Kronenberg v Bridge
[2013] TASSC 57
•4 October 2013
[2013] TASSC 57
COURT: SUPREME COURT OF TASMANIA
CITATION: Kronenberg v Bridge [2013] TASSC 57
PARTIES: KRONENBERG, David
KRONENBERG, Robyn
v
BRIDGE, Stephen
TANNER, Stuart
FILE NO: 201/2009
DELIVERED ON: 4 October 2013
DELIVERED AT: Hobart
HEARING DATE: 26, 27, 28 and 29 November, 5 December 2012
JUDGMENT OF: Tennent J
CATCHWORDS:
Restitution – Restitution resulting from unenforceable, incomplete, illegal or void contracts – Recompense for services rendered – Quantum meruit – General principles – Impact of breach of Fair Trading Act 1990, s14 on amount claimed,
Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120; Wentworth Partners Estate Agents Pty Ltd trading as RE MAX Gold v Gordony [2007] NSWSC 1135; Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510; Commissioner of State Revenue (Vic) v Royal Insurance Ltd (1994) 182 CLR 51, followed.
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Hungerfords v Walker (1989) 171 CLR 125; Fitzgerald v Masters (1956) 95 CLR 420; Homburg Houtimport BV v Agrosin Ltd [2004] 1 AC 715; Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221; Lumbers v W Cook Builders Pty Ltd (2008) 232 CLR 635, referred to.
Fair Trading Act 1990 (Tas), s14.
Aust Dig Restitution [17]
REPRESENTATION:
Counsel:
First Plaintiff: S B McElwaine SC
Second Plaintiff: S B McElwaine SC
Defendant: M E O'Farrell SC
Third Party: No appearance
Solicitors:
First Plaintiff: Shaun McElwaine + Associates
Second Plaintiff: Shaun McElwaine + Associates
Defendant: Toomey Maning & Co
Judgment Number: [2013] TASSC 57
Number of paragraphs: 155
Serial No 57/2013
File No 201/2009
DAVID KRONENBERG and ROBYN KRONENBERG v STEPEHN BRIDGE, STUART TANNER
REASONS FOR JUDGMENT TENNENT J
4 October 2013
The plaintiffs in this matter, Mr and Mrs Kronenberg, wished to build a home on land they owned at Eaglehawk Neck. They engaged an architect, Mr Tanner, ("the architect") to draw plans for the home, and ultimately engaged a builder, Mr Bridge ("the builder"). The home was built, but at a cost which was far more than the plaintiffs say they should have had to pay. The plaintiffs sued the builder, who then joined the architect as a third party. The proceedings between the architect and the builder were settled with a judgment being entered by consent on 29 October 2012 for the architect against the builder. The proceedings as between the plaintiffs and the builder did not resolve, and a trial commenced on 26 November 2012.
There was no dispute on this trial that the plaintiffs and the builder both signed a form of contract relating to the building of the home in or about January 2007, that that document was a standard form printed contract with some hand-written additions, and that thereafter the builder commenced to build the home. There was also no dispute that he completed the home to a substantial degree, but then left the project as a consequence of a dispute between him and the plaintiffs about what was being charged by him for the work he was doing, and that the project was ultimately completed by another builder. There is also no dispute that, by the time he left the project, the builder had been paid $566,192 by the plaintiffs.
The competing claims of the parties
The plaintiffs' case was put by reference to alternatives. The principal contentions initially were as follows:
AProperly construed, the parties signed a contract with a fixed price of $340,000 plus GST. The plaintiffs were, as a consequence, significantly overcharged by the defendant, and were entitled to a refund of the amount overcharged, plus an allowance by reference to Hungerfords v Walker (1989) 171 CLR 125.
BIn the alternative, the hand-written additional words constituted a variation to the fixed price contract which allowed for the contract price of $340,000 to be varied within reasonable parameters or a reasonable degree of tolerance. On this contention, the plaintiffs were still significantly overcharged and would be entitled to damages for breach of contract and an allowance by reference to Hungerfords v Walker.
CIn the alternative, there was no effective contract entered into between the parties at all. If this were accepted, all the contract- based claims would fall away, and the matter would need to be resolved having regard to principles of restitution.
DIn the alternative again, mutual and/or unilateral mistake.
The plaintiffs also contended that, if the Court were to find that there was a contract between the parties, but that it was a cost plus contract, and not either of the types referred to in contentions A or B above, they were misled by Mr Bridge. Their claim in this regard was again put in the alternative. Firstly, that there was misleading or deceptive conduct on the part of the builder contrary to the Fair Trading Act 1990, s14 and secondly, that there were negligent misstatements by the builder which induced the plaintiffs to enter into the contract.
The builder's principal contention was that the parties entered into a contract, and that it was a cost plus contract. In the alternative, he contended there was no effective contract. He denied he had misled the plaintiffs in any way.
Did the parties enter into a legally binding contract?
Counsel for the plaintiffs, in his closing submissions, identified a number of issues which he said the Court would have to determine. Counsel for the builder did the same. However, both agreed that the first, and probably most significant, issue which needed to be determined was whether the parties entered into a legally binding contract in the first place. The resolution of that issue would determine what further issues fell to be determined.
The plaintiffs pleaded that there was a contract, and that it was partly oral, partly in writing and partly to be implied. Insofar as the contract was said to be in writing, the plaintiffs pleaded it was constituted by a form of contract ("the contract document"), drawings BA01 – BA59 and specifications prepared by the architect, and a document prepared by the builder entitled "84 Blowhole Road Addition to Contract" ("the addition to contract document"). The builder admitted that, to the extent it was contended there was a contract in writing, it was constituted by the contract document and the specifications. The builder did not admit the drawings formed part of any agreement, and denied the addition to contract document did.
The builder denied, in his defence, that, in any event, any contract was partly oral or to be implied.
Paragraph 2.3 of the statement of claim related to the assertion that the contract was partly oral. It provided:
"To the extent that the contract was oral or is evidenced orally it is comprised in a discussion between the plaintiffs and the defendant at the time shortly before the signing of the contract during which, in substance;
(a) the defendant advised the plaintiffs that he would only sign a contract on a 'cost plus' basis;
(b)the plaintiffs advised the defendant that his was the most competitive price submitted for the building works and that they wanted a moderate cost project;
(c)the defendant advised the plaintiffs that a 'cost plus' price can have a variance either up or down from his advised price of $340,000 plus GST."
Paragraph 2.4 of the statement of claim related to the assertion that the contract could be implied. It provided:
"To the extent that the contract is to be implied then such implication is to be drawn from the following facts, matters or circumstances:
(a) the written documents referred to above;
(b)conversations between the parties held at each of the meetings referred to above;
(c)the fact that after the signing of the contract the defendant commenced building works on the land."
The contract document
The contract document was a standard form contract prepared by the Royal Australian Institute of Architects and described as ABIC SW-1 2002 simple works contract. The document contained numerous standard provisions and allowed the parties to insert their own relevant details. The parties met at the office of the architect. He produced the standard form, hand written-entries were made, and then the plaintiffs and the builder signed it. The document bears a date 2 January 2007.
Item 4 is relevantly entitled, "The contract price (clauseN1)". Beside that heading, the words "As a cost plus contract" were written. Under that heading was the following:
"The *cost of building work $ 340,000
*GST $ 34,000
*Contract price $ 374,000"
The numbers were hand-written. Underneath, there was a warning which said that the contract price might be subject to adjustment due to certain provisions in the document which were specified.
The contract document contained a definition section. In that document, the following definitions appeared:
cost of building work - the actual net cost of the *works excluding any amounts for *GST
works - the completed construction set out in the *contract documents (briefly described in item 5 of the Introduction)
contract documents - any special conditions shown in schedule 2, the conditions of this contract, the specifications, the drawings and any other documents shown in schedule 3 (Schedule 3 contained a hand-written entry, "As shown on Documents Title Page")
contract price - see subclause N1.1.
Clause N1.1 provided:
"The *contract price shown in Item 4 in the Introduction is a lump sum and the contractor represents that the *contract price allows for:
· Everything reasonably required to complete the *works
· All *provisional sums and *prime cost sums shown in schedule 6 and schedule 7
· Installation of any items shown in schedule 8 to be supplied by the owner and installed by the contractor
· Rise and fall
· All statutory taxes and charges applying 5 *working days before the closing of tenders
· Import duties and tariffs on imported materials or equipment to be incorporated in or used in the completion of the *works applying 5 *working days before the closing date for tenders
· Exchange rates applying 5 *working days before the closing date for tenders
· Relevant industrial awards and workplace agreements, site allowances, building industry superannuation levies and long service leave levies and
· *GST."
The contract document contained no provision for the payment of a deposit by the plaintiffs. It contained no provision for any lump sum builder's margin. Clause C1 provided that the builder would provide security for his performance by permitting the plaintiffs to retain up to 10% of each progress payment until the amount held equated to the percentage shown in item 2 of sch1 of the contract price. That percentage was the default percentage of 5%.
Clause N3 provided for progress payments. Unless otherwise agreed, these were to be made monthly on the 15th of the month.
By the time this document was signed, the architect had prepared drawings and specifications. Having regard to the wording of the contract document, there can be little doubt that, insofar as any contract between the parties was said to be in writing, it was at least constituted by the contract document and those drawings and specifications.
More problematic is the status of the addition to contract document. The plaintiffs in their pleadings described the document as a "quotation". The builder, in his defence, denied it was a quotation, and that it formed any part of any contract. In his oral evidence, however, he told the Court it was intended by him to form part of a cost plus contract. The document was not referred to anywhere in the contract document, and there is no copy of it in any of the versions of the contract document which became exhibits on the trial.
As Black CJ said in Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120 at par[23]:
"23 The principles to be applied in determining whether any, and if so what, parts of WWU were terms of the contract of employment are not in doubt. It is well established that if a reasonable person in the position of a promisee would conclude that a promisor intended to be contractually bound by a particular statement, then the promisor will be so bound. This objective theory of contract has been repeatedly affirmed as representing Australian law by the High Court. Thus, in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179, the Court said:
'It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.'"
