De Bruin v Harris
[2019] WADC 181
•23 DECEMBER 2019
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: DE BRUIN -v- HARRIS [2019] WADC 181
CORAM: STEVENSON DCJ
HEARD: 1-3 OCTOBER & 2-4 & 6 DECEMBER 2019
DELIVERED : 23 DECEMBER 2019
FILE NO/S: CIV 3722 of 2017
BETWEEN: SONYA DE BRUIN
Plaintiff
AND
RICHARD CLIFFORD HARRIS
First Defendant
REZARD PTY LTD
Second Defendant
Catchwords:
Contract - General contractual principles - Formation - Informal contracts - Factual dispute concerning scope of terms - Turns on own facts
Legislation:
Building Services (Registration) Act 2011 (WA)
Building Services (Registration) Regulations 2011 (WA)
Construction Contracts Act 2004 (WA)
Result:
Plaintiff's claim against first defendant dismissed
Representation:
Counsel:
| Plaintiff | : | Mr A Metaxas |
| First Defendant | : | In person |
| Second Defendant | : | In person |
Solicitors:
| Plaintiff | : | Metaxas Legal |
| First Defendant | : | Not applicable |
| Second Defendant | : | Not applicable |
Case(s) referred to in decision(s):
Brambles Holdings v Bathurst City Council [2001] NSWCA 61
Fazio v Fazio [2012] WASCA 72
G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251
Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295
STEVENSON DCJ:
Overview
This action is concerned with defective building work (excluding internal fit-out) which the plaintiff (Mrs De Bruin) claims was caused by the second defendant (Rezard) during construction of her prefabricated house in Bridgetown in 2017.
These reasons for decision relate to Mrs De Bruin's claim against the first defendant (Mr Harris). They concern the issue of legal liability only.
Mrs De Bruin claims Mr Harris is liable to her for the cost of making good any proven defective workmanship of Rezard pursuant to a project management agreement, or alternatively a duty of care, on the grounds that Mr Harris would:
(a)cause the house to be constructed with reasonable skill, care and diligence; and
(b)inform Mrs De Bruin if the house was not being constructed with reasonable skill, care and diligence.
Even if Mr Harris (who was not the builder) had assumed a liability of the breadth and scope set out in [3(a)], it is difficult to see in the present case, how he could do anything more, as agent for Mrs De Bruin, than say to her contractor, 'in my opinion you should fix this'. Mr Harris had no contractual rights or 'extra-curial' powers over any delinquent contractor engaged by Mrs De Bruin.
The irony in this case is, if Mr Harris owed such an obligation to Mrs De Bruin, then he would have been required to give the direction to himself because as a director and employee of Rezard he also supervised the works for Rezard. Accordingly, in the circumstances as I have found them to be, Mr Harris would have been required to wear two contradictory hats at the same time to give effect to his various roles.
For the following reasons, I am not persuaded on the balance of probabilities, that Mr Harris owed, or breached, any relevant contractual term or duty of care, arising out of his dealings with Mrs De Bruin and her husband Mr Kevin De Bruin (Mr De Bruin) which can be attributed to Rezard's building work.
In particular, I am not satisfied that the parties conduct and dealings with each other at any relevant time, when viewed objectively, manifested a mutual assent to create legal relations such that Mr Harris agreed to assume, in effect, a personal liability for the workmanship of the contractors engaged by Mrs De Bruin in the building work, including the construction work performed by Rezard. To hold otherwise would be to make Mr Harris the principal registered builder and all those who worked on the project, including Rezard, his sub‑contractors.
However, I am satisfied an agreement was reached at or after the first café meeting on 23 February 2016 between Mrs De Bruin and Mr Harris that Mr Harris would use his personal knowledge, experience and skill in the building industry to:
(a)identify an appropriate building method, including provision of associated design work;
(b)identify an appropriate builder and any other necessary trades; and
(c)advise and assist in obtaining all necessary regulatory licences, permits and approvals,
to minimize delay, with the expectation that the house would be built in the required timeframe, in consideration for payment of $15,000 in three equal tranches.
The full scope of the terms and conditions of this agreement are not entirely clear, but in my view, the parties were prepared to work together on this basis, and did so, until they were confronted with the dilemma of Mr Harris' conflict of interest arising out of his financial interest as a director and owner of Rezard.
At this point in time, in May 2016, Mr and Mrs De Bruin with full knowledge of the conflict of interest, elected to proceed as an owner‑builder, and to enter into a contract with Rezard for the supply and construction of the house. This constituted a fundamental change to the underlying contractual unity and relationship that had existed between them and Mr Harris to that point in time.
The agreement between Mrs De Bruin and Rezard undercut and, in effect, constructively resulted in the termination of the prior arrangements between Mrs De Bruin and Mr Harris. This agreement had, in any event, been substantially completed by the selection of Rezard as the builder. Mr and Mrs De Bruin did not, at that time, record the legal position she now claims in writing, or, even raise it directly in oral discussions with Mr Harris. In my view, she was too invested in the project to 'change horses' to an unknown third party and her time constraint for the build did not allow her to do so. If she had raised the issue, then the practical difficulty of Mr Harris 'wearing two hats at the same time' (as she now contends) would have been confronted and dealt with by both parties.
The conflict of interest is so immutable to the prior agreement between the parties that it could no longer continue, even if Mr Harris did in fact undertake the obligation sought to be imposed on him. They (including Mr De Bruin) appreciated at the time that Mr Harris could not sensibly give advice to Mrs De Bruin about any shortcomings of Rezard's workmanship, when he himself was a director and employee and, when he was involved in the actual construction work himself. The position would be akin to 'one eye looking forward and the other eye looking backwards' (even if it is accepted he had agreed to be responsible for 'causing the house to be constructed by the contractors without defects'). In my view, both parties were fully informed and cognisant of the nature of the conflict of interest. As a result, they agreed at the time, to proceed on a different contractual footing and understanding from this point onwards.
Matters not in dispute
Mrs De Bruin is the owner of 3 Archer Street, Bridgetown.
Mr Harris is a registered building practitioner. In addition Mr Harris was at all material times, a director and part owner of Rezard. Rezard was deregistered as a company on 15 October 2017. Accordingly, it played no role in the trial and, in practical terms Mrs De Bruin is unable to, and does not seek to, maintain any claim against Rezard.
On 23 February 2016 Mrs De Bruin, together with her husband, Mr De Bruin and Mr Harris met at a café in Shenton Park. The meeting was arranged by Mr De Bruin because they had seen a new house which Mr Harris had been involved in building. Mr and Mrs De Bruin were interested to discuss with Mr Harris the building of a similar styled home on her vacant property in Bridgetown (where she lived) for cost and time reasons known to them. Mr De Bruin had already spoken to Mr Harris by telephone before the first face‑to‑face meeting, and they had exchanged a number of written communications.
At the first meeting Mrs De Bruin provided building plans prepared by AK Homes and a second company which she had decided not to proceed with. The expressed reason for not engaging AK Homes by Mrs De Bruin was because they had advised that they could not have the build finished by the time she was expected to undertake surgery - her intention being that the home would have wheelchair access and be suitable for her post-operative recovery.
According to Mrs De Bruin, Mr Harris suggested he could 'project manage the build' for her and in this regard she subsequently provided Mr Harris with the names of two registered builders and other contractors in Bridgetown, who she suggested might be used.
Mrs De Bruin was unable, in her evidence, to indicate with any precision precisely what it was that Mr Harris was expected to undertake as 'project manager'. In general terms, she expected him to assist with the completion of relevant approvals and licences required and to liaise and coordinate with the contractors involved in the build up to 'lock-up'. It was intended she would be responsible for the internal fit-out of the home.
Mrs De Bruin considered that Mr Harris 'would be responsible for the build up to lock‑up'. As mentioned the parties did not record their understanding between themselves in writing pursuant to a scope of services and in particular the extent to which Mr Harris would be responsible for his involvement in the project.
With the passage of time, Mrs De Bruin undertook responsibility for the building on the basis that she would be an 'owner-builder'. Accordingly, there was never any formal building contract with a registered builder, who would thereby take responsibility for the build in the usual way, as had been initially contemplated by Mrs De Bruin with AK Homes. Initially Mrs De Bruin was not willing to be an owner-builder, and equally Mr Harris made it clear that he would not be the builder.
Consistent with the informality of the arrangement and understanding between the parties, Mr Harris subsequent to the café meeting proposed that his fee would be $15,000 payable in three tranches of $5,000.
Mr Harris did not at the time identify the milestones as to the timing of the payments. Mr Harris unilaterally nominated the fee for the provision of his services as 'Richard Harris'. In the course of this action Mr Harris suggested in his evidence what he says he had in mind at the time as to the timing of the payments. It is common ground that the services included provision of advice on 'alternatives for the construction method', design services with respect to plans for the proposed residence, and selection of the builder.
It is also common ground that by reason of the urgency dictated by the timeframe of Mrs De Bruin's surgery, Mr Harris would use his experience in the building industry to assist Mrs De Bruin to obtain all necessary licences, permits and approvals, and to identify and recommend a builder for the home.
Consistent with the initial understanding between the parties Mrs De Bruin was invoiced by Mr Harris for $5,000 for 'Project management fees Tranche One' on 1 April 2016. This invoice was paid by or on behalf of Mrs De Bruin (she was unsure whether she made the payment or whether Mr De Bruin caused the invoice to be paid).
In accordance with the arrangement between the parties Mr Harris as 'RH Design' prepared draft drawings to be submitted with the development application. The drawings included 'site information' of the contours obtained from 'Cottage & Engineering Services' which had been prepared in 2014 and were used by AK Homes.
Before the method of construction and builder to construct the home had been agreed, Mrs De Bruin signed a development application form on 14 April 2016 as owner and 'Richard Harris' as the applicant. Mr Harris caused the development application form to be lodged with the Shire of Bridgetown‑Greenbushes. The application was approved conditionally on 9 May 2016. The grant of the development approval did not authorise any construction and a separate building permit was required to be obtained prior to construction commencing.
Prior to the grant of the development application Mrs De Bruin was investigating whether to obtain approval as an owner-builder and she discussed this with Mr Harris. In this regard, Mr Harris advised Mrs De Bruin by email on 9 May 2016 that her concerns about being able to obtain owner-builder status should not be difficult because:
All the structural components of the house are supplied and completed by a registered builder and if that is made clear I don't think you have any problems. At the end of the day you are really only responsible for cabinets, tiling, painting and fitoff of fixtures and fittings.
Mrs De Bruin accepted in cross-examination that by 16 May 2016 she was aware that Mr Harris was proposing that she use Dorce, which she knew was a Turkish company, to supply a prefabricated home, which would then need to be constructed on site by a third party.
On 16 May 2016, Mr Harris informed Mrs De Bruin that he had 'finalised the supply and installation costs for the Dorce option'. He provided a budget for the proposed build with the Dorce component as a fixed price ($197,000) and an account from Rezard dated 16 May 2016 for $29,550 as a 'deposit on supply and installation of Dorce components, as scheduled and specified'.
Mr Harris also advised Mrs De Bruin in the written communication on 16 May 2016 as follows:
I also wish to disclose that I have an interest in the company supplying the Dorce components (Rezard Pty Ltd) and that I will also be responsible for the installation.
