Ashell Homes Constructions Pty Ltd v Kobus
[2022] ACTSC 323
•22 November 2022
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Ashell Homes Constructions Pty Ltd v Kobus |
Citation: | [2022] ACTSC 323 |
Hearing Dates: | 6 – 10 & 13 December 2021, 27 January 2022 |
DecisionDate: | 22 November 2022 |
Before: | McWilliam AsJ |
Decision: | The parties are directed to bring in short minutes of order within 14 days to give effect to these reasons, including: (1) The entry of judgment for the defendants in the sum of $25,089.35 plus interest at the rates set out in Schedule 2 to the Court Procedures Rules 2006 (ACT); (2) The removal of Caveat no. 3032521 pursuant to s 107(2)(b) of the Land Titles Act 1925 (ACT); and (3) Any orders for costs, and in the event of disagreement, the proposed timetable for resolving the question of costs, either on the papers or by way of further oral hearing. |
Catchwords: | CONTRACT – REPUDIATION – building contract – where work done by builder departed from contractual obligations over a period of time – whether breaches individually or cumulatively amounted to repudiation – where builder’s conduct evinced an intention to observe its contractual obligations only when it suited the builder to do so – repudiation established TORT – CONVERSION – building site – where building contract terminated – where builder prevented from collecting scaffolding, tools and equipment from site – whether owner deliberately exercised dominion over the items to the exclusion of the builder |
Legislation Cited: | Building Act 2004 (ACT) s 42 Land Titles Act 1925 (ACT) s 107 |
Cases Cited: | ACN 116 746 859 (formerly known as Palermo Seafoods Pty Ltd) v Lunapas Pty Ltd [2017] NSWSC 1583 Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 |
Texts Cited: | Damien Cremean, Michael Whitten and Michael Sharkey, Brooking on Building Contracts (LexisNexis, 6th ed, 2020) |
Parties: | Ashell Homes Constructions Pty Ltd ( Plaintiff) Jonathan Kobus (First Defendant) Amy Elleway (Second Defendant) |
Representation: | Counsel B Buckland ( Plaintiff) D Robens ( Defendants) |
| Solicitors O’Connor Harris ( Plaintiff) Harrington Hall ( Defendants) | |
File Number: | SC 45 of 2020 |
McWilliam AsJ
Amy Elleway and Jonathan Kobus (the defendants) wanted to build two townhouses in Weston, ACT, for a little over a million dollars. They hoped to live in one and sell the other. Ms Elleway in particular was concerned about sustainability and her objective was that each townhouse aim to be energy neutral or a “passive” dwelling. She did some research and the defendants together decided to build the townhouses using a system of structurally insulated panels (SIPs). The product was chosen because it was quick and easy to build with, provided what they considered to be superior insulation, and resulted in improved energy ratings.
Having searched on the internet for sustainable or passive house builders, the defendants found and engaged the plaintiff, Ashell Homes Constructions Pty Ltd (Ashell Homes), to carry out the construction project. At the time, the plaintiff traded as Green Homes Australia ACT. The parties executed a contract and the plaintiff commenced work in April 2018. By Christmas that year, the relationship between the parties had soured to a point where correspondence was being exchanged regarding notices of breach and purported rights of termination. The plaintiff did no further work on the project from Christmas Eve in 2018. This case is principally about who had the right to lawfully bring the contract to an end, and the damages that flow as a consequence.
The plaintiff’s claim
The Statement of Claim, filed by Ashell Homes on 18 May 2020, sets out the location of the property in Weston, referred to here as the Site, and the relevant details of the building contract for the construction of the two townhouses on the Site, which was in the form of the standard Housing Industry Association “ACT Residential Building Contract for New Homes” template, executed by the parties in February 2018 and commencing in April 2018 (the Contract). The material terms of the Contract are set out below.
The plaintiff claims that it sent a breach notice to the defendants on 19 December 2018 and a notice of termination founded on that breach notice on 21 January 2019.
Following the Contract coming to an end, the plaintiff seeks:
(a) monies owed under the Contract;
(b) damages arising from conversion of the plaintiff’s tools, equipment, and scaffolding;
(c) interest; and
(d) costs.
At the outset of the hearing, $285,468.69 was claimed (plus interest accruing) as the monies owed under the Contract. That amount included $47,621.66 for replacement costs for the plaintiff’s tools, equipment, and scaffolding that ultimately had to be replaced. The plaintiff also claims that sum under the common law tort of conversion.
In the event that the plaintiff succeeded on its claim, a further order was sought that if the defendants fail to pay any monies found to be owing within 28 days of judgment being ordered, a property owned by the defendants in Chifley be sold by the Supreme Court Registrar if necessary, with the proceeds of sale used in part to satisfy the judgment debt, plus costs and interest. The defendants previously agreed to permit the plaintiff to lodge a caveat over the property in Chifley in substitution for a caveat placed by Ashell Homes over the land in Weston.
If the plaintiff did not succeed in its contractual claim, no alternative claim for unjust enrichment on the basis of quantum meruit was pleaded. However, the plaintiff did rely upon the doctrine of substantial performance and a right to be paid for work done up to the time the contract was terminated, to the extent that the right had arisen from the partial execution of the contract. In that regard, reliance was placed on McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-7, discussed and applied recently in Mann v Paterson Constructions Pty Ltd [2019] HCA 32; 267 CLR 560 at [165] per Nettle, Gordon and Edelman JJ.
The defence and counterclaim
By amended defence and counterclaim dated 19 March 2021, the defendants allege that the plaintiff failed to construct the townhouses in accordance with the Contract and the plans, with the breaches being so fundamental that, on their case, Ashell Homes repudiated the Contract. They allege they accepted the repudiation by sending an email to that effect on 22 December 2018 and the Contract came to an end from that date.
The defendants alleged that left them with a project that was only partially complete. The defendants plead that they had to engage a subsequent builder to complete the project. That cost them an additional sum above the Contract price and they claim that sum (plus interest) against the plaintiff in damages for breach of contract. At the commencement of the hearing of the counterclaim, $144,544.51 was sought. However, following the evidence that was adduced, the figure claimed was reduced to $72,711.01.
In response to those allegations, Ashell Homes asserted that none of the complaints raised by the defendants amounted to a material or fundamental breach of the Contract that gave rise to a right to terminate the Contract in December 2018. Further, for each of those complaints, the defendants did not comply with the notice of breach provisions in the Contract. As a consequence, the defendants did not give the plaintiff an opportunity to remedy the matters complained of. However, although the plaintiff complained about the defendants “storing up” their grievances, it did not go as far as to plead an alternative defence of waiver or election.
The counterclaim originally raised claims in negligence and misleading and deceptive conduct and sought relief against Mr John Ivo Cobanov, a licensed builder and the sole director and secretary of Ashell Homes. During the hearing, the negligence and misleading and deceptive conduct claims were abandoned, and those causes of action were formally dismissed with costs on the third day of hearing (8 December 2021).
Issues
As will be apparent from the brief explanation of the claims, the issues presently for determination are:
(a) Whether the plaintiff validly terminated the Contract on 21 January 2019 with monies owing under the Contract in accordance with its terms (the contract claim); or
(b) Whether the plaintiff repudiated the Contract at an earlier date, entitling the defendants to terminate the Contract (by accepting the repudiation) on and from 22 December 2018, entitling them to claim damages (the counterclaim); and
(c) Whether the defendants prevented the plaintiff from taking possession of items to which it was otherwise lawfully entitled, including tools, equipment and scaffolding (the conversion claim), resulting in an entitlement to damages.
The appropriate course is to determine the issues chronologically, with the consequence that the counterclaim will effectively be resolved first. That is because whether the communicated acceptance of repudiation by Ms Elleway and Mr Kobus was effective to lawfully terminate the contract in December 2018 will have consequences for the finding as to the notice of termination sent by the plaintiff builder in January 2019.
For reasons that follow, I have determined that the plaintiff’s conduct was sufficient to amount to a repudiation of the Contract, so that the defendants were lawfully entitled to terminate the Contract on 22 December 2018.
I have also accepted that the defendants did, however unintentionally, convert the plaintiff’s tools, equipment, and scaffolding.
The Contract
There are a number of clauses in the Contract relevant to the various allegations of breach, repudiation, termination and whether amounts may be recoverable under the Contract, or at common law.
Under Item 6 of Schedule 1 to the Contract, the contract price was $1,050,000 inclusive of GST. The specified time for practical completion under Item 9 of Schedule 1 was 274 days (defined elsewhere as working days) after commencement, subject to clause 22 in the general terms of the Contract, which was a clause dealing with delays and extensions of time. The builder’s margin was 20% pursuant to Item 10 of Schedule 1.
Part B of Item 13 of Schedule 1 to the Contract sets out the various stages of construction at which instalment payments were to be made, as follows (emphasis added):
Stage
Percent
Amount
Deposit on signing contract
…
1.00%
$10,500.00
Site Preliminaries
Fences, toilets and excavation
4.00%
$42,000.00
Materials Order
SIPS and Windows Ordered
15.00%
$157,500.00
Ground Slab Stage
Footings poured, stumps, piers or columns complete. Internal and external drainage complete. Floor slab poured.
10.00%
$105,000.00
First Floor Stage
Ground floor SIPS installed. Bearers and joists complete.
5.00%
$52,500.00
SIPS Stage
SIPS installed, trusses completed, fascia installed.
10.00%
$105,000.00
Lock Up Stage
Windows Installed. Electrical and plumbing rough in. Bath installed. Front and back doors installed with locks. Roof covered.