To enable a determination to be made about the status of the addition to contract document, it is necessary to consider the surrounding circumstances known to the parties, and the purpose and object of the transaction. This necessarily means that reference needs to be made to the evidence about how the relationship between the parties came to be, and their dealings prior to the signing of the contract document. It also follows that I need to make some comment about the credit of the principal witnesses.
The principal witnesses
My assessment of the principal witnesses on the trial impacted on my findings. In making the assessments that I have, I have kept in mind that the events, the subject of evidence given by all of these witnesses, began nearly seven years before they gave oral evidence, and at least nearly six years before they made witness statements. Memories were not at their best, and all of these witnesses had a tendency to reconstruct events.
Dealing with the plaintiffs, I accept that they were not deliberately dishonest in the evidence they gave. However, they displayed a tendency to reconstruct situations, and at times were evasive when answering questions. They also displayed a singular naiveté in their stated perceptions of their dealings with the builder which suggested what they said may not always have been accurate.
As to the architect and the builder, neither was an impressive witness, the builder less so than the architect. The architect was at pains to paint his role as faultless generally. Some evidence he gave was unrealistic in the context of an architect supposedly with a number of years' experience. As to the builder, in giving answers he was evasive and prevaricated when pressed about matters, on occasions to a ridiculous degree. He contradicted himself in the course of his oral evidence and, in his oral evidence, contradicted his witness statement. He gave answers to a number of questions which were illogical or simply did not make sense. As a general rule, I have not accepted his evidence where it was in conflict with that of the plaintiffs.
The surrounding circumstances
The plaintiffs were at all relevant times the registered owners of a block of land at 86 Blowhole Road, Eaglehawk Neck ("the property"). In or about April 2005, they entered into discussions with the architect with a view to him drawing plans for a holiday home on the property. They proposed to him a budget of $250,000. A client/architect agreement was entered into in July 2005, and in August the same year some schematic drawings, a model and some render images were produced. The plaintiffs were happy with the concept, and, in November that year, a development application was lodged with the local council. A permit was granted in January 2006.
The architect said that, at or about the same time that permit was received, he gave an approximation of the cost of building $291,000 excluding GST. That price, he said, excluded costs of demolition of an existing old shack and other costs. He said he also warned of the need for an allowance for contingencies to cover unknown or unforseen items. Neither plaintiff gave evidence directly disputing this, although Mr Kronenberg said that he and his wife had discussed with the architect the likely cost of building a house in accordance with the drawings and specifications he had drawn. They said the architect did not ever suggest to them that it could not be done within the budget.
The architect subsequently prepared drawings which were approved by the plaintiffs. A final set of drawings for tender purposes, identified as BA01 - BA59, was prepared in September 2006.
By then, the architect had already had informal contact with the builder. According to the builder, he had been approached early in 2006, but indicated he would not tender because he only operated on a cost plus basis. Notwithstanding that early knockback, on 13 September 2006, the architect wrote to three builders seeking quotes. One was the builder, and the others were Bennett Constructions and Vos Constructions. The letter to the builder provided:
"Enclosed are the certified documents for 86 Blowhole Road, Eaglehawk Neck. I am happy to meet with you should you have any questions regarding the documents.
Please submit your price as a trade breakdown and total by close of business Friday 27th October.
Thank you & please call if you have any further queries."
The document transmittal sheet from the architect's records listed documents BA01 - BA58, which it must be presumed were the "certified documents" referred to in the letter, as being sent "by hand". I accept that the builder received both the letter and the drawings. There can be no dispute that, by that letter, the builder was being asked to provide a price, and was not then being offered the option of a cost plus arrangement.
Sometime in October 2006, after the letters to the builders, the architect prepared a set of specifications.
On 10 October 2006, the architect sent an email to the plaintiffs. In that he said:
"…I have been waiting to hear from the 3 builders, before providing any feedback.
As a general update:
· John Bamford, Surveyor has all the information and may have already surveyed the building set outs on the site. I shall call to confirm.
· The three builders we have requested prices from are Voss Construction, Bennett Construction and Stephen Bridge Builder.
Both Voss and Bennett appear keen to undertake the project, and have requested additional time to finalize their prices (mainly due to sub-contractor delays). I understand the pressing desire to get underway asap, yet I would prefer the contractors to have the time to price the building thoroughly & accurately. I suggest we allow until 30th October, 4pm.
Stephen Bridge Builder has indicated he has the same issue with his sub-contractors as Andrew Flakemore, and is confirming his involvement by the end of the week."
By a letter dated 3 November 2006 to the architect, Bennett Constructions submitted a quotation of $372,189 plus GST ($409,407) to perform works in accordance with the architects "drawings BA01, BA03-BA13, BA15-BA30, BA32, BA35, BA38-BA45, BA47, BA49 & BA53-BA57 specification provided and set out below". There then appeared a list of certain work and exclusions. By a letter of the same date also to the architect, Vos Construction & Joinery Pty Ltd submitted a quotation of $459,062 plus GST ($504,968) to perform works in accordance with the drawings numbered BA01 - BA58. That firm advised in their letter:
"We realise that this price is well over the client's budget but feel that by gaining further sub-contractor quotations from the local area this amount can drop considerably. The project is one of high quality which also reflects in the price."
The plaintiffs met with the architect on 15 November 2006. A decision was taken to reject the tenders received. Mr Kronenberg acknowledged that, at that point, he did not expect any other quotes to come in at the $250,000 budget figure, but did hope for something under the two quotes they had received. Between that meeting and lunch time on 16 November, the architect spoke to the builder. As a consequence of that discussion, the architect sent an email to the plaintiffs the same day. It was in the following terms.
"I have called Rob Newman, who unfortunately would have loved to take the project on, but is taking next year off…
I then called Stephen Bridge and indicated that the resulting prices we received were not acceptable, and would he consider pricing for a start early next year. Stephen said he would love to do the project with us, and that his initial reluctance was due to having to compete with others, and that his price might not be competitive as a result. He said he would prefer to negotiate directly with us on the project in an open book costing scenario, where we are able to have full input to the pricing process.
Before I approach other contractors, would you be interested in this approach? If so I suggest we arrange a meeting with Stephen soon.
The other query I forgot to clarify yesterday was the involvement of a Quantity Surveyor. I can ask Lee Deacey (QS) from WT Partnership, who I use regularly, to quote on costing the project to use as a checking device for any future builder prices. Let me know if you are interested in this."
Later on 16 November, the plaintiffs instructed the architect to proceed to obtain a price from the builder, and also get a quote in relation to the services of a quantity surveyor. A quote from a quantity surveyor was subsequently obtained, but the plaintiffs decided not to proceed to engage one.
A discussion between the builder and the architect on 16 November did not initially figure in the sequence of events outlined by the builder in his witness statement. The builder, instead, told the Court that, early in November 2006, the architect had told him he had two tenders, and suggested one appeared to be based on a price of about $6,000 per square metre. The architect asked the builder if he could build for $3,000 per square metre. The builder told him he was not interested, and would only work on a cost plus basis. The builder, in his witness statement, said he spoke again with the architect late in November after being told that the plaintiffs might be interested in such an arrangement. At that meeting he raised with the architect the possibility of a cost plus contract, but with a fixed fee/profit based on a notional construction cost "an idea I told him I had read about". He said at no stage did he agree to give a fixed price for building the house.
When he was cross-examined, the builder accepted that he had had a telephone discussion with the architect on or about 16 November. He accepted that the architect told him the tenders received were not acceptable, and asked him if he would consider pricing for a start early in 2007. He also accepted that he said he would like or love to do the project. However, he denied saying anything about being initially reluctant because he did not want to compete with others and his price might not be competitive. He also denied saying he wanted to negotiate directly on an open book costing scenario. The architect said, in relation to that conversation, that the builder did not mention anything about a cost plus arrangement.
Dealing with the conversation which appears to have occurred on 16 November, the builder and the architect were at odds at trial as to what was said. However, the Court does have the architect's email to the plaintiffs, written the same day the conversation occurred. Against the background of my comments about the credit of the builder, there are two reasons why I accept that that email provides an accurate representation of what occurred in that conversation. Firstly, the architect at that point would have had no particular reason to mislead the plaintiffs, and secondly, the email is a record made virtually contemporaneously with the conversation. As a consequence, I accept that the builder told the architect what is outlined in that email and did not, in that conversation, discuss a cost plus arrangement. What was, however, meant by the phrase "an open book costing scenario" was never explored in evidence from any witness, and I do not know precisely what it was intended to mean.
The builder said in his witness statement that he met with the architect and Mr Kronenberg in early December 2006. He said he reiterated then that he operated on a cost plus basis, but said that he would work out a fixed profit figure from a percentage of a notional cost. Mr Kronenberg did not dispute that, from the beginning of his discussions with the builder, the builder said he wanted a cost plus arrangement. The builder also said that, at that meeting, Mr Kronenberg stated he was hopeful the project would win an architectural award as had his brother's house in New South Wales. The evidence was that in New South Wales there was a house called the Kronenberg House which was connected to a relative of Mr Kronenberg, not his brother.
The architect said he was contacted by the builder on or about 13 December 2006. The builder agreed a conversation occurred on or about that date, although he was uncertain about who contacted whom. According to the architect, the builder gave him a lump sum figure of $330,000, excluding GST, which the builder said he arrived at after a detailed look at the drawing suite and specifications. The architect said the builder commented that the drawings were the best he had ever priced. At that time, the builder said he would prefer to use a cost plus contract and that the figure he had provided was based on the use of such a contract. The builder described, in his witness statement, having told the architect at one meeting that he was prepared to use a figure of $3,800 per square metre applied to the area of the proposed house and decks to produce a notional cost figure to which he would apply 14% to calculate his profit margin. He said he was prepared to fix his fee accordingly at $47,600. When he was cross-examined, the builder denied he gave any sort of price to the architect during any discussion. However, he did accept that, during the course of what was probably the discussion on or about 13 December, he discussed with the architect the issue of fixing his margin by reference to a notional price. He said the architect said he would speak to the plaintiffs and get back to him. The builder said he doubted the figure he gave for that purpose was $330,000.
