Sharma v Luxy Homes Pty Ltd [2026] NSWCATCD 2;

(1) the Respondent refund the sum of $25,880;

(2) a declaration that the contract is terminated due to the Respondent's breach;

(3) the Respondent compensate the Homeowners for interest losses, lost rental income, and stress; and

(4) the Respondent pay the costs of the application.

1. At the hearing, the Homeowners appeared in person. The Builder was represented by its solicitor, Mr Chen.

1. The jurisdiction of the Tribunal in this matter is conferred by ss 28 and 29 of the Civil and Administrative Tribunal Act 2013 (NSW) (CATA). Section 28 CATA confers general jurisdiction on the Tribunal, and s 29 provides for a further jurisdiction over matters where specifically enabled by other legislation.
2. In this matter, the HBA is the enabling legislation. Section 48K HBA confers jurisdiction on the Tribunal to hear and determine any building claim brought before it in which the amount claimed does not exceed $500,000.
3. The work the subject of the contract involves the construction of a new dwelling. The Tribunal is satisfied that this work is 'residential building work' within the meaning of clause 2(1) of Schedule 1 of the HBA.
4. The claim made by the Homeowners is a 'building claim' within the meaning of s 48A HBA. The Respondent submits that the claim is not a building claim, and that the Tribunal does not have jurisdiction to determine it, on the basis that the money paid was consideration under the Preliminary Works Authorisation and not the Building Contract, and that the Preliminary Works Authorisation is not an agreement for the supply of building goods or services. I do not accept that submission.
5. The preliminary works as defined in the Preliminary Works Authorisation, which include arranging site inspections, preparing plans and specifications, and submitting plans to authorities, fall within the definition of "building goods or services". They are services supplied "for or in connection with the carrying out of residential building work" to be supplied by the Builder who contracted to do that work. That preparatory works are included in the definition of residential building work is well established; Grygiel v Baine [2005] NSWCA 218; Syed Ahmad Shoaib Ali Pty Ltd v Jandson Pty Ltd [2018] NSWCATAP 228 at [293]. It follows that the Homeowners' claim, which seeks the refund of money paid for the supply of those services, is a building claim.
6. The monetary amount sought in the application is within the jurisdictional limit prescribed by s 48K HBA. The application has been brought within the time limits prescribed by ss 18E and 48K HBA. The Tribunal is therefore satisfied that it has jurisdiction to hear and determine this matter.

1. In determining this matter, the Tribunal has had regard to the following:

(1) two bundles of documents lodged in the Tribunal on 21 May 2025 by the Homeowners, marked as Exhibit A1 and Exhibit A2;

(2) bundle of documents lodged in the Tribunal on 25 July 2025 by the Builder, marked as Exhibit R1;

(3) bundle of documents lodged in the Tribunal on 8 August 2025 by the Homeowners, marked as Exhibit A3;

(4) bundle of documents lodged in the Tribunal on 22 September 2025 by the Builder, marked as Exhibit R2; and

(5) sworn oral evidence given at the hearing by Mr Tarun Sharma, Mrs Sarita Chavan Sharma, and the Builder's director, Mr Hanqing Liu.

1. Where relevant, the specific documentary and oral evidence relied upon are described in the Tribunal's findings below.

1. In order to resolve the application, the Tribunal must determine the following issues;

(1) what is the nature of the contractual relationship between the parties, having regard to the PWA and the Building Contract;

(2) whether the sum of $25,880 paid by the Homeowners was a fee under the PWA or a deposit under the Building Contract;

(3) whether the Builder breached the HBA or the Building Contract, specifically in relation to;

(a) the requirement to provide a certificate of insurance under s 92 HBA before demanding or receiving payment;

(b) the validity of the price variation notice issued on 31 January 2024; and

(c) whether the Builder's conduct, including the issuing of the price variation and the proposal to novate the contract to Code Homes, amounted to a repudiation of the contract;

(4) if a repudiation is established, whether the Homeowners validly accepted the repudiation and terminated the contract;

(5) if the contract was validly terminated by the Homeowners, what is the appropriate remedy, having regard to;

(a) the Homeowners' claim for a refund of the $25,880;

(b) the Homeowners' claim for consequential losses; and

(c) the claim for the costs of the application.