According to Mrs De Bruin in cross-examination this was the first time that she became aware of Rezard. She and her husband conducted an ASIC search of Rezard and as she said to Mr Harris in cross‑examination - 'Rezard was you'. As a result she accepted, at the time, that she thought 'Richard Harris' would be compromised on the basis that it was probable he would be biased to Dorce and Rezard.
Mr and Mrs De Bruin's concern was the subject of a telephone communication before Mr Harris wrote under the heading 'Rezard and Dorce' to Mr De Bruin (they had engaged in direct written communications before the cafe meeting too) and Mrs De Bruin on 25 May 2016. The email provided:
Hi Kevin and Sonya
Thanks for you call and raising your concern that the Dorce supply is being handled by Rezard and the potential for conflict of interest for me given that I have a financial interest in Rezard. Please let me explain …
Rezard is the Australian agent for Dorce and I have dealt with Dorce in the past on commercial type projects, in the initial stages of looking at your project I did not think the Dorce product would be suitable and so I was looking at alternative methods and materials such as SIPS, Tecta, Ecosystems etc. The costs of these systems was not going to meet the budget however.
When I realised that it would be possible to modify the design so that it was more compatible with the Dorce systems this option became viable. In retrospect I should have discussed my interest in Rezard as soon as the Dorce option was under consideration and for that omission I am sorry.
I do believe however that it is your best interest to deal with Rezard rather than Dorce direct for the following reasons:
•This is a supply and install arrangement so any issues with supply (i.e. missing parts, damage in transit) or installation (parts not fitting etc) will be the responsibility of a single entity subject to the usual consumer protection laws of WA.
•Rezard accepts the exchange rate risk.
•Rezard will manage and pay for all transport costs (door to door), import charges, duty and insurance.
•Rezard will produce the documentation and arrange certification (engineering etc) for the building license.
My original proposal to you was for a fee of $15,000 but in the circumstances I will not charge the remaining fee.
The time frame for the installation at this stage is for early September and we expect the structure to be complete in two weeks.
Regards
Richard Harris
(emphasis added)
Notwithstanding whatever was agreed between the parties as a result of Mrs De Bruin's decision to choose the Dorce option and to enter into an agreement with Rezard for the supply and installation of the component home as an owner-builder, the tax invoice for the deposit dated 16 May 2016 was paid with her agreement.
In examination-in-chief Mrs De Bruin said that the communication by Mr Harris on 16 May 2016 was the first time that she became aware in her discussions with Mr Harris that he had an interest in the company (Rezard) which was proposed to supply the Dorce components.
Also in examination-in-chief Mrs De Bruin said that the two week installation period for the Dorce components referred to in Mr Harris' email of 25 May 2016 was of interest because she was still concerned about having the home completed in time for her rehabilitation following surgery. Her evidence was that she did not ever discuss any of the issues in the 25 May 2016 email with Mr Harris.
Mrs De Bruin's submission is that notwithstanding the agreement to allow Rezard to supply and install the Dorce prefabricated home for her (as owner-builder), the original project management agreement made in February 2016 continued to apply to Mr Harris, even though he was a director and a controlling mind of Rezard which company was contractually responsible to Mrs De Bruin for the supply and installation of the prefabricated home from Dorce.
In other words the plaintiff's legal contention is, if a term is implied to the effect that 'Richard Harris' agreed to supervise and advise Mrs De Bruin of any substandard or defective workmanship by any of her contractors, including Rezard, that he was effectively required to 'supervise and report on his own work' because he was at all material times wearing two hats, namely, 'Richard Harris the project manager' and 'Richard Harris as Rezard'.
Relevantly and importantly, in cross-examination Mrs De Bruin gave evidence of her understanding of her relationship with Rezard at the time she received the deposit invoice from Rezard as follows (ts 239):
So having received an invoice from Rezard in the sum of $29,550 and having paid it, Mrs De Bruin, did you think you then had a relationship with that company? - - - No. I thought I had a relationship with the builder, with yourself.
Mrs De Bruin went on to say:
I paid the bill knowing that you were essentially going to project manage the build and that you would be supplying the installation of the components and you would be organising the erection of the building.
Mrs De Bruin confirmed that when she referred to 'you' she was referring to 'Richard Harris'. Mrs De Bruin accepted that she had paid the invoice of $29,550 to Rezard - not Richard Harris.
At this stage in the evidence the legal position as contended for by Mrs De Bruin was the subject of discussion as follows:
… But you say, do you not, that at that time, albeit that you paid this amount of money to Rezard, you had no arrangement with them, no obligations between the two of you.
METAXAS, MR: She didn't say she - she said she didn't think she had a relationship with Rezard. They're the words.
STEVENSON DCJ: Her evidence was that she thought she had a relationship with the builder Mr Harris.
METAXAS, MR: Yes.
STEVENSON DCJ: Is he the builder or the project manager? I'm totally confused, with respect.
METAXAS, MR: She said he was the project manager and the builder. She - I thought she used both words in that response.
STEVENSON DCJ: So is he also the builder now, is he, not the project manager?
METAXAS, MR: I'm sorry
STEVENSON DCJ: I just don't understand.
METAXAS, MR: No, no. Sorry. Our case is Mr Harris was to project manage the construction of the development.
STEVENSON DCJ: Right, but she just referred to him as the builder.
METAXAS, MR: And that - that obligation - I'm sorry. That obligation included that he would supervise the construction.
STEVENSON DCJ: Well, that's not what she just said.
METAXAS, MR: I'm sorry, but that's the pleaded case.
…
HARRIS, MR: Yes. Thank you.
Mrs De Bruin, I don't want to belabour this point, but I do want to understand your position? … Sure.
At this time on 16 May when you paid an account to Rezard, what role did you think Richard Harris was playing for you? … Richard Harris was project managing the building Bridgetown. Richard Harris was the director. Is that correct? Are you the director of Rezard? Is that your title?
Well, actually, I think -
STEVENSON DCJ: Well, you're - you're not meant to ask questions? Sorry.
Mrs De Bruin. You're? … As - as a person involved in the company of Rezard, you would be using Rezard to build the - the home in Bridgetown.
HARRIS, MR: So is your position, Mrs De Bruin, that they're sort of one and the same? Richard Harris and Rezard.
METAXAS, MR: With respect, I think the questions to the witness should be questions confined to matters of fact, not legal conclusions.
Following this point in the evidence the discussion continued in the absence of Mrs De Bruin.
The narrative then continues by reference to an email sent by Mrs De Bruin to Mr Harris on 3 June 2016 in which she requested some information from Mr Harris to enable her to complete an application for an owner-builder licence. Her stated opinion was that she considered that she had a builder managing her build up to lock‑up and she accepted, as was the case, that Mr De Bruin was manufacturing some of the component steel columns to be used in the building (which of course were structural and not fit-out). At this stage the parties all appeared to be working together amicably towards achieving a build on the basis that Rezard would be the builder as a contractor to Mrs De Bruin who would be an owner–builder.
As a result of a site visit by Mr and Mrs De Bruin, Mr Harris obtained at their request an amendment to the development approval to change the location of the house pad on the block. This was approved by the Shire of Bridgetown‑Greenbushes on 1 July 2016.
On 11 August 2016, Mrs De Bruin was granted an owner‑builder approval by The Building Services Board pursuant to the Building Services (Registration) Act 2011 (WA). This approval expired on 11 February 2017 and was conditional on the 'completed structure [being] checked by an engineer or building surveyor (cyclone area)'. It was confined to building work comprising 'class 1(a)(i) construct new dwelling' at lot 329/3 Archer Street, Bridgetown.
Although Mr Harris had agreed to waive any further payment by Mrs De Bruin of the two additional $5,000 tranches as agreed in February 2016, he continued to provide services to her to assist her with the build. This included provision of documents from OFFSITE Consulting Structural Engineers for the project (which communication was addressed to Mrs De Bruin) and dated 13 July 2016.
In addition, Mr Harris provided a letter by himself (not Rezard) dated 15 July 2016 for the purpose of assisting Mrs De Bruin to obtain a building licence as owner-builder. Mr Harris explained the reason for this in his evidence. It is consistent with the underlying tenor of the dealings between the parties.
This letter is relied upon by Mrs De Bruin as confirmatory evidence in writing that Mr Harris (in person) was continuing to hold himself out as under an obligation to personally guarantee by his supervision that the house would not be constructed with any defects. In my view, the letter was written for a purpose, namely to assist Mrs De Bruin to obtain her registration as a builder-owner. It was not intended by Mr Harris to create or confirm legal relations between him and Mrs De Bruin. Mr Harris was cross-examined about the content of the letter and to the extent it was suggested he may have mislead the licencing authority that is a matter for the regulatory body.
By email dated 21 July 2016 Mr Harris advised Mrs De Bruin that he had completed confirmation that the Dorce materials and specifications met:
… all the relevant Australian standards, the environmental performance requirements and the structural engineer is ready to certify the structural elements. In view of this I would like to start fabrication if you are also ready to proceed I will arrange the invoice for the next tranche for this stage ($78,800).
Mrs De Bruin wrote to Mr Harris subsequently on 21 July 2016 in relation to some queries with respect to the building plans which she wanted addressed before fabrication commenced. Mr Harris attended to these, and other matters of change, in his capacity as an employee of Rezard, who had been contracted by Mrs De Bruin as builder.
On 22 July 2016, Mrs De Bruin requested from Mr Harris a copy of the final working plans from Dorce for review. The communications referred to above were between Mrs De Bruin and Mr Harris.
On 24 July 2016 Mr Harris by email to Mrs De Bruin and blind copy to Mr Rezar Manesh (who at all material times was a director of Rezard) said that he had noted the issues raised and sought confirmation that the further information was sufficient.
On 31 July 2016 Mr Harris sent an email to Mrs De Bruin enclosing revisions as discussed and advising:
…
In respect to the enclosed schedule of costs I can confirm the fixed price component - ie the first group of costs at $302,198 will be fixed provided the changes to the window schedule does not raise the price from Dorce.
The second group of costs are either items provided by you (in which case there will be no cost from us) or materials yet to be selected.
By email dated 2 August 2016 Mr Harris sent to Mrs De Bruin a second invoice from Rezard for $78,800 which Mrs De Bruin said was paid by her. This payment permitted, according to Mr Harris, by email dated 4 August 2016, Dorce to start the fabrication of Mrs De Bruin's home.
Thereafter there was a series of communications between Mrs De Bruin and Mr Harris (as Rezard) with respect to changes to structural requirements and other requests.
In addition to communications between Mrs De Bruin and Mr Harris with respect to delays in the fabrication by Dorce on 11 October 2016 Mr Harris sent an email to Mr De Bruin in relation to a revised progress payment schedule (Mrs De Bruin was not copied). The schedule noted future payments for final payment prior to shipping, house fabricated on site, finishes and services and provisional sums.
On 24 October 2016, Mrs De Bruin completed and signed an application for a building permit by implication as owner and builder as she described herself as the owner and the builder in the application. This was consistent with the owner-builder approval she had obtained for the construction of her home.
The documentation for the building approval also included the letter from OFFSITE dated 25 October 2016 to 'Richard Harris, RH Design' confirming that the prefabricated housing unit as a structure complied with various Australian regulations.
