First Applicant v Respondent

CONTRACT - Whether the Tribunal erred in its calculation of the compensation regarding other defects of the house - Whether Owners failed to mitigate loss - Owners not 'required' to give builder opportunity to rectify - No error as to the Tribunal's calculation regarding the other defects.

Stone v Chappel (2017) 128 SASR 165; Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344; 85 Princess Pty Ltd v Fleming [2025] NSWSC 407; Ceerose Pty Ltd v Owners of Strata Plan No 89074 [2025] NSWCA 235, considered.

1 Mr John Paul Stanley and Mrs Rosina Stanley ('the Stanleys') had a house built for them by EWH Construction West Pty Ltd ('EWH'). They were not happy with the house and, in particular, they were unhappy that the driveway at the house does not permit them to reverse their caravan from the street along the driveway through the garage and into the paved rear section of their garden.

2 The Stanleys brought a proceeding in the Victorian Civil and Administrative Tribunal ('VCAT' or 'the Tribunal') against EWH. VCAT, after a three day hearing, found that:

(a) It was an express term of the contract between the Stanleys and EWH that the driveway would be constructed in such a way as to permit the caravan to be reversed down the driveway through the garage and stored in the backyard;

(b) The fixed floor level of the garage was 130 mm lower than provided for in the plans in respect of which the relevant building permit was issued;

(c) It would not be reasonable to demolish and rebuild the house in order to remedy the breaches found;

(d) The Stanleys were entitled to damages arising from their inability to store their caravan at their home;

(e) The Tribunal would hear further evidence from the parties on the damages appropriate to compensate the Stanleys for the inability to store their caravan at their home; and

(f) The Stanleys were entitled to receive compensation for a range of other defects in the building.

3 The Stanleys seek leave to appeal from VCAT's decision. They say that having identified that the building was constructed in breach of contract their prima facie remedy is for rectification of the defect, that it is not unreasonable for that prima facie remedy to apply and that, in this case, that entitles them to damages on the basis of the house being demolished and rebuilt in accordance with the contractual terms.

4 In its application for leave to appeal, EWH asserts that the Tribunal was in error in finding that it was a term of the contract that the house would be constructed in such a way that the Stanleys could reverse their caravan down the driveway, through the garage and into the backyard. EWH says the Tribunal erred in giving the Stanleys a further opportunity to provide evidence regarding damages. Finally, EWH contends that the Tribunal has overcompensated the Stanleys for the other defects in the building because it allowed for a builder's margin in relation to the rectification costs of those defects.

(a) It was a contractual term that the garage floor would be level or nearly level with the footpath at the front of the house;

(b) EWH constructed the garage in breach of that contractual term;

(c) It would not be reasonable, in the circumstances, to compensate the Stanleys for that breach by reference to the cost of demolishing the house and rebuilding it;

(d) It is reasonable that the Stanleys be compensated for their inability to reverse their caravan down the driveway;

(e) The Tribunal made no error in determining to hold a further hearing to permit the Stanleys to adduce further evidence in relation to their damage; and

(f) VCAT made no error in its calculation of the compensation for other defects in the house.

6 The Stanleys are caravan enthusiasts. Caravaning is an important part of their life and a significant contributor to their wellbeing. Mr Stanley gave evidence at the Tribunal that there had been practical difficulties storing their old caravan in their previous home and this had prompted them to look for a new home. Between 2013 and 2017 the Stanleys inspected many display homes and searched for a block of land which would meet their needs. In particular, they wanted to find a fairly flat block of land so that they could avoid any rise and fall in the driveway in order that they could store their caravan at their new home. Eventually, they found a block of land which they thought fitted the bill and began discussions with EWH about constructing a house on that land.

7 In around November 2017 the Stanleys had an initial discussion with Mr Dominic Cugliari, a sales manager with EWH. Mr Stanley gave evidence, which the Tribunal accepted that in that initial discussion and six others, between November 2017 and the entry into a written contract, the Stanleys had emphasised to Mr Cugliari the importance to them of being able to store the caravan in the backyard and the need for the driveway not to have a significant rise or fall in order for this to occur.

8 On 10 March 2018 Mr Stanley emailed Mr Cugliari. That email contains an introductory paragraph where Mr Stanley seeks confirmation that a quote provided on 11 February 2018 is still open to be accepted. The email then continues:

Please note: Our concern is there needs to be minimal rise or fall from the level of the footpath due to moving the caravan into and out of the garage.

1. Can this request be emphasized to the Design Engineers?

2. Both openings of front and rear garage doors 2350?

Note: We have placed 5 red arrows on the quotation, which are minor, and can be discussed at a later stage.

Can you please email us a copy of the drawing you have so we can confirm that it is ... the latest version you have?

Thank you and looking forward to [EWH] building our Dream Home.[1]

9 Later the same day, Mr Cugliari replied to the Stanleys' email in relation to the first question regarding the request being emphasised to the design engineers, he said:

This is a tuff (sic) one, not to say it will not be the way you want but until we get the Site survey and soil test done

then give it ti (sic) the draftsman to punch it all into the computer its hard to determine exactly. Looking at your engineering again which i have attached a diagram with the measurements

the Block falls slightly from Front to back. From the footpath to the toe and better it falls 370mm on the left side then from batter to rear of block another 170mm. We will scrape a certain amount of soil away and also Raft slabs are approx 90mm lower than Waffles. Right side (Garage side) from Footpath to the batter where your garage will be approx it falls 320mm and then another 180mm to the rear of the block.

Basically we will go over this and discuss it once we have all in front of us.[2]

10 In relation to the question regarding the openings of the front and rear garage doors, Mr Cugliari replied that this was done and amended on the quote he had provided without any extra charge.

11 The Tribunal heard evidence from Mr Cugliari that, despite his response in the email of 10 March 2018, he did not raise the issue of the rise or fall of the driveway from the level of the footpath again with the Stanleys and he would not have done so unless they had raised it with him again.

12 The Tribunal accepted Mr Stanely's evidence that the Stanleys had raised the issue of the Caravan requirement with Mr Cugliari on seven separate occasions, on each occasion emphasising the importance to them of being able to store the caravan in the backyard and the need for the driveway not to have a substantial rise or fall in order for this to occur.

13 The Tribunal was evidently unimpressed by Mr Cugliari as a witness. The Tribunal described Mr Cugliari's decision not to mention the rise and fall of the driveway again as exhibiting 'a degree of sharp practice', concluded that it did not accept Mr Cugliari's evidence of conversations with Mr Stanley where they were inconsistent with Mr Stanley's evidence and noted that in the course of his evidence, Mr Cugliari contradicted himself in a number of important respects. As will be seen, ultimately VCAT accepted that the Stanleys had made abundantly clear their requirement that the house be constructed with a driveway with minimal rise and fall and at least implicitly seems also to have accepted, that by words or conduct EWH had given the impression this would occur.

