Drinkwater v Shade Design Newcastle Pty Ltd t/as Shade Architects; Shade Design Newcastle Pty Ltd t/as Shade Architects v Drinkwater

[2025] NSWCATCD 97

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Drinkwater v Shade Design Newcastle Pty Ltd t/as Shade Architects; Shade Design Newcastle Pty Ltd t/as Shade Architects v Drinkwater [2025] NSWCATCD 97

Hearing dates:

12 May 2025

Date of orders:

16 July 2025

Decision date:

16 July 2025

Jurisdiction:

Consumer and Commercial Division

Before:

K Mortensen, Senior Member

Decision:

(1)   The Respondent is to pay the Applicants the sum of $26,341.00 within 28 days of these orders..

(2)   Cross Application dismissed.

Catchwords:

CONSUMER LAW — misleading or deceptive conduct — representations as to future matters — silence or non-disclosure — architects — architectural services agreement — architect accepted the engagement and initial payment without advising the budget was unachievable — whether the architect’s silence constituted an implied representation that it could design a home within the specified budget — whether the representation concerned a future matter — whether the respondent had reasonable grounds for making the representation

COSTS — costs as damages — distinction from costs of proceedings — whether pre litigation legal fees are recoverable as damages for loss or damage under section 236 of the Australian Consumer Law

Legislation Cited:

Australian Consumer Law (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Competition and Consumer Act 2010 (Cth)

Fair Trading Act 1987 (NSW)

Cases Cited:

Brookfield v Yevad [2004] FCA 1164

Curtis v Potter & Co Pty Ltd t/as The Africa Safari Co [2016] NSWCATAP 196

Gould v Vaggelas (1985) 157 CLR 215

Henville v Walker (2001) 206 CLR 459; [2001] HCA 52

Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54

I & L Securities v HTW Valuers (2002) 210 CLR 109; [2002] HCA 41

Marks v GIO Australia Holdings Limited [1998] HCA 69

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

Perpetual Trustee Limited and Anor v Ishak [2012] NSWSC 697

State Rail Authority v Consumer Claims Tribunal and others (1988) 14 NSWLR 474

Varma v Varma [2010] NSWSC 786

Watson v Foxman [1995] NSWCA 497

Zong v Wang [2022] NSWCA 80

Category:

Principal judgment

Parties:

Mark Drinkwater (first applicant / cross respondent)
Jill Morris (second applicant / cross respondent)
Shade Design Newcastle Pty Ltd t/as Shade Architects (respondent / cross applicant)

File Number(s):

2025/00091716
2025/00100425

Publication restriction:

Nil

REASONS FOR DECISION

Background

1. This matter concerns the provision of architectural service to the Applicants, Mark Drinkwater and Jill Morris, by the Respondent, Shade Design Newcastle Pty Ltd trading as Shade Architects. The parties initially met on 14 May 2024. At that meeting, the director of the Respondent, Mr Joel Coleman, showed the Applicants examples of the company’s work, including recently designed homes.

2. Further discussions between the parties took place on 29 May 2025 and on 16 June 2024, the Applicants engaged the Respondent by entering into an architectural services agreement (‘the agreement’) to provide designs for a new home.

3. The parties’ professional relationship proceeded through the initial design stages, for which the Applicants have paid fees pursuant to the agreement.

4. A dispute subsequently arose when the Applicants received a preliminary construction estimate from a builder which was based upon designs provided by the Respondent. That estimate was significantly in excess of the construction budget which had been disclosed by the Applicant to the Respondent.

5. The relationship between the parties then deteriorated, leading to the Applicants’ termination of the agreement in November 2024. Following that termination, the Respondent then issued further invoices which are disputed by the Applicants.

6. By way of application made to the Tribunal 8 March 2025, the Applicants allege that the Respondent engaged in misleading and deceptive conduct within the meaning of section 18 of the Australian Consumer Law and seek orders for refund in the amount of $23,800.00 together with costs of $2,541.00.

7. By way of cross application filed in the Tribunal 4 March 2025, the Respondent seeks an order for payment of its outstanding invoices in the amount of $9,334.62.

8. The matter was heard before me in Newcastle on 12 May 2025. The Applicants appeared in person and the Respondent was represented by its director, Mr Coleman.

