Coleman, B.J. v Gordon M. Jenkins and Associates Pty Ltd

[1990] FCA 735

JUDGMENT NO. . .I.c?.g:/..b

IN THE FEDERAL COURT OF AUSTRALIA ) No. NG 384 of

1         1986

GE~~~RAIJ D VISION j

BETWEEN:	BRIAN JAMES COLEMAN Applicant
AND :	GORDON M JENKINS k ASSOCIATES PTY LIMITED
First Respondent CHRISTOPHER JENKINS Second Respondent

C O W :	WILCOX J
PLACE :	SYDNEY  RECEIVED
DATE :	15 NOVEMBER 1990

FEDERAL COURT OF

EXTEMPORE FWSONS FOR JUDGMENT AUSTRALIA

WILCOX J: This is a most unfortunate case which, in the result, benefits nobody; except, perhaps, the lawyers involved in it. It is unfortunate that more thought was not given at an earlier stage to precisely what claim was available and what the evidence was. It is also unfortunate that there seems to have been little, if any, attempt to resolve in a sensible manner an argument which was one arising out of misunderstandings between the parties.

The matter - which relates to events which took place as long ago as 1983 - resulted in an action which was

commenced in 1986 and which was not heard until 1988, when

judgment was given in favour of the applicant. But the

situation on damages was so confused that the trial judge was	!	:-
L..
f
unable to assess them. So he made an order referring the assessment to the Registrar. The respondents appealed against that decision and were succeseful in obtaining an order for a new trial of the action generally. The matter comes back to me against that background. The first trial occupied some five or six days. Both parties were represented by senior counsel and it must have been extremely expensive.
To their credit, if I may make this comment, counsel at this trial have taken steps to quantify the damages and to avoid unnecessary dispute about those matters. The trial has been run by them very efficiently, having been completed within less than two days. Notwithstanding this, the burden of costs for the clients is undoubtedly extremely heavy, and I have nothing but sympathy for both parties that they have ended up in this situation.

Brian James Coleman, and the second respondent, Christopher There is a basic conflict between the applicant, Earl Jenkins, as to two aspects of their relationship. Mr Coleman is and was an interior designer and decorator. He has been involved in that occupation for some 15 years. In about December 1982 he contacted Mr Jenkins, whom he had met some years before in a casual way, to discuss with him the possibility of Mr Jenkins' designing a new home for Mr Coleman on land which he had contracted to purchase at Lower Mangrove in the Shire of Gosford. At that time Mr Coleman had yet to complete his purchase. There was some $70,000 still outstanding. He owned a home at Lane Cove which he had on the market but had not yet succeeded in selling. He was hoping to obtain some $180,000. However, he owed about $40,000 by way of mortgage on that property.

There was some discussion at the end of 1982 between

Mr Coleman and Mr Jenkins. Its precise extent is not clear.

It seems to have gone sufficiently far for M r Jenkins to receive an impression of the type of house which Mr Coleman wished to erect, an impression which I may say later turned out to be somewhat mistaken, and also for Mr Jenkins to become aware of the location of the site. Mr Jenkins said in evidence today that he visited the site, although not in company with Mr Coleman, at about this time.

However, no significant work was done because Mr

Jenkins was due to leave for an overseas trip in January 1983.

Whilst Mr Jenkins was overseas, he says, he thought about the	project and he prepared some preliminary sketches and a small
cardboard model.
Immediately Mr Jenkins returned to Australia he contacted Mr Coleman. The two men had a meeting at which Mr Jenkins produced his sketches and the model. Mr Coleman was not attracted to them and, effectively, the first concept was abandoned at that time. Mr Coleman had not yet sold his home

at Lane Cove, although it was still on the market and, as events turned out, he succeeded in obtaining a buyer shortly afterwards.

I think it is quite probable that, either before Mr

Jenkins travelled overseas or in their discussions immediately after his return, Mr Coleman gave him some outline of his financial position. In essence, Mr Coleman expected to have about $80,000 clear after he sold his property at Lane Cove and paid for the land at Lower Mangrove. In addition, he had moneys owing to him from clients. The amount which was owing varied a little bit in the evidence. At one stage Mr Coleman gave a figure as high as $40,000, saying that at least $25,000 was owing by one particular client. However, he does not seem to have been confident about the full $40,000, and I think it is likely that at some stage he gave Mr Jenkins to understand that he expected to have total funds of the order of $80,000 to $100,000.

