In this case, the NSW Court of Appeal confirmed that the prima
facie measure of damages where there are defects caused by a breach
of a contractual obligation is the cost of rectification, provided
the works to be carried out are both necessary under the contract
and reasonable, affirming the principle espoused in Bellgrove v
The court also confirmed that only exceptional circumstances
will mean that rectification is unreasonable, as observed in
Tabcorp Holdings Pty Limited v Bowen Investments Pty
Facts & background
The owners contracted with the respondent builder to build a
dwelling on a sloping block. The rear two-thirds of the dwelling
was to be constructed over land fill using a cut and fill
The contract specified the maximum depth of fill as 300mm. The
builder exceeded the specification and the fill was 500mm deep.
The contract also specified that the footings were to be 300mm
deep. However, they were founded only 100mm deep. The builder
prepared the site prior to the slab being poured by watering it for
two days, and then leaving it to consolidate for six to seven weeks
without any cover or other protection.
The building began to move within a few months after completion,
causing internal and external cracks to appear and some doors to
not open and close properly. These problems worsened over the next
couple of years.
The owners claimed rectification costs of $113,124.64 (of which
$107,224.64 was for underpinning) and relocation costs of
Decision at first instance
The owners commenced proceedings against the builder in the NSW
District Court alleging breaches of contract and claiming
rectification and relocation costs.
The owners submitted that the builder had breached the building
Using excessive fill
Founding the footings too shallow
Allowing the fill to dry out prior to the slab being poured,
which caused the slab to subsequently heave and the consequential
damage to occur.
The Trial Judge agreed that the builder had breached the
contract by using excessive fill and founding the footings too
shallow. The Trial Judge found on the evidence, however, that the
fill was not too dry.
The Trial Judge nevertheless found in favour of the builder on
the basis that, whilst the builder had clearly breached the
contract, the breaches were not causally related to the owners'
Her Honour interpreted the evidence of the builder's expert
geotechnical engineer to mean that the breaches should have caused
the slab to subside and settle, but not heave as it had.
Accordingly, Her Honour found that there was no connection between
the breaches and the heave.
The Trial Judge found that the underpinning was unnecessary.
Accordingly, the owners were not entitled to any rectification or
The NSW Court of Appeal unanimously upheld the owners'
appeal. Macfarlan JA delivered the leading judgment.
Ms Holby, Trial Judge had misinterpreted the expert evidence. A
proper construction of each parties expert evidence pointed to the
builder being responsible for the fill swelling after the slab had
been poured because the fill was too dry when the slab was laid.
Further, the Trial Judge had erred in not finding a causal link
between the breaches and the damage.
The owner's claim that they be entitled to the cost of
underpinning was successful, on the basis that the builder had
breached the contractual specification and that the underpinning
was a reasonable course to adopt to rectify the breach. In making
these findings it was confirmed they conformed with the principles
in Bellgrove v Eldridge, qualified by the High Court's
observation in Tabcorp Holdings Limited v Bowen Investments Pty
Limited, that rectification of defects will only be considered
unreasonable in exceptional circumstances.
This decision confirms that rectification of defective works
will be ordered when it is considered both necessary and
reasonable. If the cost of rectification is disproportionate to the
breach, then rectification will not be necessary or reasonable.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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