Case Note: Bata v Pathik & Ors [2026] VSCA 138
Background
A building dispute can involve more than defective or unfinished work. How the parties bring the contract to an end, respond to rectification proposals and calculate their losses can all affect the outcome.
In Bata v Pathik, the Victorian Court of Appeal considered these issues following an unsuccessful townhouse development in Seaford, Victoria.
In January 2018, Amitabh Pathik entered into a building contract with registered domestic builder Mark Bata to replace an existing house with two double-storey townhouses.
The project remained incomplete, and one townhouse was constructed in the wrong location. Mr Pathik ultimately sold the property in October 2022 without subdivision.
Mr Pathik brought proceedings seeking damages. Mr Bata counterclaimed for amounts he alleged remained unpaid under the contract.
The County Court awarded Mr Pathik $1,493,986.34 and dismissed Mr Bata’s counterclaim. Mr Bata sought leave to appeal, challenging the findings concerning termination, mitigation, damages and claims involving other defendants.
Timeline of Events
The relevant events were:
- January 2018: Mr Pathik and Mr Bata entered into the building contract.
- August 2021: Mr Pathik issued a notice requiring Mr Bata to show cause within 14 days why the contract should not be terminated.
- October 2022: The property was sold with the townhouses unfinished and without subdivision.
- County Court proceedings: Mr Pathik obtained a damages award, and Mr Bata’s counterclaim was dismissed.
- 12 June 2026: The Court of Appeal delivered its decision, allowing the appeal on the damages calculation ground.
The Court’s Decision
The Court of Appeal granted leave to appeal on the termination and damages grounds. However, only the damages ground succeeded. Leave was refused on the grounds concerning mitigation and the other defendants.
Although the Court found that the show-cause notice had not itself terminated the contract, this did not remove Mr Bata’s liability for earlier breaches. The contract had subsequently been discharged by inferred agreement, preserving accrued rights.
The successful damages ground concerned the need to assess loss using a consistent hypothetical account of what would have happened if the contract had been performed.
The Court’s Reasoning
A show-cause notice did not itself terminate the contract
The August 2021 notice communicated an intention to terminate unless Mr Bata showed cause within the specified period. It did not, by itself, communicate a subsequent decision to terminate.
The distinction mattered. Giving notice that termination may follow is a different step from exercising the right to terminate.
Nevertheless, by the time of trial, neither party was treating the contract as continuing. The Court regarded the contract as discharged by inferred agreement, sometimes described as abandonment. That discharge operated prospectively and did not extinguish rights arising from earlier breaches.
For parties considering termination, the practical lesson is to examine the contract’s requirements carefully. A notice identifying breaches may begin the process without completing it.
Mitigation depends on what is reasonable in the circumstances
Mr Bata argued that Mr Pathik should have accepted his offer to rectify the defects or completed the remaining work before selling.
The Court refused leave to appeal on this ground. The trial judge had found that the rectification offer was not credible, and the challenge did not establish an error warranting appellate intervention.
The decision does not give owners an unrestricted right to reject rectification offers. It demonstrates the importance of the circumstances in which an offer is made and whether the proposed solution is reasonably workable.
Owners should retain records explaining their decisions, including relevant correspondence, expert advice and information about completion costs. Builders should ensure rectification proposals clearly address the work required and how it will be delivered.
Damages must be calculated on a consistent basis
The central problem was the use of incompatible assumptions when assessing different components of Mr Pathik’s loss.
The capital loss calculation used a hypothetical sale in May 2022. However, interest and outgoings were also awarded on an assumption that the completed development would have been sold in May 2019.
Those scenarios could not simply be combined. A calculation assuming ownership until 2022 must account consistently for expenses associated with holding the property until that date. The Court also found that the assessment needed to conform to Mr Pathik’s pleaded case.
For anyone preparing a damages claim, the lesson is practical: valuations, financing expenses, holding costs and the alleged completion or sale date must fit together. Establishing a breach does not establish that every claimed expense is recoverable.
Claims against other defendants did not displace contractual liability
Mr Bata also challenged the treatment of claims involving two other defendants connected with the project.
The Court refused leave on this ground. Any liability those defendants might have had did not alter Mr Bata’s contractual liability to Mr Pathik.
Key Legal Takeaways
The decision highlights several considerations for homeowners, builders and parties managing construction claims:
- Follow the contractual termination process. A show-cause notice may require a further step before termination takes effect.
- Consider accrued rights separately. Bringing future performance to an end does not necessarily remove liability for earlier breaches.
- Assess rectification proposals carefully. The reasonableness of accepting or rejecting an offer depends on the evidence and circumstances.
- Keep damages assumptions consistent. Valuations and consequential expenses must reflect a coherent account of what would have happened without the breach.
- Align the evidence with the pleaded claim. Expert reports and financial calculations should support the case actually advanced.
These issues form part of the broader field of building and construction law, where contractual procedures and evidence can have substantial financial consequences.
Outcome
The June decision allowed the appeal on the damages calculation ground, with consequential orders to follow.
A subsequent decision, Bata v Pathik [No 2] [2026] VSCA 157, addressed the resulting outcome and costs. The damages award was reduced by approximately 20%, although Mr Pathik was awarded his appeal costs, fixed at $80,000.
On 8 October 2026, the High Court refused Mr Bata’s application for special leave to appeal. That refusal left the Court of Appeal’s decision undisturbed; it was not a further appeal determination on the merits.
For builders and homeowners, the case demonstrates why termination, rectification and damages should be considered together when developing a dispute strategy.
If you are dealing with unfinished work, building defects or a disputed termination, speak with Warlows Legal about your circumstances and available options.
This article provides general information only and does not constitute legal advice. Each matter depends on its particular facts and circumstances.
