Hayward v Timilty
[2009] NSWDC 54
•23 January 2009
CITATION: Hayward v Timilty [2009] NSWDC 54
This decision has been amended. Please see the end of the judgment for a list of the amendments.HEARING DATE(S): November 2008 24, 25, 26, 27, 28
December 2008 1, 2, 3, 4, 5, 8, 11
JUDGMENT DATE:
23 January 2009JURISDICTION: Civil JUDGMENT OF: Williams DCJ DECISION: The plaintiffs have been substantially unsuccessful in their claim. Likewise, except for the matters on the Scott Schedules the builder has been substantially successful. There will therefore be a verdict for plaintiff on the plaintiff’s claim against the builder to the extent of any adjustment needed to be made by the schedules and a verdict for the builder on the builder’s cross-claim against the plaintiff again, subject to the schedules and what I have said in paragraph 157. CATCHWORDS: BUILDING & CONSTRUCTION - Home Building Act - interpretation - enforceability - validity of contract - costs plus contract - fixed price contract - "estimate" meaning of - "quote" meaning of - quantum meruit - false and misleading conduct - civil fraud LEGISLATION CITED: Trade Practices Act 1974
Fair Trading Act 1987
Contracts Review Act 1980
Home Building Act 1989.
Evidence ActCASES CITED: Parkdale Custom Built Furniture Pty Ltd v Paxu Pty Ltd 1982 149 CR 191
Palmer –v– Dolman 2005 NSWCA 361
Broadshaw –v–McEvans P/L (1951) 217 ALR 1
Neat Holdings P/L –v–Karajan Holding P/L (1992) 67 ALJR 170
Winterton Constructions P/L –v–Hambros Australia P/L (1992) 39 FCR97
Pavey and Mathews P/l –v– Paul (1986) 162 CLR 221
Horton –v– James (1934) 34 SR (NSW) 368
Coshott and Anor v Fewings Joinery Pty Ltd [1996] NSWCA 122
Sunvara Pty Ltd v Williams [2001] NSWSC 433
McGrath and Another v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2
Yorke –v– Lucas (1985) CLR 661
Marks –v– GIO Australia Holdings Ltd (1998 196 CLR 494
ASX Operations P/L –v– Pont Data Australia P/L (1991) 27 FCR 492
Trimis –v– Mina (1999) NSWCA 140
Update Constructions P/L v Rozelle Child Care Centre (1990) 20 NSWLR 251
Flett v Deniliquin Publishing Co Ltd (1964-1965 NSWR 383
Cooks Constructions P/L –v– Stork Food Sytems Aust P/L 2008 QSC 179
Way –v– Latilla 1937 3 ALLER 759
Kane Constructions P/L –v– Sopov (2005) VSC 37
Kane Constructions –v –Sopov No 2 2005 VSL 492
Gray (Constructions) P/L –v– Hogan 2000 NSWCA 26
Mohammed –v– Local Court of NSW and Sleiman 2008 NSWSC 949
Brenner –v– First Artists Management P/L 1993 2VR 22TEXTS CITED: Laws of Australia Part C Unenforceable and Void Contract at [144] PARTIES: Deidre Hayward
Stephen Hayward
StephenTimilty
S J Timilty Building Pty LtdFILE NUMBER(S): 280/07 COUNSEL: Plaintiff: Mr I George
Defendant: Mr S DockerSOLICITORS: Plaintiff: Howard S. Charles & Co.
Defendant: Kemp Strang Lawyers.
1. The plaintiffs, Mr and Ms Hayward, are the owners of a house (the property). The Defendants are respectively a builder and his building company who undertook renovations at the property in 2004. Unless otherwise indicated I will refer to the plaintiffs as the Haywards and the Defendants as Timilty.BACKGROUND
2. The Haywards bought the property in 1999 and in 2003 decided to undertake quite extensive renovations. To this end, they commissioned Mr Nelson, a builder, to draw up plans and consulted Mr Whelan for various engineering specifications. Nelson and Whelan produced sets of plans, which were the basis for the Haywards’ going forward to seek a builder. Timilty was recommended to them by Whelan and was known by the Haywards to have done work on a nearby property. The Haywards consulted with Timilty several times on site. A contract was discussed and Timilty indicated his preference for a costs plus contract (C.P.C) . This is essentially a contract whereby the owners agree to pay the builders actual costs plus a percentage, in this case 10%. I am satisfied that the Haywards knew what a costs plus contract was. Indeed Mr Hayward was concerned that such a contract was, in effect, open-ended. Nonetheless, on 3/4/04, they signed a Housing Industry Association (HIA) standard term costs plus contract incorporating an initialled copy of Timilty’s letter of estimate dated 10/2/04 (the February letter) .
3. In the Statement of Claim, the Haywards plead that Timilty made 17 representations that induced them to enter the contract on 3/4/04 and that these representations were made recklessly, carelessly and indifferent to the truth thereof and “in the premises” (whatever that is supposed to mean these days) were false and the contract was induced by the fraud of Timilty and is void ab initio.
5. The Haywards say they have paid to date $424, 364.69. Timilty’s claim relates to a total of all invoices amounting to $518, 661.85. The invoices sent and the actual payments received by Timilty as well as the date and the progressive total in each case are set out in the table below.4. Alternatively, the Haywards rely on the relevant provisions of the Trade Practices Act 1974, the Fair Trading Act 1987 , the Contracts Review Act 1980 , and the Home Building Act 1989 .
CHRONOLOGY of INVOICES and RECEIPTS
INVOICE DATE NUMBER AMOUNT RECEIPT DATE AMOUNT 13/4/04 2257 $33,988.35
($33,988.35)14/4/04 $33,988.35
($33,98.35)26/4 2258 $41,789.12
($75,774.47)3/5 $40,000.00
($73,988.35)20/5 2261 $72,506.15
($148,280.62)26/5 $72,506.15
($146,494.50)8/6 2263 $61,661.10
($209,941,72)1/6
17/6$1,789.13
$61,661.10
($148,283.63)
($209,944.73)1/7 2264 $46,318.44
($256,260.16)1/7
13/7$13,685.00
$29,730.93
($223,629.73)
($253,360.66)9/8 2267 $100,210.58
($356,470.74)19/8
29/9$50,000.00
$40,000.00
($303,360.66)
($343,360.66)25/10 2270 $128,128.84
($484,599.58)25/10 $4,000
($347,360.66)21/11 2277 $21,235.95
($505,835.53)17/3/05 2288 $12,545.00
($518,380.53)? $12,545.00
($359,905.66)8/5/05 2287 $278.32
($518,658.85)6. Both parties agree that the HIA document signed was a costs plus contract. Both parties agree that the February letter from Timilty to the Haywards was incorporated into that contract.
7. The builder’s estimate was exceeded and eventually the Haywards locked him out of the site. The various claims relate to unpaid work, poor workmanship and payments made by the Haywards that they suggest should have been met by the builder.
8. Having regard to the way in which this case has been run, I think it appropriate to attempt to deal with the various issues consequentially in their chronological order, as much as that is possible. The case lasted 15 days, Mr. I. George representing the Haywards and Mr. S. Docker representing the builder. There are 2 Scott schedules. The matter was initially in the Consumer Trader and Tenancy Tribunal where some meeting of experts was conducted. On the hearing before me, the experts gave evidence in court together by way of a “hot tub” arrangement. The experts consisted of, for the Haywards, Mr. Beresford, a builder, Mr. Wilson an engineer specialising in ground water, Mr. Johns a civil engineer, and for Timilty, Mr. Reid, a builder. None of the experts were ever on site during construction and have only come into the picture once the matter was in dispute.
THE HISTORY
9. Timilty has been a builder for many years. His Company S. J. Timilty Building Pty Ltd (SJTB) was registered in 1991 and was issued with a licence under the Home Building Act in April 2001. The Haywards are husband and wife and are the proprietors of the property, which was purchased in 1999. The property had already been renovated and extended at different times prior to 2004, but not by the Haywards.
10. The Haywards consulted Mr Nelson in February 2003 to design renovations to the house. These were prepared on 27/2/03. Nelson is a retired builder. At some stage in 2003, undated specifications were prepared by Nelson and an amended design on 19/6/2003. This plan was submitted to council and approved. In March 1993, Mr Whelan was asked by Mrs Hayward to do the engineering plans, which were apparently paid for in Dec 2003 and provided in Jan 2004. Mrs. Hayward met Timilty on site to discuss the project. Timilty says that he told her, as he didn’t know what was under or inside the building, that his estimate of cost would be based on nothing going wrong and be toward the lower end of the spectrum.
11. There were further meetings between Timilty and Mrs Hayward and Mr Hayward. Keeping the existing timber floors and keeping the costs down by having timber floors and walls was discussed.
12. On 10/2/04, SJTB provided an estimate letter (the February letter; Ex A1. Guide Card 5). The terms of this letter have been the subject of much dispute and submission but firstly I note the cost is described as a “budget estimate” and not a “quote”. Secondly, the letter is on the letterhead of SJTB and sets out licence details, address and telephone number and is signed by Timilty. The letter further states that,
“The works will be carried as per the drawings prepared by Steve Whelan and Associates of Sutherland, taking into account that a timber floor system is going to be used wherever possible and, as discussed, minor changes to the Architectural drawings, such as eliminating the Blue Board and using brick and render instead.”
13. The letter confirmed that a costs plus contract would be used. The estimate was for $350K – $375K. The builder set out the hourly rates that would be charged for various trades and labourers. The addresses of a number of jobs the builder had worked on were provided.
14. The Haywards were subsequently provided with a blank HIA C.P.C form. On 11/3/04 an insurance certificate was issued. On 16/3/04 Timilty advised Whelan that a concrete slab had been located under flooring on the 1st floor and further engineering designs would be needed to deal with it.
