The court agreed the work was partly defective and allowed $574,380 to fix it. The owners still lost, and their counterclaim was dismissed. The whole case turned on fifteen days in April and May 2021.
01What it cost
The owners ended the contract. Five years later the court worked out who owed whom.
Two owners engaged a registered domestic builder to build a large two-storey home on a site at Bulla, in Melbourne's north. The contract sum was $6,553,759.42. Construction ran through 2019, 2020 and 2021, across the COVID-19 period.
The relationship broke down. The owners issued a notice to remedy default, then a notice of termination. The builder treated that termination as a repudiation of the contract, accepted it, and sued.
The arithmetic in the reasons runs to a sub-total of $1,272,185.79 including GST, less $574,380.41 including GST for the cost of rectifying defective work, leaving $697,805.38.
Subject to any submissions from the parties as to arithmetic error and in relation to the precise form of order, I propose to make orders to the effect that: (a) Hale is entitled to damages in the sum of $697,805.38 (incl GST). (b) The Owners' counterclaim is dismissed.
02How it unfolded
The termination sequence took fifteen days. The proceeding took more than five years.
03Fifteen days
The notice to remedy default was answered. That is what decided the case.
A notice to remedy default is a step in a contractual process. It puts the builder on notice of an alleged default and gives it the opportunity to answer. What it is not is a countdown that entitles the owner to terminate when it expires.
The builder here responded to the notice, or otherwise sought to remedy the alleged defaults. The court was not satisfied that the owners were then entitled to terminate.
For the reasons I have given, I am not satisfied that the Owners were entitled to terminate the Contract as they purported to do.
Hale asserts that by their attempt to terminate the Contract, the Owners repudiated the Contract. Hale says it accepted that repudiation so as to terminate the Contract at Common Law.
I agree, the conduct of the Owners demonstrated a clear intention no longer to be bound by the Contract. Hale, as the innocent party was entitled to accept that repudiation and to sue for damages.
An owner who terminates without being entitled to do so has not just failed to end the contract. They have repudiated it, and the builder can accept that repudiation and sue for what it would have earned had it been allowed to finish.
The measure of damages follows from that. The court's task was to determine the sum the builder would have recovered had it been given the opportunity to complete the works, applying the principle in Robinson v Harman that the innocent party is to be placed, so far as money can do it, in the same situation as if the contract had been performed.
04The work really was defective
This is the part that makes the outcome worth understanding. The owners were not imagining the problems.
It would be easy to read the result as a court finding for the builder on the merits of the work. It did not. A portion of the works was held defective, the builder was held liable for the cost of rectifying it, and $574,380.41 including GST was deducted from what the builder recovered.
The defects were argued item by item against a joint experts' report running from JER 2 to JER 36. Two experts gave evidence, one retained by each side. The court worked through every disputed item and wrote a separate allowance for each.
Whether the work is defective, and whether you are entitled to end the contract, are decided separately. Winning the first does not win the second. These owners won the first and lost the second, and the second was worth far more than the first.
05Claimed against allowed
The three largest claims in the case, and what the court did with them.
Those three items carried $1,622,479.66 of the owners' case between them. The court allowed ten dollars.
None of the three failed because the builder proved its work was good. Each failed on the evidence put forward to prove the claim.
06Every item that recovered nothing
Six items, and the reason each one failed in the court's own words.
One failed because a photograph was offered where a measurement was needed. One failed because the instruction post-dated the pour. One failed because the contractual standard was never proved. One failed because a natural characteristic of a timber species was called a defect. Not one of them turned on the quality of the building work.
07The ten dollar defect
The defect was real, the ceilings were genuinely too low, and the award was ten dollars.
The architectural drawings specified a ceiling height of 3000 mm. The first floor ceilings were built lower. That much was common ground.
Rectifying it meant procuring additional timber frames, reconstructing the roof and reinstalling the fabric of the house. The owners' expert estimated $511,216.06. Even the builder's expert put it at $230,262.
