Brendan Jay McAllery and Tracy Catherine McAllery v Alta Building and Developments Pty Ltd

[2014] NSWCATCD 106

Civil and Administrative Tribunal

New South Wales

Case Title:

Brendan Jay McAllery and Tracy Catherine McAllery v Alta Building & Developments Pty Ltd

Medium Neutral Citation:

[2014] NSWCATCD 106

Hearing Date(s):

28, 29 and 30 August and 18 December 2013

Decision Date:

24 June 2014

Before:

D Goldstein, Senior Member

Decision:

1.For the reasons provided, Alta Building & Developments Pty Ltd must pay the sum of $131,825.31 to Brendan Jay McAllery and Tracy Catherine McAllery within 21 days of the orders made in these proceedings.
2.The parties are at liberty to make a costs application.

3.Any costs application must be lodged in the Tribunal and served on the costs respondent within 21 days of the date of this order either attaching or referring to the documents relied upon in support of the application.

4.The costs respondent will have 21 days after the date it receives the application referred to above, to lodge in the Tribunal and serve on the costs applicant its submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.

5.The cost applicant will have 14 days after the date it receives the cost respondent’s submissions to lodge in the Tribunal and serve on the costs respondent its submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.

6.The Tribunal will determine any costs application on the basis of the submissions and attached documents lodged in the Tribunal.

Legislation Cited:

Consumer, Trader and Tenancy Tribunal Act 2001,
Consumer, Trader and Tenancy Tribunal Regulation 2009,
Home Building Act 1989,
Fair Trading Act 1998

Cases Cited:

BAE Systems Australia Ltd v Cubic Defence New Zealand Ltd HYPERLINK " [2011] FCA 1434,
CH Real Estate Pty Ltd v Jainran Pty Ltd, Boyana Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37,
Doepel & Associates Architects Pty Ltd v Hodgkinson [2008] WASCA 262,
Hart v Macdonald (1910) 10 CLR 417, Houghton v Arms 225 CLR,
Insight Oceania Pty Ltd v Philips Electronics Australia Pty Ltd [2008] NSWSC 710, Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705,
Onesteel Manufacturing Pty Ltd v United KG Pty Ltd [2006] SASC 119,
Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157

Category:

Principal judgment

Parties:

Brendan Jay McAllery and Tracy Catherine McAllery (applicants)
Alta Building & Developments Pty Ltd (respondents)

Representation

- Counsel:

Mr J Clifton for the applicants

- Solicitors:

Rexstraw Lawyers, solicitors for the applicants.

File Number(s):

HB 11/4507

Publication Restriction:

Unrestricted

REASONS FOR DECISION

1. This application is the cross application to HB 10/38289.

2. In these reasons for decision I will refer to the applicants as the owners and to the respondent as the builder.

3. This application is brought pursuant to the Home Building Act 1989. There is no dispute about my jurisdiction under the Act to hear these proceedings and to determine the owners claim.

4. The owners were represented by counsel at the hearing. The builder was represented by its director, Mr Sheppard. At the conclusion of the hearing the owners' counsel handed up written submissions and made oral submissions generally and to deal with issues not covered in the written submissions. The builder through Mr Sheppard made oral and written submissions.

5. The owners' case against the builder commenced in February of 2011.

6. These proceedings arise out of an undated Cost Plus (Residential) building contract in a form prepared by the Master Builders Association (the 'contract') entered into by the parties. The work to be carried out by the builder was described as 'New Gymnasium and Artists Studio'. The estimated cost of works pursuant to clause 30 of the contract was $297,819.50. The cost of the works far exceeded $297,819.50. It is this fact which is the issue which has caused the disputes between the parties the subject of these proceedings.

7. The owners' case against the respondent was amended on 7 April 2011 and further amended on 2 August 2011. On 30 June 2011 the builder filed a defence to the amended points of Cross Claim dated 7 April 2011. On 5 June 2012 a Second Further Amended Points of Cross Claim was filed in the tribunal on behalf of the owners.

Mr Sheppard as a party to the proceedings

1. The Second Further Amended Points of Cross Claim introduced a number of changes to the owners' case against the builder. Importantly, it purported to join Tobias Sheppard as the second respondent to this cross application. No formal order was ever made to name Mr Tobias Sheppard as a party to these proceedings. Nor was any application made before me to name Mr Tobias Sheppard as a party to these proceedings.

2. Having reviewed the file relating to HB 10/38289, I note that on 22 August 2011 Mr Sheppard of the builder notified the Tribunal that from that date all correspondence was to be sent to the builder and not to the solicitors that had been representing the builder up to that point.

3. There are two possible sources of power for the Tribunal to join a party. The first is section 26(4) of the Consumer, Trader and Tenancy Tribunal Act 2001. The second is section 32 of the Consumer, Trader and Tenancy Tribunal Act 2001. Regulation 26 of the Consumer, Trader and Tenancy Tribunal Regulation 2009 states that:

   "For the purposes of section 26 (1) of the Act, the classes of proceedings that are prescribed are those in the Residential Parks Division, Retirement Villages Division, Strata and Community Schemes Division, Tenancy Division and Social Housing Division in respect of which 2 or more persons have joint liability."

4. Given that these proceedings were commenced in the Home Building Division of the Tribunal, it is clear that the Tribunal has no power to order a joinder of Mr Sheppard under section 26(4) of the Consumer, Trader andTenancy Tribunal Act 2001 which sub-section provides the Tribunal with power to join parties 'in proceedings to which this section applies' (emphasis added).

5. The power of the Tribunal to name Mr Sheppard as a party to these proceedings is in my view contained in section 32 of the Consumer, Traderand Tenancy Tribunal Act 2001 which states that:

   '(1) The Tribunal may, in any proceedings, make any amendments to any document (for example, an application) filed in connection with the proceedings that the Tribunal considers to be necessary in the interests of justice.
   (2) Any such amendment may be made:
   (a) at any stage of the proceedings, and
   (b) on such terms as the Tribunal thinks fit,

   but may only be made after notifying the party to whom the amendment relates.'

6. So far as I am aware, no order has been made to amend this application to name Mr Sheppard as a respondent in these proceedings and Mr Sheppard has not been notified that the owners case has been amended to include a case against him to the effect that he would be personally liable to pay the owners the sum of $182,391.07 if they were successful in their case against him.

7. In proceedings where a party has the benefit of legal representation, as the owners do in this case, in my view it is incumbent on them to make a formal application to name an additional party and to obtain an order from the Tribunal, if they wish to add a party and seek relief against that party. The owners have not taken that step against Mr Sheppard. Merely naming him as a cross respondent in an amended pleading does not operate as an amendment of an application by the addition of a second respondent. I note that on 29 February 2012 the Tribunal granted leave to the owners to file and serve amended points of claim. No order was made granting leave to amend the application to name Mr Sheppard, or any party, as a second respondent.

