidence.

15. With respect to the issues ultimately joined and which require resolution, there are contemporaneous documents which provide reliable evidence as to the dealings between the Parties on those issues. To the extent necessary, I refer to the evidence of Ms Cappe and Mr Sacks as I deal with the issues.

The Defendant – Lay Evidence

16. The Defendant relied on three affidavits of Mr Nicholas Cullen and one from Mr Rod Moss. Mr Cullen is a director of the Defendant and Mr Moss was a director of the Defendant and is now retired.

17. Mr Cullen’s evidence was that he did not attend the Property site on a regular basis because Mr Moss ran the project at the Property. Although Mr Cullen addressed his view about certain of the alleged defects, the Defendant relied on its expert evidence in relation to the alleged defects. With respect to the issues ultimately joined and requiring resolution identified above, Mr Cullen’s affidavit addressed the Defendant’s allegation that the Plaintiffs prevented access to the Defendant to carry out rectification works. He exhibited text messages between the Parties in relation to that issue.

18. Mr Cullen was cross-examined. I considered he did his best to give truthful evidence, however, he did not have significant recall of the details concerning access to the Property for rectification purposes. He said, at a level of generality, that the Defendant was denied access. However, as I said above, contemporaneous documents are in evidence which provide reliable evidence as to the dealings between the Parties. To the extent necessary, I refer to the evidence of Mr Cullen when I deal with the issues.

19. Mr Moss’ affidavit evidence, relevantly to the ultimate issues, was directed to the issue of whether the Parties agreed to use a different waterproofing product to that specified in the contract. He deposed to an alleged conversation between him and Mr Sacks in this regard. Mr Moss was cross-examined. I refer to his evidence, and my assessment of his evidence, when dealing with this issue below.

Expert Evidence

20. The Parties, as is usual in building and construction cases, relied on expert evidence.

Building experts

21. The Plaintiffs relied on the evidence of Mr Aaron Kyle, a building expert, who provided evidence in relation to the existence of defects and the scope of works to rectify defects. He also provided evidence of the cost of that rectification work. He prepared three reports.

22. Mr Kyle, from 2003 to 2007, was a contract administrator and assistant project manager/project co-ordinator in relation to projects at various sites, including hospitals. From 2007 to 2008, he was a project manager at Daracon Group and from 2008 to 2018, he was a director, builder, construction manager and estimator with Platinum Building Co Pty Ltd. This included the construction of custom designed homes up to $3 million and other multimillion-dollar projects up to $10 million in value. From 2018 to the present, he has carried out a role as a consultant, mediator and expert witness through Quest Associated Pty Ltd.

23. The Defendant relied on the evidence of Mr David Hall, who provided evidence in relation to the existence of defects and the scope of works to rectify defects. Although he also gave costings, the Defendant did not rely on his costings with respect to rectification. Mr Hall is a director of David Hall Building Appraisals which he founded in 1986. He has over 37 years’ experience in the building and construction industry and has been involved in providing expert evidence on many matters. He commenced work as a building contractor with David Hall Constructions in 1976 and carried on that work to 1986. He was the president of the Australian Society of Building Contractors between 2008 and 2009 and president of the Masters Builders Association, Parramatta Division, in 1984. He prepared one report.

24. The evidence included a Scott Schedule which contained a summary of each of Mr Kyle’s and Mr Hall’s position with respect to the Plaintiffs’ alleged defects (“Scott Schedule”) which was prepared after a conclave between the two experts. Each defect was given an item number in the Scott Schedule, and I adopt those items numbers when dealing with the alleged defects.

25. The Defendant also relied on a report of Mr Ken Whyte, a quantity surveyor, who gave evidence of the cost of rectification work. Mr Whyte started his own quantity surveyor firm in late 1985 and split his time between being on-site at projects and office based as an active quantity surveyor. He has over 50 years’ experience in the construction industry. He prepared one report in which he costed the initial works set out by Mr Kyle (which were later revised and did not include the seven-phase remediation in relation to mould referred to later in the Judgment) and Mr Hall, but also separately annotated the Scott Schedule by inserting his cost opinions on the work identified by Mr Hall.

Mould expert

26. The Plaintiffs also relied on evidence from Mr Jason Pickering, a mould expert. The Defendant filed a report from a mould expert, Mr David Lark, but did not ultimately tender or read that report and did not call Mr Lark. Mr Pickering and Mr Lark prepared a joint report (“Joint Report”) concerning mould at the Property. The Plaintiffs tendered the Joint Report, including all of Mr Lark’s opinions contained therein except those in paragraphs 56 to 59 of the Joint Report.

27. Mr Pickering has more than 30 years’ experience in the construction industry and since 2006 has focused on building health and building biology, especially in relation to the impact of water intrusion. He has undertaken diagnostic investigation of water damage and mould for litigation claims since 2019.

Approach to expert evidence

28. Each of the experts called in the proceedings are experienced and well qualified. Each of Messrs Kyle, Hall, Whyte and Pickering were cross-examined. Messrs Kyle and Hall gave their evidence on defects concurrently. Messrs Kyle and Whyte gave their evidence on costings concurrently. All expert witnesses sought to assist the Court.

29. There were, however, differences in approach taken by the experts.

30. Mr Kyle inspected the Property on 3 occasions. First, on 25 September 2023 in relation to the totality of the claimed defects. Secondly, on 20 April 2024 specifically for an inspection during a period where heavy rain conditions had been experienced. It had rained heavily in the days prior to the inspection and was raining on the day of the inspection. Thirdly, on 25 February 2025 to inspect further deterioration of the Property due to water ingress. As part of his instructions, he was provided with the Contract which included the plans and specifications forming part of the Contract. In terms of costing rectification work, he derived the rates to apply by a combination of the rates set out in Rawlinsons Construction Handbook and Cost Guide 2023 and from his own practical experience in the building and construction industry.

31. Mr Hall inspected the Property on one occasion, on 21 February 2024. His instructions state that he was provided with the Contract. However, during the concurrent evidence, he said that he did not review the specifications to the Contract, nor was he shown them. He did not review the Bevan Boss Design in preparing his report and giving evidence.

32. Mr Whyte did not inspect the Property at all. He carried out a “desktop” audit in relation to costs. He, in part, relied on photographs of the Property and otherwise relied on reports with which he was provided that described the defects. He relied heavily on costs set out in Rawlinson “The Cost Guide Edition 32 - 2024” which he said, in his opinion, are appropriate for domestic projects up to $1.5 million. I note that the Contract price was over $2 million. He relied on Rawlinsons for both labour rates and for materials. In his report, he listed the documents with which he was provided. He referred to a “Specification” document, but in evidence said he had not been provided with the Contract. He did not have regard to the terms of the Contract when costing the work. In particular, he did not have regard to the requirement in the Contract that the materials to be used in the build were to be new and of the best quality. The result of Mr Whyte not having available to him the Contract is that he said when pricing, for example, certain waterproofing, he did not cost it by reference to the membrane Wolfin (which the Plaintiffs allege was required to be installed) nor did he price carpet in the main bedroom by reference to wool carpet as required under the Contract. He accepted that Rawlinsons provided a general guide for residential building costs, but that it was necessary, in estimating costs, to consider the specific circumstances of the specific build. It was put to Mr Whyte that Rawlinsons*’* rates do not distinguish between building work and rectification work and the costs applied by him are not costs for rectification works. Mr Whyte said he made adjustments to those rates. However, at least in his report, it is unclear how that adjustment was made. In answer to a question from the Court, Mr Whyte said, generally, he adjusted Rawlinsons*’* rates by increasing the number of hours referred to in the guide for particular work in relation to defects.

33. In my view, Mr Kyle’s costings are a more reliable measure of the likely cost of rectification work. Mr Kyle had the benefit of, and took into account, the Contract (including the specification), had three site visits, applied both Rawlinson**s rates and his own experience in conducting construction to arrive at what he opined was an appropriate rate for labour and materials relevant to the specific rectification works. Unlike Mr Kyle, Mr Whyte conducted a desktop review without the benefit of a site visit; did not have regard to the Contract and placed greater reliance on Rawlinsons rates. To the extent he said he made adjustments, it is not clear upon what basis the adjustment was made – that is, whether the adjustment was to allow for rectification work (as opposed to new build work) or for the location of the work (Sydney’s eastern suburbs) or otherwise.

34. Although I consider Mr Kyle’s costings are a more reliable measure of the costs of rectification work, he did not cost the scope of works identified by Mr Hall. Further, the evidence is not sufficiently clear to apply rates adopted by Mr Kyle to the scope of works of Mr Hall. Ultimately, it is the Plaintiffs’ onus to prove their loss, both in nature and in quantum. Unless the Court can cogently apply Mr Kyle’s rates to the scope of work of Mr Hall (if such scope is accepted in relation to any particular defect), then I will apply Mr Whyte’s costings as he did cost Mr Hall’s scope of works.

Wolfin waterproofing

35. The Bevan Boss Design, being part of the Contract, contained the following specification at paragraph 44:

Any ‘flat’ roof/slab/planter waterproofing to be Wolfin, or equal approved, ‘torch on system. If an alternate system is proposed, Principal to approve prior to commencement …

36. The Defendant’s case is that prior to entry into the Contract, the Parties agreed that Wolfin waterproofing would not be used because it was too expensive and that an alternative waterproofing product, at a lower cost, would be used.

37. In this regard, the Defendant relied on the following evidence:

(a) On 2 February 2017, Mr Sacks sent a text message to Mr Moss, an employee of the Defendant, which stated: “Besides Wolfin roofing what would you suggest and what price difference would it be”; (b) On 8 February 2017, Mr Sacks sent a further text message to Mr Moss. In that text message, Mr Sacks asked what the saving would be if Wolfin was not used and an alternative waterproofing was used; (c) Mr Moss’ affidavit evidence that he had a telephone conversation with Mr Sacks after the 8 February 2017 text message during which Mr Moss told Mr Sacks that using a “normal waterproofing product” instead of Wolfin would result in a probable saving of around $50,000. Mr Moss said that Mr Sacks then told him to “forget the Wolfin and use the normal waterproofing product please”; (d) Mr Moss’ evidence when called as a witness. Mr Moss maintained that Mr Sacks had told him to “forget Wolfin” and that Mr Sacks knew that a different waterproofing product was to be used. He said that the Contract was completed at his home with his wife in attendance together with the Plaintiffs. He said his wife filled details into the Contract. He accepted that there were places in the Contract in which exclusions could be identified. He accepted that the Bevan Boss Design referred to Wolfin as the waterproofing product to be used and that no-one changed that part of the written Contract to remove Wolfin. He said that was a mistake. It was put to Mr Moss in cross-examination that his evidence that Mr Sacks told him to forget about Wolfin and to use a different waterproofing was a lie. In re-examination, for the first time, Mr Moss gave evidence of a further matter supporting the proposition that there had been an agreed change with respect to waterproofing. He said that originally, the price included for the waterproofing membrane in the initial Job Break Down was much higher than the price included in the Job Break Down forming part of the Contract – that is, he claimed that the price in the final Job Break Down reflected a change from Wolfin to an alternative membrane, notwithstanding that the Job Break Down continued to refer to Wolfin as the membrane to be used. Counsel for the Defendant noted that he had not heard that explanation prior to Mr Moss giving it in re-examination. (e) Mr Sacks’ evidence in which he accepted that, at the conclusion of construction, when he provided the certifier with a certification letter by David Anthony Coleman of Leyland Brothers Waterproofing, dated 24 August 2018, he knew that Wolfin had not been used and that a membrane known as “Rimseal” had been used. Mr Sacks’ evidence was that he did not know that Rimseal was not equivalent to Wolfin and that the certification occurred after the build – that is, he did not know about Rimseal prior to the certification.

38. In his affidavit evidence, Mr Sacks denied that he had a conversation with Mr Moss to the effect alleged by Mr Moss (and as set out in [37(c)] above), and said that he did not ever give the Defendant written or oral instructions to use a waterproofing product alternative to Wolfin. In cross-examination, Mr Sacks said he did not recall any such conversation with Mr Moss and noted that it was difficult to recall an alleged conversation from eight years prior. Mr Sacks was taken to the Job Break Down on which he made handwritten notes. He said that those notes were made for his own purposes and not shown to Mr Moss or anyone from the Defendant.

39. The Defendant did not rely on any conduct or conversation by or with the Plaintiffs after entry into the Contract to establish a contractual variation with respect to Wolfin.

Terms of the Contract

40. As noted above, the Bevan Boss Design formed part of the Contract and contained the waterproofing specification referred to above.

41. Further, as noted above, clause 3(d) of the Contract was an “entire agreement” clause. It read as follows:

Apart from any terms implied by Statute, the whole of the terms, conditions and warranties of this Contract are as set out in the Contract. The same are not in any way varied or affected by reference to any prior negotiations, stipulations or agreement, whether written or verbal.

(Emphasis in the original.)

42. The Defendant’s case in relation to the alleged agreement to use a waterproofing membrane alternative to Wolfin depends on alleged communications prior to entry into the Contract. In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, [1] Mason J, after citing Goss v Lord Nugent, [2] said:

The broad purpose of the parol evidence rule is to exclude extrinsic evidence (except as to surrounding circumstances), including direct statements of intention (except in cases of latent ambiguity) and antecedent negotiations, to subtract from, add to, vary or contradict the language of a written instrument.

(Footnotes omitted.)

