The Background

The dispute arose from a multi-unit residential development in Meadowbank completed on 15 July 2014 by Wekan Pty Ltd (Developer) and Raysons Constructions Pty Ltd (Builder).

The Owners Corporation (OC) commenced proceedings in NCAT on 26 November 2020, over four months after the expiry of the six-year limitation period under the Home Building Act 1989 (NSW) (HBA). The claim was a statutory warranty claim for damages and included general building defects and structural defects.

Prior to the hearing, the Developer went into administration and the proceedings against the Developer were stayed under the Corporations Act 2001 (Cth). The claim proceeded against the Builder only.

NCAT proceedings

The OC claimed that it was entitled to an extension of the warranty period and relied upon the limited six-month extension allowed when the defect only becomes “apparent” in the final six months of the warranty period per s 18E(1)(e)-(f) of the HBA, which says in summary:

If a breach of warranty becomes apparent within the last six months of the warranty period, proceedings may be commenced within a further six months after the end of the warranty period; and a breach of warranty becomes apparent when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach.

The Builder ran a limitation defence that the proceedings were out of time.

The Tribunal found in the OC’s favour and determined:

1. that the OC was aware of the defects as early as 2014 but was not aware the defects amounted to breaches of statutory warranties until later when the OC obtained expert evidence; and
2. that the OC was entitled to the extension of the warranty period, and the Builder was ordered to rectify the defects.

Internal NCAT appeal proceedings

The Builder appealed the determination based on seven grounds, the first ground being whether the Tribunal had made an error of law by finding that the OC could rely on the six-month extension of the warranty period.

The Appeal Panel only addressed the first ground and found that the proceedings were commenced after the six-year time period for major defects expired and therefore, the Tribunal did not have jurisdiction to hear and determine the issues between the parties and therefore, the application must be dismissed.

The Builder was successful, and the Appeal Panel upheld the appeal.

Supreme Court appeal proceedings

The Supreme Court upheld the appeal and found that the OC could rely on the six-month extension of the statutory warranty period.

Key takeaways of this decision:

The Court’s decision has ultimately provided us with more guidance in relation to the following:

1. on what “becomes aware or ought reasonably to become aware”

The Court held that there are two limbs to the test. On its face, it asks whether “any” person entitled to the benefit of the warranty has either:

a) become aware; or

b) ought reasonably to have become aware of the breach.

The Court drew a distinction that just because an owner is aware of a defect, this does not mean that they should be aware that the defect is a breach of the statutory warranties as they are very different things.

The OC argued it only became aware of the true seriousness of the defects in the final six months of the limitation period when they received the expert reports. The Court agreed and said that whether defects are a breach of the statutory warranties is a legal conclusion which will usually involve further expert investigation to confirm.

2. an awareness of the defect by owners is not sufficient grounds to bar the whole claim as each defect must be assessed separately along with its link to a breach of the warranties;

3. the owner bears the onus of proof to demonstrate that they did not know about the defects. The Court found that where there is an issue of whether an owner has commenced action within the further 6 months, the onus rests with the owners to establish the facts that entitle it to rely on the extended time;
4. owners can rely on the 6-month extension, but they must prove that they only became aware of the “breach” in the last 6 months of the warranty period;
5. the Appeal Panel made an error in the way they interpreted the original NCAT determination (that the OC knew about the defects years earlier) and suggested that the errors could have been clarified by the parties via the slip rule; and
6. given that the Appeal Panel of NCAT did not address all of the appeal grounds, the matter was referred back to NCAT.

Where do builders and developers go from here?

This decision has created significant implications for key players within the building and construction industry. Therefore,  builders and developers should note that:

1. knowing when the warranty period for your residential building projects expire is beneficial;
2. running a limitation defence can be difficult to defend as well as costly and time consuming (this case took four years to reach the Supreme Court and is still ongoing);
3. considering commercial resolutions early on before proceedings are commenced as the Tribunal will likely make a work order for rectification in any event so any genuine defects should be addressed. This may avoid the risk of defending contested proceedings in the District Court or Supreme Court where the Court can only award damages not rectification; and
4. seek legal advice well in advance of warranty periods lapsing if you are on notice of defective work by owners.