8. However, the proceedings continued on as from 5 June 2012 with the owners' case in application HB 11/04507 being run on the basis of the Second Further Amended Points of Cross Claim. At that point in time, neither the builder nor Mr Sheppard had the benefit of legal representation.

9. Given the fact that the parties have proceeded on the basis of the owners' Second Further Amended Points of Cross Claim since June 2012 which pleads a case against Mr Sheppard, reluctantly I am of the view that I should proceed to consider that case against Mr Sheppard, rather than dismiss it on the basis of the owners' failure to obtain an order to amend the application to name Mr Sheppard as the second respondent.

The owners' claim in this application

1. The owners' Second Further Amended Points of Cross Claim is the basis for my description of the owners' claim. There are a number of claims made against the builder and Mr Sheppard. However the claim for relief at paragraph 20 of the Second Further Amended Points of Cross Claim does not address each head of claim pleaded.

2. The owners' pleaded claim against Mr Sheppard is for misleading and deceptive conduct with respect to future matters and for misleading and deceptive conduct, both of these claims being under the Fair Trading Act 1998.

3. The owners also claim against the builder and Mr Sheppard for misleading and deceptive conduct under the Commonwealth Trade Practices Act.

4. The owners claim that there was a variation of the contract on 25 August 2009. The claim for relief at paragraph 20 of the Second Further Amended Points of Cross Claim does not address this head of claim although paragraph 8D claims the sum of $3,222.00 in connection with this matter.

5. The owners also claim that the builder repudiated the contract, or alternatively that the 'contract ended' when the works reached practical completion on or before 21 December 2009. Damages are not claimed in connection with these issues as the claim for relief at paragraph 20 of the Second Further Amended Points of Cross Claim does not address this head of claim

6. The owners have also pleaded a defective works claim against the builder in the sum of $78,612.00.

7. The owners also allege that in breach of implied terms the builder has charged the owners $135,744.28 in excess of what is 'reasonable and proper' in relation to variations. The owners' claim for this amount in paragraph 8G.

8. The owners also allege that the respondent has charged the owners $145,281.00 in excess of what is 'reasonable and proper' in relation to other work identified in paragraph 8H of the Second Further Amended Points of Cross Claim.

9. In paragraph 20 of the Second Further Amended Points of Cross Claim the owners claimed damages against both cross respondents on what was described as the 'First basis' or in the alternative on the 'Second basis'. The First basis sought an order for damages against the second cross respondent in the sum of $182,391.07 pursuant to the Fair Trading Act or alternatively the Trade Practices Act and an order for damages against the builder for defective work in the sum of $78,612.00.

10. The Second basis referred to in paragraph 20 of the Second Further Amended Points of Cross Claim is to claim $145, 281.00 against the builder in respect of costs which were allegedly not reasonable and proper and further claims against the builder in the sum of $78,612.00 in respect of costs for defective work. A total of $223,893.00 is claimed under the second basis.

The owners' Trade Practices Claim

1. Insofar as the owners at paragraphs 3W to 3Z of the Second Further Amended Points of Cross Claim plead a claim based on the Trade Practices Act, the Tribunal does not have jurisdiction to entertain claims under the Trade Practices Act. The owners' submissions do not address this issue.

2. The owners' case under the Trade Practices Act is therefore dismissed on the basis that the Tribunal does not have the jurisdiction to entertain it.

The role of Mr Sheppard

1. It seems to me that the first issue that I should consider is the case against Mr Sheppard under the Fair Trading Act and the role in which he was acting in the negotiations for the contract with the owners. The case against Mr Sheppard is based on sections 41 and 42 of the Fair Trading Act 1998 (as amended).

2. Mr Sheppard is a director of the builder. He had previously had contact with the owners when a business or company called Mr Benchtops controlled by him carried out work for the owners. Mr Sheppard's evidence is not particularly clear about whether the builder or Mr Benchtops or both of them previously contracted with the owners. In the course of the hearing Mr Sheppard indicated that the builder carried on a business under the name of Mr Benchtops. Mr McAllery stated that his wife suggested to him that they ask Mr Toby Sheppard from Mr Benchtops to provide a quote for their proposed new work which is the subject of these proceedings.

3. In any event the evidence of both the owners and Mr Sheppard is that in or about March 2007 Mrs McAllery contacted Mr Sheppard and requested him to prepare an estimate for work at their residence situate at 4 Emperor Place Kenthurst (the 'residence'). The work under consideration was a new sauna, gymnasium, home artist's studio and a covered pergola. Mr Sheppard's evidence was that he prepared an estimate which was sent to Mrs McAllery by an email dated 22 February 2012 which is annexed to her statement.

4. The annexures to Mrs McAllery's statement show that she and Mr Sheppard were in email contact with each other regarding the works as from October 2007. It is notable that Mr Sheppard's emails were from Mr Benchtops and naturally Mrs McAllery's emails to Mr Sheppard were to Mr Sheppard personally, but at the email address of Mr Benchtops.

5. At paragraph 17 of their written submissions the owners submit that they have made out a case against Mr Sheppard or the builder. The owners do not explain in their submissions precisely how an entitlement has been made out against Mr Sheppard personally.

The basis for proceeding against Mr Sheppard

1. The owners misleading and deceptive conduct case against the second respondent is made under sections 41 and 42 of the Fair Trading Act 1987 which were in force at the time of the representations relied upon.

2. The basis of the owners' Fair Trading Act claims against the second respondent is the document prepared by him and sent by an email dated 22 February 2008 to Mrs McAllery. This document was described as a spreadsheet costing. The second respondent provided this costing in response to a request from Mrs McAllery to 'prepare an estimate for the cost of constructing a new sauna, gymnasium, home artist's studio and covered pergola'

3. The spreadsheet costing was a detailed document made up of 133 items each of which was costed. The total of all items was $297,819.50. GST was not included. There was no mention of profit or overhead.

4. It is alleged by the owners that in providing the spreadsheet costing the second respondent expressed an opinion that if he or an entity controlled by him was contracted to perform the works the total cost to the owners would be $297,819.50. It is further alleged that the second respondent did not have a reasonable basis for holding this opinion or had not used a reasonable degree of skill and care as an experienced builder in forming that opinion. In those circumstances it is alleged that the second respondent's expression of the opinion was misleading and deceptive in contravention of 42 of the Fair Trading Act.

5. Alternatively it is stated that the same facts as referred to amounted to a representation as to a future matter within the meaning of section 41 of the Fair Trading Act.

6. The owners make a case against the second respondent personally, despite the fact that at the relevant time he was acting as a director of the builder, or as a director or owner of Mr Benchtops.