20.00%
$210,000.00
Fixings Stage
Internal architraves, skirting, doors, cupboards and joinery installed. Exterior downpipes fitted and penetrations complete. Landings completed.
20.00%
$210,000.00
Painting Stage
Prime cost items installed. Interior and Exterior painting completed.
10.00%
$105,000.00
Practical Completion
All interior fit [out] items installed including door furniture, robe fails, bathroom accessories, electrical, plumbing fit [out] installed. House cleaned internally and externally. Site cleaned and all excess items removed from site.
5.0%
$52,500.00
TOTAL
100%
$1,050,000.00
The parts emphasised under the Ground Slab, First Floor, SIPS and Lock Up stages foreshadow the focus of the evidence concerning breach below.
Schedule 2 contained the Special Conditions. Items 1, 5, 11 and 15 have some bearing on the issues for determination. They are as follows:
1.Priority of Special Conditions
Notwithstanding any other provision in this Contract, these Special Conditions form part of the Contract and shall take precedence over all other Contract provisions, terms or documents. Where there is a conflict or inconsistency between the Special Conditions and any other provision, term or document of the Contract, these Special Conditions shall take precedence.
5. No Contact with Subcontractors
Notwithstanding any other clause of this Contract, the parties agree that the Owners will not directly communicate, either in writing or orally, with any of the Builder’s subcontractors. The Owners will direct all communications under or associated with the Contract or in respect of the works exclusively to the Builder.
11. Dispute Resolution
(a) In the event that there is a dispute of the quality of work or payment between the Owners and the Builder, the dispute may be referred to an expert for resolution by a Notice of Dispute.
…
15. Clarifications
…
e. Where a stage cannot be completed due to causes beyond the reasonable control of the Builder, the Builder shall be entitled to invoice, and the Owners shall pay, for works actually carried out within that stage.
In the general terms of the Contract, the following clauses have relevance to the issues for determination:
Clause 2 Definitions
the contract means the agreement set out in these conditions of contract (including Schedules 1-5) and in the signed plans and signed specifications attached to this contract, signed by both the builder and the owner.
building works means the work to be done on the site by the builder under the contract.
…
commencement means commencing work with the preparation of the site.
…
Clause 3 The building works
1. The builder must finish the building works according to the contract, and all relevant laws and statutory requirements.
2. …
3. …
…
Clause 12 Progress Payments
1.The builder must give the owner a written claim for each progress payment on completion of each stage set out in Item 13 of Schedule 1.
2.The owner must make progress payments on completion of each of the stages set out in Item 13 of Schedule 1.
3.…If Part B in Item 13 of Schedule 1 is completed then that will apply.
4.Payments must be made by the owner within 5 days after receiving a progress claim from the builder.
5.If the owner does not make a progress payment or any payment after it becomes due, the builder is entitled:
(a) to interest on the unpaid amount, at the rate set out …
(b) to suspend the building works …
…
Clause 25 Ending the Contract
1.If the owner breaches the contract the builder may suspend the building works and must notify the owner of the breach in writing by certified mail or personal service.
2.The builder may end the contract if:
(a) 10 days have passed since the builder gave notice of the breach;
(b) the owner is still in breach of the contract; and
(c) the builder notifies the owner in writing by certified mail or personal service that the contract is at an end.
3. If the owner disputes the builder’s notice before the contract is ended, the owner must notify the builder in writing by certified mail or personal service. The builder may suspend the building works and the dispute must be taken to dispute resolution (see Clause 26).
4. If the builder breaches the contract, the owner must notify the builder of the breach in writing by certified mail or personal service.
5. The owner may end the contract if:
(a) 10 days have passed since the owner gave notice of the breach;
(b) the builder is still in breach of the contract; and
(c) the owner notifies the builder in writing by certified mail or personal service that the contract is at an end.
6. If the builder disputes the owner’s notice before the contract is ended, the builder must notify the owner in writing by certified mail or personal service. The builder may suspend the building works and the dispute must be taken to dispute resolution (see Clause 26).
7. The owner or the builder may also end the contract by written agreement or by sending the other written notice by certified mail or personal service:
(a) if the other becomes bankrupt or goes into liquidation;
(b) if an automatic variation makes the contract price rise by more than 10 percent; or
(c) if planning or building approvals cannot be obtained within the time specified in Clause 7.
8. If the contract is ended by the builder, then the owner may pay as a debt due and payable to the builder:
(a) the cost of the building works to date;
(b) the cost of any materials on the site or already ordered from suppliers;
(c) the cost of leaving the site;
(d) the builder’s margin, applied to the total of (a) plus (b) plus (c);
(e) default interest on any unpaid monies under clause 12.5(a); and
(f) all other costs and losses incurred by the builder as a consequence of this contract being ended.
9. Nothing in this clause prejudices the right of a party to recover damages or to exercise any other right or remedy against the other party for a breach (including repudiatory breach) of the contract.
Clause 26 Dispute Resolution
1.If there is a dispute between the owner and the builder, either one must promptly give the other written notice of the dispute.
2.Disputes must be resolved according to Territory laws that govern the resolution of building disputes.
3.The owner and the builder must meet within 7 days to discuss the matters in dispute and attempt to resolve them by negotiation, mediation or other agreed method.
Paragraphs 4, 5 and 9 in clause 25 of the Contract have been emphasised because they give rise to an issue between the parties as to the interaction between the terms of the Contract and the exercise of common law rights.
The breakdown in the contractual relationship
On 19 December 2018, the plaintiff sent the defendants an email with the subject line “Notice of Breach of Contract”. It was in the following terms:
Hi Amy,
I would like to remind you of your obligations under the contract.
Pursuant to Schedule 2, Note 5 of the contract, it is outlined that the owner must not communicate directly with subcontractors. I understand that you have been speaking directly with the roofing subcontractor. As you are now aware this has caused a strain on our relationship with the roofer.
In addition to the above, it has come to my attention that you have been attending site without the builders approval. I note that Schedule 2, Note 15(c) outlines your obligations of informing the builder should you wish to attend site.
Whilst we will not be terminating the contract, we would appreciate that you are aware of your contractual obligations.
Moving forward we are more than happy to facilitate site visits, however John must be present. Any concerns you have regarding subcontractors must go through John also.
If you have any questions please do not hesitate to contact us.
…
On 22 December 2018, the defendants sent to the plaintiff an email with the subject line “Notice of termination of contract”. The relevant parts are as follows:
I am writing to provide you with notice of termination of contract. Please see the attached letter.
As you may not be aware, not every breach of a contract amounts to the right to termination. It is also the case that an alleged breach may not amount to a breach as a matter of evidentiary fact.
As a consequence of this, I have set out in detail in the attached letter of termination the details of the breaches that amount to fundamental and material breaches of contract which give rise to repudiation. I have also set out the evidentiary basis of each of the identified breaches.
I have restricted the content of the letter of termination to that matter. However, there are matters to attend to as a consequence of that termination, which as per the letter, has immediate effect.
…
As you are now legally excluded from the site as a consequence of the termination, I request that you provide me a proposed list, and a day and time for approved access to the site for the purposes of removal of all building items which do not belong to the site which you consider you should fairly and reasonably remove from the site.
The letter attached to the email alleged multiple and continual breaches of the Contract. Among numerous allegations were the following:
(a) Unapproved variations from approved plans in relation to the slab, building dimensions, approved engineering steel beam exclusions and roof trusses.
(b) The failure to pay suppliers and requiring the defendants to pay ahead of their contracted obligation for a completed stage progress payment.
(c) Failure to undertake work with due care and diligence, which included (among other things) the failure to install all required structural supporting beams.
The letter then stated relevantly:
We rely on our common law rights, and note Clause 25, 9 of the contract.
Each of the items detailed above individually constitute material and fundamental breaches of the contract giving rise to the right to termination. Taken collectively, and specifically the period of time between July and December 2018 where no substantive progress was made on the building site except for instances where we project managed, and made payments outside of the contract terms, the breaches are egregious and have resulted in damage to the reputation of the completed building.
…
In the circumstances, we, the owners of the Property, hereby give notice of termination of the Contract with immediate effect.
…
After a number of further exchanges throughout December 2018 and early January 2019, where the plaintiff rejected the defendants’ purported termination of the Contract and the defendants reasserted their position, the plaintiff ultimately sent its own letter of termination on 21 January 2019. It included the following:
We also refer to the Notice of breach of contract issued by the Builder to the Owners on 19 December 2018 pursuant to clause 25(1) of the Contract (Breach notice) …
…
The Owners have not disputed the Breach notice. Ten days have passed since the Breach notice and the Owners continue to be in breach of the Contract. Pursuant to clause 25(2)(c) of the Contract, the Builder hereby notifies the owner in writing that the Contract is at an end.
…
The proper construction of the Contract and whether clause 25 restricts the exercise of a common law right to terminate for repudiation
There is a preliminary legal issue, which is whether the terms of the Contract between the parties restricted the defendants’ right to terminate the Contract in a manner other than that set out in the Contract.
The plaintiff argued that pursuant to clause 25 (the terms of which have been set out above) a party “must” give the other party to the Contract notice of an alleged breach before there is any right to terminate, including where the party alleges repudiation. It was argued that the effect of the mandatory language “must”, and the terms of clause 25 overall, meant that common law rights were not excluded, but there was a notice procedure imposed upon those rights, by which such rights must be activated. Such a construction was said to be for sound commercial reasons, giving the receiving party the opportunity to make a choice: remedy the breach, dispute it, or agree to the termination of the contract. Effectively, the plaintiff argued for a construction of clause 25 whereby the Contract could be terminated if, and only if, notice were given in accordance with the clause.
