George Georges & 2 Ors v Richard Davies

[2007] NSWSC 1284

CITATION:	George Georges & 2 Ors v Richard Davies & Anor [2007] NSWSC 1284
HEARING DATE(S):	29.10.07, 30.10.07
JUDGMENT DATE :	13 November 2007
JUDGMENT OF:	Nicholas J
DECISION:	Para 53
CATCHWORDS:	EQUITY – building contract for construction of private residence – settlement of dispute between builders and owners – owners’ breach of settlement term – whether order for specific performance appropriate remedy – whether contractual obligation to demolish building improvements gave rise to fiduciary relationship between parties – principles considered – damages in lieu of specific performance – paucity of evidence – assessment of what is fair and reasonable in circumstances
LEGISLATION CITED:	Environmental Planning and Assessment Act 1979, s 121B
CASES CITED:	Bracewell v Appleby [1975] Ch 408 Breen v Williams (1995) 186 CLR 71 Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41 Jaggard v Sawyer [1995] 2 All ER 189 Longtom Pty Ltd v Oberon Shire Council (1996) 7 BPR 14,799 Post Investments Pty Ltd & Anor v Wilson & Anor (1990) 26 NSWLR 598 State of NSW v Moss (2000) 54 NSWLR 536 Wrotham Park Estate Co v Parkside Homes Ltd [1974] 2 All ER 321
PARTIES:	George Georges – first plaintiff Michael Zaarour – second plaintiff All Care Building & Maintenance Pty Ltd – third defendant Richard Davies – first defendant Carolyn Davies – second defendant
FILE NUMBER(S):	SC 5527/05
COUNSEL:	M Ashhurst SC/M Dawson - plaintiffs Ms E Olsson SC - defendants
SOLICITORS:	Wordsworth Lawyers – plaintiffs Peter Mitchell Solicitors – defendants

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Nicholas J

13 November 2007

5527/05 George Georges & 2 Ors v Richard Davies & Anor

JUDGMENT

1 His Honour: These proceedings concern the plaintiffs’ claims for relief arising from the defendants’ breach of conditions of the agreement by which their disputes in the Consumer, Trader and Tenancy Tribunal (the CTTT) were settled.

2 By an agreement dated 2 April 2003, the third plaintiff undertook the construction of a two-storey house for the price of $200,000.00 plus GST for the defendants at their property at no. 20 Tomah Street, Carlingford (the property). Building work began shortly afterwards and continued until about 25 September 2003 when the relationship between the parties broke down. The work was not completed when the third plaintiff left the site on 10 October 2003.

3 On 21 November 2003 the third plaintiff commenced proceedings no. HB03/49690 in the CTTT against the defendants to recover the sum of $59,156.70 claimed to be due under the contract. On 30 August 2004 the defendants counter-claimed in proceedings no. HB04/21444 and HB04/49690 against all plaintiffs for the sum of $443,780.00 being a claim for $263,780.00 for defective work and $180,000.00 for legal and experts’ fees. The first plaintiff is a shareholder in, and a former director of, the third plaintiff. The second plaintiff is, and at all material times was, the sole director of the third plaintiff.

4 On 12 October 2004 the parties executed terms of settlement (the agreement) which disposed of the CTTT proceedings. The agreement provided that each party would discontinue with no order as to costs, that the plaintiffs would pay to the defendants the sum of $116,000.00, that the plaintiffs would indemnify the defendants against any claim made by the plumber, Nexus Plumbing, and they would use their best endeavours to obtain from it a letter to the defendants confirming that it had no claim against them.

5 The condition in issue in the present case was in the following terms:

“4 Davies agrees to demolish the improvements carried out by All Care Building & Maintenance Pty Ltd pursuant to the Home Building Contract dated 2 April, 2003 and in this regard:
(a) Davies will as soon as practicable and using their best endeavours apply to Parramatta City Council for consent to carry out the demolition of the said improvements.
(b) As soon as the Council consent has been issued to Davies, Davies will undertake the demolition as soon as practicable except for the part of the demolition referred to in paragraph (c).
(c) As regards the detention tank and such of the footings as are necessary to support the land Davies will demolish these in conjunction with the erection on the land of new residential premises.
(d) Davies will not be entitled to sell the land until all of the demolition referred to in paragraphs (b) and (c) has been completed.
(e) All costs associated with carrying out the demolition and obtaining the Council consent are payable by Davies.
(f) Davies is responsible for any loss or damage caused by the demolition to the property of adjoining land owners and to the partially completed swimming pool remaining on the land.”

