Andrews & Andrews Construction Pty Ltd v Yao; Yao v Andrews & Andrews Construction Pty Ltd

Case •

[2025] NSWSC 322

•

04 April 2025

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Andrews & Andrews Construction Pty Ltd v Yao; Yao v Andrews & Andrews Construction Pty Ltd [2025] NSWSC 322
Hearing dates: 17, 18, 20 and 25 March 2025; further written submissions 27 and 28 March and 2 April 2025
Decision date: 04 April 2025
Jurisdiction:Equity - Technology and Construction List
Before: Stevenson J
Decision:

Special condition imposes joint obligation on the parties; defendants have not established breach by plaintiff nor damage suffered by reason of alleged breach; plaintiff entitled to recover unpaid invoices

Catchwords:

BUILDING AND CONSTRUCTION – contract – cost plus contract for construction of residence – alleged breach of contract – whether plaintiff builder entitled to claim payment for outstanding invoices from defendant owners

CONTRACT – construction – special condition – where contract obliged parties to cooperate to obtain the most competitive price for each element of trade or materials and obtain a minimum of quotations for each item – where builder did not obtain two quotations in relation to some items – where defendants resisted builder’s claim on basis that this was a breach of the provision – whether provision imposed obligation to obtain two quotations on the builder alone or rather on the parties jointly – whether provision merely exhortatory

CONTRACT – implied terms – where plaintiff builder contends for implied term to the effect that it was not necessary for the plaintiff builder to obtain two quotes in some circumstances – where such term would be inconsistent with express term of the contract

CONTRACT– damages – facilitation principle – whether owners’ damage to be measured by the difference between the cost and the reasonable value of the works not subject to two quotations –whether it would be just to permit owners belatedly to rely on the facilitation principle

Legislation Cited:

Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law

Cases Cited:

Allen v Tobias (1958) 98 CLR 367; [1958] HCA 13

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36

Blatch v Archer (1774) 1 Cowp 63; 98 ER 969

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266

Browning v Brachers [2005] EWCA Civ 753

Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24

Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12

Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46

J Kitchen & Sons Pty Ltd v Stewart’s Cash and Carry Stores (1942) 66 CLR 116; [1942] HCA 18

LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (No 2) (1990) 24 NSWLR 499

Mackay v Dick (1881) 6 App Cas 251

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; [1951] HCA 79

Miles v Luneburger Franchising Pty Ltd [2021] NSWCA 248

Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3

Reardon Smith Line Ltd v Hansen-Tangen; Hansen-Tangen v Sanko Steamship Co [1976] 1 WLR 989; [1976] 3 All ER 570

Robinson v Harman [1848] 1 Exch 850; 154 ER 363

Sanctuary Investments Pty Ltd v St Gregory’s Armenian School Inc (1998) 9 BPR 16,823

Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47

Victoria v Tatts Group Ltd [2016] HCA 5

Texts Cited:

P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters)

Rawlinsons Australian Construction Handbook (37th ed, 2017)

Virgo and Worthington (eds), Commercial Remedies: Resolving Controversies (2017, Cambridge University Press)

Category:Principal judgment
Parties: Andrews & Andrews Construction Pty Ltd (Plaintiff/Cross-Defendant)
Yao Xiang Fei (First Defendant/Cross-Claimant)
Adeline Yu Ding (Second Defendant/Cross-Claimant)
Representation:

Counsel:
A R Zahra SC / N M Maddocks (Plaintiff/Cross-Defendant)
M Ashhurst SC / H Zhao (Defendants/Cross-Claimants)

Solicitors:
Christopher C. Freeman & Co (Plaintiff/Cross-Defendant)
Juris Cor Legal (Defendants/Cross-Claimants)
File Number(s): 2020/346527

JUDGMENT

  1. The outcome of this building case, concerning the construction by the plaintiff (the “Builder”) of a luxurious waterfront home on a property in Northbridge (the “Property”) for the defendants (the “Owners”) turns on the proper construction of this handwritten clause in Schedule 4 (“the Special Condition”) of the building contract (the “Contract”):

“The Builder & Owners shall work together & cooperate to obtain the most competitive price for each element, trade or material & a minimum of two quotes shall be obtained for each item. All contracts are to be approved by the Builder & the Owners as to cost & quality.”

  1. The parties entered the Contract on 31 October 2016. The Contract was a “cost plus” contract.

  2. During the course of construction, the Builder sent the Owners 17 invoices which detailed the work done to date.

  3. The Owners paid those invoices, totalling some $4 million, without demur.

  4. Practical completion was achieved in March 2019. The Owners moved into the completed home at around the time.

  5. The Owners make no complaint about the quality of the building work.

  6. Rather, the Owners dispute their liability to pay all or some of an 18th invoice (“Invoice 18”) for $782,124.41 that the Builder sent them on 18 July 2019, some 5 months after completion of the build. Invoice 18 was intended to be a final end-of-project invoice which sought to itemise all works done, all amounts paid thus far, and the amount remaining to be paid.

  7. The Owners also dispute their liability to pay a further invoice issued by the Builder over three years later, on 29 August 2022, for $60,500 for labour expended relating to works in preparation for a party the Owners hosted at the Property (“Invoice 21”).

  8. The Builder commenced these proceedings in December 2020 seeking to recover the amounts of Invoice 18 and Invoice 21: a total of $842,624.41.

  9. In their List Response and Cross-Claim List Statement the Owners initially resisted the Builder’s claim on a number of bases, including that a significant part of the work the subject of the Builder’s claim had not in fact been approved, that a number of conditions precedent to payment had not been satisfied, and that they had suffered damage by reason of delay.

  10. Only one was pressed at the hearing, namely that:

  1. on the proper construction of the Special Condition, the Builder was obliged to get two quotations for every “item”;

  2. the Builder had not done so;

  3. the Owners were entitled to rely on the “facilitation principle”, [1] by reason of which it is to be inferred that, had the Builder obtained two quotations, it would have carried out work in relation to each “item” at a reasonable cost;

  4. in relation to 12 identified aspects of the construction the Builder did not obtain two quotations and the reasonable cost was less than the cost actually incurred;

  5. the Owners thereby suffered damage;

  6. the Owners are entitled to set off that damage against the amount now claimed by the Builder in relation to Invoices 18 and 21; and

  7. the result is that the Owners should only pay the difference between that damage and the amount claimed by the Builder.

    1. See [135] and following below.

  1. As developed in closing submissions, the amount by which the Owners contended that they had, in effect, been overcharged was $689,362.47: $153,261.94 less than the amount claimed by the Builder.

Decision

  1. On the proper construction of the Special Condition, the obligation to obtain two quotations was a joint obligation of the Builder and the Owners, not amenable to suit by one against the other.

  2. In any event, in the events that happened, it would not be just to permit the Owners to rely on the facilitation principle.