The defendants argued that when there has been repudiation of the Contract, all that is required is that the party accept the repudiation in order to terminate the Contract. That is made clear by the terms of clause 25.9, which expressly preserved the right of a party to terminate the Contract for repudiatory breach.
In reply, the plaintiff argued that although clause 25.9 preserves the rights of a party at common law, it does not absolve a party of its obligation to observe the remainder of the clause. Clause 25.9 operates as an ameliorating exception, not a wholesale exclusion.
The nature of the common law right in question – repudiation
In order to work out how the contractual provision impacts upon the right at common law to terminate for repudiation, it is important to first understand the nature of the right. In Shevill v Builders Licensing Board (1982) 149 CLR 620, Gibbs CJ stated the following in respect of an otherwise valid and binding contract at 625-6 (citations omitted):
Such a contract may be repudiated if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract …or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way. … In such a case the innocent party is entitled to accept the repudiation … and sue for damages.
In Kennedy v Collings Construction Company Pty Ltd (1991) 7 BCL 25, Giles J stated at 39 (citations omitted):
The question then is whether the [builder] had repudiated the contract. By that is meant the evincing of an intention not to be bound. That may take the form of straight-out refusal to perform the contract, or may be found if the party shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations … or only if, or as and when, it suits him…repudiation turns upon objective acts and omissions, not on uncommunicated intention, and that it is sufficient that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it...
In respect of the latter part of the above extract, his Honour drew from Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 per Deane and Dawson JJ at 658.
What then, does it mean to “evince an intention”? In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115 at [44],Gleeson CJ, Gummow, Heydon and Crennan JJ said (footnotes omitted and emphasis added):
The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. (In this case, we are not concerned with the issues that arise where the alleged repudiation takes the form of asserting an erroneous interpretation of the contract. Nor are we concerned with questions of inability as distinct from unwillingness.) Secondly, it may refer to any breach of contract which justifies termination by the other party. It will be necessary to return to the matter of classifying such breaches. Campbell J said this was the sense in which he would use the word “repudiation” in his reasons. There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words.
In Carr v JA Berriman Pty Ltd (1953) 89 CLR 327, Fullagar J (with whom Dixon CJ, Williams, Webb and Kitto JJ agreed) considered the position where there were successive breaches of contract. His Honour considered that an election not to rescind a contract for a breach did not deprive the breach of all significance, stating at 351:
When a second breach occurs, the two combined may have a significance which it might not be legitimate to attach to the first alone.
His Honour went on to discuss the facts of the case before the Court before continuing at 351-352 (references omitted):
…A reasonable man could hardly draw any other inference than that the building owner does not intend to take the contract seriously, that he is prepared to carry out his part of the contract only if and when it suits him. The intention must be judged from acts… The intention “evinced” here is an intention not to be bound by the contract. When such an intention is shown, the other party is entitled to rescind the contract.
The above authorities concerning repudiation have been helpfully collected, either in Kyren Pty Ltd v Wunda Projects Australia Pty Ltd & Ors [2012] SASCFC 23 at [108]-[110] or in Brooking on Building Contracts (LexisNexis, 6th ed, 2020) at [11.5] and [11.6].I will return to these well-established principles when considering the factual context below.
General principles applying to the construction of a contract
When construing the Contract, the following general principles are applicable:
(a) The rights and liabilities of the parties are determined objectively by reference to the contract’s text, context, and purpose: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 256 CLR 104 at [46] (Mount Bruce).
(b) When determining the meaning of the terms of a commercial contract, the necessary enquiry requires “consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract”: Mount Bruce at [47].
(c) The approach to be taken assumes that the parties intended to produce a commercial result, so that a construction which results in commercial nonsense or works commercial inconvenience should generally be avoided: Mount Bruce at [51].
Turning next to the principles regarding the interplay between a contractual right to terminate and a common law right to terminate, the question is whether, as a matter of construction, the former excludes the latter. This was stated expressly by Deane J in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 (Progressive Mailing) at 55-56:
A party entitled to terminate a contract for repudiation or fundamental breach may rely upon both a specific contractual right to terminate the contract and the common law right to terminate unless, as a matter of construction, the former excludes the latter …
His Honour further stated (at 55) that where a party is entitled to rely upon a contractual right to terminate and a common law right to terminate, there is no obligation to elect between the two grounds for terminating, rather, the party is entitled to rely upon both.
That leads to the next question of how the court determines whether a party is entitled to rely on both rights or whether the contract in question excludes the common law right to terminate.
The principle applying to resolve that question is that such right to terminate will only be excluded when the contract contains a clear intention to exclude it: Holland v Wiltshire (1954) 90 CLR 409 at 415; Concut v Pty Ltd v Worrell [2000] HCA 64; Taylor v Raglan Developments Pty Ltd [1981] 2 NSWLR 117 at 135 176 ALR 693 at [23]. Just as repudiation involves looking to the conduct of the party to ascertain whether there was an intention not to be bound, the court examines the terms of the contract to discern whether there was a manifest intention (either express or implied) to exclude either a specific common law right, or rights at common law generally: see Mazelow Pty Ltd v Herberton Shire Council [2002] QCA 119 at [7] and [11] (Mazelow).
In Concut Pty Ltd v Worrell [2000] HCA 64; 176 ALR 693 (Concut v Worrell) this principle was discussed at [23] by Gleeson CJ, Gaudron and Gummow JJ (citations omitted, emphasis added):
In Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd, Hope JA identified contracts between master and servant as a typical class of contract in which terms will be implied by law. Such terms apply in the absence of an expression of contrary intention by the parties. In discerning that intention, regard should be had to "the familiar principle of construction that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law". Thus, an express provision for termination for breach in certain circumstances may be regarded as designed to augment rather than to restrict or remove the rights at common law which a party otherwise would have had on breach.
In Eden Co Construction Pty Ltd v Leed Engineering and Construction Pty Ltd [2018] NSWSC 1882 (Eden v Leed), Fagan J applied the above principle to an issue similar to that under consideration here. His Honour was considering a building contract involving a subcontractor. There was a contractual provision that provided a procedure for termination upon notice where a subcontractor was in default. There had been no notice in that case. It had been argued that the contractual termination procedure upon notice excluded the right of termination for repudiatory breach at common law. Fagan J referred (at [32]) to the “familiar principle” articulated in the emphasised words in the extract above, before stating at [33]:
In Concut Pty Ltd v Worrell [2000] HCA 64 at [23] Gleeson CJ, Gaudron and Gummow JJ applied that principle. That case concerned an employment contract but the principle is of general application. Applying it to the present case I find no clear words to indicate that the parties intended to abandon the remedy of terminating the contract for repudiation which arises by operation of law. This is a question of construction. Far from there being any such clear words there are significant indications that there was no intention to confine the right of termination and the method of exercising it to the prescriptions of [the clause].
The existence of what may be described as a “carve out” in the contract has significance in terms of discerning a contractual intention. If the contractual right to terminate has been expressly worded to be “without prejudice to any other legal rights or remedies” (or some similar language), it is more likely that the equivalent common law right has not been excluded: see for example Mazelow at [9].
Conversely, where the terms of a contract comprehensively regulate the field of termination without any carve out provision, that may manifest an intention to exclude common law rights: see, for example, Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 at 544 per Sheppard J and 554-5 per Burchett J.
The present Contract
Applying those principles, the meaning of the Contract is clear. Clause 25 does not operate to exclude or restrict the right of a party at common law to terminate a contract for repudiation without complying with the notice requirements contained within the clause.
First, there are the plain words of clause 25.9:
Nothing in this clause prejudices the right of a party to recover damages or to exercise any other right or remedy against the other party for a breach (including repudiatory breach) of the contract.
Second, that construction is consistent with the lack of clear words to rebut the presumption that a contracting party does not intend to abandon any remedies for breach arising by operation of law, which was discussed in Concut v Worrell at [23]. What was said in Eden v Leed applies here with greater force, by virtue of the words of clause 25.9. Not only are there no clear words excluding a right of termination without notice for repudiatory breach, but there is an express preservation of such a right. The opening words of clause 25.9 are that “nothing in this clause prejudices the right”. To then construe the Contract as requiring compliance with contractual notice requirements before a right to terminate for repudiatory breach can be exercised would be to impose on the right a restraint that does not exist at common law – in other words, a prejudice to the right. The construction for which the plaintiff contended is thus at odds with the words of 25.9 and is not to be preferred.
The parties drew attention to the case of Tan Hung Nguyen & Anor v Luxury Design Homes Pty Ltd & 2 Ors [2004] NSWCA 178 (Nguyen v Luxury Design Homes). That case involved a contract between an owner and a builder for the construction of a home. The contract included provisions for the ending of the contract by the owner, namely clause 24 of the contract in question, the terms of which are set out in the judgments of Hodgson JA and Einstein J at [2] and [74] respectively. There was a broad scheme setting out what constituted a default of the builder or contractor and providing for the owner to give written notice “if such default can be remedied” for the contractor to remedy the defect within a specified period or the owner would end the contract. If the contractor did not comply with the owner’s request within the time allowed, “or if the default cannot be remedied,” the owner was permitted to end the contract. There was then a regime for what was to happen in terms of fixtures and fittings, the cost of completion and entitlements to payment.