Mr Jenkins prepared some further sketches. There

were apparently a number of meetings between the parties,	during which they discussed what Mr Coleman called the
"philosophy" of the house. Agreement was reached on a concept and the sketches were firmed up in the form of a model.
At some time in July or August 1983, this model was seen by a friend of Mr Coleman during the course of a visit to his home. The friend, Mr Mark Leonard, had a conversation in

the presence of Mr Jenkins. Apparently the three men - and others, including Mrs Coleman - were in the sunroom where the model was on display. Mr Leonard says that he commented: "This is fantastic. I cannot believe that it could be built for $80,000." He says that Mr Jenkins replied: "It is a matter of really knowing what you are doing. It could cost a fortune, but the way I have planned it it will only cost $80,000. You need not spend a lot of money to achieve spectacular results. If you know the way that you are going to do it, you can achieve a result like that for that sort of

money. "

~lthough Mr Leonard was cross-examined, and it was

suggested to him that no such conversation occurred, I am of the view that it probably did. I was impressed by Mr Leonard as a witness. He seemed to me very open and ready to assist the court. Also, I have difficulty in seeing that he would be prepared to give false evidence on a matter such as this on two separate occasions; he also gave evidence at the earlier

unless I have misjudged him completely - I do not think that	trial. It is true that he is a friend of Mr Coleman; but -
he would be prepared to tell lies in court even for a friend. Also, it seems to me that a comment of this nature is consistent with the thinking which Mr Coleman had at that time, and which he had communicated to Mr Jenkins.

Of course, the problem is that we do not know what

was the form of the model. The evidence does not indicate the

extent to which this model coincided with the building as subsequently depicted in the working drawings. But I think that there was a conversation in which a figure of $80,000 was mentioned.

Before I leave Mr Leonard, one other matter which is worthy of remark is that he does not make any reference in his evidence to any statement, by anybody, at the time of that conversation, to the effect that the building was to be constructed by Mr Coleman as owner/builder with the assistance of Mr Jenkins as a supervisor of subcontractors. I make that comment because Mr Coleman and Mr Jenkins are at issue as to when it was that it was decided that Mr Coleman should act as owner/builder. Mr Coleman says that this was the concept right from the beginning, and that the $80,000 estimate was predicated upon his taking that role with Mr Jenkins' active assistance. Mr Jenkins says that the idea of Mr Coleman acting as owner/builder only arose about the end of 1983 or early 1984 when he, Mr Jenkins, left the first respondent, a

branched out on his own and had plenty of available time. One	company which I gather was controlled by his father, and
would have thought that, if the concept right from the beginning had been for Mr Coleman to act as owner/builder, that, when M r Leonard was expressing surprise that the building could be erected for $80,000, somebody would have pointed out to him that the key to that being done was that Mr Coleman was to undertake this role.
After the conversation in which Mr Leonard was involved, there were numerous discussions between Mr Coleman and Mr Jenkins. Mr Coleman was obviously deeply involved in the project. His background as an interior designer would be more likely, I think, to cause him to take a personal interest in the details of the design. In the course of these discussions the design was, no doubt, revised on numerous occasions and gradually worked up to a final form.
On 16 August 1983, Mr Jenkins prepared a document, which is in evidence and which bears that date. It is headed, Coleman residence, Signadou, which is the name which Mr Coleman had adopted for the new home. It sets out a schedule
of areas and a calculation of costs. If one adds up the costs
as stated the total comes to $125,750. It is true that there is an error in the addition of the number of square metres of enclosed area and that if this error had been realised that sum would have been slightly reduced. But the significance of the document is that it clearly indicates an expectation of a
calculation does not make any allowance for site works, or for particularly significant when one bears in mind that the building cost substantially exceeding $100,000. This is
any garage or carport - although one or other of these was contemplated at the time - nor for the bore designed to supply water for the site, nor the small dam which was, in fact, put in to provide water for building purposes.
There is an issue between the parties whether this document was shown by Mr Jenkins to Mr Coleman. Mr Jenkins says that it was. Mr Coleman says that he does not recall it being shown to him. I think that the probabilities favour Mr Jenkins' evidence on this matter. I cannot see why Mr Jenkins would have gone to the trouble of preparing an estimate of costs unless he did so for the purpose of giving Mr Coleman some idea of what he might have to pay. It would have been pointless for him to have prepared this document and then simply keep it in his file. However, the evidence does not really establish that the document was used to bring home in any forcible way to Mr Coleman the likely extent of the cost which he would undertake if he proceeded with the building.