7. The High Court decision in Houghton v Arms 225 CLR at 553 is ample authority that such a course is permitted. In Houghton v Arms the High Court held in connection with section 9(1) of the Fair Trading Act 1999 (Vic) that employees were personally liable under section 9 of the Fair Trading Act notwithstanding that they had been acting in the trade and commerce of the corporation and not themselves.

8. The case of CH Real Estate Pty Ltd v Jainran Pty Ltd, Boyana Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37, at paragraphs 102 - 105, is to the same effect in connection with section 42 of the Fair Trading Act (NSW).

9. On the basis of the authorities referred to in the previous paragraphs, I find that the owners are entitled to mount a case against Mr Sheppard personally despite the fact that at the relevant time he was proceeding as either a director or owner of Mr Benchtops, or as a director of the builder.

Misleading and Deceptive conduct

1. The spreadsheet costing did not appear out of a vacuum. As at 22 February 2008 the owners had provided the builder with Plan G which consisted of 12 sheets, all of which were dated August 2007. Mrs McAllery provides this evidence in paragraph 19 of her statement. Mr Sheppard is not specific in his evidence about the plans he had when he prepared the spreadsheet costing. I accept Mrs McAllery's evidence that she provided Mr Sheppard with the Plan G set of plans consisting of 12 sheets, as annexed to her statement.

2. I find on the evidence before the Tribunal that the builder's spreadsheet costing was based on Plan G consisting of 12 sheets.

3. The owners allege that the spreadsheet costing was a representation. I do not doubt that. The owners allege that the second respondent expressed an opinion that if he or an entity controlled by him was contracted to perform the 'works' the total cost to the owners would be $297,819.50 (Emphasis added). The works are defined in the owners Second Further Amended Points of Cross Claim as 'new gymnasium and artists studio (including ancillary works)'.

4. The parties have not referred me to any authorities that deal with the issue of a case based on a cost estimate said to be misleading and deceptive in contravention of section 41 or 42 of the Fair Trading Act, or the equivalent of those provisions. As mentioned above as from 22 August 2011 the builder proceeded without legal representation. With respect to the builder and Mr Sheppard, I doubt whether they had the capability to consider the law relating to section 41 or 42 of the Fair Trading Act or cases based on an estimate of construction costs. In considering the issues that arise in these proceedings, I have had regard to the case of Doepel & Associates Architects Pty Ltd v Hodgkinson [2008] WASCA 262 which concerns a budget given by an architect to his client for the construction of a residence.

5. At paragraph 99 of her judgement McLure JA stated:

   'The first step is to identify what the trial judge decided as to the content of the representation. The terms of a representation must be clearly and unambiguously identified. If that is not done, it is well nigh impossible to make any sensible judgment as to whether the representation is false, misleading or deceptive or whether the representator had reasonable grounds for making it.'

6. Insofar as McLure JA states that 'The terms of a representation must be clearly and unambiguously identified', I have difficulty in reaching a similar view of the opinion or representation arising out of the spreadsheet costing as that contended for by the owners, as described in paragraph 45 of these reasons. It is desirable that if I find that the second respondent made a representation relied upon by the owners, that representation be identified as precisely as possible.

7. Given my finding that that Mr Sheppard's spreadsheet costing was based on Plan G consisting of 12 sheets, I find that the representation by him to the owners on 22 February 2008 was that if he or an entity controlled by him was contracted to perform the work shown or depicted on Plan G (consisting of 12 sheets), the cost to the owners would be $297,819.50, exclusive of GST.

1. Contrary to the owners' characterization of the builder's opinion or representation, I find that Mr Sheppard's spreadsheet costing was not an opinion or representation that if he or an entity controlled by him was contracted to perform the 'works' the total cost to the owners would be $297,819.50. The manner in which the owners' have characterized this representation has an open ended quality to it. Namely, that the cost of $297,819.50 would be the total or final cost of the works without consideration of any changes or other matters that might affect the works. An opinion or representation that has that effect leads to the conclusion that Mr Sheppard or an entity controlled by him would take the risk of holding that cost, whatever occurred, so long as the finished work retained the character of a new gymnasium and artist's studio (including ancillary works). This is in my view quite unrealistic.

2. In my view the nature of the representation made by Mr Sheppard in his spreadsheet costing as referred to above was in the nature of a representation regarding a future matter. Section 41 of the Fair Trading Act 1987 as it was on 22 February 2008 therefore applies. That section states:

   '(1) For the purposes of this Part, where a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
   (2) The onus of establishing that a person had reasonable grounds for making a representation referred to in subsection (1) is on the person.
   (3) Subsection (1) shall not be taken to limit by implication the meaning of a reference in this Part to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.'

3. Pursuant to section 41(2) the onus was therefore on Mr Sheppard to establish that he had reasonable grounds for making the representation that I have found arose out of his spreadsheet costing.

4. Mr Sheppard's first statement does not deal with this issue 'head on' most probably because it was prepared before the filing of the Second Further Amended Points of Cross Claim. Neither does Mr Sheppard's second statement. In any event Mr Sheppard's evidence is that he prepared the spreadsheet costing on the basis of the drawings that he had at the time. He states at paragraph 25 of his first statement that he had a conversation with Mrs McAllery about this. Mrs McAllery does not deny this conversation in her statement. Importantly as regards this conversation, Mr Shepard's evidence is that he stated to Mrs McAllery that the plans which I have found were Plan G consisting of 12 sheets, didn't have enough detail and that it would be very difficult for him to provide 'an accurate estimate for the costs of construction with any degree of certainty as to the final cost'.

5. In paragraph 26 of his first statement Mr Sheppard states that he prepared the spreadsheet costing based on 'the information I had to hand'. I accept Mr Sheppard's un-contradicted evidence in this regard.

6. On the basis of Mr Sheppard's evidence that he was of the view that the plans, which I have found were the Plan G set consisting of 12 sheets, didn't have enough detail, that he told Mrs McAllery of this and that he prepared the spreadsheet costing on the basis of the information that he had, I am of the view that he has established that he had reasonable grounds for making the representation which is constituted by his preparation of the spreadsheet costing. To put it another way he prepared the spreadsheet costing on the basis of the design information that he had been given, which he considered to be incomplete, as disclosed to the owners.

7. I have also considered the owners' case under section 42 of the Fair Trading Act 1987 which states that:

   '(1) A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
   (2) Nothing in this Part shall be taken as limiting by implication the generality of subsection (1).'

8. In considering the owners' case under this section of the Fair Trading Act, it is relevant to keep in mind the fact that as I have found Mr Sheppard's spreadsheet costing was not an opinion or representation that if he or an entity controlled by him was contracted to perform the 'works' the total cost to the owners would be $297,819.50. As stated the effect of such a representation would have been that Mr Sheppard or an entity controlled by him would take the risk of holding that cost, whatever occurred, so long as the finished work retained the character of a new gymnasium and artist's studio (including ancillary works).