43. To the extent that the Defendant says that the Bevan Boss Design had been varied by reason of the pre-contractual communications relied upon such that Wolfin was not to be used, I reject that proposition because:

(a) those pre-contractual communications are not available to vary or contradict the language of the written Contract. The Contract clearly required Wolfin or an equivalent product unless the Plaintiffs approved an alternative system prior to commencement; (b) the entire agreement clause referred to above expressly provides that the terms of the Contract are not affected by any prior “negotiations, stipulations, or agreement”. In my view, this clause is clearly expressed and excludes the very type of pre-contractual communication or agreement relied upon by the Defendant as operating as a variation of the Contract. [3]

44. In final submissions, the Defendant appeared to submit that it did not need to rely upon a variation of the Contract for its position that there was an agreement that Wolfin not be used. It was submitted that paragraph 44 of the Bevan Boss Design merely required approval by the Plaintiffs prior to commencement for the use of an alternative waterproofing membrane and that approval had been given. The difficulty with that submission is that the communications relied upon to establish the alleged approval all occurred prior to the entry into the Contract. Clause 44 was part of the Contract and required the use of Wolfin unless there was approval by the principal. In my view, the “approval” referred to in the clause clearly refers to an approval that occurs after entry into the Contract which results in the default position concerning the use of Wolfin being subject to an agreed change.

45. Accordingly, I reject the Defendant’s case that Wolfin waterproofing was not required to be used by the Defendant.

46. Further, and in any event, apart from the reasoning in [40]-[45] above, I do not accept, as a matter of fact, that there was any agreement for an alternative waterproofing membrane to be used.

47. In assessing the evidence of Mr Moss and Mr Sacks on the issue, it is important to have regard to the objective surrounding facts that are either undisputed or established by contemporaneous documents, and the inherent probabilities and improbabilities. In Maurtray Pty Limited v Pillemer Pty Limited , [4] Williams J noted:

[343] In any commercial litigation, contemporaneous documents “generally furnish the most reliable source of evidence as to what occurred or, at the very least, provide a generally reliable reference point from which to assess the reliability of witness testimony”.

48. Here, there are contemporaneous text messages from Mr Sacks indicating that he was enquiring about the cost of alternative waterproofing membranes. There is also Mr Sacks’ notations on the Job Break Down sheet which include a circle around the word “Wolfin” and a circle around the figure $39,000 (which is recorded against Wolfin) and a handwritten recording of the number $24,000 above the $39,000. Those entries suggest that Mr Sacks was comparing those two figures although it is not clear what the lower figure represented. It may have been the cost of an alternative waterproofing membrane, however, that was not established by the evidence.

49. However:

(a) the Contract itself continued to refer to Wolfin. If an agreement to use an alternative product had been reached prior to execution of the agreement, it is very odd that the Contract would continue to refer to Wolfin as the agreed membrane unless approval was given for an alternative membrane; (b) Schedule 3(b) of the Contract contained a section in which “any aspect of the … specifications” which was excluded from the Contract work could be identified. The Defendant did not include Wolfin in that section; (c) there is no contemporaneous document recording any agreement to use an alternative waterproofing membrane. Mr Cullen gave the following evidence in cross-examination:

Q. And to the extent that there were departures or variations to those specifications, they were recorded in writing; was that your expectation?

A. Yes.

Q. And that was an expectation you communicated to all those employed by the Defendant?

A. Yes.

Q. Including Mr Moss?

A. Yes.

Q. And to your observation, that was complied with by all those employed by you.

A. As far as I’m aware.

50. Given Mr Cullen’s evidence, I consider it quite unlikely that if the conversation alleged by Mr Moss (and referred to above) occurred, there would be no contemporaneous record of it.

51. Finally, I did not regard Mr Moss as a reliable witness. He was combative and indeed at one time abusive to Counsel for the Plaintiffs and I had the distinct impression that he was advocating for the Defendant rather than doing his best to assist the Court with his evidence. He also, in re-examination, for the first time, advanced the further explanation of why the Job Break Down was incorrect referred to above. As noted above, he said that Mr Cullen changed the price on the Job Break Down concerning waterproofing to a price for a cheaper membrane but forgot to take out the word “Wolfin”. Mr Cullen gave no such evidence nor is there any documentary support for that happening. Indeed, Mr Cullen’s evidence is inconsistent with Mr Moss’ evidence. In his affidavit of 19 May 2025, Mr Cullen described Wolfin as “extremely expensive and would have cost at least $39,000 plus GST …” The figure of $39,000 was recorded in the Job Break Down in the Contract against Wolfin and is therefore consistent with Mr Cullen’s evidence of the cost of Wolfin and inconsistent with Mr Moss’ assertion that it represented a lower figure for a less expensive waterproofing membrane. I do not regard Mr Moss as a reliable witness and do not accept his evidence.

52. Separately to, and in addition to my conclusion at [45] above, I am not persuaded, as a matter of fact, that any agreement was made to use an alternative waterproofing membrane.

53. No claim for rectification of the Contract was brought by the Defendant with respect to waterproofing.

Defects

54. The Scott Schedule identified the defects claimed by the Plaintiffs. The various defects were given item numbers.

55. The Defendant accepted that Items 9.1, 9.2, 9.3, 9.10, 9.11, 9.13, 9.14, and 9.15 in the Scott Schedule are defects. Accordingly, the issues relating to those defects concern the scope of works to rectify the defect and the cost to rectify the defects. With respect to certain other items, the Defendant disputed that they are defects and also the rectification cost if they were found to be defects. In relation to some items, the Defendant raised a limitation defence.

56. The Plaintiffs claim an amount for “on-costs” and 10% Goods and Services Tax (“GST”) in addition to the core rectification cost of the claimed defects. Mr Kyle explained the on-costs as comprising 10% for supervision, 10% for overheads and preliminaries, and 12% for the profit of the builder(s) carrying out the rectification work, being a total of 32%. In his report, Mr Whyte said that the addition of 32% for these three items was fair and reasonable (although he suggested minor internal variations). He confirmed his opinion when giving concurrent evidence. Accordingly, to the extent I find the Plaintiffs have established a defect and established the cost of rectification, I will add to that cost 32% for on-costs. Given that the Plaintiffs will be required to pay 10% GST on the service comprising rectification, they are entitled to recover that amount in addition to the rectification cost they are entitled to receive as damages.

57. I will deal with each of the claimed defects, keeping firmly in mind that the onus is on the Plaintiffs to establish, on the balance of probabilities, the existence of the defect and the reasonable scope and cost of the rectification work. Further, it was accepted by the Plaintiffs in Mr Kyle’s costings, that he included costs for certain matters that result in a doubling up of those costs having regard to his costing for the mould Item referred to below. I will account for that doubling up after dealing with each of the defects – that is, when dealing with each individual defect I will not subtract an amount for any particular doubling up, but will do so at a global level once I have dealt with all the defects.

General legal principles relevant to the assessment of damages for defects

58. In Bellgrove v Eldridge (“Bellgrove”), [5] the High Court said:

In the present case [a building 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. One or two illustrations are sufficient to show that the prima facie rule for assessing damages for a breach of warranty upon the sale of goods has no application to the present case. Departures from the plans and specifications forming part of a contract for the erection of a building may result in the completion of a building which, whilst differing in some particulars from that contracted for, is no less valuable. For instance, particular rooms in such a building may be finished in one colour instead of quite a different colour as specified. Is the owner in these circumstances without a remedy? In our opinion he is not; he is entitled to the reasonable cost of rectifying the departure or defect so far as that is possible.

59. The principle set out is, however, subject to the following qualification: [6]

The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.

60. In Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd (“Tabcorp”), [7] the High Court affirmed the principles in Bellgrove, although observed that the example given of unreasonable conduct in Bellgrove suggested that “unreasonableness” in this context is only satisfied by fairly exceptional circumstances. [8]

61. Very recently, the Court of Appeal addressed the principles relevant to the assessment of damages in building and construction matters. In 85 Princess Pty Ltd v Fleming (“85 Princess v Fleming”), [9] Ball AJA (with whom Payne and Stern JJA agreed) considered the relevant authorities on the question and held:

(a) that having referred to the qualification to the rule identified by the High Court in Bellgrove, what is reasonable is very much a question of fact that depends on the particular circumstance of the case and that the authorities his Honour referred to appeared to support the view that subjective intention is relevant to the question of reasonableness; [10] (b) that although the burden of proof for establishing loss lies on the claimant, the party in breach bears at least an evidential onus of displacing the prima facie rule that damages for breach of a contractual stipulation in a building contract are to be assessed by reference to the costs of reinstatement; [11] (c) the matters set out in Stone v Chappel (“Stone”) [12] by Kourakis CJ, as being relevant to the question of reasonableness, are a useful checklist but should not be applied mechanistically 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 the contractual stipulation”. [13]

62. With respect to the defects claimed by the Plaintiffs, each party has, generally, identified the nature of the required rectification work to remedy the relevant defect. Where I have preferred one Party’s position to the other in relation to specific items, that finding carries with it a finding, for the same reasons as identified in the relevant reasoning for that item, that the rectification and its cost is reasonable.

63. With respect to the Plaintiffs’ claims concerning waterproofing to the planter boxes and roof of the Property, the Plaintiffs seek damages that will bring that waterproofing in conformity with the Contract. The principles referred to above are particularly apposite to these claims.

Items 9.1 – Water penetration to Family/Living Room

64. This Item concerns water penetration to the family/living room of the Property. The Defendant accepted that there is a defect in construction leading to that water penetration.

65. The Mr Kyle and Mr Hall agreed in relation to Item 9.1, that the cause of the water penetration was:

(a) a lack of cavity wall flashings with weep holes; (b) a lack of capping; and (c) the need to relocate two downpipes to reduce the risk of water ingress.

66. The difference between the experts in terms of the scope of works is narrow. The issue is whether one row, or two or three rows of bricks is required to be removed to insert the new cavities.

67. Mr Hall, the Defendant’s expert, accepted that the cavity was slightly more than the width of a brick but maintained his view that only one row of bricks was required to be removed. He also opined that whether it was one or two rows that needed to be removed would make little difference to the cost. Mr Hall and Mr Kyle considered that an Arbotech tool (or something similar) would be utilised for the removal of the bricks. Mr Kyle gave unchallenged evidence that after the experts’ conclave, he visited the web-site of a distributor of Wolfin which showed the use of such a tool and which depicted an image with two or three rows of bricks removed. Mr Kyle also gave evidence that in order to have the flashing flush and with a fall, removal of more than one row of bricks is reasonably required.

68. A photograph of the flashing required to be installed that forms part of the Joint Report of Mr Hall and Mr Kyle shows that the flashing has an upturn and downturn that exceeds a single row of bricks. Given that the cavity is slightly wider than the relevant brick cavity and given Mr Kyle’s evidence referred to above about his research after the conclave, I am persuaded that it is reasonably required to remove more than one row of bricks, to carry out the rectification.

69. Included in the works identified by Mr Kyle is waterproofing for two planter boxes. There was no submission made by the Defendant that this Item duplicated any of the work in relation to the planter boxes the subject of Item 9.9 (see below) and I proceed on the basis that it does not. Nevertheless, I accept Mr Kyle’s evidence that waterproofing is required, and, in this regard, I refer to my finding at [110] below.

70. Mr Whyte, the Defendant’s quantity surveyor expert, quantified the rectification cost for Item 9.1 at $7,955.12 plus on-costs and GST. The cost is based on general rates disclosed by Rawlinsons and based on the scope of works identified by Mr Hall. As note earlier, Mr Whyte’s evidence in this regard was not based on a direct examination of the Property. Mr Kyle’s quantification for Item 9.1 rectification cost is $46,437.02 plus on-costs and GST.

71. The Defendant’s costings include an allowance for labour to install waterproofing by way of torch application. The allowance is at a rate of $88.03 per hour. However, the evidence was that the cost of labour application of Wolfin torch on membranes was $280 to $300 per hour. Mr Whyte has applied figures from Rawlinsons.

72. I prefer the evidence of Mr Kyle than Mr Whyte. In this regard, I rely on my findings at [33] above and the matters in [70]-[71] above.

73. I find that in relation Item 9.1, the Plaintiffs have established the defect, and the cost of rectification to which the Plaintiffs are entitled is $46,432.02 plus on-costs and GST.

Item 9.2 – Water penetration to the Lift Plant Room

74. Water has penetrated the Lift Plant Room at the Property. The Defendant accepted that there is a defect that has caused that penetration. Mr Kyle and Mr Hall broadly agreed as to the nature of the work required to rectify this defect. Both accepted that there is a need to excavate along the southern wall of the property to expose the Lift Plant Room external wall to enable acceptable waterproofing to be applied. They both agreed “positive waterproofing” is the appropriate method. There is a narrow path down along the southern wall at which this work will need to be carried out. They both agreed hand-digging of the path is required.

75. The primary disagreement between them was:

(a) Mr Kyle allowed for the use of a “super sucker” machine to clean the area down to the footing to allow cleaning and access to the Lift Plan Room wall and extraction and removal of the soil and other material. Mr Hall’s opinion was that the “super sucker” is not required; (b) the extent of various allowances for the time required to carry out the manual work involved; (c) Mr Kyle’s allowance for the use of a Wolfin membrane for waterproofing. Mr Hall’s opinion was that the Wolfin membrane was not required under the Contract for this location. Further, although Mr Kyle initially allowed for 30 square metres of waterproofing (which Mr Hall opined was excessive), after the expert conclave, he revised that to 15 square metres of waterproofing. Mr Hall did not take issue with that figure. I accept that 15 square metres of waterproofing is required.

76. I have considered the narrow path at which the rectification work will be required. In my view, the labour costings contained in Mr Whyte’s costing should not be accepted as they appear to me to be unreasonably low and not based on a site inspection. Mr Kyle applied his knowledge of the site and his experience, and I consider his assessment of the labour hours as more reliable. Notwithstanding the narrowness of the path, however, I am not persuaded that a “super sucker” is reasonably required for the rectification work of this defect. Mr Kyle explained that the “super sucker” is a high-powered vacuum that assists in removing debris and old waterproofing from the exposed surface of the wall and removes debris and soil dug up from the hand-digging work. The Plaintiffs are entitled to the reasonable cost of rectification reasonably required to remedy the relevant defect. They bear the burden of persuading the Court as to both the scope of work required and the reasonable cost of that work. I am not satisfied that the use of a “super sucker” is reasonably required, particularly when its use would require the repatriation of the removed soil back to the site (unless new soil was used).