On 13 December 2006, the architect sent an email to the plaintiffs in the following terms:
"Stephen Bridge has come back to me with a 'lump sum' he has arrived at after a detailed look at our drawing suite and specification, in consultation with his building team.
He is saying a price $330,000 + GST. Given his suggestion of a 'Cost Plus' contract arrangement, I did a little research through our professional institute's advisory notes on the cost plus agreement and came up with the attached cautionary note.
Whilst this note might seem quite alarming, I think Stephen is actually agreeing that we use the contract we wish to use (ABIC) and have me administer it. Non-the-less, I think this note highlights some issues of real concern to me regarding this arrangement that we either:
· Address directly with Stephen, or
· Suggest that we take his price as 'the contract price' that is used in the ABIC contract under a standard contractual situation, and any ups and downs are treated as variations in the usual way.
Stephen is writing to us formally and I think we should meet with him once we receive his letter, to thoroughly discuss all the issues.
Let me know what you think…"
The cautionary note referred to provided:
"The Cost-Plus form of contract can be useful occasionally – for example, where there is a renovation where it is impossible to determine the extent of work that must be done before the work commences. Nevertheless, it must be treated with great caution in every instance.
Before such a contract is used, it is recommended that you and your client consider the following points:
· Your client bears all the risk, and the risk is substantial.
· The builder has no incentive to complete.
· The builder has no incentive to be efficient.
· Any mistakes made by the builder are rectified at your client's cost.
· There is no retention sum.
· The client needs to provide someone on site most of the time to act as an unofficial 'clerk of works'.
· There is no guarantee that the materials claimed have all been built in to the job, or that all the wages claimed have been worked on the job.
· Budget 'blow outs' are the rule rather than the exception, and not infrequently cost more than an initial lump sum figure. For more information, see AN13.03.400 (LN25A).
· You do not supervise the contract – that is the builder's job – but even so, the administration of the contract is much more arduous because of the need to examine dockets and wage sheets and carry out general financial checking. This is most likely to increase the contract administration time above that required on an equivalent lump sum contract. Your fees should include an allowance for this additional work."
It must therefore be accepted that, as at 13 December 2006,:
· the plaintiffs were aware that the builder wanted a cost plus arrangement,
· the plaintiffs had received advice from the architect about such an arrangement, and
· the plaintiffs were well aware that there were risks for them if they proceeded on such a basis.
The architect was cross-examined by the builder's counsel about the email of 13 December. It was never suggested to the architect that the builder had not suggested a figure of $330,000 to him. Counsel for the builder also did not explore with the architect what it was the builder said he discussed with the architect, namely that he had suggested a figure of $340,000 but as a notional figure only.
The builder accepted, in cross-examination by the plaintiffs' counsel, that, as at 13 December 2006, he had the architect's drawings, but did not accept he had the specifications, although he might have. He acknowledged that he had spent some time examining the documentation he had, before he spoke to the architect, to familiarise himself with the project, but said that he did not do so to form a view about what it might cost. The builder said that, in his discussion with the architect, he had used the calculator on his telephone to carry out the calculations which produced the figure of $340,000 and the fixed margin figure.
What therefore was the discussion between the builder and the architect on 13 December? Both the architect and the builder speak of a figure being provided by the builder to the architect. The architect says it was $330,000, and the builder says it was $340,000. The architect says the figure was given as a lump sum or a price, but agreed that the builder did say it was on the basis of a cost plus contract. The builder says that the figure he gave was never stated to be a fixed price for which he would construct the house. It was a figure he calculated very quickly using the square meterage of the proposed buildings, and a building cost per square metre of $3,800. The figure was provided as a notional figure upon which to base a calculation of a builder's margin. The builder said he was prepared to fix his margin at 14% of that notional figure.
In relation to the architect's email of 16 November, I accepted the contents of it as providing the most accurate indication of what was spoken of between the builder and the architect prior to its being written. However, I have reservations about doing the same with the email of 13 December. I say that because statements within the email are inconsistent. In the first paragraph of the email, extracted at par[38] of these reasons, the architect says that the builder has given him a "lump sum". He then goes on to say that the builder "is saying a price of $330,000 + GST". Immediately after that, however, he acknowledges there was a reference to a cost plus arrangement. The two, that is a fixed price and a cost plus arrangement, are inconsistent. If indeed the builder did purport to state a fixed price and talk about a cost plus arrangement, an experienced architect should have been alerted to the inconsistency and queried it. There is no evidence the architect did that. This lends some credence to the builder's version of events, namely that, in his discussions with the architect on 13 December 2006, he did not give a fixed price, but gave a figure he could use as a basis for calculating his margin.
However, other statements by the builder, and subsequent events, are simply not consistent with the figure of $340,000 being calculated purely for the purpose the builder identified. It seems the builder wanted to do the project. He knew that quotes already obtained had been rejected because they were considered too high. He had been given information by the architect which suggested another quote might have been based on a figure of about $6,000 per square metre. He had to have known that, if he was to be engaged to do the project, any figure he mentioned had to come in under that. Against that background, he provided a figure to the architect of $340,000 calculated by reference to the area in square metres of the proposed buildings and their decks, and a rate per square metre of $3,800. He did not simply do a calculation in his own mind, and then say to the architect that he was prepared to fix his margin at $47,600. The addition to contract later prepared describes the figure of $340,000 as an estimate. Nowhere in that document is there anything to suggest the figure was a notional one for the sole purpose of calculating a margin. Indeed, in that document, the builder used the estimate of $340,000 to fix his margin, the deposit and the retention amount. I accept also, although the builder tried to say he had tried to have the figure removed from the contract document, that the builder did not, when he saw the figure of $340,000 in the contract document as the cost of building work, ask the architect to remove it.
I accept, in the circumstances, that it was more likely than not that the builder gave a figure of $340,000 to the architect on 13 December 2006 and that, when he did so, he did not provide it as a notional calculation for the sole purpose of calculating his margin, but as a figure he estimated, albeit roughly, for which the project might be completed.
As to the sequence of events between 13 December and the date upon which the contract document was signed, the witnesses were at odds. However, they did agree that the plaintiffs, the builder and the architect met on a date in January 2007, and that, at that meeting, the contract document was signed by the parties.
Mr Kronenberg said that the meeting foreshadowed in the architect's email of 13 December occurred on 2 January. He said in his witness statement that, at that meeting,:
· the builder said he could construct the house for $340,000 plus GST,
· they discussed previous work the builder had done and that the standard of his work suited their brief for a moderate, but quality, product,
· the builder said he would only operate under a cost plus contract and that "a cost plus contract can have a variance of either up or down",
· he told the builder that his quote was the most competitive price submitted "even though it exceeded our expectations for our moderate cost project",
· he and his wife were concerned about just what the relationship was between the figure provided and a cost plus contract arrangement and discussed that with the builder,
· they asked the builder to provide a breakdown of the $340,000 figure because they wanted to know what the cost of the works was likely to be, and
· once the builder had provided that breakdown, the plaintiffs would decide whether to engage the builder.
Mr Kronenberg said he and his wife "understood" from this meeting that their project would "come in" at $340,000 but with a degree of some moderate flexibility due to the distance from Hobart of the project and the nature of the site. At no stage in their evidence did either of the plaintiffs say that was what the builder actually told them, nor did they say what the builder did say which led Mr Kronenberg to the understanding he said he had.
Mr Kronenberg said that about one or two weeks after the meeting, he said occurred on 2 January, they received a document from the builder. They then decided to proceed with a cost plus contract with the builder "but based on the figures he had provided to us". There was then a further meeting at which the contract document was signed.
The architect made no mention of any meeting between the email of 13 December and the meeting at which the contract document was signed, which he said was on 2 January 2007. The builder said in his witness statement that the only meeting was that in early January when the contract document was signed. He accepted in his oral evidence however that there was a meeting in December with Mr Kronenberg, and that:
· they discussed previous work he had done,
· they discussed the standard of his work and that it suited the plaintiffs' brief, and
· the builder said that he would only operate under a cost plus arrangement.
The builder denied that, at that meeting,:
· Mr Kronenberg said his price of $340,000 was the most competitive;
· the figure of $340,000 was mentioned at all,
· he said that a cost plus contract can have a variance up or down.
The builder said he was asked at that meeting to formulate a notional figure which could be used as a base to calculate his margin. The builder's denial that the sum of $340,000 was even mentioned, and his evidence to the effect he was asked at that meeting to provide a notional figure which could be used as a basis for his margin, is completely at odds with his concession that he gave a figure to the architect on 13 December, that that figure was likely to have been $340,000, and that that figure was one he had quickly calculated purely for the purpose of establishing his margin.
Mr Kronenberg was cross-examined about various discussions. It was put to him that the builder did not offer any price in the meetings he had with him. The response was that that might be true, he could not recall. It was then put to him that he knew that cost plus meant there would be the cost of labour and materials which would be billed to him and his wife, and on top of that there would be a margin. Mr Kronenberg responded that it was not that simple. He said that the builder offered a price of $340,000 or $330,000 plus GST prior to any meetings, then when they had a meeting with the builder he said he would only do it on a cost plus basis. His understanding, he said, was that the builder offered $340,000 plus GST and that "inclusive in that price was what he called his builder's percentage on the lump sum that he offered".
Mrs Kronenberg was also questioned about what occurred at what must have been the late December meeting. She said that she had a clear recollection that the builder put the figure of $340,000 on the basis it was an estimate of cost. She did not understand him to say it would be the actual cost, but understood that it was a price that was reasonably within the range contemplated for a cost plus arrangement. She recalls asking the builder if the cost could be less than $340,000 plus GST and he said it could be less or more than that amount.
There is no doubt the contract document bears a date 2 January 2007. Both the architect and the builder say it was completed and signed on that date. I am satisfied that indeed it was completed and signed on that date and that the meeting Mr Kronenberg describes as having occurred on that date occurred earlier, and sometime between 13 December and 2 January. I am also satisfied that, at that meeting, the figure of $340,000 was discussed. I say that because it is, with respect, a nonsense for the builder to suggest that, having raised the figure of $340,000 with the architect on 13 December, it would not have been discussed in some way at a subsequent meeting with Mr Kronenberg before the contract document was signed. I am also satisfied that the builder was not asked at that late December meeting to formulate a notional figure. He was asked to provide a breakdown of his $340,000 figure.