One of the issues concerned whether the contractual provision in question excluded the common law rights to relief for repudiatory conduct. In that case, the NSW Court of Appeal held that it did. However, the clause of the contract under consideration was markedly different from the words here. For present purposes, it suffices to state two key differences (there are others):
(a) First, the contract in Nguyen v Luxury Design Homes was expressed in terms of a “default”, with that term including (among a more comprehensive list) where the contractor is unable or unwilling to complete the work or abandons the work, becomes bankrupt, or fails to remedy defective work. The terms of clause 25 of the present Contract apply where “the builder breaches the contract”, rather than to a broader category of events which might be thought to cover the field of repudiation. Under clause 25.7 here, events such as insolvency or bankruptcy entitled the other party to immediately end the Contract by written notice.
(b) Secondly, in Nguyen v Luxury Design Homes the contract in question did not contain any provision in the terms of clause 25.9.
While the different contractual provisions mean that the end result of the case does not guide the construction here, two aspects of the reasoning in Nguyen v Luxury Design Homes have significance for the reasoning in the present case. The first aspect is that in passing, Hodgson JA stated at [5] (emphasis added):
…It may be that, where the builder is guilty of repudiatory conduct, the owner can accept the repudiation without following the procedures proscribed by cl 24. However, in my opinion cl 24 indicates the intention of the parties as to how their rights are to be adjusted if the contract is terminated for default of the builder, even if its procedures are not followed: it makes it clear that the parties did not intend the contract to be an entire contract. Furthermore, the correct analysis in such a case may be that, where the conduct of the builder indicates that it would be useless to go through the motions of the cl 24 procedure, the owner may not have to do so but may simply terminate: cf. Peter Turnbull & Co. Pty. Ltd. v. Mundus Trading Co. (Australasia) Pty. Limited [1954] HCA 25; (1954) 90 CLR 235 at 246-7, Mahoney v. Lindsay (1980) 55 ALJR 118.
Einstein J stated at [83]-[85] (emphasis added):
83 A threshold question arises as to whether upon the happening of one of the identified events of default, the owner may end the contract if and only if it has first notified the contractor in writing that it will end the contract unless the default is remedied within 10 working days [or such longer period as is specified]. The matter is one of construction.
84 Notwithstanding the treatment given in recent decisions concerning the proper construction and approach to be taken to contractual termination clauses requiring the giving of notices to cure breaches [cf Hungry Jacks Pty Ltd v Burger King Corp [1999] NSWSC 1029; Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874], in my view the proper construction of clause 24 in this particular building contract is that the owner may without giving the ten day notice, terminate the contract by simply giving the notice of termination to the contractor upon the happening of an identified event of default which cannot be remedied.
85 Bearing in mind the expansive range of events of default provided for in clause 24 which properly construed would include the evincing of an intent not to carry out the contract [vide being unable or unwilling to complete or abandoning the work] it seems to me that the parties are seen to have intended clause 24 to cover the field, in the sense that the common law rights to relief for repudiatory conduct were excluded.
The emphasised words in [84] of the above extract from Nguyen v Luxury Design Homes are to highlight the recognition in that paragraph that, even where there was a finding that common law rights for repudiatory conduct had been excluded by the particular contractual provision, there were circumstances where notice was not necessary, those circumstances being where there was a default which could not be remedied. That reasoning is consistent with what Hodgson JA had expressed at [5] (in particular, the emphasised words in the extract above).
The second aspect of the reasoning that has significance for the construction question in the present context derives from [85] of Einstein J’s reasoning and the contrast between the contractual provision in Nguyen v Luxury Design Homes with clause 25 of the Contract here. Here, there is no discernible intention of the notice requirements ‘covering the field’ and indeed, the opposite is the case, because of the express carve outs in clause 25.7 and 25.9. The matters listed in clause 25.7 include bankruptcy, a matter that would fall into the wider category of a party being unable to perform the obligations under a contract. In such a circumstance, no advance notice is required.
For those reasons, applying the authorities above, the proper construction of the Contract is that there is no manifest intention to restrict the exercise of any common law right to terminate for repudiation.
Did Ashell Homes repudiate the Contract?
The email of 22 December 2018 expressly stated that the defendants were terminating the contract on the basis of the plaintiff’s repudiation and relied on their common law rights. There was no dispute that this was unequivocal conduct demonstrative of the election to end the Contract: Sargeant v ASL Developments Pty Ltd (1974) 131 CLR 634 at 646 per Stephen J. The focus here was on whether the conduct of Ashell Homes was sufficient to constitute a repudiation.
The starting point for resolving that factual dispute is clause 3 of the Contract, which required the plaintiff to “finish the building works according to the contract, and all relevant laws and statutory requirements”, with “the contract” being defined in clause 2 to include the signed plans and specifications. Lest there be any doubt about it, one of the applicable statutory requirements is s 42(1)(d) of the Building Act 2004 (ACT) (Building Act), which relevantly provides (emphasis added):
Requirements for carrying out building work
(1) Building work must not be carried out except in accordance with the following requirements:
(a)the materials used in the building work must comply with the standards under the building code for the materials in buildings of the kind being built or altered;
(b)the way the materials are used in the building work must comply with their acceptable use under the building code for buildings of the kind being built or altered;
(c)the building work must be carried out in a proper and skilful way;
Note The considerations to be taken into account to decide when work is carried out in a proper and skilful way may be prescribed under the regulations (see s (2)).
(d)for building work that requires building approval under division 3.3, the building work—
(i)must be carried out in accordance with approved plans; or
(ii)if plans have not been approved for the building work—must not be carried out;
…
In Mousa v Vukobratich Enterprises Pty Ltd [2019] QSC 49, Henry J said at [197] (emphasis added):
… It is difficult to think of a more fundamental requirement of a construction contract than that the works are to be performed in an appropriate and skilful way, with reasonable care and skill, in accordance with the plans and specifications and in accordance with relevant law …
The architectural plans that were approved were provided by Mr Peter Sullivan, the Building Consultant and Designer for Smart SIPS Pty Ltd. Mr Sullivan was based in Victoria. The structural plans and drawings, such as for the slab and footings, retaining wall, and framing, were prepared by Nsient Consulting Engineers in Victoria, but Mr Sullivan had responsibility for management of the project.
Evidence of the witnesses
Mr Sullivan gave evidence for the defendants, along with the roofing contractor, Mr Rhys Murray, and the builder who ultimately completed the project at the Site in 2019, Mr Keith Perrett. Each of the defendants, Ms Elleway and Mr Kobus, also both gave evidence.
Mr Cobanov gave evidence on behalf of Ashell Homes. Expert evidence was given in relation to the quantum of the plaintiff’s claim by a quantity surveyor, Mr Arend de Waal.
Save as to specific matters mentioned below, I have broadly accepted the evidence given by each of the witnesses.
Matters said to constitute repudiatory breaches
The following matters were relied upon by the defendants as establishing that, taken in their totality, the conduct evinced an intention on the part of Ashell Homes to fulfil the Contract only in a manner substantially inconsistent with its contractual obligations, or only if and when it suited Ashell Homes to do so. What follows does not represent the totality of the matters relied upon by the defendants, but the matters I consider to be sufficient to dispose of the issue.
(a) Footings and slab not built in compliance with the plans
The first and perhaps the most significant conduct where it was alleged the plaintiff departed from the plans in the Contract concerned the footings and slab. A comparison exercise between the engineering plans in evidence, which formed part of the Contract, and what was constructed by Ashell Homes, demonstrated that there were substantial departures.
The engineering plans had a design of a raft slab on internal beams and a grid footing system. The engineering design required the slab and footings to be poured forming one part. The purpose of such a design was to tie the slab to the footings. One of the reasons that was done was because of the soil classification for the Site, which was described as ‘M’ class. It suffices to observe that different soil classifications have different reactivities and require different structural designs.
Mr Cobanov accepted that Ashell Homes did not build the footings and the slab in the manner described by the engineering plans. He used a brick structure for the footings and he did not pour the slab and footings so that they formed one part. His evidence was that “my trade is concrete and I’ve been doing it for 40 years”. He said, “I’ve done it a better way”.
He was asked whether he consulted the structural engineer who prepared the drawings before he undertook this aspect of the project his way. He said, “I attempted to talk to the engineers, but they weren’t responsive”. I take from that response that he did not in fact consult the engineer. Mr Cobanov then agreed that in the absence of speaking to the structural engineer, he did not stop the work.
Mr Cobanov’s evidence at this point was to the effect that he later consulted a different engineer from the one engaged by the defendants and whose design had been approved. That engineer was one with whom he had worked numerous times before. The engineer engaged by the plaintiff apparently signed off on reclassifying the soil, which then enabled the engineering plans to be amended to bring them into line with what had been done at the Site. How the soil was able to be reclassified, and whether that was appropriate, was not explained. There was certainly no suggestion that the earlier classification had been in error.
In any event, the evidence of Ms Elleway, who was the defendant more directly involved with the building works, was that neither she nor Mr Kobus knew at the time the work was undertaken that the slab and footings had been poured in a substantially different way from the engineering design that had been approved. I accept that evidence.
Mr Cobanov’s evidence was that “we were all on the same page”. It may have been that the defendants were in agreement that the plans had to be amended to bring them into conformity with what had occurred after the slab had been poured, but there is nothing to suggest that Mr Cobanov sought any consent to amend the plans from either the defendants, their engineer or the certifier before he decided to carry out the works according to what he perceived as a “better way”, rather than carrying out the works in accordance with what the Contract required.
(b) Footings not built according to the plans
Separately, there was a footings plan in evidence. It shows pad ‘F1’ footings through a large area of one of the units (the western unit). The evidence established that those footings were not installed at the time of the other footings, and further, that they have not been installed to date.
Mr Cobanov’s evidence in this regard was as follows:
[Counsel]: That’s an area where there was supposed to be pad footings on the plans, isn’t it?
