What the High Court’s judgment in Mann v. Paterson Constructions means for builders

Media Release

Leading property and commercial law advisory firm, Kalus Kenny Intelex (KKI), has provided comment around this week’s High Court judgment in Mann v. Paterson Constructions Pty Ltd. [Peter Mann & Anor v. Paterson Constructions Pty Ltd (2019) – HCA 32]

KKI acted for the builder through its Partners, Jonathan Kenny and Peter Lettieri. The High Court has overturned long-standing principles and clarified inconsistent decisions in its judgment.

It is common for a builder to be owed money after a building contract has been wrongly terminated or repudiated by the owner. When that occurs, part of the building works may have been performed and paid to the builder, and the balance of the completed building work has not been the subject of a payment claim.

The effect of the decision in Mann v. Paterson Constructions Pty Ltd is that in future, even though the contract has been terminated, the builder can only sue for damages, to be assessed pursuant to the contract, for that part of the completed work that has not been the subject of a payment claim and any other damage that the builder has suffered.

In the past, the law allowed a builder to seek restitution on the basis of the fair value of the building work performed, which might exceed the amounts otherwise payable pursuant to the contract.

Mr Kenny said the judgment was particularly relevant as our local building and construction industry today represents one of Australia’s largest in its total value, investment and employment.

“The judgment will bring certainty to the building and construction industry around the important area of the basis on which damages can be sought following the termination of a contract,” Mr Kenny said.

The 5-year matter emerged during the construction of two townhouses in Blackburn in Melbourne’s east over 2014 and 2015. It had previously been before the Victorian Civil and Administrative Tribunal (VCAT) and appealed to the Supreme Court of Victoria and the Court of Appeal.