 

If you or anyone you know needs any assistance in relation to this, please contact Bradbury Legal who are specialists in this area, on (02) 9030 7400 or at info@bradburylegal.com.au.

In construction disputes – where legal costs escalate quickly and project delays can be costly – Calderbank offers are a powerful strategic tool for early resolution and litigation cost management. However, not all Calderbank offers are created equal. To be effective, particularly when seeking to recover costs, a Calderbank offer must be drafted with precision, clarity and intent. A poorly constructed offer may be given little or no weight in costs proceedings.

Before diving into the drafting rules, let’s revisit the fundamentals.

What is a Calderbank Offer?

A Calderbank offer is a written offer to settle a legal dispute, made “without prejudice save as to costs.” It originates from the English case Calderbank v Calderbank [1975][i] and allows parties to negotiate privately without prejudicing their legal position – except when arguing about legal costs after judgment.

In practical terms, if the offer is unreasonably rejected and the opposing party fails to achieve a better result at hearing, the offering party can seek indemnity costs from the date the offer was made.

With that in mind, here are 7 key rules to ensure your Calderbank offer carries legal weight and maximises its intended cost consequences.

Rule 1: Clearly mark the offer “Without Prejudice Save as to Costs”

This label ensures the offer remains privileged during the substantive proceedings but can be disclosed when the issue of costs is determined. To avoid ambiguity, include the phrase prominently – both in the heading and opening paragraph. If this wording is missing or incorrect, the offer may be inadmissible in cost proceedings, undermining its strategic value.

Rule 2: Use precise, clear and unambiguous language

When it comes to Calderbank offers, ambiguity is the enemy of enforceability. As stated in Grabavac v Hart,[ii] the offer must “leave the offeree in no reasonable doubt as to the nature and extent of what is being offered.” The offer must:

• Specify the exact amount offered or set out alternative settlement terms – such as completion of specific works or the granting of releases.
• Identify the claims being resolved – whether it’s a global settlement or limited to a specific issue, such as claims for delay damages or variations.
• Set out any conditions attached to the offer – such as execution of a deed of release, the timeframe for payment, or confidentiality provisions.

This clarity is particularly important in construction disputes, where overlapping claims are common.

Rule 3: Ensure the offer is reasonable and genuine

To be effective, a Calderbank offer must be a genuine attempt to settle, not just a tactical move. Offers that are clearly unrealistic or derisory may be disregarded by a court or tribunal. By contrast, offers supported by expert reports, quantum assessments or commercial analysis are more likely to carry weight and influence cost outcomes.

Rule 4: Include an express statement on costs consequences

Strengthen your position by making the cost implications explicit. For example, include a clause such as the following:

“This offer is made pursuant to Calderbank v Calderbank [1975] 1 All ER 333. In the event that this offer is not accepted and you fail to obtain a more favourable outcome, we will seek indemnity costs.”

This puts the recipient on clear notice and reinforces the seriousness of the offer.

Rule 5: Set a clear and reasonable deadline and acceptance process

The offer should clearly specify:

• A reasonable timeframe for acceptance – generally at least 14 days unless the circumstances justify otherwise. The appropriate duration will depend on factors such as the complexity of the project, the nature of the offer and industry standards. For instance, in Meldov Pty Ltd v Bank of Queensland (No.2) [2015],[iii] a 12-day acceptance period was found to be sufficient.
• The method by which acceptance should be communicated — such as by email, signed acceptance or written confirmation. This ensures that both parties are clear on how and when acceptance is valid.

Clearly setting out these details helps avoid disputes regarding the timing or manner of acceptance, particularly important in time-sensitive construction projects.