Jurisdiction

9. The Tribunal’s jurisdiction to hear and determine this matter is derived from Part 6A of the Fair Trading Act 1987 (NSW) (“FTA”), which empowers the Tribunal to make orders in relation to a “consumer claim”. The jurisdiction conferred by the FTA does not create a cause of action but rather confers authority on the Tribunal to determine issues before it according to law; State Rail Authority v Consumer Claims Tribunal and others (1988) 14 NSWLR 474 at 477.

10. A “consumer claim” is defined in s 79E FTA. For the Tribunal to have jurisdiction, the claim must be brought by a “consumer” against a “supplier” in connection with the supply of goods or services. The Applicants, Mr Drinkwater and Ms Morris are natural persons and are consumers for the purposes of s 79D FTA. The Respondent, a company that provides architectural services in the course of its business, is a supplier within the meaning of s 79D.

11. The architectural services provided by the Respondent fall within the broad definition of services in s 79F(1) FTA. As the parties are located in New South Wales and the services were supplied in New South Wales, the Tribunal has territorial jurisdiction pursuant to s 79K FTA.

12. The Applicants’ claim is based on an alleged breach of s 18 of the Australian Consumer Law. The Australian Consumer Law is contained within the Competition and Consumer Act 2010 (Cth), schedule 2. By reason of ss 28 and 32 FTA, the Australian Consumer Law applies as a law of New South Wales. Any reference to the Australian Consumer Law that follows in these reasons, is a reference to the Australian Consumer Law (NSW) within the meaning of s 28 FTA (“the ACL”).

13. The Respondent’s cross application for unpaid invoices also arises from the same supply of services that is the subject of the Applicants’ claim. It is therefore a consumer claim which the Tribunal has jurisdiction to determine. Section 79O FTA empowers the Tribunal to make orders in favour of a respondent, including an order requiring a claimant to pay a specified amount of money.

14. The amount claimed by the Applicants and the amount sought in the cross application by the Respondent are both within the Tribunal’s monetary limit of $100,000.00 prescribed by s 79S FTA.

15. The proceedings were commenced on 8 March 2025, which is well within the three year limitation period stipulated by s 79L FTA from when the cause of action arose in late 2024.

16. Accordingly, the Tribunal is satisfied that it has jurisdiction to hear and determine both the application and the cross application.

Evidence

17. In reaching the conclusions in this matter, the Tribunal has had regard to the following:

1. two (2) bundles of documents lodged with the Tribunal by the Applicants, Mr Drinkwater and Ms Morris, marked at the hearing as Exhibit A1 and Exhibit A2, which relevantly included their witness statements, the written design brief, the architectural fee proposal, invoices and correspondence;

2. one (1) bundle of documents lodged with the Tribunal by the Respondent, marked as Exhibit R1, which relevantly included the affidavit of its director, Mr Joel Coleman, annexing the fee proposal, meeting notes, correspondence and building quotes; and

3. oral evidence given at the hearing by the Applicants and the director of the Respondent.

18. Where relevant, the specific documentary and oral evidence relied upon are described in the Tribunal’s findings below.

Issues to be Determined

19. The primary issue arising from the Applicants’ claim is whether the Respondent engaged in misleading or deceptive conduct, in contravention of s 18 ACL. In determining this, the Tribunal must consider;

1. whether the Respondent, by its conduct, represented that it would design a home that could be constructed within the Applicants’ specified “hard budget” of $800,000.00 (“the representations”);

2. whether the representations were representations as to a future matter within the meaning of s 4 ACL and if so, whether the Respondent had reasonable grounds for making it;

3. whether the Applicants relied upon the representations when engaging the Respondent and paying its invoices; and

4. if the conduct is found to be misleading and relied upon, what loss or damage, if any, the Applicants have suffered as a result.

20. The principal issue arising from the Respondent’s cross application is whether it is entitled to payment of its disputed invoices totalling $9,334.62. That requires the Tribunal to determine;

1. whether the design services relating to the redesign of the facade as invoiced by invoices numbered 2427-4 and 2427-4b was work for which the Respondent is entitled to be paid under the agreement, or whether it was agreed to be performed for free;

2. whether the work charged at hourly rates and invoiced by invoice numbered 2427-5 constituted an additional service that was approved and charged in accordance with the terms of the agreement; and

3. whether the invoice numbered 2427-3 for the provision of “Application Documentation” is payable, or if it should be offset against the credit held by the Respondent from the Applicants’ earlier prepayment of $10,600.00.

