Australian Dream Homes Pty Ltd v Stojanovski

In the case of Australian Dream Homes Pty Ltd v Stojanovski, the dispute centred on the termination of a contract for the construction of a residential building. The plaintiff, Australian Dream Homes Pty Ltd, a builder, sought to challenge the decision of the respondent, Mr Stojanovski, the homeowner, to terminate the building contract. The matter was brought before the court following an appeal from the Victorian Civil and Administrative Tribunal (VCAT). The central issue for determination was the interpretation of the term ‘substantial breach’ within Clause 20.1 of the Victorian Master Builders Association New Homes Contract (HC-6 addition 1 - 2009) and whether Mr Stojanovski acted unreasonably in terminating the contract based on the builder's failure to rectify specified defects within the timeframe stipulated in the default notice.

The court was tasked with interpreting the meaning of ‘substantial breach’ in the context of the contract, specifically whether the builder's failure to rectify defects within the 14-day period specified in the default notice constituted such a breach. Furthermore, the court had to consider whether Mr Stojanovski's decision to terminate the contract was reasonable, given that the remediation works were estimated to take six weeks to complete. The court examined the language of the contract, the conduct of the parties, and the reasonable expectations of both the builder and the homeowner.

The court found that the term ‘substantial breach’ was not limited to immediate rectification but encompassed a reasonable timeframe for the builder to address the defects. Given the significant time difference between the 14-day notice and the estimated six weeks required for remediation, the court concluded that the builder's failure to rectify the defects within the notice period did not amount to a substantial breach. Additionally, the court held that Mr Stojanovski's decision to terminate the contract based on the default notice was unreasonable, as it did not allow for a reasonable period to address the defects. Consequently, the court dismissed the builder's appeal, upholding the VCAT's decision to affirm the termination of the contract.