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[2026] NSWSC 770
Supreme Court of NSW
2026-07-02
Muston J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Khan v Fairmont Homes (NSW) Pty Ltd [2026] NSWSC 770
Hearing dates: 28 May 2026
Date of orders: 2 July 2026
Decision date: 02 July 2026
Jurisdiction: Common Law
Before: Muston J
Decision: (1) Pursuant to Uniform Civil Procedure Rules 2005 r 50.3(1)(c), the time within which the plaintiff may bring her appeal from the decision of the Primary Judge is extended to 7 January 2027.
(2) Pursuant to s 41 of the Local Court Act 2007 (NSW), the judgment and orders of the Local Court made on 9 October 2025 are set aside and, in lieu thereof:
(a) The Local Court proceedings are dismissed.
(b) The defendant is to pay the plaintiff’s costs of the Local Court proceedings.
(3) The defendant is to pay the plaintiff’s costs of the proceedings in this Court.
(4) If either party contends for different costs orders to those which are provided for in Orders 2(b) and/or 3, they should make an application to my Associate by 4pm on 7 July 2026, whereupon I will vacate Orders 2(b) and/or 3.
(5) Should an application for a different costs order be made pursuant to Order 4:
(a) That application should include submissions of not more than 2 pages and any necessary evidence;
(b) The other party may serve and provide to my Associate responsive submissions of not more than 2 pages and any necessary evidence by 4pm 12 July 2026; and
(c) I will determine the question of costs on the papers.
Catchwords: APPEAL — appeal from Local Court — whether appeal should be allowed to be brought out of time CONTRACTS — construction of special condition — special and recognised meaning of “variation” in building contracts — inconsistency between words in standard terms and words added by parties — relevance of use of statutory language
Legislation Cited: Local Court Act 2007 (NSW) Div 4 Pt 3, s 40
Home Building Act 1989 (NSW) s 7
Uniform Civil Procedure Rules 2005 rr 50.3, 50.2
Cases Cited: Cessnock City Council v 123 259 932 Pty Ltd (2024) 281 CLR 39; [2024] HCA 17
Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118
Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679; [2019] NSWCA 185
Empire Securities Group Pty Limited v Novus Capital Limited [2026] NSWSC 83
H Lundbeck A/S v Sandoz Pty Ltd (2022) 276 CLR 170; [2022] HCA 4
NEXTracker Inc v CAN 003 905 093 Pty Ltd [2019] NSWSC 1604
Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64
Ryan v Ferguson (1909) 8 CLR 731
Tomko v Palasty (No 2) [2007] NSWCA 369
Union Fidelity Finance (Aust.) Pty. Ltd v Renauf [2025] NSWSC 356
Walker v Citigroup Global Markets Australia Holdings Pty Ltd [2006] FCAFC 101; (2006) 233 ALR 687
Category: Principal judgment
Parties: Shina Shahista Khan (Plaintiff)
Fairmont Homes (NSW) Pty Ltd (Defendant)
Representation: Counsel:
A Crossland (Plaintiff)
J Parrish (Defendant)
Solicitors:
Attwood Marshall Lawyers (Plaintiff)
Marsden Law Group (Defendant)
File Number(s): 2026/006716
This is an appeal, brought under Division 4 of Pt 3 of the Local Court Act 2007 (NSW), from a decision of the primary Judge sitting in the Local Court at Campbelltown.
Through its amended summons commencing an appeal, the plaintiff advances two grounds of appeal; described in that document as Ground 2 and Ground 4.
Before addressing each of these grounds, I will set out the uncontroversial circumstances which gave rise to the proceedings before the primary Judge, and address the threshold question of whether leave should be granted to the plaintiff to bring this appeal out of time.
The plaintiff is the registered proprietor of a property located in the Sydney suburb of Guildford. The defendant is a building and construction company, which operates under a building licence issued in New South Wales.