  3. The Builder is entitled to judgment for the amount claimed, together with interest and costs.

The events leading to the Contract

  1. The sole director of the Builder is Mr Dixon Andrews.

  2. The Owners are a married couple, Mr Xiang Fei Yao and Ms Adeline Yu Ding.

  3. Many of the relevant dealings also involved the Owners’ son in law, Mr Jing Hu.

  4. In submissions, counsel referred to these individuals as Dixon, Frank, Adeline and Daniel, respectively. For convenience, and without intending any overfamiliarity or disrespect, I will do the same.

  5. Dixon is a registered architect and builder with close to 40 years’ experience in both fields. He provides his architectural services through Dixon Andrews Architects Pty Ltd, not a party to the proceedings.

  6. In early 2015, Dixon met Daniel.

  7. In September 2015 Daniel informed Dixon that Frank and Adeline had purchased the Property and were interested in working with Dixon on the design and construction of a new house on the Property.

  8. On 7 October 2015, Dixon sent Daniel a copy of the Builder’s “Collaborative Building Concept” document under cover of an email stating that it “explains our approach to building”. That document stated that it was the Builder’s practice to use an independent quantity surveyor to prepare an estimate of the probable cost of a proposed build, which was then used to set up the Builder’s margin or fee. The document also stated that the Builder’s approach was to provide an owner with the ability to develop and refine documents and plans, within the scope of the original concept, without incurring variations which would otherwise ordinarily attract a builder’s fee.

  9. In October 2015, the Owners, through Daniel, engaged Dixon’s architectural firm to design a high-quality dwelling to be erected on the Property. The design process commenced in January 2016. Dixon prepared concept plans which were progressively developed.

  10. A development application was lodged with Willoughby City Council on 7 June 2016. Development consent was issued on 29 September 2016.

  11. On 31 October 2016, the parties entered the Contract.

The Contract

  1. As I have said, the Contract was a cost plus contract.

  2. It contained the following “warning”:

“WARNING

FOR THE PURPOSES OF THE HOME BUILDING ACT 1989

The Contract Sum or the amount to be paid by the Owner is not known as at the date of contract.

The amount of money payable to the Builder by the Owner is dependent upon the costs incurred by or payable by the Builder in carrying out work under the Contract.

…

Any figure nominated or stated below is only an estimate and is provided specifically subject to the terms …

…

$2,725,000 – .

Estimated Cost of Works and Fees inclusive of GST pursuant to Schedule 1…

The amount to be paid by the Owner is and will be determined by reference to the contact and the work done by the Builder and the costs incurred by the Builder. This will be influenced by and subject to adjustment by reason of such things as:

…

● The work actually done being different to the work contemplated at the time of signing the contract. For example cost differences arising from details provided or choices made after the contract is signed.

● Correction of Defects to work, other than new work undertaken wholly by the Builder. The Builder is to correct defects to its work at its own cost.” (Bolded and underlined emphasis in original.)

  1. To the same effect, the Contract provided:

“(2)   The Owner will pay to the Builder the cost of the works plus the fee payable under the contract and the GST consequences of the work, at the times and in the manner required by the contract.

(3)   (i) The Owner acknowledges and understands that the total cost of the works, including the fee payable to the Builder and the GST payable on the works is not known or ascertainable as at the date of this contract.

(ii) The Owner acknowledges that and understands that the work done and completed and the materials used directly affect the question of costs payable by the Owner.” (Bolded emphasis in original.)

  1. Part A in Schedule 1 of the Contract listed the “Costs of Works which are Payable by the Owner or at the direction of the Builder”.

  2. Those “Costs of Works” included:

  1. wages and other entitlements payable to the Builder’s employees;

  2. costs for the individual “Builder’s director” for carrying out the work, including administrative work at the rate detailed in the current Master Builders Association of New South Wales “charge out schedule”; [2]

    2. Provision of a nominated figure being left blank.

  3. costs of having a service provided or task done in order to have the works carried out;

  4. costs of all the work carried out by trade contractors engaged by the Builder, which costs were to be conclusively evidenced by an invoice from the contractor;

  5. costs of all goods and materials ordered for or paid for by the Builder;

  6. costs of hiring equipment necessary to enable the Builder to carry out works; and

  7. a number of other nominated costs, together with “[a]ny other cost or expense which the Builder is liable for and/or incurs by reason of the Builder carrying out work pursuant to this contract including, but not limited to, insurance costs and materials owned by the Builder.”

  1. The Contract provided that the Builder would regularly provide the Owners with a written report on the cost of the works. Such report was to include a “revised estimated total cost of works”, noting that such estimate was not a “lump sum or guaranteed amount” and was “subject to the impact of the costs and the fees payable or incurred under the contract”. [3]

    3. Contract, General Conditions, cll 1(e)-(f).

  2. General Condition cl 2A was headed “Joint Responsibilities of the Builder and Owner” and provided, relevantly:

“The Parties acknowledge the fact that:

(i)   the amount payable by the Owner under this contract is not as at the date of the contract known;

(ii)   the total amount payable under the contract will not necessarily be ascertainable during the course of the contract; and

(iii)   the amount to be paid by the Owner is the result of the costs incurred by the Builder, the Builder’s fee or return and the impact of the GST on the work done.

The parties agree in order to manage this situation that:

(a)   they will conduct regular meetings in order to:

(i)   review the work done and costs incurred;

(ii)   review the work to be done and the costs thought to be payable for such work; and

(iii)   make decisions and choices regarding work under the contract so that the work to be paid for by the Owner is consistent with the Owner’s capacity to pay.

…

(c)   they will act co-operatively and in a manner which progresses the works …”. (Bolded emphasis in original.)

  1. The parties agreed that all the works were to be completed within 18 months. [4]

    4. Contract, Sch 2, Item (c)(i).

  2. Part B of Schedule 1 stated that the “fee” payable by the Owners to the Builder was specified at $240,000.

  3. Critically, the Contract also contained the Special Condition I have set out above. [5]

    5. At [1].

The course of the works

  1. The building works commenced in December 2016, starting with demolition of the existing dwelling and excavation of the site.

  2. Over the course of the project, there were numerous and substantial changes to the scope of the works. The Builder and the Owners worked together progressively to develop and refine the design specification and plans. The additional works included increasing the size of the building by adding more floor area to a number of locations, redesigning and upgrading the joinery, including additional marble slabs, making changes to the plumbing, adding an inclinator to the harbour, creating a boatshed and front fence, and harbourside landscaping works. Substantial adjustments were also made to the quality of various finishes and fittings.

  3. The project took longer and cost more than had originally been forecast.

  4. The Builder issued progressive budget updates together with Invoices 1 to 17, which were issued between 9 December 2016 and 3 January 2019. Each of Invoices 1 to 17 contained a schedule setting out, in detail, the work done, and attached copies of the invoices received from all relevant subcontractors.

  5. A summary of the invoices is set out in this table:

Invoice no.