1. Each of those issues are considered as necessary below.

1. A central point of contention is the legal nature of the relationship between the PWA and the Building Contract.
2. The Builder contends that these are two distinct and independent agreements with separate purposes. It was submitted that the PWA was an agreement solely for preliminary works to be conducted prior to the Homeowners taking ownership of the land, and that the sum of $25,880 was a fee for those services, not a deposit under the Building Contract.
3. The Homeowners contend that the two documents form a single, integrated agreement for the construction of their dwelling. They submit that the PWA was merely a precursor to the main build and that the $25,880 paid was, and was always intended to be, the deposit for the Building Contract. They point to Schedule 1 of the Building Contract, which explicitly lists the deposit amount as being $25,880.
4. While presented as two separate documents, I find that the PWA and the Building Contract are inextricably linked and interdependent. The PWA itself, at its preamble, defines the "Building Contract" as "The HIA contract... provided to the Owner around the same time of this agreement". Further, clause 4 of the PWA expressly contemplates that the "Fee" paid under it "may be credited towards the Building Contract" once certain conditions are met, including the owner entering into the Building Contract.
5. Most significantly, Schedule 1, Item 2(b) of the Building Contract, which was signed by both parties, identifies the deposit as being "$25,880.00". This amount is identical to the fee payable under the PWA. I find that the effect of these interlocking provisions is that the PWA serves as an initial part of a single, unified transaction for the construction of the dwelling. The payment made under the PWA was clearly intended by both parties to become the deposit under the Building Contract upon the satisfaction of certain conditions. I find that the arrangement constitutes one agreement, documented in two parts.

The $25,880 Payment and Home Warranty Insurance

1. I find that the payment of $25,880 was a deposit made under the Building Contract. The primary basis for this finding is the clear and unambiguous wording of the Building Contract itself. Schedule 1, Item 2(b) of the Building Contract, a document prepared and signed by both parties, explicitly states: "THE DEPOSIT IS: $25,880.00". The Builder cannot now resile from the plain meaning of a document it has executed.
2. The Builder's submission that the payment was a separate 'fee' under the PWA, and that the conditions for it to be credited as a deposit were never met, is not accepted. The legal character of the payment is determined by its substance and the overall contractual arrangement. The PWA and the Building Contract are inextricably linked components of a single transaction for the construction of a dwelling. The payment, regardless of its initial label in the PWA, was a prerequisite sum paid to secure the Builder's obligations for the entire project. Its ultimate characterisation is confirmed by the express terms of the Building Contract.
3. Section 92(2) of the HBA prohibits a builder from demanding or receiving any payment under a contract for residential building work, whether as a deposit or other payment, unless and until a contract of insurance that complies with the HBA is in force and a certificate of insurance has been provided to the other party.
4. It is common ground between the parties that no certificate of home warranty insurance was provided to the Homeowners prior to the payment of the $25,880, or at any time thereafter. In receiving this payment, which I have found to be a deposit under the Building Contract, the Builder acted in direct contravention of the clear prohibition in s 92(2) HBA. The effect of that breach is prescribed by s 94 HBA, which renders the contract unenforceable by the builder.

1. The central issue in determining whether the contract was repudiated revolves around the "Price Increase Notice" issued by the Builder on 31 January 2024. This notice purported to increase the contract price by twelve and one half percent. The proper construction of the contractual clauses underpinning this demand is determinative of the issue.
2. At the hearing, the Builder's representative, Mr Chen, submitted that the twelve and one half percent increase was justified under two distinct contractual provisions; a five percent increase exclusive of GST pursuant to Special Condition 3.2.2, and a further seven percent increase inclusive of GST pursuant to Clause 15 of the General Conditions. I will consider the contractual validity of each component of the claimed increase in turn.

Special Condition 3.2.2 - Delay in Land Settlement

1. Special Condition 3.2.2 of the Building Contract provides that if the Homeowners did not complete their purchase of the land before 1 April 2023, the Builder is entitled to increase the contract price by two and one half percent exclusive of GST on that date, and on each subsequent six month anniversary, by serving a written notice.
2. It is an agreed fact that the Homeowners settled their land purchase on 12 January 2024. That date is clearly after the 1 April 2023 threshold and accordingly, the condition precedent for the Builder to claim a price increase under this clause was met. Pursuant to the clause, the Builder was entitled to an increase of two and one half percent exclusive of GST as of 1 April 2023, and a further two and one half percent exclusive of GST as of 1 October 2023. As at the date of the Price Increase Notice on 31 January 2024, the Builder had a total accrued entitlement under this special condition to an increase of five percent exclusive of GST.
3. I therefore find that the first component of the Builder's price variation demand, being an increase of five percent plus GST, was contractually valid under Special Condition 3.2.2.

