Bellgrove v Eldridge (1954) 90 CLR 613

Facts: The plaintiff (P) contracted with the defendant (D) to construct a two-storey ‘villa’ for £3,500. There were substantial defects in foundations and in mortar used in the walls. Trial judge awarded damages of £4,950 on a ‘reinstatement basis’, that is, on the basis that the plaintiff was entitled to the cost of rectifying the defects. The sum included the cost of demolishing and reconstructing the building.

Held: The Court rejected D’s argument that damages should be measured by the difference in value of the house built and the value which it would have had if constructed in accordance with the contract. Instead, the Court upheld an award of damages for the cost of demolishing the house and erecting one which complied with the contract. This was the only genuine measure that would compensate the P.

Test: The test is for when an reinstatement award is made by Court is first, necessary to produce conformity and secondly, that the proposed steps to produce conformity are reasonable.