77. Mr Kyle has also allowed, for this scope of work, 15 square metres of Wolfin waterproofing. However, the Bevan Boss design, as part of the Contract, only required Wolfin waterproofing to be applied to “Any ‘flat’ roof/slab/planter”. The waterproofing required for the rectification of this defect is to be applied to a vertical external wall. Accordingly, there is no requirement under the Contract for the use of Wolfin to the external wall of the plant room. The Defendant’s experts have opined that, by its inclusion in the costings of the works, that “Cosmofin” waterproofing membrane would be suitable. The Plaintiffs did not challenge the suitability of “Cosmofin” for this application – being an external wall near ground level. In the absence of any evidence that “Cosmofin” is unsuitable for this purpose, I accept the Defendant’s inclusion of it as a suitable waterproofing for this Item. In his costings in relation to Item 9.1, Mr Whyte indicated that one roll of “Cosmofin” measures 15 metres in length and 1.65 metres in width. Mr Kyle’s assessment of the required waterproofing measures 9 metres in length and 1.5 metres in width. Accordingly, one roll of “Cosmofin” would be sufficient to meet the waterproofing requirement. Mr Whyte costs one roll, when dealing with Item 9.1, at $1,100. Mr Kyle has not separately identified the amount of labour required for the waterproofing for this Item. The scope of work relied upon by the Defendant allows for four hours of labour, and in the circumstances, I accept that figure. The scope of works relied upon by the Defendant refers to the waterproofing being “torch applied” (although there is no evidence that “Cosmofin” is in fact a “torch on” system, and Mr Whyte, in his concurrent evidence said it is not – nevertheless, the scope of works proceeds on the basis that it will be torch applied). I have earlier accepted that the labour rate for torch application is $280 per hour. Accordingly, given the scope of works relied upon by the Defendant in relation to the waterproofing component of this Item, I find that the cost of the Cosmofin is $1,100 and the labour cost is $1,120 so that the total cost for reasonable waterproofing for this Item is $2,220 (compared with Mr Kyle’s allowance of $4,200).

78. I otherwise accept Mr Kyle’s scope of works and costings and refer to [33] above. It seems to me, having regard the work involved in hand-digging and removing soil and debris, and the narrowness of the site in which the work is being performed, that the allowances in the Defendant’s experts’ assessment are unrealistic.

79. Accordingly, I accept the Plaintiffs have established this defect and accept Mr Kyle’s costing of the work reasonably required to carry out the rectification of this Item, but deduct:

(a) $2,500 for the “Super Sucker”; and (b) $2,080 in relation to waterproofing.

80. The result is a figure of $21,442 plus on-costs and GST.

Item 9.3 – Water penetration to the master bedroom sliding doors

81. The experts agreed that there were water leaks at the sliding door sill to the master bedroom which was not compliant with the relevant standards. There was no dispute that there is a defect in construction. There was also no dispute as to the scope of works required to remedy the defect – namely, the location of the leak by removing the sliding door and waterproofing against the external substrate. Remedial work also involves the replacement of carpet in the master bedroom.

82. The difference between the Parties concerns the cost of the replacement of the carpet and cost of certain work.

83. With respect to the replacement of the carpet, the Contract specified the use of wool carpet. Mr Whyte’s costing for replacement carpet is not for wool carpet. Secondly, Mr Whyte’s costing for the replacement carpet includes a 70% deduction for the depreciation of the existing carpet.

84. In this case, the Contract called for wool carpet, and a water-tight structure. The defect in this Item resulted in water leakage. That water leakage damaged the wool carpet in the bedroom. However, the carpet, as installed, did comply with the specification in the contract. The impact on the carpet is confined to a very small portion attached to the sill of the sliding door. It is accepted that to rectify the consequences of the defect at the sliding door, the carpet needs to be replaced, primarily because of the impracticality of replacing a small portion of the carpet. The effect of the defect was not to make the carpet unusable, nor is there any evidence that the staining to the minor part of the carpet affected, in any material way, the Plaintiffs’ enjoyment of the carpet.

85. This is not a case where the specific item installed, the carpet, was not in conformity with the Contract. Rather, it is the consequential effect of a defect that has resulted in damage to the relevant item. In those circumstances, in my view, the appropriate measure of damage is the difference in value between the carpet in its present condition and the new carpet required to replace it. The need to replace the carpet arises because it is impracticable to replace only that part which is water damaged.

86. The depreciation adopted by Mr Hall and Mr Whyte, namely 10% per year, totalling 70%, does not have a proper foundation in the evidence. Nevertheless, I must do the best I can on the material before me to assess damages. It seems to me to be reasonable to allow half of the cost of the new carpet. This recognises the use to which the Plaintiffs have had of the existing carpet in relation to which the damage was to a small part near the sliding door.

87. Otherwise, in relation to this Item, Mr Kyle’s costing contains a statement: “Agree with DH on total of 24 hours work for external door works”. The scope of works used by Mr Hall and Mr Whyte does not contain 24-hour work in this regard. Mr Hall did not, in fact, agree to the 24 hours figure.

88. For the reasons referred to in [33] above, I prefer Mr Kyle’s costings.

89. Accordingly, I find that the rectification cost in relation to this Item to which the Plaintiffs are entitled, having regard to the agreed methodology required to rectify the defect, is $7,615.60 (which incorporates a 50% reduction in the cost of the replacement wool carpet) plus on-costs and GST.

Item 9.4 – Cracking to internal rendered walls, and Item 9.5 – Cracking to external walls

90. Mr Hall and Mr Kyle agreed that cracks less than one millimetre wide are not relevantly a defect requiring rectification. They both agreed, subject to a limitation issue, that cracks between one millimetre and five millimetres in width are a defect, though not a major defect under the HBA.

91. Mr Kyle, in his report, identified both internal cracking and external cracking which measured between one millimetre and five millimetres and included photographs of those cracks. Mr Hall did not specifically engage with the cracks identified by Mr Kyle but rather did his own review and identified cracks between one millimetre and five millimetres. A difficulty with Mr Hall’s approach is that although he independently identified cracks of this type he did not directly address, in his report, Mr Kyle’s evidence by reference to each crack identified by Mr Kyle.

92. Further, Mr Kyle was not cross-examined to suggest his measurements of the cracks he identified were wrong, or that he adopted an unreliable process to identify those cracks. Mr Hall was cross-examined, and it was suggested to him that he did not specifically check the cracks identified by Mr Kyle and he may have missed cracks on his review, however, it was not suggested to him that he adopted an unreliable manner in assessing the width of cracks. Mr Hall said it was unlikely he missed any cracks and that he had spent some time at the Property. Mr Hall said, in relation to the cracks identified by Mr Kyle:

I haven’t got a - a list where I’ve identified in sequence of Mr Kyle’s report and - and included the response to every single crack. As I said, because those cracks, I viewed them and measured, but I haven’t included all - all of them in my report.

(Emphasis added.)

93. He further gave evidence that:

I haven’t responded to every crack, but I have identified them at the inspection, and as I said, I haven’t included them because they were all less than 1 millimetre, with the exception of that in particular on page 994 and 995.

(Emphasis added.)

94. The Court is left with the position that two experts attended the Property each measuring cracks to identify those cracks that measured between one millimetre and five millimetres. It is regrettable that the Defendant’s expert did not, in his report, specifically and directly address the cracks identified in Mr Kyle’s report, however, based on his evidence, he did review those cracks but only included, in his report, those cracks that he himself considered exceeded one millimetre in width.

95. Given that the issue in relation to the cracks is simply a matter of visual identification and measurement, there is nothing in the evidence that would lead the Court to prefer one expert over the other. The effect of Mr Halls’ evidence is that the only cracks exceeding 1 millimetre in width are those identified by him in his report. Mr Kyle identified more cracks that he considered exceeded 1 millimetre.

96. The Plaintiffs have the legal burden of establishing the existence of the defects in this Item. Given the state of the evidence where both experts attended the Property to inspect cracks and given the conflict between the experts on a matter that involves visual inspections and measurement, I am not satisfied that I should prefer Mr Kyle’s evidence in relation to the identification of cracks exceeding 1 millimetre. The evidence does not provide a proper basis to do so. Given the legal burden is on the Plaintiffs, I proceed on the identification of the relevant cracks in Mr Hall’s report.

97. Mr Whyte has costed the internal cracks identified by Mr Hall at $2,689 plus “on-costs and GST”.

98. Mr Whyte has costed the external cracks identified by Mr Hall at $1,880.16 plus “on-costs” and GST.

99. Mr Kyle has not costed rectification of cracks based on Mr Hall’s identification. His evidence is not in a form that could apply his general costings of labour and the like set out in his costings to the rectification work identified by Mr Hall (even if the Court otherwise considered it appropriate to do so). Accordingly, in relation to Items 9.4 and 9.5, I find that there are defects and, subject to the limitation issue to which I turn, the rectification cost is $4,568.16 (being those costs identified by Mr Whyte) plus on-costs and GST.

100. The Plaintiffs accepted that the cracks identified as Items 9.4 and 9.5 in the Scott Schedule are not a “major defect” for the purposes of the HBA, and also accepted that if their only right in relation to them was pursuant to the statutory warranties, then their claim would be statute barred because of the expiration of the relevant limitation period (being two years for minor defects). The Defendant relies on the expiration of that limitation period. However, I accept the Plaintiffs’ submission that their rights under the Contract are separate to those that arise by reason of the statutory warranties under the HBA (and referred to earlier). Clause 1(b) of the Contract expressly repeated the warranties that would otherwise be implied by the HBA. By doing so, in my opinion, those warranties are express contractual warranties and not only warranties implied by the HBA – there would be no need for the Parties to expressly state warranties if their application was only by way of statutory implication. Accordingly, any breach of those warranties is not subject to the limitation periods in the HBA.

101. Further, paragraph 28 of the Bevan Boss Design specification provided the following:

The builder … shall carry out all works in a professional and tradesmanlike manner and to a quality as required by the building codes and standards.

Clause 1(c) of the Contract is to a similar effect to paragraph 28 of the Bevan Boss Design. The defect is a breach, in my view, of those contractual provisions. Accordingly, even if the express warranties referred to above did not have the effect that I have referred to, the Plaintiffs would nevertheless be entitled to their damages by reason of the breach of paragraph 28 and/or cl 1(c) of the Contract.

102. For these reasons, I do not consider that the Plaintiffs’ claims in relation to Items 9.4 and 9.5 are out of time.

Item 9.9 and 9.10 – Membrane

103. Item 9.9 concerns the waterproofing membrane in planter boxes at the Property. Item 9.10 is described in the Scott Schedule as “Water Ingress Through Walls/Window Cavity Flashings”, however, the Plaintiffs have dealt with the waterproofing on the roof as part of 9.10. The Plaintiffs claim the water ingress is as a result, in part, of the failure of waterproofing.

104. In short, the Plaintiffs submitted that the waterproofing on the roof of the Property and in the planter boxes was not as specified in the Contract, is an inferior product to that specified, and has also failed. The Plaintiffs submitted, correctly, that the Wolfin waterproofing membrane was specified for the roof, slabs and planter boxes.

105. The Defendant conceded that it did not use Wolfin in those areas. It used a membrane called “Rimseal” which was not a “torch on” system. I have earlier found that there was no variation to the specifications in relation to Wolfin, as alleged by the Defendant, either by way of contractual variation or agreement under paragraph 44 of the Bevan Boss Design specification. The Defendant, however, alleged that the waterproofing membrane that was used has not failed, and accordingly, it would be unnecessary and unreasonable to rectify the failure to use Wolfin by removing the existing waterproofing and replacing it with Wolfin at a significant expense. The Defendant, in substance, submitted that the “exception to the rule” identified by the High Court in Bellgrove and Tabcorp, has application to the Plaintiffs’ claim in relation to Wolfin waterproofing such that this aspect of the Plaintiffs’ claim should be rejected.

106. Further, Mr Cullen in his affidavit opined that because Ms Cappe did not want over-flow pipes on the planter boxes, when they would over-flow, water would seep into the weep holes on the external walls and into the Property. He also said in evidence that the Defendant had commenced rectification work by stripping the waterproofing in planter boxes back to concrete but had been prevented from installing new waterproofing and that had an impact on water ingress. Mr Hall, however, did not give evidence to that effect and there is no independent expert evidence to support Mr Cullen’s opinions. Further, the Defendant did not make any submission based on Mr Cullen’s evidence in this regard.

107. The Plaintiffs submitted that whether the waterproofing has failed, they are entitled to the cost to bring the property to the specification in the Contract and that includes Wolfin waterproofing to the roof and planter boxes. In doing so, the Plaintiffs relied on the principles in Bellgrove. The Plaintiffs, however, submitted further that the existing waterproof membrane has failed.

108. The Wolfin waterproofing membrane was accepted by the Parties as a “torch on” applied waterproofing membrane. Mr Kyle gave evidence that it is a “Rolls Royce” product; indeed, Counsel for the Defendant also described Wolfin as a “Rolls Royce” product. That description was plainly meant to convey that the product is a premium product superior in quality to other products that may also be used.