9. I have found that the conduct of Mr Sheppard was to provide a spreadsheet costing which was limited to a GST exclusive cost of $297,819.50 to perform the work shown or depicted on Plan G consisting of 12 sheets. Further I have found that Mr Sheppard's conduct at the time he sent his spreadsheet costing was to speak to Mrs McAllery and to tell her that that the plans didn't have enough detail and that it would be very difficult for him to provide 'an accurate estimate for the costs of construction with any degree of certainty as to the final cost'.

10. The owners' case in connection with section 42 is that the spreadsheet costing was misleading and deceptive because according to Mr Sturgess, an accurate cost of the works on the information that Mr Sheppard had at the time was in the vicinity of $388,724.00.

11. The spreadsheet costing was in the sum of $297,819.50 exclusive of GST. If one adds GST, the cost is $327,601.45, some $10,400.00 less than the Alan French quote which was provided to the owners before Mr Sheppard sent the spreadsheet costing. In Doepel & Associates Architects Pty Ltd v Hodgkinson McLure JA stated at paragraph 95:

    'However, there are some common requirements for the common law and statutory claims. First, ordinarily, the content of a representation will be determined by the express words or conduct relied on together with all relevant contextual matters that shape and inform the meaning of what can be and is communicated to the representee. Secondly, the relevant representation must be objectively capable (as a matter of law) of arising from the matters relied on. In making that assessment regard is had to contextual matters known to the representee.
    Thirdly, the question of reasonableness is to be tested as at the date of making the representation and not with the benefit of hindsight: Bill Acceptance Corporation Ltd v GWA Ltd [1983] FCA 269; (1983) 78 FLR '

12. In connection with the contextual matters referred to, the following matters are in my view to be considered in that light. First, Mr Sheppard's evidence was that at the time of sending the spreadsheet costing he told Mrs McAllery that the plans didn't have enough detail and that it would be very difficult for him to provide an accurate estimate for the costs of construction with any degree of certainty as to final cost. Secondly, at the time of receipt the spreadsheet costing the owners had another quote (from Alan French) for the same work in approximately the same amount as the spreadsheet costing. There was a variance of $10,400.00 between the two quotes after allowing GST on the spreadsheet costing.

13. In these circumstances, I find that it was highly unlikely that the owners were misled into thinking that the spreadsheet costing was a total cost of executing the works. A significant reason for this is the fact that Mr Sheppard effectively told Mrs McAllery that it was not. In addition, the costing spreadsheet was approximately in the same amount as another quote on estimate obtained by the owners. These reasons are sufficient for me to find that Mr Sheppard did not engage in conduct that was misleading or deceptive or that was likely to mislead or deceive.

Damages

1. The owners state that in reliance on Mr Sheppard's email of 22 February 2008 and it follows his spreadsheet costing, they did not proceed with an alternative quote from the builder Alan French, alternatively did not enter into a fixed price contract for $400,000.00 with another builder, but entered into the contract with the builder.

2. It is unnecessary for me to consider these issues given that I have found that Mr Sheppard did not contravene either section 41 or 42 of the Fair Trading Act. However if I am wrong in my conclusions, I have nonetheless considered the issues set out in the preceding paragraph.

3. In considering the question of whether the owners suffered any loss by reason of the conduct or representation from Mr Sheppard, I have had regard to the following statements from Doepel & Associates Architects Pty Ltd v Hodgkinson.

4. At paragraph 48, Martin CJ stated:

   'The conventional principles applicable to cases of this kind are well established. They establish that a party who has been subjected to misleading and deceptive conduct or negligent misrepresentation is entitled to be put in the position in which he or she would have been but for the breach of statutory or common law duty (Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1). So, where it is established as a fact that a different course of action would have been taken but for the breach of statutory and/or common law duty, the measure of damages is the sum required to put the innocent party, in this case Mr Hodgkinson, in the position in which he would have been but for the relevant breach of duty.'

5. At paragraph 128, McLure JA stated :

   'The better view seems to be that an unreasonable underestimation of the cost of construction will not ordinarily result in loss or damage if the owner received a building to the value of the construction costs unless there is a finding that the proprietors would have taken a different course to their financial advantage and that such damage was not too remote: Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 13; Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd [2005] WASCA 174 [96].'

6. Both Martin CJ and McLure JA refer to Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 in connection with the approach to be taken in connection with the assessment of damages for breach of provisions such as sections 41 and 42 of the Fair Trading Act. At page 13 of that decision Mason J., Wilson J. and Dawson J. stated:

   'Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed (cf. Esso Petroleum Co. Ltd. v. Mardon[1976] EWCA Civ 4; (1976) QB 801, at pp 820-821, 828-829; Doyle v Olby (Ironmongers) Ltd at p 167). The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation. In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract save that it is for the plaintiff to establish that he could and would have entered into the different contract.

   So in the present case if the appellant were able to establish that, but for his reliance on Mr Rainbird's representation, he could and would have entered into policies of insurance containing a disability clause of the kind represented by Mr Rainbird, he might then succeed in obtaining an award of damages equal to the benefits which would have been payable under such policies less the premiums paid or payable in respect of them.'

7. From the above passages it is necessary for the owners to establish that they could and would have accepted Mr Alan French's quote and entered into the contract with him or, as pleaded, with another builder for a contract sum of $400,000.00. I also have had regard to the statement by Martin CJ that it must be established as a fact that a different course would have been taken.

8. The owners' evidence was that they did not proceed with the Alan French quote because of the receipt of the spreadsheet costing from Mr Sheppard. In paragraph 20 1) of their Second Further Amended Points of Cross Claim under the First Basis, the owners claim the sum of $182,391.07. This amount is calculated as 'being the difference between the amount paid to the first Cross Respondent and the Alan French quote'.

9. If I take the total amount alleged to have been charged by the builder of $520,391.07 and deducting from that amount the Alan French 'fixed price' quote of $338,000.00, the calculation yields a balance of $182,391.07 as claimed by the owners.

10. The basis for a claim of this nature must be that if the owners had accepted the Alan French quote, which they say they did not accept because of the conduct of, or representation of Mr Sheppard as contained in his spreadsheet costing, their total liability for the work carried out would have been $338,000.00 and they therefore have sustained damages of $182,391.07 by virtue of the fact that they paid the builder $520,391.07 for the work carried out.

11. In connection with this aspect of the owners' case Mrs McAllery frankly states at paragraph 11 of her statement she cannot locate the Alan French quote and nor can Mr French. The absence of this quote makes it impossible in my view even to consider whether the owners would have taken a course to their financial advantage, as compared to proceeding in the way they did in signing the contract, if they had accepted the quote. The reason for taking this view is that while a quote may be described as 'fixed price' as it is in paragraph 30 of the Second Further Amended Points of Cross Claim, but not in the owners' evidence, it is essential to be able to consider the terms of the quote to reach a conclusion about whether it actually offered a 'fixed price' of $338,000.00 which sum could not be altered in any circumstances in the course of constructing the work which the builder ultimately carried out.

