The background story An apartment block was completed at Ettalong by the Builder in late 2013. The Owners Corporation (“the Owners”) noticed defects in February 2014 and engaged a licensed builder to inspect and report. In November 2014 a complaint was lodged with the NSW Department of Fair Trading. In late January 2015, a subcontractor of the Builder began remedial work at the cost of the Builder, with the stated goal of completing all the remedial work by May 2015. In March 2015, the site was inspected, and 30 remaining defects were identified. On a further inspection in May 2015, it was found that 19 of the 30 items had not been rectified. The subcontractor performing the remedial work continued but when another inspection occurred in August 2015, even more defects were found, including that the ceiling spaces were not compliant with fire safety requirements. The Owners gave the Builder a deadline of 18 August 2015 for a response, explaining how the rest of the defects would be fixed. The deadline expired without a response. On 19 August 2015, the Owners engaged lawyers. On 20 August 2015, the Builder wrote saying it was “organising for the defects to be rectified”. By then, the Owners had decided to exclude the Builder from the site. Litigation commences The dispute then entered litigation, with both parties engaging legal teams. Approximately 2 years after proceedings were commenced, on the first day of trial in Court, the Judge decided to refer the dispute to an expert determination, reserving the issue of legal costs for a later time. Both the Owners and the Builder brought evidence from independent expert consultants to the expert determination. A conclave of the consultants resulted in the Owners reducing their claim to $1.442 million. The Builder’s consultant conceded defects to the value of $318k. The expert preferred the Owners’ evidence and awarded the Owners $1.282 million. The only issue left for the Court was whether the Owners should get their legal costs paid by the Builder. The Builder said it should not have to pay legal costs because it had been continuing to offer to come back and rectify the work, but the Owners had refused it access to the site. The Owners said the Builder had been too slow and unwilling to rectify all of the defects. The legal principles In reaching its decision, the Court set out the following legal principles that are to be applied in these situations: • the overarching principle is that an owner is not entitled to recover losses attributable to its own unreasonable conduct; • in cases involving building contracts, the owner is required to give the builder an opportunity to minimise any damages the builder must pay by rectifying the defects, except where its refusal to give the builder that opportunity is reasonable or where the builder has repudiated the contract by refusing to conduct any repairs; • the question of what is reasonable depends on all the circumstances of the particular case – one relevant factor is what attempts the builder has made to repair the defects in the past and whether, in the light of the builder’s conduct, the owner has reasonably lost confidence in the willingness and ability of the builder to do the work; • it is for the builder to prove that the owner has acted unreasonably – it is not for the owner to prove that it acted reasonably; and • once a builder puts in issue the reasonableness of the owner’s conduct, all circumstances relevant to an objective assessment of the owner’s position become examinable. In relation to this last point, the owner is not limited to reliance on facts or circumstances known at the time. The owner may also rely on facts which come to its attention afterwards that shed light on the builder’s conduct at the time.