15. The works began on 16/3/04. On 18/3/04 Whelan prepared engineering details for the support of the 1st floor slab.
16. On 3/4/04 the H.I.A. contract was signed in duplicate, each party keeping the other parties signed copy. By consent, it was agreed that the February letter of 10/2/04 be incorporated into the contract. Mr. George argues that whilst this did not convert the contract into a Fixed Price Contract (F.P.C.) it did make it into a C.P.C. with a ceiling cost of $380K.
17. The agreement has been challenged in a number of ways.
18. Regrettably, neither party obtained either legal advice or any other sort of advice before signing these documents.
19. Section 7 of the Home Building Act provides that home building contracts must be in writing, dated and signed by the parties. Additionally, subsection (2) sets out various things the contract must contain. They are:
(a) – the names of the parties, including the name of the holder of the contractor licence shown on the contractor licence, and
(b) – the number of the contractor licence, and
(c) – a sufficient description of the work to which the contract relates, and
(d) – any plans and specifications for the work, and
(e) – the contract price if known, and
(f) – any statutory warranties applicable to the work, and
(g) – in the case of a contract to do residential building work—a conspicuous statement setting out the cooling-off period that applies to the contract because of section 7BA.20. Section 10 of the Act relates to enforceability of such contracts making contracts not in accordance with the Act unenforceable by the builder and the builder not being entitled to damages or able to enforce any breach.
21. It is argued that the contract in question contravenes s7 and is thus unenforceable and the builder is not entitled to damages or any other remedy.
22. I accept that the Home Building Act is consumer protection legislation and should be interpreted in that general light.
24. I am satisfied that the contract complies with the Home Building Act in that it contains the following: -23. Mr George argues that the contract does not comply with s7(2). Both parties however concede that the contract includes the February letter of 10/2/04.
(a) the names of the parties including the contractor licence holder
(b) the contractor licence number
(c) &(d) a sufficient description of the works to which the contact relates and
any plans and specifications for the work in that:- the address of 1 Bulls Rd is specified; the letter says that the works are to be carried out in accordance with Nelson’s architectural drawings and Whelan’s engineering drawings, but is subject to certain qualifications expressed in the opening paragraph of the February letter.
(d) As to stating the contract price, the legislation only requires the contract price to be stated “if known.” As at the date of the contract and it being a costs plus contract, the contract price was not and could not be known and therefore s7(2)(d) is not relevant.
(e) The statutory warranties were incorporated into the contract.
(f) As to a cooling off period that was not stated at all. The printed contract was one used prior to the amendment created by s7BA some months beforehand. However, as to the effect of this requirement, in the scheme of things, I note that the works had in fact been commenced prior to the contract being signed so any effect the absence of such a requirement might have had was, in effect, rendered nugatory.25. Given the fact that the contract was clearly a C.P.C., ss7(4) and (5) would appear to have little relevance.
26. I have no doubt that at all times Timilty intended to enter into a C.P.C. and not a F.P.C. In C.P.C’s, “variations” as such just become part of the costs for the particular job and it would seem that the Home Building Act did not really have in mind a C.P.C; as being likely to be used very often. Section 7 of the Act seems to be more specifically aimed at F.P.C.’s rather than C.P.C’s.
27. The point was made by Mr George that the builder is apparently in breach of s7AA, s7A and s7BA of the act. Whether or not that is the case, it is not really relevant to the issues I have to decide. He also argues that the contract creates an impermissible charge on the property contrary to s7D. However, in my view, the relevant clause, clause 9, does comply with s7D of the Act.
28. As far as I can see, the statutory warranties are effectively contained in clause 15 of the contract.
29. The contract was signed on 3/4/04. There are minor differences in the two counterpart documents, which in my view are inconsequential and in any event the documents should be looked at as a whole. The contract was signed by S.J.Timilty as director of S.J.Timilty Building P/L. The builder is nominated as S.J.Timilty of ABN 59 002 346 125 and Builders Licence No. 123747C. The A.B.N. relates to S.J.T.B. I am satisfied that the company was the contracting party.
30. As I indicated, the works began before the contract was actually signed.
31. The builder submitted the following invoices and associated documentation for payment.
Date Invoice Number Amount Owing 13/04/04 2257 $33,988.35 26/04/04 2258 $41,789.12 20/05/04 2261 $72,789.12 08/06/04 2263 $61,661.10 01/06/04 2264 $46,318.44 09/08/04 2267 $103,934.90 25/10/04 2270 $134,230.21 21/11/04 2277 $23,359.54 18/05/05 2287 $336.76 17/03/05 2288 $12,545.00 TOTAL $530,669.57 32. The Haywards made the following payments: -
Date Method of Payment Amount of Payment 14/04/04 Cheque $33,988.35 03/05/04 Cheque $40,000.00 26/05/04 Bank Transfer $72,506.15 01/06/04 Cheque $1,789.13 17/06/04 Bank Transfer $61,661.10 01/07/04 Cash $13,685.00 + $12,545.00 13/07/04 Bank Transfer $29,730.93 19/08/04 Bank Transfer $50,000.00 29/09/04 Bank Transfer $40,000.00 25/10/04 Cash $4,000 TOTAL $359,905.66 33. As to the evidence relevant to the contract entered into between the parties there are the affidavits of Mrs Hayward of 20/7/05 (DH1), Mr Timilty of 29/8/05 (ST1), a statutory declaration of Mr Timilty of 4/6/06 (ST2) , the affidavit of Mr Timilty of 12/6/06 (ST3) , the affidavit of Mrs Hayward 18/10/07 (DH2) and Mr Hayward of 19/10/07 (SH1) and the affidavit of Mr Timilty 20/6/06 (ST4). There is also the oral evidence of the parties.
34. I note that in Diedre Hayward’s affidavit of 20/7/05 (DH1) Mr Nelson, who drafted the plan, thought that a global figure to cost the job would be “around $400,000.00 as a reasonable guide and allowing for the usual material costs and various factors which can occur in a building job.” It is also fair to say that Mr and Mrs Hayward in their affidavits constantly use the word “quote” whereas Timilty uses the word “estimation”. In Mr Hayward’s affidavit of 19/10/07 (SH1) after disputing some factual matters in Timilty’s affidavit of 29/8/05 he says of the blank HIA document forwarded to them by Timilty: “Because it was blank I had concerns about the open ended nature of the costs plus contract.” In that regard, I find it highly improbable that Timilty would have said to Mr Hayward, “we can put the quote in as part of the contract,” as is alleged by Mr. Hayward in his affidavit.
35. As to what occurred before and after the contract was signed and during the building process is mainly dependent on those persons who were actually around at the time. In the present case they are Mr and Mrs Hayward, Mr Whelan, Mr Timilty and Mr Armstrong, the bricklayer.
36. The hindsight evidence of Mr Beresford and Mr Reid, the two experts employed by the Howard’s and Timilty, respectively, are of little or no value in assessing what was happening on a day to day basis. Indeed, in Mr Beresford’s evidence and Scott Schedule comments, there is a degree of partisanship on his part as well as a willingness to make presumptions contrary to Mr Timilty about which he has no experience or expertise to justify. On many occasions he suggests that materials charged to the Haywards by Timilty were not necessary and reflected work done on other properties that Hayward was working on at the time. That was pure speculation and I find no basis for such assertions.
37. Mr Reid is in a similar position as far as what actually occurred during the period. He is reliant on what he has been told by Timilty as is Beresford, reliant on what he was told by the Haywards. Resolving what happened between the Haywards and Timilty’s is not a matter for expertise but rather a function of the litigation process.
38. I accept and find that Timilty’s other concurrent jobs with the property were the Bray property at 116 Bulls Rd, which was the renovation of a boat shed, Dyers, which was a pool renovation, and 352 Woolaware Rd, which was another major renovation commenced in September 2004. I accept that any work Timilty did on his own house was concluded before he commenced the Hayward’s renovation. As can be seen from the above, the opportunity of diverting materials to other sites and charging the Hayward’s is somewhat circumscribed by the nature of the other jobs and when the jobs commenced and finished. I would also ask rhetorically, why would Mr Timilty want to do that, although it could possibly be the result of numerous accounting mistakes.
39. The Hayward’s claim, as set out in the pleadings, is made up as follows:
1 – They were induced to enter in a building contract by 17 representations made by Timilty, which were reckless, careless, indifferent to the truth in circumstances where Timilty knew and intended the Hayward’s to act on them, which, in entering into the C.P.C. of 3/4/04, they entirely did. The representations were false and the contract was induced by fraud and is void ab initio.2 – Alternatively, they were representations that were misleading or deceptive and in breach of the Trade Practices Act and/or the Fair Trading Act, and Mr Timilty aided and abetted SJTB in the contraventions. The Hayward’s seek, presumably, a declaration, that the contract was void ab initio or that the contract be varied to a FPC to the value of $380K subject to variations authorised in writing by the Hayward’s or as found necessary by the court.
3 – A further alternative, although not addressed in submissions, was that the contact be reviewed under the Contracts Review Act 1980 and the court either find the contact unjust and therefore void or make an order varying it to a FPC of $380K subject to variations as per 2 above.
4 – The Hayward’s want a refund of moneys they have paid in excess of $380K.
5 – The contract was subject to the Home Building Act and breached the statutory warranties as per Scott Schedule 1 and was overcharged as per Scott Schedule 2. Further, in response to Timilty’s cross-claim, the Hayward’s plead that the contract was in breach of s7 of the Home Building Act and is unenforceable under s10 of the Home Building Act.