[Cobanov]: Yes, that’s correct but again we eliminate those because the span of the laminated timbers don’t require any pad footings. So, it’s just pointless. And that’s why we changed the plans to accommodate.
Mr Cobanov was then asked who made the decision to delete all the pad footings. His evidence was that he made the decision. He went on to state:
…It was not necessary. If we did a span from wall to wall, what necessary do you have to have pad footings there for, for what reason? I didn’t – we put in a better product upstairs so you don’t have to do that sort of stuff. Where these plans – I could see was – it was more efficient by doing a clear span with a bigger heavier laminated timber, which was certified.
Later in his evidence, Mr Cobanov said that he did not have any plans for what he did when the work was undertaken. As I understood his evidence, he engaged an architect to prepare amended plans after the work had been undertaken. Accordingly, this is a second example of Mr Cobanov unilaterally amending the structural design of the project without architect or engineer involvement or the defendant’s approval before the work was carried out.
The evidence also established that on 10 August 2018, a Construction Audit was conducted by ACT Government building inspectors and an Inspection Report was produced, which found that the construction was not in accordance with the approved plans. The Inspection Report noted:
(a)a number of inconsistencies between plans in relation to the subfloor area beside the garage;
(b)that there was an additional suspended slab inconsistent with the engineer plans; and
(c)that the raft slab and footing were not consistent with the engineer plans.
Mr Cobanov’s evidence in this regard was as follows:
[Counsel]: So by 10 August, you had not submitted amended plans for the slab and the footings?
[Cobanov]: No, but my intention was always to submit them. It was all – it was already in the reports, in the certifications with the engineering and with ACTPLA. So it was always going to be something that had to be done, but could have been done any time during construction.
That answer appears to be completely at odds with the requirements of s 42(1)(d) of the Building Act and the terms of the Contract which incorporated such an obligation. Clearly the regulatory authority did not share Mr Cobanov’s view that the amended plans could have been submitted at any time during construction, as it issued a stop work notice.
(c) Excavation not in accordance with excavation plan
There was an excavation plan in evidence. It was self-evidently the plan for how the Site was to be excavated and where retaining walls were to be constructed. The excavation plan then fed into the drainage requirements. The evidence established that drainage was to be installed either prior to or shortly after the construction of the slab and footings.
It was put to Mr Cobanov that with regard to Unit 1, he excavated underneath the dwelling further than what the plans indicated (that is, he over-excavated). Mr Cobanov did not expressly concede that had occurred but answered “whatever the plans shows, that shows but when the ground is there, I follow the ground.”
He was taken to the area on the plans beneath the front door of Unit 1 and it was suggested to him that the wall in that location was designed to function as a retaining wall. Mr Cobanov denied that he had re-designed the plans in that area, but he also challenged the design itself twice, saying there was no need for it to be a retaining wall because in his view, the natural ground was no more than a metre and there was no pressure in that area.
Mr Cobanov was asked whether he consulted the architect at any time in relation to any discrepancy between what was depicted on the plan and the area on the Site. His evidence was that “there was no need to”.
It was clear from the photos that the work that was done by the plaintiff did not accord with what was depicted on the plans. The defendants submitted that the plaintiff caused a large and unapproved slab to be constructed, which rested on natural and unretained ground, without amendment or approval.
I have inferred from Mr Cobanov’s evidence that he knew the building works in that location did not accord with the plans, whether it was because of over excavating or simply that the natural ground level did not match what the plans indicated. Drawing together his evidence, he was not concerned about the works complying with the excavation levels and the retaining wall design in the plans or checking with the architects in the event of a discrepancy because he had formed the view that the retaining wall on the plan was unnecessary.
Elsewhere in Mr Cobanov’s evidence he was asked about excavating further north than what the excavation plan provided in respect of all of the walls on the eastern unit by about a metre and a half. He accepted that he did excavate in a manner that created a higher cut than what was provided for by the excavation plan. Part of his evidence in that regard was as follows:
How I do the construction is how I do my construction. I always do it like that. I do that for a reason; so that you don’t have any water issues.
It was then put to Mr Cobanov that if what he was doing was in discrepancy with the plans, he should consult the architect. His answer was that there was no discrepancy because that aspect was “outside of the building plan[s]”. I reject that evidence because, as Mr Sullivan’s evidence explained, the bulk excavation plan was part of the DA (Development Approval) drawing set. It was a requisite plan for approval. But even if I had accepted the evidence that for whatever technical reason, the bulk excavation plan was not part of “the building plans”, Mr Cobanov’s answer is further confirmation of the intention not to excavate according to the plan that had been supplied by the defendants.
Mr Cobanov also stated in relation to the excavation issue, “Amy [Ms Elleway] was aware of that. They saw that”. This comment is indicative of a repeated theme in the plaintiff’s case about the awareness of the defendants. I will return to this below.
The above evidence in relation to the excavation again makes it clear that Mr Cobanov not only knew that what was constructed was not in accordance with the approved plans, but that this was deliberate. He felt at liberty to construct how he had always constructed. He also did not perceive a need to consult the person who was responsible for overseeing variances from the plans because he did not consider that aspect of the work to be within the building plans.
(d) Unapproved cantilever
Mr Cobanov was taken in his evidence to a part of the construction where the footings and the lower wall were not laid to the length required to support the entire floor above. The result was that there was a cantilever where the upper floor overshot the walls below by approximately 70cm. On the plans, the wall marked “outline of level above” was not actually built under the wall on the upper floor.
Mr Cobanov agreed that a cantilever resulted from what was constructed. His evidence was that it was later drawn in the amended plans, from which I infer an implied acceptance that the cantilever that was constructed was not in the original plans that formed part of the Contract.
Mr Cobanov then gave this evidence:
…if Ms Elleway was really confused about it, she should have stopped the job there and then, instead of pushing me to keep going.
Again, the issue of the defendants’ awareness, and the fact that they did not terminate the Contract on various occasions after discovering that what had been built had departed from the original plan, is considered separately below.
(e) Failure to use materials required by the engineering plans
The next matter relied upon concerned the use of timber where steel was required on the approved plans. The Court was taken through the plans in particular detail, and it was demonstrated by reference to the photographs also in evidence, where the various steel beams were meant to be installed and where timber had been used instead. It is unnecessary to repeat the exercise in these reasons because Mr Cobanov agreed that many of the steel beams were not installed as part of the structure required to support the upper level.
His explanation was that he intended to “stitch” in the steel later. He said that the project had not got to the appropriate stage yet for that to occur. However, the evidence disclosed that the construction had reached the point where the plaintiff was building the upper floor at a time when there was only a timber member underneath instead of the steel required. Mr Cobanov’s response was “we can put the steel in anytime”.
The defendants submitted that this explanation was implausible and I agree, for two reasons. First, there is no reason why the plaintiff would incur the extra cost in materials and time and essentially do the work twice, installing timber members first, then constructing the upper floor before returning to install the steel in the lower floor, particularly when his evidence was that the steel was already on the Site. Second, the problem was identified by Mr Sullivan, who had previously visited the Site to conduct training in relation to using the Smart SIPS panels. He was later shown photographs of the progress and raised the non-compliance, returning to the Site during August 2018.
If it was the case that the proper construction of the project using the SIPS panels allowed for steel to be inserted at a later point in the build, then Mr Sullivan would not have been so concerned about what he observed as to raise it, but in any event, Mr Cobanov would have explained his position to Mr Sullivan when it was raised.
Instead, what occurred was that Mr Sullivan saw that there was steel missing from the construction and raised it with Mr Cobanov. Mr Cobanov then asked if there was an alternative. Mr Sullivan explained that there was no alternative and that it must be used where he had specified it in the design. Mr Cobanov then complied by inserting the requisite steel beams.
The more probable inference to draw from the evidence is what the defendants submitted, namely that the plaintiff had sought to avoid the cost of using the steel, without consulting either the defendants, Mr Sullivan or Nsient Consulting Engineers.
(f) Failure to install SIPS in accordance with approved design
The defendants have pointed to other examples where the work that was undertaken was defective in a significant way. One instance concerns the SIPS themselves, which were required to be constructed in a particular sequence (hence the training conducted by Mr Sullivan). That was important because the SIPS have channels for wooden members around all sides and need to be installed in a continuous row for support. The defendants argued that the SIPS were not installed pursuant to the prescribed method, were damaged in places, and had gaps that affected the insulating properties of the panels. I accept the photographs in evidence established that to be the case. However, in light of the other evidence discussed above, what would otherwise have been a material defect carries less significance. Although it evinces shoddy workmanship and a lack of care consistent with a lack of attention to complying with an approved plan or manufacturer’s method, the evidence on this point is not a defect or non-compliance where it can be said that the plaintiff deliberately engaged in conduct that was inconsistent with its contractual obligations.
(g) Payment claims made in substantial departure from the terms of the Contract
The terms of the Contract provided for instalment or progress payments on the completion of each stage as set out at [19] and [22] above. The evidence established that the plaintiff did not issue payment claims that accorded with the terms of the Contract at any time.
Ground Slab stage: The invoice for the Ground Slab stage was issued on 3 May 2018. The slab was only poured on 5 May 2018. However, the Ground Slab Stage required that the footings be poured, the stumps, piers or columns be complete, the internal and external drainage be complete, and the floor slab be poured.
Due to the deliberate choice to disregard the plans, the footings and slab had not been poured in accordance with the Contract. The drainage was also not complete. I find that the invoice for the stage was issued before the plaintiff was entitled to issue it. At the time the invoice was issued – and, having regard to Mr Cobanov’s evidence that he deliberately poured the slab and footings in what he considered to be a better way, rather than what was approved – the plaintiff knew that the work that had been done both did not comply with the Contract and was separately incomplete.