6 On about 28 October 2004 the plaintiffs paid the defendants the sum of $116,000.00 under the agreement. On 18 December 2004 the registrar of the CTTT made orders in accordance with its terms.

7 It is common ground that the defendants are in breach of condition 4 in that they have not demolished the improvements carried out by the third plaintiff. Instead, between about August and December 2005, they proceeded with the completion of the building of the house in disregard of their obligations.

8 In summary, the plaintiffs claim relief by way of an order for specific performance of condition 4 requiring demolition of the improvements at the property, alternatively damages for breach of the agreement, alternatively a claim for the amount of profit or benefit obtained by the defendants by reason of breach of their fiduciary duty to demolish the building. The defendants deny entitlement to an order for specific performance, and that there was any fiduciary relationship between the parties. They contend that the appropriate relief is an award of damages.

Background

9 The following narrative provides some background for the better understanding of the claims. The matters were not in dispute and, in any event, were established on the evidence.

10 As at the date of the agreement (12 October 2004) the improvements constructed by the third plaintiff on the property consisted of concrete footings and concrete basement floor and ceiling; brickwork walls and timber framing; first and second level timber framing and flooring; and timber roof framing and terracotta tiles.

11 The defendants claim that the building was structurally defective, particularly that the footings and foundations were unsound. They obtained reports from experts on the extent of the defective work and in respect of rectification work required.

12 In about September 2004 the defendants obtained a quotation for the demolition of the building from Charter Contracting Pty Ltd for the sum of $16,000.00. On 15 October 2004 they obtained another quotation for the demolition work from Democorp NSW for the sum of $33,600.00 plus GST.

13 In November 2004 the defendants contacted Parramatta City Council regarding its requirements for demolition. By letter dated 10 November 2004 the council informed the defendants of its intention to issue an order under s 121B Environmental Planning and Assessment Act 1979 requiring demolition of what was described as “2 storey brick dwelling partially constructed” on the ground that it was not structurally adequate.

14 Subsequently the defendants decided against demolition and to proceed with rectification of the defects and completion of the house. In their letter of 18 February 2005 to the Council they said:

“As you are aware, we have had significant problems during the construction process thus far, and have provided you with engineering and building reports detailing the deficiencies. Despite these existing deficiencies we are investigating the feasibility of keeping the existing construction, and through remedial structural engineering, intending to make the construction structurally adequate. Additionally we would be seeking approval for some variations, as some boundary setbacks and constructed floor levels are not as per the approved plans. We understand these can be adequately dealt with for certification. Due to the poor finish quality of brickwork the external appearance would also be modified by the use of a render type finish.
We have had two independent licensed builders closely inspect our building. Their strong opinion is that the building can be retained and that with significant further structural work it would meet the criteria for compliance with the relevant statutory requirements.”

15 A building inspection was carried out by the Council on 19 April 2005 following which the defendants arranged to proceed with construction. They obtained a quotation from EBRA Constructions Pty Ltd on 18 July 2005 for rectification and completion. That company then carried out the work under the supervision of Mr Gurdeep Singh, consultant engineer. The work included the removal and replacement of all of the windows and doors, demolition and replacement of timber framing, demolition of brickwork, removal and replacement of roof tiles, and rendering exterior face brickwork.

16 On about 12 August 2005 the first plaintiff observed that the improvements had not been demolished, and that new work had been commenced which apparently added to and incorporated the improvements. By letter of that date to the defendants, his solicitors referred to this activity, and requested their confirmation within seven days that the work was in preparation for the demolition of the improvements. There being no response, the solicitors made a similar request in their letter to the defendants of 6 September 2005.

17 In about September 2005 Mr Elias Georges, the father of the first plaintiff, inspected the house. He observed tradesmen working inside and finishing off the improvements carried out by the third plaintiff. He observed that no demolition of any of the improvements was taking place.

18 In their letter to the defendants of 20 October 2005 the plaintiffs’ solicitors recorded that no response had been made to the earlier letters. It asserted that the building work being undertaken at the property was inconsistent with their obligations under the agreement. They advised of their instructions to commence proceedings to enforce the agreement.

19 On 24 October 2005 the first plaintiff filed the summons seeking an order for specific performance of the agreement.

20 In their letter to the plaintiffs’ solicitors of 28 October 2005 the defendants’ solicitors said:

“In an attempt by our clients to mitigate their losses in respect of the building work undertaken by your client, our clients found that they are able to remediate the works to the satisfaction of Parramatta City Council.
Our clients are prepared to provide to your clients an appropriate form of indemnity such that your client’s position remains protected pursuant to the Terms of Settlement dated 12 October 2005.
Should your client commence proceeding those proceedings will be strenuously defended.”