12. While I accept the owners evidence that they would have accepted the Alan French GST inclusive quote of $338,000.00 if they had not received the spreadsheet costing, the evidence just does not establish that the quote was for a fixed price, as pleaded, or would have led to the owners entering into a true 'fixed price' contract with Mr French in relation to the work that has been performed by the builder.

13. The result of this finding is that the evidence does not establish to my satisfaction on the balance of probabilities that if the owners had accepted the Alan French quote and proceeded to contract, that their total liability for the work carried out by the builder would not have exceeded $338,000.00.

14. The alternative claim in paragraph 3P of the Second Further Amended Points of Cross Claim is that the owners could have in early to mid 2008 entered into fixed price contracts for a cost of 'around $400,000.00 to do the works in accordance with the approved plans'. The basis for this aspect of the owners' case is the evidence of Mr Sturgess in his expert report.

15. The particulars to paragraph 3P of the Second Further Amended Points of Cross Claim do not state precisely where in Mr Sturgess' expert report he deals with this issue. In paragraph 3.3 of his executive summary, and at paragraph 20ii of his conclusion, Mr Sturgess states that in his opinion on the basis of the documents available to the builder in February 2008 'a reasonable builder could have concluded that the construction would cost in the order of $388,724' as set out in paragraph 8.3 of his report.

16. At paragraph 8.3 of his report, Mr Sturgess calculates the sum of $388,724.00 on the basis of measuring three areas of the works and then costing each area on a (different) per square metre rate.

17. What has been established is that in Mr Sturgess' opinion a reasonable builder could have concluded that the construction would cost in the order of $388,724. In reality all Mr Sturgess has done is a valuation exercise. He has then in my view made an assumption that a reasonable builder would have reached the same conclusion as he has. The basis for this assumption has not been addressed.

18. There is no evidence at all that a builder would have entered into a fixed price contract for around $400,000.00 with the owners for the work of constructing a new gymnasium, home artist's studio and a covered pergola.

19. On this evidence there is no basis for my finding as a fact, that the owners had the opportunity of entering into a fixed price contract for around $400,000.00 whereby a builder would have done the work described above.

20. I find on the evidence available that the owners have not made out their claim that as a matter of fact they could and would have at the relevant time entered into a fixed price contract with another builder for a cost of around $400,000.00 to do the works in accordance with the approved plans. What they have done is to show that was a theoretical possibility.

21. For the reasons given above, I find that the owners have not made out their case that they have suffered loss and damage as a result of the builder's spreadsheet costing.

Second Basis of Claim

1. I will proceed to consider the owners' case against the builder on the Second basis, the first aspect of which is a claim for $145, 281.00 in respect of costs which were allegedly not reasonable and proper.

2. The basis for this claim is the implied terms which are pleaded at paragraph 5 of the Second Further Amended Points of Cross Claim.

3. The builder did not plead in response to the Second Further Amended Points of Cross Claim. However, it did plead to the Amended Points of Cross claim dated 7 April 2011 which contains an earlier version of paragraph 5. The builder's Points of Defence are at Annexure TS 59 of Mr Sheppard's statement dated which is exhibit 1.

4. The builder denies the implied terms pleaded in paragraph 5(a) and (b) and otherwise admits the warranties implied into the contract pursuant to section 18B of the Home Building Act 1989.

5. The builder has not responded to the most contentious of the implied terms pleaded, for the first time, in paragraphs 5 (d), (e) and (f) of the Second Further Amended Points of Cross Claim, namely that:

   (a)costs incurred by the builder would be reasonable and proper;

   (b)the owners would not be liable for any costs that were not reasonable and proper; and

   (c)costs charged by the builder which were not reasonable and proper would be reimbursed to the owners.

6. Clause 17 of the contract states that the 'Owner must pay to the Builder the cost of the works a set out in Schedule 1 Part A together with the fee set out in Schedule 1 Part B.'

7. Schedule 1 Part A of the contract states what the cost of the works includes. This description is set out in 9 sub-paragraphs.

8. Schedule 1 Part B of the contract which is titled 'NOMINATED LUMP SUM' provides that 'The Owner will pay to the builder a fee of $45,000.00plus GST'.

9. Clause 3(d) of the contract states:

   'Apart from any terms implied by Statute, the whole of the terms, conditions and warranties of this Contract are set out in the Contract, drawings and specification (as set out in Schedule 3) and will not and are not in any way varied or affected by reference to any prior negotiations, stipulations or agreement, whether written or verbal.'

10. Following a discussion during submissions about the above clause, counsel for the owners was kind enough to forward to the Tribunal copies of the decision of the High Court in Hart v Macdonald (1910) 10 CLR 417 and a copy of the decision of her Honour Justice Bergin in Insight Oceania Pty Ltd v Philips Electronics Australia Pty Ltd [2008] NSWSC 710.

1. In Hart v Macdonald the contract contained a term similar to clause 3(d). Issacs J. stated:

   'This action is brought for breach of an implied contract to commence and carry on the manufacture of butter so as to pay for a dairying plant, which was agreed to be supplied under a written agreement consisting of a tender and an acceptance, and to recover the price of the plant. The agreement contains this provision: "It is to be understood that there is no agreement or understanding between us not embodied in this tender and your acceptance thereof." It was urged that this provision excluded implications. But that is not so. It excludes what is extraneous to the written contract: but it does not in terms exclude implications arising on a fair construction of the agreement itself, and in the absence of definite exclusion, an implication is as much a part of a contract as any term couched in express words.'

2. In Insight Oceania Pty Ltd v Philips Electronics Australia Pty Ltd the contract between the parties also contained a term similar to clause 3(d) of the contract. Bergin J. stated at paragraph 158 of her judgement:

   'The defendant submitted that the plaintiff's claim that there are implied terms must fail because clause 5.1 of the Agreement provides that it is the "entire agreement and understanding between the parties on everything connected with the subject matter of the Agreement". In my view clause 5.1 does not mean that there are no implied terms, rather it means that it is the entire Agreement with whatever express and/or implied terms there may be within it: Hart v MacDonald [1910] HCA 13; (1910) 10 CLR 417, per Griffith CJ at 421 and Isaacs J at 430.'

3. The terms considered in Hart v Macdonald and in Insight Oceania Pty Ltd v Philips Electronics Australia Pty Ltd were similar, but not identical to clause 3(d) of the contract. In particular clause 3(d) of the contract states 'Apart from any terms implied by Statute, the whole of the terms, conditions and warranties of this Contract are set out in the Contract'.