HOME BUILDING ACT
40. I am not satisfied that the contract is in breach of the Home Building Act or if it is, the breaches are minimal. In all major areas of consumer concern, the contract complies with s7. Read as a whole, it was in writing and contained the names of the parties and the holder of the licence and the licensee number. The works were sufficiently described by reference to the plans and specifications, which Mr George agrees is sufficient. The contract price was unknown – it being a costs plus contract. The warranties were in the contract. The cooling off period was omitted, however, by the time the contract was signed the works had commenced so that particular requirement was irrelevant. There is no evidence that the contract did not comply with s7(3). Section 7(4) and (5) are irrelevant to the nature of this contract. Section 7(6) does not apply. I am therefore satisfied that the contract does comply with Home Building Act and is not rendered unenforceable under s10.
41. In paragraph 4 of the Statement of Claim the Hayward’s say that “by written quotation hearing date 10/2/04, Timilty gave an estimate of costs in the range of $350 – 375K.” This confuses two terms – a quotation and estimation in the one sentence. The letter in question made no reference to the word “quote”. The words used were “my budget estimate for the job is $350 – 375K.”
42. There can be no doubt that a number of meetings took place between the Haywards and Timilty prior to work commencing and the contract being signed. Indeed, looking at the February letter, it is apparent that prior to that date, the use of timber flooring wherever possible had been discussed, as well as eliminating blue board and using brick and render instead. Blue board is a 7.5mm fibre cement sheet used for walling and was specified in Nelson’s plans. It is also apparent that discussions had been had about the fact that the existing house had been added to on a number of occasions and it was unknown how much could be saved and how much would need to be demolished.
43. An estimate is a calculated guess at how much a job will cost all other things being equal. A quote is a calculation of what price a person is prepared to do a particular job for.
44. The only estimate as to cost that the Haywards had before speaking to Timilty was $400K from Mr Nelson, who was a builder himself and who drew up the plans. Apart from Timilty, the Hayward’s did not obtain any other estimate or quote from any other person or company.
45. It is appropriate at this point to look at the representations said to have been made by Timilty and which the Hayward’s say were the only basis on which they entered the contract.
46. Paragraph 5(a) of the Statement Of Claim pleads a representation,
“That if a ‘Cost Plus’ contract was used it would permit flexibility allowing as much of the original house to be retained as possible and would result in a saving in cost to the Plaintiffs.”
The pleading actually mis-states what was in the February letter which was that “this type of contract will allow flexibility during construction, for example, allowing us to keep as much of the existing house as is possible and saving on building costs.” Timilty explained these words in that with an F.P.C., variations incur a 20% surcharge, whereas variations to a C.P.C. simply became part of the ongoing process. He did however concede that the example given in the letter was not relevant to whether or not a person should enter a C.P.C.
47. Regrettably, none of the contract material was looked at by anyone legally qualified before it was used. The Hayward’s are not lawyers and neither is Timilty. However, both are not un-intelligent and I do not see that either party was at any legal material disadvantage to the other as to their respective abilities to enter an agreement. The fact that the Hayward’s insisted that the letter of 10/2/04 become part of the contract, I take as an admission by them that factual matters referred to in the letter were indeed true and had occurred. I am not satisfied that on a proper reading of the letter in question, the statement made in (a) was misleading or untrue. Further, there is no evidence that the Hayward’s relied on the representation in any event.
48. It is important in the scheme of things to look at all the relevant documentation. That is, the letter of 10/02/04, the HIA Costs Plus Contract and a document headed “Approximation of how the money will be spent” (the approximation document).
49. In particular, the HIA contract had terms other than the handwritten parts of the document. The contract specifically provides for:- primary obligations (1); completion, delays and extensions of time (2); materials and labour (3); subcontracting (4); builders obligations (5); owner’s obligations (6); progress payments (7); final payment (8); charge on land (9); express terms (10); commencement of works (11); insurance (12); notices (13); interpretation (14); and warranties (15).
50. The Approximation document came into being after the contract had been signed, although exactly when is unknown. The total approximation figure on this document is $380K, which is the basis for the Hayward’s claim of a maximum contract price of $380K.
51. The invoice 2267 of 9/8/04 brought the total of invoices issued to $356,470.74. As at 29/9/04 the Hayward’s had paid $343,360.66. Therefore, as at 29/9/04 the Hayward’s must have been aware that they had paid out almost the bottom of the range expressed in the February letter and yet the house was not finished. Timilty’s invoice of 25/10/04 for $128,128.84 brought the total to $484,599.58. On the same day, the Hayward’s paid cash to him in the sum of $4,000 bringing the total of their payments to $347,360.66.
52. Timilty submitted three further invoices. 2227 for $21,235.95, 2288 for $12,545 and 2287 for $278.32. The Hayward’s paid a further $12,545 making the respective totals of invoices $518,658.85 and receipts $359,905.66.
53. The builder has therefore exceeded Mr Nelson’s initial estimate by 25% and his own estimate by about 37%.
TRADE PRACTICES ACT
54. Sections 51AA, 51AB, 51AC, 51A, 52, 53 and 75B of the Trade Practices Act1974 are relied on by the Hayward’s. Sections 51AA, 51AB, and 51AC all relate to “unconscionable conduct.”
55. It is said in paragraph 9 of the Statement of Claim that the representations referred to presumably constituted unconscionable conduct and were in breach of the relevant sections. Section 51A provides that where there are no reasonable grounds for making a representation, the representation is deemed misleading. Section 52 prohibits conduct that is or is likely to be misleading or deceptive. Section 53 prohibits false or misleading representations as to the supply of goods and services. Section 75B applies aider and abettor law to persons assisting in contraventions of various relevant parts of the act.
56. In my view, s53 has no application to the present case nor has any argument been made as to why it should apply to the present case. Nor am I satisfied that ss51AA, AB or AC have any application to the present case nor has it been argued that they should.
57. Section 52 prohibits conduct that is likely to be misleading or deceptive ie. conduct that induces or is capable of inducing error ( Parkdale Custom Built Furniture Pty Ltd v Paxu Pty Ltd 1982 149 CR 191). Section 51A makes representations misleading if there are no reasonable grounds for making them.
58. In paragraphs 5(b) and (c), the Hayward’s rely on the estimate in the February letter of 10/2/04, being $350-375K, as well as the subsequent “approximation” document as limiting the cost of construction to a maximum of $380,000. In effect, they say they should not be held liable for any of the builder’s costs in excess of $380K and further the builder should reimburse them, for $66,615.38 that they have paid direct to suppliers and subcontractors. Given Mrs Hayward’s evidence at paragraph 35 of her affidavit of 20/7/05 it is difficult to believe that the Hayward’s thought that the price the house would be renovated for would be capped at $380K because she says that when Timilty delivered the “approximation” document to her he said,
“I don’t know why he wants it, it’s not worth the paper it’s written on. I could write this on a piece of toilet paper and it would mean as much.”
I would have thought what was said by Timilty then made it abundantly clear that he was endeavouring to give an approximation rather than tying himself to a fixed price. I do not accept that there was a representation that the budget was $350-375K but would not exceed $380K. Nor do I accept that there was a representation that in fact if the Hayward’s signed a C. P.C. the actual project costs would be less than $380,000. Again, that seems to fly in the face of Mrs Hayward’s affidavit in regard to the approximation document.
59. As to statement of claim 5(d), with the exception of the additional excavation work and the underpinning, the works were basically done in accordance with the design and engineer’s drawings. Any differences are the subject of matters in the Scott Schedule and have not and could not in any way have acted as an inducement to enter into the contract being ex post facto happenings.
60. As to 5(e) and (f) there is no evidence that a timber floor system was not used wherever possible. Apart from that, the “February letter” needs to be read as a whole and not as a list of building specifications, which it is not. In particular, the first two paragraphs need to be read in the context of when the letter was created. The same also applies to paragraph 5(f) of the Statement of Claim.
61. As to 5(g) and (h) I am not satisfied that the builder has charged in excess of the rates set out in the letter. A particular matter of controversy in the Scott Schedule was the suggestion that bricklayers operate in pairs with a labourer, who mixes the mortar and provides bricks and mortar to the bricklayers. The evidence established that it is practice within the industry for brickie’s labourers to be paid the same as bricklayers. I see no reason not to accept that and I cannot otherwise see that there has been any charge of rates for labourers or contractors otherwise than as set out in the February letter. One issue which became that subject of agreement between Mr Beresford and Mr Reid was that the electrician charged $50 an hour instead of $40 per hour but that this was because the electrician had an apprentice assisting him on site and the $50 charge was therefore considered very reasonable.
62. Paragraphs 5(h) and 5(j) have no relevance as the works did start shortly after the letter and before the contract incorporating the letter was signed. As Mr George conceded, nothing hinges on that representation and it is also conceded all the necessary insurances were in place and part of the contract.
63. As to paragraph 5(k), Mr Timilty gave evidence that as a builder, he gets trade discounts on hardware purchases, which he passed on directly to the Hayward’s. The invoices he gets do not factor a trade discount into them as it is already there in the price charged by the supplier to him. I am not satisfied that this matter has any merit or that what is stated in the February letter is a material misrepresentation, if one at all.
64. As to paragraph 5 (l), this somewhat misstates what the February letter says, which was “the following is a sample of an invoice that I endeavour to get out every two weeks so we can keep an eye on costs.” I also hardly think that this induced the Hayward’s to enter the contract and there is certainly no evidence to that effect. The position is actually governed by clause 7 of the HIA contract, which provides that the builder shall give “invoices in writing, not more than once every 14 days.” Again, this hardly seems to have been operative on the Hayward’s entering the contract in the first place and there is no evidence that there was any attempt by them later during the works to ask the builder to provide more frequent invoices. The fact is that the first 4 invoices were approximately a fortnight apart. The next two were almost a month apart on 1/7 and 9/8. Timilty was still on the job from 9/8 until the end of October. The invoice for 9/8 was for $100,210.58. It is difficult to accept that the Hayward’s would not have expected that the next invoice, which was on 25/10/04 would not be for a similar amount. It was for $128,128.84.
