Khan v Filardo Ercan Archtects Pty Ltd (Civil Dispute)
[2023] ACAT 35
•19 June 2023
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
KHAN v FILARDO ERCAN ARCHTECTS PTY LTD (Civil Dispute) [2023] ACAT 35
XD 731/2022
Catchwords: CIVIL DISPUTES – where applicant contracted with respondent for design of house – whether respondent breached guarantee of due care and skill under Australian consumer law – whether respondent breached guarantee of reasonable timeliness under Australian consumer law – whether respondent breached an implied term of the contract – whether brief provided by applicant was apt to serve as an implied contractual term – where applicant terminated the contract before services were complete – whether applicant obliged to pay invoice issued before termination of the contract
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 16, 17, 18, 48
Australian Consumer Law (ACT) ss 3, 60, 61, 62, 63, 64, 267, 268, 269
Competition and Consumer Act 2010 (Cth) s 139G, Schedule 2
Fair Trading (Australian Consumer Law) Act 1992 s 11
Cases cited:BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24
Savage v Fairs [2018] ACTMC 17
Scenic Tours Pty Ltd v Moore [2018] NSWCA 238
Tribunal: Senior Member M Hyman
Date of Orders: 19 June 2023
Date of Reasons for Decision: 19 June 2023
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 731/2022
BETWEEN:
NAUMAN KHAN
Applicant
AND:
FILARDO ERCAN ARCHTECTS PTY LTD ACN 647 677 263
Respondent
TRIBUNAL:Senior Member M Hyman
DATE:19 June 2023
ORDER
The Tribunal orders that:
Within 28 days of the date of this decision, the applicant is to pay the respondent:
(a)$6,270 for the unpaid invoice dated 1 April 2022; and
(b)interest on that amount calculated in accordance with the Court Procedures Rules 2006 from 8 April 2022 to 7 February 2023.
………………………………..
Senior Member M Hyman
REASONS FOR DECISION
Introduction
Mr Nauman Khan (the applicant) bought a block of land in the suburb of Whitlam. He commissioned the architectural practice of Filardo Ercan Architects (FEA or the respondents) to design a house according to his instructions. After a period of about eight months, and after many exchanges with the architects, he decided that FEA was not able or willing to meet his needs and he brought the contract with them to an end. At that time, the plans for the house were still not final, and no work had commenced on site. On 11 August 2022, Mr Khan applied to the Tribunal seeking compensation under the Australian Consumer Law (ACT) on the grounds that FEA had not done its work for him with due care and skill or in a reasonably timely way; the application also sought damages for breach of contract on the basis that FEA had produced a design that did not meet the brief he had given them. For its part, FEA contested the claims against them, and further sought that an invoice left unpaid when the applicant brought the project to an end be paid.
The matter came before me on 7 February 2023. Mr Khan appeared in person, representing himself. Ms Maria Filardo and Mr Can Ercan, principals at FEA, appeared for the respondents. Mr Khan and Ms Filardo gave evidence, and each was cross-examined. Each of the parties provided a bundle of documents in support of their case comprising witness statements by Mr Khan and Ms Filardo (Exhibits A1 and R1 respectively), with documents attached. Each bundle of documents has pages numbered sequentially, and Mr Khan’s bundle also includes some attachments without numbered pages. In this decision, the documents are referenced by those page numbers as applicant’s documents or respondent’s documents, and the attachments to Mr Khan’s documents are separately identified.
None of those directly involved in this matter has legal training. The witness statements of both Mr Khan and Ms Filardo include material in the nature of submissions as well as factual material in the nature of evidence. Further, the documents they identify as submissions often include factual material, some of which is not otherwise before me as evidence. I have drawn on all this documentation, treating any factual material as evidence and the remainder as submissions.
Issues
The issues before me in this matter are:
(a)whether FEA delivered its services so as to breach the guarantee of due care and skill set out in the Australian Consumer Law (ACT);
(b)whether FEA delivered its services so as to breach the guarantee of reasonable timeliness set out in the Australian Consumer Law (ACT);
(c)if the answer to either (a) or (b) above is “yes”, whether the failure was a major failure;
(d)if the answer to either (a) or (b) above is “yes”, what remedy should be ordered;
(e)whether FEA breached the contract by failing to provide designs in accordance with Mr Khan’s brief;
(f)if so, what damages should be paid; and
(g)whether the applicant should pay the amounts FEA says he owes them.
The legislative framework
Under the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act), a person may make an application to the tribunal in respect of a matter relating to one or more of various kinds of civil disputes, including a contract dispute, a negligence dispute, a debt dispute and a dispute under Australian Consumer Law,[1] provided the amount in dispute is not more than $25,000.[2] Mr Khan specified in his application that he was seeking remedies under Australian Consumer Law, and he further claims damages under the law of contract. FEA’s counterclaim is for a debt. All of these are civil dispute matters under the ACAT Act and the ACAT has jurisdiction to hear and decide them. Mr Khan has made a claim for $25,000, the limit of the ACAT’s jurisdiction; the disputed invoice from FEA is for $6,270.
[1] ACT Civil and Administrative Tribunal Act 2008 sections 16, 17
[2] ACT Civil and Administrative Tribunal Act 2008 section 18
The Australian Consumer Law is a body of Commonwealth, State and Territory statute law, covering among other things the supply of goods and services in trade or commerce to a consumer. The Australian Consumer Law arises from Commonwealth law, being Schedule 2 to the Competition and Consumer Act 2010 (Cth). The Commonwealth Act applies the Australian Consumer Law (Schedule 2 and regulations made under section 139G of the Commonwealth Act) to corporations and some other entities, reflecting the Commonwealth’s constitutional powers. But the protection of consumers is a shared area of regulatory supervision among Commonwealth, States and Territories, and Part XIAA of the Commonwealth Act provides for participating States and Territories to extend the Australian Consumer Law within their jurisdiction. In the ACT, the Fair Trading (Australian Consumer Law) Act 1992 applies the Australian Consumer Law in the Territory. Section 11 of the ACT Act applies the Australian Consumer Law (to be called the Australian Consumer Law (ACT) – identified as ACL in this decision) to people carrying on business in the Territory, to bodies incorporated or registered in the Territory and to persons resident in or otherwise associated with the Territory.
Mr Khan alleges that FEA breached the following sections of the Australian Consumer Law (ACT):
(a)section 60, which requires that services supplied to a consumer are delivered with due care and skill; and
(b)section 62, which requires that the delivery of services is achieved within a reasonable time, where the contract does not specify timing.
Mr Khan seeks damages under section 267 of the Australian Consumer Law (ACT). That section provides that if a person – the claimant – suffers loss or damage because another person has breached certain specified provisions of the Australian Consumer Law, including those parts containing sections 60 and 62, the claimant can recover the loss or damage or have other remedial action taken.
Mr Khan advances a further claim under contract law. He says that FEA breached an implied term of the contract between the parties, namely the requirement that FEA would provide a design of the house in accordance with the brief that he provided. He seeks damages for that breach.
In response, FEA contests all of the claims made by Mr Khan, and further, in a counterclaim, seeks payment of a final invoice of $6,270 for completed work, issued before the contract came to an end, but not paid.