4. In Hart v Macdonald Issacs J. said of the term that was relied upon to exclude implied terms;

   'It excludes what is extraneous to the written contract: but it does not in terms exclude implications arising on a fair construction of the agreement itself, and in the absence of definite exclusion, an implication is as much a part of a contract as any term couched in express words.'

5. The issue is whether clause 3(d) has in terms excluded implications. The clause recognises that terms are implied by Statute and then goes on to state that apart from those terms 'the whole of the terms, conditions and warranties of this Contract are set out in the Contract'. In my view, the recognition of terms implied by Statute does not carry with it the meaning that only those implied terms are recognised and that all other implied terms are excluded.

6. In my view the phrase 'the whole of the terms, conditions and warranties of this Contract are set out in the Contract' includes implied terms, as Issacs J. stated 'an implication is as much a part of a contract as any term couched in express words.'

7. In BAE Systems Australia Ltd v Cubic Defence New Zealand Ltd [2011] FCA 1434 Besanko J stated at paragraph 65:

   'I recognise that the terms of clause 1.4 of the Subcontract are different from the terms of the clause considered by the High Court in Hart v MacDonald. Nevertheless, assuming for the purposes of argument that the prevention principle and the duty of cooperation may be excluded by express words of a contract, those words would need to be very clear before a court held that that result had been achieved. The words of clause 1.4 are not so clear as to achieve that result. It seems to me that clause 1.4 precludes reliance on representations, statements, advices or information extraneous to the contract, but not implied terms of the nature alleged by the applicant.'

8. The words of clause 3(d) of the contract are not in my view specific enough to exclude the implication of the terms sought by the owners.

9. The owners have referred to the case of Onesteel Manufacturing Pty Ltd v United KG Pty Ltd [2006] SASC 119 in support of the terms that they state ought to be implied.

10. In Onesteel Manufacturing Pty Ltd v United KG Pty Ltd Debelle J. was concerned with a Target Estimate Contract which he stated was a 'variant of a cost plus contract'. Debelle .J considered in great detail, including a comprehensive review of the relevant authorities, whether a term ought to be implied into that contract that only 'direct actual costs that have been reasonably and properly incurred' could be recovered by the contractor.

11. At paragraph 36 of his judgement Debelle J. stated:

    'As a matter of general principle and ordinary commercial common sense, it is quite obvious that, in the absence of a clear expression to the contrary, a provision in a building contract which entitles the contractor to be reimbursed for costs incurred will be subject to an implied term that the cost will be reasonably and properly incurred. In the absence of such a provision, the building owner has an entirely open-ended obligation or, looking at the other side of the coin, the contractor has been handed a blank cheque. Such a contract would put a premium on inefficiency and extravagance. There would be no proper accountability for incompetent or unnecessary work. There are, I think, compelling reasons why it is proper to imply a term that Reimbursable Costs should be reasonably and properly incurred.'

12. I agree with the reasoning of Debelle J. as referred to above and find that a term is to be implied into the contract as contended for in paragraph 5(d) of the Second Further Amended Points of Cross Claim. However, I find that there is no basis for the implication of the terms set out in paragraphs 5(e) and (f) of the Second Further Amended Points of Cross Claim. These terms go, in my view, to the consequences of a breach of the term referred to in paragraph 5(d). In that sense they are not necessary in order to give business efficacy to the contract.

13. I have decided that the contract does contain an implied term that costs payable by the owners should be reasonably and properly incurred. As stated above, the owners claim $145,281.00 in respect of costs which were not reasonable and proper under the Second basis in paragraph 20 of their Second Further Amended Points of Cross Claim. I will now consider the detail of that claim.

14. In paragraph 8H of their Second Further Amended Points of Cross Claim, the owners allege that the builder overcharged them in respect of the following items which total $145,281.00:

    (a)Preliminaries - $19,338;

    (b)Concrete Slab, stairs and paved area - $47,011;

    (c)Retaining wall - $21,652;

    (d)Carpentry roof and wall - $22,449;

    (e)Pergola carpentry and columns including breezeway roof - $12,831; and

    (f)Tiling $22,000.00.

15. I will proceed on the basis that the costs to which the owners refer in paragraph 20 of their Second Further Amended Points of Cross Claim are those particularised at paragraph 8H, as referred to above.

16. The owners bear the onus of proving on the balance of probabilities that the builder has claimed for costs which were neither reasonable nor proper.

17. To establish that a builder under a cost plus contract has claimed costs that were not reasonable and proper will in my view require an owner to identify the item of work for which the builder has claimed the cost of, and further to identify the respects in which the costs claimed by the builder were not reasonable and proper. This process will most probably result in the Tribunal reaching a conclusion about what is or was the reasonable and proper cost of the item of work in question. To establish these matters before the Tribunal will ordinarily require expert evidence.

18. In their written outline of final submissions, the owners submit that Mr Sturgess gives evidence of the reasonable and proper costs of the job and that his evidence should be accepted in full. Mr Michael George Sturgess from the company Australian Cost Planners Pty Ltd prepared a report on behalf of the owners which is dated 4 June 2012, exhibit H in the owners' case

19. The owners have not referred to the precise places in Mr Sturgess's report where he has given evidence in support of the matters pleaded in paragraph 8H of the Second Further Amended Points of Cross Claim. In paragraph 10.3 of his report Mr Sturgess identifies trades that he says 'exhibit significant costs over runs'. The trades that he identifies, with the exception of 'Structural Steel' and 'Landscaping and Retaining Walls', correspond to the trades or work items set out in paragraph 8H of the Second Further Amended Points of Cross Claim.

20. Mr Sturgess' report is not un-contradicted. The Further Statement of Mr Tobias Sheppard on behalf of the builder which was undated, but is exhibit 3 in these proceedings addresses Mr Sturgess' report in paragraph 22. The builder's expert Mr Austin does not address the owners' allegations in connection with the items of work referred to above, namely that the builder's charges for this work were in part, neither reasonable nor proper. Mr Austin's undated report which is exhibit 7 in these proceedings does not address these issues despite the fact that paragraphs 10 and 11 of his report address other aspects of Mr Sturgess' report.

21. In paragraph 10.4 of his report, in relation to preliminaries, Mr Sturgess states that 'the actual cost incurred for preliminaries are excessive'. The owners' claim $19,338.00 in relation to preliminaries. Mr Sheppard states that the preliminaries costs 'are not excessive'.

