The Owners - Strata Plan No 76674 v Di Blasio Constructions Pty Ltd

The Owners - Strata Plan No 76674 (the Owners Corporation) sought a declaration that Di Blasio Constructions Pty Ltd (the Builder) breached the warranties implied by s 18B of the Home Building Act 1989 (NSW) (the Act) by constructing a residential building in Dalley Street, Queenscliff, with defects. The Owners Corporation also sought damages for the cost of rectifying those defects. The Builder cross-claimed against a subcontractor but settled that claim before the hearing began. It was not disputed that the construction of the building involved "residential building work" within the meaning of the Act and that there were defects in that work with the result that the Builder was in breach of the statutory warranties implied by s 18B. The defects fall into three categories: defects in the roof and guttering, a particular fire safety defect, and other defects concerning waterproofing of bathrooms and exterior planter boxes.

The key issues for the court to decide were whether the Owners Corporation was reasonable in rejecting the Builder's offer to rectify the defects, and if so, whether the Owners Corporation was entitled to damages for the cost of rectifying the defects. The Builder submitted that the Owners Corporation had failed to mitigate its loss by engaging the Builder to perform the necessary rectification work. It said that it offered to enter into a building contract to perform that work for $1, the Owners Corporation had acted unreasonably by refusing that offer and that, in circumstances where the Builder was ready, willing and able to enter into that contract, the proceedings should be dismissed. Alternatively, the Builder submitted that the Owners Corporation should recover no more than the amount it would have cost the Builder to perform the rectification work.

The court held that the Owners Corporation was not unreasonable in rejecting the Builder's offer to rectify the defects. The court noted that the Owners Corporation had lost confidence in the Builder and was entitled to do so. The court held that the Owners Corporation was entitled to damages for the cost of rectifying the defects. The court rejected the Builder's submission that the Owners Corporation was required to engage the Builder to perform the necessary rectification work because the Owner's Corporation was not obliged to engage the Builder to perform the necessary rectification work. The court found that the Owner's Corporation was entitled to damages for the cost of rectifying the defects.

The court ordered that the Builder pay the Owners Corporation $151,375 for the cost of rectifying the defects, $116,108.65 for the cost of rectifying defects with the roof and guttering, and $12,144 for the cost of rectifying the fire safety defect. The court further ordered that the Builder pay interest on those amounts.