Caravan Enthusiasts Beware: What is the Appropriate Remedy for Defective Building Works?
The old adage is that ‘one’s home is one’s castle’. Stanley & Anor v EWH Construction West Pty Ltd [2025] VSC 699 (18 November 2025) involved a claim by the Owners who were unhappy with their newly constructed house, as the site elevations did not permit them to reverse their caravan from the street through their garage and into the paved rear section. The Owners sought leave to appeal, saying the prima facie remedy was for rectification of the breach. The Builder also sought leave to appeal regarding the existence of the term regarding the caravan.
The Owners contended that the appropriate measure of their damages was the cost of demolishing the house and rebuilding it such that the fixed floor level of the garage was at a level which was not materially below the height of the footpath. Both parties’ experts agreed that it was not possible to rectify the finished floor level, and reducing the slope of the driveway, without demolishing the house. The central question in this case was what was the reasonable and necessary scope of rectification works to address this problem?
The Owners, who were described as ‘caravan enthusiasts’, repeatedly emphasised to the Builder the importance of being able to store their caravan in the backyard and the need for a driveway with minimal elevation changes. The Builder failed to deliver on this requirement. This resulted in an ‘as-built’ outcome that was inconsistent with the contract plans.
At first instance, the Tribunal rejected the Owners’ argument that the reasonable and appropriate remedy was to demolish and rebuild the entire house. Rather, the Tribunal held that the appropriate measure of damages was to compensate the Owners for their inability to store their caravan at their home.
The Owners’ appealed VCAT’s decision and contended that it was not unreasonable for the house to be demolished and rebuilt, insofar that it should comply with the contract plans and agreed terms.
While the Court held that the Builder breached the contract by constructing the garage floor 670mm below the footpath, contrary to the signed contract plans, it rejected the argument made by the Builder that later internal plan revisions, which were not provided to the Owners, nullified the contractual documents.
The orthodox rule in relation to damages for defective works is that a party is entitled to performance-based damages. In Bellgrove v Eldridge [1954] HCA 36 (Bellgrove v Eldridge), the prima facie measure for damages is the amount required to rectify the defective works so as to achieve compliance with the terms of the contract. The rule as to damages in Bellgrove v Eldridge was modified by the decision in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (Tabcorp v Bowen) in which it was held that any works to achieve conformity with the contract must also be a reasonable course to adopt.
Following Tabcorp v Bowen, the Court noted that the above prima facie rule was subject to a qualification that ‘not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.’ As to what remedial work is both ‘necessary’ and ‘reasonable’ in each case is a question of fact. The Court cited the decision of the Full Court of the South Australian Supreme Court in Stone v Chappel (2017) 128 SASR 165 (Stone v Chappel), and the factors identified in that decision which assist in determining whether rectification works were reasonable or not. The Court acknowledged that the exception to the general rule in Bellgrove v Eldridge (as set out in Tabcorp v Bown) ‘will only be satisfied in fairly exceptional circumstances.’
The Court of Appeal found that it would be unreasonable to demolish and rebuild the house and garage at an estimated cost exceeding $650,000. The Court regarded the circumstances as ‘sufficiently exceptional’ and those circumstances included that:
- there was no suggestion of any fundamental structural defect in the house, or that the fixed floor levels made it more prone to flooding;
- it is not suggested that the driveway is not perfectly adequate for vehicles other than caravans; and
- most importantly, it follows that there was a high degree of disproportionality between, on the one hand, the prima facie remedy of rectification and, on the other hand, the Owners’ interest in the performance of the contractual stipulation.
The Court found VCAT’s proposed damages assessment too narrow. The Owners were subsequently entitled to:
- damages for loss of amenity (ongoing impact on enjoyment and lifestyle); and
- damages for physical inconvenience beyond mere storage costs.
The Court remitted the question of the Owners’ loss to VCAT for determination.
Strict adherence to contract plans remains central in residential construction, however as to what remedial work is both ‘necessary’ and ‘reasonable’ in any particular case is a question of fact and this may be open to dispute.
The Approach in New South Wales
Similarly, the New South Wales Court of Appeal decision in 85 Princess Pty Ltd v Fleming [2025] NSWCA 261 reinforced modern principles on damages for defective building work. In this case there was damage to the slab of two warehouses which were repaired by an epoxy filler. The owner sued for approximately $5.3m for the cost of replacing the concrete slab and alleged a breach of warranties in the contract of sale. The trial judge rejected that claim as the replacement of the slab was not a ‘rationale or reasonable commercial response’ to the cracking. The issue on appeal centred on whether the defendant, Mr Fleming demonstrated that replacing of the slab was unreasonable. The Court of Appeal agreed it was unreasonable in the circumstances to replace the slab, confirming that the prima facie measure of damages is subject to a strict test of commercial and practical reasonableness. In particular, the Court of Appeal placed significance on the fact that the Sales Contract contemplated that the cracking in the slab would be repaired rather than replaced; the evidence was that the owner did not intend to replace the slab and the fact that there was not evidence to suggest that the concrete slab was ‘structurally unsound or incapable of bearing the loads’ it might be subjected to. This is to be distinguished from cracks that might render a building unstable (as referenced in Bellgrove v Eldridge).
Queries
Please contact the authors, or any member of our Building & Construction team, should you have any questions about this article, or if wish to discuss how we may be able to assist your business and/or projects.
Disclaimer
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.