22. In paragraph 10.5 of his report, in relation to Concrete Slab, stairs and paved area, Mr Sturgess states that the final cost of concrete works 'is excessive'. The owners claim $47,011.00 in relation to the Concrete Slab, stairs and paved area. Mr Sturgess elaborates on this conclusion in paragraph 10.6 of his report. In relation to this item Mr Sturgess states that in his opinion there has been a cost overrun because the builder made a decision to undertake this work on an hourly basis rather than sub-contract the work to Lotus Concretors Pty Ltd who had provided a lump sum quote for the work in the sum of $36,190.00. The total claimed by the builder for carrying out this work on an hourly basis was according to Mr Sturgess, $84,217.00. The reasoning of Mr Sturgess in connection with this item is that in carrying out this work on hourly rates, the builder charged approximately $48,000.00 more than would have been incurred had this work been contracted out.

23. In response in his Further Statement, Mr Sheppard states that the costs are not excessive. He states that the actual costs represent the detailed nature of the engineering requirements and that the costs of the slab achieved the best use of site labour.

24. In paragraphs 10.7 and 10.8 of his report, in relation to the retaining wall, Mr Sturgess states that the final cost of the retaining wall is excessive against both the builder's original estimate and his own estimate. The owners claim $21,652.00 in relation to the retaining wall.

25. In response Mr Sheppard states that Mr Sturgess's estimate of the work to the retaining wall is a gross under-estimate.

26. In paragraph 10.9 of his report, in relation to Carpentry roof and wall, Mr Sturgess states that the final cost of carpentry works is excessive against both the builder's original estimate and his own estimate. Mr Sturgess elaborates on this conclusion in paragraphs 10.11and 10.12. The owners claim $22,459.00 in relation to Carpentry roof and wall.

27. In relation to this item, Mr Sturgess has stated that the final cost incurred by the builder in carrying out this work was $61,407.00. He states that the builder's estimate of this work was $21,559 and that he estimated the cost of carrying out this work at $38,958.00. Mr Sturgess states that in his opinion the cost overrun was caused by the builder's decision to carry out this work on hourly rates rather than sub-contracting it. He states that the reason for this statement is his own experience and is also based on the labour:materials ratios published in Rawlinsons Australian Construction Handbook 2008 at page 702. Rawlinsons states that for the carpentry trade there is a typical ratio of 55% onsite labour to 45% material supply prices. In annexure B to his report Mr Sturgess calculates that the actual cost of materials for this item of work totalled $17,552. Based on this cost Mr Sturgess calculates that a total cost of $39,004 for this work would be comprised of actual material costs of $17,552, being 45% of the total and a calculated labour cost of $21,452 being 55% of the total.

28. In response Mr Sheppard states that Mr Sturgess' estimate of $38,958 is grossly low. He also states in response to Mr Sturgess' point about sub-contracting that the best outcome was to keep the builder's foreman and labourer fully occupied. He states that if all trades were sub-contracted the foreman and labourer would not have been fully occupied. Mr Sheppard also states that Mr Sturgess has not taken into account the heavier structure of the roof, walls and the associated steel cantilevered beams and the construction of the steel portal frame.

29. In paragraphs 10.13 and 10.14 of his report, in relation to Pergola carpentry and columns including breezeway roof, Mr Sturgess states that the final cost of this work is excessive against both the builder's original estimate and his own estimate. The owners claim $12,831.00 in relation to Pergola carpentry and columns including breezeway roof.

30. In response, Mr Sheppard states that Mr Sturgess has not taken into account the handling and erection of the steel structure required to support the pergola and the handling and erection of the concrete columns.

31. In paragraph 10.16 Mr Sturgess states that tiling totalling $22,000.00 was deleted from the contract works, but there was not a credit included in the builder's scott schedule claim.

32. In response, Mr Sheppard states that while there was no tiling, there was an extra requirement for a polished slab with associated formwork, finishing and grading to allow for drainage falls.

33. With respect, the reasoning provided by Mr Sturgess is not persuasive. If work is deleted from the contract works, the consequence will be a reduction in the contract price. The owner will not be charged for the deleted works. Mr Sturgess does not state that there was no reduction in the contract price. Further, there is no evidence that despite the deletion of tiling totalling $22,000.00, the builder claimed for and was paid for this item, thereby entitling the owners to a refund of money paid for work that was not performed. There is no reason why there should be, as Mr Sturgess suggests, a credit given to the owner for tiling in the builder's scott schedule claim, which in this case is for variations claimed by the builder. I have had regard to the builder's scott schedule. It does not claim for tiling or work carried out in lieu of tiling. If it did, then in that case, one would expect to see a credit for the original contract work omitted and replaced by the variation.

34. Mr Sturgess has provided details of why he is of the opinion that the builder has charged for costs that were neither reasonable nor proper in relation to Concrete Slab, stairs and paved area and Carpentry roof and wall.

35. For the remainder of the items which the owners state that the builder has claimed costs that were neither reasonable nor proper, Mr Sturgess has stated either that the actual cost, or the final cost is excessive. This conclusion is stated to be based on his opinion and experience.

36. For the remainder of the items referred to, Mr Sturgess has provided no reasoning process or details to identify the respects in which the costs claimed by the builder were, in relation to the items of work or the trades that he has identified, not reasonable or proper. What he has done is to prepare an estimate himself of the cost of the items of work or trades referred to. By a comparison of that estimate with the final cost, he reaches a conclusion that because the actual or final cost exceeds his estimate, it is for that reason not reasonable and proper.

37. Although Mr Sturgess's evidence has been admitted into evidence, there still remains the question of the weight that is to be given to it.

38. In considering that question I have had regard to the decision of the Court of Appeal in the case of Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. In particular, I have had regard to paragraph 85 of Heydon JA's (as he was then) judgement where his Honour states:

    '85 In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (at [41]).'

39. In the course of his judgement, commencing at paragraph 80, Heydon JA refers to a number of decisions of Anderson J in the Supreme Court of Western Australia. In Pownall v Conlon Management Pty Ltd (1995) 12 WAR 370 at 389-90 his Honour Anderson J. stated;

    'Expert opinion is to be judged like any other evidence. It must be comprehensible and reach conclusions that are rationally based. The process of inference that leads to the conclusions must be stated or revealed in a way that enables the conclusions to be tested and a judgment made about the reliability of them. This requirement is not satisfied by evidence from an expert which says, in effect: 'I have examined the costings and estimates made by others and on the strength of my own expertise and experience in the field I believe them to be reasonable.'
    Such a forensic device overlooks the most important rule that it is for the court to judge the reliability of evidence given in support of the case. If an opinion relies on facts that must be proved or assumptions that must be verified, it is to the court that they must be proved and verified, not to the expert witness.'

40. At paragraph 81 of his decision, Heydon JA refers to another decision of Anderson J:

    'In Bollock v Wellington (1996) 15 WAR 1 at 3 Anderson J said:
    "Before an expert medical opinion can be of any value the facts upon which it is founded must be proved by admissible evidence and the opinion must actually be founded upon those facts ..."