The defendants’ evidence was that the invoice was paid on 18 May 2018, at a time when the defendants were unaware there may be any issue with the slab not being installed in accordance with the approved plans.
First Floor stage: The First Floor stage required that the ground floor SIPS be installed and that the bearers and joists be complete. The invoice for this stage was issued on 2 July 2018. The photographs in evidence establish that as at 3 July 2018, work had only just commenced on the SIPS. By 9 July 2018, there were no bearers and joists and on 13 August 2018, the steel uprights discussed above had not been inserted. I accept that the invoice was issued before the plaintiff was entitled to issue it and that the plaintiff knew the First Floor Stage was not complete when it was issued on 2 July 2018.
Again, the defendants paid the invoice for the First Floor stage on 13 July 2018. On the chronology that has emerged from the evidence given, that was at a time before they knew about any issue with the steel beams not being inserted where it was required.
SIPS stage: In relation to the invoices for the SIPS stage, again, the plaintiff did not comply with its contractual obligations. First, the plaintiff split the stage into two progress payments. There was no lawful justification for doing so (that is, there were no circumstances justifying partial payment during a stage, such as those in special condition 15(e) of the special conditions above).
Second, the plaintiff had not completed the stage when either of the invoices were issued, on 27 July 2018 and 28 September 2018 respectively. That particular stage required the trusses to be complete. Although Mr Cobanov said he believed the trusses had been installed, Mr Cobanov gave evidence that there were no SIPS installed on the gables. His evidence was that he knew the SIPS had to be installed on the gables but he had no plans for those and was yet to discuss the matter with the defendants. He therefore formed the view that what he was supposed to install, had been installed.
I reject that aspect of Mr Cobanov’s evidence. The only person responsible for installing the SIPS under the Contract was the plaintiff. To the extent that the work was incomplete because Mr Cobanov was yet to discuss the installation of the SIPS in a particular area with the defendants, the fact remained that the work was incomplete and no entitlement to either invoice issued in respect of the SIPS stage had arisen. The photographs in evidence clearly demonstrated that the work required to be completed at the SIPS stage was not complete as at 22 December 2018 (when the relevant photographs were taken).
Requirement to pay roofing contractor before completion of Lock Up stage: Ms Elleway deposed to having a conversation on or around 20 October 2018 with Mr Cobanov. He rang her and told her he did not have sufficient funds to continue to progress the build and that she would need to pay him upfront if she wanted to progress on the build. Ms Elleway’s evidence is that she told Mr Cobanov, “that’s not OK”, and that he responded with words to the effect of, “it is what it is”.
The defendants decided to tell Mr Cobanov that they would pay suppliers direct for goods in order to progress, but that they would not pay Ashell homes with any progress payments ‘up front’. I accept that a conversation to the effect of that deposed occurred. The evidence is consistent with such a conversation occurring, and the defendants agreeing to paying suppliers direct up front. Mr Cobonov sent the roof trusses invoice to Ms Elleway via text message for her to pay on 22 October 2018. It was paid directly by the defendants.
In November 2018, Mr Cobanov told Ms Elleway that he was “having trouble getting hold of the roofer” (Mr Murray). Unbeknownst to the defendants, Mr Murray had communicated to Mr Cobanov that he would not attend the Site because he had not yet been paid for another job that he had completed for Mr Cobanov.
The defendants then also dealt directly with Mr Murray in order to secure his attendance at the Site in an attempt to have a roof installed by Christmas. Work commenced on the roof on 8 December 2018. While the roofing work was still being completed, Mr Murray emailed the defendants his invoice on 12 December 2018.
Lock Up stage: In that context, it must have been particularly galling for the defendants to receive the invoice for the Lock Up stage from the plaintiff on 12 December 2018, for $210,000. At the time the invoice was received, the evidence shows that the defendants had paid a total of $62,300 directly to the sub-contractors and suppliers for exterior cladding and roofing services. No deduction had been made for the amounts that the defendants had agreed to pay to contractors directly.
In relation to the timing of the invoice issued for the Lock Up Stage, Mr Cobanov’s evidence was that he issued it on 12 December 2018 “in anticipation of achieving lock up by Christmas”. That evidence confirms that the plaintiff knew two things: (a) it could only issue an instalment stage invoice when work for the stage was complete, and (b) it had not completed the work at the time the invoice was issued but anticipated that to be the case within a fortnight.
Mr Cobanov ultimately accepted (in the face of photos showing blue sky where a roof should have been), that at the time the invoice for the lock up stage was issued, lock up had not been achieved. The lock up stage also expressly included in it the requirement for the concrete baths to be installed at the Site. In a Pythonesque exchange with counsel, Mr Cobanov was cross-examined about the failure to install the bath, which was of a sunken design with a step into it. Mr Cobanov was shown a photograph of the bath that he claimed to have installed. It was sitting on the ground, with the side where there was a step into the bath next to a window, obviously facing the wrong way from that which would enable a person to step into the bath. There was no supporting frame and the bath was not connected to any plumbing. Accepting the general caution as to what inferences may be drawn from photographs, on no view could it be reasonably inferred that the bath had been installed, as opposed to simply resting on the ground in the general location of where it was to be located in the bathroom area of the dwelling. The exchange with counsel was as follows:
[Counsel]:Mr Cobanov, could you please turn to the court book and page 266? Do you have there a photo of the bath?
[Cobanov]: Yes.
[Counsel]: I recall your evidence yesterday was that at the time you left the site, the baths were installed?
[Cobanov] Yes.
[Counsel]: That is accurate as to a photo that was taken on 9 February 2019, isn't it?
[Cobanov]: Yes.
[Counsel]:To be installed, that bath needs wooden framing around the outside of it, doesn't it?
[Cobanov] Yes.
[Counsel]:It's not even orientated in the right position because the step should be on the outside of the bath to step into it, shouldn't it?
[Cobanov]: I can't say it has to go on the outside or inside because I didn't supply the bath.
[Counsel]: That bath is not installed as at the time you left the site, was it?
[Cobanov]: It is installed in its – where I believe it should have been.
[Counsel]: It's just sitting on the floor, isn't it?
[Cobanov]: No. We cut the floor out to install it.
[Counsel]:Your evidence is that that bath in that photograph is sitting in a cut-out in the floor?
[Cobanov]:That's correct. That's what I believe.
Overall, I accept the defendants’ submission that the repeated issuing of the instalment stage invoices when the particular stage was incomplete was further conduct demonstrating an intention to only comply with the terms of the Contract when it suited Ashell Homes to do so, and in this respect, it plainly did not suit the plaintiff to comply. Issuing one invoice a couple of days earlier than completion of a stage, where the payment terms of the invoice did not fall due until the stage was completed might permit an inference that there had been an inadvertent mistake in the interpretation of the terms of the Contract. However, issuing invoices for four key stages (totalling $472,500) when completion of each of those stages was not met, combined with Mr Cobanov’s communication to Ms Elleway as to his requirement to be paid “upfront”, is indicative of a knowing disregard of the requirements of the Contract. I find that the issuing of each of the invoices referred to above was done in knowing breach of Contract. In circumstances where the defendants had, as recently as October 2018, expressed to Mr Cobanov their adherence to the written obligation of completing a stage before payment was made, I find that the issue of the invoice for the Lock Up stage was done in deliberate breach of the Contract.
Conclusion with regard to repudiation
The plaintiff submitted that a number of the matters above cannot, either alone or together, be taken to constitute a repudiation, that the defendants were aware of many of the breaches but allowed the Contract to continue until 22 December 2018, and that where an issue was identified by or for the defendants, it was remedied.
If it is necessary to make such a finding, in my view, the intentional and significant departure from the footings and slab design without approval by a qualified structural engineer or consultation with the defendants was a breach that by itself evinced an intention sufficient to constitute repudiation as understood through the authorities to which reference has already been made. I would also have made the same finding in relation to the failure to use the materials required by the engineering plans and the issuing of the progress invoice for the Lock Up stage. However, it is not necessary to make any specific finding about a particular breach, because there is a separate finding below about the effect of the conduct taken as whole.
Before addressing the conduct in its entirety, I will deal with the submission that breaches were remedied when identified. The plaintiff relied on two examples. The first was the use of structural steel, where the plaintiff inserted the steel after the breach was pointed out. The second example concerned the slab defects discussed above, where the ‘rectification’ was not that the slab and footing defects were redone to comply with the plans, but that the plans were amended and ultimately approved after the non-compliances were discovered.
The logic of the argument seems to be either that the subsequent rectification or remedy indicates a lack of intention to depart from the Contract, or that there can be no finding of repudiation where the conduct that constitutes a breach had belatedly been rectified or ultimately, the plaintiff had achieved contractual compliance.
In my view, such a submission as to the inference to draw from the evidence in this case misses the point entirely. It was not for the plaintiff to undertake the building of the townhouses on the basis that Mr Cobanov was free to depart from the plans any time he thought it appropriate to do so, and if an issue were later identified, the plaintiff would rectify the departure if it was not too late to do so, or otherwise amend the plans to make them consistent with what had been built. What was required was that the plaintiff comply with the plans which formed part of the Contract.
Mr Cobanov was taken in his evidence to each of the matters where a departure had occurred and which have been referred to above. At no point in the evidence did Mr Cobanov say that any departure was inadvertent or mistaken, so as to give rise to an inference that he did in fact intend to comply with the terms of the Contract. That includes the issuing of invoices according to the obligation to complete the stage first, as set out in the Contract. Instead, what Mr Cobanov said was effectively that he knew what the Contract required, and he deliberately chose a different course for the various reasons set out above, such as a view that he knew a better way, or that he wanted to build according to how he had always built based on his experience, or because he thought issuing an invoice before the contractual entitlement to do so was justified because the stage was close to completion.
