In Depth Civil Pty Ltd v Clemence - [2022] VMC 6

IN THE MAGISTRATES’ COURT OF VICTORIA
AT MELBOURNE

Case No. J12089744

IN DEPTH CIVIL PTY LTD (ACN 139 153 496)	Plaintiff
v
DAVID CLEMENCE	First Defendant
and
PENNY MOLNAR	Second Defendant

---

MAGISTRATE:	Magistrate T.W. Greenway
WHERE HELD:	Melbourne (Online Magistrates’ Court)
DATE OF HEARING:	28 February 2022, 1, 2, 7 March 2022
DATE OF DECISION:	17 March 2022
CASE MAY BE CITED AS:	In Depth Civil Pty Ltd v Clemence
MEDIUM NEUTRAL CITATION:	[2022] VMC 6

---

BREACH OF CONTRACT – Builder obliged to conduct soil test – Repudiatory conduct – Appropriate measure of damages.

---

APPEARANCES:	COUNSEL	SOLICITORS
For the Plaintiff	Mr N. A. Andreou	DSA Law – Lawyers & Consultants
For the Defendant	Mr S. A. Rowland	Aughtersons Lawyers Pty Ltd

HIS HONOUR:

Introduction

For many years, Mr David Clemence (David) [1] and Ms Penelope Molnar (Penny) had wanted an equestrian arena (Arena) constructed on their property in Pakenham Upper (Site). The Arena was to be used by their daughter to train for equestrian events, including dressage and show jumping.
[1]As the parties identified themselves by their first names during the hearing, I have adopted that convention.

In or around September 2015, Penny arranged for drawings to be prepared by Diane Bodley Design & Drafting. The drawings included a Site Plan and Arena Plan. Both drawings became part of a planning permit application with the Cardinia Shire Council sometime in 2016. A Planning Permit[2] (Permit) was granted on 18 August 2016.
[2]Court book (CB), 222 – 225.

In late February 2018, Penny requested a quotation for construction of the Arena from Mr Tyron Stewart (Tyron), director of InDepth Civil Pty Ltd (InDepth Civil). As part of her request, Penny provided a copy of the Permit, Site Plan and the Arena Plan.

On 26 March 2018, Tyron inspected the Site and there was a conversation about the works with Penny.

On 27 March 2018, Ms Stacey Stewart (Stacey), administrative employee of InDepth Civil, sent a quotation[3] for the works to Penny (Quotation). Penny accepted the Quotation on or around 2 April 2018 and the works were scheduled for the week commencing Monday 30 April 2018.
[3]CB, 172.

InDepth Civil began the works at the Property on 2 May 2018 and continued up to 9 May 2018. Due to rainfall on Site, InDepth Civil were unable to continue the works for several weeks after 9 May 2018.

On 3 May 2018, Stacey wrote an email[4] to Penny enclosing an invoice in the sum of $21,230 for a ‘pre start deposit’. Penny then requested[5] an itemised invoice for the work done to date.
[4]CB, 177.
[5]CB, 302.

Following the rainfall on Site, David became concerned about the surface of the Arena. On 28 May 2018, David spoke with Tyron and told him that there were issues with the sub-base. Tyron visited the site on 30 May 2018 but from his perspective, there were no matters of concern.

On 1 June 2018, David wrote a more detailed email to Tyron advising that the arena’s surface had become very soft and unstable because of the rainfall. David informed Tyron he had received advice from an experienced building contractor and an excavator contractor that no further work should be performed on the Arena until a Geotechnical engineering report and core sampling could be obtained. [6]
[6]CB, 307.

As requested, on 4 June 2018, InDepth Civil provided an itemised invoice for $21,945[7] (Itemised Invoice). On the same day, David responded that a Geotechnical Engineer would be inspecting the property. David specifically informed InDepth Civil not to visit the property and if they did attend, advised that the police would be called and a charge of trespass made. [8]
[7]CB, 314 – 315.
[8]CB, 316.

Ultimately, InDepth Civil did not return to the Site and the Arena was not completed. The parties then fell into dispute surrounding the construction of the Arena and InDepth Civil’s right to payment of the Itemised Invoice.

Background to the Works

The events leading up to the construction of the works were uncontroversial and largely contained in the email correspondence between the parties.

As stated above, in late February 2018, Penny requested a quotation for construction of the Arena from Tyron. That request included a copy of the Permit, the Site Plan and the Arena Plan.

The Permit allowed for the:

Use of the land for animal husbandry and earthworks associated with a horse arena in the Rural Conservation Zone Schedule 2 Overlay, generally in accordance with the approved plan.

The Permit included, amongst other things, the following conditions:
The earthworks as shown on the endorsed plans must not be altered without the written consent of the Responsible Authority.
…
…
The slope of batters, both cut and fill, must not exceed 2:1 (horizontal: vertical) or where this is not practicable, batters must be stabilised by other means to the satisfaction of the Responsible Authority.
The Site Plan contained the proposed location of the Arena. That location had been chosen by David and Penny. The Arena Plan contained the following:

The Arena Plan also contained the following notes:

· existing excavation – only leveling required
· surface – white washed sand over granitic base
· no fencing proposed
· maple tree to be removed (bushfire effected)
· provide AG drains to base of cut & to be directed away from neighbours dam & dry creek
· There is an existing cut on that left hand bank so the trees on the top of it are not going to be affected. On the right side of the proposed arena is a creek bed (dry for 90%) of the year. The trees on the other side of that, although within 10 metres are not going to be affected! There are a few manky trees between the creek bed and where the arena edge will be. Most of the trees are European as that’s what the entire garden (about 15 acres) is filled with.

On 26 March 2018, Tyron inspected the Site and was involved in the 26 March 2018 Conversation.

On 27 March 2018, Stacey sent the Quotation[9] to Penny. The Quotation was in the following terms:
[9]CB, 172.

Re: Quotation for 40 x 20 horse arena
Supply :-
- 40x 20 arena as per plans provided and as per onsite meeting with Penny and David
- Excavate site in preparation for 40 x 20m (approx. - will try to make wider)
- Remove grass and topsoil and cart onsite as discussed and spread by us
- Cut and fill area as required and compact to height
- Supply all base materials required
- Installation of all base materials compacted in layers to finished height.
- Cut off drain around base of cut (70m) to terminate into existing culvert
Please Note: * No allowance has been made for finished surface material or spreading of material to height. All fencing and finished surface to be arranged by owners (Can be spread by us If preferred). Also, please note that if it is sand add approx. S6K.*
Sub -Total $38,600
GST $3,860
Total $42,460

Penny accepted[10] the Quotation on or around 2 April 2018 and the works were scheduled for the week commencing Monday 30 April 2018.[11]
[10]CB, 174.
[11]CB, 289.

On 17 April 2018, Penny emailed[12] Stacey informing her that:

[she was] terrified of it getting too wet here. Once it’s wet, we’re doomed, living at the bottom of a hill isn’t always fun (but it is green )

[12]CB, 290.