The Representation

21. The first issue to be determined is whether the Respondent, by its conduct, represented that it could design a home that could be constructed within the Applicants’ specified “hard budget” of $800,000.00 (“the representation”).

The Applicants’ Submissions

22. The Applicants submit that the representation was made by the Respondent’s conduct on 16 June 2024, at the time they formally engaged its services. They rely on the evidence that they provided the Respondent with a written design brief containing the specific and unambiguous instruction: “Budget is $800k. This is a hard budget. House should be designed to this budget”.

23. It is the Applicants’ submission that by accepting the written brief and their initial payment without advising them that their budget was unachievable, the Respondent implicitly represented that it could and would deliver a design for a home that could be constructed for that budget.

The Respondent’s Submissions

24. The Respondent denies making any such representation. The Respondent’s director, Mr Coleman, gave evidence that during the parties’ initial meeting on 14 May 2024, a more realistic budget of between $1 million and $1.2 million was discussed. The Respondent relies upon contemporaneous handwritten file notes which as evidence of this discussion. Those notes were tendered in evidence.

25. The Respondent submits that it was engaged to commence the design process, not to guarantee a final construction cost. It contends that its acceptance of the brief, which contained a budget contrary to its earlier advice, was not a representation that the budget was achievable.

The Law

26. Section 18 ACL provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

27. The principles applicable to whether or not conduct is misleading or deceptive or likely to mislead or deceive were summarised by Brereton J in PerpetualTrustee Limited and Anor v Ishak [2012] NSWSC 697 at paragraphs [75]-[76]. Although the Court in that matter was considering the former s 42 of the FTA, the same principles are applicable to s 18 ACL. The principles summarised therein can be paraphrased as follows;

1. the prohibition on misleading or deceptive conduct is not confined to express representations. A contravention can occur if the acts, omissions, statements or silence of a person, when viewed as a whole and in light of all the relevant circumstances, are found to be misleading or deceptive, or likely to mislead or deceive. Conduct is considered misleading if it induces, or is capable of inducing, error;

2. whether conduct has a tendency to lead a person into error is an objective question of fact. There must be an assessment of the conduct as a whole, considering all of the surrounding facts and circumstances, including the nature of the parties’ relationship and their respective knowledge of the subject matter. The focus is on the objective tendency of the conduct to cause an erroneous assumption, not the subjective effect on the claimant;

3. it is no answer to a finding of misleading or deceptive conduct that a claimant could have discovered the truth had they made their own inquiries; and

4. that does not create a general duty of complete disclosure in all commercial negotiations. A party is not considered to have been “misled” if they independently form their own erroneous impression or carelessly jump to an incorrect conclusion without being induced by the other party’s conduct.

Determination

28. In order to determine whether the Respondent, by its conduct, represented that it could design a home that could be constructed within the Applicants’ specified budget of $800,000.00, it is necessary for the Tribunal to first make certain findings of fact regarding the circumstances of the engagement. While there is a conflict in the evidence about the budget figure discussed at the precontractual meeting on 14 May 2024, it is unnecessary to resolve that conflict. The determinative conduct in this matter is that which occurred at the point in time at which the parties entered into their formal agreement.

29. The Tribunal makes the following findings of fact;

1. on 16 June 2024, the Applicants returned a signed copy of the Respondent’s agreement and simultaneously provided their written design brief, now tendered in evidence;

2. the written design brief included express instructions that the Applicant’s budget for construction was limited to $800,000.00;

3. at the moment when the Respondent received the signed agreement and the written brief concurrently, its director became aware of the Applicants’ definitive instruction regarding the budget;

4. the agreement signed by the Applicants was an offer to engage the Respondent. Upon receiving this offer and the accompanying brief, the Respondent had a choice whether to accept the engagement on those terms or decline it;

5. the Respondent chose to accept the engagement. It did so by issuing its first invoice for “Concept Design” on 25 June 2024 and accepting payment of $6,600.00 from the Applicants; and

6. upon receiving the brief with the Applicant’s budget, the Respondent did not advise the Applicants that their budget was, or was likely to be, unachievable.

