Builder’s appeal cuts home owner’s defect damages from $65,000 to $42,000 (NCAT, 2026)

What happened

Between March and May 2022 the owner of a flood-affected house and a licensed builder agreed on renovations and additions: an extension to the first floor living area, an extension to the second floor for a new bedroom and ensuite, and moving a toilet to create a hallway. The agreed price was $115,000. The written contract did not contain everything section 7 of the Home Building Act 1989 (NSW) requires, and the builder never took out home warranty insurance, which section 92 of that Act requires for work of this value.

The builder worked on the house from about January 2023 to October 2023. The owner paid $92,000 in cash payments. In October 2023 the builder asked for a further $20,000 and the relationship broke down. The owner complained to NSW Fair Trading. On 17 November 2023 a Fair Trading building inspector made a rectification order requiring the builder to finish the incomplete work and fix defective work by 23 December 2023. The order set conditions on the owner: give reasonable access, pay $25,200 (described as 70% of the remaining contract monies) before work started, and $10,800 on completion. The owner said the amounts were only payable if the builder first obtained home warranty insurance, and refused to let the builder back on site because the insurance was never obtained.

The owner applied to NCAT in June 2024. Both sides were legally represented and both filed expert building reports: the owner's expert put the cost of rectifying defects and completing the work at $85,735.05, the builder's expert at $50,701.16. At the hearing on 20 February 2026 the lawyers told the Tribunal that breach was admitted and the amount, or "quantum", was agreed at $65,000, so the experts did not need to give evidence.

The Tribunal found the builder had walked away from the contract (in law, repudiated it) and the owner had accepted that, and that the builder had broken the statutory warranties in section 18B of the Home Building Act. It ordered the builder to pay the owner $65,000 within 14 days, and later ordered the builder to pay the owner's costs. It refused to reduce the $65,000, holding that any agreement to pay a further $36,000 depended on insurance the builder never got, and that section 94 barred an uninsured builder from enforcing the contract or using any set-off without bringing and proving a quantum meruit claim (a claim for the value of work done where the contract cannot be enforced).

What each side wanted

The owner claimed damages for the cost of fixing the defective work and finishing the incomplete work. The builder did not ask the Tribunal for a money order; he argued that the damages figure itself had to be reduced by $36,000 — $23,000 of the original contract price still unpaid, plus $13,000 he said had been agreed for extra work and materials — because otherwise the owner would get a completed, defect-free house for less than the contract price. The owner argued that no further money was ever agreed or owing, that any agreement was conditional on insurance the builder never obtained, and that section 94 of the Home Building Act stopped an uninsured builder from getting the benefit of unpaid contract money without a quantum meruit claim. On appeal the builder asked for the award to be cut to $29,000; the owner asked for the appeal to be dismissed.

What the tribunal decided

The Appeal Panel allowed the appeal. It varied the Tribunal's orders of 20 February 2026 (amended in March 2026) by changing the amount of $65,000 to $42,000, and ordered the respondent to pay the appellant $23,000 within 28 days of the decision dated 11 November 2026.

On costs, the Appeal Panel ordered the respondent to pay the appellant 80% of the costs of the Appeal Panel proceedings on the ordinary basis, as agreed or assessed, reflecting mixed success on the appeal issues. Either party who wants that costs order varied must lodge a miscellaneous matters application with the Appeal Panel Registry, serve it on the other party, and set out why the variation is sought; the Appeal Panel will then issue further directions.

The builder did not get everything he asked for. He wanted the award cut to $29,000 by deducting $36,000, but the Appeal Panel did not accept that the contract price had been increased by $13,000 for extras. It also noted that the builder's complaint about the earlier costs decision was not properly before it, because the grounds of appeal were never amended to include that decision and no separate appeal against it was lodged.

Why the tribunal decided it that way

Damages for breach of the statutory warranties are worked out using ordinary contract rules. The aim is to put the owner in the position he would have been in if the contract had been carried out properly — not a better one. The Appeal Panel applied the long-standing building cases on this: the measure is the difference between the contract price for the building that was promised and what it costs to make the building match the contract.

That means the unpaid part of the contract price has to be brought into account. The Appeal Panel put the arithmetic plainly: if the contract price was $115,000, the owner had paid $92,000, and the owner then received $65,000 to fix and finish the work, the owner ends up with a completed, defect-free house for $92,000 instead of $115,000. The owner only suffers a loss once the cost of fixing and finishing exceeds what he would have had to pay under the contract anyway.

The Appeal Panel held that this adjustment applies whether or not the builder could have sued for the unpaid balance. Damages to an owner are compensation, not punishment of the builder. So the builder's breaches of section 7 (contract requirements) and section 92 (insurance), and the bar in section 94 on an uninsured builder recovering money — including on a quantum meruit basis, unless a tribunal thinks it just and equitable under section 94(1A) — are a separate question from how the owner's damages are calculated. The builder's failure to bring a quantum meruit claim, or to plead a set-off, did not excuse the Tribunal from applying the correct damages principle. Treating section 94 as an answer to the adjustment was applying the wrong legal principle, which is an error on a question of law and does not need leave to appeal.

On the contract price, the Appeal Panel said that although the Tribunal did not spell it out, no other conclusion was open than $115,000: both sides accepted that figure as the original price and only the builder argued it had risen by $13,000 for extras. The published text available here stops mid-sentence in the part dealing with the contract price, so the final working behind the figures is not fully set out, but the orders show the award was reduced by $23,000.

What this means if you are in a similar position

If you are a home owner in a similar position, this decision shows how a tribunal works out the money when a builder leaves defective or unfinished work behind. The award is not simply the cost of fixing everything. The tribunal looks at what you would have had to pay under the contract to get the finished job, compares that with what you have actually paid plus what the repairs and completion will cost, and awards the difference. Money you agreed to pay but never handed over is taken into account, even if the builder could not have sued you for it.

It also shows that a builder's own breaches do not automatically increase what you recover. Here the builder had no home warranty insurance and a contract that did not meet the Act's requirements, and those failures limited what he could claim from the owner — but they did not change how the owner's damages were calculated. The two questions are kept separate. Equally, this decision shows that agreements reached in front of a regulator, and figures written into a rectification order, can become evidence about what the contract price was.

If you are dealing with work that is defective or unfinished, the step most people take first is a written notice to the builder that lists each item, says what is wrong with it and asks them to come back and fix it by a date, keeping a copy of what was sent and when. If that is ignored, the next step is usually a complaint to the state fair trading body and then an application to the tribunal.

How to apply: our step-by-step guide to a NCAT application. More decisions: NCAT cases and builders and building defects.

Source: O’Connor v Martin [2026] NSWCATAP 361 (read the full decision). This summary was prepared from the published decision for general information. It is not legal advice, and the tribunal’s own reasons are the authoritative record.