14 On 27 April 2018 the Stanleys were provided with a set of plans for their building by EWH. Those plans were described as first preliminary plans. They do not show any fall from the footpath to the front of the garage. On 8 May 2018 Mr Cugliari sent the Stanleys a copy of a site survey. The survey contains a notation that the site slope was 'generally flat to slight'.

15 On 21 May 2018 Mr Cugliari sent the Stanleys a further set of plans. These bear the notation 'PRELIM 2' presumably indicating that they are a second set of preliminary drawings. Importantly, those plans contain the following:

It is the builders responsibility to establish the finished floor levels and finished wall heights in relation to the relevant ground levels during set-out and before any excavation works are undertaken so as to ensure that all design assumptions are fully realised in practice and comply with the relevant building codes and siting requirements.[3]

Please note: This 'siting' is preliminary only. A full site investigation is required to determine correct house siting and requirement setbacks, along with full extent & impact of existing site levels, neighbouring dwelling(s) & any council town planning requirements.[4]

(c) A proposed northern elevation which does not show any fall from the footpath to the front of the garage floor.

16 None of those matters noted in the previous paragraph had changed from the first set of plans given to the Stanleys on 27 April 2018.

17 On 27 May 2018 the Stanleys signed the 21 May 2018 plans. The Tribunal found and, it was not contested before me, that these were the plans which formed part of the written contract between the Stanleys and EWH.

18 On 3 June 2018 the Stanleys and EWH executed a written contract for the construction of their home. I deal with the terms of that contract below.

19 After the entry into the contract EWH prepared five further sets of plans in relation to the building: dated 12 June 2018, 18 June 2018, 10 July 2018, 19 July 2018 and 10 September 2018. None of those subsequent plans were provided to the Stanleys. The plans dated 10 September 2018 were the plans in respect of which the building permit was issued.

20 In these reasons I will refer to the plans dated 21 May 2018 as the 'contract plans' and I will refer to the plans dated 10 September 2018 as the 'building permit plans'.

21 The Tribunal found that on 27 June 2018 (that is after the 12 June 2018 and 18 June 2018 plans and before the latter three sets of plans) the Stanleys had a meeting with Mr Noel Clifford of EWH where they said to Mr Clifford that they wanted the home designed and built so that they could store the caravan in the backyard and the need for the driveway to have minimal rise or fall in order for this to occur. The Tribunal accepted Mr Stanley's evidence that Mr Clifford had said he also owned and enjoyed a caravan and that when the Stanleys told Mr Clifford of the difficult process that they faced in getting their caravan in and out of their old property, that Mr Clifford said words to the effect, 'I will have to look into that'. The Tribunal specifically rejected Mr Clifford's evidence that in that conversation there was no mention of the driveway.

22 The building permit plans do provide, in effect, for a driveway which slopes down from the footpath to the front of the garage. This is because those plans show an electric pit at a relative level of 10 metres and a fixed floor level for the garage of 9.46 metres. In accordance with those plans therefore, the fall from the driveway to the front of the garage would be 540 mm over a distance which is shown on the plans as 6.58 metres.

23 The Tribunal found, and it is not in dispute, that EWH in fact constructed the garage with a fixed floor level of 9.33 metres, in other words, 130 mm lower than the building permit plans required. The consequence is that in the house which was constructed for the Stanleys the driveway slopes from the footpath to the front of the garage by

67 cm. The expert evidence before the Tribunal was that the driveway has been built with an average fall of 123 mm over every metre.

24 In its decision the Tribunal found that, practically speaking, the slope of the driveway does not permit the Stanleys' caravan to be backed down the driveway and into the garage and from there into the backyard. In other words, if the builder was contractually required to construct the driveway in a way which permitted this to occur, the Tribunal found, as a matter of fact, that there had been a breach of contract by EWH.

25 The Tribunal's finding of fact in this regard was not challenged on appeal. Having reviewed the video evidence before the Tribunal, its finding in this regard was plainly open to it.

26 The contract signed by the Stanleys and EWH on 3 June 2018 is a standard form Housing Industry Association contract for a domestic building. The contract provides that EWH is responsible for obtaining the building permit.

27 Clause 1 of the general conditions of the contract provides a series of relevant definitions:

'Building Works' means the works to be carried out and completed by the Builder as shown in the Contract Documents and as varied in accordance with this Contract.

'Contract Documents' means this signed Contract and the Conditions, signed Specifications, signed Plans and Engineer's Design.

'Plans' means the drawings showing the layout and design details of the Building Works with dimensions and elevations, including Engineer's Design.

'Specifications' means the Contract document that shows the full details of the Building Works and includes the details of materials to be supplied.

'Statutory or Other Authority' means the Local Government, State or Federal Government, or any Government Agency or registered building surveyor that has the power to effect the Building Works.

(emphasis in original)

28 Clause 3 of the contract is of particular significance. It provides:

3.0 This Contract is complete in itself and overrides any earlier agreement, whether made verbally or in writing.

29 Clause 11 of the contract replicates statutory warranties which by reason of s 8 of the Domestic Building Contracts Act 1995 are required to be part of every domestic building contract. The relevant portions of clause 11 are:

11.0 To the extent required by the Domestic Building Contracts Act [EWH] warrants that:

• The Building Works will be carried out in a proper and workman like manner and in accordance with the Plans and Specifications set out in this Contract;

• The Building Works will be carried out in accordance with, and will comply with, all laws and legal requirements including, without limiting the generality of this warranty, the Building Act 1993 and the regulations made under that Act;

• If this Contract states the particular purpose for which the Building Works are required, or the result which the Owner wishes the Building Works to achieve, so as to show that the Owner relies on the Builder's skill and judgement, the Building Works and any material used in carrying out the Building Works will be reasonably fit for that purpose or will be of such a nature and quality that they might reasonably be expected to achieve that result.

30 Clause 16 provides that in the event of inconsistency contract documents take priority in the following order:

(a) Contract conditions;

(b) Specifications; then

(c) Plans.

16.1 If the Builder finds any deficiency in the Plans or any conflict between the Plans and the Specifications, the Builder must promptly notify the owner in writing.

(emphasis in original)

32 Clauses 21, 22 and 23 provide for variations to the contract. For present purposes, it suffices to note that EWH did not suggest that any of these clauses operated to provide a basis for a substitution of the contract plans by the subsequent building permit plans.