On 22 November 2016, Mr Harris provided an invoice to Mrs De Bruin for reimbursement of shire fees of $1,817 and an invoice from Rezard Pty Ltd confirming receipt of $89,141 from Mrs De Bruin.
On 24 November 2016, a building permit was issued by the Shire of Bridgetown‑Greenbushes to Mrs De Bruin as owner-builder for the construction of a new single story dwelling and carport on her property.
In early December 2016 there were communications between Mr De Bruin and Mr Harris with respect to fabrication of some of the steel components by Mr De Bruin. There were also communications involving Mr Manesh (of Rezard) with respect to importation and customs requirements concerning the shipment from Dorce.
On 2 August 2016, Mrs De Bruin emailed Mr Harris and asked whether he wanted to send through an invoice for the build deposit.
On 6 September 2016, Mr De Bruin emailed Mr Harris and asked:
We are just trying to organize a bank loan and being owner builders the bank is a bit reluctant. They would like to see a fixed price contract is there any chance you would be able to do a fixed price contract for your part? (emphasis added)
On 8 September 2016 Mr Harris responded to Mr De Bruin:
Hi Kevin
No problem with a fixed price on our scope etc. I will put together a draft for you over the next few days.
On the matter of your need to make contact with the Turkish company can you let me know what you would like us to do and/or the outcome you are looking for.
On 14 September 2016, Mr Harris emailed Mr De Bruin and said:
Hi Kevin
Here is a standard MBA contract that we can modify to suit - will this be acceptable to you and the bank?
I am working the numbers on the basis that the finishing work (painting, cabinets etc to be the client's work) will be provisional sums (ie not fixed and for the bank's benefit). The supply and installation of the structural components and other items supplied by Dorce will be at a fixed price. I'm just waiting on the final documents to be certain of the scope and so they can be added to the contract.
Regards
Richard
On 21 September 2016, Mr De Bruin responded to Mr Harris and said:
I am sure I replied with an email from my phone but just in case, would you please proceed with the standard MBA contract ASAP.
On 4 October 2016, Mr Harris emailed Mr De Bruin and attached a draft contract and advised that he had left 'the fixed price items and the provisional sums as lump sums to give you maximum flexibility with the bank etc'. Mr Harris then indicated the actual breakdown in the email.
The document entitled 'lump sum contract for medium works' dated 5 December 2016 was prepared by Mr Harris (on behalf of Rezard) is blank so far as the owner's name and signature is concerned. However, 'the contractor' is described as Rezard Pty Ltd and Mr Harris, on behalf of Rezard, signed the written document on 5 December 2016 which is the typewritten date next to his signature.
The evidence of Mrs De Bruin was that the contract document was not signed by her and she did not see it at the time. It appears to be common ground that it was provided on her behalf to the bank for the purpose of obtaining finance. It follows, the primary reason for the preparation of the document as requested by Mr De Bruin on behalf of Mrs De Bruin was achieved. Whether or not it gives rise to any formal contractual relations is moot although the parties have in their subsequent dealings proceeded to conduct themselves on the basis of the contractual obligations contained in the agreement. See for example, provision of a notice of practical completion and a letter of demand written on behalf of Mrs De Bruin by her lawyers on 12 May 2017 which relies on cl 18 of the building contract.
Mrs De Bruin in her evidence referred to exhibit 1.365 which is a photograph depicting Mr Harris on site with three others in the course of the erection of the prefabricated kit build. It is a live issue for these proceedings as to which hat Mr Harris was wearing, that is whether he was on site assisting with the build on behalf of Rezard or on site as 'project manager' for Mrs De Bruin. Arguably Mrs De Bruin would contend that he was wearing both hats.
The pleadings
Mrs De Bruin's statement of claim pleads that she entered into a contractual relationship with Mr Harris in February 2016 whereby he agreed to 'project manage' the construction of her house in Bridgetown. It is common ground that at the time of the formation of the agreement a decision had not been made if the construction would be undertaken by Mrs De Bruin as owner-builder, or by a registered builder on her behalf.
By reason of her provision to Mr Harris of the names of two registered builders in Bridgetown it is likely (and for the reasons which follow I find) that at this point in time both parties envisaged that a registered builder would undertake the building works. This is important because it potentially informs, at the outset, the services which Mr Harris was prepared to offer and undertake for Mrs De Bruin.
If a registered builder had been engaged to construct Mrs De Bruin's home then there would have been recourse and other legal avenues open to her in the event of defective workmanship by that builder. Obviously, one reason for these proceedings being maintained against Mr Harris is to attempt to make him personally liable for Rezard's alleged defective workmanship in circumstances where Rezard was a contractor to Mrs De Bruin, and not engaged as the registered builder.
The flexibility and uncertainty with respect to the precise services to be supplied by Mr Harris to Mrs De Bruin is borne out by the evidence of Mrs De Bruin herself and the way in which their commercial relationship evolved. For example, it appears Mr Harris unilaterally decided the cost of his retainer and there does not appear to have been any indication at the time to Mrs De Bruin of the milestones for the payment of the three tranches of $5,000.
On one view, it is possible Mr Harris and Mrs De Bruin considered that Mr Harris would, amongst other things, assist with identifying contractors or a registered builder to undertake the build which would have been a comparatively simple task. The fact that this did not occur, and that she proceeded as an owner‑builder whereby those who were involved in the build were engaged, in effect, as her sub-contractors is an entirely different proposition to what might reasonably be regarded as having been agreed between the parties in February 2016.
In any event, Mrs De Bruin's decision to proceed with Rezard with knowledge of the conflict of interest of Mr Harris, demanded that the nature of the legal relations between them at that point in time (whatever it was) would need to be directly and expressly reconsidered. It was not (at least openly and in writing). This 'head in the sand' approach, in hindsight, has not been in the best interests of either party.
On one view, the acceptance of the offer by Mr Harris to waive payment of the unpaid $10,000 of his initial retainer if Mrs De Bruin proceeded with Rezard, indicates there was a desire on her part to continue to work with Mr Harris but that the nature of their relationship changed, and that as a result she was content to proceed on the basis that he would be involved through his association with Rezard. In this way, Mr Harris did have a responsibility for Rezard's workmanship, but as a director and owner of Rezard, rather than in his own personal capacity.
In the statement of claim Mrs De Bruin relies on the facts and matters pleaded in par 5 ‑ par 12 to contend that there was an agreement between herself 'as principal' and Mr Harris 'as consultant to project manage construction of the Bridgetown house', and further and alternatively that Mr Harris owed her a duty of care.
The facts and matters relied upon include alleged statements made by Mr Harris to Mr De Bruin during a telephone conversation in December 2015 to the effect that he was an experienced builder and 'could build the Bridgetown house'; the first café meeting between the parties on 23 February 2016 and subsequent email communications between them; payment of Mr Harris' first tax invoice for $5,000 for 'project management fees'; statements made by Mr Harris in his email to Mr and Mrs De Bruin dated 25 May 2016 as a result of his conflict of interest due to his personal interest in Rezard; and finally, a plea that during the period of construction from 'about 24 October 2016 to 21 March 2017 Mr Harris was on site each day (1) to construct the Bridgetown house; further and alternatively (2) to supervise construction'. Each of these matters are discussed in detail in these reasons.
By reason of these matters Mrs De Bruin contends that there was a 'project management agreement', or further and alternatively a duty of care, that Mr Harris would:
(a)cause the Bridgetown house to be constructed with reasonable skill, care and diligence;
(b)inform her if the Bridgetown house was not being constructed with reasonable skill, care and diligence and this applies to both,
so as to avoid the Bridgetown house being constructed with faults and defects.
During the evidence I raised with Mr Metaxas (who did not author the statement of claim) the vexed question of when Mrs De Bruin contends 'the project management agreement' came into existence such that it constituted a legally enforceable contract. Notwithstanding that the pleading relies on and expressly refers to the facts and circumstances alleged to have occurred in the period from December 2015 to 21 March 2017, Mr Metaxas submitted 'that the agreement was made on 23 February 2016'. He said he did not understand there to be any confusion about this. This is broadly consistent with the testimony of Mrs De Bruin (see below). However, Mr Harris did not indicate at the meeting his fee for the proposed services to be rendered. This might be regarded as a fundamental term, but maybe not, as Mrs De Bruin herself was unsure of precisely what services Mr Harris was going to provide (the scope of the agreement).
If one accepts this is Mrs De Bruin's case, that is, the contract was entered into at the first meeting on 23 February 2016, it is put by her that the agreement continued from this point in time unchanged - even after Mr Harris disclosed he had a conflict of interest and also after Mrs De Bruin decided to undertake the project as an owner‑builder (thereby not utilizing a registered builder). This proposition is consistent with Mrs De Bruin's evidence that she considered the agreement started on 23 February and continued unchanged until 'lock‑up' was achieved by the builder.
By his defence Mr Harris admits he informed Mr and Mrs De Bruin that he was an experienced builder but says he made it known to them that he had ceased being a builder. The defence itself denies that Mr Harris offered to 'project manage the build of the Bridgetown house' at the first café meeting on 23 February 2016, and says 'he only proffered that he could assist with the preliminary tasks for the building of [Mrs De Bruin's] house in Bridgetown'.
Mr Harris' defence pleads that he entered into an agreement with Mrs De Bruin that he would 'assist with preliminary tasks for the building of the plaintiff's house in Bridgetown' for a fee of $15,000 for his services. The fee was to be paid (arguably consistently with the topics discussed at the first café meeting) by three tranches of $5,000. The first tranche for 'a design and obtaining planning approval', the second for 'the working drawings and obtaining a building licence', and the third for 'the selection of materials and building method based on the above and a recommendation on the builder to be engaged'.
Mr Harris by his pleaded defence denies that he agreed he would 'project manage the construction of the Bridgetown house' in his email sent to Mrs De Bruin on 24 February 2016. Mr Harris agrees that Mrs De Bruin paid the first tranche of $5,000 pursuant to their arrangement which was for design and obtaining planning approval. Mr Harris denied the construction contended for by Mrs De Bruin of his email to Mr and Mrs De Bruin dated 25 May 2016 due to his conflict of interest and his consequent offer to forego the balance of $10,000 of his service fee if Mrs de Bruin elected to enter into a contract with Rezard for the build.
Mr Harris formally denied he was engaged to be onsite each day to carry out or supervise the construction of the Bridgetown home, and further that he did not at any time provide a running commentary to Mr De Bruin in relation to the progress of the construction works.
On this basis, Mr Harris in his defence denies that he owed Mrs De Bruin a duty of care in relation to the construction works by the builder (which as it turned out was Rezard) as opposed to the services that were provided by him prior to determination of the initial agreement by Mrs De Bruin when she contracted Rezard as the builder.
In summary, Mr Harris denies he was personally engaged at any time to manage the construction of the project and that any loss suffered by Mrs De Bruin as a result of the build of the Bridgetown house was not as a result of any actions or omissions on his part (as opposed to Rezard).