The evidence of Mr and Mrs Kronenberg is at odds to a degree about what was said at this late December meeting. Mr Kronenberg said the builder said he would construct the house for $340,000 plus GST. Mrs Kronenberg however said it was an estimate of cost and, she accepted, not the actual cost. Also, Mr Kronenberg's "understanding" of what the builder offered is contradictory. On the one hand, he accepted that he knew the builder wanted a cost plus contract. He then said that the builder offered a price, and that, inclusive in that price, was the builder's margin. A fixed price arrangement is inconsistent with a cost plus arrangement. Mr Kronenberg gave no evidence that the builder told him his margin was included in the figure of $340,000, nor did he say with any precision what was said by the builder to give him the understanding he said he had. Mr Kronenberg's statement that the builder told him he could construct the house for $340,000 is also inconsistent with his knowledge of what he knew the builder wanted, and what he then knew was a cost plus arrangement.
There seems no argument that the addition to contract document was prepared by the builder and prepared after the meeting in December between the parties and before the contract document was signed. It was in the following terms:
"84 BLOWHOLE RD ADDITION TO CONTRACT"
1 ; ESTIMATE 340 K EX GST
2;LUMP SUM PAYMENT TO BUILDER 14% 47600
3;SUBTRACT RETENTION 5% 17000
4;BALANCE OF LUMP SUM 30600
5;DEPOSIT ON CONTRACT SIGNING 5% 17000
6;HOURLY RATES CARPENTERS 45 EX GST
LABOURERS 35 EX GST
APPRENTICE 30 EX GST
BUILDER 50 EX GST
7;DRAWS 15 DAYS
8; TRAVEL AN HOURS WAGE ONE WAY
9;ACCOMMADATION EXCLUDED FROM CONTRACT NEG"
According to the witness statement of the architect, the document identified in par[57] of these reasons was faxed by the builder to him at some time after his email of 13 December to the plaintiffs. He did not describe any meeting between the plaintiffs and the builder prior to its receipt. He said that he provided the document to the plaintiffs and then arranged a meeting between the plaintiffs and the builder for early January. At that meeting, he said the builder was asked to provide a trade breakdown, a trade path and construction program, but never did. He then said in his witness statement at par 32:
"Mr & Mrs Kronenberg decided to proceed with Mr Bridge and as requested, I prepared an ABIC SW1 contract. The contract was signed by all parties at my office. Item 4 of the contract was completed by Mr Bridge with all of us present. He added the words 'As Cost Plus', and this was initialled by all parties. When the contract was signed, it appeared to me that all parties understood that the contract was not for a fixed price for the work."
According to the builder, the architect arranged the meeting for 2 January on the basis the plaintiffs were prepared to sign a contract. The builder assumed his profit figure had been agreed to. He said that the document referred to in par[58] of these reasons was prepared by him on the morning of 2 January 2007, and that he took it with him to the meeting. During his oral evidence, he said he faxed it to the architect.
According to the builder, when he arrived at the meeting in early January the architect had several copies of a contract and began filling them in. The architect looked at the document the builder provided and wrote the figure $340,000 in the contract. He, the builder, queried the fact that it looked like a fixed price contract, and in response the architect wrote the words "as a cost plus contract" in the document. All parties then signed and initialled the document. The builder said that during that meeting:
· he pointed out to the plaintiffs that his profit would be $47,600 based on a notional figure of $340,000 and that the deposit would be 5% of that figure,
· he did not say he could construct the house for $340,000 or any other cost and he did not mention any variation up or down.
The builder's oral evidence about the document he prepared and the signing of the contract was wholly confusing. As to the document he prepared, he was asked what the words "Addition to" meant in the heading. He said that in a cost plus contract it was necessary to identify "your plus" and anything which it was intended would be fixed. He said he added the words to the contract document, intending the addition to contract document to be incorporated into a cost plus contract. He agreed he had entered into cost plus contracts before, that there was a specific form for such contracts, that he had such forms in his office and that he could have taken one with him to the architect's office and said, this is the form I want to use.
As to the figure of $340,000 in the document he prepared, the builder said that the figure was derived from the calculations he had done quickly when he had had a discussion with the architect about being able to do the house for $3,800 per square metre. He did not ever believe that the house could be built for about that figure. He suspected it would have to be more from the architect's reference to earlier quotes having suggested a figure of $6,000 per square metre. He did not raise that in any of his discussions because he said "everyone knew". The builder also said that, while he knew the document he prepared would go to the architect to be included in a cost plus contract, he did not know it was being prepared to go to the plaintiffs. He claimed he thought the plaintiffs would get it after they entered into the contract. He conceded however that the plaintiffs and the architect had the addition to contract document available to them at that meeting.
As to the signing of the contract document, the builder said initially that he did not read the contract the architect prepared at all before he signed it. He then said he was not sure but maybe he had read the "first couple of lines he had open". He was then asked if he had made any annotation to the contract himself and he replied, "I did one I think. Maybe two". He agreed that annotation was "As a cost plus contract". He also agreed that, as far as the copy contract which was exhibit P3 was concerned, the handwriting in which the words "As a cost plus contract" was his. However, when asked if he read the figure $340,000 before he signed the contract, the builder said he could not recall.
The builder also said that the plans he had been given did not enable him to make a proper estimate even had he intended to do so because the set of drawings was incomplete. For example, it did not contain the steel drawings which would involve a significant cost. The specifications also lacked detail.
Summary of findings as what occurred
I am satisfied from the foregoing that:
· on 13 September the builder was provided with a "tenders set" of drawings BA01 – BA58 by the architect with a request that he provide a price to construct the works.
· by the middle of November 2006, two builders, other than the builder, had provided quotes to the architect for this project which were unacceptable to the plaintiffs, because the quotes were too high.
· those quotes were $372,189 and $459,062, both prices being exclusive of GST.
· by the middle of November the builder had not provided any price for the project.
· the builder and the architect had a discussion on or about 16 November 2006, and that the architect's email of that date to the plaintiffs represents an accurate representation of what was discussed.
· on 13 December, the builder and the architect had a discussion and the builder indicated he wanted a cost plus contract arrangement but nevertheless provided to the architect a figure of $340,000 and indicated that he would fix his margin at 14% of that figure.
· the figure of $340,000 may very well have been calculated by reference to the floor area of the proposed house and decks and a construction cost of $3,800 per square metre.
· in that discussion, the builder did not advise the architect that the figure of $340,000 was a notional figure only and was not intended to be an estimate of the amount or price for which the house could be constructed.
· as at 13 December 2006, the plaintiffs knew that the builder wanted any arrangement he had with them to be on a cost plus basis, and that the plaintiffs had been given advice as to the risks attendant upon their entering into a contract of that nature.
· the parties had discussions late in December. The builder was still saying he wanted a cost plus arrangement but the plaintiffs were attempting to pin the "estimated" cost to the $340,000 figure previously given by the builder. I accept that the builder did not say he would build the house for that price, but that he gave the plaintiffs to understand it would be in the region of that price. He was asked to provide a breakdown which he did in the form of the addition to contract document.
· the addition to contract document was prepared by the builder and made available to the architect at some stage between the meeting in late December 2006 and the signing of the contract. As a consequence of receiving that document, the plaintiffs decided to proceed to enter into a contract with the builder.
· at the time the plaintiffs and the builder signed the contract document on 2 January 2007, the plaintiffs had available to them the "Addition to contract" document prepared by the builder.
· that document referred to an "estimate" of $340,000, a lump sum payment to the builder of "14% 47,600" and a deposit and retention figures calculated as percentages of $340,000.
· the contract document was, absent hand-written additions, a contract normally used for a fixed price arrangement.
· there was available at the time, which the builder had used before, a dedicated standard form cost plus contract.
· the contract document had added to it at item 4 the words "As a cost plus contract".
· under the heading to item 4, three items were printed and beside each a figure had been written. The first item was "cost of building work". Beside that the figure "$340,000 ex GST" was written. The second item was "GST" and beside that was written "$34,000". The third item was "Contract price" and beside that was written "$374,000".
· a cost plus arrangement in general terms meant that a builder would charge to a client the cost of labour and materials used for a project and then add to the total cost of those items a figure which represented a percentage of that total. That extra percentage was the builder's profit or margin.
Did the addition to contract document form part of any written contract between the parties?
As to the addition to contract document, it was prepared by the builder and seen by the parties prior to the contract document being signed. Whether it was seen two weeks before or on the day makes little difference to its status. In his evidence, the builder said he intended it to form part of a cost plus contract. It is not referred to in the contract document. There was no evidence from the plaintiffs to the effect they wanted it to form part of the contract or expected that it would be so. They did not make any request for it to be referred to in the contract, and nor did the builder.
The terms of the document are not wholly inconsistent with the contract document, in that the contract document does not provide for:
- a deposit on contract signing of $17,000;
- a lump sum payment to the builder of $47,600;
- the retention of 5% of that lump sum (I infer by the plaintiffs);
- draws (I infer progress claims) every 15 days; or
- the builder to claim any allowance for travelling.
While the wording of the provisions of the document is not such as to immediately suggest they were intended to bind parties to obligations or benefits and be relied on as such, the parties did in fact rely on them. In particular, a deposit of $17,000 was paid by the plaintiffs. Further the plaintiffs seemed to be aware there was some set figure for the builder's margin. For those reasons, I am satisfied that, insofar as any contract between the plaintiffs and the builder was in writing, it included the addition to contract document.
In the event that any contract was said to be partly oral, what if any discussions formed part of it?