Rule 6: Explain why the offer should be accepted

While not mandatory, explaining the rationale behind your offer can help demonstrate its reasonableness. Courts have recognised that where one party clearly sets out why the other will fail, and that offer is unreasonably rejected, it may support an application for indemnity costs. As Lindgren J stated in NMFM Properties Pty Ltd v Citibank Ltd (No 2) [2001],[iv] where His Honour observed:

“…No doubt where a party puts with sufficient particularity to the opposing party the reasons why the latter must fail, yet the latter does not recognise the inevitable, this will be a factor pointing to an award of indemnity costs.”[v]

Importantly, where an application for indemnity costs is made, the burden lies with the applicant to establish that the rejection of the Calderbank offer was unreasonable.[vi]

Rule 7: Retain evidence of service and communication

Always serve the offer in a traceable manner – via email with read receipt, courier or registered post. You should retain copies of:

• The offer letter and any attachments.
• Proof of service.
• Any correspondence or acknowledgements.

These records are critical if there is later a dispute about whether the offer was made, received or properly considered.

Key Takeaway

A Calderbank offer is far more than a procedural step—it’s a tactical instrument for shaping both the outcome and the cost consequences of litigation. In construction disputes, where issues are complex and stakes are high, the value of a well-drafted Calderbank offer lies in its clarity, reasonableness and procedural integrity. Draft it with precision to not only encourage early settlement, but also to protect your client’s position when costs are ultimately determined

Follow Bradbury Legal for practical insights into construction law and commercial litigation. We are a specialist firm in building and construction law, committed to delivering practical, expert advice.

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[i] 1 All ER 333.

[ii] [1997] 1 VR 154 per Winneke P at 155.

[iii] NSWSC 2015.

[iv] FCA 480; (2001) 109 FCR 77.

[v] Ibid., per Lindgren J at 87.

[vi] MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 240 per Lindgren J; Sural Spa v Downer EDI Rail Pty Ltd [2007] NSWSC 1292 at 8 per Einstein J.

A freezing order, also known as a Mareva injunction, is a powerful legal tool designed to prevent a party from disposing of or dealing with assets before a judgment can be enforced. In New South Wales, these orders are frequently sought in cases involving fraud, insolvency or complex commercial disputes. Their central aim is to preserve the enforceability of a future court judgment by preventing the dissipation of assets in the meantime.

What Is a Freezing Order?

A freezing order is an interlocutory injunction that restrains a party from dealing with specified assets, usually pending the outcome of litigation. The purpose is not to give a plaintiff a security interest in those assets, but rather to preserve the status quo so that any eventual judgment can be enforced.[1] These orders are typically granted under Rule 25.11 of the Uniform Civil Procedure Rules 2005 (NSW) and are often sought ex parte (without notifying the respondent) to avoid alerting the other party and triggering the very asset dissipation the order is designed to prevent.

Criteria for Granting a Freezing Order

Courts apply strict and well-defined criteria when determining whether to grant a freezing order. The applicant must satisfy all of the following:

1. Good Arguable Case
   The applicant must demonstrate a “good arguable” case on the substantive claim. In Lambros v Urbanlux Homes Pty Ltd (in liq)[2021][2], the Court clarified that while the case need not have a greater than 50% chance of success, it must be plausible and capable of serious argument—higher than speculative but lower than proof on the balance of probabilities.
2. Real Risk of Asset Dissipation
   There must be credible evidence that the respondent is likely to dispose of, hide, or deal with assets in a manner that could frustrate the enforcement of a future judgment.
3. Danger That Judgment Will Be Unenforceable
   The court must be satisfied that, without the order, there is a real risk that a judgment in favour of the applicant would be wholly or partly unsatisfied due to the unavailability of the respondent’s assets.
4. Balance of Convenience and Interests of Justice
   The court must be persuaded that the benefit of preserving the applicant’s potential remedy outweighs the inconvenience or prejudice to the respondent. Courts will also consider whether an undertaking as to damages has been offered by the applicant to compensate the respondent if the order proves unjustified.
5. Jurisdictional Nexus
   There must be a connection between the respondent or the assets and the jurisdiction. The Supreme Court of NSW must have authority over the respondent or the relevant assets.