33 In VCAT the Stanleys filed points of claim dated 1 December 2021. Those points of claim define the 'Caravan Requirement' as being the 'need for the garage and driveway to be built such that it would be able to accommodate [the Stanleys'] caravan traversing the driveway to pass through the garage into the backyard for storage'. The points of claim plead an oral agreement arising from conversations between 12 March 2018 and 6 May 2018 which included terms that the designs for the building would incorporate the Caravan Requirement.

34 The points of claim further allege entry into a contract on 3 June 2018 which was partly written, partly oral and partly to be implied. Insofar as it was in writing, it was alleged to be comprised of the written contract signed 3 June 2018, insofar as it was oral, it was alleged to consist of the conversations which comprised the earlier pleaded oral agreement.

35 Later, on 31 October 2022, the Stanleys filed amended points of claim. Those amended points of claim defined the Caravan Requirement in somewhat different terms, being that the Stanleys 'required any home constructed by [EWH] to take into account their caravan in relation to the grading of the relevant driveway and the front and back doors of the relevant garage'. Of greater significance, the amended points of claim do not plead any oral agreement between EWH and the Stanleys in relation to the Caravan Requirement. Rather, the amended points of claim plead that on 3 June 2018 the Stanleys and EWH entered into a major domestic building contract which was partly written and partly implied. Insofar as it was written, again, it is alleged that the contract consists of the written document signed 3 June 2018. The amended points of claim plead that insofar as the building contract was to be implied, it was to be implied to give effect to:

(i) The Caravan Requirement; and

(ii) All laws and regulations including, but not limited to, the Domestic Building Contracts Act 1995 and the Building Act 1993.

36 The amended points of claim do not plead any form of estoppel, any collateral contract or any misleading or deceptive conduct arising from the conversations between Mr Cugliari and the Stanleys in relation to the Caravan Requirement. Nor is there any claim for rectification of the written contract.

The Tribunal decision on the Caravan Requirement

37 The Tribunal found that, in accordance with relevant authorities regarding the implication of contractual terms, the Caravan Requirement was not an implied term of the contract between the Stanleys and EWH. The Stanleys do not challenge that finding on appeal.

38 However, the Tribunal did find that, nonetheless, the Caravan Requirement was an express term of the building contract:

The evidence which I have set out above in relation to the Caravan Requirement establishes that the Stanleys stated to Mr Cugliari, agent for EWH:

(a) that the particular purpose for which the Building Works were required included enabling the Stanleys' caravan to be reversed down the driveway and through the garage, which entailed EWH building a driveway with a suitably small fall;

(b) that the result which the Stanleys wished the Building Works to achieve, was not only to create a house to live in, but significantly was also to allow the Stanleys' caravan to be reversed down the driveway and through the garage, which entailed EWH building a driveway with a suitably small fall in levels, in a way which showed that the Stanleys relied on EWH's skill and judgment; and

(c) that the Building Works and any material used to carry out the Building Works were to be reasonably fit for those purposes, including the Caravan Requirement, or would be of such a nature and quality that they might reasonably be expected to achieve that result.

• Accordingly, I am satisfied that it was an express term of the building contract that the house would be constructed in such a way that it would enable the Stanleys' caravan to be reversed down the driveway and through the garage. Obviously, the term meant that the caravan could be reversed down the driveway without being scraped and damaged in the process, and without having to be driven by an expert in an extraordinarily skilled way using special equipment.[5]

Was the Caravan Requirement an express term of the contract?

40 EWH says that the Tribunal fell into error in holding that the Caravan Requirement was an express term of the contract. It relies, in this regard, on the entire agreement clause in clause 3 of the written contract and says it was simply not open to the Tribunal in those circumstances to find that the earlier discussions and email communications between the Stanleys and Mr Cugliari formed any part of the contract.

41 As will be evident from the passage of the reasons I have quoted above, the Tribunal found that the Caravan Requirement formed part of the contract on the basis that:

(a) the Stanleys had stated the particular purpose for which the building works were required and the result they wished to achieve; and

(b) by virtue of the last of the statutory warranties in Clause 11 of the contract, EWH was required to exercise its skill and judgement such that the works would achieve the stated result.

42 Before me the Stanleys contended there was no error in this reasoning.

43 I have reached the view that the Tribunal did fall into error in this respect. The last of the statutory warranties in Clause 11 requires the particular purpose or result which the owner wishes to be achieved to be stated in 'this contract'. Clause 3 of the written building contract is an entire agreement clause. There is some disagreement in the authorities as to whether an entire agreement clause operates as no more than 'the epitome of the operation of the parol evidence rule' or whether it is something more than that.[6] There is also some disagreement in the authorities as to whether an entire agreement clause excludes the possibility of a collateral contract.[7] For present purposes it does not matter how those differences of view are resolved. Here, there was no pleading of an agreement that was partly oral and partly in writing (at least in the amended points of claim), there was no allegation of any form of equitable estoppel, there was no claim for rectification of the contract and there was no pleading of misleading or deceptive conduct contrary to statutory norms. In the circumstances therefore, the Stanleys and EWH are bound by the written terms of the contract they signed and those written terms do not encompass the discussions and email communications between the Stanleys and Mr Cugliari on behalf of EWH.[8]

44 The Stanleys contend that even if the Caravan Requirement was not part of the building contract between them and EWH, nonetheless EWH breached the contract by constructing the garage at the level it did.

45 First, they say that insofar as the contract plans indicate a flat line between the footpath and the garage, EWH breached the contract by constructing a garage at a fixed floor level significantly below the level of the footpath.

46 Secondly, they contend that insofar as the fixed floor level falls below the level required by the building permit plans, this constitutes a breach of the third warranty in Clause 11 of the building contract that the works would be carried out in accordance with and would comply with all laws and legal requirements.

47 I am satisfied that both of those contentions are correct.

48 A corollary of the proposition that the parties are bound by their written contract is that EWH were required to build the house in accordance with the contract plans. Subsequent versions of the plans, which were not given to the Stanleys and which were not the subject of any variation in accordance with the terms of the contract, did not form part of the contract.

49 EWH points to the specific note regarding the preliminary nature of siting and the further note regarding the responsibility of the builder to establish fixed floor levels to say I should imply a term that the contract plans gave the builder a capacity to develop further plans and build the house in accordance with those plans. I do not accept those submissions insofar as they require implication of a term giving EWH the right to materially alter siting and finished floor levels from what was provided in the contract plans without notice to the Stanleys.

