Ozzie Homes Building and Construction Loses Appeal After Court Finds Lock Up Stage Was Not Reached and Suspension of Work Was a Breach of Contract

The Victorian Court of Appeal has overturned a County Court judgment that had awarded $169,750 to a residential builder after it issued a progress payment claim for a disputed lock up stage at a new dwelling in Craigieburn. The Court found that the stage had not been reached because the required external doors had not been installed, that the builder’s subsequent suspension of works was itself a substantial breach of the contract, and that the builder’s separate claim to be paid a fair and reasonable amount outside the terms of the contract also failed. The decision, handed down as Singh v Ozzie Homes Building and Construction Pty Ltd [2026] VSCA 25, is an important outcome for Victorian homeowners under stage based residential building contracts.

The Contract and the Project

In January 2021, Sukhvinder Singh and Rupinder Kaur entered into a standard form Victorian New Homes Contract with Ozzie Homes Building and Construction Pty Ltd for the construction of a new dwelling at 41 Andaman Drive, Craigieburn. The contract divided the works into defined stages, with progress payments falling due only on completion of each stage as prescribed in the contract’s schedule. The lock up stage was defined as the stage at which the home’s external wall cladding and roof covering were fixed, the flooring was laid, and external doors and external windows were fixed, even if those doors or windows were only temporary.

The Disputed Invoice

In February 2022 and then again in May 2022, the builder issued a tax invoice and progress payment claim for $169,750 on the basis that lock up stage had been achieved. The owners refused to pay. They pointed to two critical deficiencies: the front entrance of the home had a fixed sheet of plywood where a door should have been, and the main garage roller door had not been installed at all. The builder characterised the plywood as a temporary door and maintained that the works were complete to a standard of approximately 95 per cent.

The County Court’s Findings

The builder suspended works and in August 2022 issued a notice purporting to terminate the contract on the grounds that the owners were in substantial breach for failing to pay the disputed invoice. The matter proceeded to the County Court of Victoria, where the trial judge found in favour of the builder. The court accepted the expert evidence that the stage was approximately 95 per cent complete and treated the plywood as an acceptable temporary measure. The owners’ counterclaim was dismissed. The owners appealed to the Court of Appeal.

Why the Lock Up Stage Had Not Been Reached

The Court of Appeal rejected the County Court’s reasoning. The Court found that lock up stage required the physical installation of external doors and that the fixed plywood sheet did not satisfy that requirement. The judgment recorded that the builder “had boarded up the opening rather than install a door within the ordinary meaning of the word and could not unilaterally substitute the contractual requirement with something it preferred as ‘more secure’ or ‘practicable’.” On the stage based nature of the contract, the Court confirmed that a divisible stage must be completed in full before a progress payment becomes payable, and that an expert’s opinion that works were “95% complete” was not a substitute for satisfying the contractual definition of the stage.

The Wrongful Suspension

The Court also found that the builder’s decision to suspend works in response to an invoice that had not yet become legally payable was itself a substantial breach of the contract. The contract prescribed a specific procedure that a builder was required to follow before suspending works on the basis of unpaid invoices. The builder had not followed that procedure. By stopping work on the basis of a disputed invoice that was not yet payable, the builder placed itself in substantial breach and was therefore not in a position to terminate the contract for the owners’ alleged failure to pay. The August 2022 termination notice was found to be legally ineffective.

Why the Builder’s Fallback Payment Claim Also Failed

The builder also argued that even if the contractual payment claim failed, it should at least be paid a fair and reasonable amount for the work it had actually carried out on the home, regardless of whether the contract formally entitled it to a payment at that point. This type of fallback claim, where a party asks the court to award reasonable payment for work done even when the contract does not trigger a payment right, requires the court to be satisfied that it would be genuinely unjust to let the other party keep the benefit of that work without paying anything for it. The Court rejected this claim. Because it was the builder, not the owners, who had caused the breakdown, by stopping work without proper contractual authority and issuing an invoice for a stage that had not been completed. The Court found it was not unjust for the owners to retain the benefit of the partial work on their home. The builder could not use this fallback approach to recover money the contract had never entitled it to receive.

What the Owners Recovered

The owners succeeded in part on their counterclaim. The Court found that both parties had mutually abandoned the contract through their conduct, neither having effectively communicated a valid termination to the other. The owners recovered delay damages under clause 40 of the contract, calculated at $250 per week from the contractual completion date of 15 November 2021 to the date of abandonment on 9 August 2022, totalling $9,500. The County Court’s judgment awarding $169,750 to the builder was overturned in full.

The Significance of This Decision for Homeowners

This Court of Appeal decision has practical consequences for homeowners building under standard form Victorian residential contracts. It confirms that a builder is not entitled to claim a progress payment for a stage unless every element of that stage, as defined in the contract, has been physically completed on site. It confirms that a builder who suspends work in response to a disputed invoice that has not yet become payable is in breach, not the homeowner. And it confirms that a builder who has breached its own obligations cannot recover the disputed payment by asking the court to award a fair and reasonable amount outside the contract. That fallback avenue is not available to the party who caused the breakdown. Homeowners who face demands for payment at disputed stages should engage a building lawyer promptly and should not assume that a builder’s determination to stop work means the homeowner must pay to resume it.