The evidence
The basic outlines of the arrangements entered into by the parties are not at issue. Mr Khan entered into discussions with FEA in July 2021.[3] FEA apparently sent a questionnaire to arrive at an understanding of the parameters of the project, and Mr Khan set out a response in an email dated 12 July 2021.[4] The email is a series of answers to questions, which must be inferred from the answers, but it is reasonable to conclude that the specified parameters include that the floor space for the house was to be the maximum allowed under the plot ratio for the block of land and that the preferred timing was to be as soon as reasonably possible: “… even if we don’t end up completing the build at least we’re hoping to take a start this year”. A meeting on 3 September 2021 discussed the objectives of the project, and Mr Khan advanced the possibility of using a design based on a house recently built in WA, adapted for the regulatory environment in the ACT.[5] On 7 September 2021, the parties (on Mr Khan’s side comprising himself and Ms Afshan Jamil, who I understand to be his domestic partner) signed a contract for the project.[6] The contract sets out a fee schedule (covering preliminary sketch plans, final sketch plans, obtaining development and building approval and interior design), the basis for and timing of remuneration, the responsibilities and entitlements of the architects, and the responsibilities and entitlements of the client. The architects were required to exercise the skills of a “reasonable, qualified” architect,[7] and to provide the architectural services contracted for “within a reasonable time, except where delay is wholly or partially attributable to the Client or a person or development outside of the Architect’s reasonable control”.[8] The contract sets out a schedule of fees for the services to be provided as follows:
(a)Preliminary sketch plans: $4,850 + GST
(b)Final sketch plans : $3,600 + GST
(c)Development and building approval: $13,500 + GST
(d)Interior design: $7,800 + GST
[3] Exhibit A1 at [6]; respondent’s documents, page 1; applicant’s documents, page 3
[4] Applicant’s documents, page 3
[5] Applicant’s documents, page 3
[6] Respondent’s documents pages 24-26; in Exhibit R1 Ms Filardo gives the date as 12 September 2021, and Mr Khan also gives that date (applicant’s documents, page 3) but the document itself clearly has 7 September 2021 as the date)
[7] Respondent’s documents, page 25, clause 3.1(a)
[8] Respondent’s documents, page 26, clause 4.4(n)
The applicant gave FEA a brief for the project.[9] There were a number of elements which were potentially non-standard. Mr Khan seems to have regarded some of these as critical to the project. The brief specifies that the aim was:
To design a good quality and sustainable house that takes into account and benefits from the block’s location, its qualities and characteristics, and the surrounding environment, while achieving maximum utility through the use of cleverly designed living spaces.
[9] Applicant’s documents, attachment 3; respondent’s documents, pages 31-33
There followed a list of 26 requirements, as follows:
1) The design should incorporate the best practice principles for environmentally sustainable homes as outlined by the Australian Government at e.g. through the use of passive design, careful selection of materials, and optimal level of glazing etc. to increase the year round thermal comfort of the occupants.
2) Good quality fixtures and fittings with ease of maintenance
3) Form is important but should not compromise function
4) Double storey, separate living zones for family and guests/entertainment, and ‘cosy’ areas
5) 4 bedrooms, including 2 ensuites, 2 bathrooms – one on each floor
6) Laundry with provision for at least two washing machines and a dryer
7) Noise insulation
8) Solar panels
9) Ceiling fans
10) Indoor courtyard, if feasible, to provide for a nice sitting area with plants etc, and also to double as a ‘chimney’ in hotter months by allowing to extract hot air from inside the building
11) Use of recessed sections in walls with lighting for paintings and decoration items etc. in common areas
12) Ample storage areas
13) Terracotta roof tiles if compatible with the final design outcome, otherwise a better solution
14) At least 46m2 garage space to allow for storage solutions if required
15) Garage with provision for natural lighting and good ventilation to allow for extraction of hear during hot months
16) Outdoor covered area, preferably with access from the garage, to allow for storage of items like bicycles etc. or a small car
17) Non-standard driveway and garage floor finish (exact material to be selected based on requirements and budget)
18) Security – e.g. this would include ensuring all entry points to the house are secured with solid timber doors e.g. including access point/s from within the garage (and perhaps something like Crimsafe too if this is allowed by the budget), and provision for security cameras
19) Wide single front entry door (widest possible)
20) Entry points to the house to be designed to allow for easy movement of large bulky items in and out of the house. This would include ensuring the staircase to the first floor is designed while keeping this requirement in mind.
21) At least one bathroom on each floor with ease of access features e.g. grab handles etc.
22) Paved pathways around the house and within green areas
23) No garden beds to be in direct contact with the main structure of the house
24) All-weather outdoor entertainment area e.g. in the form of a pergola with warm lights imitating the atmosphere of Lonsdale Street in Braddon on a Summer night
25) Outdoor barbecue with a dedicated extractor fan, shelving and small washing area
26) Kitchen to be placed in a well ventilated area with window(s)
It is apparent that some of these requirements are very general (“Form is important but should not compromise function”) and others very specific (ceiling fans and solar panels). Mr Khan provided a floorplan from, it appears, a different house (presumably the house in Western Australia brought up at the meeting on 3 September 2021), suggesting that this plan would be “a good starting point” but identifying eight changes that he would want to see, if his suggestion were followed. Some of these changes were quite far-reaching, such as moving the location of the kitchen and increasing the size of the garage. Mr Khan also provided photographs of house and design styles that he liked.
There followed a series of exchanges between the parties as ideas were tested and options settled. FEA did not use the suggested plan provided by Mr Khan; they said for ethical and copyright reasons, but produced a new floor plan of their own devising.[10] The first plans appear to have been handed over on 18 October 2021, and these were in the form of basic hand-drawn sketches, with two options.[11] Following feedback from Mr Khan, one design was selected and refined, and the preliminary sketch plans were complete by 19 November 2021.[12] During this time, additional amendments were being made to the plans as Mr Khan sought to ensure that the house met all his requirements; as an example, on 14 November 2021, he sent an email asking among other things for six hinged doors to be replaced by cavity sliding doors, for bathtubs to be included in all bathrooms, and for two sinks to be included in the master bedroom ensuite.[13] In December 2021, FEA provided some 3D imaging of the house as designed, along with updated floor plans (still marked “preliminary” at this time).[14] These were also the subject of further exchanges and suggested amendments by Mr Khan.
[10] Exhibit R1 at [2]
[11] Applicant’s documents, page 4, and attachment 2
[12] Applicant’s documents, page 4; FEA documents, page 46
[13] Respondent’s documents, page 45
[14] Respondent’s documents, pages 82-83
Mr Khan had a more active role in aspects of the house design than the above outline suggests. From time to time, he drew up amended plans himself to illustrate what he wanted. On 24 October 2021, Mr Khan sent a draft plan that removed the courtyard, expanded the size of the garage and changed the placement of the bedrooms on the first floor.[15] To the email of 14 November referred to above, he attached a reworked plan to ensure that there was a walk-in robe for each of the master and guest suites.[16] These had apparently been present in earlier drafts but had been omitted in the most recent version of the floor plans.
[15] Respondent’s documents, pages 41-42
[16] Respondent’s documents, page 45
The house that these plans provided for was on three levels; a sloping block allowed what appears to be a mezzanine floor on one side of the house where the kitchen, dining room and living room were located in an open plan fashion, as well as a laundry and pantry. A rectangular alfresco area lay alongside. The ground floor had a guest suite with ensuite and walk-in-robe, an entry area, an office or library, a sitting area, a powder room, and a garage and carport. There was also a small courtyard off the guest suite. The upper floor included a master bedroom suite with walk-in-robe and ensuite, a family room, study and two bedrooms with a bathroom shared between them. A substantial balcony ran alongside the family room and master suite. Although there was some amendment in the following months, the essential layout did not change.
