Supreme Court of New South Wales | February 2026

Overview

A recent Supreme Court of New South Wales decision has reinforced an important principle for builders and property owners alike: a contractual clause that purports to limit remedies for breach of a building contract will not necessarily operate as an exclusive remedy, and may not preclude the innocent party from pursuing damages at common law.

In DeMarco v Macey [2026] NSWSC 57, the Court refused leave to appeal a decision of the NSW Civil and Administrative Tribunal (NCAT) Appeal Panel, confirming that the defendants (property owners) were entitled to claim damages beyond those specified in the contract’s dispute resolution clause. The case also raised important issues around quantum meruit claims, arithmetical errors in tribunal decisions, and the proper assessment of building contract damages.

Background Facts

In 2016, the plaintiff builder entered into a written contract with the defendant homeowners for residential renovations and additions. The agreed contract price was $770,000, which included allowances for provisional sums and prime cost items. During the course of the project, three agreed variations were added, totalling $41,124.88.

Construction commenced in October 2016, but the project was plagued by delays — delays that the builder himself admitted were caused by his own fault. By February 2019, the owners had lost patience. They terminated the contract and engaged a replacement builder to complete the works, incurring significant additional costs in doing so.

The owners brought proceedings in NCAT seeking damages for the cost of completing the works, defect rectification costs, and furniture storage costs incurred as a consequence of the delays. What followed was a series of tribunal and appeal decisions spanning several years, each adjusting the quantum of damages awarded.

The Journey Through the Tribunals

The litigation proceeded through multiple stages before reaching the Supreme Court:

NCAT initially awarded the owners $317,919 in damages.
The Appeal Panel increased this to $389,184.
The builder appealed to the Supreme Court on grounds of apprehended bias, and the matter was remitted to a differently constituted Tribunal.
The reconstituted Tribunal ordered the builder to pay $416,508.40 plus costs.
The builder again appealed to the Appeal Panel, which allowed the appeal in part — reducing the figure to $372,579.42 after correcting an arithmetical error.

Dissatisfied with the outcome, the builder sought leave to appeal to the Supreme Court. Leave was refused.

Key Legal Issues

1. Was Clause 25 an Exclusive Remedy?

Central to the builder’s appeal was an argument that clause 25 of the contract — which set out the method of calculating amounts payable upon termination — provided the exclusive remedy available to the owners. The builder contended that the Tribunal was therefore wrong to assess damages on common law principles (including claims for consequential losses such as storage costs).

Both the Appeal Panel and the Supreme Court rejected this argument. The Court confirmed that clause 25 was not expressed as an exclusive remedy and did not, on its proper construction, preclude the owners from pursuing additional remedies available at common law. This finding is consistent with the general principle that courts and tribunals will not lightly construe a contractual clause as extinguishing a party’s common law rights unless the language is clear and unambiguous.

This is a reminder to all parties drafting building contracts: if a clause is intended to operate as the sole remedy for a particular breach or event, that intention must be expressed in clear, explicit terms. Ambiguous language will generally be construed against the party seeking to rely on the limitation.

2. The Quantum Meruit Claim

The case also involved a quantum meruit claim by the builder — that is, a claim for the reasonable value of work performed, separate from the contractual entitlements. The Tribunal had rejected this claim entirely, but the Appeal Panel found that the Tribunal had erred by failing to consider evidence of an admission by the owners that acknowledged part of the claim to the value of $13,858.

This constituted an error of law — a failure to take into account relevant evidence — and the Appeal Panel varied the amount awarded against the builder accordingly. The principle from Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 remains significant here: quantum meruit claims in the building context must be carefully assessed against the contractual framework, but where there is evidence supporting even a partial entitlement, that evidence cannot simply be disregarded.

3. Arithmetic Errors and the Duty to Get the Numbers Right

One aspect of the Appeal Panel’s decision that deserves attention is its correction of an arithmetical error made by the Tribunal, which had overstated damages by $34,522.90. While this might seem like a procedural footnote, it illustrates the importance of precise calculation in building disputes where large sums are at stake.

Parties and their legal representatives should carefully scrutinise damage calculations in tribunal decisions, as errors — even innocent mathematical ones — can significantly affect the final outcome.

4. Assessment of Damages: The Bellgrove v Eldridge Principles

The assessment of damages for breach of a building contract in New South Wales continues to be governed by the principles established in Bellgrove v Eldridge (1954) 90 CLR 613. Under this approach, the primary measure of damages for defective building work is the cost of rectification — the cost of bringing the works into conformity with the contract — unless rectification would be unreasonable or involve disproportionate expense.

In DeMarco v Macey, the Tribunal and Appeal Panel applied these principles to assess:

The reasonable cost of completing the works by the replacement builder;
Defect rectification costs; and
Consequential losses, including furniture storage costs caused by the builder’s delays.

Importantly, the Appeal Panel confirmed that no adjustment was required to the contract price for prime cost items or provisional sums that the builder had not supplied, as those items were properly excluded from the contract price calculation.

Practical Implications

For Builders

This case serves as a cautionary tale. Delays that are within a builder’s control — and for which the builder bears responsibility — can expose the builder to significant liability, including not only direct completion costs but also consequential losses suffered by the owner. A contractual clause limiting remedies will not automatically insulate a builder from the full extent of that exposure unless it is specifically and unambiguously drafted as an exclusive remedy.

Builders should also be vigilant about preserving and properly presenting evidence in support of any quantum meruit or variation claims. Evidence of the owner’s admissions or acknowledgements — even informal ones — can be decisive.

For Property Owners

Property owners who terminate building contracts due to builder default should be aware that they are not necessarily limited to the remedies set out in the contract. Subject to the specific terms of their agreement, they may be entitled to claim the full cost of completing the works by a replacement builder, the cost of rectifying defects, and consequential losses flowing from the builder’s breach — all assessed on common law principles.

Owners should also engage a replacement builder carefully and document all costs, as these will form the basis of their claim. Costs that are unreasonable or disproportionate may not be recoverable.

For Both Parties

The extended litigation in DeMarco v Macey — spanning multiple tribunal hearings, two Supreme Court appearances, and several years — underscores the importance of clear contractual drafting at the outset. Dispute resolution clauses, termination mechanisms, and remedy limitations should be reviewed by experienced construction lawyers before contracts are executed. Ambiguity in these provisions invariably leads to costly disputes.

Conclusion

DeMarco v Macey confirms several important principles of NSW building contract law. Clauses purporting to limit remedies must be clearly and explicitly drafted to be effective as exclusive remedies. Common law damages — including consequential losses — remain available to innocent parties where the contract does not unambiguously exclude them. Quantum meruit claims require proper evidentiary consideration, and arithmetic precision in damage assessments is essential.

Above all, the case reinforces that building disputes have a tendency to escalate in both complexity and cost. Early legal advice — at the contract stage and at the first sign of dispute — is invariably the most cost-effective approach.

This article is intended as a general overview of the law and does not constitute legal advice. If you have a specific matter relating to a building contract dispute, please contact CML Lawyers on (02) 9299 2223 or visit us at 3 Spring Street, Sydney CBD or 125 Kendal Street, Cowra.

When “Exclusive Remedy” Clauses Are Not So Exclusive: Lessons from DeMarco v Macey [2026] NSWSC 57