The case of Andrews & Andrews Construction Pty Ltd v Yao; Yao v Andrews & Andrews Construction Pty Ltd [2025] NSWSC 322 highlights the importance of correctly understanding joint contractual obligations. It also demonstrates the need for a party to raise any concerns about cost overruns or tendering with the builder promptly during construction.
Relevant facts
In October 2016, Yao Xiang Fei and Adeline Yu Ding (Owners) engaged Andrews & Andrews Construction Pty Ltd (Builder) under a cost-plus contract to build a luxury waterfront home (Contract). The Contract included a special condition requiring the Owner and the Builder to “work together” to get two quotes for each “element, trade and item” to obtain the most competitive pricing (Special Condition).
The construction took place between 2016 and 2019 and 17 invoices had been paid by the Owners to the Builder totalling approximately $4 million (without any dispute by the Owners).
Practical completion was achieved in March 2019 and the Owners moved into the property.
The Builder subsequently issued 2 further invoices in the total amount of $842,624.41 which were disputed by the Owners.
In December 2020, the Builder commenced proceedings against the Owners for the outstanding payments of the 2 invoices.
The Owners cross-claimed against the Builder alleging that the Builder was in breach of the Special Condition as it failed to get two quotes and obtain the most competitive pricing. In an attempt to prove their loss, the Owners sought to use the “Facilitation Principle”.
The Facilitation Principle
The Facilitation Principle, established in the case of Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17, is a legal principle applicable in cases where the actions of a party in breach makes it difficult or impossible for the innocent party to prove its loss. This principle allows the innocent party’s loss to be proven through reasonable inferences made by the Court in favour of the innocent party.
Decision
Joint Obligation
The Court held that the obligation formed by the Special Condition is a joint obligation, meaning the Owners and Builder would have had to work together to fulfil it. It is not a one-sided obligation amenable to suit by one party against the other. Therefore, the Builder was not in breach of the Special Condition.
Applicability of the Facilitation Principle
The Court further stated that, had there been a breach, the Facilitation Principle would not be applicable to this case. The Owners, being aware of the Builder’s choice of contractors, project progress and costs, had previously not raised any complaints or objections at the time of construction or years of litigation. The Court determined that it would be unjust to allow the Owners to prove their loss through the Facilitation Principle where the difficulty in calculating costs is not caused entirely by the Builder, but rather contributed to by the Owners’ acquiescence.
Key Takeaways:
A breach of a joint obligation under a contract may not be enforceable against a party where the other party has contributed or acquiesced to the breach. Parties to construction contracts must be vigilant of contract provisions and (in particular, where the provision is a joint obligation) enforce the provision they wish to rely on subsequently.
If you would like to discuss this article with us, please contact Vick Tan, partner, or Behbod Izadi, paralegal on (02) 9261 5900.