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In Ceerose Pty Ltd v The Owners - Strata Plan No 89074 [2025] NSWCA 235, the builder and developer appealed a decision from the Supreme Court which ordered them to pay the owners corporation $1.95 million, for the cost of rectifying defects.
The building was completed in 2014 and the proceedings commenced in 2017. In 2018 and 2019, the owners corporation informed the builder that it had lost or was losing confidence in the builder and was not prepared to allow access for further defect rectification. Mitigation was an issue bearing upon damages.
In the Court below, issues of liability and quantum were subject of an order for a reference. The referee took the view that the builder and developer bore the onus of proving that the owners corporation's denial of access was unreasonable. In the adoption hearing, the builder and developer sought a declaration that the owners corporation failed to mitigate its loss by refusing access.
The referee had found the owners corporation's refusal to be reasonable. In the adoption hearing, the Supreme Court agreed, noting that despite a year passing since the parties had reached an 'in principle' agreement, the works were not finalised.
The Court of Appeal affirmed the decision of the referee and Supreme Court. In doing so, it examined previous decisions concerning the duty to mitigate, summarising that whether a plaintiff had failed to mitigate their own loss was dependent on the defendant showing that the plaintiff was unreasonable. The plaintiff was not expected to act with excessive diligence or perfection in this regard.
While the Court accepted that there was a general expectation for an owners corporation to give a builder a reasonable opportunity to rectify defects, this was not automatic and could not be considered a requirement. The Court went further, to say that there was no positive obligation for an owners corporation to provide the builder and developer with an opportunity to rectify the defects. Additionally, the onus of proving the owner's unreasonableness did not shift to the owner and become an onus to prove reasonableness, simply because access was denied.
Accordingly, the builder and developer's appeal was dismissed.
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