On 13 November 2020, the defendant and the plaintiff entered into a contract for the construction of a residential dwelling on the property. The contract adopted the terms of the Housing Industry Association’s “NSW Residential Building Contract for New Dwellings” (July 2020 edition) and incorporated a number of additional “special conditions”.
The contract price specified in Item 2 of Schedule 1 to the contract was $491,620 (inclusive of GST). Beneath this figure was an express warning that “[t]he contract price may vary under this contract” for reasons which relevantly included “Clause 18-variations to the building works”. I will return to cl 18 and its operation in greater detail when addressing Ground 2.
Pursuant to cl 4.1 of the contract, the plaintiff was required, within 15 working days of 13 November 2020, to provide to the defendant certain information; relevantly including written advice from any lending body that the amount of finance (if any) when added to the plaintiff’s own available funds would be sufficient to pay the contract price. Clause 4.2 went on to provide that, if the plaintiff failed to provide the required information, the defendant was at liberty to bring the contract to an end at any time prior to the physical commencement of the building works. In those circumstances, the plaintiff was obliged by cl 4.3 to pay the defendant “the price of the services provided and works carried out to the date that [the] contract [was] ended”, including an amount referable to a builder’s margin.
On 4 December 2020, the plaintiff provided the defendant with a letter from LJ Hooker Home Loans that confirmed the amount of finance being advanced by that organisation was sufficient to pay the contract price. The primary Judge did not find the plaintiff failed to provide any of the information required by cl 4.1 within the 15 working day period contemplated by the clause.
In this Court, it was faintly suggested by the defendant that the plaintiff was required by cl 4.1 of the contract to provide written proof that she had satisfied the requirements of a cleanup notice issued under s 91 of the Protection of the Environment Operations Act 1997 (NSW) by Cumberland City Council on 21 December 2021.
Cumberland City Council’s notice was not even in contemplation during the 15 working days which followed the entry by the parties into the contract. I do not accept that the plaintiff was required by cl 4.1 to have provided confirmation to the defendant of its compliance with that notice more than 12 months after the period contemplated by that clause had passed. It was not otherwise suggested by the defendant that it was entitled to bring the contract to an end under clause 4.2.
Pursuant to cl 5 of the contract, the defendant was required to obtain and pay for all applications for development consent and/or a complying development certificate for the building works contemplated by that contract. As the plaintiff had complied with her obligations under cl 4.1 of the contract within the 15 working day window it contemplated, cl 12 required that the defendant commence the building works within 20 days of receiving all necessary building permits and planning approvals or compliance. This did not occur.
The findings of the primary Judge do not address, in any detail, the source of this delay. The evidence points to an arrangement having been made between the plaintiff and the defendant whereby the former was to be responsible for demolishing a house which was then present on the property. The primary Judge’s reasons suggest that the plaintiff engaged her own contractor, Democorp Pty Ltd, to carry out these demolition works between 28 May 2021 and 7 June 2021. Assuming this to be correct, it represents a substantial departure from what was contemplated by the contract.
By 16 August 2021, the defendant had still not commenced work at the property. At around that time, the defendant’s site supervisor, Mr Alex Favaloro, attended the property and observed what he believed to be asbestos contamination in the soil.
The discovery of asbestos on the surface or subsurface of the property was an event of the type expressly contemplated by cl 14 of the contract. That clause set out the process by which the risks presented by such a discovery — being something likely to affect the building works — were to be dealt with between the parties.
In a further departure from what was contemplated by the contract, neither party appears to have exercised the rights available to them under cl 14 in relation to this discovery. Instead, the parties merely caused the building works contemplated by the contract to be further delayed until the asbestos was removed, presumably by the plaintiff or Democorp. This delay appears to have been exacerbated by proceedings brought by the plaintiff against Democorp in the New South Wales Civil and Administrative Tribunal.
The asbestos had not been removed from the property when the proceedings were heard by the primary Judge.
By 9 June 2022, the building works contemplated by the contract had still not commenced. At that time, the defendant informed the plaintiff that — as a result of what was said to be increases in the price of materials — it would be issuing a variation to increase the contract price.