When work resumed in January, the process of comment and refinement of design continued. Further sketch plans and 3D projections were produced, and these are no longer marked “preliminary”.[17] FEA issued invoices as stages of work were completed, and Mr Khan paid them. Following a set of plans and projections sent to him on 8 February 2022 Mr Khan sent an email on 9 February detailing 14 areas where he wanted changes or some issue to be considered or taken into account.[18] Issues of particular concern at this time and over the next fortnight included the nature of the roof over the alfresco area, a window in one of the bedrooms, and the kind of gutters to be used.[19] It appears that by the end of February 2022 Mr Khan had paid for the preliminary and final sketch plans and had made a 50% deposit for the design approval stage.[20]
[17] Respondent’s documents, pages 75-83, 99-103
[18] Respondent’s documents, page 85
[19] Respondent’s documents, pages 87, 88, 92, 93, 94, 97; Mr Khan’s documents pages 4, 5, 39, 40, 41
[20] Respondent’s documents, page 104
At about this time, a number of issues arose that caused Mr Khan to question the value he was obtaining from the contract. One trigger appears to have been advice from FEA about the costs associated with a building certifier. Mr Khan thought that any costs of this kind would have been included in the design and building approval costs quoted by FEA and included in the contract, but it transpired that these substantial costs were separate.[21] But this difficulty was one of a number: Mr Khan felt that FEA had been generally unresponsive to his brief; that they had been slow; that their work was not to a professional standard; that they had not taken proper account of regulatory requirements; and that he had been obliged personally to do the sort of problem solving that he would have expected from a professional architecture company.[22] He was especially bothered at the amount of time that it took to resolve the alfresco area, in particular its roof; he estimated the time at three months.[23]
[21] Respondent’s documents, pages 105-107
[22] Exhibit A1 at [8], [11]
[23] Applicant’s documents, page 5
On 17 March 2022, Mr Khan sent an email attaching the plans for a house built elsewhere in Canberra for a friend, who he said had obtained very detailed plans for the house in six weeks for a total of $3,500, ready to be submitted for building and development approvals (BA and DA). Mr Khan noted that he had paid FEA almost $17,000 and spent almost seven months, he was still waiting on final plans, and he wondered about the utility of engaging an architect. He said that he would not use FEA for the interior design part of the contract but would stop after FEA had provided the DA and BA approved plans.[24]
[24] Respondent’s documents, page 111
Plans were passed to an engineer in early March for the preparation of structural drawings. At the beginning of April, an issue arose around solar encroachment, which concerns the potential for a development on one block of land to cast shade on a neighbouring block. The parties did not agree on a number of points. The first point of disagreement was whether the encroachment was major or minor in scale. Minor encroachment could be resolved by submission of a form designated 1N, which could be expected to be processed and approved in ten days; major encroachment would require a proposal for DA, which might take several months. A second point of disagreement was that Mr Khan thought that FEA should have provided the plans in a sufficiently final stage for him to give informed agreement to making the 1N application, rather than asking him to sign the 1N form before the scope of the application was clear. FEA, on the other hand, saw the 1N form process as one they would manage on Mr Khan’s behalf, but on the basis that they would proceed only when he was happy for them to do so.
Matters came to a head in April 2022. Mr Khan’s account of this is that FEA became increasingly unresponsive; that they first insisted that the solar encroachment was manageable through a 1N application, but then started making inappropriate adjustments to the plans to reduce the encroachment so that a DA would not be needed; that they had passed the plans to the engineer for preparation of structural drawings when significant changes were still occurring to the architectural plans, so that reworking of the engineer’s plans would be needed; and then refused to pass the subsequently revised plans to the engineer.[25] To FEA, the plans were on the point of being ready for approval processes, but on 29 April 2022 Mr Khan withdrew from the contract.[26] On 19 May 2022, lawyers acting for FEA advised Mr Khan that under the contract he could no longer use the plans “in any capacity”.[27]
The arguments of the parties
[25] Applicant’s documents, page 7
[26] Applicant’s documents, page 7; respondent’s documents, page 141
[27] Applicant’s documents, page 8
Mr Khan raised a number of general points, as noted above, regarding his problems with FEA, but his application alleges three specific failures by FEA: a failure to exercise due care and skill (section 60 of the ACL); a failure to deliver services in a timely fashion (section 62 of the ACL); and a failure to abide by an implied term of the contract to design the house in accordance with Mr Khan’s brief. On each of these three points, Mr Khan’s argument points to particular aspects of FEA’s performance. The failure of due care and skill is evidenced, in his contention, by the door of the double garage being the wrong width and potentially making the garage inaccessible for two cars; and by the way in which FEA dealt with the solar encroachment issue. The failure of timeliness is evidenced by the extended time for the plans to reach the point of near completion they were at when the contract was brought to an end, and more specifically by the time to provide a compliant plan for the alfresco area, and by the repeated to and fro between 4 November and 19 November 2021 required to get the preliminary sketch plans complete. The failure to meet the brief is evidenced by what Mr Khan says are FEA’s belated, inadequate and incomplete efforts to address sustainability issues.
Mr Khan claims in damages and compensation the maximum that can be sought before this Tribunal under a civil suit, namely $25,000. He particularises his losses as the fees paid to FEA ($16,720), the fees paid to the engineer for structural drawings ($1,800), rent paid over the period that he estimates as the delay caused by FEA’s failures ($6,453) and an increase in construction costs over that same period ($30,000). In addition, he seeks the Tribunal filing fee for his application ($612) and ASIC search fee ($9). The total is well over $25,000, but Mr Khan has reduced his claim to that amount.
The argument of FEA is a simple one. In their contention, they supplied the services that they contracted for. The service was provided with the care and skill of professional architects; and the project proceeded in a reasonably timely way, within a context in which no clear timeline was ever provided; the delays that occurred were largely the result of actions by Mr Khan, such as demanding changes to the plans or the refusal to sign the authorisation for the 1N application. As for the sustainability aspects of the design, Mr Khan showed no interest until the project was near completion, and many of the parameters that he had previously insisted on were incompatible with the principles of sustainability. Mr Khan appeared happy with the project until the middle of March and he brought it to an end about a month later, when FEA’s work was 95% complete. FEA speculate that Mr Khan had abandoned his plan to build and had chosen to buy an existing house.
FEA claims $6,270 for an invoice issued on 1 April 2022 but not paid. Although the claim is not particularised, there appears also to be a claim for interest on that amount. FEA further claims the filing fee for the counterclaim ($340) and the costs of attending the hearing ($1,980 for loss of income).
Consideration
This matter gives the appearance of a complete breakdown in relations between the parties, from about late March until the contract was brought to an end by Mr Khan on 29 April 2022. The project was close to completion at that time, and both sides had invested significantly in it. Whether either side can recover depends on the operation of the ACL and of contract law.
It is evident that Mr Khan (and presumably his partner, Ms Jamil, who is not a party in the present matter) had a significant personal stake in the house design. The brief illustrates this very clearly, not only by the significant amount of detail and by implication the thought that has been put into it, but also by some of the more idiosyncratic elements, such as the reference to “the atmosphere of Lonsdale Street in Braddon on a summer night”. Indeed, the exchange with FEA gives every indication that Mr Khan was attempting to keep alive his dream of a house designed specifically for his needs, only ultimately to have that dream disappointed by the way the project turned out. FEA suggests that Mr Khan changed his mind and decided to buy a house elsewhere rather than design and build a house in Whitlam;[28] that may have happened but if so, I think it must have been a bitter disappointment for Mr Khan to make that change.