109. Mr Hall gave evidence that he did not see any evidence of leaks or stains as a result of the waterproofing to the three planter boxes at the front of the Property or evidence that the waterproofing on the roof had failed. Mr Kyle strongly disagreed with the proposition that waterproofing had not failed on the roof or in the planter boxes. He gave the following evidence:

Well, the - it’s - I’ve - I’ve been to this property multiple times. I’ve been there in dry conditions, I’ve been there in torrential rain conditions. The dates are documented within my report. I’ve been there in torrential rain, and water wasn’t coming out immediately, and it’s leaked several days later. That’s the nature of water; it leaks. It takes time. Sometimes it’s not an instant thing. Had this property had its roof waterproofed with Wolfin membrane - torch-on membrane, and the external planter boxes that share the internal walls, it shouldn’t have leaked.

110. Mr Hall also criticised Mr Kyle’s use of a moisture meter used in forming his opinions. Mr Kyle took moisture readings of walls and those returned positive moisture readings indicating to him that there had been water in the walls. Mr Hall said, during the concurrent evidence, that Mr Kyle’s measurements were invalid because his meter was not set to the masonry setting which was, in Mr Hall’s view, required for the walls at the Property. Whilst not accepting that criticism, Mr Kyle, in a supplementary report, took moisture readings with the meter set at masonry at various locations and his evidence, which I accept, was that those similarly returned positive moisture readings.

111. It was put to Mr Kyle that he has not identified “with precision” where the waterproofing on the roof had failed. He agreed. However, I do not regard that evidence as having any real significance because Mr Kyle was not directly challenged in cross-examination as to his view that the waterproofing did fail. The cross-examination did not attempt to connect any inability to identify “with precision” where the waterproofing has failed with the opinion given by Mr Kyle concerning that failure. Mr Kyle has observed the Property and the water leakage at the Property more extensively than Mr Hall. I accept Mr Kyle’s evidence that the waterproofing has failed. The fact that Mr Hall, when looking at a particular time, could not observe leaks or stains does not mean that the waterproofing has not failed.

112. I am fortified in this conclusion by the Defendant’s concession in a contemporaneous text message from Mr Cullen to Ms Cappe that the waterproofing used for the planter boxes, Rimseal, was not “fit for purpose”. In another text message, Mr Cullen said of the person who did the original waterproofing: “Obviously he didn’t use the correct waterproofing in the planters and it’s broken down”. There was no reason advanced by the Defendant why, if the waterproofing was not fit for purpose in the planter boxes, it was nevertheless fit for purpose for the roof.

113. In the extract from Bellgrove above, the High Court gave as an example a circumstance of a room having been painted in a colour that was not specified. The High Court considered in that situation, even if that difference in colour caused no difference in the value of the building, the owner had a remedy against the builder for the failure to comply with the specification. Here the matter is much more serious. The facts are that:

(a) the Wolfin “torch on” membrane was specified under the Contract for the roof and planter boxes and it was accepted by the Parties that it is a “Rolls Royce” product, meaning that it was a superior waterproofing system to that installed; (b) the waterproofing in fact used in the planter boxes was not fit for purpose; (c) there is no expert evidence as to the suitability of the waterproofing that was used on the roof, being Rimseal; (d) there is no direct evidence as to the suitability for planter boxes and the roof, as compared to Wolfin, of the membrane identified in the scope of rectification works proposed and costed by Mr Hall/Mr Whyte; (e) the waterproofing has failed on the roof and planter boxes to some degree.

114. As stated above, the Defendant, relying on Tabcorp, submitted that the cost of the remediation claimed by the Plaintiffs, namely the removal of the existing waterproofing and the installation of Wolfin waterproofing is out of all proportion to the benefit to be obtained or is otherwise unreasonable.

115. I reject the Defendant’s submissions. The Defendant has not led any evidence that the waterproofing membrane applied is as effective or is materially of similar quality as the Wolfin waterproofing specified in the Contract. The rectification works claimed by the Plaintiffs are not only works to bring the waterproofing in line with the Contract but also to deal with the failure of waterproofing installed. The Defendant’s claim that the replacement of the waterproofing is unreasonable rested, in large measure, upon the submission that the waterproofing had not failed. I have found otherwise.

116. In Stone, Kourakis CJ identified the following matters as being relevant to the issue of unreasonableness in this regard:

(a) the degree of departure from the contractual stipulation – here the degree of departure is significant in that the waterproofing product specified was not used and the product used was not of equivalent quality and indeed was described by the Defendant, at least in relation to planter boxes, as “not fit for purpose”; (b) the adverse effect of the departure on functional utility – I have found that the waterproofing on the roof and in planter boxes has failed. Wolfin waterproofing as specified was described in evidence as a “Rolls Royce” product and there was no evidence that the Rimseal product would provide functional equivalency and the evidence in fact points otherwise; (c) the reasons, objectively ascertained and commonly known, for which the innocent party made the stipulation breached – in this case, it is plain that the stipulation of Wolfin waterproofing was made to provide the best protection against water ingress from flat slabs and planter boxes. That was an important reason for the stipulation; (d) the practical feasibility of the rectifying work – there was no suggestion by the Defendant that the removal and replacement of the waterproofing was ‘impractical’. Rather, the allegation was that it would be unreasonable and disproportionate to carry out that work; (e) whether the Plaintiffs intend to carry out the rectification work – the Defendant did not put to either plaintiff that they did not intend to carry out the waterproofing rectification work. The documentary evidence to which I refer when dealing with the mitigation issue below, makes it plain that the Plaintiffs wanted the waterproofing rectified and wanted Wolfin waterproofing (or at least an equivalent product approved by them); (f) the absolute cost of the rectification and whether it is, relevantly, disproportionate to the value of the building and contract price – the cost for these Items is, as set out below, just over $100,000 which, as an absolute figure, whilst not insignificant, cannot be said to be disproportionate to the Contract price of $2.8m. There is no evidence of the current value of the Property; (g) the nature of the wrongdoer’s default – Apart from the Defendant’s allegation that the Plaintiffs agreed to have a cheaper waterproof membrane installed (which I have rejected), the Defendant has not explained the use of Rimseal instead of Wolfin, particularly when it accepts that, at least in relation to planter boxes, Rimseal was not fit for purpose; (h) the public interest in reducing economic waste – as Ball AJA said in 85 Princess, there is doubt as to the relevance of this matter. I do not propose to consider it as no submissions were made in relation to this particular matter.

117. I do not apply the matters in Stone mechanically but rather consider them as part of the overall circumstances of the case.

118. Having regard to the principles referred to in [58]-[63] above, I find that:

(a) the waterproofing has failed and the Plaintiffs are entitled to the cost of rectification. That is, I find that the Plaintiffs have established a major defect in relation to the waterproofing used on the roof and in the planter boxes; (b) Wolfin was specified in the Contract. By reason of that fact, together with the matters referred to in [113]-[115] above, the Plaintiffs are entitled to have the cost of Wolfin waterproofing installed to rectify the defect; (c) the use of Wolfin is both reasonable and necessary to remedy the defect in the waterproofing to the roof and planter boxes.

119. The Defendant did not lead any evidence of the cost of applying Wolfin to the roof and planter boxes. Accordingly, the only evidence is that of Mr Kyle.

120. Mr Kyle costed the rectification work for the roof at $61,450 and for the planter boxes at $50,715, each together with on-costs and GST. With respect to the planter boxes, Mr Kyle again includes use of a “sucker truck” but there is no direct evidence that it is in fact necessary to use and I will reduce his costing by the $2,500 referable to that truck.

121. Accordingly, I find that the cost of rectification of defects in these two Items is $109,665 plus on-costs and GST.

Items 9.11-9.13 – Laundry, Powder Room, Garage water ingress

122. The Parties’ experts agreed both as to the existence and nature of the defects in respect of Items 9.11 and 9.13 (water ingress to the laundry and garage). The dispute concerned the cost of that rectification. The Defendant disputed that Item 9.12 is a defect.

123. Item 9.11 concerned the impact on the laundry at the premises of, at least, the defect set out in Item 9.1 (that is, water ingress into the laundry). Item 9.11 concerned the internal work required in the laundry to rectify that impact.

124. The Plaintiffs are entitled to damages to rectify the consequential damage to the laundry because of the defect in Item 9.1. The dispute between the Parties is that the Defendant submitted that the cost of that rectification work is $6,283.15 whilst the Plaintiffs submitted that the cost is $9,492.60.

125. A main difference between the Parties is that Mr Kyle allowed for removal and replacement of bathroom tiles, and the application of a waterproofing membrane to the floor of the bathroom which is above the laundry. The Defendant submitted that such work is excessive and not required. However, the submission that was put was in the following terms: “If there were issues with the floor tiles and they were leaking it is unlikely that room would be in use …” However, Mr Kyle’s evidence was that the waterproofing in the bathroom sitting above the laundry failed and there are photographs in evidence clearly depicting water damage to the ceiling of the laundry. Mr Hall opined that this damage is solely due to the defect set out in Item 9.1.

126. The photographs 9.11.1.2 and 9.11.1.3 of Mr Kyle’s report show damage to the laundry ceiling likely from water ingress to the ceiling. In Mr Kyle’s supplementary report, he gives evidence of using a moisture meter, set on the masonry setting, indicating positive moisture levels on the underside of the bathroom slab which he stated confirmed water ingress. He captured that reading after a site inspection following heavy rainfall.

127. Mr Hall’s report also accepted that there is required to be new waterproofing above the laundry ceiling but at paragraph 4.11.4 and photographs 4.11.1.1 and 4.11.1.2 of his report, he opined that it is the waterproofing sitting under stones where the concrete slab is external of the brick wall that requires replacing. Accordingly, the dispute was whether the tiles (which are internal of the brick wall) need to be removed so that the membrane sitting on the slab internal of the brick wall is required to be replaced (which would then require the bathroom tiles to be removed and replaced). .

128. The Plaintiffs bear the burden of establishing the necessary and reasonable works required to rectify the defect. I am not satisfied that the moisture readings captured by Mr Kyle indicate water leakage from the inside slab of the bathroom as opposed to the external slab depicted in Mr Hall’s report.

129. In these circumstances, I prefer the Defendant’s scope of works and costing of the remedial work in relation to the laundry. Mr Kyle’s costing is not in a form capable of being reliably applied to the Defendant’s scope of works. Accordingly, in relation to Item 9.11, I adopt the Defendant’s opinion of the cost of the remedial work required to the laundry, as set out in its submissions. That is, the Plaintiffs are entitled to $6,283.15 plus on-costs and GST.

Item 9.12 – Powder Room mould

130. This Item concerned mould to the powder room. The Defendant submitted there is no defect. The Plaintiffs submitted that the mould is caused by water ingress and therefore is a defect.

131. Mr Hall’s opinion was that the mould in the powder room was caused by condensation and the lack of use of an exhaust fan. Mr Kyle’s opinion was that the mould was because of external water ingress that would be resolved by the remediation of the defect in Item 9.2. The Plaintiffs also relied on the evidence of Mr Pickering – an expert in mould. His evidence was that it was likely that the mould in the powder room was caused by water ingress. His reasoning was that the mould was not isolated to the ceiling but also appeared on the door and other painted surfaces in the area of the powder room. He also noted his instruction from Ms Cappe that the shower at around the powder room was not used by the Plaintiffs. The Defendant led no evidence from any mould expert. Although Mr Hall is a very experienced building expert, he is not a mould expert although he has experience dealing with mould.

132. In determining the factual issue in relation to this Item, I find the evidence of Mr Pickering as to the source of the mould persuasive and it is supported by Mr Kyle.

133. Accordingly, I find:

(a) Item 9.12 is a defect caused by water ingress; (b) the cost of rectification is as set out by Mr Kyle (there being no equivalent costing by the Defendant for the work identified by Mr Kyle) is $2,350 plus on-costs and GST.

Item 9.13

134. This Item concerned the impact to the garage of the Property of water ingress referred to in other items. There is no dispute that this item is a defect and that rectification work is required to remedy internal damage to the garage. Mr Whyte, the Defendant’s cost expert, costed the rectification work at $1,880.16 whilst Mr Kyle costed the works at $2,434.53, each plus on-costs and GST.

135. Mr Kyle’s costings were based on his experience in carrying out building works and his site visits. Mr Whyte has relied on average rates of work set out by Rawlinsons by way of a desk-top audit. For the reasons set out in [33] above, I accept Mr Kyle’s costings.

136. Accordingly, I find in relation to the defect being Item 9.13, the Plaintiffs are entitled to $2,434.53 plus on-costs and GST.

Item 9.14 – Corroded Bar Chairs

137. The Defendant accepted this Item is a defect. The defect concerns rust on bar chairs which is apparent through the concrete render at the Property. The bar chairs hold the steel reinforcing within the concrete slab in place of the formwork when the concrete slabs are poured to ensure the reinforcing steel is in the middle of the concrete slab.

138. The Defendant submitted that the rectification cost is $600.70 whereas the Plaintiffs submitted that the rectification cost is $2,420. The difference between the Parties was that Mr Kyle considered that core drilling is required to the rust spots to create a cavity to rectify the defect. He considered that this is required to avoid the possibility of future “concrete cancer”. Mr Hall rejected that opinion and said that the bar chairs are not structural and do not impact the structural steel used in the Property so that if there is any issue with concrete cancer in the future, it would not be because of the bar chairs.

139. I found Mr Hall’s description of the purpose of the bar chairs and the work to rectify the rust compelling. In my view, Mr Kyle’s concern in relation to the possibility of concrete cancer relied on a speculative assessment of future risk. I prefer the evidence of Mr Hall in relation to this item.

140. Mr Kyle did not cost Mr Hall’s opinion of the rectification work required. Accordingly, I adopt Mr Hall’s opinion and the Defendant’s submission such that the Plaintiffs are entitled to $600.70 plus on-costs and GST in relation to this item.

Item 9.15 – Mould affected areas

141. There was no dispute between the Parties that certain rooms in the Property are affected by mould.

142. The Defendant submitted that the mould is consequential to water ingress that has occurred since occupation by the Plaintiffs and in circumstances where the Plaintiffs could have mitigated the loss arising from the mould by permitting the Defendant to return to rectify the issues causing water ingress or by rectifying them by retaining their own builder.