Scope and Enforcement

Freezing orders can apply to a wide range of assets, including bank accounts, real property, shares and personal valuables. They can also extend to assets located both within and outside Australia. Additionally, these orders can bind third parties, such as banks that hold assets on behalf of the respondent.

Key Considerations for Applicants

While freezing orders are powerful tools for preserving assets, they are discretionary and exceptional remedies that courts do not grant lightly.[3] Applicants seeking a freezing order should be mindful of the following:

• Undertaking as to damages: Applicants must be prepared to compensate the respondent if the order is later found to have caused unjust harm, particularly if the freezing order is ultimately unjustified.
• Access to funds: Orders generally allow respondents to access funds for reasonable living or business expenses, as specified in the order.[4]
• Full and frank disclosure: In ex parte applications, applicants are under a strict duty to disclose all relevant facts, including those adverse to their case.[5] A failure on the part of the applicant to do so may result in the order being set aside.
• Proportionality: The scope of the order must be proportionate to the value of the claim and tailored specifically to the risk of asset dissipation.

In Bennett (bht Jones) v State of NSW & Anor [2022][6], the Court reaffirmed its cautious approach to freezing orders, highlighting the need for a real danger of asset dissipation supported by clear and reliable evidence. The case underscores the importance of thorough preparation and detailed investigation of the respondent’s conduct when seeking such relief.

Freezing orders are also particularly effective in situations involving allegations of fraud, misappropriation of funds or asset stripping. They are also increasingly used in cross-border litigation, given their availability against third parties or foreign respondents in certain cases.

Final Thoughts

Freezing orders are a powerful litigation tool, but they must not be sought lightly. As an extraordinary and intrusive remedy, they demand careful attention to the evidence, full disclosure and precise drafting. Courts will closely scrutinise whether the legal criteria—especially in an ex parte setting—have been properly met.

Notwithstanding, when used wisely, freezing orders can mean the difference between a hollow victory and an enforceable judgment—underscoring the value of a strategy that enables litigants to freeze now, enforce later.

 

[1]  Jackson v Stirling Industries Ltd (1987) 162 CLR 612; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380.

[2] NSWSC 1615 at [39].

[3] Frigo v Culhaci [1998] NSWCA 88, approved in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [51]; Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141 at [57].

[4] Goumas v McIntosh [2002] NSWSC 713 at [23].

[5] See Rees J in Madsen v Darmali [2024] NSWSC 76 at [12]–[15].

[6] NSWSC 1406.

When entering into a contract for the performance of building works, the roles and responsibilities of each party are generally defined well enough to ensure the contract can be performed in a mutually beneficial manner. Although, what happens when these responsibilities are affected by the interaction between two pieces of legislation?

In Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club [2025] NSWSC 123, the Supreme Court of New South Wales considers this question, where payment obligations between a Builder, Principal and Subcontractor changed due to the simultaneous application of the Building and Construction Industry Security of Payment Act 1989 (NSW) (SOPA) and the Contractors Debts Act 1997 (NSW) (CDA).

Key facts

During December 2023, Woonona Bulli RSL Memorial Club Limited (the RSL Club) contracted with Warrane Design Construct Fit-Out Pty Ltd (the Builder) to undertake works to the RSL Club’s carpark and converting the bowling green to another parking space (the Works). Shortly after, to complete the Works, the Builder entered into a subcontract with All Civil Solutions Group Pty Ltd (the Subcontractor). In the following year, the Subcontractor subsequently obtained three debt certificates from the District Court of NSW each valued at $989,183.55, $1,102,958.87 and $464,008.78 for unpaid works which were then served on the RSL Club pursuant to sections 6 and 7 of the CDA.[i] These provisions effectively allow a subcontractor who was not paid and still owed for works that were carried out, to obtain that payment from the principal that engaged the contractor.