21 By letter of 27 November 2005 to the Council, Mr Singh certified various matters referable to the construction, being information required by the Council for the issuing of a building certificate. The letter included advice that the rectification work had been undertaken, and that the entire building was structurally sound.

22 On 29 November 2005 the plaintiffs’ notice of motion that the building work be stopped pending the hearing of the proceedings was heard by Young, CJ in Eq. He ordered that unless the sum of $116,000.00 was paid into court to the credit of these proceedings, the defendants be restrained from carrying out further building work at the property other than the demolition of the improvements. The amount was paid into court on 15 December 2005.

23 On 5 December 2005 the Council issued a building certificate. On 16 December 2005 Yellamo Building Certifiers Pty Ltd issued an occupation certificate for the property which included the statement that the building is suitable for occupation or use in accordance with its classification under the Building Code of Australia.

24 On 21 December 2005 the statement of claim was filed.

Specific performance

25 The plaintiffs’ primary position was that there should be an order for specific performance of the agreement by which the defendants are ordered to demolish the improvements at the property. In the amended statement of claim the improvements were described to be the concrete brick and terracotta structure comprising basement level and two upper floors constructed upon the property, not including the detention tank and such of the footings as are necessary to support the property.

26 Before turning to the submissions it is convenient to refer to the first plaintiff’s evidence, which I accept, concerning the significance to him and to the third plaintiff of the defendants’ agreement to demolish the improvements carried out by the third plaintiff. He said he was concerned as to the adverse affect upon the reputation of both himself and the third plaintiff if the house continued to exist in the defective condition as alleged by the defendants. He also said that he understood that demolition would effectively relieve the plaintiffs of the risk of future claims by third parties.

27 For the plaintiffs it was submitted that the defendants’ failure to comply with their obligation to demolish was wilful and deliberate in that at all times they were aware of their obligation under the agreement but deliberately chose to ignore it and then proceeded with the building works. It was put that in those circumstances, and notwithstanding that demolition may be oppressive to the defendants, the situation was entirely their own fault in proceeding with construction in breach of the condition after due warning.

28 It was put that relevant to the exercise of discretion was the special importance to the plaintiffs that their reputations remained in jeopardy, and the risk of future claims continued unless the house was demolished. It was argued that the evidence fell short of proving that the defects had been remedied in the course of completion of the house, and left it unknown as to whether or not the source of the plaintiffs’ concerns had been removed. It was put that, absent evidence as to the detail of the work, uncertainty as to the true position will continue.

29 In opposition to this claim, the defendants pointed out that since December 2005 the house has been completed, and has been certified by experts to be structurally sound and fit for occupation. It was put that there is no evidence which would counter the inference that the defects have been incorporated into the present building or otherwise remedied, or that the existence of the house is likely to threaten the reputation of the plaintiffs, or that the prospect of future claims has any reasonable basis. The defendants contended that it is self-evident that it would be oppressive to order demolition. They also relied on what was claimed to be the plaintiffs’ delay in bringing the proceedings as a bar to relief. They put that, in all the circumstances, the order should be refused as an award of damages was the appropriate remedy.

30 The approach to be taken by the court in deciding the question is with regard to well-known principles (e.g. those explained in Longtom Pty Ltd v Oberon Shire Council (1996) 7 BPR 14,799). It is sufficient to refer to the observations of Millett LJ in Jaggard v Sawyer [1995] 2 All ER 189, pp 207-208:

“When the plaintiff claims an injunction and the defendant asks the court to award damages instead, the proper approach for the court to adopt cannot be in doubt. Clearly the plaintiff must first establish a case for equitable relief, not only by proving his legal right and an actual or threatened infringement by the defendant, but also by overcoming all equitable defences such as laches, acquiescence or estoppel. If he succeeds in doing this, he is prima facie entitled to an injunction. The court may nevertheless in its discretion withhold injunctive relief and award damages instead. How is this discretion to be exercised? In a well-known passage in Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287 at 322–323, [1891–4] All ER Rep 838 at 848 A L Smith LJ set out what he described as 'a good working rule' that—
(1.) If the injury to the plaintiff's legal rights is small, (2.) And is one which is capable of being estimated in money, (3.) And is one which can be adequately compensated by a small money payment, (4.) And the case is one in which it would be oppressive to the defendant to grant an injunction:-—then damages in substitution for an injunction may be given.'
Laid down just 100 years ago, AL Smith LJ's checklist has stood the test of time; but it needs to be remembered that it is only a working rule and does not purport to be an exhaustive statement of the circumstances in which damages may be awarded instead of an injunction.
Reported cases are merely illustrations of circumstances in which particular judges have exercised their discretion, in some cases by granting an injunction, and in others by awarding damages instead. Since they are all cases on the exercise of a discretion, none of them is a binding authority on how the discretion should be exercised. The most that any of them can demonstrate is that in similar circumstances it would not be wrong to exercise the discretion in the same way. But it does not follow that it would be wrong to exercise it differently.
The outcome of any particular case usually turns on the question: would it in all the circumstances be oppressive to the defendant to grant the injunction to which the plaintiff is prima facie entitled? …”

31 Having regard to these principles, in my opinion, an order for specific performance must be refused. I find it just and reasonable in all the circumstances that the plaintiffs’ remedy be confined to damages. Indeed, although the plaintiffs did not abandon the claim, their Senior Counsel recognised that there was a very strong argument why damages may be more appropriate (T pp 46, 69).

32 Relevantly, on the evidence, and I find, the plaintiffs have suffered no pecuniary damage or reputational harm to date, and there is no evidence of likelihood that they will suffer any such loss in the future. It is also relevant to keep in mind that under the agreement the structure for demolition consisted of the improvements built by the third plaintiff. There was no evidence as to the extent to which such improvements may still be identifiable. It is reasonable to infer that those improvements, or what remains of them, have been incorporated into the house, and are inseverable from the work which completed it and was carried out by others. It follows as a matter of common sense and reality that, if the order sought is made, the defendants would be required to undertake demolition on a scale greater than that which they agreed to do.

33 I have not overlooked the fact that the defendants’ breach was deliberate, and without regard to the plaintiffs’ rights under the agreement. However, the discretion is to be exercised with regard to the interests of justice in the particular case, and the court is obliged to consider the case at the time of the hearing before the judge. To order demolition would be to subject the defendants to a loss out of all proportion to any reasonably identifiable harm to the plaintiff which would occur if the house was permitted to stand. In truth, the effect of the order would be punitive only, which is enough for refusing to make it. In my assessment the present situation is far removed from that before Powell, J in Post Investments Pty Ltd & Anor v Wilson & Anor (1990) 26 NSWLR 598 in which his Honour ordered demolition of alterations to a house which had been made in breach of a restrictive covenant in flagrant disregard of, and injurious to, a party’s rights.

34 In summary, I find that any loss to the plaintiffs is relatively small. The parties accepted that it is capable of being estimated in money. I am satisfied that such loss can be adequately compensated by an appropriate money payment, and that it would be oppressive to the defendants to order demolition. The tests referred to in the “good working rule” of A L Smith, LJ are fulfilled, and justify the exercise of discretion to award damages in lieu of an order for specific performance.

35 I deal with the assessment of damages later in these reasons.

Fiduciary relationship

36 As an alternative to the claim for specific performance, the plaintiffs claimed that the defendants’ refusal to demolish the improvements was a breach of a fiduciary duty owed to the plaintiffs under the agreement. In summary, the plaintiffs’ case was that the defendants’ acceptance of the contractual term to demolish the improvements established a fiduciary relationship between the parties. It was said that under this relationship the plaintiffs relied upon the defendants to perform acts for the protection of their reputations and to protect them from potential claims by third parties. In other words, the agreement was not one from which the defendants were to profit; it was simply one by which they agreed to protect the interests of the plaintiffs, and from which only the plaintiffs would benefit.

37 It was submitted that the critical feature which distinguished the relationship under the agreement from an ordinary trading relationship was that by promising to demolish the improvements the defendants bound themselves to act in the plaintiffs’ interests, but not in their own. It was put that in the circumstances the defendants should be required to account to the plaintiffs for the benefit derived from preferring their own interests to those of the plaintiffs in failing to demolish the improvements. It was claimed that by their conduct they obtained the financial benefit of saving on the cost of demolition and rebuilding the improvements which amounted to the total sum of $255,000.00. The cost of demolition saved was said to be $33,600.00 plus GST as quoted by Democorp NSW. The cost of rebuilding saved was said to be the contract price of the improvements, namely $220,000.00.