On 2 May 2018, Stacey wrote to Penny providing an update for the job. She said:

…They will officially start Friday I believe. You will see Adam, he is lovely and will go above and beyond the scope of works to get things perfect. He has a folder to give you, Just some information we give everyone for arena builds. If you have any concerns or questions though just let me know. [13]

[13]CB, 291.

InDepth Civil commenced works at the Property on 2 May 2018. Works continued up to and including 9 May 2018. The works were carried out by Mr Adam McCallum, an employee of InDepth Civil. Tyron attended the site regularly and observed the works being carried out.

The works were as follows:

(a)the first day was clearing vegetation on the site;
(b)the second day involved removing the topsoil and stock piling it on site;
(c)on the third day, InDepth Civil commenced a ‘cut and fill’;
(d)on or around the last day, InDepth Civil purchased 40 mm crushed rock and spread it over the arena sub-base.

On 3 May 2018 at 1:30pm, Stacey wrote an email to Penny which stated amongst other things:

… It is also protocol for me to send through an Invoice for a pre start deposit. You will receive this shortly with a 14 day payment term listed however if you need a little longer to organise funds please let me know…[14]

[14]CB, 177.

At 1:37pm on 3 May 2018, Stacey forwarded invoice 3322 to Penny. The description of invoice dated 3 May 2018 states: ‘Pre start deposit for new arena build at 944 Pakenham Rd, Pakenham Upper 50% of quoted works” and the debt claimed was $21,230. [15] This was said to be InDepth Civil’s standard practice to cover the cost of materials and other disbursements.[16]
[15]CB, 293, 294, 179.
[16]CB, 347.

Penny responded by email at 9:06am on 4 May 2018 stating she “will get payment sorted”. [17] The deposit had never been raised with David or Penny previously.
[17]CB, 179.

On 22 May 2018, Stacey wrote a follow up email[18] regarding payment of invoice 3322. She wrote:

Hi David & Penny,
I hope the arena base is holding up well in this rainy weather.
I’ve noticed your pre-start payment for the arena is still out-standing. Normally we do not give terms on pre-start payments but because we kept you waiting I gave you 14 days out of good faith. This payment was due last week so can you please make immediate payment of his invoice [sic]. We look forward to scheduling more works in soon.

[18]CB, 184.

Penny also responded[19] on 22 May 2018. She said:
[19]CB, 302.

Hi Stacey,
Apologies for the delay.
David and I were wondering if we could meet with Tyron on site at some stage on Friday as we have a few questions. We’ve had a lot of rain here and would like some clarity around the work plan, site management and time frames from here. If Friday is no good, let me know some days/times that would suit and we’ll do our best to fit in.
Also would be it possible for you to provide an itemised invoice for the work done to date ie. Labour, machinery hire and materials? This would really aid our understanding of the process – this is all new to us!

Stacey answered Penny’s query regarding an itemised invoice as follows:

Hi Penny,
Yes, I can break down the invoice for you. 80% of the current invoice is materials which we have paid for and laid for the sub-base which Adam has completed. More materials need to be order [sic] to complete the top base however I cannot order these materials until this out-standing invoice has been paid. Once ordered these take around a week until they are available for pickup. I am back in the office tomorrow and will send through a breakdown of the invoice.
Tyron is currently interstate until Monday. Once he is back I will organise an on-site meeting to discuss the next stage.[20]

[20]CB, 302.

On 25 May 2018, Stacey wrote a further email[21] to Penny explaining the breakdown of invoice 3322:
[21]CB, 303.

Hi Penny,
I just spoke to Tyron about that invoice. He said it is 50% of the arena work we quoted.
It’s not reflective of the work that has just been done as we haven’t used that much rock yet but will be ordering more once payment is made.
At which point Adam will be back to do the upper base with the materials I order.
I hope that clarifies things further for you.

David and Tyron had a conversation about the works on 28 May 2018. David told Tyron that he was very concerned about the stability of the base of the arena and wanted to engage a professional to provide an independent opinion. In reply, Tyron requested payment of invoice 3322 and said there was nothing wrong with the work thus far.[22]
[22]CB, 328.

Later that evening, Stacey wrote[23] to David and Penny as follows:
[23]CB, 304.

Hi David and Penny,
I’m shocked and confused by the conversation you have had with Tyron this afternoon.
I am not really sure why this has happened but I’m really disappointed that our integrity is being questioned here and I feel the need to address this. We pride ourselves on being 100% upfront and honest with all our clients and hold our heads high with the quality of work our boys produce. We are not the cheapest arena builders around but this is because we build our arenas right the first time – Ask our previous clients who have all been thrilled with the quality we have produced.
I hounded and hounded Tyron to start this work in between some of our bigger jobs and now here we are.
Our normal procedure with any arena is to ask for 50% deposit upfront because materials need to be ordered and paid for. We are currently carrying the cost of the materials for the base we have laid on your property based on your approval of the quotation given.
We will provide you with a cost breakdown. At which point we would appreciate payment for all materials/labour/machines/floats to date.
As Tyron has been interstate as I stated last week I haven’t been able to provide this breakdown yet but I will be sending it through tomorrow.
If there is further clarification needed on anything we are only too happy to discuss over the phone.

On 30 May 2018, Tyron wrote an email directly to David. [24] It read:
[24]CB, 308.

G’day David
Further to our conversation the other day.
I needed the laser for another job so I have picked up from site.
Whilst there I had a good look at the conditions of the site whilst in the middle construction [sic] and was only too happy with progress and the way it is fairing with the weather.
Considering it is only at stage 1 and the drainage is yet to go in (as per quotation).
The base and sub base was firm and there was no evidence of any pooling on the surface. The consistent rain will only help in further compaction throughout the early stages of the base.
Once it drys out completely it will be at full compaction and it is at this stage we will come and put in all the drainage and the final layers of base.
The drainage will protect the finish surface from any excess water entering the arena area. Please understand the drainage is in the next stage for various reasons.
Please advise if you wish to dispute any of this explanation and we can arrange a solution.
Please advise by end of business tomorrow so I can move forward either way.
Take care talk very soon.
Don’t hesitate to call me to discuss.

David responded[25] to Tyron’s email on 1 June 2018. He said:
[25]CB, 307.

Hello Tyron,
My apologies for not contacting you earlier.
As per our phone discussion of Monday May 28, the rain that stopped work at our site after four days excavation and one day of rock delivery and compaction, resulted in the surface becoming temporarily very soft and unstable.
As the rain had not been particularly heavy, the surface softness concerned me, which added to existing doubts as to the quality of the work done thus far, which included the fact that top soil was used as fill, instead of being placed around our existing lawn as previously agreed. The spreading of subsoil and clay between the back of the float shed and the horse paddocks also appeared non sensical, despite Adam’s explanation that this was required for the Quarry trucks.
My concerns lead me to seek an opinion from an experienced Building Contractor who questioned the integrity of the fill , given the amount of topsoil, sub soil and plant material evidence. He also added that if we were to receive very heavy rains, the batter at the western end of the cut would be washed away.
Another opinion was subsequently sought from an Excavation contractor, who also heavily criticized the standard of the cut and doubted that the base could ever be compacted adequately without remedial action. The intended addition of drains after the levelling and compaction work, and especially after the beginning of Winter rains, made sense to the contractor.
As a result, I have received advice that there is to be no further work on our arena until a report is done by a Geotech engineering firm, post site inspection and core sampling. This is likely to occur within the next three weeks.
I am sorry that we have lost faith in In Depth, however given the two opinions received thus far, I see no other option.
I will forward more discussion points once they come through from the Excavation Contractor. [26]

[26]CB, 308.

