The decision of Stynes J in Hacer Group Pty Ltd v Euro Façade Tech Export Sdn Bhd [2022] VSC 373 provides a clear and helpful summary of the principles applicable to a court’s role in undefended proceedings, and in relation to contractual claims for defective building work.

Hacer was the design and construct contractor for a substantial apartment and mixed commercial use project in Heidelberg and engaged Euro to design and construct the façade.

The parties fell into dispute. Hacer asserted, amongst other things, that there were design and manufacturing defects in the façade works and sought to recover the cost of rectification from Euro.

Euro filed a defence and counterclaim claiming alleged variations and the balance of the subcontract sum, but otherwise did not defend Hacer’s claims, or prosecute its own claims. Following consideration of the applicable principles, the evidence and submissions Stynes J entered judgment for Hacer on certain of its claims and dismissed Euro’s counterclaim.

As to the approach a court should take in an undefended proceeding, Stynes J noted [at paras 25-27] that:

• the non-appearing party is not prevented from relying on legal defences that do not depend on facts that the non-appearing party has not proven
• the court must investigate the merits of the matter
• the represented party must prove its case on the balance of probabilities in the usual way
• the represented party is restricted to the relief claimed in its pleadings and does not have free reign to amend its pleadings to raise issues the absent party has not had notice of
• the court may allow evidence to be tendered and affidavits to be read on behalf of the represented party and is entitled to assume the correctness of the facts claimed in its submissions where the represented party tenders uncontroverted evidence in support of those submissions.

As to the principles applicable to contractual claims for defective building work Stynes J referred with approval to the detailed summary provided by Woodward J in the well-known Lacrosse decision (Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd [2019] VCAT 286) [at para 29].

Stynes J also set out the following further applicable principles [at para 30]:

• the aggrieved party bears the onus of proving the loss and damage it has suffered
• where the aggrieved party can reasonably prove the quantity of the loss and damage suffered, they must do so on the balance of probabilities and with as much precision as the subject matter permits
• if the circumstances of loss and damage are such that the aggrieved party is unable to prove the quantity of its loss and damage, it will not be deprived of an award of damages as the court must do its best to estimate the loss and damage suffered by them fairly
• where damages are uncertain for lack of evidence, difficulties of assessment are generally resolved against the party who could or should have provided the evidence
• prima facie, the measure of damage for defective work performed in breach of contract is the cost of rectification
• both the manner of rectification and the cost of performing that rectification work must be reasonable
• it is generally accepted that the owner must give the builder a reasonable opportunity to rectify any defects, which obligation may be an aspect of the duty to mitigate since it may be less expensive for the builder rather than a third party to rectify the defects
• where rectification work has been performed, the actual cost, if known, is evidence of the reasonable cost and will ordinarily provide the basis for damages

It is not uncommon to have to grapple with the practicalities of proving claims in an undefended proceeding. Further, submissions regarding the principles applicable to contractual claims for defective building work are ubiquitous in construction cases. The lucid summary of the applicable principles set out by Stynes J in Hacer v Euro is of great assistance on both counts.

Andrew Laird

Liability limited by a scheme approved under professional standards legislation