In Ceerose Pty Ltd v The Owners – Strata Plan No 89074 [2025] NSWCA 235, the New South Wales Court of Appeal considered whether the Owners acted unreasonably by denying access for rectification works, and if so, whether that constituted a failure to mitigate its loss.

The Owners engaged Ceerose to build a 16-storey residential building in Sydney. Following the emergence of defects, the Owners commenced proceedings seeking damages for breach of statutory warranties under section 18B of the Home Building Act.

At first instance, Ceerose implicitly admitted the existence of some defects but contended that the Owners had failed to mitigate its loss by denying Ceerose the opportunity to rectify those defects.  A central issue was which party bore the onus of proving whether the Owners had acted reasonably in refusing access.

In awarding damages to the Owners, the primary judge confirmed that where a defendant alleges failure to mitigate loss, the defendant generally bears the onus of proof.  Accordingly, the Owners were not required to prove that its refusal to allow rectification was reasonable. Our detailed summary on this decision can be found here.

In this case, the Owners had lost confidence in Ceerose’s ability and willingness to complete the rectification works. The Court of Appeal accepted that the primary judge did not err in finding that this loss of confidence was genuine and reasonably held, and that the refusal to permit further access was not unreasonable in the circumstances.

The Court rejected Ceerose’s submissions and confirmed that:

• a plaintiff bears the duty to establish loss, but the onus is on the defendant to prove that the plaintiff acted unreasonably in failing to mitigate that loss;
• there is no “positive obligation” on an owner to provide the builder with an opportunity to rectify defects; and
• the builder bears both the legal and evidentiary onus to establish that the refusal to permit rectification was unreasonable in the circumstances.

The Court dismissed the appeal with costs.

This decision reinforces that an owner does not have a positive legal obligation to allow a builder to rectify its defects before claiming damages for that defective work. Where a builder seeks to rely on a failure to mitigate defence, it bears the onus of proving the owner’s conduct was unreasonable.

The decision can be found here.