Homeowners Secure Over $260k in Damages After Long-Running Building Dispute

Susie and Fabio Castellan engaged Icecorp Pty Ltd in May 2013 to construct two new townhouses at their Hawthorn East property under a major domestic building contract valued at $1,300,000. Following delays, incomplete works, and a wide range of construction defects, the Castellans took possession of Unit 8A on 1 July 2016 despite unresolved issues. Over the following years, they obtained expert defect reports, engaged third-party contractors, and eventually commenced VCAT proceedings in March 2020 seeking rectification costs, liquidated damages, and consequential losses.

Key Defects Identified Across Both Units

VCAT examined defects in Units 8 and 8A in extensive detail. For Unit 8, the Tribunal confirmed defects including inadequate subfloor ventilation, brickwork deficiencies, box gutter overflow issues, parapet flashing problems, downpipe spreaders, condensate drainage, paintwork, waterproofing failures, water entry, and incomplete items such as cleaning render, drainage issues, and installation omissions including skylights.
In Unit 8A, VCAT found similar issues: insufficient subfloor ventilation, brickwork finish problems, gutter overflows, box gutter defects, flashing issues, drainage concerns, paintwork, waterproofing deficiencies, water entry into multiple rooms, incomplete items such as irrigation, fireplace surround, paintwork, sliding door works, walkway barrier height, and laundry ventilation.
VCAT also confirmed multiple construction omissions, including missing skylights and a missing coat cupboard, along with loss-of-amenity damages for missing shower niches. The Tribunal determined the reasonable cost of rectifying proven defects using expert comparisons and Australian Standards.

Assessment of Landscaping Agreements and Liquidated Damages

A significant portion of the dispute centred on landscaping works governed by a series of agreements between the Castellans and Icecorp between 2015 and 2017. These agreements involved a $30,000 payment for extensive landscaping based on Whyte landscape drawings, later adjustments for incomplete works, and a $20,000 payment made by Icecorp in October 2017.
VCAT found that the homeowners had promised not to seek liquidated damages if Icecorp undertook the landscaping works for the agreed discounted price. Based on the evidence, the Tribunal held that Icecorp relied on this promise when performing substantial landscape work, foregoing $20,000 from its final claim, and paying the Castellans $20,000. As a result, the homeowners were prevented from recovering liquidated damages.

Damages for Defective and Incomplete Building Work

Across both townhouses, VCAT awarded rectification damages calculated strictly item-by-item. Unit 8 resulted in $54,428.66 for agreed defects and $12,967.45 for disputed defects. Unit 8A resulted in $42,734.12 for agreed defects and $20,477.60 for disputed defects.
VCAT also confirmed additional rectification payments of $12,160.50 to third-party contractors engaged by the Castellans, and $48,664 in consequential loss for rental income the homeowners were unable to earn between 1 June 2021 and 1 February 2022 while rectification work was performed.

Impact of Rising Construction Costs on Final Compensation

In its 2025 follow-up decision, the Tribunal acknowledged the significant increase in Victorian construction costs since the original expert reports were prepared. Judicial notice was taken of a 25.2% rise in residential building costs from 1 January 2021 to 30 September 2025, based on Australian Bureau of Statistics data.
As a result, VCAT adjusted the Castellans’ compensation for future rectification work totalling $19,330.99, adding $23,129.19 to account for inflation. The Tribunal also awarded interest on previously incurred rectification costs totalling $111,276.84 at a rate of 10% from 1 April 2022 to 21 November 2025, amounting to $40,547.45.

Final Compensation and Costs Order

When combining historic rectification damages, inflation adjustments, interest, and consequential loss, VCAT ordered Icecorp to pay the Castellans $261,467.46.
Additionally, due to the complexity of the proceedings—spanning eight hearing days and extensive written submissions—and the homeowners’ substantial success, VCAT ordered Icecorp Pty Ltd to pay the Castellans’ legal costs on the standard basis, to be taxed by the Victorian Costs Court if not agreed.