$511,216.06
- Rebuild the roof structure
- Additional timber frames
- Reinstate the fabric of the house
$10
- Rectification out of all proportion
- Measure moves to diminution in value
- No evidence of diminution was led
In my view, this is a clear example where the cost of the proposed rectification is unreasonable, being out of all proportion to the benefit to be obtained. The authorities suggest that in such a case an appropriate measure of damages is the diminution in the value of the work occasioned by the breach. As the Owners lead no evidence of any diminution in the value of the property occasioned by this breach, I award nominal damages in the sum of $10.
Once rectification is out of all proportion, the law offers a second measure: what the defect did to the value of the property. That measure was available the whole time. A valuer would have answered it. Nobody obtained one, so the second measure sat unproven and the award fell to a nominal sum.
08The defects everyone agreed on, worth nothing
Four items the experts agreed were defects. No costing was provided for any of them.
The judgment has a short section headed "Defect items for which no costing was provided". The experts agreed each of these items was a defect. No rectification method and no costing were put forward, so the court did not consider them further.
Nobody disputed these were defects. Both experts accepted it. They still produced no recovery, because a court cannot award a number that no one has put in front of it. A report that identifies a defect and stops there has done half the job.
09What the court did allow
Twenty items were allowed. The pattern in the wins is as useful as the pattern in the losses.
The same report that lost the two largest items also won twenty smaller ones. Where an estimate was specific and reasoned, it was accepted, often in full.
Unless noted, each allowance carries a further 10% for contingencies plus GST. The total came to $522,164.01 excluding GST, or $574,380.41 including GST.
I accept the estimate prepared by [the owners' expert], being the only clear articulation of the costs involved in that work, as a reasonable estimate of the rectification costs. I will allow rectification costs of $95,968 plus an allowance for contingencies of 10% and GST.
The phrase doing the work is the only clear articulation of the costs involved. It was accepted because it was specific, it was reasoned, and nothing else in the evidence did the job.
10What a report has to do
Drawn from what this court accepted and what it refused, item by item.
- Measure it, do not just photograph it. The deviation item failed because the photographs "do not clearly show the alleged deviation" and no measurement was provided.
- Name the standard the work fails. The largest claim in the case collapsed because the contractual standard, "commercial grade", was never proved to have been breached.
- Cost every item, including the agreed ones. Four agreed defects recovered nothing because no costing was provided.
- Show the workings. One item was reduced because the calculations of area were never supported. Another was corrected for an arithmetic error.
- Justify the method, not just the price. Rectification scope was trimmed where the evidence did not justify removing tiles and timber lining.
- Where rectification is disproportionate, value the loss instead. That is the difference between $511,216.06 and $10.
We are not suggesting the outcome would have been different with a different report, and nobody could honestly claim that. What the reasons set out, unusually clearly, is what a court needed and did not get — and that is a standard anyone commissioning a report can hold their consultant to before a dispute begins.
We don't just do inspections. We investigate.
11Before you end a building contract
The practical order of operations, and the one step that is not ours to give.
Whether a particular contract can lawfully be ended depends on its own terms and on what has actually happened between the parties. That is a question for a lawyer, and it is not one this article, or any building consultant, can answer for you. These owners ended their contract and the court held that in doing so they repudiated it. The cost of asking first is very small against $697,805.38.
What a building consultant can do is put you in a position to get useful advice, and to prove your case if it comes to that. In practical order:
- Document the defects independently while the work is still there to inspect. Measurements, the standard each item fails, and a costing for every item.
- Keep the paper trail. What the builder was told, when, and what it did in response. The termination in this case turned on the builder having answered the notice.
- Take legal advice on the contract before serving anything. A notice served on the wrong basis can be worse than no notice at all.
- Where rectification would be disproportionate, get a valuation as well. Otherwise the alternative measure of damages sits there unproven.
- Check who you are engaging. Ask whether the consultant has given evidence before, whether their reports quantify rectification item by item, and whether they will stand behind the report if it is tested.
12Sources
- Hale Corp Pty Ltd v Ng [2026] VSC 492
- Law Library Victoria, Library Bulletin, Issue 14
- Robinson v Harman (1848) 1 Exch 850
- Bellgrove v Eldridge (1954) 90 CLR 613
- Victorian Civil and Administrative Tribunal Act 1998 (Vic), section 77
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