On 17 June 2022, the defendant provided the plaintiff with a variation described as “Building Variation No: BV-2”. BV-2 described the variation it contemplated as follows:
“In accordance with Special Condition 3 of signed HIA Contract, [the defendant] reserves the right to revise all tender and contract prices in line with current pricing structure.”
The increase in the contract price proposed in BV-2 was $48,573.
Notes appearing at the foot of BV-2 stated:
“Please return signed copy within five (5) working days of receipt of this variation.”
The plaintiff did not sign and return BV-2 or otherwise agree to the increase in the contract price it proposed.
On 6 December 2022, the defendant issued a breach notice to the plaintiff. That notice was said to have been issued in accordance with cll 27.3 and 27.5 of the contract. It described the dispute as follows:
“(1) Clause 27.2(f) of the Contract provides that the Owner is in substantial breach of the Contract if it fails to give an instruction or direction within the time specified.
(2) On 17 June 2022, the Builder issued the Owner with Variation BV-2, which the Owner has failed to sign and return to the Builder.
(3) Variation BV-2 expired on 24 June 2022.
(4) Pursuant to Clause 27.2(f) of the Contract, the Owner is in substantial breach of the Contract by failing to give instruction and/or direction within the required time as Variation BV-2 was not returned by 24 June 2022 (the Breach).”
“The Builder gives you notice that if the Breach is not remedied within 10 working days, then the Builder may end the Contract.”
On 15 February 2023, the defendant issued a notice of termination. The notice of termination referred to the circumstances giving rise to the dispute described in the breach notice, and the fact that no action had been taken by the plaintiff in response to the breach notice. It thereafter purported to bring the contract to an end “in accordance with Clause 27.4 and 27.5 of the Contract.”
The primary Judge was satisfied that the plaintiff’s failure to respond to BV-2 was a “substantial breach” of the contract within the meaning of cl 27.2 and that, in these circumstances, the defendant was entitled to bring the contract to an end. It is this conclusion which is challenged through Ground 2 in the plaintiff’s amended summons.
The primary Judge went on to award damages to the defendant for this breach in the amount of $76,703.99. Separate orders were made in relation to interest and costs. The plaintiff seeks to challenge the quantification of these damages through Ground 4 in her amended summons.
Pursuant to Uniform Civil Procedure Rules 2005 (“UCPR”) r 50.3(1), a summons commencing an appeal from the Local Court must be filed within 28 days of the “material date”. While the rule permitted the primary Judge to extend this time, no such extension was sought or granted in the present case.
The term “material date” is relevantly defined in UCPR r 50.2 as the date on which the “judgment, order, opinion, direction or determination” is pronounced or given.
The orders from which the plaintiff seeks leave to appeal were made by the primary Judge in open court on 9 October 2025. Accordingly, that is the material date, and the plaintiff was required to have filed any application for leave to appeal from those orders by 6 November 2025. The current proceedings were not commenced until 8 January 2026; around eight weeks out of time.
The failure to have commenced these proceedings within 28 days of 9 October 2025 has been explained in an affidavit sworn by the solicitor with day-to-day conduct of this matter on behalf of the plaintiff. The solicitor candidly explained that he mistakenly caused a Notice of Intention to Appeal to be filed and served on 6 November 2025, not realising that this process did not apply to an appeal from the Local Court. The solicitor did not become aware of his error until 31 December 2025, when it was drawn to his attention in an email received from the plaintiff’s counsel.
On 7 January 2026, a summons in the appropriate form was filed on behalf of the plaintiff. It was served on 8 January 2026. It was not suggested that the defendant has suffered any prejudice as a result of the delay in filing the plaintiff’s summons. In fact, the defendant does not oppose the plaintiff’s application to bring this appeal out of time.
To bring this appeal, the plaintiff requires an order under UCPR r 50.3(1)(c) extending the time within which it may be commenced. In Tomko v Palasty (No 2) [2007] NSWCA 369 at [55], Basten JA identified four factors of general relevance when determining an application for an extension of time, namely:
The length of the delay.