30. The provision by the Applicant of a clear, written brief containing their construction budget at the moment of formal engagement crystallised the Applicants’ instructions, no matter what may or may not have been generally discussed in precontractual conversations.

31. In the context of a consumer engaging a professional for design services, there is a reasonable expectation that if a fundamental parameter such as an inflexible upper limit for a construction budget is clearly disclosed but cannot be achieved by the services offered, the professional ought to say so before accepting the engagement and taking payment.

32. By accepting the engagement and the initial fee without any qualification or warning about the budget, the Respondent’s silence was significant. Viewed objectively in the context of all the circumstances, the Respondent’s conduct in proceeding with the engagement constituted an implied representation.

33. Accordingly, the Tribunal finds that the representation made upon Respondent’s acceptance of the agreement and initial payment, was that the Respondent would perform its architectural services in a manner that would meet the key parameters of the brief, including the fundamental budgetary constraint of the maximum construction costs of $800,000.00 for the building designed by the Respondent.

A Future Matter

34. Having determined that a representation was made, the Tribunal must next consider whether that representation was a representation as to a future matter within the meaning of s 4 ACL and if so, whether the Respondent had reasonable grounds for making it.

35. That step is necessary because if the representation is so characterised, the statutory assumption of s 4 ACL is engaged. That section provides that a representation about a future matter is taken to be misleading unless the maker of that representation can prove they had reasonable grounds for making it. In practical terms, such a finding will reverse the evidentiary burden of the parties by requiring the Respondent to establish a reasonable basis for making the representation.

The Applicants’ Submissions

36. The Applicants did not make any express submissions as to whether the legal characterisation of the representation should be one concerning a future matter. However, the submissions made were to the effect that the Respondent has not provided any evidence to show that it had a reasonable basis for the representation made.

37. During the hearing, the Tribunal was taken to a builder’s estimate of $1.56 million and Mr Coleman’s email of 11 November 2024 as evidence that the Respondent had no reasonable grounds to believe that a home within their budget could be built from the design resulting from the services provided.

The Respondent’s Submissions

38. The Respondent submitted that based upon the general industry experience of its director, it had a reasonable basis for proceeding with the provision of the design services. Tendered in evidence were three building quotations obtained in early 2025, which were said to be evidence that its initial concept design could be built for approximately $800,000.00. It is implicit in that submission that there was a reasonable basis for the representation.

The Law

39. Section 4(1) ACL provides that if a person makes a representation with respect to any future matter, that representation is taken to be misleading if the person does not have reasonable grounds for making it.

40. Section 4(2) of the ACL reverses the usual evidentiary burden. It provides that a person who makes a representation as to a future matter is taken not to have had reasonable grounds unless they adduce evidence to the contrary. If no such evidence is adduced, the representation is deemed misleading.

Determination

41. The representation was that the Respondent could design a home capable of being built within the Applicants’ specified budget. That is properly characterised as a representation with respect to a future matter, as it concerns the future outcome of the design and construction process.

42. Section 4 ACL therefore applies. The representation is taken to be misleading unless the Respondent adduces evidence that it had reasonable grounds for making it at the time of the engagement in June 2024.

43. The Tribunal finds the Respondent has failed to discharge the required evidentiary onus. The Respondent’s reliance on building quotes obtained in early 2025 is misplaced. Those quotes, prepared for the purpose of these proceedings, do not provide evidence of the grounds the Respondent had at the relevant time that the representation was made in June 2024.

44. Further, those quotations were based on a preliminary concept sketch. They are not evidence that the fully developed design, incorporating the Applicants’ desired features, could be built within the Applicants’ budget.

45. I am not persuaded that a general assertion of industry experience is sufficient to constitute reasonable grounds for a representation about a client’s specific budget. That is particularly so in circumstances where pricing within the construction industry is widely considered to be presently in an inherently volatile state. The respondent has not led any evidence, for example, of any cost analysis or other objective material that was considered prior to accepting the engagement.

41. The Respondent’s own evidence actually supports a finding that it lacked any reasonable grounds for making the representation. Mr Coleman, in his email of 11 November 2024 to the Applicant, stated in paragraph four that “$800k is not what I would expect this build to be in any form”. That is a clear admission that he did not believe that a build costed within the Applicant’s budget was achievable.