The ACL
[28] Transcript, page 60, exhibit R1 at [8]
Part 3.2 of the ACL sets up a number of guarantees that are implied into contracts for the supply of goods and services between a commercial supplier and a consumer. A person is taken to be a consumer in regard to the supply of services if the amount paid or payable for the services is $40,000 or less, and the services are of the kind ordinarily acquired for personal domestic or household use.[29]
[29] Australian Consumer Law (ACT), section 3
The relevant guarantees in Part 3.2 of the ACL, for present purposes, are sections 60 and 62. Sections 60 and 62 read as follows:
60 Guarantee as to due care and skill
If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.
62 Guarantee as to reasonable time for supply
If:(a) a person (the supplier ) supplies, in trade or commerce, services to a consumer; and
(b) the time within which the services are to be supplied:
(i) is not fixed by the contract for the supply of the services; or
(ii) is not to be determined in a manner agreed to by the consumer and supplier;
there is a guarantee that the services will be supplied within a reasonable time.
Section 64 of the ACL states that terms in a contract that purport to exclude, restrict or modify the guarantees (whether of goods or services) are void.
The consequences of a failure to abide by the ACL guarantees are set out in the remedial provisions in Part 5.4 of the ACL. For present purposes, the relevant provisions are sections 267, 268 and 269. Section 267 sets out the remedies for a failure by a commercial supplier of services to comply with one of the guarantees in Part 3.2; section 268 sets out the basis for determining whether a failure to comply is a major failure or not (the remedies for a major failure are more far‑reaching); and section 269 sets out the timing considerations relating to the rescission of a contract where that is the remedy applied under section 267.
Section 267 reads as follows:
(1)A consumer may take action under this section if:
(a) a person (the supplier ) supplies, in trade or commerce, services to the consumer; and
(b) a guarantee that applies to the supply under Subdivision B of Division 1 of Part 3-2 is not complied with; and
(c) unless the guarantee is the guarantee under section 60--the failure to comply with the guarantee did not occur only because of:
(i)an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or
(ii)a cause independent of human control that occurred after the services were supplied.
(2)If the failure to comply with the guarantee can be remedied and is not a major failure:
(a) the consumer may require the supplier to remedy the failure within a reasonable time; or
(b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time--the consumer may:
(i)otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or
(ii)terminate the contract for the supply of the services.
(3)If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may:
(a) terminate the contract for the supply of the services; or
(b) by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services.
(4)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.
(5)To avoid doubt, subsection (4) applies in addition to subsections (2) and (3).
Section 268 sets out what constitutes a major failure of a supplier of services against one of the guarantees in the ACL:
When a failure to comply with a guarantee is a major failure
(1)A failure to comply with a guarantee referred to in section 267(1)(b) that applies to a supply of services is a major failure if:
(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 a 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; or
(c) both of the following apply:
(i)the services, and any product resulting from the services, are unfit for a particular purpose for which the services were acquired by the consumer that was made known to the supplier of the services;
(ii)the services, and any of those products, cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
(d) both of the following apply:
(i)the services, and any product resulting from the services, are not of such a nature, or quality, state or condition, that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier;
(ii)the services, and any of those products, cannot, easily and within a reasonable time, be remedied to achieve such a result; or
(e) the supply of the services creates an unsafe situation.
(2)A failure to comply with a guarantee referred to in section 267(1)(b) that applies to a supply of services is also a major failure if:
(a) the failure is one of 2 or more failures to comply with a guarantee referred to in section 267(1)(b) that apply to the supply; and
(b) the services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of those failures, taken as a whole.
Note: The multiple failures do not need to relate to the same guarantee.
(3)Subsection (2) applies regardless of whether the consumer has taken action under section 267 in relation to any of the failures.
It is helpful at this point to take a step back and consider the broader context of the ACL. This is national legislation given effect at Commonwealth, State and Territory level to protect the interests of consumers in their dealings, especially with commercial operations of various kinds. Part 3.2 provides that a number of specific guarantees are implied into transactions for both goods (sections 51-59) and services (sections 60-63). The guarantees with regards to services are for the supply of services with due care and skill (section 60); for the fitness of the services for the specified purpose of the consumer or the specific outcome sought (section 61); and for the delivery of the services within a reasonable time (section 62).[30] Section 61 requires that where the consumer makes known the purpose for which the services are being obtained, or the result that is intended, then there is a guarantee that the services will be reasonably fit for that purpose or could reasonably be expected to deliver that result. But subsection 61(4) provides that the section does not apply to the supply of services of a professional nature by qualified architects and engineers.
[30] Section 63, excluding from the subdivision contracts for the supply of transportation and storage of goods and insurance contracts, is not presently relevant
The singling out of engineers and architects for an exclusion from the guarantee in section 61 is striking. Presumably engineers are excluded because as suppliers of an expert professional service they must meet particular standards which are unlikely to be familiar to the lay people who engage them; as an example, there may be limits to the forces a particular material can sustain. Similar considerations may apply to architects, who may also be excluded because as the creative contributors to building design it may be judged inappropriate to require them simply to deliver on a specified service.[31]
[31] The Explanatory Memorandum to the relevant Bill, the Trade Practices Amendment (Australian Consumer Law) (No 2) Bill 2010, which introduced the Australian Consumer Law, is silent on the point
One of Mr Khan’s abiding themes is that FEA refused or was unable or was reluctant or was slow to meet the specifics of the brief;[32] but these complaints are excluded from the guarantees in the ACL by subsection 61(4), and in my view it is plainly not the intention that section 60 be interpreted broadly so as to allow inclusion of failures that section 61(4) sets out to exclude. Mr Khan has recognised this limitation by putting his case in respect of specific matters that he says meet the tests set by sections 60 and 62, and as a claim for breach of contract, based on the alleged failure of FEA to provide a plan that met the sustainability elements of the brief, which might have been a failure under section 61 were it not for the exclusion in subsection 61(4).
[32] Applicant’s documents, pages 4, 5, 7, 10, 11, 12, 29, 32, 33, 34, 35, 37, 38, 39, 40, 41, 45
One way in which I am hampered in coming to a decision in this matter is that neither party has called any expert evidence. Mr Khan has referred to other projects, and provided materials prepared in the context of some of those projects, and he reports on conversations or exchanges he has had with builders or other architects. But all of the evidence of this kind that he has put forward is at best hearsay; none of the people he has spoken to has been called as a witness; none of the evidence has been tested in cross-examination; no information is available on the qualifications of those who have provided comment to Mr Khan; and no detail is available to me to help decide whether other house projects with which Mr Khan compares his own are genuinely comparable. FEA similarly has chosen not to call any expert witnesses to support their case that the project was handled professionally and in accordance with industry standards. Yet a number of the judgments I am called on to make are of the kind that would be easier if I were able to draw on expert opinion evidence.
Did FEA fail to act with due care and skill?