The reason for the delay.
Whether the applicant has a fairly arguable case.
The extent of any prejudice suffered by the respondent to the application.
Having considered each of these factors, I am satisfied that it is appropriate to permit the plaintiff to bring this appeal out of time.
By Ground 2, the plaintiff contended that the primary Judge erred in finding that the plaintiff’s failure to execute BV-2 was a breach of the contract.
The plaintiff said that Ground 2 “involves the application of legal principle to the facts of this case”. On this basis, the plaintiff accepted that she required leave to bring this aspect of her appeal. Leave was not opposed by the defendant.
Ground 2 raises a question as to the proper construction of the contract and its application to the unchallenged findings of fact made by the primary Judge. For reasons analogous to those I gave in Empire Securities Group Pty Limited v Novus Capital Limited [2026] NSWSC 83 at [14]-[21], it is my view the plaintiff was entitled to bring this aspect of her appeal as of right under s 39 of the Local Court Act. If I am wrong in that view, I would nevertheless have granted her leave to bring this aspect of her appeal.
At the heart of this aspect of the appeal lies special condition 3. It provided that:
“The contract price and tender price is valid as long as construction has commenced (in the form of site excavation by [the defendant] within 180 days of the contract being signed. [The defendant] reserves the right to revise all tender and contract prices in line with the current pricing structure should this be delayed past this time. The variation will be issued for the additional pricing. By signing of this contract, you agree to these terms”.
“Clause 18. Variations
18.1 A variation must be in writing and signed by or on behalf of the builder and the owner. Either the owner or the builder may ask for a variation.
18.2 If the owner asks for a variation, the builder must reply in writing as soon as is reasonable.
18.3 The reply is to be either:
(a) a signed written offer to carry out the variation detailing:
(i) the work required to carry out the variation;
(ii) the price of the variation; and
(iii) any extension of time to the building period as a result of carrying out the variation; or
(b) a refusal to carry out the variation. The builder does not have to give any reasons for refusing to carry out a variation.
18.4 If the owner does not give to the builder signed written acceptance of the builder’s offer within 5 working days of the builder giving the reply, the builder’s offer is deemed to be withdrawn.
…
18.6 The price of a variation is due and payable at the next progress payment after it is carried out unless a different time is agreed.
…”
(Emphasis in original).
“Clause 27. Ending the Contract – Breach
…
27.2 A substantial breach of this contract by the owner includes but is not limited to if the owner:
(a) fails to pay any amount by the due date;
(b) fails to give evidence of ability to pay as requested;
(c) fails to establish and maintain a security account if requested;
(d) interferes with or obstructs the progress of the building works;
(e) fails to give or interferes with the builder’s possession of the site;
(f) fails to give an instruction or direction required within the time specified.
27.3 If a party is in substantial breach of this contract the other party may give the party in breach a written notice stating:
(a) details of the breach; and
(b) that, if the breach is not remedied within 10 working days, that party is entitled to end this contract.
27.4 If 10 working days have passed since the notice of default is given and the breach is not remedied then the party giving the notice of default may end this contract by giving a further written notice to that effect.
…
Clause 29. Effect of the Builder Ending the Contract
29.1 If the builder ends this contract under Clause 14, Clause 26, Clause 27 or Clause 28, then at the election of the builder, the owner, must pay as a debt due and payable either:
(a) the greater of the cost of or the market value of the building works to date including the cost of any materials on the site or already ordered from suppliers and the cost of quitting the site less the amount already paid by the owner; or
(b) damages.”
(Emphasis in original).
“[75] Three core principles emerge from what French CJ, Hayne, Crennan and Kiefel JJ said in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]:
(1) The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean.
(2) That requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. That, in turn, is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating.
(3) Unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result. The contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.