Date

Amount due (incl GST)

Status

1

09/12/16

$76,823.37

Paid

2

02/02/17

$202,997.50

Paid

3

08/05/17

$300,925.15

Paid

4

03/07/17

$250,557.25

Paid

5

22/08/17

$349,024.28

Paid

6

22/09/17

$193,248.09

Paid

7

30/10/17

$294,280.47

Paid

8

12/12/17

$190,436.69

Paid

9

15/01/18

$272,478.85

Paid

10

20/02/18

$342,464.15

Paid

11

20/03/18

$311,433.31

Paid

12

18/04/18

$328,043.56

Paid

13

18/06/18

$322,777.98

Paid

14

24/07/18

$232,953.11

Paid

15

20/08/18

$99,673.42

Paid

16

11/10/18

$107,486.00 [6]

Paid

17

03/01/19

$250,000.00

Paid

18

15/07/19

$782,124.41

Unpaid

21

29/08/22

$60,500.00

Unpaid

6. Which was an error as the invoice incorrectly overstated the amount paid by the Defendants since invoice 15. The actual amount owing was $277,944.32.

The proper construction of the Special Condition

Principles

  1. There was no dispute as to the relevant principles.

  2. A court in interpreting a provision of a document has regard to its words, its context, and the purpose of the document as a whole. The leading modern statement on the importance of context and purpose is found in the reasons of French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd: [7]

“The rights and liabilities of parties under a provision of a contract are determined objectively, [8] by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. [9]

…

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. [10]

However, sometimes, recourse to events, circumstances and things external to the contract is necessary.”

7. (2015) 256 CLR 104; [2015] HCA 37 at [46], [48]-[49].

8. Citing Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640 at 656; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ).

9. Citing Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 350, 352 (Mason J); [1982] HCA 24; Reardon Smith Line Ltd v Hansen-Tangen; Hansen-Tangen v Sanko Steamship Co [1976] 1 WLR 989 at 995; [1976] 3 All ER 570 at 574 (Lord Wilberforce).

10. Citing Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (supra) at 352 (Mason J).

  1. The question is what a reasonable business person in the position of the parties would have understood the relevant terms to mean; an objective task involving identification of the imputed intention of the parties by reference to the contractual text, construed in the light of its context and purpose. [11]

    11. Miles v Luneburger Franchising Pty Ltd [2021] NSWCA 248 at [32] (Gleeson JA, Macfarlan JA and Simpson AJA agreeing), citing Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (supra) at [35] French CJ, Hayne, Crennan and Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd supra) at [46]-[51], [108]-[109] (French CJ, Nettle and Gordon JJ); Victoria v Tatts Group Ltd [2016] HCA 5 at [51]-[75] (French CJ, Kiefel, Bell, Keane and Gordon JJ); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16] (Kiefel, Bell and Gordon JJ); Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [18] (French CJ).

  1. Further, as has also been correctly stated: [12]

“… the only relevant meaning is that which the text conveys. This follows from the need to ascertain the intention expressed in the document. Although ... context and purpose are relevant, ultimately the court must attribute meaning to the words actually used.” (Italicised emphasis in original.)

12. P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Thomson Reuters) at [19.60].

The Special Condition

  1. Dixon composed the Special Condition in response to Frank’s or Daniel’s statement that they wanted construction to be as cost effective as possible.

  2. To repeat, the Special Condition provided:

“The Builder & Owners shall work together & cooperate to obtain the most competitive price for each element, trade or material & a minimum of two quotes shall be obtained for each item. All contracts are to be approved by the Builder & the Owners as to cost & quality.”

  1. As set out in the Contract, the Special Condition was in the form annexed to these reasons.  Special Condition, Schedule 4 of the Contract (CB 1536) (381094, pdf)

The “full stop” point

  1. In closing submissions, Mr Ashhurst and Mr Zhao, who appeared for the Owners, [13] submitted, for the first time, that there appeared to be a full stop on the fourth line of the manuscript Special Condition after the word “material” and before the “&” and thus that the Special Condition should be read as having three sentences.

    13. For convenience, and without intending any disrespect to Mr Zhao, I will henceforth refer only to Mr Ashhurst.

  2. In the light of that submission, I suggested that one or other of the parties tender the original of the Contract. Mr Ashhurst’s instructing solicitors located the original of the Owners’ copy of the Contract.

  3. Perusal of the original of the Special Condition does show, on the fourth line, a dot on the line between the word “material” and the “&”. However, reading that “dot” as if it were a full stop involves either ignoring the following “&”, or reading the “&” as a conjunction intended to commence Mr Ashhurst’s posited third sentence. I do not think that a reasonable person in the position of the parties would understand the dot as being intended to have either of those possible effects.

  4. Further, there also appears to be a dot before the word “to” on the second line, slightly above the line. That dot plainly could not be construed as a full stop.

  5. My conclusion is that the dot on the fourth line between “material” and the “&” is no more than a slip of the pen by the author of the clause, Dixon, and plays no role in the proper construction of the Special Condition.

“Each item”

  1. The Special Condition refers to the obtaining of “two quotes” for each “item”.

  2. It is common ground that, in the Special Condition, “item” should be seen as a collective noun for the earlier referred to “element, trade or material”.

  3. To understand what the parties intended to refer to when using the words “each item” in the Special Condition, it is necessary to have regard to a number of documents forming part of the Contract, and the provenance of those documents.

  4. Several months before the Contract, Frank retained a quantity surveyor, Kue-S-Services Pty Ltd, to make an estimate as to the likely cost of construction of a home that by then had been designed by Dixon through his architectural company. [14]

    14. As contemplated by the Builder’s “Collaborative Building Concept”; see [23] above.

  5. On 9 May 2016, Kue-S-Services provided a detailed report to Frank expressing the opinion that the cost of construction would be $2,473,139. The report broke that figure down into 27 “Trade Descriptions” and, over 38 pages, provided a detailed analysis of the elements of the structure including such matters as skylights, gutters, downpipes, windows, doors, tiles and the like.

  6. On 15 July 2016, Dixon wrote to Frank and Daniel:

“I have converted the [Kue-S-Services] report into a budget that is easier to follow.

[Kue-S-Services] lists the work based on elements rather than trades. This makes it hard to keep track [of] the costs of the work onsite.

The headings I use for the budget make it much easier to track costs during construction.”

  1. Dixon attached a budget dated 12 July 2016 (“the Budget”). A copy of the Budget is annexed to these reasons.  12 July 2016 Budget (CB 1104-1105) (929238, pdf)

  2. As can be seen, the Budget listed a large number of building elements, setting out a figure for each under “QS Budget”, “Adjustments” and “Adjusted Budget” and arriving at a total budget, including margin, of $2,784,497.

  3. The Budget including an item of $345,000 for “Prelims”.

  4. Daniel engaged another quantity surveyor, Cubic Construction Management, to review Kue-S-Service’s report.

  5. On 23 September 2016, Cubic Construction Management produced a report estimating the total cost of construction, including margin, to be $2,927,200. That report set out, under the heading “Trade Detail”, estimated quantities and rates of a large and detailed list of building elements including, in relation to provisional cost items, matters such as basins, shower screens, toilet roll holders and the like.