143. The Plaintiffs led expert evidence from Mr Pickering concerning mould. The Defendant’s mould expert, Mr Lark, was not called. However, certain parts of the Joint Report prepared by Mr Pickering and Mr Lark were tendered by the Plaintiffs.

144. Mr Lark, in the Joint Report identified the existence of mould in the Property in the following way:

Several areas within the Property exhibit significant moisture related damage, visible mould growth, and strong mould odours.

Moisture & Mold Presence

Strong mould odours were detected in multiple rooms, including the laundry, study, bedrooms, kitchen, and garage.

A ceiling leak was identified around the skylight in the centre of the house (suggesting a roof leak was still active).

Water intrusion was detected in walls, floors, and ceilings, with visible mould growth noted in affected areas.

Damp conditions were noted within 0.9 Metres of the exterior walls, supporting the likelihood of water penetration.

Specific Areas of Concern

Laundry: Strong mould odour, ceiling opened by others for leak repair, high moisture presence.

Study: Mold-affected tack strips and a wet exterior north wall were identified on thermal imaging.

Boys' NE Bedroom: The carpet was lifted, and the tack strips were black with mould

Kitchen: Strong mould odour with suspected water intrusion.

Guest Ensuite: Visible mold surrounding the toilet.

Garage: Mould growth is present on the brick walls, floor, and ceiling.

Main Bedroom (NW Corner): Loose carpet with mould colonisation near the balcony sliding glass door.

Gyprock ceilings and walls across multiple rooms show significant peeling paint, buckling, and efflorescence due to moisture exposure.

Carpets and underlays were visibly affected by mould, particularly near doors and exterior walls.

(Paragraph references removed.)

145. There can be no doubt that mould in the Property is a significant issue. In the Joint Report, the mould experts agreed that a seven-phase remediation process to remediate and treat the mould is required. Mr Kyle was the only expert who identified a scope of works for the seven-phase remediation and the only expert who costed the work. The Defendant chose not to lead expert evidence on those issues, having relied on its submission concerning mitigation referred to above.

146. The Defendant submitted that:

(a) a report in evidence from the “Mould Doctor” based on an inspection on 28 April 2023 only found visible mould in one bedroom and one bathroom; (b) the Plaintiffs failed to stop water ingress or allow the Defendant to stop water ingress and that conduct contributed to the consequential mould that now requires remediation; (c) in those circumstances, the Defendant is not liable for the seven- phase remediation process now required.

147. The difficulty with the Defendant’s submission is that it is unsupported by expert evidence and contradicts the expert mould evidence that was given in the proceedings. It is true that in cross-examination, Ms Cappe agreed that following the “Mould Doctor” report, the mould problem became significantly worse. However, it is clear that she was describing visible mould. In any event, the expert evidence on the question is far more probative than Ms Cappe’s lay observation.

148. Mr Hall agreed that, following completion, it was likely that a major wetting event occurred with water ingress into the Property. At least as early as January 2019, the Plaintiffs were complaining of a “big issue” with mould in a text message to the Defendant. Ms Cappe’s evidence was that within months after moving into the Property, she observed defects relating to water damage on all three levels of the Property.

149. With respect to the report from the “Mould Doctor”, no evidence was called from the author of the report, nor is there any detail of the level of expertise of the author. Further, it appears that the report was directed to “visible” mould. Mr Pickering, a mould expert, was dismissive of the report when taken to it by Mr Hyde, Counsel for the Defendant. He described the nature of the report in the following way:

This appears to be the typical type of investigation - I wouldn’t even call it an investigation to be frank. It’s a type of assessment that a mould remediator would do when they’re trying to assess whether or not there’s a job here for - for them to - to progress to. But it’s - it’s preliminary at best.

150. As to whether the nature and extent of the remediation work now required to deal with the mould would be materially different had the Defendant been given access to the Property and commenced rectification in 2021, Mr Pickering said the following in the Joint Report:

It is my opinion that whilst the fungal loading could have been reduced (as is measured in an ERMI test) the actions required to remediate the mould issue would not have been significantly reduced if the defendant was allowed to access site in February 2021 for the following reasons:

a) The defects allowing water penetration existed since the building’s construction and noted in the report prepared and provided by Rob Wheelan of Advanced Building Inspections Pty Ltd dated 2 February 2021.

b) Removal of moisture sensitive items would be required after only several days of moisture exposure in accordance with the ANSI/IICRC S500 Standard for Flood Restoration as it would have to be considered as a Category 3 water intrusion (Contaminated with microbials) and as a Class 4 flood affected building (water that is deeply bound within the building materials) requiring a similar scope to the one presented here-in.

151. As noted earlier, the Defendant did not lead evidence from the expert it retained on the question of mould. Apart from putting the “Mould Doctor” report to Mr Pickering, Mr Hyde cross-examined Mr Pickering to suggest that mould problems become worse if left untreated or if more wetting events occurred. The following exchanges occurred:

Q. And to put it in layman’s terms, does that mean that it effectively spreads if left untreated?

A. The real estate, not necessarily. But the types of moulds that are involved start to deepen. So you make it a more deeper colonisation into the substrate. But as far as spread goes, that really depends on how far the - the first wetting event, how far that spread. Mould only takes one wetting event to start to develop

…

Q. And what happens if there’s a continuing series of wetting events? Does that increase the growth or not?

A. It can, of course. But the - the colonies don’t extent past where the available moisture is. So..(not transcribable)..moisture came in on the first wetting event, which is often the case in - in a storm for example, mould will start to develop on that if it’s left unattended. If water continues to come into the same spot, then that ecology will start to shift to what we call tertiary colonisers. They’re more your toxic moulds.

152. Mr Pickering accepted that if left untreated, or if subject to further wetting events, the ecology of mould may shift, and shift towards more serious toxic moulds.

153. However, Mr Pickering was not directly challenged on his evidence in the Joint Report set out in [150] above. There is nothing in the way Mr Pickering gave his evidence that would lead the Court not to accept his evidence. Further, there is nothing in the objective material before the Court that would lead the Court not to accept his evidence. Accordingly, I accept his evidence referred to in [150] above.

154. As will be explained below, the Defendant bears the onus of proof on the question of mitigation of loss, including establishing that part of the claimed loss that would not have occurred had the Plaintiffs not acted unreasonably (as alleged by the Defendant). I address below the Defendant’s claim that the Plaintiffs have acted unreasonably in this regard. However, and in any event, given my acceptance of Mr Pickering’s evidence, the Defendant has not established that, had access been provided to the Defendant in 2021, the remediation work now required would have been different to any real degree.

155. As I noted earlier, Mr Kyle was the only expert who identified a scope of works for the remediation required and identified in the Joint Report of the mould experts. Mr Kyle was not challenged on his evidence in relation to the remediation work or its cost. The Defendant did not lead evidence of any different costing for that work. In those circumstances, I accept Mr Kyle’s evidence both in relation to the scope of the works required and the costing of that work.

156. Mr Kyle’s supplementary report dated 16 October 2024 sets out his costings for the seven-phase remediation work in relation to mould. Mr Kyle’s supplementary report was prepared after an initial Scott Schedule was prepared by Mr Kyle which contained an initial costing (not for the seven-phase remediation work) for mould at $22,088.75. Mr Kyle’s opinion in his supplementary report was that the cost of the seven-phase remediation is $81,190 plus on-costs and GST. The Scott Schedule retained the figure $22,088.75, however, it is tolerably clear, as set out in their final written submissions, that the Plaintiffs’ claim for this Item is the quantum set out in Mr Kyle’s supplementary report.

157. Accordingly, I find that in relation to Item 9.15 the Plaintiffs have established that the mould is consequent upon defects resulting in water ingress, and the Plaintiffs are entitled to $81,190 plus on-costs and GST.

Item 9.16 – Master Bedroom Water Ingress

158. The Plaintiffs did not press this Item at trial.

Item 9.17 – External Storage Room

159. The Defendant disputed that there is a defect in relation to the external storage room, however, accepts, in its submissions, that there is minor dampness to the walls of the storage room. Mr Kyle, in his supplementary report, attended the site and used a moisture reader, set to masonry, to record the moisture against the internal wall cavity located inside the storage room. That returned a positive moisture reading which he said confirmed water ingress. Photographs 9.17.1.1 and 9.17.1.2 to Mr Kyle’s report show obvious signs of water ingress in my view. Mr Hall accepted that the storage room is not watertight and that there is water ingress.

160. The Defendant submitted that because the storage room is an uninhabitable area, even if there is water ingress, it is not a relevant defect because it is a Class 10A structure under the relevant standards and, being uninhabitable, is fit for its purpose.

161. I reject the Defendant’s submission in this regard. Paragraph 28 of the Bevan Boss Design, forming part of the Contract requires the “works” to be watertight. There can be no dispute that the external storage room is part of the “works” under the Contract. Accordingly, if the external storage room is not watertight, then there is a relevant defect and breach of the Contract.

162. The Defendant also submitted that, if there is a defect, it is not a major defect within the meaning of that term under the HBA and relies on the limitation period under the HBA of two years from the date of breach for minor defects. In my view, the Defendant fails in these submissions on two bases. First, although the storage room is not a habitable area, a “major defect” is defined in s 18E of the HBA as including any defect that results in the inability “to use the building (or part of the building) for its intended purpose”. In my view, the photographs referred to above establish that the defect is a major defect under this definition because of the water ingress leading to mould in the storage room. That water ingress has the capacity to damage items stored in the room or to result in certain items not being stored that would otherwise be stored. Secondly, for the reasons set out in [100]-[101] above, the Plaintiffs have the benefit of express terms which are breached by this defect and are not affected by the limitation period in the HBA.

163. The Defendant also challenged certain costs claimed by the Plaintiffs as set out in Mr Kyles’ report. The Defendant submitted that Mr Kyle included costs for removal of furniture and ancillary costs related to access to the storage room from inside the house, and that the storage room is accessible from the side path of the house.

164. Although no doubt it might be more convenient for builders to access the storage room through the back sliding door of the house, Mr Kyle did not opine that that was necessary. It is true that the Defendant did not put its proposition, referred to in [163] above, to Mr Kyle, however, the onus is on the Plaintiffs to establish that the rectification work and cost are both necessary and reasonable. Other than including that work as part of the scope, Mr Kyle did not give positive evidence that access external of the house was unavailable or unsuitable. In those circumstances, I do not think there was an obligation to put that proposition to him. I am not satisfied that the costs included in Mr Kyle’s report concerning access from the inside of the house should be included in the necessary and reasonable costs of rectification of this Item.

165. The Defendant in final submissions did not challenge any other aspect of Mr Kyle’s costings in relation to this Item and Mr Whyte did not cost the work required as identified by Mr Kyle. Given the water ingress that is accepted, I accept Mr Kyle’s opinion that new waterproofing is required as part of the rectification works.

166. Accordingly, I find that there is a defect in relation to this Item, being that the structure allows for water ingress; that it is a major defect under the HBA, and is otherwise within time; and the rectification cost to which the Plaintiffs are entitled is $3,480 plus on-costs and GST (which is the $3,900 identified by Mr Kyle less amounts referable to internal access to the storage room from the house).

Item 9.21 - Skylight

167. The Plaintiffs claim a defect in relation to the skylights at the Property. The Plaintiffs claim that the material used for the flashing between the skylight and the concrete slab on the roof was not aluminium as specified under the Contract and has rusted. Mr Hall accepted there is rust on the flashing, describing it as “some rust” occurring because the steel used for the flashing did not have sufficient coating to deal with the marine environment at which the Property is located. Mr Hall’s view, however, was that there was no defect in the skylight itself, it being glass.

168. Mr Kyle’s evidence is that the skylight needs to be replaced and not merely the flashing. In a supplementary report, Mr Kyle included photographs of the skylights which showed substantial rust on the base on which the skylights sit on the roof. There is no rust visible on the material bordering the glass skylight itself. Mr Kyle’s evidence during the expert’s concurrent evidence was that it appeared that the same material was used for the skylight as the flashing (which both experts accepted contained rust). Mr Kyle said the following:

The only reason that the rusting hasn’t occurred yet to the extent of the flashing is because, obviously, the bulk of the powder coated metal skylight has a vertical or curve - curvature around the - the skylight. Whereas the flashing is - there’s a lot more surface area that’s flat and horizontal, and water pools, therefore it decays and corrodes far more.

169. Mr Kyle’s evidence in this regard, however, was dependent upon his view that the material used for the skylight appeared to be the same material as used for the flashing. Mr Hall’s evidence was based on his assessment of the photographs in Mr Kyle’s supplementary report. Mr Kyle conducted a visual inspection of the skylights. No attempt was made by the Plaintiffs to establish the specifications of the skylights installed at the Property. There is no documentary evidence relied upon by the Plaintiffs to prove the nature of the material bordering the glass of the skylights. The highest Mr Kyle’s evidence goes is that on a visual inspection the material “appeared” to be the same material as the flashing. Mr Hall necessarily disagreed because his opinion was that there was nothing wrong with the skylights themselves, as opposed to the flashing.

170. As the plaintiff bears the onus of establishing the defect which they claim exists, they must persuade the Court, on a balance of probabilities, that the material used in the skylights themselves is the same as the flashing. The photographic evidence indicates that there is no rust on that material. Mr Kyle gave an explanation for that, but explanation was, in itself, dependant on his view that material “appeared” to be the same as the flashing. The effect of his evidence is that the fact that there is no rust on the material is not an indication that it is not the same material as the flashing. However, equally, it is not evidence that it is the same material.

