April 18, 2019

In the recent decision of Mousa & Anor v Vukobratich Enterprises Pty Ltd & Anor [2019] QSC 49, the Queensland Supreme Court considered whether defective building work could constitute repudiation of a building contract.

In or around April 2014, the Mousas (the Client) engaged MV Designer Homes (the Builder) to construct a high-end luxury home in Cairns (the Contract). During construction, the Builder experienced a number of constructability, workmanship and contract administration issues.

A dispute arose between the parties and the Client terminated the Contract in December 2015 on the basis that the Builder had failed to undertake the works:

  •   in an appropriate and skilful way;
  •   with reasonable care and skill and in accordance with the plans and specifications; and
  •   in a competent manner.

The Client commenced proceedings against the Builder seeking, amongst other things, damages for wrongful repudiation of the Contract by the Builder.

In finding that the Builder had repudiated the Contract which gave rise to an entitlement to terminate the Contract, Henry J held that:

  •   The critical question was whether the Builder’s conduct manifested an intention to fulfil the contract in a manner that was substantially inconsistent with its obligations.
  •   The defects in question were not merely the result of minor error but demonstrated a high level of ineptitude on the part of the Builder and an inability on its part to perform the works with reasonable care and skill.
  •   The nature of the defects went well beyond superficial and easily remedied flaws which might occur in a standard construction process. Henry J found that the work completed by the Builder was so fundamentally flawed that it clearly demonstrated that the Builder had an intention to no longer be bound by its contractual obligations, and effectively amounted to a repudiation of the Contract.

This decision serves as a reminder to contracting parties that, in certain circumstances, defective work can be deemed to constitute wrongful repudiation of a building contract. The determining factor will be whether the repudiating party’s conduct, when viewed objectively, evinces an intention to fulfil the contract in a manner which is substantially inconsistent with a party’s contractual obligations.

The full decision can be found here.

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