38 The defendants’ submissions against the existence of a fiduciary relationship were succinct. It was put that the agreement taken as a whole benefited both parties. In particular, it was put that both would benefit from demolition by getting rid of a defective structure. In any event, it was put that more is required than that a party should benefit under a contract in order to establish a fiduciary relationship.

39 There are a number of passages in Hospital Products Ltd v United States Surgical Corporation & Ors (1984) 156 CLR 41 which provide guidance for deciding whether a contractual relationship imposes fiduciary obligations. Gibbs, CJ (p 69) said that the fact that one person subjectively trusted another is neither necessary for nor conclusive of the existence of a fiduciary relationship. He observed that an ordinary transaction for sale and purchase does not give rise to a fiduciary relationship simply because the purchaser trusted the vendor and the latter defrauded him. He also said (p 70) “… the fact that the arrangement between the parties was of a purely commercial kind and that they had dealt at arm’s length and on an equal footing has consistently been regarded by this Court as important, if not decisive, in indicating that no fiduciary duty arose.” He expressed the view (p 71) that “… the fact that there is a duty to be performed – a job to do – cannot in every case create a fiduciary obligation” and pointed out that, as a general rule, contractual duties arising under ordinary commercial contracts cannot be said to impose fiduciary obligations.

40 Mason, J (p 96-97) said:

“The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v. Boardman 125 , at p. 127), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions "for", "on behalf of", and "in the interests of" signify that the fiduciary acts in a "representative" character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.
It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed: see generally Weinrib, "The Fiduciary Obligation", University of Toronto Law Journal , vol. 25 (1975), pp. 4-8. Thus a mere sub-contractor is not a fiduciary. Although his work may be described loosely as work which is to be carried out in the interests of the head contractor, the sub-contractor cannot in any meaningful sense be said to exercise a power or discretion which places the head contractor in a position of vulnerability.”

Dawson, J said (p 141-142):

“Notwithstanding the existence of clear examples, no satisfactory, single test has emerged which will serve to identify a relationship which is fiduciary. It is usual — perhaps necessary — that in such a relationship one party should repose substantial confidence in another in acting on his behalf or in his interest in some respect. But it is not in every case where that happens that there is a fiduciary relationship. If it were, whenever there is "a job to be performed" ( Tito v. Waddell [No. 2] 219 , at p. 229) and entrusting the job to someone involves, reposing substantial trust and confidence in him, equity would impose fiduciary obligations. Clearly, that is not the case. Nor does a fiduciary duty arise because the person to whom a job is entrusted acts in his own interest and thereby fails to perform the job properly, however useful it may appear with hindsight that such protection should have been available. As Megarry V.-C. put it in Tito v. Waddell 220 :
"If there is a fiduciary duty, the equitable rules about self-dealing apply: but self-dealing does not impose the duty. Equity bases its rules about self-dealing upon some pre-existing fiduciary duty: it is a disregard of this pre-existing duty that subjects the self-dealer to the consequences of the self-dealing rules. I do not think that one can take a person who is subject to no pre-existing fiduciary duty and then say that because he self-deals he is thereupon subjected to a fiduciary duty."“

(See generally Breen v Williams (1995) 186 CLR 71 (pp 93, 106-110).)

41 In this case the relationship between the parties was governed by the agreement pursuant to which the litigation in the CTTT was settled. The evidence shows that it was a commercial arrangement entered into by the parties at arm’s length and on an equal footing. In my opinion, the defendants’ covenant to demolish the improvements cannot be categorised as a fiduciary duty owed to the plaintiffs.

42 Furthermore, the agreement provided to the plaintiffs no rights over, or in relation to, the improvements on the property. The improvements belonged to the defendants. The defendants simply agreed to demolish them as part of the overall bargain they made with the plaintiffs. They did not agree to protect the reputations of the plaintiffs. No right or interest of the plaintiffs was entrusted to the defendants under the agreement. The defendants’ undertaking was not one to do something for or on behalf of the plaintiffs as the plaintiffs themselves had no right to demolish. They could only achieve that result if the defendants performed their agreement to do so. In short, their relationship was not akin to a trust.

43 That the plaintiffs trusted the job to the defendants and expected them to honour their agreement and thereby to derive some consequential benefit is not enough, in the circumstances, to give rise to a fiduciary relationship. For these reasons I conclude that the defendants were not involved in a fiduciary relationship with the plaintiffs under the agreement and, accordingly, this basis for relief against them is rejected.