The plaintiffs pleaded at par 2.3 of their statement of claim that anything oral arose from a discussion between the plaintiffs and the builder "shortly before the signing of the contract". Based on the findings I have already made, that discussion is one which most likely occurred in late December 2006. The first statement said to form part of the agreement between the parties was one by the builder to the effect he would only sign a cost plus contract. As to the second statement, while I accept that Mr Kronenberg may have said that the builder's price was the most competitive they had, Mr Kronenberg did not give evidence that he said he "wanted a moderate cost project". He did use the term moderate to describe the nature of the project, but it could not be said that he made any statement which could be in a form to bind the builder. In any event, there was no evidence from anyone as to what the term "moderate" meant and it is clearly a very subjective term. What is moderate to one person may not be so to another.
As to the third assertion, I accept Mrs Kronenberg's evidence about what she says she asked the builder about an actual cost being up or down from the estimate provided, and that she was told it could be either.
The first assertion in par 2.3 of the plaintiffs' statement of claim was clearly intended by the parties to impact on their relationship. As to the second, in my view it was not. As to the third, while I am satisfied that the plaintiffs were told this by the builder, I am not satisfied that a reasonable person in the position of the plaintiffs would necessarily have intended these words to be part of their bargain.
Insofar therefore as it is contended that any contract between the parties was partly oral, I am satisfied that it was to the extent of the first assertion in par 2.3 of the plaintiffs' statement of claim.
Implied contract?
In my view there can be little doubt, that the parties, as a consequence of the various dealings they had had in November and December 2006, the signing of the contract document on 2 January 2007 and the builder starting construction work thereafter, believed they had entered into a binding contract, and to that extent it can be said a contract was implied.
What were the terms of the contract the parties believed they had entered into?
The plaintiffs assert that they had a binding contract with the builder, and that that contract was either for a fixed price of $340,000 plus GST, or a fixed price contract with a variation which allowed for a contract price of $340,000 to be varied within reasonable parameters or a reasonable degree of tolerance. Counsel for the plaintiffs indicated that the plaintiffs would accept that reasonable parameter could be up to 10%. The builder asserts that any binding contract was a cost plus contract.
As to the first of the plaintiffs' assertions, their counsel submitted that the words "As a cost plus contract" were so fundamentally inconsistent with the price in item 4 and the other terms in the document as to have no meaning in the context of the agreement, and that, as a consequence, they should be ignored. He submitted that this was a case of patent fundamental and inconsistent ambiguity. He referred to a passage at 426 - 427 in Fitzgerald v Masters (1956) 95 CLR 420 which he said was authority for the proposition that, where there is inconsistency, "words may be supplied, omitted or corrected in order to avoid absurdity or inconsistency".
With respect, while the words quoted above do appear in the judgment of Dixon CJ and Fullager J, they are not authority for a general proposition to the effect submitted by counsel. The court was there dealing with a contract for the sale of a property which incorporated an arrangement to pay a price by instalments over a number of years. Clause 8 provided that the usual conditions of sale in use or approved by the relevant real estate institute, so far as they were "inconsistent" with the other terms of the agreement, were to be embodied in it. Their Honours said at 426:
"There is a superficial difficulty in cl. 8, because it purports to incorporate a set of conditions so far as they are inconsistent with what has been specifically agreed upon. No real difficulty, however, is created. Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency. Here it would be indeed absurd to suppose that the parties, having expressed their agreement on a number of special and essential matters, should intend to incorporate by reference terms inconsistent with what they had specifically agreed upon. What they must clearly have intended is to incorporate a set of general conditions except so far as they were inconsistent with what they had specially agreed upon, and cl.8 must be read as if it said 'consistent' or 'not consistent'."
The present case is nothing like the type of scenario with which the High Court was dealing in Fitzgerald's case.
Counsel for the builder, on the other hand, referred to passages at 737 in Homburg Houtimport BV v Agrosin Ltd [2004] 1 AC 715. The House of Lords there dealt with the construction of some bills of lading. Lord Bingham of Cornwall said at par[11]:
"Secondly, it is common sense that greater weight should attaché to terms which the particular contracting parties have chosen to include in the contract than to pre-printed terms probably devised to cover very many situations to which the particular contracting parties have never addressed their minds."
In Wentworth Partners Estate Agents Pty Ltd trading as RE MAX Gold v Gordony [2007] NSWSC 1135, Young CJ said at pars[53] – [54]:
"53 The significance of this is as Lewison points out in his Interpretation of Contracts, 3rd ed (Sweet & Maxwell, London, 2004) para 9.10:
'The printed form is designed to cope with a number of different contracts being made in different circumstances, whereas the written or typed clauses are designed to cope only with the particular contract in the course of being made. In such circumstances the court will place greater weight on the written clauses, and if necessary allow them to prevail against the printed clauses.'
54 This passage is well supported by authority from the classic statement of Lord Ellenborough in Robertson v French [1803] EngR 639; (1803) 4 East 130, 136; [1803] EngR 639; 102 ER 779, 782, up to the words of Lord Bingham in Homburg Houtimport BV v Agrosin Ltd [2003] UKHL 12; [2004] 1 AC 715, 737."
In the present case, we are dealing with words which are, it is accepted, wholly inconsistent with other terms of the contract document, but which were inserted by a party to achieve a specific purpose. It is not a situation where the parties simply made an obvious error which could be easily corrected to produce a result consistent in every other way with what the parties intended. The plaintiffs clearly understood that this contract was not for a fixed price of $340,000 capable of variation only within the constraints of the provisions of the contract document. The additional words inserted by the builder into the contract were clearly designed to produce a result other than that contended for by counsel, which the plaintiffs well knew. I am satisfied that, if indeed there was a legally binding contract between the plaintiffs and the builder, it was not a fixed price contract for $340,000 plus GST.
Could it have been a fixed price contract capable of variation as asserted? As I understood the plaintiffs' case, this was not a claim that the price of $340,000 could be varied by reference to the terms of the contract document itself. This was a claim which it was suggested had its genesis in discussions between the parties, not committed to writing. Counsel for the plaintiffs described this asserted contract as an "estimate contract". He submitted that:
"… properly construed item 4, with its specification of the price, and the handwritten alteration 'as a cost plus contract' constituted an agreement that the contract price was capable of variation within reasonable parameters, that is to say either a lesser or a greater price as being based upon the quotation, amounting to the best estimate that the defendant was able to provide as to the likely costs of the work…..On this contention the agreed price was either $374,000 or a lesser or greater figure, within a reasonable degree of tolerance. That is the inherent flexibility of an estimate: an approximate calculation of degree or worth; a statement indicating the likely cost of some job."
Counsel for the plaintiffs canvassed the evidence of the parties, and, in particular, pointed to matters about which counsel for the builder did not challenge the architect. The difficulty with this claim is that, notwithstanding all the matters counsel for the plaintiffs raised in his submissions, at no time did either of the plaintiffs give evidence to the effect that anything the builder said or did gave rise to an understanding that any price could "be varied within reasonable parameters or a reasonable degree of tolerance". The only evidence which came anywhere near such an assertion was that of the plaintiffs to the effect that the builder said there could be a variance up or down with a cost plus contract. The plaintiffs knew what a cost plus contract was, and it was not an arrangement which involved a fixed price to be adjusted within a reasonable degree of tolerance. In effect, this claim depends on the Court drawing a conclusion that the words "cost plus" could simply mean that any base figure could be varied in some ill-defined way. With respect, there was no evidence on the trial supporting that definition of those words.
While I accept that the plaintiffs now say that is what they understood, with respect, that is a view coloured by hindsight and not one borne out by the evidence. Another aspect of this particular claim is that there was no evidence as to what might be considered a variation within reasonable parameters, or a variation within a reasonable degree of tolerance. Had they been asked, the parties might have had completely different views as to what were reasonable parameters or a reasonable degree of tolerance. With that uncertainty, the parties can hardly have been ad idem in relation to price. I am not satisfied that there was any legally binding contract on that basis.
The defendant asserts there was a legally binding cost plus contract between the parties. There is no dispute on the evidence that the builder had said he wanted a cost plus contract. Mr Kronenberg and the architect both said that the plaintiffs were prepared to go ahead with a cost plus contract. From Mr Kronenberg's perspective, that was qualified by his statement that such a contract was subject to the figures the builder had given.
It is quite obvious that the contract document, save for the addition of the words "As a cost plus contract", bore no resemblance at all to a cost plus arrangement. The standard form used was clearly for a simple works fixed price arrangement. The form used was not one which the builder acknowledged was used for cost plus arrangements which he had entered into before. Nowhere does the contract document contain anything which indicates:
· that the plaintiffs would be bound to pay to the builder the costs of the materials and labour he would incur plus a percentage of the total of those costs as his margin;
· an agreement between the parties to "fix" a builder's margin at $47,600 unrelated to whatever the actual costs of building would be;
· that the contract price contained in item 4 was not in fact a contract price, but a likely inaccurate estimate of the costs of building works for the sole purpose of calculating the builder's margin;
· that the provisions in the document specifically relating to variations to the cost of building work figure were effectively to have no effect at all, and
· that generally any provision in the document consistent with a fixed price contract was to be ignored.
The addition of the words "As a cost plus contract" is a clear indication that the builder wanted a cost plus contract, and that the plaintiffs accepted that the contract was in some way, shape or form, a cost plus contract. Counsel for the builder submitted that the addition of those words should override, in effect, any provisions in the contract which might suggest it was a fixed price contract.
The evidence, in my view, is clear that what the plaintiffs thought they were agreeing to and what the builder thought he was agreeing to were two different things. The plaintiffs clearly did not intend that their agreement was one which was effectively unrelated to the figure of $340,000. They did not intend that they were to pay the builder whatever costs he incurred for materials and labour plus a margin, even if that margin were fixed at $47,600.
I am not satisfied, in all the circumstances, that there was any legally binding contract entered into between the plaintiffs and the builder because they failed to reach agreement as to an essential term of any agreement, namely what was to be paid by the plaintiffs to the builder for the building of the house.
What consequences flow?
As a consequence of a finding that there was no legally binding contract entered into by the parties, the plaintiffs' claim against the builder, and the builder's counterclaim, need to be considered having regard to principles of restitution.