65. I do not accept that this invoice was deliberately held back to disguise the “bad news” from the Hayward’s. In Mrs Hayward’s first affidavit (DH1), paragraph 51, she says of this invoice that they were stunned. They had already expended the $375K they had borrowed and “were forced to sell our investment property at Cronulla to pay the other charges.” In evidence, Mrs Hayward conceded that this property had been placed on the market in June ’04 to assist in paying for the debt on a business run by Mrs Hayward called “Canterbury Lace Miranda” which closed in September ’04 leaving an unpaid overdraft and also because they were expecting a child. I reject the suggestion that the investment property was sold because of the receipt of invoice 2270 on 25/10/04. Indeed, any proceeds of the sale of that property were not used to pay Timilty anything at all and it is more probable than not, in my view, that Timilty’s evidence of holding back the invoice because the Hayward’s were selling this property is correct, rather than Mrs Hayward’s version.
66. As to paragraph 5(m) and (n), I am satisfied that the Hayward’s were provided with such particulars, which are readily viewable in exhibits A2 and 1.1. One complaint raised by Mr Beresford relates to a number of plumbing invoices from Peter Abbott. These appear in Scott Schedule 2 at items 108 and 129/134 which relate respectively to invoices 2270 and 2277. There can be no doubt that individual plumbing invoices were issued by Mr Abbott to SJ Timilty Building P/L and were for the Hayward’s property. Item 108 is for materials supplied to date, being $1948.31, and labour costs from 11/5/04 to 2/8/04, a period of 3 months. Item 134 is for materials of $1,082.24 and labour $4,482.50 in regard to,
“carry out plumbing and drainage works to renovations including fit out to bathrooms, kitchen and laundry. Install new gas service pipes and connect to various fittings make up and install downpipes and connect to storm water drains.”
The complaint is that the plumber has not provided invoices for the materials he supplied, that is invoices on an invoice.
67. However, Timility says he received these invoices and they related to the job at 1 Bulls Rd and that he was required to pay them. On that basis, I am reasonably satisfied that the invoices related to that job. Indeed, the invoices say so. The Hayward’s challenge them and say they now require strict proof of the make up of the invoices. The Hayward’s submit that if these invoices are left to stand, there is no accountability of the plumber for the materials charged. I presume in those circumstances that the labour charges are not disputed. The Hayward’s say the claim for these invoices should fail, as there is no evidence that establishes the invoice is accurate. In my view, the invoice is prima facie accurate and it is really a matter for the Hayward’s to show that it is somehow incorrect. As was submitted for Timilty, his evidence was that he only purchased some small plumbing items and it is not disputed that Abbot did work on the job. The amount of the materials relative to the labour component does not appear to be far fetched or fanciful and absent some reputable evidence of irregularity, I am satisfied these claims are prima facie legitimate.
68. I am also satisfied that the Hayward’s received all original documentation supplied by contractors and merchants to the builder albeit some of these documents were themselves photocopy documents. Nonetheless, they were the original photocopies supplied to the builder and not photocopies of photocopies.
69. In any event nothing turns on this issue and it hasn’t been suggested that Timilty has somehow forged any documentation in any way by re-photocopying and altering an original.
70. Items 5(o) and (p) are essentially reiterations of 5(b) and (c).
71. Having heard the evidence of the Hayward’s, Mr and Mrs Timilty, Mr Whelan and Mr Armstrong, I am not satisfied that there is any evidence of fraud on the part of Mr Timilty, either at a civil level or at a criminal level. Usually, fraud requires proof of a false statement of a material fact, which was known by a defendant to be false at the time it was made and that the defendant intended the plaintiffs to act upon it. The plaintiff has to be ignorant of the falsity of the fact in question but relied, and was entitled to rely, on the statement, to the plaintiff’s material detriment. Concepts of negligence and recklessness may also be relevant.
72. The Hayward’s claim is for a refund of moneys overpaid i.e. moneys paid beyond $380K, a figure of $424K in round terms which includes an amount of $64K in round terms, being moneys paid by the Hayward’s to suppliers in respect of “prime” costs under the contract. So in effect, the Hayward’s seek in round figures the sum of $44K. The builder on the other hand, says that he has expended $518K in round figures; the Haywards have paid $360K so he is therefore owed $158K in round figures.
73. Whilst the Hayward’s seek damages in the nature of distress, anxiety, disappointment, vexation and loss of amenity caused by the delays and uncertified works there is no claim for aggravated or exemplary damages.
74. I have no doubt that the figures of $350K, $375K, and $380K were Timilty’s estimate of the cost and not a quote of a price. I also have no doubt that the Hayward’s understood they were getting an estimate rather than a quote and that is evidenced by Mr Hayward’s attempts to lock Timilty into a fixed price contract by the incorporation of the February letter and Mrs Hayward’s evidence in regard to the approximation document. The fact that three figures were given within a relatively short period of time is evidence of Mr Timilty’s uncertainty as to cost and must have provided a similar indication to the Haywards.
75. The Shorter Oxford English Dictionary relevantly describes “estimate” as the forming of a notion of a quantity but without actual enumeration of measurement or using precise data. A “quote” is described as the amount stated as the price of any commodity for sale. As Timilty said in evidence, if he was to quote for every job he had to do, he would be spending more time than could be justified by his business as quoting involves detailed and often intrusive inspections of premises and lengthy calculation of various costs.
76. Even further evidence that Timilty’s figures were estimates is his statement to Mrs Hayward, and not denied, that the breakdown of costs in the approximation document, were not worth the paper they were written on.
77. In any event, it is conceded that in two areas the builder was required to do extra work, not contemplated in his estimates namely the Haywards’ desire to increase the size of the excavated area under the house and the necessity for the underpinning of some walls. These extra costs were not inconsiderable in the scheme of things as was the unforseen problem encountered during excavation of the garage involving a subterranean spring which caused problems with water filling the excavation and which needed to be dealt with in the construction of the premises.
78. I am not satisfied that it has been established on the balance of probabilities that Timilty was reckless, careless or indifferent as to the truth of the various matters said to have induced the contact. In that regard, Mr Nelson, a builder who drew up the plans originally, told Mrs Hayward (DH1 paragraph 13),
“that allowing for the usual material costs and various factors which can occur in a building job, for this particular work you should be looking at around $400,000 as a reasonable guide to the total estimate.”
This was without the additional excavation asked for by the Hayward’s, without any need for underpinning and without knowing about the underground spring. In those circumstances, I have no doubt that the Timilty’s estimates were regarded favourably by the Haywards in light of what they had been told by the builder who drew up the plans. We don’t know what Mr Nelson would have estimated had he known of the additional matters. If $400K was a reasonable guide, allowing for the various factors that can occur on a building job, surely $380K is in a similar category being from a different builder.
79. Civil fraud us a serious allegation to make. Section 140 of the Evidence Act requires that proof in civil cases be on the balance of probabilities having regard to the nature of the case, the subject matter and the gravity of the allegations. In Palmer –v– Dolman 2005 NSWCA 361 Ipp JA at paragraphs 33-47 conveniently set out the law regarding the standard of proof in civil cases where fraud is alleged, with particular reference to Broadshaw –v–McEvans P/L (1951) 217 ALR 1 @ 5 and Neat Holdings P/L –v–Karajan Holding P/L (1992) 67 ALJR 170 @ 171. Applying those principles and s140 of the Evidence Act to the present case, I am not satisfied that fraud has been established on the balance of probabilities. The contract is not therefore void although I note that Mr George conceded such an order could not be made, no doubt as the contract has been substantially performed.
80. I have already referred to the Trade Practices Act . A further misrepresentation relied on by Mr George, although not pleaded, is a misrepresentation by silence as can be envisaged by s52. This relates to what Timilty said in his affidavit of 29/8/05 (ST 1) at paragraph 8 which was as follows:-.
81. Par 8:- During a meeting with Diedre Hayward and Steven Hayward in or around early February 2004, a conversation took place in words to the following effect:
Stephen Timilty: “As the house is quite old, has had numerous renovations and changes, and not knowing what we will find once we start working, I recommend that we do the work on a cost plus basis.”
Diedre Hayward: “How does that work?”
Stephen Timilty: “That is where I do the work by providing the labour and the materials at my discounted price. I then add my margin which si 10% of the total labour and the materials and that is what you pay. This way if we hit problems you don’t get charged for variations which can be very costly.”
Diedre Hayward: I agree with the costs plus basis."
82. During the course of the trial, Mr George said,
“This is Mr Timilty’s own evidence your Honour, it’s not an assertion being made by the plaintiffs, this is what Mr Timility tells your Honour on oath he told them. Now the silence there is deafening because when it was put to Timility in the box this wasn’t correct he then explained, well under a costs plus contract there’s no such thing as a variation. He didn’t tell his clients that, he told them they wouldn’t be subject to variations because they can be very costly. Now your Honour if that’s not a misleading or deceptive statement nothing ever will be.”
83. Reliance is placed on what was said by Hill J in Winterton Constructions P/L –v–Hambros Australia P/L (1992) 39 FCR97 to the effect that the failure to communicate a relevant matter affecting a person may constitute misleading or deceptive conduct if the person acts to his detriment by inferring that no detriment existed because of a defendant’s silence. I do not see that Timilty’s saying that with a CPC “if we find problems you don’t get charged for variations which can be very costly” constitutes silence as to a relevant matter affecting the Haywards to their detriment and on which they acted - a factor about which there is no evidence anyhow. I have already referred to the differences involved in “variations” as between CPC’s and FPC’s. If the Hayward’s were so concerned about the situation initially, they could have insisted on a FPC or gone to a builder who was prepared to work under one and who would quote accordingly. The essence of CPC contract is that as work is done or required, the costs plus 10% (or whatever percentage is agreed) is to be met by the homeowner. With an FPC, on the other hand, if events happen that have not been included in the contract, a variation occurs which is costed by the builder and a percentage added, usually 20%, which total figure then becomes a variation to the contract and that variation figure then binds the builder and the homeowner, i.e. if the builder can do it for less, he comes out ahead but if it costs him more, then he loses out. I am not satisfied that anything said or left unsaid in the process between the parties constituted misleading or deceptive conduct as contemplated by Hill J in Winterton .
