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Representation: Counsel:
M Klooster (Plaintiffs/Cross-Defendants/Applicants)
Solicitors:
G&S Law Group (Plaintiffs/Cross-Defendants/Applicants)
Hicksons (Second Defendant)

File Number(s): 2022/72717

JUDGMENT

1. The plaintiffs are the owners of residential property at Rosehill (the “Property”).

2. On 15 September 2017, the plaintiffs entered into a contract (the “Contract”) with the first defendant, Dominium Homes Pty Ltd (the “Builder”), for the construction of 10 townhouses on the Property for $2,700,000 inclusive of GST (the “Works”).

3. The Builder commenced the Works on 25 September 2017. Issues arose as to the adequacy of the Builder’s performance of the Works, which the plaintiffs raised with the Builder through a number of breach notices served from October 2019. It appears those issues were not resolved, and the plaintiffs terminated the Contract on 9 March 2022, before the Works were completed.

4. The plaintiffs claim damages for breaches of the statutory warranties implied into the Contract in relation to defects in that portion of the Works completed by the Builder, [1] and the costs of completing the Works insofar as they are otherwise incomplete. The plaintiffs’ claim against the Builder comprises:

| Rectification costs | $1,873,379.24 | | Completion costs: costs to complete the Works as of December 2021 ($1,216,225.49 excluding GST) less the balance payable under the Contract ($119,000) | $1,097,225.49 | | Subtotal 1: | $2,970,604.73 | | 15% uplift in prices since January 2022, when costings of the rectification and completion works were prepared by the plaintiffs’ quantity surveyor | $445,590.71 | | Subtotal 2: | $3,416,195.44 | | GST | $341,619.54 | | Total: | $3,757,814.98 |

5. The Builder was initially legally represented and filed a Technology and Construction List Response and a cross claim against the plaintiffs in November 2022. Its solicitors filed a Notice of Ceasing to Act on 20 June 2024.

6. On 25 June 2024, the plaintiffs filed a Notice of Motion which sought, among other things, that default judgment be entered in their favour, that the Builder’s List Response and cross claim be struck out, and that the matter be listed for a hearing on the assessment of damages.

7. On 8 November 2024, Ball J struck out the Builder’s List Response and cross claim and entered default judgment for the plaintiffs against the Builder.

8. The balance of the plaintiffs’ Notice of Motion, being the order for a hearing on the assessment of damages, was stood over until it came before me in the motions list on 28 February 2025. The Builder did not appear. Having received a court book and written submissions from Mr Klooster, who appeared for the plaintiffs, I suggested, and Mr Klooster agreed, that I should deal with this matter on the papers.

9. On 22 November 2024, I granted the plaintiffs leave to join the NSW Self Insurance Corporation as second defendant to the proceedings, and in that regard the plaintiffs filed a Further Amended Summons and Technology and Construction List Statement on 25 November 2024. That aspect of the proceedings will continue, and insofar as Uniform Civil Procedure Rules 2005 (NSW), r 30.1(3) might otherwise require that the hearing of the assessment of damages as against the Builder proceed at the same time as the hearing of the claim against the second defendant, I dispense with the application of that rule.

Proper approach to the assessment of damages

10. All that remains to be determined, so far as the plaintiffs’ claim against the Builder is concerned, is the appropriate measure of damages to be awarded.

11. The measure of damages for defective building work is the reasonable costs of rectification, so as to give the plaintiff “the equivalent of a building … which is substantially in accordance with the contract”. [2] The rectification work must be “necessary to produce conformity” with the contract and also “must be a reasonable course to adopt”. [3] These are questions of fact to be examined in each case. Such work will only be considered unreasonable in “fairly exceptional circumstances”, such as where the innocent party is “merely using a technical breach to secure an uncovenanted profit”. [4]

The evidence

12. The plaintiffs tendered expert reports from:

13. a building consultant, Mr Elie Farah, whose report deals with general building defects (the “EBC Report”);

14. a building surveyor, Mr Jad Davis, whose report deals with fire and life safety issues (the “Davis Report”); and

15. a quantity surveyor, Mr Kenneth Whyte, whose report deals with the quantification of the cost of completion and rectification works.

