NSW Court of Appeal clarifies owners’ duty to let builders fix defects

The New South Wales Court of Appeal has confirmed that property owners don’t always have to give builders the chance to fix defective work before claiming the costs of rectification.

In Ceerose Pty Ltd v The Owners – Strata Plan No 89074 [2025] NSWCA 235, the Court ruled there is no automatic or “invariable” rule requiring owners to let builders return to rectify defects, nor any special common law rule in building contracts that forces owners to do so.

Background

The appeal arose from a building dispute over multiple defects that were present in “The Eliza” apartment building in Sydney, brought by the owner's corporation against the builder, Ceerose Pty Ltd, and the developer, Prisand Investments Pty Ltd.

The Supreme Court of New South Wales, adopting recommendations from two reports made by a referee (Mr Goldstein) in accordance with a court order, found in favour of the owner's corporation in the amount of $1.95 million (excluding GST).

The builder appealed the Supreme Court’s decision, arguing, amongst other reasons, that the primary judge erred by not accepting that the owners had a "positive obligation" to afford the builder a reasonable opportunity to rectify any alleged defects.

The findings of the Court of Appeal

The Court dismissed the appeal, holding that:

• The developer and builder, as the defendants, bore the onus of establishing that the owners, as the plaintiffs, failed to, or failed to take steps to, mitigate its losses.
• Establishment of a failure to mitigate loss depends upon the defendant proving that the plaintiff has acted unreasonably in some respect, however:
  
  • neither excessive diligence nor perfection is required of an owner in exercising any steps to mitigate its loss; and
  • there is no special common law rule applicable to building contracts concerning mitigation of loss, which would therefore require that the owner give the builder an opportunity to rectify any defects.
• The owners had no invariable requirement to allow the builder to rectify the defects.
• The builder bore the onus of proof to demonstrate:
  
  • that the owners’ refusal to allow the builder to rectify the defects was unreasonable based on the facts and circumstances, such that some, or all, of the claimed loss resulting from the breach of contract should be disregarded; and
  • the owner had acted unreasonably from beginning to end with respect to their claim that the owners had acted unreasonably.
• The primary judge thus did not err in failing to hold that there “was not evidence enough, or at all, for the Respondent to displace its evidentiary onus”.

Why it matters

This decision provides useful clarity concerning the issue of an owner's obligation to mitigate loss, and the issue of allowing access to a builder to rectify defects in their own works.

The NSW Court of Appeal has ultimately found that owners have no invariable requirement to allow builders access to rectify defects. Instead, the builder, as the defendant in a proceeding, bears the onus at all times to establish that an owner's refusal to allow the builder access to a site to remedy defective works was unreasonable based on the particular facts and circumstances.

Building defects and their rectification are significant issues for the construction industry. For assistance contact our Construction and Infrastructure team.

This Insight was written by construction and infrastructure lawyers Partner Andrew Kelly, Special Counsel Thomas McKillop and Law Graduate Thomas Cockburn.