171. In the absence of objective material establishing the specifications of the skylights that were installed, the Plaintiffs have not satisfied me that the skylights themselves are defective, as opposed to the flashing. The Plaintiffs have not separately costed the replacement of the flashing. The Defendant did not cost rectification works for this Item so that the only evidence in that regard is Mr Kyle’s. Clearly some labour is required to replace the flashings, which the Parties agreed is required. Doing the best I can, I find that three hours of labour is reasonable (given that Mr Kyle estimated a total of nine hours for the removal of the skylights and their disposal together with waste removal). I adopt Mr Kyle’s hourly rate for this removal, namely $90. Accordingly, subject to the limitation issue to which I will now turn, the Plaintiffs are entitled to $270 plus on-costs and GST.

172. The Plaintiffs first claimed this defect when Mr Kyle’s supplementary report of 23 March 2025 was served. That was more than six years after the date the Plaintiffs occupied their home following construction. The Defendant submitted that, if there is a defect in relation to the skylights, it is only a minor defect. On that basis, the Defendant submitted that the Plaintiffs are out of time, both at common law and under the HBA, in relation to this alleged defect.

173. Insofar as the Defendant submitted that the claim in relation to the skylights was not claimed until after six years from the date of occupation and for that reason is out of time, that submission must be rejected. In Parkview Constructions Pty Ltd v Owners – Strata Plan No 90018 (“Parkview Constructions”), [14] the Court of Appeal held that at common law there is a single cause of action for breach of contract (including statutory warranties implied into a contract) and the introduction of a claim for further defects after a relevant limitation period does not result in those defects being out of time because the claim in relation to those defects is not based on a new cause of action but rather the original cause of action concerning the defective works. The Court made plain that nothing in the HBA changed that position and claims for breach of statutory warranties under the HBA are similarly based on a single cause of action. [15]

174. In my view, the defects in relation to the skylights cannot be described as minor defects. Mr Hall accepted that if the defects were not remedied, then they would lead to waterproofing problems which I take to mean that it is likely to result in water ingress from the skylights into the Property. In those circumstances, the defect is a major defect for the purposes of the HBA. In any event, for the reasons referred to in [100]-[101] above, the Plaintiffs have the benefit of express warranties and would not be out of time even if the defect was a minor defect.

Temporary Accommodation

175. The Plaintiffs claim the cost of alternative accommodation for 12 weeks while the Property is rectified. Mr Kyle provided a costing of $35,904.55. Mr Kyle’s costing is based on his research of AirBnB premises large enough to accommodate two adults, two children, and a dog. The Defendant denied the Plaintiffs’ entitlement to this claim but has not led evidence of any alternative cost of such accommodation as claimed by the Plaintiffs.

176. The 12 weeks allowed for in Mr Kyle’s accommodation cost is the period he opined was required for the rectification work.

177. The work that the experts agreed is required for rectification of the defects, which I have found are established, is mostly external work. There is, no doubt, some internal rectification work, including in relation to the main bedroom (for example, carpet replacement). Mr Kyle’s evidence was that the pathway external of the house is quite narrow which makes access to the various parts of the property difficult, and he considers that using the internal parts of the house for access will be more convenient. Mr Hall disagreed and opined that the vast majority of works are external works and there is sufficient external access for the rectification work, such that there is no need for temporary accommodation.

178. Mr Kyle’s costing, as noted, is for the entire period which he estimated was required for rectification. The Plaintiffs, as with all claims, carry the onus of proof on the claim for the cost of temporary accommodation. The nature of the evidence relied upon by the Plaintiffs does not establish a requirement for the Plaintiffs to move out of the Property for the entire 12-week rectification period, particularly given that most of the work is external work.

179. The Plaintiffs submitted that they are entitled to this claim because they contracted for building work where the Defendant had free access to the site (that is, they were not residing at the site when the work was being carried out). In my view, this is not a correct analysis. The claim for the cost of temporary accommodation is a claim for loss consequential to the breach of contract by the Defendant in the building works. The Plaintiffs must prove that the need to obtain temporary accommodation was caused by the Defendant’s breach of contract.

180. I accept that there is some internal work and that there is a period of time when mould rectification work is required during which it is unreasonable to expect the Plaintiffs to remain in the premises (the evidence disclosed that protective gear will be worn by those remediating the mould). I accept that there is a need for some temporary accommodation, and the Plaintiffs are entitled to some damages.

181. The Court must do the best it can on the evidence available. I find that it is reasonable to allow five weeks of temporary accommodation to provide for the time when internal work is required and mould rectification is required, and occasions when access issues may require some internal access. I do not accept that the access issues identified by Mr Kyle require internal access for the duration of 12 weeks and in that regard, I prefer the evidence of Mr Hall in which he explained how, by removal of the screen or gate on the side of the house, access can be improved. Nevertheless, it is reasonable to expect that that access may not be able to be adopted for every aspect of the rectification works and at all times. The Defendant did not provide any costings for alternative accommodation, nor was any objection made to Mr Kyle’s evidence of AirBNB costs as being indicative of temporary accommodation costs. In those circumstances, I consider it appropriate to pro-rata Mr Kyle’s costs, being five-twelfths of his cost of $35,904.55, which is $14,960.23. I find that the Plaintiffs are entitled to damages in the amount of $14,960.23 for temporary accommodation costs.

Double Counting

182. The Defendant submitted that Mr Kyle’s costings of the various defects referred to above contain certain elements that appear on more than one costing such that there is a level of double counting of certain costs. The Plaintiffs accepted that the Defendant is correct in this regard.

183. In relation to several defects, Mr Kyle included an allowance for chemical treatment and related trade materials, consumables and the like all related to mould removal. However, I have found that the Plaintiffs are entitled to the cost of rectifying the mould issues as identified by Mr Kyle. Accordingly, the separate allowance for chemical treatment and related items in individual defect costings amounts to double counting. That double counting appears in relation to Items 9.1, 9.2, 9.3, 9.10, 9.12, 9.13, and 9.17. The total amount of double counting in these items is $5,050 (excluding on-costs and GST). That amount must be deducted from the total rectification costs.

Findings on Defects and Quantification of damages

184. I have found that the Plaintiffs have established various defects. Those findings are set out above. I have also made findings as to the cost of rectifying those defects.

185. Subject to the Defendant’s allegation that the Plaintiffs failed to mitigate their loss, the effect of those findings is that the Plaintiffs are entitled to damages, quantified as follows:

186. Rectification cost: $281,281.16

187. On-cost at 32%: $90,009.97

188. Amount for GST: $37,129.11

189. Temporary accommodation cost: $14,960.23

190. Being a total of: $423,380.47.

191. I turn now to deal with the Defendant’s case on mitigation.

Mitigation

187. The Defendant alleged that the Plaintiffs failed to mitigate their loss such that they are not entitled to damages, or at least a portion of the damages claimed.

Common Law Principles

188. At common law, there is no “duty” to mitigate. Rather, “loss which is due to unreasonable or improvident actions of the [Plaintiffs] is generally disregarded by application of the rules of mitigation of loss”. [16]

189. Very recently, in Ceerose Pty Ltd v The Owners – Strata Plan No 89074 (“Ceerose Pty Ltd v The Owners”), [17] the Court of Appeal considered the common law principles concerning mitigation in the context of building contracts. It serves well to extract what the Court said:

[28] It has long been established that even though a plaintiff bears the duty of establishing loss, the onus is on the defendant to prove facts going to a claim that the plaintiff failed to mitigate the loss: see, eg, Bagnall v National Tobacco Corporation of Australia Ltd (1934) 34 SR (NSW) 421 at 430 (Jordan CJ). The High Court said this in Arsalan v Rixon (2021) 274 CLR 606; [2021] HCA 40:

[32] Where a plaintiff acts in an attempt to reduce a loss, the onus shifts to the defendant to show that the acts actually taken by the plaintiff were unreasonable acts of mitigation. Unless the plaintiff’s actions are shown to be unreasonable, costs that are incurred in an attempt to mitigate loss caused by wrongdoing become, themselves, a head of damage that can be recovered. Even if the costs incurred by the plaintiff are greater than the loss that was attempted to be mitigated, those costs will be recoverable other than to the extent that they are shown to be unreasonable. [footnotes omitted]

[29] The High Court was addressing circumstances where the plaintiff incurs costs in attempting to ameliorate the loss or its effects. The principle as to onus is the same where the defendant claims the plaintiff should have taken steps to reduce loss. That type of issue is addressed as a matter of mitigation even though, as Ball J has pointed out, “the [plainitff] is not mitigating its loss, but rather the [defendant’s] damages”: Owners SP 76674 v Di Blasio Constructions Pty Ltd [2014] NSWSC 1067 at [44]. Whether or not a failure to mitigate is established depends upon the defendant establishing that the plaintiff has acted unreasonably in some respect. That might be so by acts (incurring unnecessary or unreasonable expenses) or omissions (failing to take steps that reasonably should have been taken to reduce the loss). Loss “which is due to unreasonable or improvident actions of the plaintiff is generally disregarded by application of the rules of mitigation of loss”: Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17; (2024) 98 ALJR 719 at [120(3)] (Edelman, Steward, Gleeson and Beech-Jones JJ).

[30] Neither excessive diligence nor perfection is required of a plaintiff in this regard. As Lord Loreburn LC said in Lodge Holes Colliery Company Ltd v Wednesbury Corporation [1908] AC 323 at 325:

Now I think a Court of justice ought to be very slow in countenancing any attempt by a wrong-doer to make captious objections to the methods by which those whom he has injured have sought to repair the injury. … Errors of judgment may be committed in this as in other affairs of life. It would be intolerable if persons so situated could be called to account by the wrong-doer in a minute scrutiny of the expense, as though they were his agents, for any mistake or miscalculation, provided they act honestly and reasonably.

[31] The position was well summarised by Giles JA in Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313; (2000) 10 BPR 18,235 at [187]:

[187] A plaintiff who acts unreasonably in failing to minimise his loss from the defendant’s breach of contract will have his damages reduced to the extent to which, had he acted reasonably, his loss would have been less. This is often misleadingly referred to as a duty to mitigate, although the plaintiff is not under a positive duty. The plaintiff does not have to show that he has fulfilled his so-called duty, and the onus is on the defendant to show that he has not and the extent to which he has not. Since the defendant is a wrongdoer, in determining whether the plaintiff has acted unreasonably a high standard of conduct will not be required, and the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct if it was reasonable for the plaintiff to do what he did. [citations omitted]

[32] There is no special common law rule applicable to building contracts in this regard. The appellants placed some reliance on the statement by Ball J in Di Blasio, at [44], that “[i]n the case of building contracts, it is also generally accepted that the owner must give the builder a reasonable opportunity to rectify any defects”. His Honour was not suggesting there is some automatic requirement to that effect. As the primary judge here noted (J [42]), one of the sources his Honour invoked was Julian Bailey, Construction Law: Volume II (1st ed, 2011, Routledge) at [14.109], where the following was said:

Even where a contract does not require the owner, or the contract administrator, to give the contractor the opportunity of correcting a defect for which it is responsible, it may, in the circumstances, be a reasonable step for the owner, in attempting to mitigate its loss, to give the contractor such an opportunity. This is especially so where the alternative is for the owner to engage a new contractor to perform the remedial work, where the new contractor may — rightly — only wish to undertake the remedial work on the basis that it be performed from scratch (and for a substantial cost), rather than attempting to fix up the suspect or shoddy work of the first contractor; whereas if the first contractor were given the opportunity to correct its work the cost would be relatively small. [citations omitted, emphasis added]

[33] As this explanation indicates, there is no invariable requirement that the owner provide the builder with an opportunity to rectify defects. The issue is whether the conduct of the plaintiff — including the failure to provide an opportunity to rectify — was unreasonable in all the circumstances, such that some or all of the claimed loss resulting from the breach of contract should be disregarded. The onus of proof and persuasion in that regard is on the defendant. That onus is a legal one. It is for the defendant to establish the relevant facts on the balance of probabilities and to persuade the decision-maker of the conclusion. The defendant also bears the evidential onus on the point, that is, it is for the defendant to identify evidence sufficient to raise the issue: Munce v Vinidex Tube Makers Pty Ltd [1974] 2 NSWLR 235 at 239.

[34] The respondent did not have a “positive obligation” to provide the appellants an opportunity to rectify the claimed defects (to quote grounds 5 and 6 of the notice of appeal). The refusal of such an opportunity by the respondent was a relevant fact which the appellants could invoke in arguing that the respondent’s damages claim should not be upheld in whole or part. But it was the start of the argument, not the end of it. The appellants needed to persuade the referee that in all the circumstances of the case the respondent’s refusal was unreasonable, and they needed to establish the facts which supported that argument.”

190. The decision in Ceerose Pty Ltd v The Owners confirms and establishes the following important principles:

(a) The legal and evidential burden in relation to a claim of a failure to mitigate is upon the Defendant; (b) The Defendant must show that the Plaintiffs acted unreasonably by either a positive act or omission or a combination of the two; (c) If the Defendant does establish that the Plaintiffs have acted unreasonably, then loss due to the conduct or omission of the Plaintiffs is generally disregarded by application of the rules of mitigation of loss; (d) There is no special rule concerning mitigation that applies to building contracts.

191. The Defendant also bears the onus of establishing the loss that is due to conduct of the Plaintiffs which it claims should be deducted from the loss claimed. [18]

192. What is unreasonable for a plaintiff to do, or not do, when faced with loss arising from the defendant’s conduct will depend on all the circumstances. In the context of building matters, in The Owners – S**trata P**lan 76674 v Di Blasio Constructions Pty Ltd (“Di Blasio”), [19] Ball J said:

[45] The question of what is reasonable depends on all the circumstances of the particular case. One relevant factor is what attempts the builder has made to repair the defects in the past and whether, in the light of the builder's conduct, the owner has reasonably lost confidence in the willingness and ability of the builder to do the work….