50 In relation to the note regarding the preliminary nature of the siting of the house it is to be observed that, prior to the contract having been signed, a full survey of the block had been completed on 3 May 2018. This survey was sent to the Stanleys on 8 May 2018. In those circumstances as at the time of signing the contract on 3 June 2018, the matter in respect of which the siting of the house was said to be preliminary had occurred and, as a result, notwithstanding the notation on the plans, the siting of the house was no longer preliminary in accordance with the contractual plans.

51 In relation to the builder setting 'finished floor levels', it is plain the builder did not have carte blanche. EWH were required to set such levels 'to ensure that all design assumptions are fully realised in practice'. In the circumstances a design assumption of the contract plans was that the garage would have a floor level at or near the same level as the footpath. In other words, the implied term for which EWH contends is, in my view, contrary to the express terms of the contract which are embodied in the plans.

52 In any event, a term in the contract which gave EWH the right to materially alter finished floor levels from what was provided in the contract plans without notice to the Stanleys is not necessary to give business efficacy to the contract.

53 In the circumstances, I am satisfied that the construction of the house with a garage floor 670 mm below the footpath was a breach of the contractual requirement to construct the house in accordance with the contract plans.

54 If the contract plans were not in a form which allowed the builder to obtain a permit it was for the builder to seek a variation to the contractual terms from the Stanleys. To the extent that the contract plans and the building permit plans created a situation where EWH had inconsistent obligations it was for EWH to resolve that inconsistency by raising it with the Stanleys. As I have previously noted, this did not occur.

55 If, contrary to the view that I hold, it was not necessary for the builder to construct the house and garage in accordance with the contract plans then, in any event, it is evident that the builder did not construct the garage in accordance with the building permit plans. That failure would constitute a breach of the third warranty in clause 11 of the contract and entitle the Stanleys to a remedy for breach of contract.

Are the Stanleys entitled to damages based on demolishing the house and rebuilding?

56 Before the Tribunal, the Stanleys contended that the appropriate measure of their damages was the cost of demolishing the house and rebuilding it such that the fixed floor level of the garage was at a level which was not materially below the height of the footpath.

57 The Stanleys argued for this measure of damages on the basis that it is not possible to rectify the level of the floor in the garage and reduce the slope of the driveway without demolishing the house. VCAT's reasons record that EWH's expert witness Mr Glenn Edwards conceded this proposition. The Tribunal proceeded to consider an appropriate remedy on the basis that it was not possible to rectify the level of the garage floor without demolition of the entire house and rebuilding.

58 The Stanleys contended that in accordance with orthodox principles they were entitled to performance based damages and therefore the prima facie measure of their damage was the amount required to rectify the defects complained of so as to give them a building on the land in accordance with the contract. For this proposition they relied on the principle established in Bellgrove v Eldridge[9] where the High Court said:

In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building on her land which is substantially in accordance with the contract.[10]

59 The Court in Bellgrove v Eldridge, however, noted that the prima facie rule was subject to a qualification that 'not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt'.[11] Expanding upon the circumstances in which the qualification might arise, the Court said:

No one would doubt that where pursuant to a building contract calling for the erection of a house with cement rendered external walls of second-hand bricks, the builder has constructed the walls of new bricks of first quality the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks. In such circumstances the work of demolition and re-erection would be quite unreasonable or it would, to use a term current in the United States, constitute "economic waste"... We prefer, however, to think that the building owner's right to undertake remedial works at the expense of a builder is not subject to any limit other than is to be found in the expressions "necessary" and "reasonable", for the expression "economic waste" appears to us to go too far and would deny to a building owner the right to demolish a structure which, though satisfactory as a structure of a particular type, is quite different in character from that called for by the contract. Many examples may, of course, be given of remedial work, which though necessary to produce conformity would not constitute a reasonable method of dealing with the situation and in such cases the true measure of the building owner's loss will be the diminution in value, if any, produced by the departure from the plans and specifications or by the defective workmanship or materials.

As to what remedial work is both "necessary" and "reasonable" in any particular case is a question of fact.[12]

60 The Tribunal considered Bellgrove v Eldridge and determined that, in the circumstances, the qualification to the general rule applied and that the Stanleys were not entitled to rectification costs comprising the complete demolition of the house and garage and the rebuilding of them. Its reasons were brief:

... [E]ven recognising that we are talking about the Stanleys and not 'generic owners as a class', and recognising that it was a term of the contract that EWH had to satisfy the Caravan Requirement, demolishing and rebuilding the house to remedy the [fixed floor level] defect would undoubtedly be unreasonable.[13]

61 The Stanleys contend that the Tribunal's reasoning in relation to remedy is subject to error in a number of respects:

(a) that VCAT's reference to 'loss' in [110] and [117]−[118] of its reasons is indicative of a failure to appreciate the critical difference between performance based damages and loss based damages;

(b) that the Tribunal failed to identify the relevant test regarding the qualification to the general principle of an entitlement to performance based damages;

(c) that the Tribunal failed to properly apply the relevant test regarding the qualification to the general principle of an entitlement to performance based damages in that the facts as found could not support a finding that the qualification applied; and

(d) that the Tribunal failed to give adequate reasons for its assessment that it was unreasonable in the circumstances to provide for damages to the Stanleys in accordance with the prima facie principle established by Bellgrove v Eldridge.

62 The High Court in Bellgrove v Eldridge described the question of what is reasonable in terms of rectification as a question of fact in any given case. An appeal from VCAT must raise a question of law. The following questions have been held to raise questions of law:

(a) whether the tribunal has identified the relevant legal test;

(b) whether the tribunal applied the correct legal test;

(c) whether there is any evidence to support a finding by the tribunal of a particular fact;

(d) whether the facts found fall within a statute properly construed; and

(e) whether facts as found can properly support the legal description given to them.[14]

63 I am satisfied the Stanleys have raised questions of law regarding the Tribunal's decision in this respect.

64 I have found there was a breach of contract on a different basis to the Tribunal but the effect of the breach I have found is the same. Under both the Tribunal's decision and mine, the Stanleys were entitled to a driveway which did not have a significant fall from the footpath or put another way, to a garage which had a floor which was not materially below the level of the footpath. In those circumstances, it is appropriate to consider whether there was any error in VCAT's approach to the appropriate remedy for the Stanleys.

No failure to appreciate the difference between performance based and loss based damages

65 There is nothing in the proposition that the Tribunal failed to appreciate the difference between performance based damages and loss based damages. As is evident from the statement of principle in Bellgrove v Eldridge there is no linguistic rigour which distinguishes the use of the term 'loss' or terms such as 'compensation' from the use of the term 'damages' in this context.[15] The principle in Bellgrove v Eldridge which establishes a prima facie entitlement to performance based damages describes that measure as a prima facie measure of the home owner's 'loss'.