42. Accordingly, the Tribunal finds that the Respondent had no reasonable grounds for representing that it could design a home capable of construction costed within the Applicants’ budget. Pursuant to s 4 ACL, that representation is therefore taken to be misleading for the purposes of s 18 ACL.

Reliance

48. A finding that a representation is misleading is of itself, insufficient to attract liability to the Respondent. The Applicants must also prove that they relied upon that representation when deciding to engage the Respondent by entering into the agreement and paying the fees, as any loss suffered cannot be otherwise said to have been attributable to the contravention.

The Applicants’ Submissions

49. The Applicants maintained that they relied entirely on the Respondent’s representation when deciding to enter into the agreement. They asserted in both written and oral submissions that the $800,000.00 budget was a fundamental requirement and that they would not have engaged the Respondent or paid any fees had they been advised that their construction budget was unachievable for the design to be provided.

50. The substance of the Applicants’ submission is that as consumers without expertise in architecture or construction costing, they were entitled to rely on the skill and judgment of the professional they were engaging. They submit that their decision to pay the invoices for stages one and two was a direct consequence of their reliance on the initial representation that the design would result in a building for which the construction cost were feasibly within their budget.

The Respondent’s Submissions

51. The Respondent disputes that the Applicants’ loss was caused by reliance on its representation. The Respondent argues that the potential building cost quoted upon were a result of the Applicants’ own instructions to change and upgrade the specifications beyond the initial brief.

52. It was the Respondent’s position that the quoted costs of the build demonstrates that the Applicants were not relying on the initial representation about budget, but rather on their own evolving desires for the home, which broke any chain of causation between the Respondent’s initial conduct and the eventual dispute.

The Law

53. To establish that loss or damage was suffered “because of” a contravention of s 18 ACL, a claimant must demonstrate a causal connection between the misleading conduct and the loss. The requirement that the loss be suffered ‘because of’ the conduct is usually satisfied by demonstrating reliance.

54. The law does not require that the misleading conduct be the sole or exclusive cause of the claimant’s decision to enter a transaction. It is sufficient if the conduct was one of the factors in the claimant’s decision; Brereton JA in Zong v Wang [2022] NSWCA 80 at [27], citing Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [14] (Gleeson CJ); see also I & L Securities v HTW Valuers (2002) 210 CLR 109; [2002] HCA 41 at [33] (Gleeson CJ), [57] (Gaudron, Gummow and Hayne JJ), [210] and [216] (Callinan J); Gould v Vaggelas (1985) 157 CLR 215 at 250 (Brennan J); [1985] HCA 75. The conduct must have materially contributed to the claimant’s actions.

Determination

55. The Tribunal makes a finding of fact that the Applicant’s specified budget was a fundamental requirement of the design agreement to be entered into by the Applicants. That is established by the clear and emphatic language used in their written design brief provided at the moment of engagement and was reinforced by their consistent oral evidence at the hearing.

56. The Tribunal accepts the Applicants’ evidence that they would not have entered into the agreement or paid the sum of $23,800 had they not been led to believe that their budget was achievable.

57. The Tribunal is satisfied that the representation materially contributed to the Applicants’ decision to engage the Respondent. A clear causal link has been established between the contravening conduct and the payment of fees by the Applicants. The Tribunal therefore finds that the Applicants relied on the Respondent’s misleading representation in making their decision to enter the agreement and pay for the initial services under that agreement.

Damages

58. Having established that the Respondent engaged in misleading or deceptive conduct in contravention of s 18 ACL, and that the Applicants relied upon that conduct in deciding to enter into the agreement, the Tribunal must now determine the loss or damage suffered by the Applicants as a result.

The Applicants’ Submissions

59. The Applicants submit that as a direct result of the Respondent’s conduct, they have suffered a total loss of $26,341.00. That amount is comprised of two parts.

60. The first is a refund of the $23,800.00 in architectural fees paid to the Respondent. The Applicants contend that the architectural services provided were of no value to them, as the resulting design was for a home that was fundamentally different from their brief, in that it could not be built within their budget.

61. The second is a claim for damages in the amount of $2,541.00, which is said to be the cost incurred by the Applicants in payment of professional fees for legal services. They submit that these fees were necessary to respond to debt collectors engaged by the Respondent and were a direct and necessary consequence of the Respondent’s unreasonable actions after the dispute arose.