Mrs Sonya De Bruin
Mrs De Bruin gave evidence in the first tranche of the hearing on 2 and 3 October 2019, and subsequently during the second tranche on 2 December 2019. I accept Mrs De Bruin did her best to give honest and truthful evidence bearing in mind that over three years had elapsed with respect to many of the communications. It was also difficult for her because at all material times she was living in Bridgetown and Mr De Bruin was living in Perth. Many of the written communications appear to have been exchanged between all three parties, but at times she was not privy to all of the communications. This manifested itself in her frustration when giving evidence because of her inability to answer some questions put to her, for example in relation to the statement of claim filed on her behalf. It is not clear whether she was given an opportunity to review it for accuracy before it was filed as part of the writ of summons to commence the proceedings in this court. Mrs De Bruin's evidence was that she could not recall if she had seen the statement of claim at any time before it was shown to her in the witness box by Mr Harris. In infer from this evidence, and other evidence, that Mr De Bruin was instrumental in giving instructions to Mrs De Bruin's lawyers for the purpose of these proceedings.
With due respect to Mrs De Bruin, and taking into account her understandable frustration at being unable to answer some of the questions put to her because of the circumstances she was in, there was demonstrable confusion on her part as to the nature of the legal relationship she was in with Mr Harris and also Rezard (see below). Consistent with the personal communications between her and Mr Harris throughout the course of the project, including after Rezard became involved, it would have been confusing and unclear for her as to whether or not at the relevant time Mr Harris was acting on his own behalf as 'project manager for Mrs De Bruin' or as an agent and owner of Rezard.
In any event, Mrs De Bruin did, at times in her evidence, demonstrably appreciate the importance of distinguishing between Mr Harris and the services he provided to her as opposed to the work undertaken for her by Rezard. Although the line was blurred in various parts of her evidence, she was usually able to fall back to her pleaded case against Mr Harris.
It is clear with the benefit of hindsight that she now fully appreciates the obligations that she undertook as owner-builder and also understands the legal liability sought to be imposed on Mr Harris as opposed to Rezard. She was cross‑examined at length by Mr Harris and she responded in the same way in her answers.
Mrs De Bruin was, to her credit, open to the fact that she did not fully appreciate or understand the specific services that she had engaged Mr Harris to provide to her at the outset. It appears that a working relationship was formed between her and Mr Harris and this relationship continued even after Rezard became involved as the primary builder. Unfortunately, there was no clarification between Mrs De Bruin and Mr Harris at the point in time that she decided to engage Rezard as to the role of Mr Harris that had been undertaken to then, even though she and Mr De Bruin obviously appreciated Mr Harris' conflict of interest by reason of his interest in and part ownership of Rezard.
When giving evidence Mrs De Bruin was in between a rock and a hard place. Even before the first café meeting there were a number of communications between Mr De Bruin and Mr Harris to which she was not privy at the time. Many of the subsequent discussions and written communications occurred between Mr De Bruin and Mr Harris, sometimes without the knowledge of Mrs De Bruin. For example, by 6 January 2017 Mrs De Bruin's evidence was that she had not seen the written contract dated 5 December 2016 prepared by Mr Harris on behalf of Rezard for the purpose of her obtaining bank finance. Apparently it was not signed by her because she was not asked by Mr De Bruin to do so, even though it appears he made the contract available to the bank. Mrs De Bruin was also unsure if Mr Harris had been paid more than the first tranche of $5,000 for his services as agreed before Rezard became the preferred contractor for the build. This is because she did not know, as she said, if Mr De Bruin had paid other amounts to Mr Harris as 'project manager'.
Mr De Bruin was also dealing directly with Mr Harris in relation to his fabrication of some the steel work for the construction work. The frequency of the communications appears to have increased between them as the construction work on the site progressed. Mr De Bruin with his business background and experience, understandably, also played an important role supervising the works and communicating with Mr Harris as he was the link to co‑ordinating the finishing trades on site (see the communications dated 5 December 2016 and 6 January 2017).
Mrs De Bruin's disconnect also probably arose in part because Mr De Bruin did not always attend the café meetings with Mr Harris, even though at the time, Mrs De Bruin was living in Bridgetown and Mr De Bruin was living in Perth. Another example arising out of the evidence was Mrs De Bruin's lack of knowledge of the reference in Mr Harris' email to Mr De Bruin and herself dated 20 December 2016 to - 'our programme as discussed still being on track'. The implication is that it is a reference to a discussion between Mr Harris and Mr De Bruin to which she was not privy.
I accept Mrs De Bruin did the best she could in the difficult circumstances while giving evidence. She took the opportunity, whenever she could, to repeat that Mr Harris agreed to 'project manage' her build even though she did not know what service this involved and precisely what was being offered by Mr Harris. The relationship was built on trust and progressed well until issues of workmanship emerged in the construction works by Rezard. Both parties, attended to matters as required and Mr Harris was amenable to, and did, prepare letters and other documents to enable Mrs De Bruin to proceed as an owner‑builder with Rezard contracted to undertake the building works. It must be assumed that the parties fully appreciated what was being done and where their financial and commercial risks lay.
Mr Kevin De Bruin
Mr De Bruin is the husband of Mrs De Bruin. At all material times he lived in Perth while she lived in Bridgetown.
It is common ground that Mr De Bruin played a significant role as advisor and agent of Mrs De Bruin in relation to the construction of the house in Bridgetown.
Mr De Bruin was the first person to make contact with Mr Harris and progressed the matter before the parties first met on 23 February 2016. As payments became due, both Mr and Mrs De Bruin variously arranged for payment of the accounts. Mr De Bruin, relying on his experience in the building industry, played a significant role in monitoring and supervising the document trail, authored many of the written communications to Mr Harris and Rezard, and was involved in the supervision and inspection of the construction works by Rezard.
Since 1995, Mr and Mrs De Bruin have owned a business that manufactures remote area buses. Prior to this, Mr De Bruin was part owner of a construction company with his brother. The company constructed industrial and commercial buildings using concrete tilt-up panels.
Mr De Bruin clearly understood the import of questions put to him in cross-examination. Some of his answers were non-responsive. This was caused in part by his apparent need to repeat the proposition like a mantra: Mr Harris as project manager was responsible for Rezard's performance under its contract. For example, in cross‑examination Mr De Bruin accepted he was responsible for the supervision and payment of the trades involved in the internal fit-out. His role in this regard was compared to the role that Mrs De Bruin contends Mr Harris exercised in respect of the construction works by Rezard. However, when asked if he would describe his role with respect to the finishing trades as 'a project manager', his response was 'no'. As a result, Mr De Bruin was asked by Mr Harris what duties he would expect a project manager to perform. His response (ts 468) was 'I don't know. A project manager would be to, project manage the build. To lock up'. The rider 'to lock up' was added by Mr De Bruin to limit the point in time that Mrs De Bruin says Mr Harris agreed to act as project manager, and to limit his duties to exclude the finishing trades.
Mr Richard Harris
Mr Harris is self-represented. He describes himself as a self‑employed building consultant, offering services to building contractors, practitioners, architects, engineers and other persons that may require advice on how to proceed with building related projects. In addition, Mr Harris is a 'registered building practitioner'. He was first registered in May 2003. It also seems that at the relevant time Mr Harris was a 'registered building contractor'. But Mr Harris professed he was unaware of this and he maintained that this was a register error.
At all material times Mr Harris and Mr Reza Maesh were directors of Rezard. Rezard was deregistered by the Australian Securities Investment Commission on 15 October 2018. According to Mr Harris Rezard is insolvent.
In summary, Mr Harris contends that he agreed to provide services to Mrs De Bruin on the basis that he could assist her with management of certain aspects of the construction of a home in Bridgetown. Mr Harris maintained that he only ever agreed to assist Mrs De Bruin up to the point that she selected a builder for the construction of the house. Mr Harris says he never undertook in his personal capacity at any time to be responsible for the supervision of the construction works by the selected builder.
Mr Harris in his evidence said that he could not be the registered builder. He says he told Mr and Mrs De Bruin from the outset that because he had liquidated his building company he 'no longer wanted to be involved in building per se'. He said the services he provided 'was on the basis that [he] could assist [Mrs De Bruin] with management of certain aspects of it' and that they would need to engage a builder.
Mr Harris maintains that by reason of Mrs De Bruin engaging Rezard to construct the house, from the point that decision was made onwards, he was acting at all times as 'Rezard'. Mr Harris accepted, in cross‑examination, that he was, as a director of Rezard, also the manager and superintendent for Rezard's work on site. In this role he was at all material times during the construction works undertaken by Rezard, acting as a director and employee of Rezard.
Mr Harris, in effect, characterised the relationship between himself and Mr and Mrs De Bruin as a 'building consultant' engaged to assist Mrs De Bruin with the preparatory work necessary which included identification of the building method, assistance with obtaining all necessary licences and approvals and selection of a builder. It follows, that the interpretation and construction put to him in cross-examination by Mr Metaxas by reference to the written communications between the parties was not in every instance accepted. I find Mr Harris answered questions directly and without equivocation.
First café meeting - 23 February 2016
(a) Evidence of Mrs De Bruin
The evidence of the parties as to what was discussed at their first face to face meeting is broadly consistent. One point of difference is that Mr Harris says he did not mention the fee at the meeting and this was only advised to Mrs De Bruin in his email dated 25 February 2016. Whether he did, or did not, does not materially affect the findings. As a credibility issue between the parties, given the passage of time, this is not of such weight on its own to be determinative of other matters.
Mrs De Bruin, as already referred to above, doggedly stuck to the position that Mr Harris agreed he would 'project manage the build until lock-up' and this included taking responsibility for the work of the builder. As far as she is concerned, nothing changed after she elected to contract Rezard and after she decided to proceed as an owner‑builder, even though at the time she fully appreciated Mr Harris had a conflict of interest.
(b) Evidence of Mr De Bruin
Mr De Bruin's evidence was that he told Mr Harris 'that Sonya was chasing economical, green, well-insulated, wheelchair accessible method of construction in a timely fashion that, because of the pressing deadline we had with Sonya's operation - - - we were on a tight timeframe to have this building ready'. The reason for the timeframe was also mentioned by Mrs De Bruin in her evidence. Apparently, according to Mr De Bruin, Mr Harris said in response to the timeframe deadline, that 'he would project manage the construction for us'. This does not admit to any particularity of what Mr Harris was offering to do or to provide by way of services, and critically it does not expressly say to what point in time he was prepared to act.
Mr De Bruin said at this stage they were looking at all possibilities even though they were interested in a concrete tilt-up design panel because they considered it would be faster and more economical. This was why they approached Mr Harris. The slope of the property was against this method and Mr Harris said so.
According to Mr De Bruin, even though there was only a general understanding that the house to be built would be based on concept drawings prepared by an architect and the construction method 'was still to be explored' he said Mr Harris (page 417) 'suggested that he would project manage the build for Sonya, that he would charge $15,000. That that would be cheap because we would - and the money that he would save would be recovered three or four times over'. The mentioned budget was 'around $350,000'.
By the time of the meeting, Mr De Bruin and Mr Harris had already exchanged some ideas and information concerning the possible use of Tecta Systems as a construction method. Notwithstanding the considerable uncertainty about any future build at the time of the meeting, Mr De Bruin maintained 'we were comfortable and Richard Harris committed to project manage it for $15,000'. In cross‑examination, Mr De Bruin said Mr Harris 'offered' at the meeting to 'project manage the construction of the house'. Even though Mr De Bruin kept saying that Mr Harris agreed to 'project manage the build', he said Mr Harris did not outline the various steps that would need to be taken. In contrast to this position, Mr De Bruin then accepted by reference to the various permits and licences required to be obtained, that Mr Harris did say that he would be able to assist to this extent.