66 It is plain that the Tribunal appreciated the distinction between performance based damages and loss based compensation in the context which arose in this case. The use of the word 'loss' at paragraphs [110] and [117]−[118] of the Tribunal's reasons do not indicate any substantive failure to appreciate that difference.

67 In relation to the Stanleys' contention that the Tribunal failed to identify the relevant test for the application of the qualification to the general rule in Bellgrove v Eldridge, the Stanleys relied particularly on the High Court decision in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd ('Tabcorp').[16] In that case the Court referred to the general rule in Bellgrove v Eldridge and then went on to discuss the qualification that the work undertaken must not only be necessary to produce conformity with the contract but that it must also be a reasonable course to adopt. The plurality quoted the example of the second-hand bricks replaced by new bricks referred to in the judgment in Bellgrove v Eldridge ('the brick example') and said:

That tends to indicate that the test of "unreasonableness" is only to be satisfied by fairly exceptional circumstances. The example given by the Court aligns closely with what Oliver J said in Radford v De Froberville, that is, that the diminution in value measure of damages will only apply where the innocent party is "merely using a technical breach to secure an uncovenanted profit".[17]

68 The Court in Tabcorp went on to consider the House of Lord's decision in Ruxley Electronics and Construction Ltd v Forsyth ('Ruxley').[18] In Ruxley the House of Lords held that the reconstruction of a swimming pool which had been constructed one foot six inches more shallow than the contract provided was not reasonable because the evidence showed that the pool as constructed was perfectly safe to dive into and that the cost of reconstruction would be wholly disproportionate to the disadvantage of the difference in depth of the pool.[19] The Court in Tabcorp described the result in Ruxley as 'on one view inconsistent' with the principle established in Bellgrove v Eldridge but said that for the purposes of the resolution of the case before them it was sufficient to say that the facts of that case were distinguishable because their Lordships had evidently seen the facts in Ruxley as 'quite exceptional'.[20]

69 The Stanleys contend that the Court in Tabcorp made plain that a departure from the prima facie rule in Bellgrove v Eldridge should only occur in exceptional circumstances and that VCAT did not find exceptional circumstances.

70 I accept that the qualification to the general rule in Bellgrove v Eldridge will only be satisfied in fairly exceptional circumstances. I also accept that the Tribunal did not, in terms, make a finding that the circumstances denying the Stanleys an entitlement to rectification were exceptional. In the way it expressed its finding, the Tribunal seems to have regarded the unreasonableness of demolishing a house and garage because the slope of the driveway was too steep for a caravan as self-evident.

71 Nonetheless, for reasons I discuss below, I am not satisfied that the failure to identify the need for exceptional circumstances has any real consequence in this case because I am satisfied that on the basis of the facts found by the Tribunal there were such exceptional circumstances.

72 In Stone v Chappel[21] a decision of the Full Court of the South Australian Supreme Court, Kourakis CJ described the assessment of the reasonableness of rectification as 'only quasi-factual' and importing a normative standard.[22] Both Kourakis CJ and Doyle J held that a decision as to the reasonableness of rectification was an evaluative judgment which did not require the application of the principles in House v The King.[23]

73 The Stanleys contend that VCAT misapplied the test established in the authorities regarding the application of the qualification to the prima facie rule in Bellgrove v Eldridge. They say that the facts do not support the Tribunal's finding that rectification was unreasonable. I am satisfied that in this regard the Stanleys have raised a question of law as to the correctness of the VCAT decision.

74 However, in light of the fact that the question of unreasonableness of rectification involves an evaluative judgment, it seems that whether or not the Tribunal expressly found exceptional circumstances for denying a rectification remedy, I am required to consider that question.

75 The Stanleys, in effect, submit that, once regard is had to the brick example in Bellgrove v Eldridge and the approach of the Court in Tabcorp, that the only circumstance which would be regarded as 'exceptional' was one where the innocent party is merely using a technical breach to secure an uncovenanted profit. In my view, this overreads both the Bellgrove v Eldridge and Tabcorp judgments. The example given in Bellgrove v Eldridge is just that, an example, and the sentence in which it is given starts with the words 'No one would doubt that ...'. In other words, it is an example of a clear and obvious case falling within the purview of the exception chosen for the purposes of exposition. The New South Wales Court of Appeal has held that the reference in Tabcorp to using a technical breach to secure an uncovenanted profit is not an exhaustive description of what will constitute exceptional circumstances.[24]

76 In Stone v Chappel[25] the Court considered questions of relief in relation to a breach of a building contract. In that case, Mr and Mrs Stone had entered into a contract with Mr Chappel and Mr Smallacombe to build an apartment in a retirement village. The contract contained a term providing for a ceiling height of 2,700 mm. In breach of that term the ceiling height was, on average, 48 mm less than the contractually required height.

77 At first instance the Court found that it was not reasonable for the Stones to receive rectification in relation to the ceiling height because this would have required the demolition and rebuilding of the ceiling, but held that the Stones were entitled to an award of damages for the loss of amenity which had arisen as a result of the builder's breach of contract.

78 In separate reasons each member of the Full Court of the South Australian Supreme Court upheld the trial judge's finding that, in the circumstances, rectification was not a reasonable course. Each of Kourakis CJ, Doyle J and Hinton J held that rectification damages would be disproportionate to the attainment of the contractual benefit. In this regard all of the judges took into account the relatively minor departure from the contractual term and the evidence that rectification works would impact on third parties in the building and potentially create a fire risk. Each member of the Full Court, after a review of the authorities, accepted that notwithstanding that conclusion, the Stones were nonetheless entitled to more than nominal damages because the failure to meet the contractual specification had had an impact on the enjoyment of their place of living and a general damages award for their loss of amenity was appropriate.