The Respondent’s Submissions

62. It is the Respondent’s contention that the Applicants have not suffered a total loss of the fees paid. It contends that the Applicants received the benefit of its professional services through the concept design and design development stages and that the work done has value.

63. The Respondent further submitted that any losses incurred by the Applicants was caused not by its conduct, but by the Applicants’ own evolving instructions, which increased the scope and cost of the project and ultimately resulted in a design that could not be built within budget.

The Law

64. Section 236 ACL provides that a person who suffers loss or damage “because of” the contravening conduct of another person may recover the amount of that loss. While claims are assessed by applying established legal principles, the Tribunal has a discretion to adopt the appropriate measure of damages, and the assessment is more flexible than a strict application of the principles in either tort or contract law; Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388.

65. The principle is to place the claimant, so far as money can do, in the position they would have been in but for the contravention; Marks v GIO Australia Holdings Limited [1998] HCA 69. Where a claimant would not have entered into the transaction at all but for the misleading conduct, the common measure of damages is a refund of the monies paid, less any actual value the claimant has received. To establish their loss, a claimant must show that the amount they paid was in excess of the true value of the services or goods acquired; HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640. If the services provided had no value to the claimant, the loss is the full amount paid.

66. In making orders, the Tribunal must also be satisfied that they will be “fair and equitable to all parties to the claim” pursuant to s 79U(1) FTA. However, that provision does not empower the Tribunal to depart from established legal principles on the basis of a general concept of “fairness.” The power to make a fair and equitable order must be exercised in accordance with the law; Curtis v Potter & Co Pty Ltd t/as The Africa Safari Co [2016] NSWCATAP 196 at [69].

Determination

67. The Tribunal has already found that the Applicants were induced to engage the Respondent by its misleading conduct and that, but for this conduct, they would not have entered into the agreement. The matter is therefore properly characterised as a “no transaction” case. In the circumstances, the appropriate measure of damages is the amount required to return the Applicants to their precontractual position. Accordingly, their primary loss is the full sum paid to the Respondent for its services, which amounts to $23,800.00.

68. However, the Tribunal must also consider whether any value was received by the Applicants that should be deducted from that amount. The Respondent provided design services which culminated in a design for a home estimated to cost $1.56 million. The core, fundamental instruction from the Applicants was for a design for a home that could be built for $800,000.00 or less. The design produced was so far removed from that essential requirement that it was entirely unsuitable for the Applicants’ purpose. The Tribunal finds that the services provided had no value to the Applicants. Accordingly, the loss suffered by the Applicants in relation to the fees paid is the full amount of $23,800.00.

69. The Applicants also claim the sum of $2,541.00 for legal fees incurred to respond to the debt collectors engaged by the Respondent. The Tribunal must determine the correct legal basis upon which that claim can be considered.

70. Here, there is an important distinction between an order for legal costs of proceedings under s 60 of the Civil and Administrative Tribunal Act 2013 (‘CATA’) and an award of damages for loss under the ACL. The Tribunal’s power to order a party to pay the legal costs of another party is usually governed by s 60 CATA.

71. The definition of “costs” in s 60(5) CATA limits what can be awarded under that section. It defines “costs” as “the costs of, or incidental to, proceedings in the Tribunal”. The legal fees claimed by the Applicants were incurred prior to the commencement of these proceedings and were for the purposes of dealing with a debt collector. They are not costs of the proceedings before the Tribunal and accordingly, cannot be awarded as costs by order made pursuant to s 60 CATA.

72. Rather, it must be considered whether the legal fees claimed constitute a “loss or damage” suffered “because of” the Respondent’s contravening conduct, thereby being recoverable as damages under s 236 ACL. To succeed, the Applicants must establish a causal link between the Respondent’s misleading conduct and this particular head of loss.

73. The Tribunal finds that the causal link is established. The evidence demonstrates a clear sequence of events. The Respondent’s misleading conduct induced the Applicants to enter the agreement. That conduct ultimately led directly to a dispute over the design project’s feasibility. The Respondent then acted unreasonably by engaging debt collectors to pursue a disputed debt that arose from its own contravention. That action in turn foreseeably and necessarily compelled the Applicants to incur legal fees to protect their rights and respond to the demands.