(c) Evidence of Mr Harris
The evidence of Mr Harris about the 23 February 2016 meeting was as follows (ts 487):
… That - that was our first face to face meeting and a number of things were discussed. Initially Mr De Bruin had raised the option of building a concrete house at Bridgetown. And I advised him that that wouldn't be a viable option, given that concrete is not suitable for single level houses. And the site conditions would make it very expensive. As the discussion progressed, I was able to explain to them the sort of services I could provide to them and I suggested that they would need development approval from the Shire of Bridgetown. They would then proceed to require a building licence and that would entail engaging a structural engineer, receiving a certificate of energy rating, a - and various other documents and materials that the Shire would require. I've given this very serious thought, your Honour, and my recollection is that at no time did I suggest that I would be the project manager. I said I could assist them in all of these items and that would bring them to a position where they could appoint a builder and proceed. I would also investigate the various building methods and ways and means of delivering whatever method or whatever material they chose. Again, I have looked to my memory and I cannot recall that we discussed that the project would only - would be taken to a Lock Up stage. My clear recollection is that my involvement would be up to the appointment of a builder. …
Mr Harris maintained that he did not nominate the fee for his services at the meeting on 23 February 2016 as he needed time to consider what services he could provide.
Mr Harris was cross-examined with respect to the scope of works which he considered to be the preliminary tasks for the building of the house and which he maintained he had agreed to assist Mrs De Bruin with. He denied that his involvement in these tasks was agreed to be for the duration of the building. He maintained he 'communicated to Mrs De Bruin the stages that needed to be undertaken, the approvals that needed to be obtained before she could commence building' on the basis that these were all preliminary matters which had to be completed.
In cross-examination about the meeting, Mr Harris opined at ts 524 as follows:
I think it's fair to say that neither party clearly defined exactly what the services were to be. But I had it very clear in my mind what I intended to do.
Mr Harris rejected the proposition that at the time of the meeting he could have nominated himself as the builder. Mr Harris maintained 'there was no intention at that point in time that I would be involved with the building'. Mr Harris accepted that Mr and Mrs De Bruin did not say that he could not nominate himself as the builder because, as he said:
They didn't need to because I'd informed (them) that I couldn't be the builder.
In summary, Mr Harris contended in his evidence that the agreement to assist Mrs De Bruin with the services which he identified came into effect after the meeting of 23 February 2016 and was complete on her acceptance of his proposed fee of $15,000. But Mr Harris denied there was ever any intention, at that time, that he would be involved in the building as a project manager or supervisor, or in any other capacity.
The development approval
Mr Harris assisted Mrs De Bruin to obtain a development approval which was conditionally granted by the Shire of Bridgetown‑Greenbushes on 9 May 2016. It is noteworthy that this was at about the time that Mr and Mrs De Bruin were deciding on proceeding as an owner-builder and using the Dorce product.
An amended development approval was granted on 1 July 2016 as a result of a request by Mr and Mrs De Bruin to change the house footprint on the block. Mr Harris facilitated this variation, which was after Mrs De Bruin had decided to contract Rezard as the builder to supply and erect the house.
Owner-builder licence
On 11 August 2016 the Building Services Board granted Mrs De Bruin owner-builder approval pursuant to the Building Services (Registration) Act 2011 to construct a class 1(a)(i) new dwelling. Regulation 3 of the Building Services (Registration) Regulations 2011 (WA) defines an owner-builder as follows:
…
owner-builder, in relation to building work, means a person who has an owner-builder approval granted under the Building Services (Registration) Act 2011 section 45 to carry out the building work;
...
Prior to this, by email dated 15 July 2016, Mr Harris provided Mrs De Bruin with a package of documents which he considered would be sufficient for the purpose of obtaining her a owner-builder approval. One of these documents was a letter dated 15 July 2016 signed by Mr Richard Harris as building practitioner 11382. This letter provided as follows:
15th July 2016
Dear Sonya
Proposed House: 3 Archer Street Bridgetown
I am pleased to confirm that I will assist you in the constructing of your new residence at the above address. In particular, I will supervise the supply and installation of all structural components as noted:
Concrete footings
Structural Steel
External and internal walls
Structural roof framing
Rood sheeting
Windows and doors installation.
External decking.
I am also available for assistance with the finishing trades.
Yours sincerely,
[signed]
Richard Harris
Building Practitioner #11382
In cross-examination, it was put to Mr Harris that this letter was sent in his personal capacity (as opposed to Rezard) and is consistent with the project management agreement contended for by Mrs De Bruin, namely, that he would be involved in the construction of the house. Mr Harris, in his evidence, maintained that he had provided the letter to Mrs De Bruin as a 'supporting document' for her application and to assist her in this regard.
Mr Harris said 'the letter was written for a purpose and so the language was relevant to that purpose' and 'it is a letter that must be read in the context of the time it was written'. Mr Harris said that if the letter constituted an offer at that time, on 15 July 2016, there was no acceptance of it and Mrs De Bruin did not act on the letter. Mr Harris said he signed the letter under his name deliberately so he could use his building practitioner number with full knowledge that it would aid Mrs De Bruin's application. Consistent with this proposition the letter concluded with the statement 'I am also available for assistance with the finishing trades' - by this time there had been discussion that Mr and Mrs De Bruin would be responsible for this part of the build to minimise costs.
The package of documents provided by Mr Harris to Mrs De Bruin included a draft owner-builder approval application form which was annotated by Mr Harris to assist Mrs De Bruin. In particular, it indicated that she could complete by way of comment in order to obtain 40 points, his name (not Rezard) in response to the question under the heading 'type of knowledge - supervision by registered building surveyor, registered architect, registered builder or professional engineer (building related)'. Mr Harris was a registered building contractor, and again in order to facilitate Mrs De Bruin's application being granted, he was content for her to insert his name at this part of the form. The actual application as lodged is not in evidence but it is inferred that Mrs De Bruin inserted Mr Harris' name together with his building practitioner number.
In my view, Mr Harris' letter of 15 July 2016 is yet another example of him being prepared to assist Mr and Mrs De Bruin in obtaining necessary approvals and licences to enable the construction of the house to proceed. By this time, of course, Mrs De Bruin had decided to engage Rezard for the building contract and Mr Harris would, as a result, be involved.
Mr Harris gave evidence as follows in response to the statement in his email dated 9 May 2016 to Mrs De Bruin that 'all the structural components of the house are supplied and completed by a registered builder and if that is made clear I don't think you have any problems' (in the context of a proposed owner-builder application). Mr Harris said (ts 554):
- as it transpired with the house at Bridgetown, the structural components were supplied by Rezard, and in turn Rezard did employ a registered builder. Not a registered building contractor, but a building practitioner. By explanation of that, you can be registered as a practitioner but you only have the right to undertake building works once you then become registered as a contractor. So a practitioner in effect can be a supervisor attached to a building company. A building company cannot operate without a practitioner. So it's a two-tiered system and I - I'm a building practitioner, not a building contractor although I acknowledge that that was my understanding at the time. … So again, if indeed the building works were - the structural works and so forth would be undertaken by Rezard. They would be supervised by me as a - as an employee of Rezard.
The conflict of interest - Rezard (Dorce)
The fact that Mr Harris was a director and part-owner of Rezard was (understandably) a matter of great concern to Mr and Mrs De Bruin in May 2016 when they became aware of this fact. As Mr De Bruin said 'because (of) the way the Dorce option was being pushed towards us I began to wonder if there was any - that - if Richard had an interest in it'. After making some inquiries, there was a telephone discussion between Mr De Bruin and Mr Harris. This was followed by an email dated 25 May 2016 from Mr Harris to Mr De Bruin and Mrs De Bruin (separately) dealing with the issue. Mr Harris had earlier disclosed by an email dated 16 May 2016 that he had an interest in the company which would supply the Dorce components. Mr Harris identified that company as Rezard.
In cross-examination Mr De Bruin, when asked by Mr Harris, candidly said that Mr Harris had a conflict of interest 'being the project manager' because he stood to benefit by Rezard performing part of the building contract.
Mr De Bruin said he discussed the conflict of interest with Mrs De Bruin at the time. In cross-examination he accepted that because of the conflict of interest Mr Harris could not, as project manager, advise Mrs De Bruin independently. Mr De Bruin said he expected the project manager to be in a position to give 'unbiased advice'. As Mr De Bruin said (ts 448):
THE 1ST DEFENDANT: So you accept that if Richard Harris was going to give you any project management service, that he would be conflicted by his arrangement with Rezard
DE BRUIN, K.H.M.: Yes, cos he's part of Rezard, yep.
Notwithstanding Mr and Mrs De Bruin's full knowledge of the conflict of interest, Mr De Bruin went on to give evidence that he still expected Mr Harris as project manager to 'supervise the work that Rezard undertook'. Mr De Bruin purported to maintain that this would be independent supervision on their behalf because Mr Harris (as project manager) would 'be acting for us'. Mr De Bruin said in his evidence that Mr Harris did in fact project manage and supervise the work of Rezard, even though he himself was 'hands on the tools on site' for Rezard during the construction work undertaken by Rezard.
Mr Harris accepted in his evidence that he should have advised Mr and Mrs De Bruin earlier than he did of his conflict of interest if they decided to choose the Dorce product. In his 'progress report' email dated 24 March 2016 to Mrs De Bruin, Mr Harris advised her that he had identified '5 active alternatives'. Dorce was listed as the third possibility and he made the comment that he had used the product before and was arranging for it be priced. Surprisingly, he did not disclose his conflict of interest. The true position was also somewhat masked by his final comment that he would provide his recommendation after he been to Bridgetown at Easter to speak to possible builders and trades. Nevertheless, the fateful decision of Mr and Mrs De Bruin to contract Rezard to supply and build the house, was made with full knowledge of the conflict of interest. I find, Mr and Mrs De Bruin both appreciated at the time that Mr Harris could no longer be an independent advisor because of his personal and financial interest in Rezard.
Post-Rezard involvement and construction period
Mr Harris maintained in his evidence that after Mr and Mrs De Bruin had decided to engage Rezard to undertake the supply and installation of the Dorce pre‑fabricated home that his dealings with her were on behalf of Rezard. The email communications between the parties, and the addresses used, does not appear to have changed, although towards the end of their relationship Mr Harris appears to have used his Rezard email address. His co-director Mr Rezar Manesh is also a party to many of the communications.
During this time, and in particular during the construction period when Rezard was undertaking the work, Mr Harris maintained that he was involved in the project as 'Rezard' as its director and employee. He accepted that in this capacity he was responsible for the supervision of the building works being undertaken by Rezard (but not that he was personally liable to Mrs De Bruin for any defective workmanship by Rezard or its employees or sub-contractors).
Mr Harris maintained that after he sent the contract on 5 December 2016 between Mrs De Bruin and Rezard to Mr De Bruin as requested, he had 'almost no contact with Mrs De Bruin after that date and communication with her only started after Rezard issued a notice of practical completion'. Mr Harris' position is that during this time he was not involved in the project as 'Richard Harris' acting on behalf of Mrs De Bruin. He says his involvement was as a director and employee of Rezard.