[46] It is for the defendant to prove that the plaintiff has acted unreasonably. It is not for the plaintiff to prove that it acted reasonably …

193. In the context of building contracts, relevant facts that may bear upon the question of whether a plaintiff has acted unreasonably when dealing with the building include:

“1. the extent and seriousness of the defects;

2. the quality of any repairs effected by the builder;

3. the builder’s engagement with the owner in respect of the suggested defects and proposed method of rectification, in short, has the builder responded in a timely manner, taken the complaints seriously and acted fairly; and

4. the efficacy or perceived futility of continuing to negotiate with the builder.” [20]

The HBA

194. Section 18BA of the HBA relevantly provides:

(1) Breach of a statutory warranty implied in a contract constitutes a breach of the contract and accordingly—

(a) a party to the contract who suffers loss arising from the breach has a duty to mitigate their loss, and

(b) the onus of establishing a failure to mitigate loss is on the party alleging the failure.

…

(3) The following duties apply to a person who has the benefit of a statutory warranty but do not limit any duty the person has to mitigate loss arising from breach of a statutory warranty—

(a) when a breach of the statutory warranty becomes apparent, the person must make reasonable efforts to ensure that a person against whom the warranty can be enforced is given notice in writing of the breach within 6 months after the breach becomes apparent,

(b) the person must not unreasonably refuse a person who is in breach of the statutory warranty such access to the residential building work concerned as that person may reasonably require for the purpose of or in connection with rectifying the breach (the duty to allow reasonable access).

(5) If a failure to comply with a duty under this section is established in proceedings before a court or tribunal concerning a breach of a statutory warranty, the failure is a matter that the court or tribunal may take into account. If the failure is a failure to comply with the duty to allow reasonable access, the court or tribunal must take the failure into account.

195. The Parties proceeded upon the basis that common law principles relating to mitigation apply, unaffected by the H**BA, including with respect to onus. I proceed on that basis in the absence of any argument otherwise. The mandate in the last sentence of s 18BA(5) does not take the matter any further, because at common law, if a Court determined that a plaintiff unreasonably failed to allow reasonable access, it is to be expected that the Court would take that matter into account in assessing the overall question of whether the plaintiff acted unreasonably and whether loss was incurred due to that unreasonable conduct or omission.

196. I note that, in The Owners – Strata Plan No 89074 v Ceerose Pty Ltd, [21] her Honour Rees J said at [53] that “Common law principles can be expected to continue to inform the application of the section …”

The Contract

197. Clause 24 of the Contract set out a mechanism by which the Plaintiffs could identify defects by way of a written list to the Defendant during the Contract Maintenance Period, which was the period of 13 weeks after practical completion. The Defendant had a contractual obligation to rectify the defects identified if they were attributable to the Defendant.

198. Clause 24(d) of the Contract provided that the Plaintiffs were to allow the Defendant the opportunity to attend and rectify defects or faults identified during the Contract Maintenance Period. It further provided that any dispute as to defects or faults did not prevent the builder exercising the right to attend to inspect and/or carry out rectification works. Clause 24(e) provided that the Plaintiffs were required to provide the Defendant access during normal working hours to facilitate the Defendant’s rectification work.

199. Clause 25(b) of the Contract, in part, dealt with the circumstances where the Plaintiffs notify the Defendant of defects after the Contract Maintenance Period. In summary, if the Plaintiffs notified the Defendant of defects after the Contract Maintenance Period, they were required to allow the Defendant free access to review the alleged defect. Unless that access was provided and provided that the Defendant responded within 25 days of receipt of the notice, then the Plaintiffs were not to make any claim or take any action in relation to those works. Further, by cl 25(iii), the defendant was to be allowed to carry out any necessary work “provided it is within the above time periods”. This reference to “time periods” must, as a matter of construction, refer to a period after the Contract Maintenance Period, being a reference to the 25-day period referred to in cl 25(b)(ii).

200. The effect of cl 25 was that for defects notified after the Contract Maintenance Period, unless the Defendant responded to the notification within 25 days, the Plaintiffs were contractually entitled to take action against the Defendant. If the Defendant did respond within the 25-day period, it was to be allowed to carry out necessary work.

201. The Contract Maintenance Period ended on 31 December 2018.

The Defendant’s submissions

202. In final submissions, the Defendant submitted that the Plaintiffs failed to mitigate their loss and alleged that the Plaintiffs:

(a) failed to comply with s 18BA of the HBA; and (b) cl 25 of the Contract (the Defendant in final submissions did not assert a failure to comply with cl 24 of the Contract).

203. As noted above, the Parties proceeded on the basis that s 18BA did not affect the common law principles concerning mitigation and the Defendant accepted that the statutory duty under s 18BA is generally to be interpreted as co-extensive with the common law duty. It did not submit that the section had any wider operation.

204. The Defendant’s submissions treated cl 25 of the Contract as imposing an obligation upon the Plaintiffs to permit the Defendant to rectify defects. However, cl 25 imposes an obligation upon the Plaintiffs to provide the Defendant free access to inspect defects notified, relevantly, after the Contract Maintenance Period. Only if the Defendant responded to that notice within the 25 days referred to in cl 25, was the Defendant to be allowed to carry out necessary works.

205. The Defendant’s allegation of a failure to mitigate focussed primarily on the contention that the Plaintiffs unreasonably refused the Defendant access to the Property to rectify defects.

206. Before turning to the facts concerning the Defendant’s access to the Property for rectification purposes, it is necessary to first address the Defendant’s submission, in final address, that the Plaintiffs breached cl 25 of the Contract. I have referred to the effect of cl 25 above. Notwithstanding the terms of cl 25, the Defendant did not plead, in its Amended Defence, that upon notification of a defect or defects after the Contract Maintenance Period, it responded within 25 days, and despite that response, the Plaintiffs denied them access to rectify the defects. That is, it did not plead the constituent requirements of cl 25 to establish its breach.

207. Further, the Defendant, in this regard, relied on a Fair Trading Rectification Order (“Order”) dated 10 August 2021. The Defendant submitted that the Plaintiffs refused to allow the Defendant to return to rectify defects identified in the Order and that refusal “was a clear breach of clause 25 of the contract …”

208. Putting to one side, for present purposes, whether the Plaintiffs did refuse access as alleged, I do not accept the Defendant’s submission in relation to cl 25 for the following reasons:

(a) First, I do not consider that an order by the Fair Trading is a notification by the “Owner … in writing” as required by cl 25. The Order is not a communication by the Plaintiffs and does not constitute a notice by them under cl 25. (b) Secondly, the Plaintiffs issued a notification dated 17 February 2021 through their solicitor at the time, identifying numerous defects, including the fact that Wolfin had not been used. The notification invited the Defendant to inspect the Property, provide a scope of works to rectify the defects and a construction programme. The Defendant did not respond to that notification until 24 June 2021, well beyond the 25 days referred to in cl 25.

209. For the Defendant to succeed in establishing a failure to mitigate, it is not necessary for it to establish a breach of cl 25 by the Plaintiffs. What it must do is to establish that the Plaintiffs have acted unreasonably, and that some or all of their loss would not have occurred if they had not so acted. I turn now to the facts concerning the Defendant’s claim that the Plaintiffs did act unreasonably in denying it access to rectify defects.

Did the Plaintiffs act unreasonably with respect to the Defendant’s access to the Property?

210. The Amended Defence pleads that the Defendant attended the Property and carried out rectification works in the period 14 October 2018 to 1 February 2021. The first date upon which the Amended Defence pleads a refusal of permission to attend the Property is 3 February 2021.

Documentary material

211. The following facts emerge from the objective documentary record of communications between the Plaintiffs and the Defendant.

212. As at January 2021, it was plain that a significant issue, from the Plaintiffs’ perspective was water leakage. That issue related to waterproofing at the Property. On 22 January 2021, Ms Cappe sent a text message to Mr Cullen, stating if “your current waterproofer is” not licensed the Plaintiffs did not want to use him and noted that the Plaintiffs had spoken to “Wolfin” who informed them that there was no record of a Wolfin warranty at the Property. Mr Cullen responded that Wolfin was not used, and that the Defendant was fixing the planter boxes with an approved waterproofing which was fit for purpose. He further stated that “what was used was not fit for purpose”. Mr Cullen accepted in cross-examination that the Plaintiffs were justified in being “alarmed” in circumstances where Mr Cullen had told them that the waterproofing products used were not fit for purpose.

213. On 1 February 2021, the Plaintiffs pressed the Defendant for details of the proposed waterproofer that the Defendant intended on using in rectification works and the product it intended to use. The Plaintiffs sent a further text message on that day to Mr Cullen, saying:

NO works done until we receive company details including name and licence, their insurance, and warranty of your waterproofing company you used and want to continue using.

Mr Cullen accepted, in cross-examination, this message did not amount to a refusal for any work to be done by the Defendant.

214. On 3 February 2021, Mr Sacks sent a text message to Mr Cullen pressing him for details in relation to waterproofing and said: “No one work will done on our property. We require this information from you. Once we receive this information we will be in touch with you on next steps.”

215. On 4 February 2021, Mr Cullen sent a text message to Ms Cappe in which he said that he did not know who did the original waterproofing, that he obviously used the wrong product in the planter boxes, and that he will send “the spec sheets” of the waterproofing product he intended to use “which I will send as soon as I get them.”

216. On 5 February 2021, Mr Cullen sent a text message stating that as he did not hear from the Plaintiffs, he had “lost” the waterproofer he booked for 8 February 2021. He stated that the Plaintiffs were “stopping” him from “getting it fixed”. Ms Cappe responded by stating that the Plaintiffs were not obstructing the Defendant, nor were they intending to do so but that they were “entitled to verify the product for fitness of purpose … also waiting on the additional information you said you were sending us …”

217. Mr Cullen said, in evidence, that he did inform the Plaintiffs of the waterproofing he intended to use, namely Ardex. He said he was told by the waterproofer that the product he was going to use was the most suitable product. In evidence there is an extract of the specification for Ardex. His evidence was that he sent that specification on 5 February 2021 and that he suggested use of that product for the planter boxes. The specification itself suggests that it is a membrane to be used for planter boxes.

218. As noted earlier, on 17 February 2021, the Plaintiffs, by their then solicitor, sent a clear request to the Defendant to inspect defects and to propose a scope of works and construction programme to rectify the defects. That letter listed 17 alleged defects. As also noted earlier, the Defendant did not respond under 24 June 2021. Whilst the response indicated certain timeframes for rectification works for certain of the alleged defects, it did not propose a scope of works nor did the Defendant, by this response, confirm that it intended to use Ardex for the planter boxes and further did not indicate what waterproofing product it intended to otherwise use.

219. On 6 July 2021, the Defendant sent an email attaching a scope of works. On 9 July 2021, the Plaintiffs replied by raising several issues with the Defendant’s proposed works and asking for a response in seven days. The Plaintiffs said they “call[ed] upon you to comprehensively and satisfactorily attend to the repair of these building defects”.

220. On 10 August 2021, the Order was issued by Fair Trading.

221. On 12 August 2021, the Defendant indicated it would be “starting” on 31 August 2021 and asked for confirmation about access. On 13 August 2021, the Plaintiffs indicated they would respond to the email of 12 August 2021.

222. On 17 August 2021, the Plaintiffs’ new solicitors sent a letter to the Defendant, referring to the previous communications between the Parties and again referring to the defects notified in the 17 February 2021 letter. It also said that the Order omitted several defects that the Plaintiffs required to be rectified. It further said that the Plaintiffs maintained their view that they wished to resolve the dispute amicably. The letter proposed a framework whereby the defendant would attend the Property with a consultant of its choice, together with the Plaintiffs and a consultant of their choice, to carry out a thorough examination of the Property to assess the alleged defects. It was proposed that a joint list of defects then be prepared. The letter requested commencement of rectification works to the exterior of the Property. In relation to the interior, the letter requested commencement within seven days of COVID-19 restrictions lifting. The Defendant responded to this letter and did not agree with the alleged defects set out in it.

223. Subsequently to this exchange of correspondence, each of the Plaintiffs and Defendant communicated with Fair Trading in relation to the Order, each, in substance saying that the Parties had not agreed on the rectification works and defects. The Parties had, however, agreed to have respective experts meet on 8 November 2021 at the Property.

224. On 12 November 2021, Fair Trading emailed Mr Sacks. Fair Trading stated that Mr Sacks had advised it that he “did not want the [Defendant] to rectify the work as detailed in the Order without the contractor providing an agreed scope of works. As a consequence, the [Defendant] does not have your permission to enter your property to comply with the Order”. That email was also provided to the Defendant. The Plaintiff’s solicitor responded to Fair Trading, denying that they had refused access to the Defendant and stated that the Plaintiffs have always been open to joint site meetings to resolve the defects disputes. He also noted the impact of COVID-19 restrictions on the question of access. He further reiterated the Plaintiffs’ denial of a refusal for access and noted, in that regard, that they had sought an extension of time for compliance with the Order.

225. Ultimately, the Parties and their respective consultants met on site on 15 December 2021. On 11 February 2022, the Plaintiffs’ solicitor wrote to the Defendant’s solicitor enquiring as to when rectification work will commence following the consultants’ meeting. On 14 February 2022, the Defendant’s solicitor responded that it was their understanding that the Plaintiffs’ consultant was to compile a list of issues to which the Defendant and its consultant would respond.

226. On 1 March 2022, the Plaintiffs’ consultant (Mr Pickering) emailed the Plaintiffs. Mr Pickering noted that there was confusion regarding what had to be done, and by whom, after the on-site meeting. He said he would get onto working on a detailed scope of works.

227. A rectification report was prepared for the Plaintiffs dated 16 August 2022. On 6 September, Mr Pickering sent to the Defendant’s consultant (Mr Hall) an adjusted rectification scope of works. Mr Hall responded, indicating he would review it and confer with the Defendant’s solicitors.