74. The Tribunal is satisfied that the legal fees claimed are a loss directly flowing from the initial misleading conduct and the Respondent’s subsequent unreasonable handling of the dispute. They are therefore recoverable as damages under s 236 ACL. Accordingly, the Tribunal finds the Applicants have suffered a further loss in the amount of $2,541.00.

75. The total loss and damage sustained by the Applicants as a result of the Respondent’s conduct is therefore the sum of $23,800.00 awarded for architectural fees thrown away and $2,541.00 awarded for legal fees spent in relation to the dispute. The total awarded to the applicants in respect of the claim for misleading and deceptive conduct will therefore be $26,341.00.

Respondent’s Cross Application

76. By way of its cross application, the Respondent seeks an order for payment of its outstanding invoices, which total $9,334.62.

77. The determination of the cross application requires the Tribunal to resolve the disputes concerning three specific sets of invoices. These issues, as identified earlier in these reasons, involve contested questions about whether the work was agreed to be free, whether additional services were authorised in accordance with the agreement’s terms, and how prepaid funds should be accounted for. The Tribunal will address each of these issues in turn.

Invoices 2427-4 and 2427-4b

78. The first issue to be determined in the cross application is whether the Respondent is entitled to payment for invoices numbered 2427-4 and 2427-4b, which are for services relating to the redesign of the building’s facade. The resolution of that issue depends on whether the parties agreed to vary their original agreement. The Applicants contend that the Respondent agreed to perform the redesign work for free, whereas the Respondent denies that and asserts the work is payable as an additional service.

Applicants’ Submissions

79. The Applicants submit they are not liable for invoices numbered 2427-4 and 2427-4b because the Respondent expressly agreed to perform the work at no cost. Mr Drinkwater gave oral evidence at the hearing that on 23 October 2024, after receiving the $1.56 million building estimate, he spoke with Mr Coleman by telephone. Mr Drinkwater stated that following a “very heated conversation” about the budget blowout, Mr Coleman agreed to redo the facade design for free.

80. In support of this, the Applicants rely on a contemporaneous text message which Mr Drinkwater sent to Ms Morris immediately following the phone call. That message, a copy of which was tendered in evidence, stated in part: “He has agreed to redesign the facade for no costs”. The Applicants submit that the contemporaneous text message is compelling evidence of the agreement reached and that the subsequent invoices for that work were therefore not in accordance with that agreement.

Respondent’s Submissions

81. The Respondent submits that it is entitled to payment for the facade redesign. Mr Coleman denied in oral evidence that he agreed to perform the work for free. He submitted that the redesign was undertaken in good faith to assist the Applicants, but that any arrangement was nullified when the Applicants terminated the agreement. In oral evidence Mr Coleman stated that “…the clients are saying that we were doing free work to change their design...we’ve since amended that to be full price because of the termination and of the actual cost”. In written submissions, the Respondent justified the charge on the basis that the original agreement was “now annulled”.

The Law

82. The legal issue is whether the original written agreement was varied by a subsequent oral agreement. A binding variation requires the same elements as contract formation, those are offer, acceptance, and an intention to create legal relations.

83. Where, as it is here, evidence of an oral variation is contested, the Tribunal must determine, on the balance of probabilities, certain findings of fact relating to the elements of contract that are said to give rise to that variation.

84. It is often cited that the fallibility of human memory increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman [1995] NSWCA 497; (1995) 49 NSWLR 315 at 318–319; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41]; Varma v Varma [2010] NSWSC 786 at [424]–[425].

85. In Brookfield v Yevad [2004] FCA 1164 at [416], in relation to the importance of documents in terms of testing credibility, Lander J said relevantly as follows:

Often, especially in commercial causes, the best evidence of the events the subject of the inquiry in the trial is contained in the contemporaneous documents. Usually, documents are created in circumstances where parties do not expect the documents to surface in a trial. They often, therefore, contain the true account of the contemporaneous event.

86. In assessing the conflicting oral evidence relating to the offer and acceptance of the variation, I have given significant weight to the contemporaneous evidence of the Applicants’ text message. That message was created immediately after the conversation between the parties and long before statements and affidavits were prepared for the hearing of this matter. I therefore make a finding of fact, on the balance of probabilities, that there was an oral agreement between the parties to perform the facade redesign without additional cost to the Applicant, and did not vary the architectural services agreement between the parties to include the rework now invoiced.