Counsel for the plaintiffs acknowledged that the plaintiffs have received a benefit from the builder in the form of materials and labour supplied and what he described as the "organizational ability of the defendant from the date of commencement of construction to the date that he left the site". He submitted that this case was within a long established and well recognized category of cases which involved work and labour done at the request of another. The builder, in those circumstances, was entitled to be paid a "reasonable price" for the work he had done. He equated reasonable price to a fair price. Counsel quoted, in his written submissions, from three cases which dealt with restitutionary claims, namely Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221, Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51 and Lumbers v W Cook Builders Pty Ltd (2008) 232 CLR 635. The submissions of counsel for the builder did not suggest any opposition to the principles to be extracted from those cases.
However, counsel for the builder relied more specifically upon Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510. That was a decision of the Victorian Court of Appeal. The case dealt with a dispute between a builder and a building owner. The case on appeal was dealt with in two parts. The first dealt with the issue of how the contract between the parties had come to an end. The court upheld the trial judge's finding that the contract was terminated by the builder's acceptance of the owner's repudiation. The issue on the second part of the appeal was whether the builder was entitled to sue on quantum meruit or was confined to seeking contractual damages. The court determined that the builder could sue on quantum meruit, and then considered the various arguments about just what that would allow to the builder. While the arguments mounted and the decisions made were against the background that a contract had once existed but had been terminated, and the present case is one in which a finding has been made that there never was an effective contract, in my view the remarks in Sopov remain relevant.
At 516, the court dealt with "The influence of the contract". The trial judge had taken the view that the "influence of the contract cannot disappear entirely, even if the contract itself no longer exists". The court on appeal said in relation to that at par[21]:
"21 With great respect, we do not think that this view can be sustained. It is because the quantum meruit remedy rests on the fiction of the contract's having ceased to exist ab initio that the contract can have no 'continuing influence' when the value of the work is being assessed on a quantum meruit. It is because this alternative remedy does ignore the bargain which the parties struck, and does ignore the rights accrued under the contract up to the date of termination, that the availability of quantum meruit in the alternative is now seen as anomalous. But, for reasons we have already given, those incongruities are as entrenched as the remedy itself. It is true that the contract price is relevant on a quantum meruit, but not because of any 'continuing influence' of the contract. The price is merely a piece of evidence, showing what value the parties attributed – at a particular time – to the work which the builder was agreeing to perform."
The court dealt at pars[24] – [32] with the questions of whether the contract price could constitute a ceiling and whether a contract price could be said to be the best evidence of value. Their Honours said (omitting footnotes):
"2. Is the contract price a ceiling?
24 For reasons we have given, where the claim is made on a quantum meruit the contract price does not impose a ceiling on the amount recoverable, though it may provide a guide to the reasonableness of the remuneration claimed. The price agreed on at the time of entry into the contract is evidence – and no more – of the view of the parties at that time as to the value of the work to be performed.
25 The proper approach to assessment of a quantum meruit claim is, as the trial judge said, to ascertain the fair and reasonable value of the work performed. Axiomatically, the measure of the restitutionary remedy is the value of the benefit conferred on the party which received it. Once it is accepted that the quantum meruit claim is available independently of the contract, then it follows – as Meagher JA said in Renard - that it would be 'extremely anomalous' if the defaulting party could invoke the contract which it has repudiated to impose a ceiling on the amounts recoverable.
3. Is the contract price the best evidence of value?
26 Nor is the contract price 'the best evidence' of the value of the benefit conferred. As counsel for Kane pointed out, the contract price is struck prospectively, based on the parties' expectations of the future course of events. The quantum meruit, on the other hand, is assessed with the benefit of hindsight, on the basis of the events which actually happened.
27 In the present case, Kane submitted, the contract price provided very little guidance because the actual course of events in the carrying out of the works was 'radically different' from what had been anticipated when the contract was entered into. Counsel pointed, for example, to the trial judge's findings about the incompetence, and lack of independence, of the person appointed by the Principal to be the superintendent of the project. Her Honour found that the superintendent's shortcomings 'had a cumulative and influential effect upon the performance of the contract.'
28 As the New South Wales Court of Appeal said in Renard, there is no conceptual difficulty in the notion that the 'fair and reasonable' value of the benefit conferred may exceed the price for which the contractor agreed to carry out the works in question. Restitutionary liability is independent of contract. In a case like the present, the choice of remedy defines the question which must be answered.
29 In our respectful view, her Honour was fully entitled to approach the assessment of the value of the works in the way she did, by requiring Kane Constructions to prove:
(a) the total costs incurred and payments made by it in carrying out the works; and
(b) that the amounts in question were fair and reasonable in the circumstances.
30 At trial and again on appeal, it was contended for the Principal that proof of the costs incurred in performing the work did not establish the value of the work. It was also contended that there had been no proof by Kane that the costs were reasonable. In our view, these submissions should be rejected. First, it is well-established that the value of the work done can be proved by evidence of costs actually incurred. It is hardly surprising that this should be so. The (reasonable) cost of constructing a building seems a perfectly sensible measure of the value of the benefit conferred. Ex hypothesi, the owner would have incurred that cost had it undertaken the construction itself.
31 Secondly, Kane's entire quantum meruit case was founded on the proposition that the costs the subject of the detailed evidence led were reasonably incurred. So much should have been readily apparent to those representing the Principal, as it was to the trial judge. The Principal chose not to put in issue the reasonableness of the costs – either in the pleadings or by cross-examination of Kane's witnesses or by the calling of expert evidence to challenge the quantum claimed. Had that matter been put in issue, it would have fallen to Kane to seek to meet the challenge. That not having occurred at trial, it is not an objection which can be raised on appeal.
32 We therefore reject the Principal's submission that Kane failed to establish the value of the work and, hence, that the only course open to the judge was to take as her starting-point 90 per cent of the contract price. We turn to consider the various arguments about the appropriate adjustments to the cost figure."
The court also dealt with the issue of whether the builder was entitled to a 10% margin he claimed. The court said at par[35] before ultimately determining in that case that the builder was entitled to a 10% margin:
"35 The existence of the entitlement to a profit margin seems entirely consistent with the restitutionary objective of measuring the value of the benefit conferred. The inclusion of a margin for profit and overhead means that the calculation approximates the replacement cost of the works. As we have said, it is an appropriate index of value to ascertain what it would have cost the Principal to have had these works carried out by another builder in comparable circumstances. The answer to that question must necessarily include that other builder's margin."
The court also dealt with the issue of variations. It said at pars[41] – [43]:
"41 Kane raised for determination in the proceeding variation claims totalling $440,723. By agreement, the claims – and the arguments for and against each claim – were set out in a Scott Schedule. Her Honour allowed variation claims totalling $162,418 and rejected claims totalling $278,574. The figures are not in dispute. Kane's complaint concerns the judge's decision that the quantum of the unsuccessful variation claims should be deducted from its quantum meruit entitlement.
42 In our view, that complaint is well-founded. The variation claims were advanced, and decided, as claims under the contract. So much is clear from the nature of the competing arguments set out in the Scott Schedule, which involved a close examination of the original scope of the works as defined by the contract. For reasons given earlier, no such question arises when the claim under consideration is a claim on a quantum meruit.
43 If the work the subject of the variations has been carried out – and there was no dispute here that it had been – the only question is the fair and reasonable value of the work. It is irrelevant whether or not the work fell outside the original contractual scope. All that matters is that the performance of the work has conferred a benefit on the owner, for the reasonable value of which the builder should be remunerated."
What therefore was a fair and reasonable amount to be paid to the builder for his work?
Between April 2007 and September 2008, the builder made 21 progress claims in relation to work he had performed on the plaintiffs' site, and the architect issued 21 certificates in relation to those claims. The total paid pursuant to those certificates was $549,192, clearly a figure well over what the plaintiffs asserted was the builder's estimate of the cost. In addition, a deposit of $17,000 had been paid to the builder, although that was not taken into account in any of those certificates, meaning the builder was paid, in total, $566,192. While the parties were clearly already in dispute by the time claim 21 was paid, that dispute was not directed at the substance of the claims, that is, for example, whether work had been done or whether the claim was inherently reasonable. The dispute was directed to the issue that has ultimately seen this matter come to trial, namely that the plaintiffs said the cost was supposed to be well below what had been claimed.
There were two further claims by the builder. One became the subject of an architect's certificate numbered 22 in the amount of $11,634.35. It was supported by invoices, but not paid. The last claim was contained in a tax invoice rendered by the builder on 28 September 2008 in the amount of $15,154.57. In the material provided to the Court, there were no supporting invoices. However, they are referred to, and I assume were provided to the architect. That claim was not certified by the architect and was never paid. The builder left the site on 27 October 2008. On 1 December 2008, the builder sent a tax invoice to the plaintiffs. It totalled $86,915.08. In the material provided to the Court, there were no supporting invoices. The invoice included claims 22 and 23 together with interest on both. It also included claims for the following:
- Legal costs for breaches of contract.
- Workers compensation and all risks insurance.
- Payments to a bricklayer, a toilet hire business, an electrician, Aurora, a container and scaffold hire business and K&D invoice.
- Labour for the builder up to and including 28/10.
- An amount for a site phone shown as 75% use of a mobile.
- The remaining margin on estimate.
- Margin on MBA variation.
These extra amounts claimed over and above claims 22 and 23, and interest on those claims, totalled $59,593.23.
As to the margin payments, the builder had claimed $30,600 of the margin referred to in the addition to contract document of $47,600 in his progress claim certified by the architect on 27 June 2007. The December 2008 invoice related to the remaining $17,000. The other claim arose out of what the builder said was 14% of a variation on the contract price of $120,000 organized early in the year, that is $16,800.
Another contractor, Mr Mason, was engaged to complete the project after the builder left. He charged in all $124,983.29. That figure was largely calculated by reference to a batch of invoices, not from that builder alone, but in relation to expenses it was asserted had been incurred to complete the project, in Mr Kronenberg's words "in accordance with the original design plans and specifications". $7,474 of the amount was paid, however, without any supporting invoices. When Mr Kronenberg was cross-examined, he said he did not take any step to check that anything he was charged for by Mr Mason was in accordance with the original drawings and specifications. He just took it on trust.
