Grech v Biltar [2025] VSC 636
Overview
In Grech v Biltar Pty Ltd [2025] VSC 636, the Victorian Supreme Court was asked to determine whether a clause in a settlement deed – requiring the builder to carry out rectification works of defects – was enough on its own to justify an order for specific performance.
At first glance, it may seem obvious: if the parties agreed that the builder must fix the defects, shouldn’t the court simply enforce that agreement? However, as this case makes clear, the inclusion of such a clause does not give rise to an automatic right. Specific performance is not a contractual entitlement; it is an equitable remedy, available only in limited and exceptional circumstances.
To understand why the Court reached this conclusion, we need to step through the facts.
Facts
The plaintiff, as owner of a property, entered into a building contract with the defendant on 13 April 2022 for the construction of a double-storey dwelling. The builder failed to complete the project by the agreed date (17 October 2023), and defects and delays occurred during construction. As a result, a dispute arose between the owner and the builder regarding the quality and completion of the works.
To avoid ongoing litigation and resolve the dispute, the owner and builder entered into a settlement deed on 21 May 2024. In this deed, the parties were to jointly engage an expert to prepare a defects report and the builder would then fix those defects within 60 days. The deed of settlement expressly contemplated specific performance as a remedy. Under clause 7.4(b) of the Deed, if the builder defaulted on its obligation to carry out the rectification works to the expert’s satisfaction (as per clause 5), the owner was entitled to take the matter to court and seek an order requiring the builder to perform the terms of the deed, along with interest and costs – to ‘commence proceedings in a court of competent jurisdiction against the Builder seeking specific performance of the terms of this Deed plus interest and costs.’
The defendant failed to complete the rectification works within the agreed timeline under the Deed, citing difficulties in coordinating necessary trades, and sought an extension from the plaintiff, which was refused due to concerns about the builder’s cash-flow position and reliability.
The plaintiff filed proceedings for an order of specific performance to require the defendant to perform its obligations under the Deed, indicating a lack of confidence in the defendant’s ability to meet its commitments without a court order. He argued that this clause demonstrated the parties’ intention that the Court should compel specific performance if the builder failed under Clause 7.4(b). The plaintiff also contended that damages would be insufficient, pointing to the difficulty and expense of engaging a replacement builder in a regional area, as well as concerns about the builder’s financial stability.
Rule
The Court reaffirmed the established principles governing equitable relief, emphasising that specific performance is not automatically granted upon request. This is because such performance requires ongoing supervision, creates scope for further dispute; and demands cooperation between parties, which is difficult as such parties are usually already in conflict/mistrust each other.
The court will rarely decree specific performance of building contracts where there are practical difficulties in enforcement, unless three criteria are met:
(i) The building work is defined with clarity in the contract
(ii) The owner demonstrates a substantial interest in contract performance that cannot be adequately compensated by damages
(iii) The builder has possession of the building site.
Specific performance is a discretionary equitable remedy, not a right. Its availability depends on the Court’s assessment of the particular circumstances in accordance with established principles, including whether an award of damages would provide an adequate remedy.
Decision
The Court held that damages were an adequate and more appropriate remedy in the circumstances.
Reasons for Judgment
Although the Court accepted that clause 7.4(b) gave the owner the right to seek an order for specific performance, it emphasised that this did not oblige the Court to grant it. The equitable discretion to withhold specific performance still applied.
Unclear rectification works
A key factor in refusing specific performance was the lack of clarity in the defects reports and the rectification obligations under the Deed, which made any order for specific performance too uncertain to enforce. Items such as balcony compliance, glass panel openings, and brickwork cleaning were
described in vague terms. The Court emphasised that it will not make orders requiring performance of building works where the required scope is not clearly defined.
Cash-flow issues
The Court considered the practical realities between the parties. The builder’s delays were partly due to cash-flow issues – exacerbated by the plaintiff’s late payments – which resulted in trades being terminated and work stalling. However, though the Court did recognise the builder’s cash-flow difficulties and their effect on the damages assessment, it found that this factor alone did not justify granting specific performance.
The Court characterised the case as a typical domestic building dispute, noting that another builder could readily complete the works and that ordinary cost or delay in doing so did not justify specific performance.
Relationship deterioration
The relationship between the parties had also significantly deteriorated, and the Court found that forcing ongoing cooperation under a court order would be impractical and likely to cause further disputes. It would require continuous judicial supervision, which the Court is generally reluctant to undertake in construction matters.
Insurance
Importantly, the builder was covered by domestic building insurance through the VMIA, which would indemnify the owner for the cost of rectifying defects up to $300,000 if the builder became insolvent or failed to complete the works. As there was no evidence that the rectification costs would exceed this statutory cap, concerns about the builder’s solvency did not justify the equitable relief of specific performance.
For these reasons, the Court declined to order specific performance and held that damages were sufficient to achieve justice between the parties.
Conclusion
While such clauses regarding defect rectification are meant to help resolve defects and make sure the builder follows through with their obligations, they only work in limited situations, specifically when the obligations are clearly defined and the arrangement is practical to enforce. Sometimes, accepting a monetary settlement and moving on is a faster, cleaner and more effective solution.
Useful tip: Consider drafting a settlement deed in a construction matter to require payment of the assessed defect costs if the builder fails to carry out the works. This provides the owner with a clear financial fallback, removing the need to seek specific performance or reopen the dispute through further litigation.