To use a simplistic contractual example, if a person contracts with a dressmaker at a bridal boutique to have a wedding dress made out of ivory silk, it is highly unlikely that the person making the dress would consider themselves at liberty under the contract to use calico and dye the dress purple, simply because the dressmaker had 40 years’ experience and they thought it looked better, or coincidentally it was cheaper to use calico instead of silk, or because that is the type of dress the dress maker at the store had always made in the past. Such conduct would be repudiatory because it manifested an intention to fundamentally depart from what had been ordered by the customer. The repudiation is not ameliorated by the dressmaker consulting the purchaser after the purple calico wedding dress had been made, so that time had marched on to the point where the purchaser had no choice but to work with the decision of the dressmaker and try to bring the dress into line with the original concept before an imminent wedding.
Scale that example up to the time and expense of constructing two houses, and the importance of the contractual obligation to build according to the plans (even though the builder knows a different or ‘better' way from 40 years’ experience), to seek approval where an alternative construction method or material was being considered, and to avoid amending plans on the fly by at the very least consulting the owner before the work was carried out, should be obvious.
The plaintiff argued that the defendants stored up their grievances, and that they should have invoked the notice of breach clause earlier to permit rectification. In evidence, Mr Cobanov made repeated references to the defendants being aware of what was going on due to regular visits to the Site and their involvement in amending the plans. Some examples of those comments have been set out above. The argument was pressed in closing submissions, where it was suggested that there was an obligation on the defendants to notify the plaintiff earlier about matters they viewed as being in breach of the Contract, instead of allowing the building project to continue.
That argument may be dealt with briefly. The complete answer to it is that election and/or waiver has not been pleaded.
Moreover, it need hardly be said that evidence that the defendants were aware after the event that the plaintiff had undertaken an aspect of the construction in a manner that resulted in a departure from the approved plans is not a substitute for consulting the defendants before the departure occurred in the first place.
The approach taken by the plaintiff deprived the defendants of any opportunity to consult with those who had the expertise to know whether Mr Cobanov’s desire to do the construction “how he had always done it” made any appreciable difference to the structure of the design or the plans that had been approved.
Assuming without deciding that at least Ms Elleway was aware of a non-compliance after the event, and that the defendants were involved in signing documents required to amend the plans on more than one occasion, that awareness and assistance in bringing about a compliant building on the Site did not excuse the plaintiff’s contractual obligation to build according to the plans in the first place.
John,
Further to the conversation we just had:
1.The scaffolding and the fencing forms part of the building contract and has been paid for consistently with the progress payments to which they relate.
2.You can have access to the building site to retrieve those items at the point where they are no longer required to complete the building as per your contractual obligation …
3.My current advice is that should be in about 1 [month’s] time. I will contact you and propose a mutually agreeable time for supervised access to the site.
…
7.I reiterate that you are not provided with any agreement or approval to enter the building site for any reason or any purpose and I will pursue my full legal rights and remedies …
The defendants confirm their exclusion of the plaintiff from the property
On 21 January 2019, the plaintiff ultimately sent a notice purporting to terminate the contract pursuant to clause 25.2.c of the contract. Its only relevance here, in light of the findings I have made above as to termination having occurred at an earlier date, is for the response it generated from the defendants.
Their email to Ashell Homes of the same date, confirms the following (emphasis added):
… If you want to enter the [Site] to claim property that you consider is rightfully yours, you either need my agreement, or a court order. As per my original correspondence, I made a good faith offer to engage with you and give you site access under agreed terms. That you did not engage with that offer speaks to an intent to act dishonestly, and not in accordance with due process and oversight from independent 3rd parties.
As per previous correspondence, you have no rights to enter the property.
…
I will not be responding further unless it is formal commencement of due process, or a request in writing from you to access the property to retrieve possessions not belonging to us or reasonably the building site for the duration of the build.
The emphasised words are to draw attention to two matters: first, a communication excluding the plaintiff from entering the location where its possessions were located, and second, the defendants’ view that the plaintiff’s property might “reasonably" belong to the Site until the project was finished. It discloses an intention to use property that they knew was part of the plaintiff’s “possessions”.
On 4 February 2019, Ashell Homes emailed the defendants to advise that Mr Cobanov would be collecting Ashell’s equipment from Saturday 9 February 2019 to Tuesday 12 February 2019. By that email, the plaintiff appears to have attempted to comply with the defendants’ requirement of a request in writing for access.
However, the defendants’ reply (the same day) added further conditions:
Please advise me the list of materials that [Mr Cobanov] intends to collect. It is important that we agree the list of materials, and include a work safety plan for the manner in which they will be collected, prior to me providing you with legal access to the property for that purpose.
Please also note, that once the list and manner of collection is agreed, I will only be able to provide you with supervised access to the site, and accordingly, that will have to be during week days, during business hours.
According to Mr Cobanov, it was not possible for Ashell Homes to meet these requests as they could not prepare a list of items from memory and the times on offer were so narrow as to be unrealistic (that is, the task could not be completed within the hours that were offered – it would take days). That was his evidence years after the event and ultimately a list or inventory was able to be reconstructed. Whatever the validity of the reason, at the time, he did not communicate the difficulties he perceived to the defendants. Perhaps if he had, what next occurred may have been avoided.
An altercation on Site – the defendants prevent the plaintiff from taking possession of its items
On 9 February 2019, Mr Cobanov attended the Site as he had foreshadowed, with a view to attempting to reclaim the plaintiff’s property. His evidence, which I accept, was that tools, equipment, and scaffolding were still on the Site. The largest part of the removal was going to be disassembling the scaffolding, which Mr Cobanov estimated would take several hours.
Ms Elleway was alerted to the presence of Mr Cobanov by the new building contractor, Mr Perrett, who had reportedly phoned her and said that Mr Cobanov was on site. Having received this information, Ms Elleway drove to the Site.
Upon her arrival, Ms Elleway directed Mr Cobanov to stop what he was doing and leave the Site. Ms Elleway recalls saying words to the following effect:
You are trespassing and you have to immediately remove yourself from my property.
Mr Cobanov said that he was there to remove his equipment and continued to disassemble the scaffolding. Ms Elleway said that if he did not stop and leave, she would call the police. Mr Cobanov continued. Shortly afterwards, the police arrived on Site and, after conversing with Ms Elleway, reportedly advised Mr Cobanov to leave for a little while, “to keep the peace”, before returning to finish collecting his equipment. Mr Cobanov and Ms Elleway then left the Site.
A short time later, Mr Cobanov returned to Site to continue collecting his goods. Ms Elleway was informed of this by one of the neighbours who telephoned her and said the builder was back. Ms Elleway called the police again who advised that they would not be returning to Site.
Following this, Ms Elleway called WorkSafe ACT and asked them to attend the site and provide advice on safety obligations. A WorkSafe ACT officer attended, inspected the Site, and spoke to both Ms Elleway and Mr Cobanov separately. The officer advised Mr Cobanov that he needed to leave the Site due to the perimeter fence being partially deconstructed and thus no longer safe. At this point Mr Cobanov abandoned his attempt to collect his equipment and left the Site. A copy of the officer’s ‘Non-Disturbance Notice’ records that all work was to cease on site and a surrounding exclusion zone be maintained until 12 February 2019.
On the 10 February 2019, Mr Cobanov returned to the site and took some photos and video footage. He did not at that time collect any of his tools, but he did dismantle and remove some of his scaffolding.
Ms Elleway takes legal action to prevent the plaintiff from accessing the Site for any purpose
On Monday 11 February 2019, Ms Elleway sought and, by the following day had obtained, an interim personal protection order which prohibited Mr Cobanov from coming onto the Site for any purpose and from contacting Ms Elleway except through a legal practitioner, at a court or tribunal proceeding, or at a counselling or mediation session arranged with her consent.
The matter came before the Registrar in the Magistrates Court on 15 April 2019 for a preliminary conference where the interim orders were remade until the final hearing. Rightly or wrongly, there was no exception made in the orders facilitating Mr Cobanov being able to access the Site to retrieve the plaintiff’s tools and equipment. Ms Elleway’s view, expressed in an email to solicitors for the plaintiff on 10 July 2019, was that this was because the plaintiff was “unable to enumerate a list and given that [Mr Cobanobv] had already accessed the site on numerous occasions it seemed disingenuous to the Registrar that any such tools were likely to still be on the site.”
Subsequently Ms Elleway did not appear at the final hearing of the matter in July 2019, and the personal protection order was not extended.
The defendants partially use the plaintiff’s property
On 7 January 2019, the new builder, Mr Perrett of Envision Living, took over the project. The plaintiff’s scaffolding was clearly in use on the Site at that time. According to Mr Perrett, in late January 2019, the new scaffolding subcontractor, MPR Scaffolding, inspected the scaffolding on site and added some further components to render it more compliant. The scaffolding remained in use on site until completion of the work requiring it. MPR Scaffolding then dismantled and stacked the scaffold, separating the “original equipment” and the “extra equipment”, before removing and storing all of it at a suppliers’ yard.
This account from Mr Perrett broadly corresponds with the statement made by the director of MPR Scaffolding, Mr Petar Josifoski, dated 21 September 2020. He explained that MPR Scaffolding assessed and then rectified the scaffolding on the Site over the period late January and early February 2019. Reference was made to work undertaken on 15 February 2019 where MPR Scaffolding “rebuilt the scaffold that had been dismantled”. This is also consistent with Mr Cobanov’s evidence that he had been disassembling sections of the scaffolding on 9 and 10 February 2019.