    He then said at 3-4, citing Steffen v Ruban:

    "As with any other evidence, expert opinion must be comprehensible and the conclusions reached must be rationally based. A court ought not to act on an opinion, the basis for which is not explained by the witness expressing it ...
    None of these requirements is satisfied, when all that the medical expert says is 'I have examined this patient and from what I know about plant operation I think he can drive a D10 bulldozer on production work'."

    He also said at 4, citing Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 at 390:

    "Unless the process of inference by which an opinion is reached is expressed in a manner which permits the conclusions to be scrutinised and a judgment made as to its reliability, the opinion can carry no weight."

1. Mr Austin is critical of Mr Brown's costing. Mr Austin's estimate of the cost of the work is $20,000.00 - $25,000.00.

2. I have reviewed Mr Brown's costing. I disallow the sum of $2,100.00 in the preliminaries for the preparation of a defects report. I cannot see that a defects report would be relevant to rectification work particularly when $3,200.00 is allowed for design and documentation of the rectification work.

3. I allow the owners $48,715.81 in connection with this head of claim.

Owners' claim for $135,744.28

1. In the section of these reasons which describes the owners' claim, I refer to the owners' claim in paragraph 8G of the Second Further Amended Points of Cross Claim that, in breach of implied terms, the builder charged the owners $135,744.28 in excess of what is 'reasonable and proper' in relation to variations.

2. The owners' rely in the report of Mr Sturgess to support this head of claim.

3. Mr Sturgess deals with this head of claim in section 12 of his 4 June 2012 report which addresses the builder's scott schedule claims in HB 10/38289 where a total of $145,099.08 is claimed for variations. The builder's scott schedule consists of 17 items of claim which are addressed in section 12 of Mr Sturgess' report. Mr Sturgess expresses the opinion at paragraph 12.7 of his report that 'the value of variations against items 1 -17 of the Builder's Scott Schedule totals $9,584.12' (sic).

4. In paragraph 12.4 of his report Mr Sturgess calculates his valuation of variations as $9,354.80 and incorrectly states this amount as $9,584.12 in paragraph 12.4 of his report. It follows from this expression of opinion that variations claimed by the builder to the value of $135,744.28 are in dispute ($145,099.08 - $9,354.80 = $135,744.28). However this is a completely different matter to stating that the owners have overpaid variations and an amount of $135,744.28 is payable to them as is pleaded in paragraph 8G of the Second Further Amended Points of Cross Claim.

5. In my view this head of the owners' claim is misconceived and on that basis is dismissed.

Claim for $3,222.00 on the basis of Variation of the Contract

1. The basis of this head of claim is that there was a meeting on site between Mr McAllery and Mr Sheppard representing the builder on 25 August 2009. It is alleged by Mr McAllery that at this meeting certain matters were discussed and agreed in connection with the amounts that the builder would charge for the work remaining to be carried out. The owners also allege that at this meeting it was agreed by Mr Sheppard on behalf of the builder that the original builder's fee of $45,000.00 would not be increased.

2. The conversation between Mr McAllery and Mr Sheppard was heard by Mr Mclean who was working for Mr McAllery in the area of the premises where the conversation in issue took place. Mr McLean has provided a witness statement in these proceedings in which he corroborates Mr MacAllery's version of the agreements reached at the meeting.

3. Mr McAllery and Mr Sheppard have also given evidence about this meeting and what was said.

4. Mr Sheppard had the opportunity to cross-examine Mr Mclean. I was impressed by Mr Mclean being a careful and honest witness. I accept his evidence and that he has not prepared a statement and given evidence for the purpose of conferring a benefit on his employer.

5. Mr Mclean in his evidence states that an element of the agreement reached at this meeting was that Mr Sheppard 'would complete his project manager's role without any increase in his original fee' and if costs over-ran the estimates set out on a spreadsheet printed out at the meeting, those costs would be absorbed by the builder.

6. Annexure A to Mr McAllery's statement which is exhibit A is a spreadsheet of costing which has been initialled by Mr McAllery and Mr Sheppard (the 'spreadsheet'). I find that the spreadsheet was printed and initialled at the meeting.

7. The owners Second Further Amended Points of Cross Claim alleges that contrary to the agreement, the builder overcharged in relation to the items of painting, plastering and paving as shown on the spreadsheet.

8. I have reviewed the spreadsheet. In relation to painting it shows cash required to complete of $6,725.00. In relation to plastering it shows cash required to complete $8,673.00. In relation to paving it shows cash required to complete of $9,050.00.

9. In paragraph 5A iii) of their Second Further Amended Points of Cross Claim the owners allege that the amounts to be charged by the builder for the above items were in relation to painting, $7,835.00, in relation to plastering, $8,673.00 and in relation to paving $9,404.00. Mr McAllery's statement does not support that allegation. He refers only to the spreadsheet, the relevant details of which are set out above.

10. In paragraph 8C of their Second Further Amended Points of Cross Claim the owners allege that they were charged amounts in excess of the amounts agreed in relation to these items, namely $12,873.00 in relation to painting, $9,298.00 in relation to plastering and $9,772.00 in relation to paving.

11. The owners do not identify the evidence to sustain their allegations of paying amounts in excess of the amounts agreed for these items at the 25 August 20009 meeting. Mr McAllery does not address this issue in his statement. Nor does Mr Sturgess address this issue, so far as I can ascertain, in his report. The owners do not address the issue in their final written submissions. I have not been referred to the evidence which would establish this aspect of the owners' case.

12. I dismiss this head of the owners claim on the basis that no evidence of loss has been proved.

Conclusion

1. I have found in the owners favour in connection with the following items.

Claim for amount not reasonably and properly incurred	Concrete Slab, stairs and paved area	$47,011.00
Claim for amount not reasonably and properly incurred	Carpentry roof and wall	$22,459.00
Defective work	Control Joints in accordance with engineer's drawings	$6,330.50
Defective work	Reinforcing steel	$583.00
Defective work	Render	$264.00
Defective work	Plasterboard wall sheeting	$6,462.00
Defective work	Inadequate Drainage	$48,715.81
Total	$131,825.31

1. The owners are entitled to an order that the builder must pay the sum of $131,825.31 to them within 21 days of the date of this order.

Costs

1. The parties are at liberty to make a costs application in these proceedings.

2. Any costs application must be lodged in the Tribunal and served on the costs respondent within 21 days of the date of this order either attaching or referring to the documents relied upon in support of the application.

3. The costs respondent will have 21 days after the date it receives the application referred to above to lodge in the Tribunal and serve on the costs applicant its submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.

4. The cost applicant will have 14 days after the date it receives the cost respondent's submissions to lodge in the Tribunal and serve on the costs respondent its submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.

5. The Tribunal will determine any costs application on the basis of the submissions and attached documents lodged in the Tribunal.

   D Goldstein
   Senior Member
   Civil and Administrative Tribunal of New South Wales

   24 June 2014