1. The Builder sought to justify the remaining seven percent of its twelve and one half percent price increase by relying on clause 15 of the Building Contract. This clause permits a price adjustment where a "statutory or other authority introduces or increases... any requirement that affects the building works that causes any increase in the cost of the building works". The basis for this claim was not specified in the notice itself, nor in the Builder's filed submissions. It was only during oral submissions at the hearing that the Builder's solicitor, Mr Chen, submitted for the first time that changes to BASIX requirements arising from the State Environmental Planning Policy (Sustainable Buildings) 2022 (NSW) (the SEPP) had triggered the Builder's entitlement to an increase under clause 15 of the Building Contract. When specifically questioned by the Tribunal however, Mr Chen was unable to identify the amending instrument that caused the change but gave "June of 2024" as the time the changes relied upon took effect.
2. I have reviewed the legislative history of the SEPP. As at 31 January 2024, when the Builder issued its notice, there were no amendments that had recently commenced or were about to commence in 2024 that related to the substantive technical building standards as claimed. The only relevant amending instrument that could possibly be the one referred to by the Builder is the State Environmental Planning Policy Amendment (Estimated Development Cost) 2023 (NSW) (EPI 523), which commenced on 4 March 2024 but did not alter any technical building requirements. Its purpose was to standardise the methodology for calculating a project's "Estimated Development Cost" to determine planning fees and assessment pathways. Those are administrative costs, and not costs of the "building works" as defined by the contract and required by clause 15.
3. The Builder has therefore failed to identify any legislative change that could enliven its right to claim a price increase under clause 15. The justification provided at the hearing; an increase in BASIX standards, is not supported by the record of legislative amendment for the relevant period. There is no evidence of a "requirement" that was "introduced" by a "statutory or other authority" that caused an "increase in the cost of the building works". The submissions of the builder relating to Clause 15 appear to be entirely without contractual or factual foundation.

1. Whilst the Builder was entitled to claim an increase of five percent plus GST under Special Condition 3.2.2, it did not confine its demand to that amount. Instead, it unlawfully demanded a total increase of twelve and one half percent, making its performance of the contract conditional upon the Homeowners' acceptance of the increased price.
2. By insisting on performance for a price substantially greater than its contractual entitlement, the Builder demonstrated an intention to no longer be bound by the contract according to its actual terms. This constituted a repudiation of an essential term of the contract. The repudiatory conduct is not excused by the fact that part of the price increase demand was valid; the demand for the whole twelve and one half percent exclusive of GST was what was communicated as the basis for future performance.
3. This finding is reinforced by the context in which the notice was issued. The notice actively steered the Homeowners towards a different builder, Code Homes. The Homeowner, Mr Sharma, gave uncontested evidence that he was told Luxy Homes was no longer building in the area, leaving him feeling "cornered". This conduct, viewed objectively, demonstrates a clear intention by the Builder to no longer perform the contract itself.
4. I find that the Builder's conduct, comprising the demand for a price increase to which it was not contractually entitled and the simultaneous attempt to novate the contract to a third party, made it plain that it was not prepared to perform its obligations under the Building Contract. That conduct, in its totality, amounted to a repudiation of the contract.

1. Having found that the Builder repudiated the Building Contract on 31 January 2024, the next issue to be considered is whether the Homeowners validly accepted that repudiation and terminated the contract.
2. When faced with a repudiation, an innocent party has an election. It may either accept the repudiation, thereby bringing the contract to an end and suing for damages, or it may affirm the contract, in which case the contract remains on foot for the benefit and burden of both parties.
3. The evidence shows that following the Builder's repudiatory conduct, the Homeowners did not immediately terminate the contract. Instead, acting on the Builder's proposal, they engaged in lengthy negotiations with the alternative builder, Code Homes, between February and December 2024. These negotiations, which were facilitated by the Builder, ultimately failed to produce an agreement on terms acceptable to both parties.
4. The Builder submitted at the hearing that its contract with the Homeowners remained on foot. The implication of this submission is that by engaging in the lengthy negotiations with Code Homes, the Homeowners had affirmed the contract. I do not accept that. The negotiations with Code Homes were a direct consequence of the Builder's own repudiatory conduct and the specific alternative it had presented. Exploring an alternative path proposed by the repudiating party does not, in these circumstances, amount to an unequivocal affirmation of the original contract. It was an attempt by the Homeowners to find a workable solution to the predicament created by the Builder.
5. After the negotiations with Code Homes failed, the Homeowners formally communicated their position to the Builder. On 4 March 2025, Mr Sharma sent an email to the Builder which served as a "Formal Notice to Terminate the contract and refund my deposit".
6. I find that notice to be a clear and unequivocal act of accepting the Builder's repudiation by which the Homeowners elected to bring the contract to an end.
7. Therefore, I find that the Building Contract was validly terminated by the Homeowners on 4 March 2025 as a consequence of their acceptance of the Builder's repudiation.