84. The Trade Practices Act needs to be looked at in the circumstances of the particular relationship between the parties because all relationships are not the same by any means. In that regard, I have exercised considerable caution in accepting at face value the various conversations recorded as having occurred between the Hayward’s and Timilty in their respective affidavits, as they have a degree of artificiality or unreality about them that causes me to look to independent evidence to see if what is recorded as being said is in fact supported.
85. The Hayward’s claim they have paid the builder $359,905.66. They also claim they have paid out a figure of $66,615.38 for services or claims they say should have been paid by the builder under the contract, that is that the $380K quoted for by the builder should have included these items. If that proposition is correct this would mean, in effect, that the rest of the work done by the builder should have been done by him for $313,384.62. In my view that just cannot be reasonably supported by the evidence.
86. One issue that has arisen is that apart from anything else, does the builder’s failure to comply with s7(2)(g) of the Home Building Act make the contract unenforceable by the builder by virtue of s10. Section 10 of the Home Building Act provides as follows: -SECTION 7(2)(G) OF THE HOME BUILDING ACT
87. In other words, the section suggests that there are three sets of circumstances which, if not complied with, make the contract unenforceable at the builder’s behest. Each of s(1) ss(a)(b) and (c) are alternatives and that is clear from the fact that if ss(a) applies the other sub sections have no place.
(1) A person who contracts to do any residential building work, or any specialist work, and who so contracts:(a) in contravention of section 4 (Unlicensed contracting), or
(b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or
(c) in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph, is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person.
(4) This section does not affect the liability of the person for an offence against a provision of or made under this or any other Act.
88. Read in full, ss(b) and (c) are as follows:(b) A person who contracts to do any residential building work, or any specialist work, and who so contracts under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates is not entitled to damages or to enforce any other remedy etc.; or
(c) A person who contracts to do any residential building work, or any specialist work, and who so contracts in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph is not entitled to damages or to enforce any other remedy etc..
89. Mr Docker argues that s10(1)(c) does not apply to any provision of s7 that is not referred to in s10(1)(b) ie any provision other than the provisions requiring the contract to be in writing and to have a sufficient description of the work as per s7(1) and s7(2)(c). I have found that the contract was in writing and did contain a sufficient description of the work. I also have found that the contract otherwise complies with the provisions of s7except as to s7(2)(g).
90. Section 10(1)(c) is in somewhat strange terms. One needs to be careful to look at the whole of the subsection because to quote it only in part leads to misinterpretation. The subsection does not provide that “in contravention of any other provision of this act or the regulations (the builder) is not entitled to damages etc.”: (ssTP553.3) This leaves out the important words “that is prescribed for the purpose of this paragraph.” I would regard the sections ordinary meaning to be that, if the Act or regulations prescribe that a breach of the act or regs is a breach under s10(1)(c), then such a contract to do building work in contravention of a breach of such a provision, renders the builder not entitled to damages or to enforce any other remedy. The important words are “that is prescribed for the purposes of this paragraph”, which I interpret to mean, for the purposes for s10(1)(c). I am not aware of, nor has it been submitted, that any provision of the Act or regulations has been so prescribed.
91. In any event, having regard to the terminology of s10(1)(b), I would interpret that subsection to mean that a failure to comply with the provisions of s7 other than those requiring the contract to be in writing and to contain a sufficient description of the work, does not necessarily make the contract unenforceable or render the builder not entitled to damages. This interpretation makes practical sense as s10(1)(b) singles out the two most important aspects of a contract, that it be in writing and that it sufficiently describes the work. In other words, leaving out the contractor’s licence number, for example, won’t render the agreement invalid if indeed the builder is licensed. Subsection 7(1) provides for the contract to be in writing and signed by the parties or their representative. That is obviously a significant provision as is the provision in regard to the description of the works and those two provisions are the essential basics or heart of any building contract.
92. This gives added impetus to the meaning I have ascribed to s10(1)(c). If, however, that interpretation is wrong, it is difficult to see that the Act envisaged making a contract, that was otherwise valid, unenforceable because it failed to comply with s7(2)(g). That is particularly so bearing in mind that ss(2)(g) was only inserted into the Act with s7BA on 14/02/04, that the work commenced on 17/03/04 and that the contract to which a cooling off period applied was signed on 3/4/04. Had this provision been inserted it would have had little meaning in the circumstances and there is no evidence that the Hayward’s would have taken advantage of it in any event. Indeed, the high probability is that they would not have in the circumstances that prevailed. The particular circumstances of this case add to the correctness of the view I have taken of the meaning of ss10(1)(b) and (c).
93. In my view, the contract is enforceable or rather is not rendered un-enforceable by virtue of any relevant breach of the Home Building Act.THE “VARIATIONS”
94. There are two areas where it is conceded that the builder had to deal with problems not initially considered by the parties. The first is the increase in the size of the excavation under the house for the garage to include a storage area and the underpinning of some of the support foundations.
95. At the outset, I do not accept that Mr Whelan’s evidence was to the effect that “the method of construction that has been employed is detrimental in the long term to the Hayward’s house” (see TP 494.26).
96. By way of background, the original plans called for a double garage of certain dimensions. The Hayward’s requested an additional space for use as storage. The additional work can be seen by comparing Mr Whelan’s drawing S1 of June ’04 and the hand drawn plan prepared by Timilty (the hand drawn plan), which appears in annexure B of Mr Johns expert report. Mr Whelan’s drawing (Sk03) “Brick Retaining Wall Detail” (the BRW detail), part of annexure B to Mr Johns expert report is also important, because the retaining wall was not constructed precisely in accordance with that drawing.
97. What happened, and I accept that it did, is that during excavation for the garage, an underground spring was discovered that caused considerable problems in regard to the ingress of water into the excavation and which posed a problem of disposal of water on a permanent basis. Timilty’s solution to the problem was as set out in the hand drawn plan (without comments written on the document by someone else). As can be seen from that document the additional excavated space in question is that area to the right of the floor plan (S1). The diagram at the top indicates a concrete slab floor, a rock excavation under that floor to a depth of 250-350mm and filled with blue metal, a sump pit and an agg pipe, excavated into a channel in the rock, leading from the sump to an exterior pit with a submersible pump (the bilge pit). Around the slab Timilty’s drawing shows a cavity brick wall and a retaining wall with the agg drain in situe as per the BRW detail. However, it is not disputed that the agg drain that appears in both diagrams was not installed in that position but instead under the slab next to the interior brick wall, with weep holes through the retaining wall and the brick wall.
98. Mr Armstrong was the bricklayer contractor who did this work. The reasons why the agg drain was installed inside the wall and under the slab are set out and explained in paragraph 4 of his affidavit of 18/2/08 (JA2). Mr Armstrong also gave evidence.
99. I accept his evidence as being consistent, reliable, logical and making practical common sense. I accept that the excavation did fill with water as indicated and that there were significant construction problems caused by the water coming in as described by Mr Armstrong. I accept the reasons and practicality of relocating Mr Whelan’s agg line in the BRW detail as described by Mr Armstrong at paragraph 4(e), (f), (g) and (h). This was commented on by Mr Whelan at T.P.455, to 460. I am satisfied that if the house is properly maintained, the way the agg drain was changed from outside the wall to inside the wall, does not pose any significant threat to the structure of the house in the short or long term, despite Mr George’s attempt to give evidence as to what is in fact going on underneath this house as a result of his personal observations (TP460). I am not satisfied in particular, that the failure of Timilty to comply with the BRW Detail in regard to this agg drain constituted neglect or poor workmanship on his or his subcontractors part, but was a reasonable response to a practical problem.
100. A further issue relates to the sump drain under the slab and the agg line that connects it to the bilge pit with the submersible pump, which is outside the building curtilage on the LH S of the entrance to the garage. This bilge pit can be better seen in the photographs that are part of Exhibit B. In B1, a pipe, that I have highlighted with yellow, connects to the grated drain at the entrance to the garage which drains driveway stormwater to the streets storm water system. This drain was part of the original Nelson plans and is seen in drawing 2031902SH/A sheet 3 which I will call the drainage plan. It is also part of Mr Johns expert report. The bilge pit area is part of unfinished work that Mr Timilty said he wasn’t given the opportunity of concluding. Nor did anyone ask him how he proposed to finish this particular job (See T.P.356.16 and 17).
101. The problem is that Council will apparently not sign off on a “stormwater” system that relies on a pump that sends stormwater from a dwelling to the street, because it might fail. Mr Johns in evidence produced a further drawing, Exhibit G, by which he suggests that a natural fall can be achieved between the pipe invert in the blue metal under the slab and the curb outlet invert. According to the drainage plan, the RL of the concrete slab is 11.58 at the entrance to the garage and of the pipe invert of the box drain is 11.43. The concrete slab is 110mm thick, although there is a deeper lip on the edge. The invert level at the street is 11.04. There is no evidence that the pipe that crosses the top of the bilge pit does not drain by gravity to the street. Contrary to what appears in the transcript at TP73, there is no “pump” under the garage slab. The word should be “sump” and my question of the witness then makes sense. As far as I can determine no one has measured the RL of the two agg drains that drain into the bilge pit, although Mr Johns has measured their distance below the top of the pit.
102. However what I understand Mr Johns to be saying is that if one ran a pipe from RL 11.270 to the street at RL 11.040 one can achieve a permitted gravity storm water discharge. The RL 11.270 is obtained by subtracting the thickness of the slab (110mm) and 200mm being the invert of the blue metal substrata under the garage floor slab being the depth between the bottom of the slab and the rock surface beneath the blue metal. This gives a RL of 11.580 – 0.310 = 11.270. He was unable to say what it would cost to achieve such a result (T.P.70.11) although a hole could relatively easily be drilled through the lip of the slab.
