Owners Corporation PS801173C v Devakon Pty Ltd [2025] VCAT 830
What happens when apartment owners claim nearly $1 million in building defects, only for the Tribunal to decide that most of those issues either weren’t defects at all, or simply didn’t warrant costly repairs? This Victorian case shows that in building disputes, it’s not about how much you claim, but whether your claim is actually reasonable and backed by evidence.
The Background
This case tells the story of an apartment building in Melbourne that didn’t quite turn out as promised. What began as a standard residential development soon spiralled into a multi-party dispute over defects, delays, and finger-pointing between the developer, the builder, and ultimately the people who bought and lived in the building.
The builder, Devakon Pty Ltd, had been engaged under a major domestic building contract to construct the apartments. But partway through the project, the relationship between the builder and the developer completely broke down. The contract was terminated, Devakon was removed from the site, and other contractors were brought in to finish the job.
When the building was eventually completed, the Owners Corporation and several lot owners discovered a range of defects, such as water leaking into the basement, issues with fire doors, roofing and plastering problems, and more. Experts were engaged, and the owners brought proceedings against the builder under the Domestic Building Contracts Act 1995 (Vic), claiming that the builder had breached the statutory warranties that every builder in Victoria is bound by, which is that the work must be done properly, with reasonable care and skill, and in accordance with plans and standards.
Initial Claim, Nearly $1 Million
The owners’ expert initially identified 24 defects and estimated the total cost to fix them at almost $1 million. However, as the case unfolded, not all defects held up under scrutiny. Some had already been rectified, others weren’t caused by the builder at all, and a few were simply maintenance issues rather than true defects.
Interestingly, a negligence claim that the owners first tried to argue was abandoned early on because of a recent High Court case ruling in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61228.[1]
Therefore, the case ultimately came down to one key question: Was the builder responsible under the statutory warranties for the defects that remained, and if so, what was the reasonable cost to fix them?
The Legal Test
The builder didn’t deny that some defects existed, but argued that many were too minor, technical, or caused no real loss, so the owners shouldn’t be entitled to large sums of money. To assess this, the Tribunal turned to leading High Court cases like Bellgrove v Eldridge,[2] Tabcorp Holdings Limited v Bowen Investment Pty Ltd,[3] and Stone v Chappel,[4] which all establish a key rule: if building work is defective, the usual remedy is the cost to fix it, but only if that cost is reasonable.
This means owners are entitled to get what they bargained for, but not to pursue excessive or wasteful repairs. Rectification won’t be awarded if the cost is out of proportion to the actual impact of the defect.
When deciding reasonableness, the Tribunal looks at things like how serious the defect is, whether it affects functionality or appearance, how practical it is to fix, and whether the owners actually intend to carry out the works.
By the time the hearing began, the owners had narrowed their case to 19 defects, ranging from basement leaks to tiling and drainage issues. They argued each one breached statutory warranties under the Domestic Building Contracts Act 1995 (Vic), which requires building work to be done properly, with care and skill, and to be fit for purpose.
The Tribunal then assessed each alleged defect against these legal principles to determine what was truly compensable, and what wasn’t.
The bulk of the owners’ claim centred on water ingress in the basement, and the remainder of the defects were assessed individually. Many were withdrawn, not proven, or found too minor to justify major rectification.
Outcome
Despite the owners initially claiming close to $1 million, the Tribunal awarded a total of $119,562.39, confirming that damages must be reasonable, proportionate, and directly linked to actual defects, not speculative or excessive claims.
[1] Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61228 (2014) 254 CLR 185.
[2] Bellgrove v Eldridge [1954] HCA 36.
[3] Tabcorp Holdings Limited v Bowen Investment Pty Ltd (2009) 236 CLR 272.
[4] Stone v Chappel [2017] SASCFC 72.