In Scenic Tours Pty Ltd v Moore[33] (Moore), the NSW Court of Appeal noted the broad and inclusive definition of “services” in the ACL and made the point that the ambit of services covered by the due care and skill guarantee is not delimited by the terms of the contract between supplier and consumer:[34]
174. The text of s 60 does not imply and certainly does not compel the conclusion that if there is a contract in place between the supplier and the consumer the obligations imposed on the supplier by the Care Guarantee are co-extensive with the supplier’s contractual obligations. Unless there is some contextual reason to construe the Care Guarantee in s 60 of the ACL as applying only to “services” that are co-extensive with the supplier’s contractual obligations, there is no basis for doing so. …
175. In my view there is no contextual reason to construe any of the Consumer Guarantees in this way. To construe the Care Guarantee as applying only to services that are co-extensive with the supplier’s contractual obligations would not achieve the object and purpose of the legislation ascertained from the text and structure of the statute. The Care Guarantee is plainly designed to protect consumers by ensuring that the benefits, facilities or other services with which they are to be provided will be rendered with due care and skill. …176. The threshold inquiry mandated by each of the Consumer Guarantees is to identify … the benefits and facilities the supplier is to provide to the consumer. This requires an objective assessment of the dealings between the supplier and the consumer to determine the benefits or facilities the consumer can reasonably expect the supplier to provide in return for the consumer’s payment.
[33] [2018] NSWCA 238, (Sackville AJA, Payne JA and Barrett AJA agreeing)
[34] Scenic Tours Pty Ltd v Moore [2018] NSWCA 238 at [174]-[176]
Similarly, in Savage v Fairs,[35] the ACT Magistrates Court noted that although “due care and skill” is not defined in the legislation, it could be applied along the same lines as negligence under the common law. The test was first whether the supplier of services had the requisite skill, and second whether the supplier then applied that skill with the necessary or appropriate care. Whether or not due care and skill was exercised is a question of fact.[36]
[35] [2018] ACTMC 17
[36] Savage v Fairs [2018] ACTMC 17 at [48]
Ms Filardo and Mr Ercan provided material about their qualifications and experience.[37] Both have qualifications in architecture and related disciplines, and both are members of the Australian Institute of Architects. Both quote extensive relevant experience, including in residential projects. I have no difficulty in finding that FEA brought an appropriate level of skill to Mr Khan’s project. The remaining question is whether FEA executed the project with due care.
[37] Respondent’s documents, pages 17-21
Mr Khan bases his argument about a failure of due care and skill on two principal alleged failures by FEA: one relates to the door of the double garage; the other concerns the solar encroachment issue. In terms of the scope of the services to which the due care and skill guarantee applies, as discussed in Moore, I note that the parties accepted that the services delivered by FEA extended to the requirements set out in Mr Khan’s brief.
The problem with the garage door arose because when the plans were at a reasonably advanced stage it was discovered that in the suburb of Whitlam it was not possible for the wall of the garage to be on the boundary of the block (apparently in some other suburbs this is possible).[38] As a result, the wall needed to be shifted 1.5 metres to allow the prescribed setback from the side boundary. Mr Khan says that FEA neglected to make the adjustment to the door of the garage, leaving a design in which the door was only four metres wide, a width that Mr Khan says is insufficient to allow two cars to use the garage.[39] Mr Khan says he drew FEA’s attention to this on 4 April 2022 and advised the engineer to stop work on the engineering drawings on 7 April 2022.
[38] Transcript of proceedings, 7 February 2023, page 44
[39] Applicant’s documents, page 15
FEA did not contest the assertion that when the requirement to include a setback from the side boundary became apparent, they had narrowed the garage but did not adjust the garage door width. The explanation Ms Filardo offered was that the brief emphasised the storage uses of the garage space and that with a carport as well as a double garage it was unlikely that two cars would need to occupy the garage.[40] Mr Khan pressed this point in cross-examination of Ms Filardo at the hearing; Ms Filardo refused to acknowledge that the narrow door was an error, insisting it was intentional. Mr Khan pointed to Australian Standards that set a standard double garage door at a wider dimension; FEA countered, noting that the standards in question were voluntary rather than mandatory.[41]
[40] Transcript of proceedings, 7 February 2023, pages 55-58
[41] Transcript of proceedings, 7 February 2023, page 56
I think it highly unlikely that the narrower garage door was done intentionally. It would surely be unusual for a double garage in Canberra to be too narrow for two cars to enter and leave the space, especially, given the rigours of the local climate. And in any case a wider door would not, of itself, lead to any reduction in the storage space available, if Mr Khan wished to use it for that purpose; all it would do is to ensure that the space could not be used for a vehicle. In my view, it is more likely than not that FEA forgot to adjust the plan by widening the door and was subsequently unwilling to acknowledge the error. Accepting that the relevant standard is not mandatory, and that the brief lays some emphasis on the availability of the garage space for storage, it seems to me nevertheless that an appropriately careful architect, when considering such an unusually narrow door, would at the very least consult the client about the matter; and that FEA did not do.
FEA argues that in any case the narrowness of the door was identified and the plans corrected, and depicted that process as part of the normal interchange between client and architect, in which design ideas are tested and corrected.[42] I am unpersuaded by that argument. If FEA had alerted Mr Khan to the narrowness of the door, I might have looked at it differently. But it does not seem to me that any failures at all by an architectural practice, no matter how egregious, escape the ACL guarantees provided they are detected and corrected by the client before the plans reach final form. In my view this was an oversight, and from a professional firm of architects it was a failure to exercise due care.
[42] Transcript of proceedings, 7 February 2023, page 56
On the second of the matters identified by Mr Khan, i.e. solar encroachment, Mr Khan drew on the advice of a professional architect that any encroachment issue should have been highlighted at an early stage.[43] He notes that the plans were sent to the engineer on 8 March 2022;[44] that the existence of a solar encroachment issue only became apparent when it appeared on one of the plans on 8 April 2022;[45] that FEA initially claimed to see no problem with the encroachment, despite an inconsistency with planning rules;[46] when Mr Khan said he would not pay any additional costs if the matter had to go to DA because of the encroachment, FEA offered to make changes to reduce the encroachment – changes that in his view were poorly thought out.[47] An unsatisfactory exchange with FEA followed in which they seemed to him unwilling to resolve the issue.[48]
[43] Applicant’s documents, pages 12-13
[44] Applicant’s documents, page 16
[45] Applicant’s documents, page 17
[46] Applicant’s documents, page 18
[47] Applicant’s documents, page 18
[48] Applicant’s documents, page 19
FEA’s explanation for all this is that the solar encroachment issue only came to light as the final shape of the project became apparent, and that their experience led them to believe that they would be successful in getting approval under a 1N application.[49] Ms Filardo was adamant at the hearing that the degree of encroachment would not require a DA application, because the encroachment was large only in the horizontal dimension – in the vertical dimension, which in her view was what counted, the encroachment was minor. She said that other projects with similar or greater encroachments had been dealt with under the 1N rules without problems.[50]
[49] Respondent’s documents, page 7
[50] Transcript of proceedings, 7 February 2023, pages 49, 96
It seems to me that the existence of a solar encroachment issue would most likely come to light once the roofline had been determined, as Ms Filardo suggested. There was a protracted exchange during February 2022 over the solution to the roofline to avoid box gutters, to ensure the solid roof that Mr Khan wanted over the alfresco area and to make consequential changes to other aspects of the design.[51] FEA consistently argued that a 1N approval would have been forthcoming, despite the apparent inconsistency with the rules. That claim has not been tested. In any case, a number of solutions were available that would reduce or eliminate the solar encroachment, including reducing the size of one bedroom or lowering the house by 300mm. Mr Khan brought the contract to an end before these issues were finally resolved. No doubt he was extremely frustrated by this stage, and FEA’s only explanation why, when the roofline was resolved on 25 February 2022, the solar encroachment issue did not come to notice until six weeks later, on 8 April, is that final details of the shape of the house were still being worked out during March 2022.[52]
[51] Respondent’s documents, pages 73-98
[52] Transcript of proceedings, 7 February 2023, page 49
This issue could have played out in a number of ways, if the contract had continued: FEA might have been vindicated, if the unamended plans succeeded in the 1N application process; or amended plans may have been submitted for approval; or some other issue might have required that the project be submitted to the DA process (FEA seemed to believe that the retaining wall at the edge of the block would have triggered the DA requirement, whereas Mr Khan believed that his solution of parallel retaining walls had avoided this[53]). Since the project was never submitted for approval, these questions must remain unanswered. But what then might have constituted the failure of FEA to apply due care? Was it that the issue was not identified earlier? Or that it was not the subject of advice to Mr Khan as soon as it became apparent? Or that the solutions were offered late and were unacceptable to Mr Khan? I do not think it is reasonable to identify any of these as a failure of due care, although they may have reflected unsatisfactory communication between client and professional or have been symptoms of the breaking down of relations between the parties. FEA insists that they would not have submitted plans for 1N approval without Mr Khan having agreed, and that getting him to sign the 1N application form was simply a way of ensuring that an application could be made quickly when the time arrived.[54]
[53] Transcript of proceedings, 7 February 2023, page 53
[54] Transcript of proceedings, 7 February 2023, pages 50, 52
I do not believe that Mr Khan has met the burden that lies on him to establish a failure to exercise due care with respect to the solar encroachment. I do not believe I have the certainty that I would need to arrive at such a conclusion, especially as the potential of the project to receive approval through the 1N process was not tested.