16. Mr Klooster’s submissions refer to a report from InCode Solutions dated 20 April 2018, which was a report commissioned by the Builder to provide a solution to address the fire safety of certain openings within the external walls of the sole occupancy units. That report is not an expert report; and, in any event, it is apparent that the Davis Report is the report of importance as it identifies the defects in the Works and is one of the reports relied on by Mr Whyte in the preparation of his costings.

17. Mr Farah inspected the Property over a number of days in November 2021. In his report he says that at the time of inspection, the interior of the Property had reached “lock-up stage”, installation of internal fixings was not complete, external finishes had not been undertaken, [5] and the basement area was at 80% completion. Mr Farah’s report annexes a Scott Schedule identifying the defects said to be present in the Works and the appropriate method of rectification; the photographs in that Scott Schedule clearly reveal that the Works depicted are incomplete and defective.

18. In his report, Mr Davis sets out, in a Scott Schedule, a significant number of systemic issues relating to the fire and life safety of the Works. As with the EBC Report, the photographs in the Davis Report clearly show the Works depicted to be incomplete and defective.

19. Mr Whyte holds qualifications in quantity surveying and has been working in that field for many years. He inspected the Property on 13 December 2021 and prepared a report dated 20 December 2021 setting out his opinion as to the cost of rectifying the defects in the Works and bringing them to completion, including with reference to the contents of the EBC and Davis Reports. He states that the cost of rectifying and completing the Works will be in the order of $3,089,604.73 plus GST, comprising $1,873,379.24 plus GST for rectification costs and $1,216,225.49 plus GST for completion costs. His calculations allow preliminaries in relation to rectification and completion at 25% and 15% respectively, a contractor’s margin to cover the costs of offsite overheads, profit, and risk, and a contingency rate of 10% to allow for unforeseen work associated with rectifying the Works on the basis that more concealed defects may be discovered upon “opening up” the finishes and structures.

20. In his affidavit affirmed on 7 November 2024, Mr Whyte said that he would allow a 15% increase on the pricing in his report to allow for “the rises and fall [sic] of building materials and rates in Sydney … since January 2022”.

Damages

18. The evidence adduced by the plaintiffs satisfies me that the likely total cost of remedying the defects and bringing the Works to completion is $3,757,814.98 inclusive of GST. The evidence before me shows that the proposed work is necessary to produce conformity with the Contract and is the reasonable course to adopt. There is no suggestion in the evidence that the plaintiffs are seeking to secure an uncovenanted profit or that the costs are out of proportion to the benefit to be gained.

19. Although the plaintiffs’ List Statement raised an issue of overpayment to the Builder, that issue was not pressed. Mr Klooster accepted that $119,000 should be deducted from the amount allowed for completion costs. [6]

20. I am also satisfied that it is appropriate to allow an uplift of 15% on the costings in Mr Whyte’s report, noting that that report was prepared over four years ago.

21. It is also appropriate for the plaintiffs to recover an amount equivalent to the GST payable in respect of rectification and completion costs.

22. I enter judgment in favour of the plaintiffs against the Builder in the sum of $3,757,814.98, and order that the Builder pay the plaintiffs’ costs of the proceedings to date on a party/party basis. I order that those costs be payable forthwith.

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Endnotes

Home Building Act 1989 (NSW), s 18B.

Bellgrove v Eldridge (1954) 90 CLR 613 at 617; [1954] HCA 36 (Dixon CJ, Webb and Taylor JJ).

Ibid at 618.

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 at 288; [2009] HCA 8 at [17] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ), citing Radford v de Froberville [1977] 1 WLR 1262 at 1270; [1978] 1 All ER 33 (Oliver J).

Only the construction of planter boxes, concrete steps, and the courtyard slab are complete.

That is, the difference between the contract price of $2,700,000 and the payments of $2,581,000 made to the Builder.