  6. On 20 October 2016, Dixon Andrews Architects Pty Ltd produced a “Detailed Schedule” comprising some 40 pages of detailed specifications for the construction (“the Specification”). The Specification contained granular detail of what was to be involved in the construction including such matters as light switches, motion sensors, smoke detectors, exhaust fans, gas fireplaces, shower screens and the like.

  7. In the Contract, after the page containing the “warning” set out at [28] above, a page appeared in the form annexed to these reasons. Agreement and Particulars of Contract (CB 1526) (809482, pdf)

  8. On that page, under the heading “What”, the Contract referred to the “Cost Estimate by Cubic”, being the report referred to at [64] above, and, adjacent to the words “Specification prepared by”, the Specification.

  9. Schedule 3 of the Contract was in the form annexed to these reasons.  Schedule 3 of the Contract (CB 1534) (633788, pdf)

  10. As can be seen, reference was there again made to the Cubic Construction “Cost Estimate” and the Specification.

  11. The Cubic Construction Cost Estimate was not attached to the Contract but was, by reason of the matters to which I have referred, incorporated by reference into the Contract.

  12. The Specification was included as an attachment to the Contract, and thus formed part of the Contract.

  13. There is no dispute about these two matters.

  14. The Budget was not referred to, in terms, in the operative parts of the Contract but was also included as an attachment to the Contract. [15]

    15. The Owners’ copy of the Contract is a bound volume within which the Budget, initialled by Dixon, is included.

  15. In that context, my conclusion is that a reasonable person in the position of the parties would understand that the “items” refer to the Special Condition were each “element, trade or material” referred to in one or other of the Cubic Construction Cost Estimate, the Specification and the Budget.

  16. That conclusion resolves a number of matters that arose during closing submissions.

  17. First, as “Prelims” were referred to in terms in the Budget, it must follow that any “element, trade or material” involved in “Preliminaries” was an “item” for the purpose of the Special Condition.

  18. Second, as the Budget specified all the categories of work involved in the project, and thus necessarily included work that the Builder chose to do itself, as opposed to work it chose to subcontract to others, the work done by the Builder itself comprised an “element” and thus an “item” for the purpose of the Special Condition.

  19. Third, as the Cubic Construction Cost Estimate and the Specification descended to the granular detail to which I have referred, each of the items referred to in those documents was an “element” or was a “material”, and thus an “item” for the purposes of the Special Condition.

The nature of the obligations in the Special Condition

  1. When considering the words used by the parties in the Special Condition it is necessary to keep in mind that, at the time of Contract, the parties knew that:

  1. the Builder proposed that construction would be effected consistently with the Builder’s Collaborative Building Concept; [16]

  2. the Contract was a cost plus contract such that the Owners were obliged to pay the Builder the fee of $240,000 plus whatever the actual costs of the build turned out to be; [17]

  3. although the quantity surveyors retained by Frank had prior to the Contract made estimates of the cost of construction, the parties, and the Owners in particular, knew, and in the Contract itself acknowledged, that as at the date of the Contract the actual costs were not “known or ascertainable” and would depend on the work actually carried out and include any “differences arising from … choices made after the contract is signed”; [18] and

  4. the parties acknowledged in the Contract that they had “joint responsibilities” under the Contract and had agreed to “act co-operatively and in a manner which progresses the works”. [19]

    16. See [23] above.

    17. See [28] and [29] above.

    18. See [28] and [29] above.

    19. See [33] above.

  1. Thus, front and centre of the parties’ consideration at the time of the Contract must have been a means by which costs could be ascertained and controlled.

  2. The Special Condition was obviously directed to that question.

  3. As I have explained, I do not accept Mr Ashhurst’s submission that the Special Condition contains three sentences. It contains two sentences.

  4. The opening words impose an obligation on the Builder and the Owners to “work together” and to “co-operate” to obtain “the most competitive price for each element, trade or material”. Those words, by their plain terms, imposed a joint obligation on both the Builder and the Owners.

  5. The following words, “& a minimum of two quotes shall be obtained for each item”, were part of the same sentence and can only be seen, in the context of the clause, as being directed to the same object: the obtaining of the “most competitive price for each element, trade or material”; and thus also to be part of the joint obligation referred to in the opening words of the clause.

  6. This is consistent with the parties’ acknowledgment that costs were not then known and with the parties’ acknowledgment of their “joint responsibilities” to “act co-operatively”. [20]

    20. See [33] above.

  7. In that context, a reasonable person in the position of the parties would have read the Special Condition distributively so that the stated obligation to “work together & obtain” is governed by both the “most competitive price for each element” and the “minimum of two quotes”.

  8. Thus, the Special Condition should be read as:

“The Builder & Owners shall work together and cooperate to obtain:

- the most competitive price for each element, trade or materials; &

- a minimum of two quotes … for each item.

All contracts are to be approved by the Builder & the Owners as to cost and quality.”

  1. So read, the obligation in the Special Condition was a joint obligation, and not one imposed only on the Builder.

  2. I do not think that a reasonable person, in the position of the parties, would understand from the words in the Special Condition that either could sue the other if, as it turned out, between them, they did not obtain two quotes for each and every “element, trade or material” in the build.

  3. Mr Ashhurst submitted that:

“The idea that the Owner[s] had an actual obligation (as distinct from an ability) to itself obtain quotations would create the absurd result (which must be avoided) [21] of neither party having the specific obligation to obtain the necessary quotations before the work was performed, and therefore neither party could ever be in breach of a Special Condition or be able to sue the other for such breach.”

21. Referring to such authorities as J Kitchen & Sons Pty Ltd v Stewart’s Cash and Carry Stores (1942) 66 CLR 116 at 124-125 (Latham CJ and McTiernan J); [1942] HCA 18; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109-110 (Gibbs J); [1973] HCA 36.

  1. In the context of this Contract, I do not see this as being an “absurd” result. On the contrary, it reflects the parties’ agreement, reflected in the words they have used in the Contract, that they would work together, without intending to impose an exclusive obligation on the other, to ensure that the costs incurred by the Builder were competitive.

  2. To adopt the words of Young J, [22] when considering a similar clause, the Special Condition is “exhortatory rather than being a promissory condition which can be enforced by damages”. [23]

    22. As his Honour then was.

    23. Sanctuary Investments Pty Ltd v St Gregory’s Armenian School Inc (1998) 9 BPR 16,823 at 16,829.

  3. The protection for the Owners was contained in the final sentence of the Special Condition that, as I have set out, provided that “all contracts” were to be approved on behalf of the Builder and the Owners “as to costs & quality”.