Later that evening, Tyron replied by email as follows:

Please provide details of contractors so I can contact them regarding there[sic] concerns.
Or make payment within 24 hrs.
All materials remain the property of Indepthcivil and you are way outside payment terms [27]

[27]CB, 307.

On 4 June 2018, Stacey wrote to Penny and David enclosing a re-issued invoice. The email provided:

Hi Penny,
Please find attached broken down invoice as requested. Payment is due now!
Unfortunately for reasons unbeknown to us Dave is not answering Tyron’s calls. Tyron wished to meet onsite to discuss the arena with him but clearly Dave does not wish to resolve this issue and the fact that he is not returning any calls or refuses to meet with Tyron is unacceptable.
There is no way we will be waiting 3 weeks for a Geotech report when you haven’t even allowed us to install drainage to the arena (an integral part of the process and one which could have been completed by now) as this period of waiting will have an impact on the report no doubt.
There are two options to choose from
1.You can pay this invoice and we will release you from any obligation relating to acceptance of the quotation or
2.As all the materials belong to us until all monies owed are paid in full as stated on the quotation I will instruct the boys to come and remove all the materials we have laid and you can get someone else to finish the project.

Either way a decision needs to be made and this needs to be resolved. I will need a decision by end of tomorrow (Tuesday) Penny. If I haven’t heard from either yourself or Dave I will move to the next step of the recovery process.
We have done absolutely nothing wrong to warrant being treated this way. In fact we have tried very hard to resolve this issue with nothing from your end. Happy to meet onsite as stated – this suggestion has gone unanswered.
I will be expecting your response and would appreciate your promptness. [28]

[28]CB, 314.

The re-issued invoice 3322 was in the amount of $21,945. [29]
[29]CB, 315.

Later that evening at 8:05 pm, David wrote a response email[30] to Stacey and Tyron stating:
[30]CB, 316.

Due to the plethora of defects as previously outlined, it is absolutely reasonable that we engage a Geotech engineer in order to determine what is wrong with the excavation, what should have occurred and what remedial action will be required in order for the arena to remain in a usable state in the long term.
The Geotech has informed us that he will be inspecting the site some time next week. This is not an unreasonable time period to wait before we can start negotiations.
…
Please do not visit our property. If you do, the police will be called and I will make application for a charge of trespass.

On 5 June 2018, Stacey responded the David’s email. She wrote:

David- Can you please help me understand why we have not been afforded the opportunity to meet with you on-site to discuss the plethora as you put it – of defects you have found???
…
Please forward me a list of these so called defects you have found (You may of sent this to Tyron but I have no copy of it). I will go through the list with Adam who did the incredibly difficult initial cut and see what he has to say about it! I also do not think it is unreasonable to ask for the names of the people you meet with and provided you with their expert opinions. I need to do my own checks to see what qualifications they hold, how much knowledge they have on building arenas so I can determine how credible the information they have given you is. I would also like to know the exact day the Geotech testing is being done, Again I do not think this is an unreasonable request!

Shortly thereafter, InDepth Civil engaged solicitors to act on its behalf. On 14 June 2018, InDepth Civil’s solicitors wrote a letter to David and Penny requesting, amongst other things, that:

(a)the Itemised invoice in the sum of $21,945 be paid by 5.00pm on Monday, 18 June 2018, failing which a Complaint would be issued; and
(b)an expert retained by InDepth Civil be allowed access to the Property to inspect the works, by no later than 18 June 2018.[31]

[31]CB, 194.

By letter dated 18 June 2018, David responded to InDepth Civil’s solicitors. He wrote:

… We dispute your instructions from InDepth Civil P/L (your client) as follows (your numbering.) …
… 8. We are now in receipt of three sound opinions, all of which agree that the works have been seriously defective from the moment your client used top soil (containing considerable organic content) and silty subsoil as fill used for raising the western end of the proposed arena. These opinions are also unanimous in deploring you client’s failure to remove all silts from the excavation site and for not importing clay for use as a stable base, upon which the crushed rock layer should lay…
… Instead my email of June 1 2018… set out a reasonable course of action which began with my engagement of a Geotechnical Engineer. His site visit occurred on June 17 2018 and a follow up visit is planned for this week. The report, in full, will be made available to your client as soon as it is received.
We welcome an inspection by your client’s expert – presumably a qualified civil engineer, given paragraph 9 of your instructions. This consent is conditional upon your client not being present, and that the expert liaises directly with me, in regards to a mutually acceptable appointment time.
It is fair and reasonable that negotiations between me and your client can only begin once I have received and duly considered my Geotechnical Engineer’s report and then obtained quotes for any necessary remedial works…
… Issuing a Complaint at this juncture would appear premature given my willingness to pursue a course of action such as this.[32]

[32]CB, 209.

Under cover of letter dated 25 June 2018, David forwarded a copy of a Geotechnical Engineer report of Hardcore Geotech Pty Ltd dated 15 and 18 June 2018.

On 8 August 2018, InDepth Civil’s solicitors responded[33] to David’s letter of 18 June 2018:
[33]CB, 218.

… Our client did not use topsoil, containing considerable organic content or otherwise, nor silty subsoil as fill at the western end of the arena. It used the clay cut from the eastern end of the arena, as recommended by the plans from which our client worked. Mr Stewart had no reason to question the quality of that clay.
…Further, it is clear the only deficiency revealed by your report (that would not have been rectified had our client been allowed to finish the work scope) is potential deficiency in the fill. Any such deficiency was the fault, not of our client, but of whomever undertook the drawing and designing of the plans not to recommend soil testing…
… Complaint
Given your unwillingness to engage with Mr Stewart in his efforts to resolve your concerns, we do not think it premature to issue a Complaint. A Complaint has therefore been sent to the Magistrates’ Court for issuing. Could you please inform us whether you intend to instruct solicitors to act for you both if you intend to defend the proceeding, and if so, could you please provide their details. If we do not receive your response in that regard by the time we have received the issued Complaint back from the Magistrates’ Court, we will make arrangements with a process serve to have it served on you both personally…

On 9 August 2018, InDepth filed its Complaint claiming a debt of $21,945.

The Agreement

The agreement and its terms were largely common ground between the parties. It provided for the construction of the Arena in accordance with the Quotation, Permit, Site Plan, and Arena Plan.[34]
[34]Amended Complaint, 2 – 4; Defence to Amended Complaint, ,2 - 4.

Relevantly, the Quotation provided for the supply of a ’40 x 20 arena as per plans and as per onsite meeting[35] with Penny and David’.
[35]which took place on 26 March 2018 (26 March 2018 Conversation).

In an email of 23 March 2018[36] Penny informed Tyron that she was ‘very keen to get this arena… moving before winter as it will just get too wet here’.
[36]CB, 281.