After the site works commenced there were substantial communications both orally and in writing, and on site, in particular between Mr De Bruin and Mr Harris. By reason of the content of these communications Mr Harris considered and understood at the time that Mr De Bruin was in effect supervising the work of Rezard because he was raising issues and giving directions with respect to the performance of Rezard.
This, of course, is in contradistinction to the position of Mrs De Bruin that Mr Harris was also in fact acting at the same time on her behalf as 'project manager'. I infer, even with the benefit of hindsight and the history of the matter, that Mrs De Bruin believes that Mr Harris' duty of loyalty can be shared equally between Rezard and her. However, the difficulty, in my view, is obvious. It can be readily seen when Mr Harris, wearing both hats, is called upon to make a decision as to whether a particular part of the building work by Rezard is sub-standard or not. That is the conflict of interest.
Building permit
According to Mr Harris, because Rezard was not a registered building contractor it could not hold a building permit for the construction of the house. Mr Harris maintained this was the position even if he 'supervised' the work. In this regard, Mr Harris relied upon the first bullet point in his email of 25 May 2016 where he indicated to Mr and Mrs De Bruin that any issues arising out of the supply and installation of the Dorce pre-fabricated kit would be the responsibility of Rezard, and Rezard alone as the single entity performing the work.
On 24 October 2016, Mrs De Bruin as owner-builder completed and signed the application for the building permit.
As I understand it, the building permit can only be issued to an approved owner-builder or a registered builder (a registered building contractor).
In cross-examination, Mr Harris was asked about his communications with Mr Rick Cameron about the possibility of using Tecta Systems as the method of construction. In the email communications about 24 February 2016 Mr Harris said he had been engaged by Mrs De Bruin 'to manage the selection of builder and building method'. (Mr Harris accepted in cross‑examination that there was a retainer for his services at this juncture, even though his proposed fee had not been accepted by Mrs De Bruin.) The communications which followed between Mr Harris and Mr Cameron do not admit to any statement that Mr Harris was also engaged to supervise the building works as well.
In response to the statement by Mr Harris that he had been engaged to select the builder and building method, Mr Cameron wrote in reply to Mr Harris:
I assume you will as the 'builder' for the building licence. We are comfortable with that. Is Sonya open to being the nominal 'owner‑builder' to save on insurance costs or would you prefer otherwise?
In response, Mr Harris replied:
I will arrange for a 'builder' to hold the licence, insurances etc but it will not be me. Sonya is not comfortable with being an owner-builder.
These written communications between Mr Harris and Mr Cameron indicate at this point in time, the day after the 23 February 2016 meeting, there was no agreement as to how the building contract would proceed. Importantly, however, there is reference at an early stage to the distinction between Mrs De Bruin proceeding as an owner‑builder or with a registered building contractor with appropriate licences and insurances. I infer from these communications that at this time Mr Harris thought the project would proceed with a builder, and not, as it did, with Mrs De Bruin as an owner-builder.
It is not in issue that a building permit for the proposed construction from the local authority could only be issued to a registered building contractor (who holds the necessary licences and insurance) or an owner-builder.
The written contract between Mrs De Bruin (as owner) and Rezard (as contractor) dated 5 December 2016
It is common ground that Mr De Bruin requested a contract in writing from Mr Harris in his capacity as Rezard. The request was made because Mr De Bruin was seeking bank finance and the bank asked to see a contract. As a result, Mr Harris on behalf of Rezard, proffered a written contract in the form requested by Mr De Bruin ('a standard MBA contract').
Mr De Bruin said he provided the contract to the bank even though it was not signed by Mrs De Bruin as 'the owner'. The contract was described as a 'lump sum contract for medium works - agreement and conditions of contract' and signed by Mr Harris on behalf of Rezard as 'the contractor'. The parties subsequently relied upon the terms and conditions of this contract for an adjudication process between them under the Construction Contracts Act 2004 (WA) (CCA).
In cross-examination, Mr De Bruin said they did not accept the terms of the written contract but merely forwarded it to the bank to satisfy the banks request (even though Mrs De Bruin, in the adjudication proceedings, was prepared to proceed on the basis that it was a construction contract between the parties).
The way in which this written contract was requested by Mr De Bruin (it seems without much involvement by Mrs De Bruin) from Mr Harris, in my view, evidences the underlying degree of trust and co-operation that existed at the relevant time. This is another example of how Mr Harris was prepared to facilitate the build by preparing a document that would assist Mrs De Bruin. It is similar to the letter he proffered for her to attach to her owner-builder approval application form. All parties were working together to minimize the cost of the builder, and I find, did so in a way to avoid the extra costs that would have been incurred if a 'registered builder' had undertaken the works. As John Glenn, the first American to orbit the Earth said in 1962 'As I hurtled through space, one thought kept crossing my mind - every part of this rocket was supplied by the lowest bidder'.
Formation of a contract - legal principles and the relevance of conduct
(a) Formation of a contract
The major elements of formation of a contract are:[1]
1.Agreement;
2.Consideration;
3.Intention to create legal relations; and
4.Certainty of the essential terms.
[1] Cheshire and Fifoot, Law of Contract, (11th ed) [1.16].
Traditionally, the common law has required that agreement be constituted by the elements of offer and acceptance, however, agreement can also be inferred by conduct.[2] While the terms of the offer determine the express content of the contract, further implied terms may also exist.[3] An offer may be made in correspondence, orally or by conduct.[4]
[2] Cheshire and Fifoot, Law of Contract (11th ed) [1.16].
[3] Cheshire and Fifoot, Law of Contract (11th ed) [3.3].
[4] J D Heydon, Heydon on Contract, 2019 Thomas Reuters [2.200].
Good consideration is required to render a contractual promise legally enforceable.[5]
[5] Cheshire and Fifoot, Law of Contract (11th ed) [4.2].
Intention to create legal relations is also necessary for enforceability. The test is whether a reasonable person, in the position of each party, thinks that the other intended to create legal relations.[6]
[6] J D Heydon, Heydon on Contract, 2019 Thomas Reuters [4.20]; Brambles Holdings v Bathurst City Council [2001] NSWCA 61 [81]. Note it is argued by some, including E Williston, that intention to create legal relations is not a separate requirement where consideration is present.
Finally, to have legal effect, a contract must be sufficiently certain, that is, clear and complete in the essentials.[7] Non‑essential terms may still be construed by the court (or ultimately ignored or severed).[8]
(b) Agreement by conduct
[7] Cheshire and Fifoot, Law of Contract (11th ed) [6.1].
[8] Cheshire and Fifoot, Law of Contract (11th ed) [6.2].
Where the court cannot specifically identify an offer and its acceptance, it may adopt a more global approach to infer that the parties intended to make a contract.
In Fazio v Fazio [2012] WASCA 72 at [189], Murphy JA with whom Pullin and Newnes JJA agreed, held that 'a contract may be inferred from the acts and conduct of parties, as well as or in the absence of their words'.
When considering whether the parties intended to create legal relations, the court must determine 'whether the parties' conduct, viewed objectively, reveals a tacit understanding or agreement, or a manifestation of mutual assent, which evinces an intention to create legal relations'.[9]
[9] Cheshire and Fifoot, Law of Contract (11th ed) [190].
There is a relationship between uncertainty and the intention to create legal relations. If uncertainty cannot be cured, it may lead a court to conclude that there is an absence of intention to create legal relations.[10]
(c) Admissibility of conduct in the construction of contracts
[10] E.g. Lord Wright in G Scammell & Nephew Ltd v HC & JG Ouston [1941] AC 251, 268 ‑ 269, cited in Cheshire and Fifoot, Law of Contract (11th ed) [5.2].
While the general principle is that the parties' subsequent conduct should not be used as an aid in the construction of a contract, in practice, courts may have regard to subsequent conduct, particularly when attempting to construe informal agreements.[11]
[11] Fazio v Fazio [191] - [192].
In Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295, Edelman J illustrates this point:
[98]This subsequent conduct is a relevant matter to consider in finding whether, as a fact, the alleged oral promises were made. Mears v Safecar Security Ltd,116 Stephenson LJ (with whom O'Connor LJ and Sir Stanley Rees agreed) said:
I have already expressed my view that this agreement was oral, but even if it was partly in writing, we are concerned with the search for a term that was not written down, and there is nothing in those authorities which prevents the court from looking at the way the parties acted for the purpose of ascertaining what that term was. Common sense suggests that their subsequent conduct is the best evidence of what they had agreed orally but not reduced to writing, though it is not evidence of what any written terms mean.
[99]This passage was approved by Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] and the latter half was quoted with approval by Murphy JA (Pullin & Newnes JJA agreeing) in Fazio v Fazio. The statement by Stephenson LJ is consistent with statements in a number of other cases. Spigelman CJ has also described post-contractual conduct as a matter of 'significant weight' in identifying the subject matter of an alleged oral contract. This approach also accords with principle. It would be peculiar if courts were to be constrained in the exercise of finding facts from considering any relevant matter subsequent to the alleged occurrence of the fact in issue.
Subsequent conduct may therefore be used 'for the purpose of inferring not only whether a binding agreement had been reached, but also its subject matter and the identification of its necessary terms'.[12]
Was there an agreement that Mr Harris would project manage or supervise the construction work of the builder?
(a) Evidence of Mrs De Bruin
[12] Fazio v Fazio [193].
In her evidence, Mrs De Bruin was taken at length to her understanding of the scope of the agreement which she says was made at the first café meeting between the parties on 23 February 2016. As a general observation, it is noteworthy, that at the beginning of her evidence Mrs De Bruin was unable to state with any particularity the obligations she understood Mr Harris was proposing to undertake. Later in her evidence, she spoke of the obligations by reference to general steps in a building project.
On occasions, Mrs De Bruin conflated the alleged role of Mr Harris during the construction phase as project manager with the actual building obligations undertaken by Rezard as her contractor as owner‑builder. For example, in cross‑examination Mrs De Bruin said to Mr Harris 'we were discussing that you would project manage the build for me and that you could use contractors or registered builders in order to build the home for me'. Mrs De Bruin was then asked if she considered there was a difference between a project manager and a registered builder and candidly she said 'I would now differentiate between - in retrospect, yes, I would'. The implication is that at the time of the alleged agreement, Mrs De Bruin was uncertain as to parties' roles and did not appreciate any distinction.
In cross‑examination when asked about how she considered the role of Mr Harris as a project manager or a registered builder she said (ts 225):
I would have thought that you were a builder. I - I - I didn't know there was a term, 'project manager', for a build for - for small builds such as what you - a - a house build. I wouldn't have thought that that would be a - that would be something that you did. That was something that - that we had discussed that was a possibility, that you would project manage the build and essentially build the home or be in - at least be in charge of building the home'.
Mrs De Bruin went on to indicate that from her view point Mr Harris could be the builder and at the same time he could be the project manager - 'if he didn't choose to use one of these building companies, he could build the home himself'.
