mitigation of losses in defective building works

Traditionally, home owners have a duty to mitigate losses caused by builders. Legalese December 2014 explored the obligations relating to the principle, specifi-cally, that an owner is required to give the builder an opportunity to minimise the damages it must pay by remedying the defects unless refusal to give the opportunity is reasonable or the builder has repudiated the contract through refusal to conduct repairs. However, in a recent case in the NSW Supreme Court the principle was restated with the judge emphasising that “mitigation only has to be reasonable.”

 

In Owners Strata Plan 78465 v M D Constructions Pty Ltd [2016] NSWSC 162, an owner corporation made claims against a builder under the statutory warranties granted by s 18B of the Home Building Act 1989 (NSW). The owners were left with buildings that were “systemically” defective, having leaks, no flashings around the windows and doors and, balcony balustrades did not comply with the Building Code. The question left for the court was whether the owner had reasonably miti-gated losses and could refuse the builder access to the property to rectify damages.

 

The Court found that the owner had reasonably attempted to mitigate its losses and could even refuse the builder an opportunity to remedy the defects. Refusal to give a builder an opportunity to repair damages can only occur if it was reasonable, Justice Hammerschlag provided a detailed list of why in the circumstances the by the owner’s corporation refusal was reasonable. Foremost, the owner corporation had no confidence in the abilities of the builder because the original work was so poor. Also, the builder did not hold a current building license and refused to meet with the owner corporation to discuss plans on rectification with an expert. Finally, the builder did not take responsibility for the damage, blaming third parties such as the manufacturers and, consistently refused to repairs the damage or carried out repair while, not addressing the underlying defects.

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