Tyron inspected the Site on 26 March 2018 and had a conversation with David and Penny about the proposed works. Tyron’s opinion of the site was that ‘it would be difficult to work with, given it had quite a steep incline’. [37]
[37]CB, 346.

The contents of the 26 March 2018 Conversation were particularised as follows:

During this conversation [David and Penny’s] requirements in respect of the equestrian arena were made known to [Tyron], in particular the arena would be used for horse jumping and dressage and David and Penny required a high quality arena with a stable base and effective drainage, and Tyron acknowledged that it was capable of producing an equestrian arena to the standard required.[38]

[38]Amended Counterclaim, 2.

These particulars were admitted by InDepth Civil as if they were material facts.[39]
[39]Defence to Counterclaim, 2(a) and (b).

During the course of Tyron’s evidence, a dispute arose as to whether Tyron had told David and Penny that it was a ‘perfect site’ for the Arena. David and Penny gave evidence that this phrase was used. Tyron denied this. His evidence was that he had told Penny it was a ‘perfect setting’ for the Arena.

Tyron’s recollection of the 26 March 2018 meeting was incomplete. He frankly conceded that he did not recall David being at the meeting but said ‘David may have been present’ and he was not saying that ‘David wasn’t there’.

There was a further dispute surrounding whether drainage was mentioned in the same conversation. David’s evidence was that he had raised the issue of the Arena’s drainage with Tyron, to which Tyron had replied ‘not to worry, he had plenty of experience’. Penny gave evidence that Tyron had said ‘drainage would not be a problem’. Tyron initially did not recall drainage being raised. In cross-examination, Tyron said, ‘drainage was only a problem because there was none there’.

Due to Tyron’s imprecise recollection of the 26 March 2018 Conversation, I prefer the evidence of David and Penny. They had been planning for the Arena for many years, and its construction was important to them. On the other hand, Tyron’s evidence was that the Arena was ‘just another job’. Tyron’s evidence about drainage was also inconsistent with the pleaded admissions set out earlier in the Amended Defence.

Accordingly, I find that Tyron was that drainage was discussed at the Site. I also accept that Tyron had told David and Penny it was a ‘perfect site’ for the Arena.

Further, the parties agreed to the following additional terms formed part of the Agreement: [40]
[40]Amended Counterclaim, 3; Reply, 3; and Defence to Counterclaim, 3.

(a) InDepth Civil would conduct a soil test prior to commencing construction (Soil Test);
(b) the Arena would be constructed within a reasonable period;
(c) the Arena would be constructed with all due care and skill and to a professional standard; and
(d) the Arena would be free of defects and fit for purpose. [41]
(Agreement)
[41]Implied as statutory warranties pursuant to the Australian Consumer Law, Schedule 2.
InDepth Civil’s Claim

In its Amended Complaint, InDepth Civil says that David and Penny’s conduct amounts to a repudiation of the Agreement, which it has accepted. InDepth Civil’s claim is for the sum of $21,945:

(a) by way of a contractual right having accrued prior to the repudiation; or alternatively
(b) on a quantum meruit basis in accordance with the principles set down in Mann v Patterson.[42]

[42][2019] 267 CLR 560, 57.

David and Penny deny any liability. They say that the works undertaken were defective, carried in breach of the Agreement and there is no liability to pay for them.[43] They further submit that there was no term of the Agreement for payment of a ‘pre-start deposit’.
[43]Amended Defence, 6 and 8.

InDepth Civil’s first claim is based on debt. It submitted that the Agreement was divisible and that the work described in the Quotation contemplated various stages of construction. The stages of work were said to be in the following sequence:

(a) the excavation;
(b) spreading of the topsoil; and
(c) the cut and fill and part compaction.

As InDepth Civil had completed the stage of work set out in the Itemised Invoice, it submitted it was entitled to payment. InDepth Civil also relied on the fact that David and Penny had initially agreed to pay Invoice 3322 and had sought itemisation of the work done.

David and Penny submit that the Itemised Invoice was post-contractual and was not raised with them before 3 May 2018. Their primary submission was that payment under the Agreement only became due after the entirety of the work was completed.

Whether a contract is entire or divisible depends upon the contracting parties’ intention as manifested objectively, primarily from the terms of the contract itself.[44]
[44]GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1, 704 (Finn
J).

In my opinion, the Agreement should be interpreted as an entire contract. First, the Agreement had no term in relation to a deposit or any form of part payment. Rather, payment is for an entire sum. Secondly, the individual items on the quotation are not separately costed. For example, there are no costs identified for the excavation component, or the supply of the base materials. Nor is there any reference to the cost of machinery, labour or materials. The cost of each stage therefore cannot be reasonably identified.

Further, there is nothing in the Agreement to suggest that InDepth Civil would be paid after each item on the Quotation was completed. The benefit to be conferred by the Agreement was a completed arena. As McColl J said in Tan Hung Nguyen v Luxury Design Homes Pty Ltd: [45]

The reason building contracts are construed as being entire, even where there is no express undertaking to that effect, is plain. It is of the essence of such a contract that the consideration for the payment of the contract sum is “entire and indivisible”. A partially completed building is of little use to the owner of the land upon which it is to be constructed.

[45][2004] NSWCA 178, 27.

I do not consider the fact that David and Penny expressed a willingness to pay Invoice 3322, or requested the Itemised Invoice changes the objective interpretation of the Agreement. Penny’s statement that she would ‘get payment sorted’ related to Invoice 3322 not the Itemised Invoice. It was made in response to Stacey’s email stating ‘it is also protocol for me to send through an invoice for a pre start deposit’. As noted above, the Agreement did not provide for progress payments. In those circumstances, Penny’s comments do not create a separate obligation to pay a ‘pre start deposit’.

Similarly, the request for the Itemised Invoice was a response to Stacey’s follow up on payment. After making the request, Penny states “this would really aid our understanding of the process – this is all new to us!”. Again, I do not consider this to be an acknowledgment that the Agreement provided for payment of a pre start deposit or created a new liability to pay.

Finally, as there was no dispute as to what the terms of the Agreement were, post contractual conduct is not relevant to determining what a contract means.[46]
[46]Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, 26.

InDepth Civil’s claim based on debt fails as it had no contractual right to payment until the works under the Agreement had been completed.

InDepth Civil’s Claim – Repudiation – David and Penny’s right to terminate

InDepth Civil’s alternative claim was for quantum meruit on the basis that David and Penny had repudiated the Agreement. It relied on ‘Category 3’ as described in Mann v Patterson, [47] being:

work done by the Builder in respect of the plans and specifications set out in the Contract for which the Builder had not yet accrued any contractual right to payment under the Contract at the time of its termination.

[47][2019] 267 CLR 560, 57.

The applicable legal principles regarding repudiation were not in dispute. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd, [48] the High Court said the following:

The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it…
Secondly, it may refer to any breach of contract which justifies termination by the other party… There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words. [49]

[48](2007) 233 CLR 115.

[49]Ibid, 44, (Gleeson CJ, Gummow, Heydon and Crennan JJ).