  4. What might well be seen as “absurd” would be a construction of the Special Condition that imposed on the Builder an obligation to obtain two quotations in relation to each and every one of the “items” that I have found the parties intended be an “element, trade or material” for the purpose of the Special Condition. Such a construction would require the Builder to have obtained two quotes for work it was to perform itself; when there was only one possible party that could provide the relevant element; in relation to an element arranged selected or procured by the Owners; and in relation to all the detailed elements referred to in the Specification and the Cubic Construction Cost Estimate: even a box of nails.

  5. The parties’ decision to impose the obligation specified in the Special Condition jointly on each other is saved from “absurdity” by the impossibility of either to sue the other for breach.

  6. Having such a joint obligation, it would be necessary for both the Builder and the Owner to do all that was necessary to ensure that their joint obligations were fulfilled. This is reflected in the familiar rule in Mackay v Dick that: [24]

“[W]here in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”

24. (1881) 6 App Cas 251 at 263 (Lord Blackburn, Lord Selborne agreeing).

  1. I do not accept Mr Ashhurst’s submission that the opening words of the Special Condition do no more than reflect the rule in Mackay v Dick. Rather, those opening words create the obligation “that something should be done”, to which the Mackay v Dick rule applies.

  2. Mr Zahra SC and Ms Maddocks, who appeared for the Builder, [25] submitted that the Special Condition should be read as if qualified by the words “whenever reasonably practicable to do so” or “where reasonable and appropriate to do so”.

    25. For convenience, and without intending any disrespect to Ms Maddocks, I will henceforth refer only to Mr Zahra.

  3. Ultimately, Mr Ashhurst accepted that some such qualification should be read into the clause. Thus, Mr Ashhurst accepted that “objectively” the clause could not be read as imposing an obligation on the Builder to obtain two quotations, or indeed any quotation, in relation to Council fees, there being only one possible entity that would charge such fees, which entity would be unlikely to be prepared to offer a quotation. Similarly, Mr Ashhurst accepted that, again looking at the matter “objectively”, the parties could not have intended that either have an obligation to obtain two quotations, or indeed any quotations in relation to “small items or pieces of work or some item of work that was required urgently”.

  4. It may well have turned out to be the case that it was not “reasonably practicable” for the parties jointly to perform their obligations under Schedule 4.

  5. To that extent, the Special Condition might be seen, in hindsight, as being somewhat aspirational, despite its mandatory language: “shall work together” and “shall obtain” quotes.

  6. However, as set out below, the parties appear to have had little or no difficulty managing their joint obligations.

The ambit of the obligation

  1. Having reached that conclusion, it is not necessary to consider the ambit of the obligation under the Special Condition.

  2. However, I will do so, as it is relevant to the Owners’ position in relation to the facilitation principle. [26]

    26. See [135] below and following.

  3. The obligation was to obtain two quotations.

  4. It does not follow that, to the extent that this was the Builder’s obligation, the Builder was obliged to accept the lower of those quotations.

  5. The obligation to obtain two quotations was in furtherance of the object of achieving of the “most competitive price”. But reasonable persons in the position of the parties would not understand from the words used in the Special Condition that the Builder was obliged to accept a lower quote, no matter what the credentials of the quoting party.

  6. The Owners wanted the Builder to construct a high quality, luxury home. Reasonable persons in their position would expect the Builder to exercise judgment to ensure that the best, not necessarily the cheapest “element[s], trade[s] or material[s]” would be used.

  7. Nor does it follow from the obligation to obtain two quotations that, if the Builder did obtain two quotes, the Builder was not entitled to pass on to the Owners a higher cost if, in the events that happened, more cost was incurred than was indicated in the quotation. Each case would have to be examined on its merits. It may be that there would be cases where the quoting party should have been held to its quoted price. But there may be other cases where, for any variety of reasons, it would be reasonable for the Builder, ultimately, to pay the quoting party more than the quoted price: a variation in the works being an obvious example.

  8. Nor does it follow from the obligation to obtain two quotations that, if the Builder did obtain two quotations and the work was ultimately carried out at a cost that, in hindsight, was in excess of its reasonable value, then it would necessarily follow that there had been a breach of the Special Condition; or the Contract generally. It would depend on an examination of the particular circumstances.

The parties’ performance of their joint obligation

  1. The evidence shows that the parties adopted a common sense, protean, approach to the performance of their joint obligations under the Special Condition.

  2. The Builder provided two quotations for many items of work.

  3. There were, however, occasions where the Builder performed work itself, or engaged subcontractors to do work without providing two quotations.

  4. There were also other occasions where the Builder provided two quotations to the Owners, but where the quotations were limited in scope and related only to part of the work done.

  5. There are also occasions where the Builder provided two quotations but the costs incurred were higher than in the quoted amounts.

  6. There are other occasions where Daniel arranged to provide a quotation and where the Builder did not arrange for a second quotation.

  7. Both the Builder and the Owners were aware of the progress of construction. The Builder was of course on site at all times. So far as the Owners are concerned, Daniel made regular visits to the site, often a number of times during the week.

  8. There is no evidence of either party preventing the other from complying with the joint obligation nor of making any complaint about the manner in which the other was performing their share of that joint obligation.

The “Quotes Exception”

  1. The Builder alleges that a term, described as the “Quotes Exception”, should be implied into the Contract to the following effect:

“…it was not necessary for [the Builder] to obtain two quotes for:

(i) items of work performed by [the Builder];

(ii) items of work where it was not reasonably practicable to obtain two quotes;

(iii) items of work which were arranged, selected or procured by the [Owners] directly… ;

(iv) items of work where it is not normal industry practice to do so;

(v) items of work where adoption of a different procedure will result in a more cost effective or better quality outcome for the [Owners]; and

(vi) items of work the total cost of which are less than $2,000.”

  1. In view of my conclusion as the proper construction of the Special Condition, it is not necessary for me to deal with this point.

  2. However, the obvious difficulty is that the “Quotes Exception” would be inconsistent with and contradict the express term of the Contract set out in the Special Condition and would constitute a rewriting of the Contract. [27]

    27. See the familiar principles concerning implication of a term established in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 (Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel agreeing); Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347 (Mason J, Stephen J agreeing), at 404 (Brennan J); [1982] HCA 24; and as to rewriting a contract, see Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [18] (Basten JA, McColl and Campbell JJA agreeing), and the authorities cited therein.

The Builder’s estoppel, misleading or deceptive conduct and quantum meruit claims

  1. In alternative answer to the Owners’ claim that the Builder acted in breach of its obligations under the Special Condition, the Builder advanced arguments as to estoppel, misleading or deceptive conduct for the purposes of s 18 of the Australian Consumer Law, [28] and made an alternative claim for a quantum meruit.

    28. Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law.

  2. In view of my conclusion concerning the Special Condition, these questions do not arise.

The Owners’ damages case

  1. As I have not accepted the Owners’ case that the Builder acted in breach of an obligation imposed on it by the Special Condition to obtain two quotes for all the “items” referred to in the Special Condition, it is not necessary for me to deal with the manner in which the Owners put their case in damages.