The next significant step was the preparation of.

working drawings and a specification. These documents are in evidence. I have observed, in looking at the specification, that it is quite a detailed specification which takes a lot of trouble to set out finishes; for example, the particular fittings which have to be provided in the bathroom and

one of the issues between the parties is whether it was	the building. This is significant because, as I have said, toilets, and the type of timber to be used in various parts of
envisaged from the beginning that Mr Coleman would act as his own owner/builder. If he was to act as owner/builder, there was really no necessity for this sort of detail to go into the specification. All that would have been required would be a document which would satisfy the local council as to compliance with the building regulations. I have difficulty
in believing that the council would be very concerned with the particular type of toilet or bath which was to be installed. To my mind, the specification reads much more like a document which was prepared with a view to its been given to tenderers, as part of an invitation to them to quote for the erection of the building in accordance with the working drawings and the specification.
On 7 October 1983, a building application was lodged with Gosford Shire Council. There are two different versions of what happened at that time, but Mr Coleman and Mr Jenkins agree that they were both aware of the estimated cost which was stated in the building application; namely, $120,000. Mr Coleman's version of the matter is that he accompanied Mr Jenkins - who signed the building application - to the counter at the Gosford Shire Council office where it was lodged. He says that Mr Jenkins mentioned a figure of $100,000 orally, that the counter clerk indicated a view that the building would be more expensive than that and that, consequently, it
was decided to insert the figure of $120,000.
Mr Jenkins' account of the matter is that he selected the figure of $120,000, telling Mr Coleman that he would write a lower figure than the likely actual building cost so as to save him some building application fees. It is common ground that building application fees are assessed by reference to the estimated building cost, so the higher the estimate the higher the building application fee which had to

be paid to the council.

Aa between these two versions of the matter, I have

no hesitation whatever in selecting the version given by Mr Jenkins. It seems to me much more probable that Mr Jenkins deliberately wrote a lower than expected cost in order to save fees. Mr Jenkins says that this is an everyday practice amongst architects. I do not doubt that that is so. I think it is most unlikely that Mr Coleman who, after all, had to pay the building fee, would have mutely stood by while the counter clerk increased the estimate from $100,000 to $120,000. It seems to me that, if MZ Coleman was not previously aware, then by 7 October 1903, beyond any shadow of doubt, he was aware that Mr Jenkins expected the cost appreciably to exceed $100,000.

At that date, the only expenditure which had been incurred by Mr Coleman was his liability for architect's fees and a sum of $280 which had been paid to a surveyor to peg out the site of the house. Following the building approval, there

was considerable delay before work actually started but there	were discussions between Mr Jenkins and Mr Coleman about what
was to happen. At about this time Mr Jenkins made up his mind to leave the first respondent and go into practice on his own. Apparently, each of the men visited each other's homes from time to time. I have no doubt that they had become quite close friends. Mr Jenkins outlined his plans. Mr Coleman was able to steer him in the direction of a substantial engagement

with a client of his own. There was discussion about the renovations to Mr Jenkins' home. Mr Jenkins told Mr Coleman that he was going to act as an owner/builder in connection with his renovations. I think that it is extremely probable that it was about this time - that is to say, late in 1983 or early in 1984 - that it first occurred to the parties that it might be desirable for Mr Coleman to proceed at Lower Mangrove in this manner.

Shortly before Mr Jenkins left the employment of the first respondent, he had some discussions with other people in the office about an account being sent to Mr Coleman. In the result, an account was sent, dated 1 December 1983. It claimed fees owing in the sum of $9,750. This account gave details, "Fee as per our letter to you dated 26 May 1983, 6.5 per cent of estimated cost of $150,000."

I should explain the reference to the letter of 26

May 1983. There is in evidence a draft of a letter of that

the first respondent. M r Jenkins says that he personally	handwriting and then had typed by a secretary at the office of date which, according to Mr Jenkins, he wrote out in his own
delivered it to Mr Coleman; although he does not claim that Mr Coleman read it in his presence or otherwise referred to it. The letter set out a calculation of fees in three stages, being schematic design, 1.2 percent; design development, 1.3 percent; and contract documentation 4 percent. The letter went on:

"Fee calculated on flat 10 per cent of estimated cost. The estimated cost $150,000. Fee 6.5 per cent of $150,000 equals $9750."

I am not satisfied that this letter was received by

Mr Coleman or, if handed to him, was read by him. I think that, had it been, there would have been earlier discussion about the cost of the building than in fact occurred.