228. On 9 February 2023, the Plaintiffs’ solicitors wrote to the Defendant’s solicitors, noting that no response had been provided to the scope of works identified by Mr Pickering in the five months since that had been provided to the Defendant’s consultant. The letter advised that if a response was not received by 22 February 2023, the Plaintiffs would commence proceedings. No response prior to that date is in evidence.

229. Although Ms Cappe and Mr Cullen addressed, to some extent, the access issue in their affidavits, their evidence did not materially add to the documentary evidence referred to above. The documentary evidence is, in my view, the most reliable evidence on the issue. The witnesses’ gloss on or view of the documents does not assist the Court. Neither witness identified any conversations beyond those contained in the documents that touches upon the issue in any material way.

230. In cross-examination, both Ms Cappe and Mr Sacks agreed that without an agreed scope of works, the Defendant did not have permission to enter the Property to comply with the Fair Trading order. Mr Sacks gave evidence to the effect that the Defendant was not allowed to enter the Property to rectify defects set out in the Fair Trading order because there were defects not included in the order and the Plaintiffs sought answers from the Defendant in relation to those defects. He also said in cross-examination that a precondition of permission for the Defendant to return to the site was the information the Plaintiffs were seeking in relation to waterproofing.

Consideration

231. The Defendant placed much emphasis on the email from Fair Trading dated 12 November 2021 in its submission that the Plaintiffs acted unreasonably in preventing access to the Defendant to carry out rectification works.

232. I have already found that the Defendant has failed to establish a breach of cl 25 of the Contract by the Plaintiffs. Further, in my view, a fair assessment of the evidence referred to above is, and I find, that:

(a) the Plaintiffs wanted the Defendant to carry out rectification works with respect to the defects they identified after the Contract Maintenance Period expired; (b) the Defendant was prepared to carry out rectification works only in relation to defects it considered existed; (c) the Plaintiffs were not prepared to proceed with the Defendant’s rectification works until a clear scope of works was understood and agreed, and further that information in relation to both the waterproofing product and the waterproofer was provided; (d) the Plaintiffs were prepared to give the Defendant access to carry out rectification works but only once they were satisfied of the matters referred to in [232(c)] above. The Plaintiffs, by their solicitor’s letters of 17 February 2021 and 17 August 2021, requested the Defendant to carry out the rectification works. The Plaintiffs invited the Defendant to carry out an inspection of the Property; (e) the Order did not deal with several of the defects identified by the Plaintiffs; (f) the Plaintiffs continued to deal with the Defendant, after the Order, to resolve disputes about defects and have the Defendant rectify the defects; (g) the Parties agreed to meet with respective consultants to agree on a scope of works for rectification of defects. That occurred on 15 December 2021; (h) after the consultants met, there was some confusion as to the next steps between them. Ultimately, in February 2022, it became clear that the Defendant and its consultant had understood that the Plaintiffs’ consultant would provide a scope of works for rectification; (i) the Plaintiffs’ consultant completed a detailed defects report in August 2022 and sent a detailed scope of works on 6 September 2022 to the Defendant’s consultant; (j) the Defendant did not engage in any material way by 9 February 2023 at which point the Plaintiffs threatened the commencement of proceedings if no adequate response was received by 22 February. No such response was received.

233. In my view, the Defendant has not established that the Plaintiffs refused access to the Property by the Defendant, nor has it established that it was unreasonable for the Plaintiffs to not proceed with rectification works by the Defendant until they:

234. understood and agreed on the works to be carried out for rectification; and

235. were provided the details in relation to both the waterproofing product to be used and the waterproofer being used. Those details included the name of the product and its suitability, given the Contractual Specification in relation to Wolfin.

236. The documentary evidence establishes, in my view, a desire by the Plaintiffs to have their dispute with the Defendant resolved by the Defendant carrying out the rectification works. Plainly there were disagreements as to the extent of the work required. It is to be noted that even in this proceeding, at trial, the Defendant disputed both the existence of one or more defects, and the scope of work required for rectification of one or more defects

237. As noted above, in Ceerose Pty Ltd v The Owners, the Court of Appeal observed that:

[33] … there is no invariable requirement that the owner provide the builder with an opportunity to rectify defects. The issue is whether the conduct of the plaintiff — including the failure to provide an opportunity to rectify — was unreasonable in all the circumstances, such that some or all of the claimed loss resulting from the breach of contract should be disregarded. The onus of proof and persuasion in that regard is on the defendant.

236. Given the Defendant’s failure to establish a breach of cl 25 of the Contract, in my view, the Defendant did not have an unfettered right to access the Property. The Defendant has not established that the conditions placed on the commencement of rectification works by the Defendant (namely, as set out in [236] above) were unreasonable in the circumstances.

237. It is to be recalled that there were numerous defects, and further, that from the Plaintiffs’ perspective, they considered (correctly as I have found) that the Defendant was obliged to use Wolfin as the waterproofing membrane and not only did the Defendant not use Wolfin, but admitted that the membrane used was not fit for purpose (at least with respect to the planter boxes). This was a serious breach by the Defendant, and the Plaintiffs were well entitled to be concerned about the Defendant’s conduct in this regard.

238. The Defendant submitted that non-waterproof related defects could have been attended to by the Defendant but that the Plaintiffs refused access to the Property for that purpose. However, no scope of works was agreed to rectify the defects

239. With respect to the matters referred to in Di Blasio, and having regard to the facts set out in [232] above, in my view:

240. the number and nature of defects alleged by the Plaintiffs was serious;

241. after February 2021, the Plaintiffs did engage with the Defendant in relation to defects, but the Defendant did not respond in a timely manner;

242. the Defendant did not agree to a scope of works with the Plaintiffs and there remained disagreement in the course of these proceedings. Given my findings in relation to the claimed defects, the Plaintiffs have been materially more successful in the disputed matters concerning the defects and accordingly, their view about the nature of the defects cannot be said to have been unreasonable during their engagement with the Defendant.

243. For these reasons (as referred to in [232]-[239]) above the Defendant has failed to establish unreasonable conduct of the Plaintiffs amounting to a failure to mitigate their loss.

244. In any event, other than in relation to mould (which I have dealt with above and rejected the Defendant’s submissions) the Defendant:

(a) did not lead evidence to establish that had the Plaintiffs conducted themselves, with respect to access, as the Defendant alleged they should have, the Plaintiffs would not have suffered any particular loss claimed with respect to any defect. To put it another way, the Defendant did not lead evidence to establish that any loss claimed was due to any unreasonable conduct or omission of the Plaintiffs; and (b) limited submissions in this regard to an allegation that the 32% overall margin claimed by the Plaintiffs would not have been incurred had the Plaintiffs not acted unreasonably.

242. If I am wrong in finding that the Defendant has not established unreasonable conduct on the part of the Plaintiffs such that there is a failure to mitigate loss, it would be necessary to deal with the submissions of the Defendant in relation to the 32% on-costs. I do so now on that basis.

243. In making this submission, the Defendant did not:

(a) specify in its submissions what it says the 32% on-costs comprises (although Mr Whyte broadly agreed with Mr Kyle’s evidence in this regard); nor (b) lead any evidence of its own practice in relation to the incurring of costs that make up on-costs.

244. The Plaintiffs’ building expert, Mr Kyle, gave evidence in his report as to the components of the 32% on-costs. His unchallenged evidence was that the 32% is made up of:

(a) supervision (10%): This represents the cost of supervising and managing the rectification works. This involves supervising and co-ordinating all necessary trades. His opinion was that there is usually more time required to supervise rectification works than involved in new construction works; (b) Overheads and preliminaries (10%): This is an amount to cover the costs of operating and managing a building and construction business. His evidence was that such costs usually cover general operational costs such as vehicles, insurances, licensing, employee entitlements, administrative expenses, general consumables and reasonable tools and equipment; (c) Profit (12%).

245. In Ceerose Pty Ltd v The Owners, the Court of Appeal at paragraph [29] referred with approval to Ball J’s statement in Di Blasio at [44] that “the plaintiff is not mitigating its loss, but rather the defendant’s damages”. In Di Blasio at [44], Ball J referred to the fact that it may be “less expensive” for the relevant Defendant to do the rectification work – his Honour referred to the “cost to the builder” in this regard.

246. In these proceedings, the Defendant did not lead any evidence establishing that the cost to it would be less if it did the work itself than if it paid the damages claimed (or ultimately determined). That is, the Defendant did not lead evidence that it would not have incurred the equivalent of the 10% supervision cost, and the 10% overheads and preliminaries included in the 32% on-costs. It did not lead evidence that the cost to it of those items would be less. For example, it is simply unknown whether, if it carried out the rectification work, the Defendant would need to employ, or sub-contract supervision or management work on the scope of works or whether it could absorb that cost at no detriment to itself. Accordingly, with respect to the 20% aspect of the margin attributable to supervision and overheads and preliminaries, even if I am wrong in relation to the Defendant’s claim that the Plaintiffs acted unreasonably in mitigation, the Defendant has not established that this aspect of the damages claimed is as a result of that unreasonable conduct.

247. A more difficult question arises in relation to the profit margin. On the assumption that the Defendant made good its defence with respect to mitigation, it argued that the 12% profit margin allowed for in the quantification of damages should be disallowed as it would be a “loss” that would not have been incurred absent the unreasonable conduct. That is, the cost to the Defendant of undertaking the work would not have included that profit margin – the Defendant would not be “paying” that profit to a third party.

248. Whilst there is a superficial attraction to the Defendant’s argument in this regard, I am not persuaded that it is correct. If the Defendant was able to carry out the rectification work without sacrificing other profit generating work, I would accept the Defendant’s submission. However, if to carry out the rectification work, the Defendant would need to give up other profit-making work that it would otherwise have carried out, or would be likely to have carried out, then the rectification work would carry with it a “cost” to the Defendant, namely that loss of the profit that would have been generated on that other work. That would be a real, and not speculative, cost to the Defendant. It seems to me that if a Defendant, in the position of a builder, seeks to reduce the damages payable, because of a failure to mitigate, by reference to the saving of a “profit margin” allowed in relation to the rectification cost, the Defendant needs to lead evidence that it could have carried out that rectification work without incurring a cost equivalent to that “profit margin” – a lost opportunity to earn that profit on another job because of the need to carry out the rectification work, is, in my view, a cost.

249. Here, the Defendant did not lead any evidence at all in relation to its work schedule during 2018 to 2023 and its ability to carry out the rectification work without sacrificing profit on another job.

250. In those circumstances, if I am wrong in rejecting the Defendant’s claim that the Plaintiffs acted unreasonably with respect to access to the Property for rectification work, I find that the Defendant has failed, in any event, to establish that any of the loss claimed is due to that unreasonable conduct or omission.

Conclusion

251. The Plaintiffs are entitled to judgment against the Defendants in the amount of $423,380.47.

252. In their Statement of Claim, the Plaintiffs have made a claim for interest. However, the Plaintiffs did not make any final submissions in support of that claim. The Scott Schedule, which contained costings relied upon by the Plaintiffs was signed on 9 August 2025. Although Mr Kyle’s original costs relating to the claimed defects appeared in his report of 6 December 2023, his costings in the Scott Schedule are not the same for each item and reflect, amongst other things, updated opinions following the experts’ conclave. For example, in relation to Item 9.9 Mr Kyle referred to “updated Scope of Works and Costings”. There is no evidence that the costs of rectification of the defects that I have found have increased since the date of the Scott Schedule (being only a few months ago) or the date on which Mr Kyle initially prepared his costings. In those circumstances, I do not consider that the Plaintiffs have established that an order for interest under s 100 of the Civil Procedure Act 2005 (NSW) should be made [22] .

253. I will deal with the question of costs after the parties comply with the directions made below.

254. Accordingly, the orders I make are:

255. Direct the Parties to confer and provide to my Associate on or before 4 February 2026, draft orders giving effect to these reasons for Judgment and which deal with the question of costs, if costs can be agreed.

256. If the Parties cannot agree on the terms of orders, then each Party is to provide to my Associate on or before 4 February 2026:

(a) the form of orders which they propose should be made; (b) written submissions in support of the orders they propose together with any evidence they wish to rely upon. The written submissions are to be no longer than 5 pages in length;

3. Stand the matter over to 6 February 2026, or such other date as agreed with my Associate.

**********

Endnotes

(1982) 149 CLR 337 at 347; [1982] HCA 24. See also, Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at 483-484; [2004] HCA 55 at [33]-[36].

(1833) 5 B & Ad 58 at 64-65; 110 ER 713 at 716.

See Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190 at 194. See also, Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 at 357–358, 363, 365–366,368; [1937] HCA 90.

[2022] NSWSC 1181.

(1954) 90 CLR 613 at 617; [1954] HCA 36.

Bellgrove at 618.

(2009) 236 CLR 272; [2009] HCA 8.

Tabcorp at 288 [17].

[2025] NSWCA 261.

85 Princess v Fleming at [63].

85 Princess v Fleming at [66].

(2017) 128 SASR 165 at 182; [2017] SASFC 72 at [55].

85 Princess v Fleming at [65].

[2023] NSWCA 66.

Parkview Constructions at [94]-[95].

The Owners – Strata Plan No 89074 v Ceerose Pty Ltd [2024] NSWSC 1494 at [38].

[2025] NSWCA 235.

Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17 at [120]-[121].

[2014] NSWSC 1067.

The Owners Strata Plan No 89074 v Ceerose Pty Ltd [2024] NSWSC 1494 at [51].

[2024] NSWSC 1494.

Neville’s Bus Service Pty Ltd v Total Group Constructions Pty Ltd [2024] NSWSC 215 at [97]-[98].

Amendments

19 December 2025

19/12/25 - Order 3 amended pursuant to r 36.17 of the UCPR 2005 (NSW)