InDepth Civil submitted that David and Penny repudiated the Agreement by the email of 4 June 2018[50] read in the context of the 1 June 2018 email.[51] By the 4 June 2018 email, it was said that David and Penny:

(a)intended to determine ‘what was wrong’ and ‘what should have been done’ in order to start further negotiations; and
(b)wanted a Geotechnical engineer to determine the scope and specification of the works to be completed for the remainder of the Agreement; and
(c)refused access to the Site for the works to be completed.

[50]CB, 189.

[51]CB, 187.

InDepth Civil submitted that the 4 June 2018 email demonstrates that David and Penny no longer wanted to proceed with the Agreement but wished to negotiate something other than completion of the remaining works. There had been no provision for a Geotechnical Engineer’s report or specification as part of the Agreement.

Furthermore, InDepth Civil submitted it had been prevented from completing the works, as any attempt to return to the Site would have been met with the police being called and a charge of trespass.

In response, David and Penny submitted the 4 June 2018 email should be considered in the context of intensifying demands for payment by InDepth Civil. They refer to an earlier email on 4 June 2018 which provided a ‘two pronged ultimatum’:

(a)pay the Itemised Invoice and be released from any further obligations under the Agreement; or
(b)[Stacey] will instruct the boys to come and remove all the materials we have laid and David and Penny can get someone else to finish the project.

Read in context, David and Penny submitted that the 4 June 2018 shows that they wanted an investigation by a “Geotech” before anything else was done[52] and that the suspension of works was temporary. It was InDepth Civil’s insistence for payment and refusal to pause matters while a Geo-technical report was obtained that was objectively unreasonable.
[52]Defendant’s submissions, 20.

The legal onus is on the party asserting the repudiation to prove the facts essential to it.[53] A repudiation is a serious matter, which will not be found or inferred lightly.[54] In Rawson v Hobbs,[55] Dixon CJ described repudiation as follows:

One must be very careful to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness. On the other hand it is absurd to treat one party as tied to the performance of an executory contract although the other has neither the means nor intention of performing his part when his turn comes, simply because his incapacity to do so is not necessarily final or logically complete.

[53]Egan v State Transport Authority (1982) 31 SASR 481, 513.

[54]Shevill v Builders Licensing Board (1982) 149 CLR 620, 633, (Wilson J).

[55](1961) 107 CLR 466, 481.

An innocent party is entitled to terminate a contract if the other party repudiates it. However, neither breach nor repudiation by one contracting party of itself terminates the contract. It is necessary that the other party elect to treat it as discharged. [56]
[56]Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435.

In my opinion, InDepth Civil’s claim has not established its case for repudiation. First, I do not consider the engagement of a Geotechnical Engineer in the above circumstances amounted to repudiatory conduct. The foreshadowed report was commissioned to identify potential issues with the works and to assist David and Penny understand the construction. It was plainly to be used in negotiations with InDepth Civil about the remaining works under the Agreement. However, there was no demand to change the scope of works. In my view, the 4 June 2018 email did not manifest a ‘definite resolve’ against the future performance in a manner inconsistent with the Agreement by InDepth Civil.

Further, I do not consider the request not to visit the site constituted a permanent suspension of the works. The 4 June 2018 email advised InDepth Civil that the Geotechnical Engineer would attend the Site ‘sometime next week’ (11 to 15 June 2018) and then negotiations would occur.

The request not to visit the site must also be considered in context. It was made in response to Stacey’s email of 1:10pm on 4 June 2018 where she said that she would ‘instruct the boys to come and remove all the materials we have laid’.

These matters suggests that the suspension of works was temporary and would be reconsidered in negotiations after the Geotechnical Engineer’s report had been received.

Secondly, it is not clear from the correspondence that InDepth Civil unequivocally accepted the alleged repudiation contained in the 4 June 2018 email. [57]
[57]As pleaded in the Amended Complaint.

InDepth Civil’s first response to the 4 June 2018 email was by Stacey on 5 June 2018. That email relevantly stated:

David- Can you please help me understand why we have not been afforded the opportunity to meet with you on-site to discuss the plethora as you put it- of defects you have found???
…
Please forward me a list of these so called defects you have found (You may of sent this to Tyron but I have no copy of it). I will go through the list with Adam who did the incredibly difficult initial cut and see what he has to say about it! I also do not think it is unreasonable to ask for the names of the people you meet with and provided you with their expert opinions. I need to do my own checks to see what qualifications they hold, how much knowledge they have on building arenas so I can determine how credible the information they have given you is. I would also like to know the exact day the Geotech testing is being done, Again I do not think this is an unreasonable request!
David, I am doing my Utmost to resolve this issue whilst trying to remain respectful, I would expect the same in return.

(emphasis added)

I do not consider that this email unequivocally brought the Agreement to an end. It was conciliatory in tone and sought to resolve the issue of the alleged defects. The email also accepted the fact that a Geotechnical report was being obtained. In my view, this conduct is more consistent with keeping the Agreement on foot by participating in ongoing negotiations about alleged defects.

David and Penny’s Counterclaim

David and Penny counterclaim for loss and damage cause by InDepth Civil’s breaches of the Agreement. First, they claim that InDepth Civil did not carry out a soil test prior to commencing construction, or at all.

In response, InDepth Civil said that it did conduct a soil test prior to the construction and the Agreement did not require a third-party to carry out a soil test. After conducting a soil test, InDepth Civil’s position on the in situ soil was that:

it was satisfied that the material below the sub-soil was of sufficient consistency and quality for the construction of an equestrian arena given the construction method to be used by [it]. [58]

[58]Reply, 2(a) and (b); Defence to Counterclaim, 4(a) and (b).

David and Penny assert further breaches of the Agreement, namely, that the works carried out by InDepth Civil were not carried out with due skill and care, were not fit for purpose and were defective.

InDepth Civil denies it has breached the Agreement. It says further that it was not responsible for defects that were beyond its control. Further, if David and Penny had not repudiated the Agreement, the Arena would have been completed and been fit for purpose.

Alleged Defective Works

Particulars of the defective works were set out in the expert reports of Mr Luke Tymenson (Tymenson) and Mr Russell Brown (Brown). InDepth Civil relied upon the report of Mr Lucas Pardo, civil engineer. At trial, Tymenson, Brown and Pardo gave evidence as an expert conclave.

In summary, the defective works were said to constitute the following:

(a)the use of the in situ red clay soil as ‘fill’, because the soil lost structural integrity when wet. This meant the base/sub-base was defective.
(b)the presence of organics in the fill and the general compaction of the base/sub-base; and
(c)the batter angles and heights were not constructed in accordance with the Permit and too close to an existing shed on the Site. This required construction of a retaining wall to stabilise the north-eastern section of the Arena.

Tymenson attended the Site on 15 and 18 June 2018 and carried out geotechnical soil testing by drilling three boreholes. The results of these tests formed the basis of the other experts’ opinions.