[76] Notwithstanding these three core principles, as French CJ, Nettle and Gordon JJ stated in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [48], ‘ordinarily this process of construction is possible by reference to the contract alone’.
[77] As Allsop P observed in Onesteel Manufacturing Pty Ltd v Bluescope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1 at [61], the analysis is an objective one that can produce only one true meaning. The process of construction is not a process necessarily concluded by logical reason or a priori analysis. It involves the weighing of differing considerations partly logical and partly intuitive (though rational) leading to a choice. Analysis of competing arguments assists in that process, but the ‘correct’ answer is not arrived at merely by seeing which side has the greater number of “good” points.
[78] As Leeming JA observed in Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561…at [53], the starting point is to determine the literal or grammatical meaning or meanings of the clause. Second, one determines the legal meaning of the clause. Whereas here, there are several clauses of the agreement to be construed, it is clear that every provision must be read, together and construed with the others, so as to render, as far as possible, the provisions harmonious with each other: see Herzfeld and Prince, Interpretation (3rd ed, 2024, Thomson Reuters) at [22.30] and the cases cited therein. This is with a view to the legal meaning reflecting a measure of internal coherence: see HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 (HP Mercantile) at [134] per Leeming JA.
[79] Where there is more than one available legal meaning, a court looks at the text, context and purpose with a view to determining which potential meaning best accords with those considerations. An iterative process is called for – checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences.
[80] As Leeming JA further observed in HP Mercantile at [134]:
…The process of working through the consequences of the competing literal or grammatical meanings enables a court to assess whether either party’s preferred legal meaning gives rise to a result that is more or less internally consistent and avoids commercial absurdity.”
By the time BV-2 came to be issued by the defendant, well more than 180 days had passed since the contract was signed. It was common ground between the parties that, in these circumstances, special condition 3 operated to relieve the defendant of its obligation to carry out the building works contemplated by the contract for the originally agreed contract price. This much is clear on its face. The parties disagreed as to what other rights and obligations arose out of special condition 3 in these circumstances.
The plaintiff initially submitted that she was bound by special condition 3 to pay any increased price that might be proffered by the defendant under that special condition if work had not commenced after 180 days; the only limitation being that the new price needed to be “in line with the current pricing structure”. This submission was seemingly advanced to answer the primary Judge’s finding that the plaintiff had failed to give an instruction or direction to carry out the building works for the increased price specified in BV-2 — the argument being that if she was bound to pay the increased price, no instruction or direction from the plaintiff was actually required.
I do not accept that this construction of special condition 3 reflects the intention of the parties, as objectively ascertained in the sense discussed in the above extract from Union Fidelity Finance.
It is inherently unlikely that the parties intended that the plaintiff would — after 180 days — become liable to pay whatever new price might be put forward by the defendant.
Such a construction is inconsistent with the clear recognition in other terms of the contract that the plaintiff was borrowing money from a lending institution to fund the building works. She was expressly required by cl 4.1 to provide written advice from the lending institution that the funds being advanced — when combined with the plaintiff’s own money — would be sufficient to pay the original contract price. This confirmation was required to be given within 15 days of the contract being signed.
Nothing in special condition 3 or cl 4.1 can be construed as requiring that this confirmation process be revisited if a new price is proffered under that special condition. On the plaintiff’s primary construction of special condition 3, she would be bound by a new contract price which she may not have the means to pay. Moreover, the defendant would also be bound to perform the building works in those commercially disadvantageous circumstances.
It may be accepted that views may — and often will — vary on what constitutes a “businesslike interpretation” or “commercial result”, and that judges are rarely well placed to make a properly informed assessment of this: Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679; [2019] NSWCA 185 at [58]. However, for the reason identified in the above paragraph, the plaintiff’s primary construction produces an outcome which might be simultaneously deleterious to both parties. In my view, this is most unlikely to reflect the common intention of the parties when they entered the contract.
The plaintiff’s suggestion that the defendant was only entitled to proffer a new price “in line with the current pricing structure” is no answer to this problem. That phrase does not address the plaintiff’s capacity to pay whatever price it might produce and is, in any event, largely meaningless.