The two examples examined above are those that Mr Khan focused on in his submission. But during the hearing he identified some other issues, and although he did not explicitly state that these were intended as examples of a failure of due care, that appears to be the heading under which those issues best fit. These issues include:
(a)an early sketch plan done during October 2021 included a kitchen that was eight metres long, which Mr Khan regarded as ludicrously out of proportion;[55]
(b)at about the same time, plans envisaged an internal staircase two metres wide, which Mr Khan also regarded as impractical;[56]
(c)the absence of walk-in robes in the master and guest bedrooms;[57]
(d)inconsistent or wrong information and advice, for example at one point regarding whether the plot ratio had been maximised;[58] and
(e)late in the process differences of view emerged about the retaining walls referred to above, with Mr Khan wishing a level block of land, to be achieved by retaining walls and fill, and FEA taking the view that if that were done the height of the retaining wall at the edge of the block would be greater than the 1.5 metres allowed, requiring an application for a DA.[59]
[55] Transcript of proceedings, 7 February 2023, pages 42-43
[56] Transcript of proceedings, 7 February 2023, page 21
[57] Transcript of proceedings, 7 February 2023, pages 23, 27
[58] Transcript of proceedings, 7 February 2023, pages 32-3
[59] Transcript of proceedings, 7 February 2023, page 53; exhibit R1 at [27]
I do not think that any of these additional examples assist Mr Khan’s case. As FEA pointed out, the 8-metre kitchen and 2-metre-wide stair were both included in conceptual sketches at an early stage of the process, when possible, layouts were being explored. The sketches in question were drawn by hand, and although they were to scale, they were clearly at the conceptual end of the process, and details of the kind attacked by Mr Khan do not, in my view, show any absence of due care, as it was to be expected that plans would be substantially amended and reworked from this point. The walk-in robes, similarly, were omitted at an early iteration of the plans, and in any case were not explicitly set out in the brief – rather, they were to be inferred from the inclusion of those features in the Western Australian house offered as a good start for the process. Whether or not FEA made an error when advising Mr Khan about the plot ratio is not a point on which I can reach a conclusion; the point was not been made with sufficient particularity and supporting evidence to allow me to reach a finding. As for the retaining wall, the evidence that was advanced on that matter is incomplete; it was never discovered whether the retaining wall solutions of either Mr Khan or FEA would receive approval through the 1N process, and I am unable to reach any conclusion about whose judgment was right.
The garage door therefore is the only failure against the guarantee of due care and skill that Mr Khan has identified.
Did FEA fail to supply their services within a reasonable time?
This is the issue on which expert evidence would have been of particular use. Mr Khan has consulted people who he says are expert in the field, but the evidence is hearsay, the experts come without anything to back up their expert status, and where other projects are cited for comparison I have no information to allow me to know whether the projects are genuinely comparable, not only in scale and type but also in terms of the interchange between architect and client. What is a reasonable time for an architect to design a house of this size and complexity? That, it seems to me, is a question on which I have no useful evidence at all.
Mr Khan points to the indications he gave at the outset of the project that he was keen to move quickly. In his response to FEA’s initial questions, in July 2021, he expressed a wish to start construction by the end of the year, and in the FEA pro forma completed at about that time (the “project identification form”) he said that he wished to proceed as soon as possible.[60] But the contract that the parties signed does not make time of the essence; the client is entitled to the services being provided “within a reasonable time”, except where the client or some third party causes delay.[61] Mr Khan attempted in the hearing to establish that he had made it clear to FEA that he had a timeline of six months for the design process to be complete, so that construction could begin; but first of all FEA contested this; and second, Mr Khan in any case signed a contract that sets an indeterminate timeline, so he cannot reasonably claim that there was some more certain timeline implied into the contract.
[60] Respondent’s documents, page 28
[61] Clause 4.4(n), Respondent’s documents, page 26
Mr Khan also pointed to the exchange he had in early October 2021, in which FEA stated that they would need two to three weeks to settle the basic design of the house, and then seven to nine weeks to work up documentation.[62] What FEA said in this exchange, however, was not a contractual promise, but an outline of expectations – an outline that would in practice be influenced by other factors, such as feedback from the client, quite apart from time lost at the Christmas and New Year period.
[62] Applicant’s documents, attachment 1
Mr Khan asserts that the time on average between signing a contract with an architect and having plans ready to be sent for approval is six to nine weeks.[63] He puts forward an exchange between an architect and a client that appears to reflect that timeline.[64] But, as noted earlier, I do not have the information that allows me to be sure that the project is comparable to Mr Khan’s; and the architect and client in the other matter have not been called as witnesses and have not been cross‑examined.
[63] Applicant’s documents, page 22
[64] Applicant’s documents, pages 23-24
There were two periods in the seven to eight months of the project where a delay occurred for special reasons: the first is an initial period of about a fortnight attributed to the lockdown in Canberra; the other is the Christmas and New Year break. I do not see any reason why each of these should not be accepted as reasonable. Leaving those aside, Mr Khan’s objections focus on the exchange with FEA on the details of the design when the preliminary plans were being finalised (from 4-19 November 2021); and on the protracted exchange about the alfresco area (from 6 December 2021 to 25 February 2022). In each case, there was a great deal of back and forth between the parties before the design was finalised to Mr Khan’s satisfaction.
What I believe happened on each of these issues is that Mr Khan’s wish to have his brief met precisely as he had initially set out came up against the wish of FEA as architects to contribute in a genuinely creative fashion to the project. Mr Khan engaged architects; but when he put forward his brief and gave indications of what he wanted (“what we like”[65]) he intended that those specifications should be precisely met. The variations and new ideas that FEA put forward, in the way that might be expected of architects, were met with rejection every time, because what Mr Khan had put forward were not examples or options or suggestions but hard and fast prescriptions.