His conclusion was that the results indicated a lack of compaction and suitability of the fill material. Tymenson described the results of this testings as follows:

The three (3) boreholes revealed that the fill material is a mix of SILT, CLAY and organics – mainly trees roots and grasses. The fill was found to be very moist to wet and poorly compacted to loose. The area where we were standing on the fill batter was settling underfoot while the work was being completed. No vehicle access could be made due to the soft and settling nature of the site.
The fill was found to be 600mm thick until the natural SILT soils were reached at Borehole 1 in the south – western corner of the site. The fill was found to be 1400mm thick in the middle of the batter along the western side and the fill was found to be 1000mm at the north – western end of the fill batter. The fill was found to be very moist to wet and poorly compacted to loose in all boreholes. The DCP results confirmed this.
At the south – western end the DCP blows were 1 blow for the top 400mm. At the north-western end of the DCP blows were 1 blow for 700mm. At the eastern end of the site, in the cut area, the DCP blows were 1 blow per 100mm for the top 200mm. These results indicate a lack of compaction and suitability of the fill materials used and also indicated that the natural SILT soils are susceptible to water ingress and are therefore not suitable to be used as a sub-grade materials.
It was also noted during the site inspection that there are tree roots pushing through the crushed rock surface and that there are signs of settlement where a small ‘sink hole’ has developed. This can be seen in the photos’ attached…
(emphasis added)

Tymenson also identified that the cut at the eastern end of the site had been too close to the existing shed and that a retaining wall was required to make the area safe.

Tymenson opined that the works were defective. He went on to state that the Arena could be rectified and made ‘fit for its purpose’ as a horse arena. His proposed rectification works were as follows: [59]

In order to rectify the site, firstly a spoon cut off drain needs to be installed upslope of the site. This drain then needs to go to the point of discharge for the area.
Then the next step is to remove the crushed rock and fill material.
All of the water sensitive SILT soils will need to be excavated.
Appropriate fill material then needs to be placed and compacted.
The crushed rock then needs to be placed and compacted.
It should be noted that in any earthworks or pavement construction it is crucial that the foundation layers are completed appropriately as any settlement will reflect to the finished surface. This requires appropriate drainage, correct cut and fill batter angles and appropriate fill materials and appropriate compaction. Without this then the site will not perform for its intended use.

[59]CB, 51-52.

There was no quantification of Tymenson’s rectification works.

The suitability of the red clay for use as fill material was also questioned by Brown in his 19 June 2019 report where he said:

The particular materials on this site particularly the two layers of clay should never have been contemplated as filling material. Once they are exposed to water, one of them can become acutely unstable. Consequently, protection of the natural materials from moisture ingress is paramount and should have been from the word go. [60]

[60]CB, 39-40.

In Brown’s first report, he considered the Arena could be made fit for purpose provided but the cost of the proposed rectification works was impossible to determine at that point. [61]
[61]CB, 33.

In his supplementary report No2, Brown revised his opinion as to whether the Arena could be rectified. His opinion was that Tymenson’s recommendation for rectification may not ‘stand up to final scrutiny’ as major ongoing maintenance would be required. He said:

From an engineering point of view I think it represents a methodology of using soil compaction, site drainage etc., to gain a construction element that can be utilised for the original purpose of training horses, but with major ongoing maintenance costs. Based upon the technical information within the Hardcore report, the cost economics of such a procedure preclude such an approach being possible.
To make the project work, you would have to dig out in the order of 2m of natural material to be guaranteed to be down to a material that will have, and can maintain, a CBR value of 3 or more without the addition of lime. Thereafter you will need to build it back using fully imported materials as none of the on-site materials found in the testing can be made to produce a proper fill material with compaction levels at CBR 3 and/or above.
I emphasise the CBR of 3 as it’s an absolute minimum, noting that the existing material on site is basically thixotropic, meaning that with water it flows i.e. virtually loses all internal strength and becomes as close to a fluid as one could imagine. It is incapable of sustaining loads for an extended period and in turn forms to a liquid if hit with an impact load i.e. the hooves of horses.
The Hardcore test results and the CBR values approaching 0.6 indicate the only methodology of correction and making this functional is the use of concrete paving over the complete site, preferably prestressed so there are no gaps cracks or areas where moisture can be transferred, and it would need a very deep edge beam, approaching 2m deep, around its perimeter (needs to penetrate into good natural ground).
The cost of this makes it impractical. By the time one builds the soil and the slopes in and around it to make it functional, and to give it access, and to put in a format where the horses can train on it i.e. additional topsoil on top of the concrete the cost will exceed any sensible expectation.
By the time one digs down deeper to get to good material for the training area, the costs and the height of the retaining wall to protect the shed uphill will be seriously increased and thus cost as well. In addition, the swale drains that are also needed to go around the perimeter to keep water away will also build onto the cost.
To make the concept on this location working is an impossibility using sensible economic rationale. I believe that the only option is to find another location to train horses. [62]

[62]CB, 161.

Pardo generally agreed that the Site had presented issues for the construction of an arena. In particular, he noted that ‘the in situ soils relied [upon] for subgrade support, either due to the presence of historical fill and poor material properties of these soils posed an inherent difficulty’ at the Site.

However, Pardo disagreed that the issues would have affected InDepth Civil’s completion of the Arena. He considered site difficulties would have likely required a change in methodology, significant site preparation and ongoing maintenance. He opined:

Had a geotechnical investigation been carried out prior to the awarding of the construction contract, a significant alteration of the design approach would have been required (as the soils at the site have been subsequently found to be partly unsuitable for the proposed Horse Arena construction). At the very least, it would have prompted a review of the proposed design, and the construction practices employed to achieve such design.
A Horse Arena could be constructed at the site. However, the site requires significant preparation to render it suitable. Ongoing maintenance will also be required to maintain usability of the Horse Arena. At this site, such regular maintenance could include construction of diversion surface swales and drains, and keeping them clear of debris, with regular repairs following heavy rain or if they are overgrown with vegetation. In addition, the Horse Arena surface will require top ups, or replacement from time to time, depending on the usage. The maintenance schedule will vary from site to site (depending on the number of horses using the facility, weather conditions, availability of plant to carry out repairs, etc.). However, it should be expected that such maintenance will be required at least at the end of summer and at the end of winter. [63]

[63]CB, 386.

Pardo also disagreed that the works performed had been defective. Had the works continued, he expected the difficulties presented by the in situ soils would have manifested, but that InDepth Civil would have had the necessary experience to complete any additional works required.

He went on to say:

The works undertaken by the contractor regarding site preparation and laying down of a working platform material, up to the point of cessation of works, are in line with good construction practice. The works were never completed, which means any geotechnical assessment of the site conditions after significant time has elapsed, cannot provide a complete appraisal of the appropriateness of any remedial works the contractor would have undertaken at the time. It is expected that had the contractor been allowed to continue the works, they would have encountered the difficulties posed by the conditions of the in situ soils. However, the contractor is experienced enough, and had access to the right equipment to have been able to complete the works, including any additional works required during construction. The conditions would have necessitated a change in methodology, but engineering solutions are possible to enable the construction of a Horse Arena fit for the purpose at the site.[64]
(emphasis added)
[64] Pardo’s expert evidence.

Defects and a ‘construct only’ contract

In its closing submissions, InDepth Civil submitted that it was bound to carry out the excavation as set out in the plans. That required a cut and fill of the existing soil. It submitted that if the works were defective, that was the result of defects in the Arena Plan for which InDepth Civil was not responsible.