The construction of special condition 3 propounded by the defendant is equally problematic. On its case, the parties agreed through special condition 3 to vary the contract if the building works had not commenced within 180 days of the contract being signed. While the defendant contended that the plaintiff was not bound by special condition 3 to accept any new price which might be put forward by the defendant, it said that she was required to choose between:
instructing or directing the defendant to proceed with the building work at the new price; or
not giving such an instruction or direction – which, on the defendant’s case, would include giving an instruction or direction not to proceed with the building works at the new price – and, thereby, commit “a substantial breach” of the contract in the sense contemplated by cl 27.2.
The express terms of the contract make clear that “a substantial breach of the contract” by the plaintiff gave the defendant a right to bring it to an end and recover damages: cll 27.4 and 29.1. When this is recognised, the practical difference between the defendant’s construction of special condition 3 and that propounded by the plaintiff in this Court is so subtle as to be almost indiscernible.
The reasons of the primary Judge make clear that her Honour adopted the defendant’s construction of special condition 3; entering judgement against the plaintiff. By doing so, her Honour fell into error.
An important element of the defendant’s construction of special condition 3 is its contention that the word “variation”, where used in that special condition, should be construed as a contractual variation in a general sense rather than as a reference to the specific concept addressed in cl 18 of the contract. This distinction is central to the primary Judge’s conclusion that the plaintiff was required to instruct or direct the defendant to proceed in accordance with BV-2.
In my view, the word “variation” used in special condition 3 should instead be construed as a reference to a variation of the type expressly contemplated by cl 18. This approach was ultimately embraced by the plaintiff as an alternative position.
The term “variation” has a special and recognised meaning when used in the context of legal discourse about building contracts. That commonly understood meaning is reflected in the way in which the word is used in cl 18 of the contract. It should be given that meaning wherever it appears in the contract unless there are other factors present that show that it was not intended by the parties to be used in that way: Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [174].
An important factor — said by the defendant to show that the word was not intended by the parties to be used in that way when deployed in special condition 3 — is the fact that the definition of “variation” found in cl 1.1 of the contract is not wide enough to capture a variation of the type contemplated by special condition 3.
That definition expressly provides that the word “variation” means:
“(a) an omission, addition or change to the building works; or
(b) a change in the manner of carrying out the building works”
(Emphasis in original).
“the building works to be carried out, completed and handed over to the owner in accordance with this contract as shown in the contract documents and includes variations.” (Emphasis in original).
It may be accepted that the definition of “variation” expressly provided in cl 1.1 of the contract does not readily accommodate a variation of the type contemplated by special condition 3. However, the words used in that special condition have been specifically chosen by the parties and added to those found in the standard form agreement prepared by the Housing Industry Association that the parties had otherwise adopted.
Where, as here, an inconsistency arises between the terms of a standard form contract and words added to those standard terms by the parties, greater weight is ordinarily given to the words added by the parties: Ryan v Ferguson (1909) 8 CLR 731 at 735-736 per Griffith CJ (with whom O’Connor J agreed); Walker v Citigroup Global Markets Australia Holdings Pty Ltd [2006] FCAFC 101; (2006) 233 ALR 687 at [77]. As was noted by Ball J in NEXTracker Inc v CAN 003 905 093 Pty Ltd [2019] NSWSC 1604 at [26], that principle reflects a presumption that the words specifically chosen by the parties are more likely to reflect their intentions than the words of a standard form which they have chosen to incorporate into their contract.
Applying that principle to the contract, it is my view that — recognising that the definition of “variation” found in cl 1.1 would not readily accommodate a change to the contract price where the building works had not been commenced within an agreed period — the parties nevertheless agreed, through special condition 3, to expand the circumstances in which a variation could be issued under cl 18 to include those specifically contemplated by that special condition.
