Ceerose Pty Ltd v The Owners – Strata Plan No 89074 [2025] NSWCA 235  

Andrew Hales  |  Zar Chavla

Key takeouts

The legal and evidentiary onus is on a defendant to prove that the plaintiff has failed to mitigate its loss. In building contract cases, there is no invariable requirement that the owner provide the builder with an opportunity to rectify defects. The issue is whether the conduct of the plaintiff, including the failure to provide an opportunity to rectify, was unreasonable in all the circumstances, such that some or all of the claimed loss resulting from the breach of contract should be disregarded.

The Court of Appeal dismissed a builder and developer’s argument that the onus ‘shifts’ to the plaintiff if the builder establishes that the plaintiff has not provided the builder an opportunity to rectify defects. In doing so, the Court of Appeal reinforced that the owner had no ‘positive obligation’ to provide the builder and developer an opportunity to rectify the defects. The onus was on the defendant ‘from beginning to end’ to prove the plaintiff had acted unreasonably.

Legal background

Section 18BA(1) of the Home Building Act 1989 (NSW) provides that a party to a building contract who suffers loss arising from a breach of that contract has a duty to mitigate their loss, and the onus of establishing a failure to mitigate loss is on the party alleging the failure.

Facts

The first appellant was the builder, and the second appellant was the developer, of a 16-level apartment building known as ‘The Eliza’ on Elizabeth Street, Sydney. The respondent was the owners corporation of the building.

Construction of the building finished in 2014. Defects in the building led to the owners commencing proceedings. The proceedings were stood over to enable settlement discussions, leading to an ‘in principle’ settlement in October 2018.

However, on numerous occasions in 2018 to 2019, the owners’ solicitors informed the appellants’ solicitors they were losing or had lost confidence in the builder and were unwilling to allow the builder any further opportunity to repair the defects. On 8 November 2019 the owners refused the appellants access to the building to carry out certain rectification work.

The matter was heard by a referee. The referee found that the appellants had been given a reasonable opportunity to undertake urgent fire safety defect rectification works and failed to keep the owners properly informed about the progress of the rectification works. In that context, the referee found the owners did not act unreasonably in losing confidence in the appellants and refusing entry.

Decision at first instance

Rees J at first instance substantially adopted the referee’s reports and gave judgment to the owners for $1.95 million (excl GST). On the mitigation issue, her Honour said that ‘the fact that the owner refused access does not, of itself, shift the onus of proof from the builder to the owner to prove the reasonableness of that decision‘.

Decision on appeal

The Court of Appeal dismissed all grounds of the appeal, upholding Rees J’s decision. Of particular importance was the Court of Appeal’s emphatic rejection of the appellant’s argument relating to a ‘shifting’ onus.

No obligation to provide opportunity to rectify

The Court first made clear that there was no ‘special common law rule‘ that required an owner to provide a builder with an opportunity rectify the defects. Put another way, the owners did not have a ‘positive obligation‘ to provide the appellants an opportunity to rectify the claimed defects. The issue was whether the conduct of the owners, including the failure to provide that opportunity, was unreasonable in all the circumstances. The appellants needed to establish the facts and persuade the referee that the owners’ conduct was unreasonable. By simply establishing that the owners had refused access and suggesting without evidence that the owners did so out of hopes of receiving a cash settlement instead, the appellants had failed to satisfy the evidential onus.

Rejecting the use of a ‘shifting’ or ‘tactical’ onus

The Court found that, by asserting the evidentiary onus had shifted to the owners once it had been established that access had been denied, the appellants had sought to invoke a ‘tactical onus’.

The Court said that the appellants use of the ‘tactical onus’ illustrated ‘the confusion commonly created by that notion, and why its invocation is best avoided‘. The Court cited its recent judgment in XJS World Pty Ltd v Central West Civil Pty Ltd [2025] NSWCA 133, where the ‘tactical onus’ was discussed as generally being a concept to describe ‘a tactical evaluation of who is winning at a particular point in time‘, and was of ‘doubtful utility at the end of a hearing (or in an appeal) when the course of adducing evidence has come to an end‘, by which time the question is ‘whether the party bearing the legal burden of proof has discharged it‘.

To that effect, the Court also dismissed the appellants’ reliance on prior authority that stated the evidentiary onus could shift ‘during the trial‘, noting that this authority did not suggest a tactical onus is relevant to assessment at the end of the trial.

The Court compared the use of a ‘tactical onus’ to a sporting contest where one team leads at a particular point, whereas ‘in litigation, disputes are resolved when receipt of the evidence has concluded and the evidence is assessed. In the case of a draw – where the court is not persuaded either way – the party bearing the legal onus loses‘.

The Court of Appeal ultimately held that Rees J did not err in finding that there was not enough evidence for the appellants to displace their evidentiary onus and dismissed these grounds of appeal.