I accept that, ordinarily, a builder is not responsible for defects in a design by a third party. However, I do not consider that the Agreement should be construed as a ‘construct only’ contract. This conclusion follows from the fact that:

(a)by agreeing to carry out the Soil Test, InDepth Civil assumed the responsibility that the in situ soils were suitable for the construction methodology it adopted;
(b)the construction methodology was not solely dictated by the Arena Plan. It required some interpretation as the Arena Plan was incomplete and contradictory in part;
(c)InDepth Civil agreed to ensure that the Arena built on the in situ soil was fit for purpose; and
(d)as part of the construction methodology, InDepth Civil chose to install drains after construction had commenced.

As it happened, Tyron gave evidence that he did not conduct a formal soil test. Rather, Tyron’s evidence was that he was satisfied with the in situ soil, having constructed horse arenas on that soil previously. I do not consider Tyron’s inspection of the Site to be a ‘soil test’ within the ordinary meaning of that term. The objective purpose of obtaining a soil test was to ensure the soils were suitable for the proposed method of construction. This did not occur in the present case. Alternatively, if it was a soil test, it was plainly deficient.

All the experts agreed that the in situ soil lost its structural integrity when it became wet. The impact of rain on the in situ soil was a matter for InDepth Civil to consider when selecting its construction methodology. InDepth Civil knew the construction was to take place in winter and Penny had informed Tyron that the Site became very wet in winter and was on an incline.

Had InDepth Civil properly carried out a soil test, the propensity of the soil would have been identified. The suitability of the in situ soil was of fundamental importance to the construction methodology as it would form the base/sub-baes of the Arena. This fact was acknowledged by InDepth Civil when it pleaded that:

it was satisfied that the material below the sub-soil was of sufficient consistency and quality for the construction of an equestrian arena given the construction method to be used by [it]. [65]

[65]Reply, 2(a) and (b); Defence to Counterclaim, 4(a) and (b).

The Arena Plan was also incomplete and partly contradictory. There was only one cross-section in Section A, which ran north-south and set out the finished level in the centre of the Arena. The notes on the Arena Plan stated that there was ‘an existing excavation – only leveling required’.

Section A also contains an alleged instruction of ‘max 1.0m cut’. However, the eastern section of the Arena required significant excavation to achieve the finished level. In the conclave, the experts said the following about this apparent inconsistency:

Pardo:There is no survey of the site to indicate the type of cut, the [north-eastern] side was steep so in order to fit what’s on that drawing the cut and fill had to be greater than what may have been presumed by the comment.
Tymenson:I’m not sure what that note is in reference to. When you look at the spot levels that have been provided around the edge of what I presume was the existing level, the left had side was all 10s and the [right] side from 13.3 to 12.6, so you’re looking at somewhere between a 3.2 and 2.2 metres cut. I wouldn’t say that’s levelling.
Brown:From what [Tymenson] just said those levels that you mentioned, in particular the 13.3, he’s at the location where we’re going to have our flat platform but noting that the slope of the ground there is fairly steep. By the time you go up and get to the top of the batter at that location you are going to be in dire trouble because it going to be more than 13.3.

The conclave also gave evidence in relation to the inconsistency in the Arena Plan and the Permit conditions. When asked about the affect this had on construction of the batters, they said:

PardoAs Mr Brown said, this drawing is far removed from a design, even though the title says ‘design and drafting’. It had the effect of having everyone that looks at this drawing trying to interpret what needs to be done and then having opinions about how to achieve what’s in the drawings. If you had had a design drawings with cross sections there would have been no doubt about that needed to be done. I think this drawing in itself leaves too much for interpretation without accurately spelling out the difficulties or otherwise in achieving what needs to be done.
TymensonThere is a disagreement in the two to one [in the Permit] and in Section A showing only a metre cut when there’s clearly by the levels up to three and a half meters of cut on various parts. This changes the project from a small amount of earthworks and small cuts to a very large cuts and very large earthworks.
BrownI think in a purely geotechnical point of view, I think both Tymenson and Pardo have covered it.

The Arena Plan therefore called for interpretation from InDepth Civil as to the depth of the cut required and how the batters were to be constructed.

In particular, InDepth Civil had to determine how to construct batters of 2-1 on a site that required a cut of at least 3m on the north-eastern section of the Arena. This task was complicated by the existing shed in that location. InDepth resolved this issue by not meeting the 2-1 ratio required by the Permit. As discussed below, this was a material defect in the works.

As part of the methodology it adopted, InDepth Civil also made the decision to install drains after construction had commenced. All of the experts agreed that drainage was important to the Site.

Pardo said it generally would have been good practice to install the drains first. However, he was unsure whether it would have prevented the subsequent problems. Tymenson said drainage and/or water management was the first thing that should have been done. Brown’s opinion was that in view of the Site, ‘it was almost unbelievable’ that drainage had not occurred first.

Further, I consider the ‘fitness for purpose term’ also indicates that the Agreement was not a ‘construct only’. InDepth Civil agreed to ensure the Arena constructed on the in situ soils would be fit for purpose. That purpose was for a horse arena on which show jumping and dressage would take place. In the circumstances, it was not simply a matter of building solely in accordance with the Arena Plan.

Accordingly, the question is whether David and Penny have established that works carried out by InDepth Civil between 2 May and 9 May 2018 were in breach of the Agreement.

Breach of Agreement

As stated above, I have found that InDepth Civil breached the Agreement by not carrying out a soil test or alternatively, conducting a soil test that was deficient.

The breach had serious consequences for the construction of the Arena. The failure to conduct a soil test meant that the methodology adopted under the Agreement was inappropriate. All experts agreed that the in situ soil, when wet, was unsuitable for use as fill. They also agreed that the batters were not constructed in accordance with the Permit conditions and required rectification by the construction of a retaining wall.

David and Penny submitted that InDepth Civil’s breaches of the Agreement amounted to a repudiation.[66] They submitted that ‘there was a reasonable basis to conclude, as at the date of the plaintiff’s last work, that the arena could not be delivered as per the plans and discussions (or possibly at all), nor could it be rectified’.
[66]In the second sense identified by Koompahtoo.

InDepth Civil submitted that it could have completed the Arena as per the Agreement. It relied upon Pardo’s opinion that engineering solutions were possible to enable the construction of a Horse Arena fit for the purpose at the site.

Those engineering solutions were not set out in Pardo’s report. It was not part of his brief to do so. When asked what solutions were possible, Pardo gave evidence that there were several ways of reinforcing the soil without necessitating a complete removal of the thixotropic materials. By way of example, he said that:

(a)a geotextile membrane could be included to ensure water ingress did not impact the base/sub-base;
(b)some affected areas could be removed; and
(c)construction could have been completed in summer months.

Of the potential solutions for building an arena on the in situ soils, I prefer the solution proposed by Brown above.[67] I consider the alternative solutions proposed by Pardo were not advanced with any particularity and were expressed largely in the abstract. I find there was no alternative scope of works put forward that would address satisfactorily the issues with the Site. Nor was there a costing of the alternative solutions proposed by Pardo. He simply disagreed that such works would be economically unreasonable.
[67]Above, 102.