79 Kourakis CJ listed eight relevant considerations in determining whether it was reasonable to award rectification damages they are:

(1) the degree of departure from the contractual stipulation;

(2) the adverse effect of the departure on the functional utility, amenity and aesthetic appearance of the building;

(3) the reasons, objectively ascertained and commonly known, for which the innocent party made the stipulation which was breached;

(4) the practical feasibility of rectifying the work, including the effects on third parties of attempting to do so;

(5) whether or not the innocent party intends to carry out the rectification work;

(6) the absolute cost of the rectification work and the disproportion between that cost and

• the value of the building and contract price;
• the diminution in commercial value of the building;
• the effect of the departure on the functional utility, amenity and aesthetic appearance of the building;

(7) the nature of the wrongdoer's fault for the defect; and

(8) the public interest in reducing economic waste.[26]

80 Doyle J identified the following matters in determining the reasonableness of rectification costs claimed:

(a) the proper identification of the plaintiff's performance interest, that is the benefit bargained for;[27]

(b) the extent to which the defendant has, despite departure from the contractual standard, nevertheless achieved the contractual objective and hence provided the plaintiff with the benefit they bargained for;[28]

(c) any lack of proportionality between the proposed work and cost, and the benefit to be achieved by the innocent party through the work;[29]

(d) the intention and ability of the innocent party to carry out the rectification work;[30]

(e) inconvenience to third parties or safety risks associated with the proposed rectification work;[31] and

(f) possibly, the nature and quality of the defendant's breach.[32]

81 Hinton J's reasons focussed on the disproportion between the aesthetic and amenity benefit to be obtained by the rectification works and the cost of those works.[33]

82 Senior Counsel for the Stanleys submitted that Stone v Chappel was inconsistent with the High Court's decisions in Bellgrove v Eldridge and Tabcorp and that I should not follow it. Stone v Chappel is a decision of an intermediate court of appeal regarding the common law of Australia. I am bound to follow it unless persuaded that it is plainly wrong. I am not so persuaded; indeed I would reject the submission that there is any inconsistency between the approach adopted by the Full Court of the South Australian Supreme Court and the two High Court decisions. In particular, I do not accept that the High Court decisions require a binary choice between the full costs of rectification as performance based damages and an assessment of diminution in value, particularly in circumstances such as arose in Stone v Chappel where the former measure is not available because those costs would be unreasonable and the latter measure would leave the innocent party without a remedy.

83 Further, the approach of considering whether the cost of rectification is out of all proportion to the benefit to be obtained has been endorsed by the New South Wales Court of Appeal.[34]

84 The considerations referred to by Kourakis CJ in Stone v Chappel were with one exception applied by Brereton J in 85 Princess Pty Ltd v Fleming.[35] Brereton J expressed doubt regarding the relevance of the eighth consideration listed by Kourakis CJ, being the public interest in avoiding economic waste, in light of the High Court's deprecation of that expression in Bellgrove v Eldridge.[36]

85 I propose to follow the same approach as Brereton J in 85 Princess Pty Ltd v Fleming. It seems to me whilst the approaches of Kourakis CJ and Doyle J in Stone v Chappel differ in expression and emphasis, they give effect to the same substantive underlying considerations.

86 I am satisfied that most of the factors identified by Kourakis CJ point to the appropriateness of rectification as a remedy. Having regard to the Tribunal's findings of fact in light of the breach of contract which I have identified:

(a) There has been a significant departure from the contractual stipulation of a garage floor at or near the level of the footpath and its concomitant, a driveway without significant rise or fall;

(b) The departure from the contractual stipulation has had a significant adverse effect on the functional utility of the driveway from the perspective of the Stanleys and the amenity associated with their occupation of the house on the block of land;

(c) The reasons, objectively ascertained and commonly known, for the stipulation were the Stanleys expressed desire to be able to back their caravan down the driveway, through the garage and into the backyard for storage. In this regard, I note that whilst the conversations between the Stanleys and Mr Cugliari did not form part of the contract between them, they may be considered as part of the context of the contract in determining why the Stanleys would have insisted on a particular stipulation in relation to garage height;[37] and

(d) It is practically feasible to demolish the house and garage and rebuild them. There will be no effect on third parties in doing so.

87 The Tribunal did not make any specific finding of fact regarding the intention of the Stanleys to carry out rectification works but EWH in its submissions to VCAT seems to have accepted that they had such an intention.[38] So this consideration also points in favour of the prima facie measure of damages.

88 Notwithstanding all of those considerations pointing to the Stanleys' right to their prima facie remedy of rectification, I am nonetheless satisfied that the degree of disproportion between the cost of rectification work and the Stanleys' interest in the performance of the contractual stipulation is such as to make that remedy unreasonable in the circumstances.

89 In its reasons at [110], VCAT summarised various arguments of EWH. At the conclusion of that paragraph the Tribunal says:

Put in the language of Bellgrove v Eldridge, that it would be unreasonable to suggest that the house should be demolished and rebuilt because there is no structural deficiency in the house; no suggestion that the lower than contracted for [fixed floor level] makes the house liable to flooding or the like; and that the driveway itself is not defective, in the sense of being poorly constructed, cracked, or distressed.

90 In my view when regard is had to the context of that last sentence in [110] it is a recitation of an argument made by EWH rather than a finding by the Tribunal. Nonetheless, a fair reading of the reasons as a whole makes plain, in my view, that in making its finding as to unreasonableness the Tribunal has, in effect, accepted that portion of the EWH argument.

91 Separately, and in any event, I am satisfied that it would be unreasonable to demolish and rebuild the house and garage at a cost exceeding $650,000 in circumstances where there is no suggestion of any fundamental structural defect in the house, or that the fixed floor levels make it more prone to flooding, where other defects in construction may be remedied and it is not suggested that the driveway is not perfectly adequate for vehicles other than caravans. Overall I would regard these circumstances as sufficiently exceptional as to deny the Stanleys their prima facie right to damages based upon performance of the contract.

92 It follows from that conclusion regarding the disproportionate cost of demolishing and rebuilding the house and garage that if, contrary to the view I take, the contractual requirement permitted the builder to construct a garage with a fixed floor level of 9.46 metres, the Stanleys would still not be entitled to rectification damages as a remedy.

93 For completeness though, I note that I do not accept EWH's contention that there is no evidence that the 130 mm difference would have made any difference to the process of backing the caravan down the driveway. In light of its finding regarding the Caravan Requirement, it was unnecessary for the Tribunal to make any specific finding in relation to the impact of a 130 mm higher garage floor but there is however, evidence on which the Tribunal might have made such a finding. If the contractual term stipulated a fixed floor level of 9.46 metres, the contractually agreed fall of the driveway would have been 540 mm. In that context, an extra 130 mm is an extra 24%. Further, the Tribunal found that in the video of the caravan reversing down the driveway the gap between the bottom of the caravan and the driveway was a matter of a few centimetres, about the size of a matchbox. In that context, it would have been open to conclude that a difference of 13 centimetres in the height of the garage floor would likely have made a significant difference to the gap between the bottom of the caravan and the driveway.

94 Ultimately then, I am satisfied that, notwithstanding that VCAT did not expressly refer to the existence of exceptional circumstances as a reason for denying the prima facie right to rectification damages, it is nonetheless the case that on the facts before the Tribunal there were such exceptional circumstances and no error has been shown in VCAT's conclusion in this regard.