  2. However, I will deal with some aspects of it but without descending into some of the considerable detail of the parties’ submissions.

  3. As I have said, the Owners contend that they are entitled to recover damages based on application of the facilitation principle.

  4. Mr Ashhurst put the submission this way in the Owners’ opening outline submissions:

“Because the Builder failed, on many occasions, to obtain the quotations prescribed by the contract, it is now impossible to determine the terms of the specific quotations the Builder would have obtained (or more accurately the quantum of those quotations). In those circumstances the ‘facilitation principle’ prescribes that an inference should be drawn that had the Builder complied with its contractual obligations and obtained those quotations it would have been able to perform those works for the amounts estimated by the quantum experts called for both parties.” (Italicised emphasis added.)

  1. This was the first time the Owners had sought to rely on the facilitation principle.

  2. The quantum experts to whom Mr Ashhurst referred were the quantity surveyors called by the parties, being Mr George Zakos for the Builder and Mr Adrian Jamieson for the Owners.

  3. As I have said, at its highest the result is that the Owners are entitled to damages of $689,362.47: $153,261.94 less than the Builders’ claim under Invoices 18 and 21. [29]

    29. See [12] above.

How the Owner’s put their damages case

  1. The Owners identified 44 categories of work, based on trade descriptions adopted by Mr Zakos and Mr Jamieson.

  2. The Owners’ claim for the alleged breach of the Special Condition relates to 12 of those 44 categories.

  3. Mr Zakos and Mr Jamieson reached agreement as to the reasonable costs of performing work of most of those categories. [30]

    30. Preliminaries being a notable exception.

  4. A table setting out those 42 categories is annexed to these reasons (Reasonable costs table (131754, pdf)), together with, in relation to each category:

  1. the Owners’ contentions as to whether two quotations were obtained;

  2. the amount charged by the Builder; [31]

  3. the reasonable costs as determined by Messrs Zakos and Jamieson; [32]

  4. the amount claimed by the Owners in relation to the 12 categories where a loss is alleged; [33] and

  5. in the cases where two quotations were not obtained but the Builder performed the work for less than the reasonable cost, the difference.

    31. Mr Zahra submitted that some of these figures were not correct by reason of there being a “disconnect” between the relevant category and a document prepared by the Builder called Schedule of All Charges that set out how the Builder had actually charged for the work done. However, the categories were the ones adopted by the Builder’s own expert, evidently based on those adopted by an earlier expert retained by the Builder, and presumably on instructions. The quantity surveyor experts have conducted their joint deliberations on this basis. It is too late for the Builder to contest this.

    32. There were some differences between Mr Zakos and Mr Jamieson, particularly concerning preliminaries: see from [186] below.

    33. Emphasised in bold in the table.

The “facilitation principle”

  1. The High Court has recently dealt with the “facilitation principle” in Cessnock City Council v 123 259 932 Pty Ltd. [34]

    34. [2024] HCA 17.

  2. The general rule is that the object of compensatory damages for breach of contract is to place the plaintiff, so far as money can do it, in the same position as if the contract had been performed. [35]

    35. Robinson v Harman [1848] 1 Exch 850; 154 ER 363 at 365 (Parke B), summarised by Gageler CJ in Cessnock City Council v 123 259 932 Pty Ltd (supra) at [6] and by Edelman, Steward, Gleeson and Beech-Jones JJ at [60].

  3. In Cessnock City Council v 123 259 932 Pty Ltd, the plurality said:

“The legal onus to prove loss arising from a breach of contract falls upon the plaintiff. Whilst this legal onus is not frequently stated, the reason for the infrequency may simply be that ‘the rule is beyond doubt’. But although the plaintiff bears that legal onus, in some circumstances the common law facilitates its discharge. For instance, as explained above, a defendant has the burden of establishing that a plaintiff’s loss was unreasonable in the sense required by the rules concerning mitigation of loss. So too, in a principle deriving from the law of torts, a plaintiff is assisted in proof by reasonable inferences where a defendant’s breach has resulted in difficulties or impossibilities of proof of loss or damage. This principle of assistance in proof, or ‘facilitation principle’, lies at the heart of this appeal.” [36] (Footnotes omitted.)

And:

“As so explained, the facilitation principle is not confined to circumstances where it is impossible to assess damages, or to intentional acts of a defendant, [37] but has been applied in particular categories of case where the wrongdoing of the defendant has resulted in uncertainty that has made the assessment more difficult. In those particular categories of case, the risk of uncertainty that results from the acts of the wrongdoer should be thrown on the wrongdoer rather than the injured party.

In other contexts, in this Court the facilitation principle has been described as one which permits inferences to be drawn in favour of a plaintiff where the wrongdoing of the other party ‘made quantification difficult’. [38] Naturally, however, the greater the difficulty in proof that results from the defendant’s wrongdoing, the stronger the inference the court will be prepared to draw against the wrongdoer.” [39]

36. At [127].

37. See Allen v Tobias (1958) 98 CLR 367 at 375 (Dixon CJ, McTiernan and Williams JJ); [1958] HCA 13.

38. Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at 416; [2004] HCA 3 at [74] (Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Hedyon JJ). See also LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (No 2) (1990) 24 NSWLR 499 at 508 (Hodgson J); Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59 (Handley JA, Mason P and Beazley JA agreeing).

39. At [131]-[132].

  1. The facilitation “principle” is not a substantive rule of law, nor one that “prescribes”, the word used by Mr Ashhurst, [40] any particular outcome or inference. It is a principle that permits, but does not require, the drawing of inferences in favour of a plaintiff, to “facilitate” the discharge of the plaintiff’s onus of proof of loss as the result of a defendant’s breach of contract, in circumstances where the defendant’s wrongdoing has resulted in uncertainty concerning the quantum of loss or has otherwise made quantification difficult. [41]

    40. See [127] above.

    41. Cessnock City Council v 123 259 932 Pty Ltd (supra) at [29] (Edelman, Steward, Gleeson and Beech-Jones JJ).

  2. The principle is related to the notion that difficulty in assessing damages for breach of contract should not preclude an award of damages, [42] and operates in concert with the principles in Blatch v Archer that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other side to have contradicted”. [43] The principle is not a substitute for proof of loss; it is intended to give the plaintiff “a fair wind” to establish loss, not a “free ride”. [44]

    42. See Cessnock City Council v 123 259 932 Pty Ltd (supra) at [130]-[132] (Edelman, Steward, Gleeson and Beech-Jones JJ).

    43. (1774) 1 Cowp 63 at 65; 98 ER 969 at 970 (Lord Mansfield).

    44. Cessnock City Council v 123 259 932 Pty Ltd (supra) at [139], citing Browning v Brachers [2005] EWCA Civ 753 at [210] (Parker LJ, Mance LJ and Morritt VC agreeing) and Kramer, “Proving Contract Damages” in Virgo and Worthington (eds), Commercial Remedies: Resolving Controversies (2017, Cambridge University Press) at 232.