Damages

44 The defendants accepted liability for damages. The real contest was quantification.

45 It became common ground that the measure of damages should be the amount which the plaintiffs could reasonably have expected to have received from the defendants for their release from the obligation to demolish the improvements. I was requested by both parties to proceed on this basis. It was accepted that this was consistent with the approach taken in Wrotham Park Estate Co v Parkside Homes Ltd [1974] 2 All ER 321, p 341; Bracewell v Appleby [1975] Ch 408, pp 419, 420 and Jaggard, pp 202, 212, 213.

46 The plaintiffs submitted that the award should be calculated with regard to the profit or benefit which the defendants gained by avoiding demolition. It was put that this was equivalent to the savings on the cost of demolition ($33,600.00 plus GST quoted by Democorp NSW on 15 October 2004) and of rebuilding the house to the stage it had reached at the time of agreement ($220,000.00) in the total amount of $255,000.00. It was put that the court should find that, in the circumstances, the fair price which the plaintiffs would be willing to accept and the defendants would be willing to pay was the amount of $127,000.00 being an amount equivalent to 50% of the defendants’ benefit from the breach.

47 The defendants submitted that if any cost referable to demolition was to be taken into account, it should be based on the figure of $16,000.00 quoted by Charter Contracting Pty Ltd in September 2004 which had been taken into account in negotiating the sum of $116,000.00 paid by the plaintiffs under the agreement. It was put that it is more likely that this was the figure which would have been in their minds, than that obtained from Democorp NSW. They submitted that there was no evidence of the factors which the plaintiffs would have taken into account in negotiating a price for the release. In effect, the defendants submitted that an objective evaluation of the positions of the parties would lead to the conclusion that the price would be substantially less than that claimed by the plaintiffs.

48 Because of the paucity of relevant and specific evidence both parties recognised that I was left in the realm of possibilities rather than probabilities, and that the process of assessment was necessarily imprecise and involved the exercise of a wide discretion. (The principles were reviewed in State of NSW v Moss (2000) 54 NSWLR 536, paras 66-87 by Heydon, JA.)

49 Thus the question for the court is the amount of damages which, insofar as it can be estimated, is equivalent to a proper and fair price which would be payable for the release. The court’s task is to endeavour to arrive at a fair price which the parties would have struck as one which the plaintiffs would accept as compensating them for their loss of what they perceived to be the protection afforded by demolition, and which at the same time would not be so high as to deter the defendants from proceeding to complete the house.

50 In evaluating the positions of the parties I have taken into account that, from the plaintiffs’ viewpoint, the agreement to demolish afforded them protection of reputation and against future risk of third party claims. It may be assumed that they would have believed that demolition would give them substantial certainty of such protection. I am satisfied that this protection was believed by them to be important and valuable. It is reasonable to suppose that the plaintiffs would also take into account the likelihood that the concession sought was of substantial value to the defendants. They would also take into account the likelihood that if the defects were incorporated into a structurally sound house, or otherwise rectified, their need for protection would evaporate or, at least, be substantially diminished.

51 From the defendants’ position it seems to me reasonable that they would be prepared to pay an amount which took into account the saving of the cost of demolition and the value to them of the improvements done by the third plaintiff, or the corresponding saving of the cost of rebuilding the house to the same stage, but would discount that value to some extent to allow for what was necessary to remedy or overcome the defects. In my opinion, it is probable that the defendants would have considered the cost of demolition to be as quoted by Democorp NSW rather than as quoted by Charter Constructions Pty Ltd. The former was provided shortly after the agreement was made and sets out details of the work to be done. The latter was given earlier, and was merely a figure without supporting details.

52 In my opinion, the amount of $127,000.00 claimed by the plaintiffs is well within the range of reasonable amounts which the parties might probably have agreed upon. It seems to me to be one which is fair and not excessive. I have reached this conclusion, not by the simple exercise of halving the amount of the benefits said to have been derived by the defendants, but by an objective evaluation of what the parties, in the circumstances, might reasonably have agreed to as a quid pro quo for the release.

53 Accordingly, I award damages to the plaintiffs in the sum of $127,000.00.

54 Finally, it may be noted that during the course of final submissions Senior Counsel for the defendants stated that the issue initially ventilated as to the construction of the agreement was no longer pressed (T p 70).

55 The plaintiff is directed to bring in short minutes to give effect to my conclusion and for disposal of the cross-claim. Failing agreement, the parties should have the opportunity to put submissions on any outstanding issues as to interest and costs. Arrangements for re-listing of the matter should be made with my associate before 4pm 23 November 2007.

**********