1. Having found that the Builder repudiated the Building Contract and that the Homeowners validly terminated it, I now turn to the question of the appropriate remedy.
2. The primary remedy for a breach of contract is an award of damages that places the innocent party in the same position they would have been in had the contract been performed. In building cases where work is defective, the ordinary measure is the cost of rectification works necessary to achieve conformity with the contract, subject to the work being necessary and reasonable; Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613. The test for unreasonableness is a stringent one, satisfied only in "fairly exceptional circumstances"; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272.
3. However, this is not a case of rectifying defective work. This is a case where the Builder has repudiated the contract before any "building works" commenced, and the Homeowners seek the return of the deposit paid. This engages principles of restitution for a total failure of consideration.
4. The Homeowners' primary claim is for a full refund of the $25,880 they paid to the Builder. I have already found that this payment constituted a deposit under the Building Contract, and that it was taken by the Builder in breach of s 92(2) HBA.
5. It is common ground that the Builder performed no physical construction work on the site. The payment of the deposit was made in anticipation of the Builder performing its obligations under the contract, namely, to construct a dwelling. As a result of the Builder's repudiation and the subsequent termination of the contract, the basis for the payment has wholly failed. There has been a total failure of consideration.
6. The Builder is therefore not entitled to retain the deposit. Its right to retain the payment was contingent on the contract remaining on foot and its own performance of its obligations. Having repudiated the contract, the Builder cannot seek to enforce its terms or benefit from its own wrongful act. The Homeowners are entitled to be restored to the position they were in prior to entering the contract by having the deposit returned to them in full.
7. Further, the Builder's right to retain any money is defeated by its breach of the HBA. As the payment was received in contravention of s 92(2) HBA, s 94 HBA operates to make the contract unenforceable by the Builder. The Builder is not entitled to damages or to enforce any other remedy, which includes any right to retain the deposit. The circumstances are similar to those in Champion Home Sales Pty Ltd v Voulgaris [2024] NSWCATAP 244 where the Appeal Panel upheld a decision dismissing a builder's claim for damages where no certificate of insurance had been provided.
8. The Tribunal is aware of the recent Appeal Panel decision in Luxy Homes Pty Ltd v Li [2025] NSWCATAP 320 (Li), which allowed an appeal by the present Respondent and set aside a similar refund order made at first instance. However, that matter is distinguishable from the present case, as the appeal was allowed and the matter remitted on the basis of a denial of procedural fairness, as the Tribunal had determined the matter on the basis of repudiation without that issue having been properly pleaded or argued by the parties. In the present matter, the issue of repudiation was squarely before the Tribunal and was the subject of submissions from both Mr Sharma and the Builder's representative, Mr Chen.
9. For these reasons, I am satisfied that the appropriate remedy is an order that the Builder refund the full amount of the deposit of $25,880 to the Homeowners.

1. The Homeowners also seek compensation for interest losses, lost rental income, and stress. At the hearing, the Homeowner, Mr Sharma, was asked how this amount was calculated and what evidence he relied upon for this part of his claim. He stated he had done a calculation of around $14,000 for interest paid on the land but conceded, "I haven't done precise calculations" and had not tendered the bank statements or other evidence upon which the claim was based.
2. A party claiming damages bears the onus of proving the loss it has suffered. It is not for the Tribunal to speculate or calculate a sum on behalf of a party. In the absence of any calculations or evidence to substantiate these claimed losses, this part of the Homeowners' application must fail.

1. At the conclusion of the hearing, both parties made oral applications for their costs of the proceedings. The power of the Tribunal to award costs is governed by s 60 CATA. Section 60(1) establishes the general rule that each party is to pay their own costs.
2. While the Tribunal may award costs if satisfied that special circumstances exist, Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014 (NSW) provides a separate basis for a costs order. It provides that, despite s 60 of the CATA, the Tribunal may award costs if "the amount claimed or in dispute in the proceedings is more than $30,000".
3. In this matter, the Homeowners' application sought a refund of the $25,880 deposit and compensation for consequential losses, which Mr Sharma estimated at the hearing to be approximately $14,000. The total monetary value of the claim brought before the Tribunal was therefore in the order of $39,880. As that amount exceeds the $30,000 threshold, the Tribunal's discretion to award costs is enlivened under rule 38(2)(b).
4. However, the fact that the discretion is enlivened does not mean that a costs order must be made. The Tribunal must consider whether, in all the circumstances, an award of costs is fair and equitable. This often involves an assessment of the relative success of the parties on the issues in dispute.
5. In these proceedings, success has been divided. The Homeowners have been entirely successful in their primary claim for the refund of the deposit. However, they were entirely unsuccessful in their claim for consequential losses, which constituted a significant monetary component of the relief they sought.
6. Conversely, the Builder has been entirely unsuccessful in its defence of the claim for the deposit. It has been found to have breached the HBA and repudiated the Building Contract. However, the Builder was entirely successful in defending the claim for consequential losses.
7. Where both parties have had a measure of success and failure on the substantive issues before the Tribunal, it is often appropriate that no order as to costs be made. Neither party has been wholly successful. In circumstances of such divided success, I am not satisfied that it is appropriate to depart from the general rule provided for in s 60(1) CATA.
8. Accordingly, both parties' applications for costs are dismissed. Each party will bear their own costs of the proceedings.

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