103. Mr Johns diagram attached to exhibit B, (called Hay 12 of 26/11/08), shows a rough measurement of the top of the bilge pit being 30mm below the top of the slab and the centre of the agg pipe being 550mm below the top of the pit, which would place the agg pipe at an approximate RL of 11.580 – 0.580 ie 11.00 which is slightly lower than the RL of the curb invert which is 11.04. Thus gravity could not directly drain any discharge from the existing agg pipes. The water draining from these two agg pipes is essentially groundwater constituted by water from the spring and water that seeps into the ground without first evaporating or running off. It is not what I would regard as stormwater, ie water that comes from rain falling on impervious surfaces such as roofs and driveways or water flowing over the ground due to over saturation of a pervious surface.
104. If one were simply to cut a section from the existing storm water pipe, water filling the pit would drain by gravity to the street once the water level reached the level of the bottom of that pipe. However, the effect of that would be that water would back up under the slab until it reached RL11.43 and remain there unless pumped out or another gravity fed line is introduced whereby it could then start running to the street.
105. In my view, the existing drainage of “storm water” has been done according to plan and I cannot understand the Council’s objection, as the existing system does allow “storm water” to drain by gravity to the street. The pump system allows the Hayward’s to utilise non-storm water that would otherwise just run continuously out into the street in different volumes depending on what climatic event has happened at an earlier point in time. Timilty was not allowed to finish the job and so I have no idea of any cost involved, which would have been the responsibility of the Hayward’s in any event. So where all this goes in the long run is somewhat difficult to see. However, I am satisfied that the management of the spring water under the slab via the bilge pit was a reasonable response to the unforeseen problem. This water is not a problem created by Timilty. It was created naturally and was unforeseen. If anything, the Haywards have the benefit of an apparently endless supply of water, which can be used for other purposes.
106. The drainage line, installed in accordance with the plan 2031902SH/A, sheet 3 cannot be at any great depth given that it runs along the surface of the garden beside the driveway for some distance (see exhibit B photo 2) and the land slopes down to the curb.
107. Adopting the solution suggested by Mr Johns at T.P.69 and 70 would not in my view be an expensive exercise. Whether it would be practical is difficult to say as Mr Timilty hasn’t been given the opportunity of saying how he proposed to deal with the problem, he being in the best position to know exactly “what lies beneath” as it were.
108. I am not satisfied that this constitutes poor workmanship.OTHER LEGAL ISSUES
109. I have essentially found that the contract was a valid costs plus contract which is enforceable within the terms of the Home Building Act, subject to the Scott Schedules. However, I have been addressed on the law that should apply if the contract is in fact invalid and I should briefly deal with the arguments that have been raised, In that regard, it is perhaps helpful to deal with the issues in order of the cases that have cited to me, although there is some inter relation between a number of the cases and the relevant principles.
110. In a building case, Pavey and Mathews P/l –v– Paul (1986) 162 CLR 221 is clear authority for the proposition that, unless expressly excluded by statute, work done by a builder and accepted by the owner, entitles the builder to fair payment for the work done. In the present case, there is no instance of work being done by the builder that wasn’t asked for by the owners or accepted by them once done. There was a part of the work done that was not in the original contemplation of the builder but was asked for by the Hayward’s and done by Timilty. That related to the additional excavation work and the necessary underpinning to the engineering detail prepared by the Hayward’s engineer, Mr Whelan. As Mason and Wilson JJ said in Pavey, proof of the oral agreement goes to establish that the work done was not unasked for or a gift. Thus if the work is done and accepted that raises an obligation that “differs in character from the contractual obligation had it been enforceable.”
111. It is also clear that “indebitatus”, “quantum merit” or “restitutive” actions, so called, can only occur in the absence of an enforceable agreement and can’t be used where there is an enforceable agreement. However, where there is an unenforceable agreement, reference may be made to the agreement in order for the court to determine the appropriate amount of compensation [Deane J at 257 per Jordan CJ in Horton –v– James (1934) 34 SR (NSW) at 368.]
112. As Deane J also said in regard to the applicable legislation, whilst the contract cannot be enforced by the builder, the owner remains liable “to pay reasonable compensation for work done for which he has received a benefit and for which in justice he is obligated to make such payment by way of restitution.”
113. In the present case, no challenge has been made to the reasonableness of any of the labour charges, or the costs of materials supplied. What has been challenged in some instances is the necessity for and quality of the same.
114. The Statute of Frauds was referred to. This ancient relic of legislation required agreements to be in writing. However, Jordan CJ said in Horton’s case that lack of writing does not prevent an action in indebitatus if the agreement is unenforceable.
115. I am also satisfied that in an appropriate case, the court can award damages by way of solatium, for inconvenience, disappointment and loss of amenity (Coshott and Anor v Fewings Joinery Pty Ltd [1996] NSWCA 122 and Sunvara Pty Ltd v Williams [2001] NSWSC 433).
116. Damages for rectification must relate only to work “necessary to produce conformity” and that “it must also be a reasonable course to adopt.” Solatium, however, relates to “sentiment, love or affection, as distinguished from property loss.”
117. I accept that the Trade Practices Act provides in s51A that there is a deeming provision as to the effect of a representation as to a future matter, namely that reasonable grounds for making the representation will notbe deemed unless the representor adduces evidence to the contrary. Where such evidence is adduced, it is a matter for the Court to determine on the balance of probabilities if there were reasonable grounds for making the representation (McGrath and Another v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2).
118. Section 6 of the Trade Practices Act extends liability from a corporation to an individual, as far as the operation of s52 is concerned. However, the circumstances in which that occurs is somewhat limited to where the conduct of the corporation involves the “use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast [s6(3)(a) and (b)]. I am not satisfied that any of such relevant qualifications apply to the present matter or that this section was intended to cover any of the existing circumstances.
119. Additionally, I am satisfied that whilst s75B of the Trade Practices Act (re aiders and abettors etc.) extends liability for corporate breaches to individuals who have aided and abetted the breach. In order for that section to be enforced, the proponent must prove that the person intended to assist the corporation in the breach, being fully aware of the essential elements of the contravention (Yorke –v– Lucas (1985) CLR 661). Of course, intent is not necessary to be proved if a corporation has breached s52 of the Act.
120. Mr Docker argued that in any event, whether or not there has been a breach of the Trade Practices Act, the Hayward’s have been unable to establish any loss, having got exactly what they paid for and more, whether under the contract or by way of quantum merit. In particular, orders of the nature sought in paragraph 12 of the Statement of Claim should not be made. Marks –v– GIO Australia Holdings Ltd (1998 196 CLR 494) is authority for the proposition that all other things being equal, unless the party contravened against can establish loss or damage, the court cannot make any orders under s87 of the Act.
121. Some of the concepts referred to in the judgement are also found in the laws relating to damages for negligence particularly in regard to “failure to warn” cases.
The joint judgement at P511 said as follows: -”The disappointed expectations of a person induced by a misrepresentation to believe erroneously that his insurance policy entitles him to the payment of benefits on maturity or on the happening of a certain event are sometimes so great as to encourage the thought that compensation on the basis of lost expectations would be appropriate. However, neither authority nor principle offer support for adopting this approach. In all the cases in which a plaintiff has sought to recover damages on the footing that a representation amounts to a collateral contract, a fraudulent misrepresentation or a negligent misstatement, damages for expectation loss have only been awarded when the representation amounted to a collateral contract. Neither the fact that the representation induces entry into a contract nor the fact that it is a statement of the benefits to which the plaintiff will be entitled under that contract is enough to justify compensation for expectation loss.
This conclusion involves no element of injustice to a plaintiff who is entitled to damages reflecting the loss of benefits he would have obtained under a contract which he could and would have entered into but for his reliance on the contravening conduct of the defendant. Of course he must prove such loss but there is nothing unfair in requiring him to do so. “
The Court went on to say at P514 – P515: -
“[47] The bare fact that a contract has been made which confers rights or imposes obligations that are different from what one party represented to be the case does not demonstrate that the party that was misled has suffered loss or damage.
[48] A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted. Thus, the party that is misled will have suffered loss if a chose in action which was acquired was worth less than the amount paid for it.
[49] It is necessary, then, to determine whether the value of what was acquired is less than what was paid. How is value to be assessed? It is to be assessed objectively, not according to what either or both of the parties to the contract believed that it would obtain from the contract.
[50] If a person agrees to pay $50,000 for goods which the vendor falsely represents are worth $100,000 but which are, in fact, worth $50,000, what loss has the purchaser who is misled suffered by agreeing to buy (assuming no more is known)? If a person agrees to pay interest at the rate of 10 per cent for a loan which the lender falsely represents would ordinarily command interest at a rate of 15 per cent but which, in fact, would ordinarily command interest at 12 per cent, what loss has the borrower who is misled suffered by agreeing to borrow (again, assuming no more is known)? And so the examples could be multiplied.
[51] The reason that neither of these persons suffers a loss is that viewed objectively each obtained rights having a value (a value determined objectively) at least equal to what it paid for those rights. It is only if some alternative (less detrimental or more beneficial course) were available, that it can be said that the contract which was made was less valuable to the party that was misled than had been represented -- for it is only then that a comparison of value can be made.
[53] …we do not accept that a person suffers injury simply because a hoped for advantage does not materialise.”