At the time, the RSL Club fully paid the first but only partially paid the value of the second certificate. It is important to note that these were monies that would have been paid to the Builder, not the Subcontractor, as the act of issuing the debt certificates effectively assigned the RSL Club’s requirement to pay the Builder under to the contract to the Subcontractor. [ii]

Following this, the Builder obtained an adjudication determination against the RSL Club pursuant to section 22 of SOPA, and successfully sought to enforce it by way of an adjudication certificate and garnishee order for just over $2 million.[iii] Throughout this process, the fact that the RSL Club had made payments to the Subcontractor was not raised as a contentious issue before the adjudicator.

In response to this, the RSL Club filed two separate sets of proceedings to quash the determination by $1,030,281.79, [iv] on the basis that they had already partly paid or at the very least remained liable to pay the Subcontractor under the CDA.[v] The RSL Club also sought to set aside the garnishee order until the conclusion of the first set of proceedings.

What did the Court say?

Justice Stevenson concluded that because the Subcontractors served the debt certificates onto the RSL Club and payments were made pursuant to the CDA, the $2,141,780.83 awarded overstated the amount the RSL Club owed the Builder by approximately $1.2 million. [vi]

His Honour concluded that it was proper for the garnishee order to be set aside as this would undermine the legislative purpose of sections 6 and 7 of the CDA.[vii] Justice Stevenson also affirmed that the interpretation and construction of both SOPA and the CDA should be done in a way that ensures their ‘harmonious interaction’.

What does this mean for you?

Occasionally, certain Acts interact with each other which create new implications for how contractors and principals are required to manage and undertake payments. Given the large role legislation plays in encouraging or requiring parties to fulfil their payment obligations, ensure you can keep track of these obligations or otherwise seek assistance.

[i] Contractors Debts Act 1997 (NSW) ss 6-7.

[ii]  Ibid s 8(1)-(2).

[iii] Building and Construction Industry Security of Payment Act 1989 (NSW) ss 22, 25.

[iv] Warrane Design Construct Fit-Out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123 [15] (Stevenson J) (‘Warrane’).

[v] Ibid [15]-[17].

[vi] Ibid [17].

[vii] Contractors Debts Act 1997 (NSW) ss 6-7.

What is mitigation?

In the context of construction disputes, “mitigation” refers to the obligation of a person suffering loss to not act unreasonably in allowing loss they suffer to worsen and result in additional loss.[1]  It is not about whether there was some better or ideal way in hindsight[2], but whether what was done was reasonable.  The obligation is not overly burdensome and does not require the person suffering loss to go out of their way and against self-interest to avoid loss, merely to have acted reasonably in seeking to prevent themselves suffering avoidable losses.[3]

For example, if the owner of a building is having significant water ingress issues due to defective roof waterproofing installed by their builder, the loss directly caused by the builder is a recoverable loss for the owner.  But if that owner sat on their hands and allowed the water ingress to worsen or cause consequential damage resulting in a greater loss e.g. internal damage of floors, walls, and furniture etc., the failure to avoid that additional loss is a failure to mitigate.

The mitigation obligation will be shaped heavily by any contractual agreement between the parties and override general law principles.[4]

Avoidable losses are not recoverable

In that example, an owner failing to avoid losses that can be avoided by taking reasonable action is exposed to the risk that a court or tribunal may decide the owner themselves caused that additional, avoidable loss and will not be able to recover it.  This is the case even where the original cause of the loss is the builder or one of its subcontractors.

The reason for this is that the compensation principle only requires that the owner is restored (by rectification works or money in our example) to the position they would have been had the builder not performed defective works.[5]  Avoidable loss caused by an owner’s inaction is not caused by the builder, only consequent upon it.

Further, the person who claims the other has failed to mitigate loss is required to prove that failure.[6]  In our example, the builder bears the obligation of persuading the court or tribunal that some parts of the ongoing loss suffered due to the water ingress followed from the owner’s failure to take reasonable steps to halt the water ingress.

Costs of reasonable steps to avoid loss are recoverable

Fortunately, the costs of actions taken by an owner to prevent the suffering of avoidable loss are compensable.  However, such losses must not be too remote which refers to excluding recovery of losses that would not typically arise or would not have been foreseen by the parties at the time of entering their agreement due to the breach.[7]

Recovery is possible even where the costs of the reasonable steps exceed the likely cost of the avoided loss (with the builder having to prove steps were unreasonable).[8]  For clarity, it is not necessary for the reasonable actions taken to have actually succeeded in avoiding the loss for the costs to be recoverable.