95 In light of my conclusion in the previous paragraph, it is unnecessary to consider whether VCAT's reason for its conclusion at paragraph [116] were adequate. Having made my own evaluative judgment based on the matters outlined above, I have determined that the conclusion expressed in that paragraph is correct, whether or not the reasons given for that conclusion were adequate.

96 Question 1(b) of the Stanleys' Amended Notice of Appeal raises the question of whether it was open to measure their loss as the costs of storing their caravan away from their home for a reasonable period. It was open for the Tribunal to find that that was part of the Stanleys' loss but I am however satisfied that the Tribunal's approach to the assessment of the Stanleys' damages, in relation to the breach of the contract I have identified, is too narrow.

97 The Tribunal ordered in paragraph 3 of its orders:

... [T]he applicants' claim for damages is to be assessed as:

(a) the cost of rectification of defects ("Scenario Two" in the costings prepared by Tom O'Dowd of Victorian Building Consultants Pty Ltd) including rectification of plumbing defects insofar as those costings have been accepted by the Tribunal, as set out in the Reasons accompanying this Order; plus

(b) the cost of alternative accommodation and storage of chattels during rectification works (raised in paragraph 10 of their Amended Points of Claim); plus

(c) the applicants' cost of storing their caravan away from their home for a reasonable period of time (which is open under paragraph 10 of their Amended Points of Claim given the breadth of paragraph (b) of the Particulars under that paragraph).

98 The reference to paragraph 10 of the amended points of claim in paragraph 3(c) of the orders is presumably intended to be a reference to paragraph 18.

99 In Stone v Chappel, having rejected the prima facie measure of damages for which the Stones contended, the Full Court upheld the trial judge's award to the Stones of $30,000 for loss of amenity.

100 The Tribunal's reasons avert to the possibility of damages for loss of amenity in the following terms:

the Stanleys may be able to establish an entitlement to damages for loss of amenity, but the parties will be aware that awards of this kind are insubstantial.[39]

(a) damages for loss of amenity are only available in circumstances where there has been a breach of a term of the contract intended to provide a level of amenity;[40]

(b) the Stones had suffered a material loss of amenity which had impacted on their enjoyment of their place of living, an impact likely to be experienced daily and on an ongoing basis;[41] and

(c) there was no error in the trial judge's approach of taking into account an award in a different case and adjusting for differences in exchange rate and inflation in arriving at an assessment of fair compensation for the Stones.[42]

102 I have held that the reasons, objectively ascertained and commonly known, for the stipulation that the garage floor would not be materially below the level of the footpath were the Stanleys expressed desire to be able to back their caravan down the driveway, through the garage and into the backyard for storage. In those circumstances, I am satisfied that the Tribunal was correct to avert to the possibility of damages for loss of amenity.

103 However, I am not persuaded that there is any a priori reason why such damages should be insubstantial. Where damages for loss of amenity are awarded in a context where rectification is possible and the loss of amenity is for a fixed period the amount awarded is, other things being equal, likely to be less than in circumstances where rectification is not possible and the loss of amenity is ongoing. On the basis of the Tribunal's findings, it would seem the Stanleys have suffered a material loss of amenity which has impacted on their enjoyment of their place of living and, whilst that impact might not be experienced daily, it is ongoing. Adjusting the amount awarded in Stone v Chappel for inflation yields an amount close to $39,000.

104 In addition, the Stanleys are entitled to receive damages for physical inconvenience arising from the breach of contract. In Stone v Chappel Kourakis CJ said that awards of such damages 'need not be restrained or modest'.[43] In the circumstances of this case the physical inconvenience arises from the storage of the caravan elsewhere, beyond simply the question of storage costs.

105 I am therefore satisfied that order 3 of the Tribunal's orders proposes an assessment of the damages of the Stanleys on too restrictive a basis.

106 I had asked the parties whether, if I reached this conclusion, I should assess any award of general damages myself. Both parties agreed that if I felt I had sufficient evidence before me I could. The Stanleys in particular submitted that they wished for the litigation process to come to an end and would seek to avoid a further hearing if that was possible.

107 On reflection, I do not think it is appropriate for me to assess any award of general damages either for loss of amenity or physical inconvenience. The Tribunal has seen the Stanleys give evidence. It is best placed to assess the degree to which the breach of contract has impacted on their enjoyment of their place of living. It is also best placed to assess any damages for physical inconvenience. In circumstances where the Tribunal will have to quantify other heads of damage in any event it is appropriate for the Tribunal to assess any damages for loss of amenity and physical inconvenience.

108 In making that assessment the Tribunal might wish to consider an approach analogous to that of the trial judge in Stone v Chappel and should not approach the task on the basis that any such award will be insubstantial.

109 Having determined that the Stanleys would be entitled to damages referable to the costs which would be associated with storing their caravan elsewhere than on their property, the Tribunal scheduled a further hearing to provide the Stanleys with an opportunity to adduce evidence regarding this measure of loss.

110 EWH says the scheduling of the further hearing regarding loss constituted an error of law. It accepts that it has to demonstrate House v The King type error.

(a) The Tribunal mistook the facts when it said at [10] and [180] of its reasons that EWH submitted the Stanleys should have an opportunity to present evidence on the costs of alternative accommodation. EWH says it always opposed that course;

(b) It says that the Stanleys had effectively closed their case and so, in permitting them to reopen, the Tribunal made the following errors:

(i) the Tribunal has not inquired why such evidence was not called at the hearing, where the owners are bound by the forensic decision of their counsel not to lead evidence on the three heads of damage;

(ii) the evidence to be adduced is not 'fresh evidence' in the relevant sense;

(iii) the circumstances of this case are otherwise not within any recognised category of case to justify the re-opening of the case;

(iv) there are otherwise no exceptional circumstances;

(v) the Tribunal has already given reasons for its decision and is thereby functus officio;

(vi) the interests of justice do not require adducing the further evidence;

(vii) the Tribunal failed to have regard to the fact that the additional evidence would not affect the result (as the owners had already established liability on part of EWH);

(viii) two of the three heads of damage for which the Tribunal granted leave to adduce evidence are unpleaded; and

(ix) the Tribunal failed to have regard to matters of efficient case management.

112 The decision by the Tribunal to hold a further hearing regarding damages is a matter of practice and procedure and was plainly open to it. EWH is not prejudiced by the course proposed, it can lead evidence and make submissions. To the extent that EWH's grounds of appeal are premised on the proposition that the Stanleys had 'effectively closed their case' that premise is demonstrably false. The Stanleys had always indicated they would seek to adduce further evidence regarding damages. True it is, that the scope of that evidence was different to the scope of the evidence contemplated by the Tribunal, but the suggestion that the Stanleys had closed their case has no merit. In those circumstances, the Tribunal was not functus officio, was not required to grant leave to re-open, had a broad discretion to do justice between the parties and was plainly conscious of the desirability of efficient case management.