122. Amongst the problems for the Hayward’s in the present case is that they have not established in any way that they would have acted any differently even if there had been a misrepresentation as to the price. Nor has it been established in any way that the result of Timilty’s activities has, other than an obligation to pay, resulted in any damage to them, such as a diminution in the potential value that the property may have had if the matter had proceeded in a relevantly different way. Indeed there is no evidence from the Hayward’s to the effect that if they had known what the actual cost was going to be, they would not have gone ahead at all. But even if there was such evidence, the Hayward’s have a duty to mitigate their damage, which could have been done by selling the premises and purchasing a more economically viable alternative. I find it difficult to accept that what they have now is less valuable than what they started with, even though some minor rectification is required and some works are unfinished.
124. Mr George referred to and relied on a case of Trimis –v– Mina (1999) NSWCA 140. This case involved a fixed price contract for home building work. The matters of principle relevant to his submissions are contained in the judgement of Mason P. His Honour referred to what Deane J had said in Paveyin regard to a valid agreement precluding a claim for reasonable remuneration. At paragraph 56, His Honour said: -123. Indeed as far as that is concerned it has been said that in applying the powers given to it under s87, the court would “be slow to impose upon the parties a regime which could not represent a bargain they would have struck between them.” I am well satisfied that Mr Timilty would not have entered into the regime proposed as a solution to the present case by Mr George. (cf ASX Operations P/L –v– Pont Data Australia P/L (1991) 27 FCR 492 [at] 503.
“Parties to a contract may so frame their agreement that it does not encompass the whole of their business relations. Thus, a contract for work may not preclude a claim for additional work, under an implied contract or on a restitutionary basis, where the additional work is done "outside the contract" and in circumstances where the law would recognise a contract to pay for it or impose a restitutionary obligation to similar effect. But merely because the work differs from that contracted for will not suffice, even if delivered to the plaintiff or performed upon the plaintiff's land (see Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347 at 353-5; Steele v Tardiani [1946] HCA 21; (1946) 72 CLR 386 at 402). Exactly what extra must be demonstrated before a restitutionary claim will lie is a matter of some controversy. Different positions are adopted depending on how essential one regards the need for the defendant's "benefit" to be established as an element in a restitutionary cause of action.”
125. His Honour also referred to what Priestly JA had said in Update Constructions P/L v Rozelle Child Care Centre (1990) 20 NSWLR 251 at 271-275 discussing the case of Liebe v Molloy (1906) HCA 67. At paragraphs 60 and 61 this was said:
“One point which seems to me to be basic to the decision in Liebe is that if the work claimed for had been work required by the contract to be done, then the builder could not recover for it, because he had not complied with the contractual requirements. If however the work was work which the builder was not required to do by the contract ("outside the contract" in the words of the High Court) then, if certain further facts were found, the builder could recover. It may be that the basis of such recovery would these days be referred to ideas of restitution rather than implied contract.”
126. As far as any so called variations to the contract I have already indicated I am satisfied they were requested, completed and accepted in the sense that the Hayward’s haven’t said the works should not have been done but correspondingly have had the benefit of them.
127. Section 10 of the Home Building Act makes any non complying contract unenforceable as to a breach of the contract nor is there an entitlement to damages for breach of the contract. I am not satisfied that those expressions exclude a claim for restitution (quantum merit) as suggested in Laws of Australia Part C Unenforceable and Void Contract at [144]. There is ample authority for that interpretation in Pavey amongst other cases and the statutory expression “not enforceable”, has been held to not exclude a claim for restitution.
128. There is also an issue in regard to a quantum meruitclaim as to the evidence needed to establish the value of the work done and whether or not a profit margin is permitted in assessing that value. Before having looked at any of the cases, I would have thought that it was inescapable that some profit margin has to be part of a quantum meruit claim, particularly in a building case. Profit margins exist in every component of building work from the price of materials to the price of labour. It is also clear that there must be some external standard by which a court assesses a reasonable price for work and materials (Flett v Deniliquin Publishing Co Ltd (1964-1965 NSWR 383). It is also clear from Flett and Pavey that the court can look at the disputed contract as some evidence of price. (Cooks Constructions P/L –v– Stork Food Sytems Aust P/L 2008 QSC 179). Where work is done by a builder and accepted by the owner on the basis that some price would be paid, there is an implied promise that the owner will pay what that work is worth (Way –v– Latilla 1937 3 ALLER 759 at 765).
129. In Kane Constructions P/L –v– Sopov (2005) VSC 37 at 878, Warren CJ declined to allow a profit margin of 10% on the basis that such a component was not contemplated by the authorities in the context of assessing a quantum meruit claim and that such a component tended to lie more properly in a claim for contractual damages.
130. However, Her Honour did not apparently disallow the claim for overheads in assessing the quantum meruit amount. In Kane Constructions –v –Sopov No 2 2005 VSL 492, Her Honour looked at the parties entitlements under the contract in order to determine the quantum meruit amount. Her Honour referred to Trimis and Brenner.
131. However, in Gray (Constructions) P/L –v– Hogan 2000 NSWCA 26, the court accepted inclusion of a profit margin was not in-appropriate: -“The builder was only to be allowed what it deserved ("quantum meruit") … The parties, the referee and Mr Zacos clearly understood that the proper time to factor in the profit margin figure was after all of the details of costing were worked out to the referee’s satisfaction.”
132. As Smart AJ said in Mohammed –v– Local Court of NSW and Sleiman 2008 NSWSC 949, at paragraph 53,“while the enquiry is not primarily directed to the cost to the plaintiff of performing the work that cost should not be totally ignored. Of course, remuneration for overheads and a reasonable amount for profit cannot be overlooked.”
133. His Honour found that on any view the primary judge had to “allow for overheads and a reasonable amount of profit.”
134. I accept that this is the preferred position as far as NSW is concerned and, to any extent if at all that Kane is contra, I decline to follow the latter. Indeed, Brenner –v– First Artists Management P/L 1993 2VR 221 also supports that proposition where it talks about taking account of any price or commission agreed between the parties being evidence of the value the parties themselves have put on the services concerned.THE EXPERTS
135. Submissions have been made as to how I should regard the various expert’s evidence.
136. Firstly, none of the experts were present when any of the work was done and I explicitly reject any attempt by any such witness to express an opinion about day to day tasks except where the result is indicative of poor workmanship.
137. The two principle experts are the builders, Mr Beresford for the Hayward’s and Mr Reid for Timilty. The other exerts, Mr Johns and Mr Wilson, both for the Haywards, were restricted to engineering issues in dispute.
139. In a building case, it may well be that an expert can comment on whether or not work or materials said to have been supplied were or were not in fact supplied, or whether a charge for goods or services supplied is grossly inflated. But that is not the case here. Outside of the defective workmanship, Mr Beresford’s comments as to whether or not an invoice related to the Hayward’s house or to some other work Mr Timilty has done elsewhere are pure speculation and not a matter for expertise. Further, they tend to support the accusation of partisanship. Likewise, comments about the frequency and necessity for visits to suppliers is speculative and in the absence of direct knowledge it is of no use to the court in determining the outcome.138. Mr Docker criticises Mr Beresford as being partisan. He cites the fact that Mr Beresford was initially consulted by the Hayward’s and it was Mr Beresford who referred them to a solicitor. Although sought to be produced, no letter of instructions to the solicitor was placed before the court. He also argues that Mr Beresford was prepared to make speculative statements in unqualified terms. Some of these I have already referred to, particularly unfounded and unsubstantiated allegations that invoices related to other jobs that Timilty was doing. Such statements were totally outside any area of expertise and were indicative of a degree of partisanship on his part. Scott Schedule 2, in particular, is defective in this regard. Mr Beresford as well, often gives statements by the Hayward’s as evidence of a fact in dispute (SS2 item 1). I do not accept that Mr Beresford has, by way of expertise, the ability to comment on how many trips were required to the hardware store, whether there are alterations to dockets, how may people were needed on site or any other such matter, unless it results in evidence of poor workmanship (SS2 item 5). Apart from anything else, such evidence is speculative and is therefore not admissible. This applies to Mr Reid as well although I am not satisfied that there is any evidence of partisanship other than the fact that he was employed by the builder to act as the builder’s expert. His response to a number of matters on the Scott Schedules to the effect “I am instructed” simply means that the resolution of the item in question is really matter of evidence from Timilty rather than his expertise. (See Reid report 31/08/05 [Reid 1] L Exhibit 1.1.)
140. During the course of the trial, the Hayward’s sought to rely on the affidavit of Mr Dreis. Mr Dreis was required for cross-examination on his affidavit, however, he refused to attend and avoided attempts to be served with a subpoena. I ruled this evidence inadmissible. Apart from the inherent failure of the affidavit to comply with the Makita ratio in many areas, it was also apparent that Mr Dreis was a friend of Mrs Hayward’s father and had been approached after the event to provide the report, and so his impartiality was seriously in doubt. There was also a late attempt to introduce a report from Mr Nelson, the drafter of the original plans. That was rejected for the reasons given in my Judgement of 4/12/08, which reasons still are relevant and current. There was also a late attempt to introduce a further report from Mr Beresford as to his estimates as to the need for various labour components of the amount claimed in the Scott Schedules. For the reasons given in my Judgement of 4/12/08, I rejected this evidence and again the concerns I had then remain relevant and current.
141. Where there are disagreements as to matters of expertise between Mr Beresford and Mr Reid, I prefer the evidence of Mr Reid. Apart from anything else, his evidence in regard to the underpinning is supported by the on site evidence of Mr Armstrong and Mr Timilty and the initial estimates and the method by which such estimates are made and is logical and makes practical good sense. Based on the plans available to Mr Timilty as set out in this report of 18/03/08 (Reid 4 – Ex1.1) as well as Mr Nelson’s estimate of $400,000 on his own plans, I am not satisfied that Mr Timilty’s initial estimate was so flawed as to exhibit evidence of fraud or as being misleading or deceptive.