I also consider Pardo’s opinion that the Arena could be made fit for purpose, was substantively qualified by the need for ongoing biannual maintenance. In my view, such a degree of ongoing maintenance was not contemplated by the Agreement.

The experts also agreed that some kind of retaining wall was required to ensure the batters (particularly on the North-Eastern side of the Arena) complied with the Permit conditions and to stabilise the Site. This was the result of InDepth Civil cutting the batter angles too steeply and too close to the existing shed. [68] The cost of the retaining wall, or its scope of works, were not particularised by any of the experts. However, the experts agreed that the design would have to take into account the in situ soils and be up to 3m high.
[68]CB, 79.

Brown’s opinion was that the cost of the retaining wall, by itself, was uneconomical given the need to construct it on a stable soil base. He did not consider the in situ soils to be appropriate. His evidence was that:

The first thing I did cost, which is falling in my stronger area of expertise was a retaining wall. It needs to be three and a bit metres high, that’s not the problem. The bottom of it needs to go into something that’s not thixotropic, so we could end up with something in the order of five metres by the complete width of this construction. You’re looking at $100,000 for that alone. Forget the soil fix, the way this site has been cut and to leave the cut where it is, the cost is horrendous. If you add the cut with this material when it gets wet, it has a slope angle of five degrees. It’s not a useable product. I can cost a retaining wall of that size and that volume and it just makes the whole thing uneconomic for getting anything else such as digging out two or three metres of materials that’s already there and putting back material. You don’t need to do a dollar sign to know it isn’t going to work.

On the basis of the expert evidence and the fact that no other expert expressed a firm opinion as to the costing of rectification works, I accept Brown’s conclusion that the combined costs to rectify the Site were economically unreasonable given the cost and purpose of the Arena.

In my opinion, the fact that new ‘fill’ material was required, together with the construction of a significant retaining wall compels the conclusion that the methodology adopted by InDepth Civil was for construction of the Arena on the Site was fundamentally flawed. This was largely the result of InDepth Civil’s breach of the Agreement by failing to conduct an appropriate soil test, failing to install drainage prior to construction and cutting the batters on the north eastern side of the Arena too steeply.

Further, I consider that the flaws in the methodology meant that the Arena could not be made fit for purpose without incurring disproportionate rectification costs. The additional rectification works were so significant as to fundamentally change the scope of works that InDepth Civil was obliged to carry out under the Agreement. Accordingly, I find that InDepth Civil breached the consumer guarantee that the Arena be fit for purpose.

Given these conclusions, I consider that InDepth Civil’s breaches of the Agreement enabled David and Penny to terminate the Agreement and claim damages for its breach. For the foregoing reasons, the breach of the fitness for purpose consumer guarantee also constituted a major failure within the meaning of s 268 of the Australian Consumer Law as: [69]

(a)the services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
(b)the services are substantially unfit for purpose for which services of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose.

[69]Competition and Consumer Act 2010 (Cth) Sch 2 (‘Australian Consumer Law’).

David and Penny were also permitted to terminate the Agreement by operation of s 269 of the Australian Consumer Law.

I find that the Agreement was terminated by David and Penny upon filing of their Defence on or around 12 September 2018.

Alternatively, as InDepth Civil had no contractual right to press for payment of the Itemised Invoice, I find the service of the Complaint on or around 9 August 2018 also constituted a repudiation by InDepth Civil. The Complaint did not assert that David and Penny had repudiated the Agreement. It simply asserted a right to payment of the Itemised Invoice.

This repudiation was accepted upon service of the Defence to the Complaint on or around 12 September 2018.

Damages

David and Penny initially sought the costs of removing the works and re-constructing the Arena. This amounted to $111,358.50. [70] Following the change of opinion by Brown, they now seek the sum of $37,455 as damages to rehabilitate the Site.
[70]CB, 28.

Reliance was placed upon the principles set down in Bellgrove v Eldridge[71] where it was said that:

The measure of the damages recoverable by the building owner for the breach of a building contract is, it is submitted, the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract.
The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.
We prefer, however, to think that the building owner’s right to undertake remedial works at the expense of a builder is not subject to any limit other than is to be found in the expressions ‘necessary’ and ‘reasonable’.[72]

[71](1954) 90 CLR 613.

[72]Ibid, 5.

David and Penny submitted that the appropriate damages award was the cost to rehabilitate the land that has been damaged by InDepth Civil works. Such an award, it was said, would restore the land to the situation it would have been had the plaintiff kept its promise and made a correct assessment of the site and materials.[73] They also submitted that the costs of reinstating the Arena in accordance with the Agreement was not feasible or may be impossible.
[73]Defendant’s submissions, 49.

Subject to the principle noted in Bellgrove, the purpose of an award for breach of contract is to place the innocent party, so far as money can do so, in the same position as if the contract had been performed.

In the present case, I consider the claim for damages is best reflected in the cost to demolish the works on the Site. David and Penny have elected to seek damages for demolition but not to pursue the additional costs of reconstruction in accordance with the Agreement. In accordance with Bellgrove, I consider that such an approach is both necessary and reasonable.

I also consider that David and Penny may obtain that relief by virtue of s 267(4) of the Australian Consumer Law for breach of the fitness for purpose consumer guarantee. That section provides:

The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.

The damages for rehabilitation of the Site were plainly reasonably foreseeable as a result of InDepth Civil’s breach of the fitness for purpose consumer guarantee.

In relation to quantum, the sum of $37,455 was contained in the quotation[74] of Mr Brendan Watson (Watson). The quotation contained the following scope of works:

·supply Equipment, Trucks, tools and labour;
·import approximately 1500m/3 of compactable material;
·spread and compact; and
·shape to contour of existing land/fall.

[74]CB, 399 (Watson Quotation).

InDepth Civil submitted that there were several deficiencies in the Watson Quotation.

First, Watson had not been given any documents to prepare his quotation. To rehabilitate the Site, he was relying on the natural contours of the land. He was also not aware that the original job was a cut and fill. This was significant as Watson did not know that soil had not been removed from the Site.

Secondly, InDepth Civil submitted that the introduction of 1,500m3 of additional soil amounted to a betterment, not a rehabilitation of the Site. The soil to be introduced was mudstone, not the in situ red clay and was to be used to achieve a compaction.

In evidence, Watson said he had chosen the mudstone as red clay was unavailable. He said that he had estimated the 1,500m3 was required to compact the Site. The cost of the soil was $22,000 (inc GST).

For the reasons advanced by InDepth Civil, I am not satisfied that the importation of mudstone reflects the cost to rehabilitate the Site. In the circumstances, it was not clear why 1,500m3 of a different soil type was required for fill, when no soil had been removed from the site.

I will therefore deduct the sum of $22,000 from the Watson Quotation as the measure of damages suffered by David and Penny.

There will be judgment for David and Penny in the sum of $15,455.

InDepth Civil’s claim is dismissed.

I will direct the parties to confer as to the proposed form of order and hear the parties on the question of costs.

MAGISTRATE GREENWAY

17 March 2022