Consistent with an emerging knowledge base by Mrs De Bruin as a result of the project, she readily accepted in cross‑examination her understanding about the different roles changed because she 'hadn't undertaken the owner‑builder certification at this first meeting'. Mrs De Bruin's evidence was with respect to the fee of $15,000 that she understood it was for 'project management' but she was unable to say there was anything specific she was expecting in return for payment of the fee. It appears she did not know what she expected to receive in return for payment of the first instalment to Mr Harris.
Mrs De Bruin accepted in cross‑examination that the work undertaken by Mr Harris before the conflict of interest arose in May 2016, including the design services and applications for permits and approvals was consistent with what she understood Mr Harris had agreed to do.
Importantly in cross‑examination, Mrs De Bruin said, even though she had paid a first invoice from Rezard of $29,550, she did not think she had a relationship with Rezard. Her evidence was 'I thought I had a relationship with the builder, with yourself'. Mrs De Bruin maintained (ts 239):
I paid the bill knowing that you were essentially going to project manage the build and that you would be supplying the installation of the components and you would be organising the erection of the building.
Mrs De Bruin said that she understood having obtained an owner‑builder licence that the owner‑builder was responsible for supervising the trades or the works (but in her case she limited this to the internal trades only). Notwithstanding this, Mrs De Bruin's evidence was that she did not personally supervise the works on the basis that she gave that responsibility to Mr Harris as the project manager. As she said (ts 263):
So the responsibility for the completion of the build from start to lock‑up was - was your responsibility and then I was responsible for the internal fit‑out of the home.
Mrs De Bruin, consistent with her version of the agreement, maintained that she (and her husband) were responsible for the work of all contractors and 'tradies' involved purely in the internal fit‑out. Her evidence was that Mr Harris 'was responsible for the build up to fit‑out'. Mrs De Bruin said the contractors they engaged included an electrician, a plumber, a tiler and a carpenter in addition to the work undertaken by Mr De Bruin himself (which included fabrication of steel components required for the construction work undertaken by Rezard).
Mrs De Bruin in cross‑examination gave the following evidence (ts 266 ‑ 268):
Okay. So Rezard was a contractor on that - that project, were they not? - - I don't believe so. I believe you were the contractor that used Rezard to build the home.
Okay. So your contention is that Rezard was in fact a subcontractor to Richard Harris. Is that the ‑ ‑ ‑? - I don't know. I don't know the - the word subcontractor, sorry.
Well, let me ask you this, Mrs De Bruin? - In the terms that we subcontracted tradies to do the work, I guess you could say that Mr Harris contracted Rezard to build the home.
Right. So - - ? - - If that's the - the comparison you'd like to make.
Yes. So Mrs De Bruin, who paid Rezard? - - Sometimes it was myself and sometimes it was Kevin.
Right. But you didn't give a sum of money to Richard Harris on the basis that he would then pay Rezard, did you? - - - No, I didn't.
...
But you also say that you don't hold Rezard responsible for their - any defective work, is that correct? - - - Yes, because you were the project manager and you are the director of Rezard, so I would - I wouldn't approach your tradies if there was a problem with your part of the build. I would go straight to yourself. I wouldn't rock up to one of your tradies that was doing something on the home and say, you know, 'This is not working for me'. I would have gone to yourself.
And when you say 'yourself', do you refer to Richard Harris as a director of Rezard? - - - No, Richard Harris as a - my project manager also.
So I'd take you to that point again, Mrs De Bruin. The - the Rezard is a - is a special case, is it not, in that you're saying that you would not approach a director of Rezard, you would approach your project manager when dealing with Rezard? Well, I can't see how we can compare a contractor that is not project managing my build to Rezard whose director is project managing my build - my build. We're not comparing apples with apples, I don't feel.
In her evidence, Mrs De Bruin agreed that Mr De Bruin acted as her agent and also engaged various contractors to do work on the building, but in respect of the internal finishes only. The evidence discloses that there was overlap in the construction itself in the sense that Rezard did not achieve practical completion as a line in the sand and before other contractors undertook work on the building for Mr and Mrs De Bruin. In respect of their work, Mrs De Bruin said Mr De Bruin was supervising the work to ensure it met appropriate standards.
It is noteworthy that Mrs De Bruin in cross‑examination initially maintained that she became the owner‑builder 'in order to complete the internal trades of the home' and that her ticket 'was not for the completion of the whole building'. She eventually conceded that she understood that the owner‑builder licence was not limited in this way and that Rezard was in fact contracted by her as the owner‑builder (even though at an earlier stage in her evidence she maintained that there was no such contract, and even asked rhetorically whether or not such a contract existed).
In cross‑examination Mrs De Bruin also said she did not remember receiving an invoice from Mr Harris for preparation of the application for the building permit but she understood (ts 307):
That an invoice could have been sent, as part of your project manager duties would be to do - fill in the relevant forms for building projects.
This evidence contradicts Mrs De Bruin's stated contractual position, namely that Mr Harris had agreed to provide all the project management services for a fixed fee. Related to this evidence was her evidence, again in cross‑examination, about the cost Mr Harris would have necessarily incurred if in fact he had agreed to be onsite every day during the construction period. Mr Harris suggested that the fee of $15,000 for over a period of 12 months including being on site every day as pleaded would not make commercial sense.
In another part of her evidence, again in cross‑examination, Mrs De Bruin appears to transpose the role of Mr Harris as project manager with that of Rezard as the building contractor. Mrs De Bruin said (ts 308):
... I didn't know whether the people that you had working on site were tradies from Rezard or whether they were people that you had contracted to do work for you.
Mrs De Bruin went on to say that she did not have any expectation of Mr Harris as project manager being on site on a regular basis because (ts 309):
You were in charge of the build. I had a meeting with you. I trusted that what you said at that meeting that you would construct a house for me to lock‑up, and I allowed you to do that because you were project managing it for me.
This evidence suggests that there was never any change in the scope of the agreement (irrespective of the date it was made). As Mrs De Bruin said (ts 310 - 311):
We didn't sit down as project manager and as principal and make a list of the services that you would provide for me. Broadly, as a project manager I would expect that you would provide me the services that would enable the build to take place as per at its first discussion.
Mrs De Bruin in her evidence maintained that she expected Mr Harris, pursuant to the agreement, to provide supervision. When asked whether this included an expectation that Mr Harris would, as project manager, supervise the activities of Rezard, the question was met with objection by Mr Metaxas. This happened a number of times during the evidence of Mrs De Bruin at strategic moments. This occurred, quite properly, in part because Mr Harris is self‑represented and also in part because of a lack of clarity in the evidence and in the parties cases as pleaded.
Mrs De Bruin maintained to Mr Harris in cross‑examination that she had (ts 322):
No expectation of what you would or wouldn't do, I had an expectation that the build would be performed from the ground to lock‑up. We didn't have any - there wasn't any expectation. I understand the building processes, that there would be design work, that there would be different permits that needed to be gathered, and that would be essentially the scope of work of a project manager.
Mrs De Bruin went on to say (ts 323):
As a project manager one of the jobs would be for you to supervise your trades on site, that could be one of your services, yes.
(emphasis added)
As to the building work undertaken by Rezard, Mrs De Bruin maintained that Mr Harris as project manager 'could have' supervised Rezard's employees and (ts 323):
be interested in the quality of the build that you were erecting and that you would build ... to make sure that the work would be at a satisfactory level or standard.
(emphasis added)
Finally, with respect to the scope of services which Mrs De Bruin contends Mr Harris agreed to provide in February 2016 (before Rezard), she says it included engaging in the building activity which Mr Harris was supposed to be supervising, that is, in addition to his role as project manager (ts 324):
That's - Mrs De Bruin, that's in addition to his role as a project manager, is that correct? - - -Yes, but the - the - at the first meeting we didn't know that we were going with Dorce and that you were - that you would be using Rezard and the Dorce component. So I had no - if - if you were the - in charge of the construction of the kit home that Rezard installed, well, then you would be responsible for that. But if - maybe if you had of used one of the other building contractors or registered builders, say Peter and Linda Vowles, maybe you would just work - get Mr Vowles to do the work. It - it - it's not your company, so - so you wouldn't be involved in the work, but because it was - Rezard was your company, Dorce was your product you had to essentially be involved in the erection of the home.
(emphasis added)
Mrs De Bruin said when she was asked if she had an expectation that Richard Harris would attend the site during the construction period that she 'actually didn't have any expectation ... and it wouldn't worry me if you drove from Perth to Bridgetown everyday'. This evidence was in the context of the commerciality of a $15,000 fee for the scope of services contended for by Mrs De Bruin. To further deflect this issue, Mrs De Bruin said (ts 329):
But you were installing your product too, Richard. You were - you were installing a product from a company that you were a director of. And that was giving you an opportunity for you - for your company, Rezard, to - to build a home.
Towards the end of her evidence, Mrs De Bruin when asked again specifically what services she was expecting under the alleged agreement that (ts 337):
I understood that under the broad umbrella of a building contract that there would be specific services that you would need to carry out and that would include the services that you have provided. Permits, licences, earthworks, that sort of thing.
(b) Evidence of Mr De Bruin
The issue of the scope of the agreement between the parties following the 23 February 2016 meeting is inextricably bound up, in my view, with the evidence about whether the construction would be undertaken by a registered builder or by Mrs De Bruin as an owner‑builder engaging a builder as a contractor. The reason for this is because Mr Harris says that he did not agree to supervise the construction of the building by a builder (registered or otherwise).
As a matter of law this is a fundamental term about which there can be no equivocation if legally enforceable contractual obligations are said to arise. As hinted at by Mr Harris in his cross‑examination of Mr De Bruin, if Mr Harris was to assume legal responsibility for supervising the builder, then one would expect him to be party to the building contract between Mrs De Bruin and the contractor, thereby setting out and giving him power and authority to supervise and give directions on her behalf. Otherwise he is a toothless tiger and arguably, just a busybody. This of course highlights what was apparent to all parties when Mr Harris' conflict of interest emerged when Mrs De Bruin contracted Rezard to build the house.
The uncertainty about what would happen, as it existed at the time of the 23 February 2016 meeting, is very apparent from the evidence of Mr De Bruin at ts 424 when asked what discussions occurred at the meeting on the topic of owner-builder. Mr De Bruin's response was:
DE BRUIN, K.: To the best of my recall, the discussion at the time, Richard suggested it was one possibility that Sonya be an owner-builder and that would be supervised by her - sorry, supervised by him, is one option. We could use local builders down there too, that was one discussion as well. And then - so Richard would project manage it and interact with a builder, that's one possible option.
METAXAS, MR: You've referred to an owner-builder, a local builder, and I'm not understanding what the delineation was. Is there a delineation between those two concepts?
DE BRUIN, K.: Well, back at that stage, we were still working out the possibilities of which way to go forward.
METAXAS, MR: So what were the possibilities, as discussed at this meeting
DE BRUIN, K.: As discussed at the meeting, under Richard's project management, we could go forward with Sonya as an owner-builder - - -
METAXAS, MR: Yes
DE BRUIN, K.: - - - we could go forward with a local builder.
METAXAS, MR: Yes
DE BRUIN, K.: Yes. Or we could just - Richard - yes, that's the main possibilities, or a construction system that Richard would put forward.