Mitigating by allowing the original builder access to rectify

With those general points in mind, this article considers a specific type of mitigation scenario which is an owner’s obligation to allow the original builder to return to rectify defective or non-compliant work before engaging a third party to take over and then claim monetary compensation.  This obligation can exist in the contract between the parties, in statute[9], and otherwise at common law[10].

Determining whether or not an owner has acted reasonably is assessed against the factual circumstances of the dispute.  Helpfully, Justice Rees in Ceerose[11] distilled four key facts that will be relevant in determining the question:

1. the extent and seriousness of the defects;
2. the quality of any repairs effected by the builder;
3. the builder’s engagement with the owner in respect of the suggested defects and proposed method of rectification, in short, has the builder responded in a timely manner, taken the complaints seriously and acted fairly; and
4. the efficacy or perceived futility of continuing to negotiate with the builder.

In this mitigation scenario, given the obligation to prove the failure falls on the builder and the standard of what is reasonable conduct for the owner is not high, it will typically be difficult to establish a failure to mitigate with the owner being precluded from recovering the avoidable loss.  Justice Rees in Ceerose remarked on this when considering recent decisions on this specific mitigation scenario.[12]

Economic advantages to both owner and builder of rectification

The advantages to an owner of mitigating their loss by allowing the original builder to return include:

1. Ordinarily, the original builder will undertake this work at no cost to the owner given contractual and statutory obligations[13] to do so.
2. If certain defects or non-compliant works are worsening over time, urgent and proactive action by an owner to allow a builder access will generally be a reasonable step to mitigate avoidable loss. As mentioned above, losses that could have been reasonably avoided will not be recoverable by an owner given the true cause of those losses is the failure to avoid them.

Builders often prefer returning for the simple fact it is generally cheaper than paying the equivalent amount in money to an owner.  This is because a knowledgeable builder will have contractual rights to compel subcontractors to rectify issues in their work at no cost, or, if there is a cost, that cost is less in the original builder’s hands compared with a fresh third party builder (which will include contingencies for the cost of unknowns involved in remedial work).[14]

Provided the rectification work is performed in good faith and correctly, the parties’ interests are aligned in this scenario and resolution is achieved without protracted litigation and accompanying costs.

If you’re an owner in a situation where your losses may worsen and you need advice on what steps you can take, or you’re a builder dealing with an owner that is refusing access which is worsening any issues you may have originally caused, please contact our team on (02) 9030 7400 or at info@bradburylegal.com.au.

 

[1] The Owners – Strata Plan No 89074 v Ceerose Pty Ltd [2024] NSWSC 1494 (Ceerose) at [38]-[39] per Rees J and the references therein.

[2] Banco de Portugal v Waterlow and Sons Ltd [1932] AC 452 at [506].

[3] Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [187] per Giles JA.

[4] Ceerose at [37] per Rees J.

[5] Robinson v Harman (1848) 1 Ex 850.

[6] Ceerose at [40] per Rees J and the references therein.  See also section 18BA(3) of the Home Building Act 1989 (NSW).

[7] Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) [2012] FCA 1028 at [988] per Rares J.

[8] Arsalan v Rixon Nguyen v Cassim [2021] HCA 40 at [32] per Kiefel CJ, Gageler, Keane, Edelman and Steward JJ.

[9] For example, section 18BA(3) of the Home Building Act 1989 (NSW).

[10] See generally Ceerose at [53] per Rees J.

[11] Ceerose at [51] per Rees J.

[12] Ceerose at [48]-[50] per Rees J.

[13] For example, in a claim for breach of the statutory warranties contained in section 18B of the Home Building Act 1989 (NSW) or the statutory duty of care contained in section 37 of the Design and Building Practitioners Act 2020 (NSW).

[14] See also Ceerose at [41]-[43] per Rees J and the references therein.