The plaintiffs, in their statement of claim, calculated that, on the basis of restitutionary principles, they were entitled to be paid by the builder the sum of $262,387.29. That amount was calculated as follows:
There was another variation allowed for in Ms Stone's figures of some $6,380 for joinery. However, the builder conceded he did not do any. This could not therefore be the subject of any variation. I do not propose to deal with the other entries in the plaintiffs' Scott Schedule, nor those in Ms Stone's list of variations. There are clearly matters which affect Ms Stone's figures arising from the preceding paragraphs such as to render her estimate of the cost of work questionable. There is not the evidence before the Court to enable a calculated adjustment to her figures as a result of some or all of the listed variations being disregarded.
Counsel for the plaintiffs in any event urged that I disregard Ms Stone's evidence because she was a probationary quantity surveyor, her estimates did not make clear the information she had been provided with which underpinned her calculations, and she was unable to explain some of her calculations. He also pointed to the fact that, even if the Court were to accept her figures, they still evidenced overcharging by the builder. In her report, Ms Stone estimated the cost to complete the works, in accordance with the tender, inclusive of GST, at $490,332. If her estimate of the cost to complete after the builder left of $77,327, inclusive of GST, is deducted from that, it leaves an amount of $412,995 as the cost of work done by the builder. That is clearly far less than he actually charged and seeks to charge.
Another matter to which reference needs to be made is the amount paid to Mr Mason. That he was paid the sum of $124,983 was not in dispute. However, the evidence shows there were no external controls at all on what he did or charged for, and some amounts were paid to him without even an invoice to underpin the charge. He claimed amounts for work not covered by the original plans and specifications. Further the amount paid does not sit comfortably with either Mr Darvelle's estimate to complete early in 2008 nor Ms Stone's estimate to complete as at when the builder left. While he presumably incurred the costs he claimed for, they cannot in the circumstances be relied on as an accurate assessment of what the actual cost was for completing the project in accordance with the plans and specifications, and hence in the manner counsel for the plaintiffs has attempted to use them.
In summary, the evidence produced by the plaintiffs to enable the Court to establish a fair and reasonable price to be paid to the builder for the work he did, and the level to which it was asserted he overcharged, was inadequate.
Impact of misleading and deceptive conduct and negligent mis-statement assertions on the plaintiffs' claim by reference to restitutionary principles
The plaintiffs' statement of claim was divided into parts under a number of headings. These were "Introduction", "The Contract", "The Representations", "Breach of Contract", "Restitution and an ineffective contract" and "Relief". The only part of the pleadings in which reliance is placed on conduct being in breach of the Fair Trading Act 1990 or negligence is that part under the heading "Representations". There is nothing in that part of the statement of claim under the heading "Restitution and an ineffective contract" to suggest any reliance on either concept. Further, the part headed "Representations" commences with a pleading:
"Prior to the entry into the contract the defendant;
(a) provided the advice; and
(b) provided the quotation to the plaintiffs, at their request
each as representing the likely cost of undertaking the works in accordance with the drawings and the specifications."
At pars 3.4 – 3.12, the plaintiffs then pleaded:
"3.4Each of the advice and the preparation of the quotation and its delivery by the defendant to the plaintiff s amounted to conduct engaged in by the defendant in the course of trade or commerce, being the conduct of the defendants business as a builder, within the meaning of the Fair Trading Act 1990.
3.5In addition, the conduct of the defendant in providing the advice and in preparing and delivering to the plaintiffs the quotation was conduct upon which the defendant knew or ought to have known that the plaintiffs would reasonably rely in deciding whether to enter into a contract with the defendant for the undertaking of the building works.
3.6The advice and the preparation and delivery of the quotation by the defendant to the plaintiffs constituted conduct by the defendant which was misleading or deceptive or likely to mislead or deceive the plaintiffs within the meaning of section 14 of the Fair Trading Act 1990 in that it caused the plaintiffs to believe and the plaintiffs in fact believed that:
(a) each represented a fair estimate by the defendant of the likely cost of undertaking the building works;
(b) each had been prepared by the defendant based on the extent and scope of the building works referred to in the plans and the specifications referred to at paragraph 2.2(c) and 2.2(d);
(c) as a consequence the plaintiffs could reasonably rely upon each
itas a true estimation of the likely cost of the cost of the building works, within a reasonable degree of tolerance of the price referred to in it; and(d) if the plaintiffs entered into a binding contract with the defendant to undertake the works at a price of $340,000, exclusive of GST on a "cost plus basis", that the actual cost of the works would in fact equate this sum or would be within a reasonable degree of tolerance of it
each of which did or was likely to induce error in that:
(a) the actual cost of the building works charged by the defendant to the plaintiffs between January 2007 and December 2008 was $549,192; and
(b) by December 2008 the defendant had not completed the building works for a price of $340,000, exclusive of GST, or within a reasonable degree of tolerance of this sum.
3.7To the extent to which the preparation and delivery of the quotation concerned a representation made by the defendant with respect to any future matter, the plaintiffs rely upon section 11(2) of the Fair Trading Act 1990.
3.8 Acting in reliance upon the quotation the plaintiffs entered into the contract.
3.9In addition, or in the alternative, the conduct of the defendant in providing the advice and in preparing and delivering the quotation to the plaintiffs was conduct upon which the plaintiffs, in the circumstances, were reasonably entitled to rely and upon which they in fact relied in good faith in determining whether or not to enter into the contract.
3.10 In the premises, the defendant owed to the plaintiffs a duty of care to exercise a reasonable degree of skill, care and competence in giving the advice and in preparing the quotation so as to ensure that each truly reflected the likely costs of undertaking the building works within a reasonable degree of tolerance of a price of either $330,000 or $340,000 each exclusive of GST.
3.11 In breach of such duty the defendant was negligent.
Particulars of Negligence
The defendant ;
(a) failed to correctly or adequately estimate the likely cost of the building works;
(b) provided an estimate which was not reliable within a reasonable degree of tolerance;
(c) failed to properly or adequately assess the extent of the works required, the degree of difficulty and as a consequence the likely cost;
(d) failed to estimate the cost of the works by reference to objective costing methods, such as use of publications by the firm known as Rawlinsons;
(e) failed to properly estimate the actual time required by the defendant to execute and complete the works or the likely cost of materials;
(f) failed to provide the plaintiffs with accurate advice as to the likely cost to be charged by the defendant in undertaking the building works; and
(g) expressly represented to the plaintiffs that the likely cost of undertaking the building works would be in the order of $340,000 plus GST when at that time the defendant knew or ought to have known that the likely cost to be charged by him would substantially exceed such sum.
3.12As a consequence of such misleading or deceptive conduct and or negligence, the plaintiffs have suffered loss."
Under the heading "Restitution", the plaintiffs pleaded:
"5.1 If it be the case, but not otherwise, that;
(a) the plaintiffs entered into the contract thinking and believing that it was for a price of $340,000 plus GST, subject only to variations in accordance with its terms or an increase or a decrease within a reasonable parameter of that price; and
(b) the defendant entered into the contract thinking and believing that it was not for a price of $340,000 plus GST, subject only to variations in accordance with its terms or increases or decreases within reasonable parameters of that price
then the plaintiffs and the defendant failed to reach agreement upon fundamental terms of the contract and as a consequence the contract is void.
5.2 In that event the plaintiffs contend as follows;
(a) the defendant is entitled to receive a reasonable and fair remuneration for the objective value of the works undertaken by him purportedly pursuant to the contract based on a quantum meruit;
(b) the plaintiffs have taken the advantage of the work undertaken by the defendant purportedly pursuant to the contract and must give fair and objective credit for the value of that work;
(c) the defendant is obliged to give credit to the plaintiffs for the actual sums paid by them to him purportedly pursuant to the contract; and
(d) restitution must be effected according to the following principles;
ithe fair and reasonable cost of undertaking the work by the defendant in accordance with the drawings and specifications is $411,788 (including GST);
ii the plaintiffs have paid to the defendant $549,192 (including GST);
iiithe plaintiffs incurred further costs in completing the building in accordance with the drawings and the specifications of $124,983.29 (including GST); and
ivas a consequence the defendant must pay to the plaintiffs $262,387.29, together with interest thereon."
Notwithstanding the pleadings, in his closing submissions counsel for the plaintiffs submitted as follows:
"6.3Thus it is necessary to make findings on the misleading and deceptive conduct and negligent mis-statement claims even if there is no legally effective contract as, clearly, what Mr and Mrs Kronenberg were induced to believe, and how they relied upon that belief, affects the quantum of an adjustment of the rights and obligations of the parties.
6.4Thus, and to take a relatively uncomplicated example, if there is no legally effective contract and if Mr and Mrs Kronenberg, as a consequence, are obliged to pay more than the represented price for the same work, then they have suffered loss by reason of the misleading and deceptive conduct or negligent mis-statement. Of course an adjustment needs to be made for any legitimate variations.
6.5This is not a case where credit is to be investigated and given in favour of Mr Bridge for the true value of the product produced: no party has called evidence from a valuer.
6.6On this analysis the measure of loss for misleading or deceptive conduct or negligent mis-statement is the difference between the amount determined as payable and issue for, and the estimate represented by Mr Bridge of either $330,000 or $340,000 plus GST."
Counsel for the builder made no submission to the effect that the approach as suggested by counsel for the plaintiffs was not open. As I understood cl 6.6 of the submissions for the plaintiffs, what counsel said was that the damages to which the plaintiffs were entitled by reference to claims of misleading or deceptive conduct and/or negligent mis-statement should be whatever the Court found was a fair and reasonable price for the work done by the builder, less $330,000 or $340,000 plus GST.
The Fair Trading Act, s14, is an offence provision and does not in itself create a cause of action. It provides that a person must not engage in conduct that is misleading or deceptive or is likely to mislead or deceive. However, s37 does allow a person who suffers loss or damage by conduct of a person done in contravention of s14 to recover the amount of that loss or damage. Has the builder contravened s14? The plaintiffs maintain he has by telling the architect on or about 13 December 2006 a price of $330,000 or $340,000 and by giving the quotation which was the addition to contract document.