However, there is no doubt that Mr Coleman did receive the letter of 1 December 1983. When he received it, he contacted Mr Jenkins and Mr Jenkins went to his home to talk to him. It is clear that Mr Coleman made a complaint; although the precise nature of the complain is not so apparent. According to Mr Jenkins, one major item of complaint was that the account had been sent by the company, Gordon M Jenkins and Associates Pty Limited; whereas Mr Coleman thought that any payment should go to Mr Christopher Jenkins personally, as he had done all the work. Mr Jenkins says that he replied that he had been employed by the company,

was a complaint about quantum. He says that Mr Coleman wanted	it. However this may be, Mr Jenkins also concedes that there and that therefore it was appropriate that payment be made to
to "haggle" about the amount. Mr Coleman says that he complained about the manner of calculation and said that the $150,000 was wrong. To this, he claims, M r Jenkins responded, "Well, I have said it was $80,000 and if it is only $80,000 then we will adjust the fee accordingly." Mr Coleman says that he was satisfied with this.
I have great difficulty in believing that the conversation described by Mr Coleman would have occurred; both because it seems to me unlikely that Mr Jenkins, having so recently calculated the appropriate fee would have been prepared to agree, in effect, to a figure of only slightly greater than half that amount, and also because of subsequent events.

Mr Coleman did not immediately pay the account. On

1 March 1984, an account rendered was sent to him for $9,750.

The account rendered referred back to the account of 1 December 1983. On 16 April 1984, Mr Coleman wrote a letter to Gordon M Jenkins and Associates enclosing a cheque for $3,000 which he referred to as "being part payment of my outstanding account." He went on: "Further remittance will be favoured as soon as possible." The letter made no reference to Mr Coleman's conversation with Mr Jenkins of December. It made no complaint about the manner of calculation of the fees or the fact that he was being told that the value of the building

which had been designed was $150,000. Bearing in mind that Mr Coleman had had many years' experience in business, I find it	quite incredible that, when he was actually writing to the
company, he would not have mentioned some or all of these matters.

There was a further meeting between Mr Coleman and

Mr Jenkins on 22 August 1984 at which costs were discussed.

In the meantime, building work had commenced on the site. Although the completed work represented a low proportion of the total job, it seems that work worth more than $20,000 had been completed and other estimates had been obtained. The two men were able to work out what expenditures had either been made or were precisely foreseeable as at that date. Each of them wrote down a list of items with a figure against each item. Although these lists are not precisely identical, they are fairly consistent. Going only to Mr Coleman's document, he shows ascertainable items totalling $71,196.20, not including a refundable payment which had been made to the Sydney County Council of $6,600. Mr Coleman then notes a list of items which were not included in the figure of $71,196.20, many of which were very substantial. There is no doubt that, by that stage, he was aware that there was no possibility whatever of completing the building for $80,000 or anything like it. Indeed, at that stage, he must have realised that that figure was probably not much more than half the total likely cost.

no complaint of the cost to Mr Jenkins. One would have Surprisingly, however, on Mr Colemanfs case, he made

thought that there would have been a major falling out between

the two men, but this was not so. Mr Jenkins continued to assist Mr Coleman in the project, going regularly to the site to supervise subcontractors. Their working relationship did not come to an end until about November 1984.

There are two versions of the cause of the break-up.

According to Mr Coleman, it was because Mr Jenkins did not attend at the site as required. According to Mr Jenkins, it was because Mr Coleman declined to continue payments. Mr Coleman did, in fact, pay $3,000 to Mr Jenkins, personally, for his work as supervisor.

It is submitted by counsel for the applicant that the fact that Mr Coleman wished to have the meeting of 22 August 1984, and that the two men went through the cost, is an indication that he had not previously realised that the job would cost more than $80,000. I cannot agree with this. It seems to me that it would have been only prudent for him to review, at that stage, how much money had been spent and what his likely commitment would be.

As I have said, the case for the applicant is that
it was represented to him that the building which was designed

by the respondents could be erected for $80,000. I do not

think that that case can be accepted.	I do think that there
mentioned. I think that the probabilities favour the view	was discussion in which figures of $80,000 to $100,000 were
that Mr Coleman mentioned these figures to Mr Jenkins - probably more than once - at an early stage in order to give
Mr Jenkins some idea how much money would be available for the
job. I think it is also very likely that, when the plans were being worked up, the original concept was expanded, perhaps in size, perhaps in quality of finish or both, so that a set of plans was evolved which provided for a building which would

cost much more than this range. There is unchallenged evidence from a quantity surveyor that, at August 1983 prices, the cost of the job depicted in the working drawings and specifications submitted to the council was of the order of $151,000.

I think it is also clear that, at least by the date when the building application was submitted to the council, Mr Coleman was well aware of the fact that the building could not be erected for anything like $80,000 to $100,000. Notwithstanding this awareness, by that time he had become so enthused with the project, that, very understandably, he pressed on regardless.