87. That finding alone is sufficient to dispose of the Respondent’s claim for payment of invoices numbered 2427-4 and 2427-4b. However, even if the Tribunal had not accepted the Applicant’s evidence regarding the Respondent’s promise to redesign without fee, the Respondent’s claim for those invoices would still fail due to the Respondent’s failure to adhere to the express terms of the architectural agreement, which require the Respondent to “immediately notify the Client” that an additional fee would be “likely” before undertaking the work now invoiced for.

Determination

88. Accordingly, the Respondent is not entitled to payment for invoices numbered 2427-4 and 2427-4b.

Invoices 2427-4 and 2427-4b

89. Whether the Respondent is entitled to payment for invoice numbered 2427-5 in the amount of $2,706.00 depends on whether the work detailed in the invoice constituted an additional service that was requested by the Applicants and charged in a manner consistent with the express terms of the architectural agreement.

Submissions of the Parties

90. The Respondent submits that it is entitled to payment for this invoice as the charges relate to “Client initiated changes to approved drawings” and other additional services that fall outside the fixed-fee stages of the agreement. The Respondent relies on the “Drawing Amendments” and “Changes in Instruction and Extended / Protracted Services” clauses in its standard terms and conditions as the basis for its entitlement to charge for this additional work on an hourly basis.

91. The Applicants submit that they are not liable for invoice 2427-5. They assert that they were never notified that the work would incur an additional fee, nor was their approval sought before it was performed. The Applicants rely on the Respondent’s own contractual terms, which require that “An estimate of the time and cost...will be made...and approval sought before works commences” and that the Respondent “shall immediately notify the Client” should any additional fees appear likely. The Applicants gave oral evidence at the hearing that the process set out by the architectural agreement between the parties was never followed.

92. The Applicants further submit that the credibility of the invoice is questionable, as it was issued for the first time several months after the work was allegedly completed and only after the dispute had escalated to the point of debt collector involvement.

Consideration

93. The Respondent’s entitlement to be paid for work that is additional to the fixed-fee stages is governed by clear procedures set out in its own contract. The agreement establishes a mandatory two step process for client initiated changes. First, the provision of an estimate, and second, obtaining the client’s approval before commencing work. For any other additional work, the agreement imposes a proactive duty on the Respondent to immediately notify the client if an extra fee is likely. The onus is on the Respondent, as the party seeking orders for payment, to prove that it complied with those contractual requirements.

94. The Respondent has failed to provide any evidence whatsoever to demonstrate that it complied with these critical conditions. The Tribunal has not been taken to any emails, file notes, or other documents in evidence showing that an estimate was provided to the Applicants, that their approval was sought, or that they were notified of any likely additional costs before the work was undertaken. The Respondent cannot ignore the mandatory procedures in its own agreement and later claim an entitlement that was conditional upon following them.

Determination

95. Accordingly, the Tribunal determines that the Respondent is not entitled to payment for invoice number 2427-5, and no amount is payable by the Applicants for it.

Conclusion

96. For the reasons set out above, the Tribunal finds that the Applicants have established their claim. The Respondent engaged in misleading and deceptive conduct by representing that it could design a home capable of construction for a cost within the Applicants’ specified budget.

97. The Tribunal is satisfied that the Applicants relied on this conduct and, but for that inducement, would not have entered into the agreement. Consequently, the Applicants have suffered a loss of $26,341.00, comprising a full refund of fees paid for services that ultimately had no value to them and the legal costs they were forced to incur as a direct result of the Respondent’s handling of the dispute.

98. In relation to the cross application, the Tribunal finds that the Respondent has failed to establish its entitlement to payment for any of the disputed invoices. The claims for the facade redesign and additional hourly work fail because the work was either agreed to be performed at no cost or, in any event, was not authorised in accordance with the mandatory variation procedures of the Respondent’s own contract. The claim for the final stage invoice must be offset against the larger credit owed to the Applicants, which the Respondent has acknowledged.

99. Accordingly, the application is successful, and the cross-application must be dismissed in its entirety. The Tribunal will make a formal order requiring the Respondent to pay the Applicants the sum of $26,341.00.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 13 October 2025