The question is, by one or both of those representations, did the builder lead the plaintiffs into error?: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198. I will deal firstly with what was characterized as "the advice". There is no dispute that, on or about 13 December 2006, the builder gave a figure to the architect, and that it was most likely $340,000. There is also no dispute that the builder prepared the addition to contract document, and that the plaintiffs had it at the time the contract document dated 2 January 2007 was signed. As a matter of fact therefore, the builder provided a figure of $340,000 to the architect and the plaintiffs. I have already determined that, notwithstanding what the builder may have thought he was doing, that figure was not solely for the purpose of a margin calculation, but was an estimate of the cost of works, albeit a rough one. Whatever the builder may have thought he intended by the use of that figure, it is impossible not to conclude that the plaintiffs had regard to it, that it led them to believe, entirely wrongly, that their project could be completed by the builder for a figure in the region of that amount, and that they then decided to enter into an arrangement with the builder. The plaintiffs had already had two tenders which they had rejected. The lowest of those was for an amount of $409,407, inclusive of GST. The plaintiffs had a budget of $250,000. They were clearly looking for a figure less than that lowest tender and in the ball park of their budget. In the circumstances, I am satisfied that by his conduct, the builder breached s14.
It is therefore necessary to look at whether the plaintiffs have suffered any loss or damage as a consequence of that breach. This issue is, again, a problematic one. Counsel for the plaintiffs submitted that compensation must be awarded to address the disadvantage that the plaintiffs have suffered as a consequence of their reliance upon the builder's conduct. He submitted this could be approached in different ways. The first was by reference to what he described as the "What if" question. That is, what if the builder had not provided that figure? He submitted that it is more likely than not that, had the builder not supplied that figure, the plaintiffs would not have engaged him and would have proceeded with someone else. Therefore, their loss is what they may be required to pay to the builder, less what it would have cost them had they engaged another builder such as Bennett Constructions with its fixed price contract. Counsel also referred to the loss of a chance to proceed with Bennett Constructions.
There was no evidence to the effect that the plaintiffs would have considered taking up the tender of Bennett Constructions. They had already rejected it. There was no other tender anywhere near that one. It is also quite clear on the evidence that, once they became involved in discussions via the architect with the builder, the plaintiffs did not believe, despite the provision of the figure by the builder, that their project would be completed for $340,000, plus GST. They hoped, with respect naively, that it might. However, once the project got underway, they continued to pay certified progress claims to a level well over that. It is impossible to accept that they did not believe that they were getting value for money, even if the cost was over what they expected. As has been made clear in this case, it involves no complaint about the workmanship of the builder. While it may be argued that the plaintiffs could have built a project within the contract price offered by Bennett Constructions, what they now have the benefit of is the project as completed.
The project as now completed must be different, if for no other reason, for example, than the issue of the joinery costs and the difference between the estimate of the quantity surveyor and actual expenditure. The plaintiffs have the benefit of the project as completed. Should the plaintiffs be compensated at a level which, in those circumstances, would be entirely artificial, and would leave them with an end result or benefit which would have cost far more than the quote from Bennett Constructions.
I accept that the plaintiffs may not have proceeded with the builder had he not given the figure that he did. However, they did proceed, and any loss which it might be suggested has flowed from that decision, cannot be considered in a vacuum. It must be considered in light of the circumstances which now exist. Having said that, I have no means of determining just what the plaintiffs now have in terms of value. The same comments apply to any case which might be made out in relation to negligent mis-statement.
Conclusion as to the plaintiffs' claim
The plaintiffs have paid the builder $549,192.18 in respect of 21 progress claims made and $17,000 by way of a deposit not accounted for in those claims, a total of $566,192.18. They claim to be entitled to be repaid by the builder a sum in the region of $276,000. That figure is, they say, payable either on the basis of their restitutionary claim (see par[100]) or, if it is determined the builder is entitled to what he has already received and still claims, on the basis of damages for misleading and deceptive conduct or negligent mis-statement.
The evidence in relation to either basis is, in my view, inadequate, for the reasons I have identified as to each. The plaintiffs had an obligation to prove the various matters that they pleaded. They were unsuccessful in their claims that a contract of some description existed. The Court was therefore required to look at their claim by reference to restitutionary principles. It was accepted in that context that the builder was entitled to be paid a fair and reasonable price for the work he had done up to the time he left the project in October 2008. The plaintiffs produced no evidence directly addressing that issue. The evidence they did produce was that of:
- a quantity surveyor as to what he estimated was the price at which the project could have been completed by reference to tender documents,
- a builder who had tendered effectively by reference to the same documents, and
- the plaintiffs as to what they had paid another builder to complete the project after the builder left.
The Court was asked to infer, from the figures provided in that evidence, a fair and reasonable price to the builder for the work he had done. For reasons I have already given, that material did not allow me to calculate any such figure with any degree of accuracy.
The only other evidence was of what the builder had claimed and been paid, what he still claimed by reference to a December 2008 invoice and the evidence of Ms Stone. All of this evidence directly addressed the question of what a fair and reasonable price for the work done by the builder was. As to the builder's claims numbered 1 to 22, there was no suggestion they contained anything by way of goods purchased which were not properly claimed for and used in the project. There was no real suggestion that labour claims were not correctly claimed. The challenge to expenditure mounted under cross-examination was directed to whether amounts claimed could be considered variations or not under an enforceable contract. As to those amounts claimed in claim 23 which was never certified, the architect, in his evidence, said there was nothing untoward about what was claimed.
The starting point must therefore be the amounts claimed in progress claims 1 to 23 which amount to $575,981.10. Those claims include part of a margin claimed by the builder. There would seem no reason why such a figure is not appropriately claimed (see Sopov). It follows that the balance of the margin is also claimable. That increases the figure claimed by the builder to $592,981.
There are also the items, not abandoned or already referred to, in the December 2008 tax invoice, which amount to a further $17,551.48 which are claimed. There was some cross-examination in relation to these but it was not detailed. There were no invoices and no evidence from the builder as to what all were for. I will make some comment. The insurances claimed for, looking at previous claims, appear to cover, at least in part, a period after the builder left the site. There is a large allowance for a site phone which I assume is simply three-quarters of whatever the builder's mobile phone account was for an unidentified period. There is no claim in earlier claims for such an expense, and I am not satisfied it is an expense which has been justified as one which reasonably ought to be paid by the plaintiffs. The labour claimed of $8,630, I infer, having regard to claim 23, was for the period 9 September 2008 to 28 October 2008. While that is probably a somewhat longer period than was covered by earlier claims, the time and amount claimed is nearly double that in the previous claim. There was no explanation for this. I am not satisfied in the circumstances that the builder is entitled to the whole of the $17,551.48 on this invoice. It should be reduced by $1,193 (insurances), $2,345 (site phone) and $2,876 (one third of labour claimed), a total of $6,414. That reduces that claim to $11,137 in round figures
That makes the overall figure claimed by the builder $604,118.48. Should that figure be adjusted down having regard to the evidence of Mr Darvelle, Ms Stone or Mr Spaulding?
Despite the fact that counsel for the plaintiffs disavowed reliance generally on Ms Stone's evidence, as I have said, it came closer to addressing the core issue than did that of Mr Darvelle. Her figures are not dramatically different from those of the builder, but are clearly lower. If there were to be any reducation by reference to her evidence, it would be entirely arbitrary and in those circumstances it would be inappropriate to make such a reduction.
I am therefore satisfied that the builder is entitled to the sum of $604,118 as a fair and reasonable price for the work he has done. From that must be deducted what he has already been paid, which includes the unaccounted for deposit. That reduces the figure to which he is entitled to $37,926.
The impact of any damages allowed for misleading conduct aspects of the matter then needs to be considered. I have already described the plaintiffs' evidence as inadequate. On some basis, I am being asked to consider what loss the plaintiffs have suffered by entering into the project with the builder which they did. Counsel for the plaintiffs says that is as simple as taking the figure I have determined the builder is entitled to, and taking off the original figure of $340,000. That would produce a figure of $264,118. He submitted in his written submissions that:
"This is not a case where credit is to be investigated and given in favour of Mr Bridge for the true value of the product produced: no party has called evidence from a valuer."
With respect, it is for the plaintiffs to establish any loss they have actually suffered. It is not the case that the plaintiffs can expect to claim as a loss an amount they did not expect to pay, and simply ignore the fact they have received a benefit for that extra amount. Were there evidence from a quantity surveyor to the effect perhaps that the work actually performed could have been performed for an amount far less than was charged, or it was shown that the product the plaintiffs now have is simply not worth what it cost to build, there may be a loss capable of calculation. There is no such evidence.
There is no doubt that the plaintiffs paid more than they anticipated they would have to for this project, and that they have borrowed more than they anticipated they would have to. However, not even the plaintiffs said they expected to only pay $340,000. The contract document they signed allowed for a figure inclusive of GST of $374,000 and they anticipated it could, and would, most likely be higher. They continued to accept and pay progress claims certified by the architect. The total of those progress claims exceeded $340,000 in January 2008. There was no evidence the plaintiffs, at that point said, we had a contract for $340,000, you have to complete the house for that and we are not paying you any more. Instead they continued on, and it must be assumed, accepted that the product they were getting was worth what they were paying for it.
I am not satisfied, on the basis of the evidence as presented, that the plaintiffs have established what, if any loss, they suffered as a consequence of entering into the arrangement they did with the builder. I accept that the process for them has probably been extremely stressful. Unfortunately without more, I am not able to make an appropriate determination.
Proportionate liability
I have not determined that the builder is liable to pay any amount to the plaintiffs. In those circumstances, any claim which might arise under Pt 9A of the Civil Liability Act does not arise.
Outcome
The plaintiffs' claims are dismissed. On the counterclaim, the builder is entitled to recover the sum of $37,926 from the plaintiffs. The builder should be entitled to interest on that sum. I will give liberty to the parties to bring in orders to be signed to give effect to my findings.
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