Further support for this proposition can be drawn from the fact that the contract was governed by the Home Building Act 1989 (NSW), of which s 7(5) relevantly provides that:
If the contract price … may be varied under the contract, the contract must contain a warning to that effect and an explanation of the effect of the provision allowing variation of the price. The warning and explanation must be placed next to the price if the price is known.
Parties that contract in respect of statutory rights are ordinarily taken to use statutory language according to its statutory meaning, which is central to the matrix of facts within the context of which the common intention of the parties falls to be objectively determined: H Lundbeck A/S v Sandoz Pty Ltd (2022) 276 CLR 170; [2022] HCA 4 at [51].
As I have already noted, a warning of the type contemplated by s 7 of the Home Building Act did appear beneath the contract price in Schedule 1 to the contract. That warning expressly referred to cl 18 and several other terms. The warning made no reference to special condition 3. In my view this is entirely consistent with an approach to that special condition whereby the potential increase in the contract price which it contemplates is facilitated through the mechanism provided by cl 18 of the contract.
The consequence of this different approach to the word “variation” in special condition 3 is material because cl 18 of the contract does not impose upon the recipient of a variation any obligation to respond unless the variation relates to building works required by law or any statutory or other authority; BV-2 did not. To the contrary, cl 18.4 expressly contemplated the situation in which the plaintiff failed to give the defendant “signed written acceptance of” BV-2. In this circumstance, the offer contained in BV-2 was deemed by the contract to have been withdrawn. The consequences of this withdrawal are existential from the perspective of both the contract and the building works. Nevertheless, it is in my view likely that this reflects the objectives intention of the parties.
Special condition 3 is only engaged where the building works have not actually commenced within 180 days of the contract having been executed. It is understandable why a party in the position of the defendant would wish to shield itself from any increases in the costs of the building works or other changes in prevailing market conditions that might have occurred during those 180 days. However, the party in the position of the plaintiff remains bound to pay the original contract price.
In this respect, special condition 3 does favour the defendant; it gives the defendant a choice. It can seek to increase the contract price by issuing a variation. If the plaintiff accepts this variation, the contract price is increased. If not, the offer to carry out the building works for the increased price is deemed to be withdrawn. As the defendant is no longer bound to carry out the works for the original contract price it is at liberty to walk away from the contract without consequence. However, the rights provided through the combined operation of cll 27.2, 27.4, and 29.1 of the contract are not enlivened in these circumstances.
In resisting this conclusion, the defendant pointed to the fact that a party in its position may have incurred — and in its case did incur — costs associated with taking steps in preparation for the works which had not been commenced within the 180 day window contemplated by special condition 3. It said that there is nothing inherently uncommercial about an approach to the contract whereby it would be entitled to recover such costs from the plaintiff if she chose not to “instruct or direct” that the building works go ahead for any revised contract price proffered under special condition 3.
The commerciality of this outcome is likely to be viewed differently by the parties. It will also be informed by the circumstances leading to any delay and the extent (if any) to which responsibility for the delay might be attributed to one party or the other. Other than causes of delay expressly addressed in the terms of the contract, the parties are to be taken to have agreed that loss (if any) will lie where it falls in the event that special condition 3 precipitates the abandonment of the contract.
In this respect, I note again that cl 14 of the contract does provide expressly for the outcome contended for by the defendant where any delay in the commencement or continuation of the works is attributable to the discovery of surface or subsurface conditions likely to affect the building works; this includes the discovery of asbestos.
The defendant could have commissioned a consultant to report on the effect that the discovery of asbestos would have on the building works and the plaintiff would have been required to pay for that report: cl 14.1. Having received the report, the defendant would have been entitled to issue a notice to the plaintiff “detailing the details of any extra work required and the estimated cost of that work”: cl 14.2. Having done so, the plaintiff would have had five working days to confirm, in writing, that the defendant was authorised to proceed with the extra work: cl 14.3(a). If it did so, the plaintiff would have been required to pay the additional costs associated with that work: cl 14.3(b). If the plaintiff did not authorise the extra work, the defendant would have been permitted by cl 14.4(b) to bring the contract to an end and exercise its rights under cl 29.1 to recover any costs it had incurred or damages (whichever is greater).