Whilst I say that this is understandable, any causal connection between the original conduct of the respondents and the expenditure of the vast bulk of the money was broken at that time. Knowing the position, Mr Coleman elected to proceed with the project. I think that the only real question

which arises is whether, nonetheless, there should be judgment

for the applicant in respect of the expenditure which was

incurred prior to the date of the building application.

Amongst the variety of ways in which the applicant pleads its case is an allegation of negligence by both respondents. In effect, what is said is that Mr Coleman explained to Mr Jenkins the limit of his financial resources and inquired from him about the possibility of a house being designed which could be erected for that amount. The allegation is that he received an affirmative answer and, on the strength of that answer, retained the services of the first respondent; Mr Christopher Jenkins actually doing the work.

I accept this case. I think that there were discussions at which the amount of money was mentioned. In effect what Mr Coleman asked Mr Jenkins to do was to design a house to a maximum cost of $100,000. What he ended up with was a set of plans and specifications for what was, no doubt,

a much more attractive house than it might otherwise have been

but which would cost $150,000.

It is true that Mt Coleman decided to press ahead with the building as designed and, to that extent, it could perhaps be argued that he obtained the benefit of the plans; although, at least with the wisdom of hindsight, it is obvious that he would have been financially better off if he had burnt

project at all. I think the truth of the matter is that he

the plans when he received them and not gone ahead with the

did not get what he bargained for when he retained the respondents and that he has suffered damage to the extent that he has had to pay them money. As it happens, the only money which he paid in respect of the account for $9,750 was the first instalment of $3,000. The first respondent made a cross-claim for the balance of $6,750, but this was dismissed at the first trial. Although the matter was reagitated before

the Full Court, the Full Court did not interfere with the order dismissing the cross-claim. Consequently, the balance of $6,750 cannot be recovered by the first respondent and the limit of the applicant's damage, in relation to architect's fees, is $3,000.

The only other possible item is the surveyor's fee of $280. This is a rather debatable item. The fee was incurred after the estimate of 16 August 1984, but before the building application. As I have said, I think that Mr Jenkins probably conveyed to Mr Coleman at least the gist of the estimate; but it is probably a fair comment that at that point it might not have been borne home to Mr Coleman sufficiently that the project was getting out of control. Perhaps giving him the benefit of the doubt in a matter which is both difficult and minor in quantity terms, I think I should add this sum to his claim.

Accordingly, the appropriate order is that there be

judgment for the applicant against the respondents in the sum

of $3,280.

In relation to costs, whatever order one makes seems unsatisfactory. The Full Court dealt with the costs of the appeal before it; awarding costs in favour of the present respondents, who were the successful appellants. The Full Court ordered that the costs of the first trial abide the outcome of the second trial. Therefore, I have to decide what

course ought to be taken in regard to them. So far as the costs of this trial are concerned, I think that the applicant should obtain an order for costs. Although the amount is small and I have been asked to deny costs for this reason, the applicant has succeeded, albeit to a very limited degree. Although it is unfortunate from the respondents8 point of view, I think that the respondents ought to pay the applicant's costs of this trial.

Insofar as the costs of the first trial are concerned, although the applicant succeeded in persuading the Judge at that trial that he was entitled to succeed, I do. not think that there should be any order for costs of that trial. My main reason is that the trial proved unsatisfactory, according to the Full Court, because of the manner in which the applicant presented his case. This was, no doubt, not the fault of the applicant personally; but the situation was that the trial Judge was left without any real way of working out what was the appropriate amount of damages. It would be wrong

which got into confusion for reasons which have to be laid at

to burden the respondent with the applicant's costs of a trial

the door of the applicant rather than the respondent. On the other hand, I think it would be wrong to grant the respondent the costs of a trial at which, after all, the applicant succeeded; and the result of which, in terms of general liability one way and the other, is consistent with the view that I have taken today.

Accordingly, I order that the respondents pay the applicant's costs of the proceedings incurred after the date of the decision of the Full Court, but that there be no order for the costs of the proceedings at first instance prior to the hearing of the appeal in the Full Court.

I certify this and the nineteen (19)
preceding pages to be a true copy of
the Reasons for Judgment of
his Honour Justice Wilcox.

~ssociate:
Date :

Counsel for the Applicant:	R Cameron
Solicitors for the Applicant:	G W Howe and CO
Counsel for the Respondents:	G M Watson
Solicitors for the Respondents:	Creagh and Creagh
Date(s) of hearing:	14 and 15 November 1990