113 The Tribunal has mischaracterised EWH's submissions in [10] and [180] of its reasons. In House v The King terms, it mistook this fact. I am satisfied that, ultimately, nothing turns on this. Whether EWH agreed that there should be a further hearing regarding damages or not, the Tribunal was manifestly entitled to reach the view that the appropriate course was to adjourn the matter for further hearing regarding damages.

114 I would not grant EWH leave to appeal in relation to this ground of appeal.

115 In its decision, VCAT awarded the Stanleys damages in respect of a range of other building and plumbing defects. The Tribunal records that both the expert called by the Stanleys and the expert called by EWH were comfortable with adding a margin to the costs of rectification. The Tribunal accepted this approach. EWH contends that the Tribunal erred in adding a builder's margin to the costs of rectification.

(a) it was a corollary of the duty to mitigate loss that the Stanleys were required to give EWH an opportunity to rectify defects; and

(b) if they did not give such an opportunity, they could not recover from EWH the margin they would be required to pay another builder to rectify the defects.

117 After the hearing before me had concluded, the New South Wales Court of Appeal delivered judgment in Ceerose Pty Ltd v Owners of Strata Plan No 89074 ('Ceerose').[44] The parties properly drew my attention to that decision and were given leave to make short written submissions regarding its effect.

118 In Ceerose Kirk JA (with whom Leeming and Ball JJA agreed) said:

...[T]here 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...

The respondent did not have a "positive obligation" to provide the appellants an opportunity to rectify the claimed defects...[45]

119 That passage spells the end of EWH's original argument.

120 In its submissions filed after judgment in Ceerose EWH said_:_

Whilst the 'requirement' was referred to by the Builder, its rejection in Ceerose does not invalidate its submissions here and below, or its ground of appeal. The Builder did not submit that the mere failure to afford an opportunity shifted the onus of proof on the question of mitigation. On the contrary, it expressly made submissions on mitigation and directly submitted that the Owners had not acted reasonably by reason of their failure to provide an opportunity. Whilst the ground was couched in terms of failing to give the Builder an opportunity, in the context of the case brought, that was a reference to the facts; not to the rejected 'rule'. The ground and submission that the Tribunal failed to take into account the facts of failing to provide an opportunity remain intact and directed towards the question of mitigation which remained unanswered.

121 EWH bore the onus of establishing there had been a failure to mitigate on the part of the Stanleys. It pleaded a failure to mitigate in respect of the Caravan Requirement only. Its final submissions before the Tribunal rested on a 'requirement' that the Stanleys provide EWH an opportunity to remedy the defects. There is no such requirement. Further, it is implicit in the Tribunal's approach to the award of damages for the other building and plumbing defects that it did not regard EWH as having established any failure to mitigate on the part of the Stanleys.

122 I am, in any event, satisfied that EWH did not discharge its onus in establishing a failure to mitigate on the part of the Stanleys. The Stanleys sought as their primary remedy the demolition and rebuilding of the house and garage. Even though I have held they were not entitled to that remedy, there was plainly nothing unreasonable in seeking it. In circumstances where that was their primary remedy, there was nothing unreasonable in not asking EWH to remedy other building and plumbing defects. Further, in circumstances where the Tribunal has found that Mr Cugliari of EWH engaged in 'sharp practice' and where EWH produced five sets of plans without ever showing them to the Stanleys it is not unreasonable for the Stanleys to have any rectification works done by another builder.

123 EWH has not shown any error of approach by the Tribunal in its calculation of damages for the other building and plumbing defects.

124 The Stanleys should have leave to appeal and that appeal should be upheld on the limited basis I have indicated. Order 3 of the Tribunal's orders made on 15 January 2025 should be varied to include:

(d) damages for loss of amenity and/or physical inconvenience arising from the breach of the contractual term requiring the construction of a garage floor at or not materially below the level of the footpath.

125 Orders 4 to 7 will need to be set aside and appropriate directions in relation to the quantification of damage can be made by the Tribunal in due course.

126 EWH should have leave to appeal in respect of question 1 of its Notice of Appeal and should have an extension of time in respect of that question. Its appeal on question 1 has demonstrated error in the reasons of the Tribunal, but that error does not lead to any error in the orders made by the Tribunal. The appeal on question 1 should be dismissed. I would not grant leave to EWH in respect of questions 2 and 3 of its Notice of Appeal. In the circumstances, I would not extend time in respect of those questions.

127 The parties should file agreed orders giving effect to these reasons including as to costs within seven days. In the event they are unable to reach an agreed position, they should file and serve their proposed competing orders for which they contend and written submissions of no more than three pages in length also within seven days.

[5] Stanley v EWH Construction West Pty Ltd (Building and Property) [2025] VCAT 44, [85]-[86] ('Tribunal's reasons').

[6] Compare Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424, 542 [440] (Allsop CJ) and Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305, [119] (Jackson J).

[7] Compare McMahon & Anor v National Foods Milk Ltd [2009] VSCA 153; (2009) 25 VR 251, 272−273 [39]−[41] (Nettle JA) and Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305, [138] (Jackson J).

[8] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471, 483−484 [33], [36] (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ).

[9] [1954] HCA 36; (1954) 90 CLR 613 (Dixon CJ, Webb and Taylor JJ).

[14] Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2014] VSCA 353; (2014) 45 VR 771, 783−784 [48]−[49] (Warren CJ), 805−806, [167]−[169] (Whelan and Santamaria JJ).

[15] Williams v Toyota Motor Corporation Australia Ltd [2024] HCA 38; (2024) 98 ALJR 1282, 1306−1307, [96]-[98] (Edelman J).

[16] (2009) 236 CLR 272 ('Tabcorp').

[18] [1996] AC 344.

[21] (2017) 128 SASR 165 ('Stone v Chappel').

[23] Ibid 181-182 [54], 183 [61] (Kourakis CJ); 223 [279] (Doyle J).

[24] The Owners of Strata Plan No 97315 v Icon Co (NSW) Pty Ltd [2023] NSWCA 303, [12].

[34] See Owners SP 92450 v JKN Para 1 Pty Ltd [2023] NSWCA 114, [70] and the cases cited therein and The Owners of Strata Plan No 97315 v Icon Co (NSW) Pty Ltd [2023] NSWCA 303, [12].

[35] [2025] NSWSC 407.

[37] Stone v Chappel 177 [35], 182-3 [58].

[44] [2025] NSWCA 235.