For reasons not explored before the primary Judge or in this Court, the defendant chose not to avail itself of the mechanism provided by cl 14 when it discovered asbestos at the property.
For the above reasons, I would uphold Ground 2.
Ground 4 relates to the primary Judge’s assessment of damages. Through this ground, the plaintiff contended that the primary Judge erred by:
failing to apply the correct principle, namely, that the plaintiff could only be liable for losses that were caused by her breach; and
failing to give reasons for determining that the plaintiff was so liable.
As I have upheld Ground 2 of the plaintiff’s appeal, Ground 4 does not arise. Were this not the case, I would nevertheless have refused leave to bring that aspect of the plaintiff’s appeal.
As Ground 4 raises a question of mixed law and fact, it can only be brought with leave: s40(1) Local Court Act. Leave was not opposed by the defendant. However, to obtain leave to appeal, an applicant must ordinarily demonstrate that there is an issue of principle, a question of public importance or a clear injustice which is more than merely arguable: see Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118 at [15] and the cases cited therein.
Ground 4 does not raise any issue of principle or question of public importance. I am also not satisfied that the plaintiff has demonstrated that the error alleged in Ground 4 has produced any injustice, let alone one that is clear and more than merely arguable.
In this Court, the plaintiff asserted that the primary Judge did not find that the losses claimed by the defendant had been relevantly caused by the breach of the contract which her Honour found to have been established. On this basis, it was said that the primary Judge’s acceptance that the moneys claimed by the defendants were recoverable necessarily embodied an error of principle.
The defendant responded by contending that it was entitled to recover what it characterised as wasted expenditure as a species of “expectation damages” of the type recently considered in Cessnock City Council v 123 259 932 Pty Ltd (2024) 281 CLR 39; [2024] HCA 17.
The principles to be applied in assessing damages received very subtle treatment in the plaintiff’s submissions to the primary Judge. Clause 29 of the contract does not appear to have been addressed by the plaintiff in those submissions. The primary Judge’s reasons must be viewed in this context.
If the defendant was entitled to bring the contract to an end pursuant to cl 27.4, any entitlement it may have had to recover costs incurred up to that point arose under cl 29.1. The reasons and factual findings of the primary Judge are not structured around the requirements of cl 29.1. Whether the primary Judge was — or would have been — satisfied the requirements of cl 29.1(a) or (b) had been established by the defendant’s evidence cannot now be teased out of the findings made by her Honour. This is, in large part, a product of the way the case was presented by the parties in the Local Court. The plaintiff should not now be granted leave to revisit that approach through the auspices of Ground 4.
For the reasons I have given above, I make the following orders:
Pursuant to Uniform Civil Procedure Rules 2005 r 50.3(1)(c), the time within which the plaintiff may bring her appeal from the decision of the Primary Judge is extended to 7 January 2027.
Pursuant to s 41 of the Local Court Act 2007 (NSW), the judgment and orders of the Local Court made on 9 October 2025 are set aside and, in lieu thereof:
(a) The Local Court proceedings are dismissed. (b) The defendant is to pay the plaintiff’s costs of the Local Court proceedings.
(a) That application should include submissions of not more than 2 pages and any necessary evidence; (b) The other party may serve and provide to my Associate responsive submissions of not more than 2 pages and any necessary evidence by 4pm 12 July 2026; and (c) I will determine the question of costs on the papers.
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Khan
Fairmont Homes (NSW) Pty Ltd
(2024) 281 CLR 39
(2022) 108 NSWLR 342
(2019) 101 NSWLR 679
(2022) 276 CLR 170
(1909) 8 CLR 731
(2006) 233 ALR 687
(2014) 251 CLR 640
(2015) 256 CLR 104
(2013) 85 NSWLR 1
(2016) 93 NSWLR 561