  3. The leading High Court authorities concerning the facilitation principle in its application to proof of damages for breach of contract are concerned with circumstances where a plaintiff had expended money in anticipation of, or in reliance on, the performance of a contractual obligation, and where the defendant’s breach of that obligation had made it difficult or impossible for the plaintiff to prove that any reasonably incurred expenditure would be recouped. [45] The “facilitation” in those cases took the form of treating the plaintiff’s loss as equivalent to the amount of wasted expenditure reasonably incurred in anticipation of, or in reliance on, the performance of the obligation that was breached. [46]

    45. McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; [1951] HCA 79; Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54; and Cessnock City Council v 123 259 932 Pty Ltd (supra).

    46. Cessnock City Council v 123 259 932 Pty Ltd (supra) at [137]-[149]; [184] (Edelman, Steward, Gleeson and Beech-Jones JJ).

  4. Here, the Owners seek to deploy the “facilitation principle” in circumstances beyond those referred to in any existing authority to which I have been referred.

This is not an appropriate case to be resolved by resort to the facilitation principle

  1. As I have said, the basis on which Mr Ashhurst submitted that the Owners should be permitted to have resort to the facilitation principle to prove what damage they have suffered as a result of the Builder’s alleged breach of the Special Condition is that “it is now impossible to determine the terms of the specific quotations the Builder would have obtained”. [47]

    47. See [127] above.

  2. It may be that, now, it is no longer possible for the Owners to determine these matters. But they have, at all times, been aware of the terms of the Special Condition and of the extent to which they, primarily through Daniel, obtained quotations.

  3. They have also been aware, by reason of Invoices 1 to 17 and their accompanying documents, of the detail of the work done by the Builder and the nature of the subcontractors engaged by the Builder throughout the course of construction.

  4. It may be, as Mr Ashhurst submitted, that the Owners could not divine, from Invoices 1 to 17, the extent to which the Builder had or had not obtained two quotations for the charges it was passing on to the Owners.

  5. This was, evidently, a matter of no concern to the Owners during the course of construction, that is between December 2016 and March 2019, as they made no complaint about, or any reference to, any possible breach by the Builder of the Special Condition.

  6. After the Builder delivered Invoice 18 in July 2019, the parties engaged in an extensive email exchange, over several months, during which time no complaint was made about any possible breach of the Special Condition.

  7. The Builder does not, however, as may well have been open to it, make any allegation of waiver.

  8. As I have said, the Builder commenced these proceedings in December 2020.

  9. The first time the Owners contended that the Builder had failed to comply with the Special Condition was when they filed their Technology & Construction List Response on 26 March 2021, where they pleaded:

“In further answer to the whole of the [Builder’s] Contentions, the [Owners]:

a.   say that the [Builder] has breached the special conditions set out in Schedule 4 of the Contract by failing to seek their approval and providing at least two competitive quotes as to the items that are claimed by the [Builder] in these proceedings and disputed by them to be payable … ; and

b.   in the premises, they are not liable to pay for those items.” [48]

48. At [C18].

  1. As can be seen, the Owners did not then assert that they had suffered damage as a result of the Builder’s alleged failure to obtain two quotations. Rather, the Owners asserted that, because the Builder had not obtained two quotations, the Owners were not liable to pay the Builder for the “items” the subject of the Builder’s claim.

  2. The evidence does not reveal what had, by then, alerted the Owners’ attention to the Builder’s asserted breach of the Special Condition.

  3. On 22 August 2022, the Owners filed a Technology and Construction List Cross-Claim Statement in which, for the first time, they sought damages by reason of the Builder’s alleged breach of the Special Condition.

  4. The Owners pleaded, under the heading “Unapproved or unauthorised items of work”:

“Throughout the course of the Construction Period, the [Builder] engaged in work or caused others to do work without the approval or authorisation of the [Owners].” [49]

49. At [C20].

  1. The Owners then particularised the alleged unapproved and unauthorised work and asserted that the amount that the Builder had charged the Owners for that work was $1,767,698.13. [50]

    50. At [C21] and [C22].

  2. The Owners then pleaded:

“The [Builder] did not provide the [Owners] with any quotations or obtain any authorisation or approval for the work [referred to at [154] and [155] above]

By reason of the matters pleaded [as I have set out at [154] and [155] above], the [Builder] breached the terms in [the Special Condition] … and is liable to the [Owners] in damages for the sum of $1,767,698.13 (and any GST paid on any part of that amount).” [51]

51. At [C23] and [C24].

  1. Thus, the damage that the Owners then asserted they had suffered by reason of the Builder’s alleged failure to obtain two quotations was the cost of the work the Builder had allegedly carried out without approval or authorisation: $1,767,698.13.

  2. On 30 August 2023, the Owners filed an Amended Cross-Claim Statement in which they made the same allegations concerning the Special Condition as they made in the 22 August 2022 Cross-Claim, save that the figure claimed as being the cost of the charges made by the Builder for unapproved or unauthorised work, and thus the Owners’ damage, was changed from $1,767,698.13 to $1,379,049.

  3. On 17 February 2025, about a month before the hearing commenced, the Owners filed a Further Amended Cross-Claim Statement in which they amended the plea set out at [154] above so that it read:

“Throughout the course of the Construction Period, the [Builder] engaged in work or caused others to do work without the approval or authorisation of the [Owners] as to the proposed cost of that work in breach of the [Special Condition].” [52] (Underlined emphasis in original.)

52. At [C20].

  1. The Owners repeated their earlier contention that the costs charged by the Builder to the Owners for unapproved or unauthorised work was $1,379,049. [53]

    53. At [C22].

  2. The Owners then pleaded:

“By reason of the matters pleaded … above, the [Builder] breached the terms in [the Special Condition] … and is liable to the [Owners] in damages for the sum representing the difference between the amount charged by the [Builder] for this work and the reasonable or proper value of this work: $337,627 (excluding GST).” [54] (Underlined emphasis in original.)

54. At [C24].

  1. In this iteration of their Cross-Claim, the Owners did not preface the paragraph to which I have just referred with a paragraph to the effect of that set out at [156] above asserting a failure on the part of the Builder to provide a quotation.

  2. The difference between the loss claimed by the Owners in the 17 February 2025 iteration of their Cross-Claim, compared to the two earlier iterations of their Cross-Claim was that the loss now claimed was not the actual amount of the amount charged by the Builder for the allegedly unauthorised and unapproved work, but the difference between that amount and the “reasonable or proper value” of that work: asserted to be $337,627.

  3. During the hearing, the Owners, with leave, filed a Second Further Amended Cross-Claim Statement which made some presently immaterial changes to the manner in which this aspect of the matter had been pleaded in the 17 February 2025 Cross-Claim.

