Shane Monks (led by P D T Applegarth SC) represented the Fourth Respondent.
The Appellant developed a mixed residential, retail and office complex at Cleveland. After construction, it subdivided the property into community titles schemes and sold most of the lots. It then sued the parties involved in the development’s design and construction, and the local council, for alleged defects. It claimed approximately $31 million, being the cost of demolishing and rebuilding the development, and alternatively its diminished value. The primary judge struck out those parts of its statement of claim, and the Appellant appealed.
The Court of Appeal held that the rectification measure of damages from Bellgrove v Eldridge did not apply. On the Appellant’s own pleading, the contracts were for a marketable development. Its loss was therefore measured by any diminution in the development’s market value, not the cost of rectification. The Appellant had realised its return from selling the lots and could not carry out the rectification work because the purchasers had neither required nor consented to it. The cost of rebuilding was therefore not recoverable. The Court also rejected the Appellant’s reliance on the exception recognised in St Martins Property Corporation Ltd v Sir Robert McAlpine Ltd, as any loss was suffered before the lots were sold, and the Appellant did not sue for the benefit of the purchasers. Its alternative pleading that it would procure the demolition failed to plead how the obstacles to rebuilding would be overcome.
The appeal was dismissed with costs.
The judgment can be read by clicking here