[65] Applicant’s documents, attachment 3
As an example, Mr Khan’s insistence on walk-in robes in the master bedroom and guest suite, in the period leading up to 19 November 2021, was justified by the inclusion of those features in the equivalent locations in the house design from Western Australia that Mr Khan put forward as “a good start”. Clearly, this house design was not just some possible source of ideas; it was in effect a template for what Mr Khan wanted. Similarly, the extended debate over the alfresco area involved FEA offering various solutions, only to have them rejected by Mr Khan because his identification of “what we like” was not a conceptual starting point but a clear statement of the outcome he wanted and expected. It would also seem to me that spending a fortnight (from 4 to 19 November 2021) getting certainty on the preliminary plans was perhaps not outrageous, in the sense that those plans would determine the essential parameters for the project as it proceeded. Once again, it fell foul of Mr Khan’s very clear sense of what he wanted, which meant that from his perspective an extended debate was not needed.
For all these reasons, I cannot conclude that FEA failed to meet the guarantee of timeliness in section 62 of the ACL. While the project does seem to have a timescale that is on the long side, I do not have evidence about an industry standard or common industry practice for such a timeline, or expert evidence of other kinds that would allow me to decide that the project did not meet the reasonable timeliness standard set by the ACL guarantee.
Was FEA’s failure against the guarantees a major failure?
The remedies available where there is a failure to meet one of the guarantees in the ACL depend on whether any failure can be remedied or on whether it is a major failure. A major failure or a failure that cannot be remedied entitles the consumer, under section 267, to terminate the contract or recover compensation for any reduction in the value of the services.[66] For any failure, the wronged consumer is entitled to recover losses consequential on the failure, where those losses were reasonably foreseeable.[67] Where a failure can be remedied, the consumer can require it to be remedied or recover the costs of remedying it.[68] Section 268(1) identifies five circumstances where a failure to comply with one of the statutory guarantees is a major failure: paragraph (a) provides that a major failure occurs where a reasonable consumer would not have acquired the services if fully informed of the circumstances of the failure; paragraphs (b), (c) and (d) provides that a major failure occurs where the services were not fit for the purpose for which those services are usually engaged, or for the particular purposes for which supplier was engaged, or the services were not of the kind and quality that would be expected to achieve the result expected and made known, and in each of those cases the failures cannot be reasonably remedied; and paragraph (e) states that a major failure occurs where the supply creates an unsafe situation. Section 268(2) adds that it is also a major failure if there are two or more failures against a guarantee and a reasonable consumer would not engage the supplier if fully informed about the failures as a whole.
[66] Australian Consumer Law (ACT) section 267(3)
[67] Australian Consumer Law (ACT) section 267(4)
[68] Australian Consumer Law (ACT) section 267(2)
In the present circumstances, I have identified a single failure against the guarantee in section 60 of the ACL, namely the narrow door for the double garage. This, it seems to me, was an error of the kind that could easily be made but should have been picked up. It was easily remedied; once identified, the plans could be readily modified to correct the error, and this is what in fact happened. Because the plans were corrected, the consequences of the error were minimal, it seems; certainly, there was no question of an unsafe situation arising, for example.
I do not think this can be regarded as a major failure. There was a single error, so subsection 268(2) was not engaged; the error was easily remedied, so paragraphs 268(1)(b), (c) and (d) were not engaged; and in the absence of a safety issue, paragraph 268(1)(e) was not engaged. That leaves paragraph 268(1)(a), which would require me to conclude that a reasonable consumer, fully informed of the failure, would not engage FEA. I do not think I can reach that conclusion. The error was of the kind usually identified as “human error”, in my view; and although a professional architecture practice should have noticed it, I do not think it to be of the kind that would lead a reasonable consumer to decide that FEA could not be relied on. What is more the issue here, I think, is that Mr Khan’s concept of what an architect should do, and FEA’s concept of that task, were radically different. A reasonable consumer, aware of what might be expected from an architect, would not, I think, be discouraged from engaging FEA. I return to the mismatch between Mr Khan and FEA below.
What remedies should be ordered under the ACL?
The remedies available under section 237 of the ACL are, for major failures, or where a failure cannot be remedied, that the consumer can terminate the contract and recover moneys paid under it. Otherwise, the remedy is to correct the error. For any failure consequential losses can be recovered, where those losses were reasonably foreseeable.
In the present matter, the only failure I have found is that the garage door was too narrow. That failure has already been remedied. I cannot see that any consequential losses flowed from that failure. Mr Khan has identified a significant quantum of losses, including the payments made under the contract to FEA, moneys paid to the engineer for technical drawings, rent paid for the period beyond the time that plans should have been complete, according to him, and the increase in construction costs occasioned, he says, by the delay in completion. None of these costs flowed from the failure to put the correct size garage door in the plans. It follows that I do not propose to make any orders in respect of that failure.
Did FEA breach the contract by failing to produce a design addressing sustainability issues?
Mr Khan’s application asserted that FEA had breached an implied term of the contract, namely the implied requirement to produce a design in line with the brief he provided. This failure was specifically in respect of the sustainability aspects of the brief. The brief called for a “sustainable house” and the first item in the brief was that the design should “incorporate the best practice principles for environmentally sustainable homes … e.g., through the use of passive design, careful selection of materials and optimal level of glazing etc”. The item referred to an Australian Government website that gives advice on and examples of good design and the application of sustainability principles.
That item of the brief does not appear to have been given any attention until 11 April 2022, when Mr Khan sent an email to FEA asking for their input, repeated on 14 April 2022. FEA responded with an email on 20 April 2022,[69] stating that they had addressed all the sustainability principles, and listing twelve headings: orientation, footprint, landscaped area, natural light and ventilation, energy, heating/cooling, hot water, water, windows, shading, materials, and insulation. Against each heading FEA noted what choices had been made in the design to this point, and where options were still open, what choices would be best from a sustainability perspective as the house proceeded.
[69] Respondent’s documents, page 131
Mr Khan submitted that the response does not address “all the elements” of sustainability, as FEA claimed; that many or most of the elements of sustainability had been ignored throughout; and that the choices now set out by FEA had been made without consulting him and without being documented.[70] FEA had only turned its mind to the issue when he had asked, and this had occurred after the plans had already been passed to the engineer.
[70] Applicant’s documents, page 29
There are some issues raised by this part of Mr Khan’s application. It appears to be a way by which he can seek redress on the same basis as might have been possible under section 61 of the ACL, were it not for subsection 61(4). Nevertheless, I can see no reason why this part of his application should not be entertained; the intent of subsection 61(4) is to limit a claim under the ACL; it has no bearing, so far as I can see, on a claim made under contract law, and surely the ACL is intended to supplement contract law, not constrain its operation.
FEA did not oppose the assertion by Mr Khan that meeting the brief that he provided was an implied term of the contract. Implied terms have usually only been accepted by the courts where they are necessary to render a contract effective, that is, they fill a gap that would otherwise render a contract unenforceable. In a leading case, BP Refinery (Westernport) Pty Ltd v Hastings Shire Council,[71] the Privy Council noted five criteria that must be met before a term could be implied into a contract: the term must be reasonable and equitable; it must be essential for the contract to have business efficacy; it must be obvious; it must be capable of clear expression; and it must not contradict or be inconsistent with any express term of the contract. This doctrine has been followed on numerous occasions by the High Court.[72]
[71] (1977) 180 CLR 266
[72] See for example Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24
I think the suggested implied term in the present matter meets the first, second, third, and fifth of the above criteria. The term is reasonable and equitable and consistent with the express terms. It is in my view essential and obvious: the contract itself is more or less silent on the content of the work to be undertaken. That seems to me to leave open the question of what the architects are to do and makes it impossible to know whether any work done is in accordance with the contract or not.