142. Mrs Hayward has made a number of affidavits (DH1, 2, 3 and 4) as well as giving extensive evidence. I accept that she regularly attended the site and, judging from her evidence, would have taken a keen interest in what was going on. There was no evidence of any unwillingness on the part of Mr Timilty to discuss matters with her and I presume she would not have hesitated to ask questions about the works. I do not accept therefore that she was unaware of the fact that some of the ground floor walls were going to be stud walls rather than not only brick, but double brick. This variation came about because of the decision to use a timber floor on the first floor except where the existing suspended slab was discovered under the kitchen/dining area and which required engineering adjustments to be made. Mr Hayward was hardly ever on site except for some weekends and is unable to give evidence as to the day to day activities of those who were.143. Mr Docker submits that I ought not rely on the evidence of Mrs Hayward where there is a conflict between her and Mr Timilty and points to a number of areas where others have contradicted her evidence, including her husband.RESOLUTION
144. Mr Hayward supports Mr Timilty and Mr Armstrong’s evidence as to the existence of water in the garage excavation whereas Mrs Hayward denies that this was ever so although she purchased a tank or tanks to enable the bilge pit water to be diverted. Suggestions from the photographs as to the impossibility of water being able to collect as stated, are not supported by those photos and I accept the evidence to the contrary. Mr Hayward also supports the number of meetings had before Mr Timilty gave his estimate and Mr Timilty’s refusal to give a quote.
145. Mrs Hayward was on site almost daily and must have been aware of what was going on. She clearly is an intelligent woman who took an active interest in the works. She and Mr Timilty, from all accounts, got on well together, so that it could be inferred that, although she wasn’t a builder, she was not unable to see the general nature of what was occurring.
146. One point made is that despite concerns the Hayward’s had as to the ultimate cost in August ‘04, they were prepared to allow Mr Timilty to continue to work on the property up until 29/10/04 when Mr Timilty was excluded from the property, a period of almost two months, during which labour and materials were being expended. On 31/08/04, the Hayward’s had been given a list of “overruns” on the works. (cf ex1.1, SJT 1 annexure C), so at least at that point the Hayward’s were aware that the original estimate was not going to be achieved apart from the extension to the garage, the underpinning and the finding of water beneath the house.
147. Mrs Hayward was educated to High School level and did a Banking and Finance course through TAFE. She ran her own business selling linen between 1999 and September ’04.
148. In her affidavit, DH1, Mrs Hayward says at paragraph 38 “I visited weekdays and simply observed what was going on. If he saw me Timilty might say hello, but rarely if ever, did he invite me in or give me an approval of what was happening at the time.”
149. At T.P.193.46 she was asked: -
Q. Mrs Hayward, when you went to the site and talked to Mr Timility, you would talk about the progress of the job. That's right, isn't it?
A. Yes.Q. I mean, that's really the only thing you had to talk to him about, isn't it?
A. No, not always. It would be a matter of if he needed an item, as I said, we bought most of the PC items when he required it. It wasn't always about just, I suppose it essentially is, I guess that is the progress, but, yeah. Or to show me something, like the staircases, how would we do them.Q. Mrs Hayward, what I'm suggesting to you is that the topic of the conversation between you and Mr Timility was always about the building works.
A. Absolutely, yes.Q. Mrs Hayward, where did most of these conversations occur? On the site or out the front of the site?
A. Either/or. If there was no access to the property it would be out the front. If I was able to get in it would be inside.Q. And when you were on the site and Mr Timility was there, he was always prepared to talk to you, wasn't he?
A. Yes, otherwise - I mean, no. Because sometimes he was on the phone but, yes, I guess so.Q. When you went to the site, Mr Timility used to accompany you to different parts of the site and show you things. That is right, isn't it?
A. On occasion, yes.Q. And he would discuss with you matters which he was seeking your instructions about?
A. Yes.Q. And I suggest to you that he did this all the way through the job.
A. Yes.Q. And, Mrs Hayward, I suggest to you that you were inquisitive about how the job was going.
A. Yes.Q. You wanted to know these things.
A. Yes.Q. And is it the case that when you looked at the job yourself that you would raise issues that you wanted to know about with Mr Timility?
A. Yes.Q. So it wasn't just him raising issues with you, you'd raise issues with him?
A. Mm-hmm.Q. And would you agree that you had what appeared, at least, to be constructive and open dialogue with him through the course of the job.
A. YesQ. And you didn't feel that there was anything that you couldn't raise with him?
A. Except money, yes. The cost of the job. Yes, no. In regards to the works, no.Q. Mrs Hayward, I suggest to you that you understood that the cost of the job would depend on the progress of it.
A. Yes, but we still relied on that 350 to 370,000, and the 380,000 that the - documentation that we received.150. The impression given in the affidavit is that Mr Timilty was unco-operative and evasive and yet in evidence Mrs Hayward describes a fairly normal and positive relationship.
151. Also in DH1 at paragraph 44 Mrs Hayward says of the “overrun” letter of 31/8/04 that, “I have carefully analysed these alleged problems and expanded in Tab 11.” This statement is somewhat misleading as the document at tab 11 is a document that was never conveyed to Mr Timilty prior to the proceedings commencing. It also appears to be a document prepared in conjunction with persons, presumably some of the experts, who were not privy to what occurred during construction.
152. Other areas of concern are; her evidence that the excavation did not have water in it, when clearly it did; her evidence as to why the locks were changed and her willingness to make an assertion that subcontractors were given keys, when there was no evidence that they were; the existence of a spring, denied in her affidavit but clearly established; and the size of the laundry about which the evidence clearly establishes that it was built to plan.
153. Mr Timilty’s evidence tended to be more straightforward. Much of the minute detail he could not remember, but he was prepared to make admissions against interest eg. he was unable to say if the driveway retaining wall was keyed in to the house and he was unable to say how many cubic metres of fill was taken from the excavation but accepted the invoices he was charged for.
154. Mrs Timilty did the books on the information passed on by Mr Timilty. There are a few account errors, as might be expected, and they have been rectified. However, their accounting processes have not been shown to be so defective as to be totally unreliable.
155. I am satisfied that if Mr Timilty says a disputed account is related to the Hayward’s property, it is in fact related to that property. Mr Beresford, without any foundation, suggests the following, of Mr Timilty.
i. He is inefficient in having a number of deliveries from one supplier on the same day.
ii. He is fraudulent in that he has assigned the cost of materials for a job on another site to the Hayward’s site. Why he would want to do this escapes me unless he was doing a project for himself, about which there is no evidence. The jobs being done at other sites at the relevant time were less substantial and of a different nature to the Hayward’s works.
iii. He hasn’t passed on any discounts
iv. He has overcharged for labour when there was no need.156. As I have already previously stated, I am satisfied that this was a costs plus contract that complied in all relevant respects with the Home Building Act and is not therefore unenforceable. The Hayward’s make a claim for some $66,615.38 in regard to prime cost items under the contract, that they say that the builder should have paid for under the contract to do the works for $380K. The very fact that the Hayward’s were prepared to expend such a large amount of their own money on such items, seems to me to be a powerful indicator of their realisation as to the true nature of the agreement they had entered into, being a costs plus contract, where it was perhaps to their benefit to make such purchases themselves. Apart from that, however, no evidence has been led that I can see, that substantiates that they have in fact spent such an amount, other than what appears in Mrs Hayward’s affidavit (DH1 Ex A1). Looking at the listed items, the most substantial amounts in that document, as far as I can tell relate to paint, tiles, water tanks, door handles, kitchen ($16K), carpet and fencing. I note there is also a charge for Mr Wicht their engineer and Preddings Locksmiths, for changing the locks and Mr Whelan, also their engineer. Some items are clearly their own responsibility such as carpet and the engineers as well as painting as they indicated to Mr Timilty that they would be doing their own painting. I don’t know what the kitchen cost actually relates to, ie if it is cupboards and/or whitegoods, but clearly the amount of $66,000 is not a correct amount of their relevant expenses that could possibly be tied to an FPC.I reject those contentions for reasons already given.
157. If the contract was indeed a fixed price contract for $380K, why didn’t the Hayward’s submit these payments to the builder? The answer must be that they realised that they were going to have to pay them anyhow because it was not a fixed price contract but a costs plus contract.
158. If I am wrong on the legality of the written document and the Home Building Act, I would allow the same charges by way of restitution to the builder for work done and material provided as there has been no suggestion by any one, including the experts, that the charges made for labour and materials was excessive to a reasonable price on the open market at that time.
159. However, there is one aspect of the builder’s claim that needs comment. For invoice 2267 and thereafter he agreed to reduce the margin he claimed from 10% to 5%. This invoice was substantially paid by the Hayward’s by 25/10/04, Mr Timilty now seeks to re-instate that percentage to the full 10% because the amounts, particularly of the later invoices, have not been paid. In my view, the builder is still bound by the originally accepted offer to reduce those invoices by 5%.
160. Except in regard to the matters on the Scott Schedules, the plaintiffs have been substantially unsuccessful in their claim. Likewise, except for the matters on the Scott Schedules the builder has been substantially successful. There will therefore be a verdict for plaintiff on the plaintiff’s claim against the builder to the extent of any adjustment needed to be made by the schedules and a verdict for the builder on the builder’s cross-claim against the plaintiff again, subject to the schedules and what I have said in paragraph 157.
161. The parties are to bring in short minutes of orders after they have had the opportunity of reconciling my judgement and the amounts awarded in Scott Schedule 1 and as may be agreed, in accordance with my directions, in Scott Schedule 2. If the parties cannot agree on any item or items, I will resolve those matters in chambers on being informed which items are in contention.
162. The short minutes should be settled within 14 days as well as any further disputed matter in Schedule 2. Costs should follow the event but if not, I will hear any argument as to costs on Friday 6/3/09.
08/05/2009 - Paragraphs 1, 9, 27 and 38 have been amended to delete un-necessary identification material - Paragraph(s) 1, 9, 27, 38
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