Danthanarayana v GR8 Constructions [2012] FCA 231

An owner charged his property with payments owed to his builder under a building contract. The contract was terminated owing to alleged defective work and the owner sued the builder for damages for the cost of remedying the defective work. The builder cross-claimed for what he was owed and lodged a caveat against the property. The owner gave an undertaking to the court not to sell or charge his interest in the land until determination of the dispute and now seeks to be released from that undertaking to obtain further financing to remedy the works.

The court found that despite termination of the building contract, the builder had become entitled to the progress payments and security for those progress payments by way of equitable charge and such accrued rights survive the termination of the contract. The fact that the building contract had been terminated did not cause the builder’s equitable charge to cease to have effect.

The court found that were it to release the owners from their undertaking, the promise not to further encumber the property would fall away and the builder would lose the benefit of that promise. The owners’ equity in the property would be further diluted.

The court noted that it was being asked to release the owners from their undertaking so that they could pursue refinancing when there was no specific refinancing plan in place and none in prospect but simply on the basis that it imposed inconvenient restrictions on their freedom to borrow further funds.

The court also found the vague drafting of the Deed of Priority inadequate for the builder’s protection. The promises made in it were to no-one in particular and fall well short of the protection given to the builder by the owners’ undertaking.

The application was dismissed with costs.

Click here to read the full judgment

Scroll to Top