  4. The position as articulated in the Owners’ 17 February 2025 Cross-Claim was not the case run at trial, which was that the damage suffered by the Owners was the difference between the charges made by the Builder for work where two quotes were not obtained and the reasonable value of that work; rather than the difference between the value of all of the allegedly unauthorised and unapproved work and the reasonable value of that work.

  5. However that may be, the point is that the Owners have been agitating the question of the Builder’s alleged failure to obtain two quotations since March 2021, and the question of what loss the Owners have thereby suffered since August 2022.

  6. Until February 2025, the Owners put that loss as the exact amount of all of the allegedly unauthorised and unapproved works: initially $1,767,698.13, and later $1,379,049: a proposition that cannot be reconciled with the manner in which they sought to establish their loss before me.

  7. The Owners have now abandoned their case that any work was unauthorised or unapproved.

  8. It was when Mr Ashhurst made the submission at [127] above that the Owners sought to invoke the facilitation principle.

  9. The conventional way for the Owners to prove the loss they suffered by reason of the Builder not obtaining two quotations for each “item” would be to prove that other, lower quotations were available at the time.

  10. Assuming that it would now be difficult, perhaps impossible, to prove these matters, that is a product of the manner in which the Owners have sought to prove their case.

  1. Had the Owners, at the outset of these proceedings, sought to advance the case now propounded, it may very well have been possible to prove that case in the conventional way.

  2. As things turned out, until very recently the Owners sought to prove their damages case by reference to a now abandoned contention that the Builder performed a significant body of work without their authorisation or approval.

  3. Such difficulty as might now face the Owners in seeking to prove their case in the conventional way does not, in the circumstances I have set out, provide a reason for the Owners now, many years after the event, to seek to prove their case by inference and to, in effect, throw upon the Builder the onus of having to show that it produced two quotations for all elements of the construction, which construction took place between five and seven years ago.

  4. In any event, the Owners’ belated invocation of the facilitation principle in the manner advocated by Mr Ashhurst, requires the drawing of inferences that:

  1. in the case of each “item” referred to in the Special Condition, the Builder would have been able to, first or as necessary, [55] obtain quotations or a quotation for the “item” in question;

  2. those quotations would have been for the reasonable costs of performing the work or would, somehow, between them, be the reasonable cost of performing the work;

  3. the Builder would have adopted the lower of those quotations, regardless of the credentials of the quoting party; with no provision being allowed for the exercise of judgment by Dixon as to whether the Owners’ best interests required that the lower quotation not be accepted; [56] and

  4. the work done by the quoting party would in every case have been performed for the quoted amount.

    55. Assuming, for example, that the Owners had already obtained a quotation.

    56. A point expressly made by Mr Ashhurst at T222.

  1. Having regard to my findings at [105] to [110] above, I do not think that the drawing of those inferences could be justified, and to do so may well overstate the Owners’ loss, assuming the Special Condition has the effect for which Mr Ashhurst contended.

  2. There is a further problem.

  3. The Owners’ case, as now advanced, is that, in effect, they have been overcharged for the items in respect of which the Builder did not obtain two quotations by an amount equal to the difference between the amounts actually charged and the reasonable value of the work.

  4. The corollary must be that to the extent that, on occasions when the Builder did not obtain two quotations, the Builder charged the Owners less than the reasonable costs of the relevant, the Owners have received a benefit from the Builder’s asserted breach that they must bring to account.

  5. The Owners have not sought to do this. Rather, their calculation of their loss simply accepts the Builder’s charges for those other items, without taking into account the extent to which those charges were less than the reasonable charges determined by the quantity surveyor experts.

  6. The occasions when the Builder, allegedly, did not obtain two quotations charged less than the reasonable value of the work itemised in the final column of the Schedule is set out at [134] above. The total of those amounts is $344,679.

  7. It is true, as Mr Ashhurst submitted, that the Builder would have had no contractual entitlement to recover from the Owners more than it actually cost to effect this work. However, assessing the damage the Owners have suffered using inferences said to arise from the application of the facilitation principle, it would, in my opinion, have been necessary to take these items into account.

  8. Had I otherwise been inclined to accept the Owners’ formulation of their case in damages, it would have been necessary to set that amount off against the Owners’ claim.

Preliminaries

  1. In these circumstances, it is not necessary for me to descend into the granular detail of the parties’ competing contentions concerning the items set out in the table at [134] above. However, I will deal with the largest item, namely preliminaries.

  2. Initially, both Mr Zakos and Mr Jamieson assessed preliminaries as a percentage of total work.

  3. Rawlinsons Australian Construction Handbook (37th ed, 2017) prescribes a range of 8% to 14% for preliminaries for various types of buildings.

  4. Mr Zakos selected 14% having regard to the nature of the property, in particular its steep terrain and waterfront location.

  5. Mr Zakos opined:

“… The project preliminaries must be distinguished against the individual project, the design of the building, the construction techniques and methodologies, the location of the site, the topography of the site which affects the cost of preliminaries. Rawlinsons at page 204 lists numerous other preliminary costs which are to be added.

In my opinion, the percentage of 14%, which is Rawlinsons based, is reasonable as it accounts for the following, amongst other issues:

(a)   The additional man handlings of materials associated a sloping site.

(b)   The additional equipment and access ways associated with a sloping site.

(c)   The additional protection of services and finishes required and associated with prestige construction.”

  1. In his first and second reports, Mr Jamieson adopted the same methodology, but opined that 10%, rather than 14%, was the appropriate rate to apply.

  2. In his third report, Mr Jamieson adopted a new approach, and assessed the reasonable value of each of the items actually expended by the Builder as preliminaries.

  3. There is no direct evidence before me to the effect that usual building practice is to apply the Rawlinsons expenditures when assessing preliminaries, although that has been my experience in cases such as this.

  4. More importantly, it was the method adopted by both quantity surveyor experts at the outset.

  5. That said, the rationale for adopting Mr Jamieson’s more focused methodology is apparent.

  6. Mr Zahra made a number of criticisms of the manner in which Mr Jamieson had applied that rationale, including what appeared to be somewhat arbitrary reductions of 5%, 10% or 15% for a large number of the relevant items.

  7. As appears from the table at [134] above, the experts’ competing methodologies produced sharply divergent views as to the reasonable cost of preliminaries: $343,634 for Mr Jamieson and $546,008 for Mr Zakos.

  8. Had it been necessary for me to express any view about this, I would have been inclined to adopt a figure somewhere between those two amounts to take account of the more focused nature of the enquiry inherent in Mr Jamieson’s approach but to take into account the somewhat arbitrary discounting of certain of the items.

Conclusion

  1. The result is that the Owners have not established a breach by the Builder of the Special Condition, nor the damage that they assert they suffered by reason of that alleged breach.

  2. The Builder is entitled to recover an amount equal to Invoices 18 and 21, together with interest and costs.

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Endnotes

Decision last updated: 04 April 2025

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Allen v Tobias [1958] HCA 13
Allen v Tobias [1958] HCA 13
Allen v Tobias [1958] HCA 13