Whether the fourth of the criteria is met is more problematic. The notional term can be clearly expressed, along the lines of “the architects will complete a design according to the brief supplied by the client”, but that term also requires that the brief itself be of sufficiently clear expression that a court or tribunal can determine whether any part of it has been met or not. In this case that is less than certain. Many of the 26 elements in the brief are of such generality that one could never be sure whether or not they have been met, for example “Good quality fixtures and fittings with ease of maintenance” or “Form is important but should not compromise function”. Others are clear but of uncertain application in the work of architects, such as “ceiling fans” and “solar panels” which presumably are there to ensure that ceiling heights and roof structure will allow for later installation when the house is built.
These uncertainties cause me to wonder whether the requirement to meet the brief can be satisfactorily considered an implied term. And the problems do not end at this point. What is the status of the attached house plan from Western Australia, put forward as “a good start”? What is the force of the suggested changes to that plan that follow, especially given that FEA decided not to follow the plan, for what seem to me quite proper ethical and intellectual property reasons?
If the brief were to be regarded as a term of the contract, it must be interpreted objectively, rather than according to Mr Khan’s subjective sense of what he intended. That is important because the requirements of the brief appear to have been a good deal more definite in Mr Khan’s eyes than an objective construction would suggest. The walk-in robes in the master bedroom and guest suite and the alfresco area being under the roofline do not appear in the 26 elements of the brief. The need for the walk-in robes must be deduced from their inclusion in the house design offered as “a good start” and from the suggested changes to that design.[73] As for the alfresco area, the design brief element 24 refers to an outdoor entertainment area “e.g. in the form of a pergola”, a design option later firmly rejected by Mr Khan.[74] The need for an alfresco area under the roofline could perhaps be deduced from the “what we like” photograph, showing an extensive outdoor area that plainly falls under the roofline of the house, although the requirement for the alfresco area to be under the roofline surely cannot be part of the implied term of the contract, given the wording of element 24 of the brief. A brief drawn up in this way and providing a backdrop to the project as it proceeded, does not readily lend itself to the strict construction it would have as an implied term of the contract.
[73] Applicant’s documents, attachment 3
[74] Respondent’s documents, pages 85, 92, 93; Transcript of proceedings, 7 February 2023, page 24
The term in the project brief that relates to sustainability is general in its wording – “the design should incorporate the best practice principles for environmentally sustainable design as outlined by the by the Australian Government at …” References to passive design, use of materials and glazing are given as examples. In his submission Mr Khan places a great deal of emphasis on passive design as an underlying principle. The website quoted by Mr Khan in his brief covers a range of issues but includes substantial material about passive design, which involves the use of orientation, thermal mass, choice of materials, glazing, insulation, ventilation and airtightness and the like to provide comfort while minimising the use of energy for heating and cooling.
It is clear from the material on the website that although passive design elements can be retrofitted, it works best when factored into the house design process from the early stages. One might have expected, therefore, that this might have been a focus of some of the early discussions about the elements of the design for the house. But that is not how events proceeded. The identification of an existing house as one to follow with a few changes effectively put other considerations to one side, including any attempt to consider how elements of passive design might be factored into the design. As the project proceeded, it would seem to me that Mr Khan’s very prescriptive requirements would have offered limited room for the addition of sustainability considerations into the design process. What is more, as FEA noted when providing their sustainability input on 20 April 2022, some of the essential features of the design that Mr Khan had insisted on were not well aligned with general sustainability principles: the quoted website refers to the advantages of a person building the smallest home that can meet their needs,[75] whereas Mr Khan insisted on fully using the plot ratio available.[76] Similarly, sustainability principles look to retain ecological values, and to use plantings to shade the house in summer;[77] but Mr Khan wished to keep plantings away from the house.[78]
[75]
[76] Applicant’s documents, page 3
[77]
[78] Respondent’s documents, page 31
It might be possible, given the generality of the brief, that the implied term of the contract necessarily contains a further implication that the specific demands it made must be addressed flexibly taking into account variations in Mr Khan’s requirements as the project proceeded. That would apply especially, I think, to the more general elements in the brief, such as the sustainability element. Furthermore, the website referenced by Mr Khan appears to be of the “toolbox” variety, that is, it offers a range of ideas and options on the basis that a choice can be made according to site, circumstances, budget and so on. In all the circumstances, in my view FEA’s email on 20 April 2022 was a reasonable attempt to meet the requirements of their client and to abide by the brief. That was the email that set out a dozen sustainability issues and addressed how they had either been reflected in the design or could be taken into account in choices and decisions that were yet to be made.
More generally, it is difficult to see how FEA could be in breach of the contract with regard to the specific issues set out in the brief, such as passive design, when those specific issues are put forward not as requirements, but as examples. In the first place, on an objective construction, those examples are not requirements with which FEA was obliged to comply. Further, it was always possible that those examples could be displaced by other demands made by the client – and that is what happened as Mr Khan insisted on a significant number of his own design ideas being met.
Finally, if Mr Khan were to succeed in this part of his claim it is not clear what remedy could be ordered. The purpose of damages for breach of contract is to put the aggrieved party in the position it might have been expected to be in if the contract had been performed. Mr Khan is claiming for a failure to specify the sustainability considerations that should have been factored into the house design, or for the inadequacy of those that were put forward on 20 April 2022. But a week after receiving advice on this point he terminated the contract. It is not at all clear what injury the alleged failure to receive sustainability advice caused, nor is it clear how an order could be made when the contract has ended, and the fate of the project is unclear (suggestions were made that the land had been sold but no confirmation on that point came from Mr Khan).
In summary, then, it is not clear that the brief provides a satisfactory basis for an implied term of the contract between the parties; even if were taken as an implied term, to the extent that is possible, I do not think that I could conclude that FEA was in breach; and even if there were a breach no satisfactory remedy seems to be available.
Does Mr Khan owe money to FEA?
FEA issued an invoice to Mr Khan on 1 April 2022 for $6,270[79] as a progress payment for the design approval part of the contract. The invoice was unpaid when Mr Khan terminated the contract on 29 April 2022. As I have found no failures against the guarantees in the ACL that would warrant termination of the contract, and no breach of the contract, the invoice remains to be paid, and Mr Khan is obliged to pay it. He must also pay interest on the amount owed.
Conclusion
[79] Respondent’s documents, page 118
This is an unfortunate case. Mr Khan set out to build his dream house but found that his architects would not deliver on the project he had firmly set his eyes on. Perhaps the root of the problem was that Mr Khan knew from the start almost exactly what he wanted, whereas FEA was looking for ways of delivering on a general concept; in other words, FEA was operating as an architect while Mr Khan wanted a building designer or even a draftsperson to draw up plans to his specifications. On a number of occasions in the papers, FEA says that their aesthetic and design ideas, and their professional advice, were rejected by Mr Khan;[80] this is especially apparent in the protracted debate over the roof of the alfresco area.[81] These exchanges illustrate the tension between the roles in which the parties cast themselves.
[80] Exhibit R1, at [4], [7], [26], [27], [28], [29]
[81] Respondent’s documents, pages 85-98
Mr Khan has succeeded in establishing a failure by FEA, and FEA has successfully counterclaimed for payment of the outstanding invoice with interest. No order will be made for recovery of the filing fee by either side. FEA cannot claim for the cost of their attendance at the tribunal: section 48 of the ACAT Act does not allow for the award of costs other than for very limited purposes.
………………………..
Senior Member M Hyman
Date(s) of hearing: | 7 February 2023 |
| Applicant: | In person |
| Respondent: | Ms M Filardo, authorised representative |
1
3
4