On 8 March 2019, the plaintiff issued to the defendants a notice of debt due and payable which included amounts for the removal of scaffolding and tools and the cost for scaffolding hire.
On 1 April 2019, the “right hand side of the job” was dismantled, according to the letter in evidence from MPR Scaffolding. The remainder of the scaffolding was dismantled on 11 April 2019. All materials were then removed from the Site and stored in a yard in Fyshwick.
Ms Elleway’s evidence was that she asked Mr Perrett to advise Mr Cobanov where his scaffolding was. The time frame regarding that instruction is unclear except that it was made after the dismantling and removal of the scaffolding from site. I have pieced that evidence together with the statement of the director of MPR Scaffolding, who said that he received a phone call from someone six to eight months later, regarding the scaffolding that was taken from Site. The director advised this person that they could collect their gear from a yard in Fyshwick but that they would need to pay storage and transport fees first.
On 19 July 2019, an amended notice of debt due and payable was issued by the plaintiff. It included invoices 50 and 51, which quantified and itemised the cost for the unreturned scaffolding (by way of allocating a hire cost for the scaffolding per week) and the cost for the unreturned tools. It is probable that the receipt of the invoice on 19 July 2019 prompted Ms Elleway to request Mr Perrett to tell Mr Cobanov where the scaffolding was.
None of the items referred to in the invoices have been returned.
Do the facts constitute conversion here?
Recalling the elements necessary to constitute conversion, the facts as set out above establish:
(a)That the plaintiff had an immediate right to its property, but it did not have an immediate right to access the land where it was located (being the Site).
(b)That the defendants excluded the plaintiff from the Site. Such conduct was deliberate and was inconsistent with the plaintiff taking possession of its property or having use of it.
(c)That the plaintiff made a request to retrieve its property, from at least 4 February 2019.
(d)That the defendants not only initially placed conditions that had to be met before they would accede to the plaintiff’s request (such as the creation of a list and the presence of third parties) but ultimately obtained a court order which had the effect of preventing the plaintiff from taking possession of its property at the Site for at least a number of months.
(e)During that time the defendants continued to use at least part of the plaintiff’s property, before permitting it to be removed to a location where the plaintiff would then have to pay money to retrieve it. That was clearly conduct by the defendants exercising dominion over the plaintiff’s property.
Calling the police and then WorkSafe ACT on 9 February 2019 so as to have Mr Cobanov removed or barred from the Site, and the retrieval of the plaintiff’s property halted, can aptly be characterised as using, “such force or contrivance as to interfere entirely with the dominion of the true owner”: England v Cowley at 128. As the plaintiff submitted, the defendants’ conduct on 9 February 2019 crystallised the conversion. Up until that point, the property on the Site could perhaps be characterised as being merely detained or handled (to use the language of Palermo Seafoods at [111]) by the defendants but without the requisite interference with the goods. Whilst the defendants had communicated a belief that the scaffolding and fencing should remain on Site until finished with, they arguably had not taken any positive steps to actually exclude the plaintiff from the Site before 9 February 2019.
However, once Mr Cobanov made it clear that he would be collecting the property and Ms Elleway took positive steps to obstruct that from happening, the defendants were intending to deprive the plaintiff of dominion over its property, by excluding it from possession and use. Applying Joule v Poole at 390, that amounts to the requisite interference with the plaintiff’s ownership.
To the extent that the defendants argued the plaintiff had an opportunity to recover its belongings on 9 and 10 February 2019, I disagree. The situation is analogous to that which existed in Palermo Seafoods (at [132]), in that the plaintiff was entitled to be able to calmly sort through what was at the Site to retrieve and remove the entirety of that which it owned. The plaintiff had indicated it would take from 9-12 February for that to occur.
Even if an opportunity were given, it would have been insufficient, because on 11 February 2019 when the interim protection order was sought and granted, the plaintiff’s property undoubtedly remained at the Site. The plaintiff was still entitled to possession and use of its property after whatever conditional short window of opportunity provided by the defendants had expired.
Ms Elleway says she knew that the property ultimately belonged to the plaintiff and did not intend for the property to never be returned (as evidenced by her initial offer to arrange a time to attend Site). It is important to distinguish between doing something deliberately and desiring the end result. The intention with which conversion is concerned is directed to the former; it does not matter that Ms Elleway did not have a specific intent to deprive the plaintiff of their rights in respect of the property: Palermo Seafoods at [108]. Even though Ms Elleway did not dispute that the plaintiff was the true owner, her conduct was deliberate, and from 9 February 2019, it constituted a complete interference with the plaintiff’s right to possession: see Caxton v Sutherland at 202.
The defendants were also mistaken in believing that it was permissible for them to retain the plaintiff’s scaffolding on Site, even if its removal from Site caused a safety issue. To the extent that the defendants had any right to the use of the scaffolding while the plaintiff was undertaking work on Site, that right was a contractual one, and it ceased upon the ending of the Contract. The continued use of another’s goods is a clear act of dominion inconsistent with the owner’s title: Palermo at [129], as is unjustifiable detention of goods after demand is made for their return: Pratten at [60]-]61]. That is precisely what occurred here. If the consequence for the defendants was that upon removal of the plaintiff’s scaffolding, the Site would not be safe, that was an issue for the subsequent builder to immediately rectify, either by hiring or providing its own scaffolding. The safety concern the defendants had about the Site if the plaintiff’s scaffolding were removed did not provide any justification for them to retain and use the plaintiff’s property until mid-April 2019 and then to remove it from Site and leave it to the plaintiff to trace and recover the property at its own expense. Ultimately, the defendants failed to deliver to the plaintiff that which they had possessed and used.
Accordingly, while I accept that the defendants may not have meant to permanently deprive the plaintiff of its property, they have misunderstood the effect of their conduct while the project was being completed. The elements of conversion are plainly met.
The plaintiff claimed the cost of replacing the tools, equipment, and scaffolding, and the interest that has accrued.
The evidence supporting the claim for scaffolding was two invoices, where the plaintiff has charged the defendants a weekly scaffold hire fee of $418 and a dismantling fee. Part of the explanation was that the plaintiff lost the benefit of using the scaffolding on other sites and would have had to hire it. There is a detailed discussion of whether to approach the question of damages on a compensatory or restitutionary basis in Bunnings v CHEP at [178]-[186] per Allsop P and [194]-[205] per Giles JA (Macfarlan JA agreeing with Allsop P). It suffices to record here that I consider it appropriate to allow the hiring fee, applying the authority of Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246, as considered in detail in Bunnings v CHEP and applied at [182] and [199].
As there was no real challenge to the amounts claimed or the foundation for those amounts, I have accepted what was claimed as the measure of the loss, namely:
(a) Tools and equipment: $36,785.09
(b) Scaffolding: $10,836.57
Interest and Costs
The matter has proceeded on the basis that any monies payable between the plaintiff and defendants would be set off. Accordingly, the damages payable on the conversion claim ($47,621.66) may be set-off against the damages payable on the counter-claim ($72,711.01). Following set-off, that results in a sum of $25,089.35 in favour of the defendants.
The Court has a discretion as to the point at which interest ought to accrue. The plaintiff claimed interest on the $47,621.66 sum from 9 February 2019, when he attended the Site and dismantled part of the scaffolding. The plaintiff would have been entitled to pre-judgment interest as an integral element of the compensation: Haines v Bendall [1991] HCA 15; 172 CLR 60 at 66. Here, the conduct and demands were somewhat buried under the contractual dispute. Although there was also some indication that the plaintiff sought damages for the tools, equipment and scaffolding prior to filing the statement of claim in July 2019, the filing of the statement of claim on 18 May 2020 was the first time it was made clear to the defendants that there was a separate conversion claim against them.
Further, the defendants would also have been entitled to interest on the damages arising from the repudiation which was accepted, with those damages accruing from 9 February 2019, if not earlier.
What I have considered to be the fairest approach to the parties in terms of interest, is to calculate interest upon the $25,089.35 sum that results from the set-off of each claim, at the rates set out in Schedule 2 to the Court Procedures Rules 2006 (ACT), from the date that proceedings were commenced, being 18 May 2020.
I will hear the parties on costs as there may be matters outside the knowledge of the Court which are relevant to this question, and in light of the result, considerations arise as to whether the matter may have been more properly heard in the Magistrates Court.
Conclusion and Orders
Finally, pending the resolution of this dispute and by consent of the defendants, the plaintiff has, since 6 December 2019, registered caveat no. 3032521 over a different property in Chifley. It is appropriate that such caveat now be removed as there is no longer a legal or equitable interest supporting it.
The parties are directed to bring in short minutes of order within 14 days to give effect to these reasons, including:
(1) The entry of judgment for the defendants in the sum of $25,089.35 plus interest at the rates set out in Schedule 2 to the Court Procedures Rules 2006 (ACT);
(2) The removal of Caveat no. 3032521 pursuant to s 107(2)(b) of the Land Titles Act 1925 (ACT); and
(3) Any orders for costs, and in the event of disagreement, the proposed timetable for resolving the question of costs, either on the papers or by way of further oral hearing.
| I certify that the preceding two hundred and eight [208] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Kristen Cummings Date: 22 November 2022 |
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Amendments
| 21 December 2022 | Replace “]61]” with “[61]” | Paragraphs: [197] |
| 21 December 2022 | Replace “303251” with “3032521” | Paragraphs: [208] ‘Decision’ section of cover page |
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