Mr Metaxas sought clarity with respect to Mr De Bruin's evidence. Mr De Bruin said 'one option that was put forward is that Richard would project manage it and using a local builder down there, a local registered builder' and 'the other option was owner-builder, Sonya do it as an owner‑builder, but then use a construction system which would be supervised by a registered builder to lock-up. And I expressed - we expressed an interest in doing the final fit-out'.
In contrast, in cross-examination by Mr Harris, Mr De Bruin said (ts 444):
THE 1ST DEFENDANT: Is it fair to say, Mr De Bruin, at the meeting of 23 February there was no agreement as to how the building would be managed at that point
DE BRUIN, K.H.M.: There was agreement that you would project manage it, yes, and we accepted that.
THE 1ST DEFENDANT: No agreement as to what type of house there would be
DE BRUIN, K.H.M.: No.
THE 1ST DEFENDANT: Did Richard Harris say to you at that time that he would not act as your builder?
DE BRUIN, K.H.M.: No, you didn't.
THE 1ST DEFENDANT: So you were not confused about the role of a project manager and a builder then, Mr De Bruin
DE BRUIN, K.H.M.: No, a project manager, a builder is a registered builder.
Critically, when pressed as to whether Mr De Bruin discussed with Mr Harris the scope of being project manager, his evidence was (ts 450):
THE 1ST DEFENDANT: Did you speak with Richard Harris about the service of being a project manager, specifically?
DE BRUIN, K.H.M.: We would have done at some stage, I would imagine.
THE 1ST DEFENDANT: You would have - you would have said to him, 'We expect this and that or other services.' Is that correct?
DE BRUIN, K.H.M.: To manage the build to lock up, yes.
THE 1ST DEFENDANT: Specifically?
DE BRUIN, K.H.M.: Specifically to manage.
THE 1ST DEFENDANT: So there would have been things you would have put to - to Richard Harris specifically about the project manager's service?
DE BRUIN, K.H.M.: Yes, to manage the build to lock up.
THE 1ST DEFENDANT: But that's the extent of it. Is that correct?
DE BRUIN, K.H.M.: That's the extent of it. Yes.
(emphasis added)
Further, and importantly, Mr De Bruin was asked again (ts 452) about communication of their expectation of Mr Harris' role as project manager. His evidence was:
THE 1ST DEFENDANT: Did you inform Richard Harris that you would hold him responsible for the performance of Rezard at any time?
DE BRUIN, K.H.M.: Sorry, repeat that question.
THE 1ST DEFENDANT: Did you inform Richard Harris that you would hold him responsible for the performance of Rezard at any time?
DE BRUIN, K.H.M.: Could you repeat that again, sorry
THE 1ST DEFENDANT: Did you inform Richard Harris that you would hold him responsible for the performance of Rezard?
DE BRUIN, K.H.M.: We would hold him responsible for project managing, yes.
…
THE 1ST DEFENDANT: - - - Richard Harris wouldn't know, from anything you said, that he was responsible for the performance of Rezard?
DE BRUIN, K.H.M.: He is responsible for the performance of Rezard, yes.
THE 1ST DEFENDANT: You didn't tell him that, did you
DE BRUIN, K.H.M.: No, that's a given, really.
(emphasis added)
Also in evidence, Mr De Bruin, like Mrs De Bruin, appears to conflate the alleged role of Mr Harris as 'project manager' with his involvement in the build as Rezard. For example, at ts 464, he said:
THE 1ST DEFENDANT: Some things are addressed to Rezard but other things are meant for Richard Harris. Is that correct?
DE BRUIN, K.H.M.: It's pretty well one and the same but yeah. We didn't delineate at that stage. We were just dealing with Richard Harris.
THE 1ST DEFENDANT: So in paragraph 3 you're really asking Rezard to fix the defects. Is that correct
DE BRUIN, K.H.M.: I'm asking you to get them rectified. Yes. I'm asking Richard Harris to get them rectified.
(emphasis added)
In summary, it seems Mr De Bruin expressed the belief that 'Mr Harris was responsible for everything to the lock-up stage' and saw no distinction between the contractual obligations of Rezard and the role of Mr Harris as project manager, even though the issue lay at the heart of the conflict of interest, which, at the time was a matter of great concern. I infer that Mr and Mrs De Bruin were prepared to engage Rezard for expediency, irrespective of the conflict of interest to avoid losing time on the build.
(c) Evidence of Mr Harris
Mr Harris accepted in his evidence that he agreed to assist Mrs De Bruin (and Mr De Bruin) to deal with all of the preliminary matters necessary to be undertaken to 'bring them to a position where they could appoint a builder and proceed'.
Although Mr Harris considered in his evidence that the parties had not clearly defined exactly what the services would be, he maintained he had a very clear understanding in his own mind as to what was necessary. He described these matters as 'preliminary tasks' - that is all the things that were required to be done before building could commence.
The effect of Mr Harris' evidence is that whatever the scope of the agreement initially entered into with Mrs De Bruin was, it was only up until the point in time that she selected a builder. He says, in any event, the agreement was in any event effectively abandoned, with full knowledge of all parties, by reason of the conflict of interest which arose when Mrs De Bruin decided to engage Rezard to supply and install the prefabricated kit home.
Mr Harris said in relation to the letter in support of Mrs De Bruin's owner-builder licence that it was deliberately written by him in the way he did to give it more weight, and that he wrote it 'in the knowledge that if Rezard was going to supply those items then they would be supervised by Richard Harris as an employee of Rezard'. On this basis, he did not regard the letter as misleading.
Mr Harris was cross-examined about the services he in fact provided to Mrs De Bruin. The services provided were consistent with his evidence, that he, at the time, decided to charge three tranches of $5,000 on the basis that the first payment would be a fair remuneration for preparing the documents and obtaining a development approval, the second payment would be a fair remuneration for producing working drawings, coordinating with the structural engineer and obtaining all the necessary certificates to gain a building licence, and the final payment would be for assessing the building methods and assisting to identify and select a builder.
Mr Harris maintained that this was, in general, communicated to Mrs De Bruin at various times on the basis that these were all preliminary matters which had to be completed. Mr Harris relies on the fact that he waived or abandoned the $10,000 that was not paid by Mrs De Bruin as originally agreed, as evidence that the contractual relationship changed from that point on. It must of course be borne in mind that the consideration for this was as an inducement to get Mrs De Bruin to enter into the contract with Rezard.
What did Mrs De Bruin think the role of Mr Harris and Rezard was?
The contents of the written communications between the parties do not expressly reveal the scope and content of the obligations undertaken to each other. Regard must also be had to the conduct of the parties which is to be discerned from the whole of the evidence, oral and documentary.
The evidence of Mrs De Bruin with respect to her understanding of the contractual relationship between first, herself and Mr Harris, and secondly between herself and Rezard, is insightful. With respect, it discloses 'fuzzy thinking' which is completely understandable from a lay person's viewpoint. Unfortunately, the communications and conduct needs to be sufficiently clear and unambiguous to discern what the position is, if it is to give rise to enforceable legal duties and obligations between the parties.
There is no evidence that during the period of the dealings between the parties Mr and Mrs De Bruin sought legal advice, and I infer they did not give proper consideration to the matter of legal responsibility, prior to disputes being formally notified to them.
By the time of the trial, Mrs De Bruin must have been well aware of the criticality of the factual and legal issues in dispute including, in particular, whether or not there was an enforceable contract between her and Mr Harris, and if so, the scope of the terms and conditions of any such agreement.
At one stage in Mrs De Bruin's evidence, she told Mr Harris there was no contract between her and Rezard because 'it was a contract that Kevin asked you for to secure bank finance'. It seems, at the relevant time, Mrs De Bruin did not consider there was an agreement between her and Rezard, in terms of the written agreement dated 5 December 2016 because, in her mind, it had only been prepared for the sole purpose of Mr De Bruin providing it to the bank to obtain finance.
Mrs De Bruin subsequently maintained in evidence that she had been advised by her lawyer that the contract was legally binding between her and Rezard and for this reason, subject to legal advice, her then legal firm (Metaxas & Hager) represented her in an adjudication with Rezard under the CCA. For the purpose of those proceedings Mrs De Bruin formally accepted that the written contract dated 5 December 2016 was a 'construction contract' between her and Rezard for the purpose of the CCA.
In addition to the adjudication proceedings, Mrs De Bruin's lawyers by letter dated 12 May 2017 contended by reference to the written contract that Rezard had been engaged 'to perform building works'. It was not contended at that time on behalf of Mrs De Bruin that Mr Harris had any personal liability for the defects and faults caused by Rezard pursuant to a separate project management agreement.
When asked by Mr Harris in cross‑examination as to why Mrs De Bruin considered he was responsible in his personal capacity for the defects, she replied 'because you were the supervisor and you were building the house. You were there, physically, building the house'. Mrs De Bruin then maintained in her evidence by reference to the letter of demand dated 12 May 2017 that it was in fact, in her opinion, addressed to Richard Harris. Her explanation for this view was (ts 398):
But I've not really thought very deeply about this so whether its - as I said, whether you fixed or Rezard fixed it. I just wanted it to be fixed.
Mrs De Bruin made it plain many times in her evidence that she considered (ts 402):
Mr Harris was responsible for - to lock‑up and then Kevin and I would do the inside so I would get my owner‑builder certification so then I could complete the inside of the home.
Finally, Mrs De Bruin's position can also be seen from her evidence when asked in re‑examination as to her understanding of who was doing the supply and installation - she replied 'Richard' on the basis that 'he was going to supervise a build'. Her understanding at the time is summed up in her evidence (ts 403-4):
I just thought that Richard was the person that was project managing so he would be the one that would supply and install' the house.
…
I just had talked to Richard and he was the person that had done all my - so I just presumed that he would be supplying and installing the - the home.
(emphasis added)
I find, based on the evidence of Mrs De Bruin (as a lay person) that she made no distinction between the legal entity of Rezard and Mr Harris in his personal capacity. She conflated the legal position of Mr Harris and Rezard as one party. Mr and Mrs De Bruin's had an obvious (and understandable) concern in May 2016 about Mr Harris' conflict of interest if they dealt with Rezard. I do not accept that this had no impact on the agreement made on 23 February 2016. With respect, to find otherwise, would be inconsistent with the conduct of the parties and would make no commercial sense, even to a lay person. It is noteworthy, when Mr Harris indicated to Mr and Mrs De Bruin in his email of 25 May 2016 that if they decided to engage Rezard he would not charge 'the remaining fee' of $10,000, that Mrs De Bruin did not say orally or in writing that 'we still consider you are bound by the agreement you made on 23 February 2016 to project manage the build and will hold you personally accountable'.
Conclusion
Mrs De Bruin has not established that the parties' conduct viewed objectively, reveals a tacit understanding or agreement, or a manifestation of mutual assent, which evinces an intention to create legal relations that Mr Harris would 'cause' the house to be built without any defective workmanship by the building contractors.
I am not persuaded that Mr Harris owed Mrs De Bruin a duty in contract or tort, which as a matter of law could result in him being liable for any (yet to be proven) defective workmanship of Rezard in the construction of the house at Bridgetown.
Any liability for defective workmanship is to be found in the contractual relationship that existed between Mrs De Bruin (as owner‑builder) and Rezard (as building contractor).
Accordingly, Mrs De Bruin's claim against Mr Harris must be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
MD
Associate to Judge Stevenson23 DECEMBER 2019
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