McPherson v Choi - [2017] SADC 25

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MCPHERSON v CHOI
[2017] SADC 25
Judgment of Her Honour Judge Tracey
23 March 2017
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - REMEDIES FOR BREACH OF CONTRACT
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - LIABILITY FOR BREACH OF TRUST
The plaintiff and the defendant entered into a contract by which the plaintiff was to construct a garage, steps and driveway on the defendant's property. The plaintiff issued proceedings for payment, but subsequently abandoned claim. Council issued emergency order to demolish. The defendant counter claimed the plaintiff's work was defective and in breach of contract and sought damages for demolition and re-building. The defendant says the plaintiff and defendant to cross action entered into the contract as collective trustees of family trust, are jointly and severally liable to her and she is entitled to an indemnity from trust assets.
Held: The plaintiff and defendant to cross action entered into the contract as collective trustees of the family trust. The work performed by the plaintiff was defective and the defendant is entitled to damages. The proper measure of damages is the cost of demolition and rebuilding, together with the additional costs of investigations carried out to establish the need for and extent of the rectification.
Building Work Contractors Act 1995 (SA) s 28, s 34; Development Act 1993 (SA) s 69, s 69(2), referred to.
In the Estate of William Just, Deceased (No.1) (1973) 7 SASR 598; Dennis Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154; FloMin Inc v Australian Raw Materials Corporation Pty Ltd [2011] NSWSC 585; Psevdos v Commonwealth of Australia (No.2) [2017] FCA 19; Bellgrove v Eldridge (1954) 90 CLR 613, considered.

MCPHERSON v CHOI
[2017] SADC 25

The plaintiff Stephen McPherson (Mr McPherson) issued proceedings in the Magistrates Court on 27 June 2012. Mr McPherson sought payment for building work he alleged was in addition to work he had performed pursuant to a contract for the construction of a concrete garage, steps and driveway (‘the project’) on the defendant Ms Choi’s property.
In her defence, Ms Choi:
·denied liability for the amounts claimed by Mr McPherson;
·sought damages or compensation for a failure to comply with the terms of the contract entered into between the parties and for performing defective or noncompliant work;
·issued a cross action by counterclaim against Julie Walker (Ms Walker); and
·claimed that Mr McPherson and Ms Walker entered into the contract as collective trustees of the Stephen McPherson and Julie Walker Family Trust (‘the Trust’).
At trial, Mr McPherson and Ms Walker appeared unrepresented and Mr McPherson abandoned his own claim. Mr McPherson gave evidence but called no expert evidence as regards the criticisms of his work on the project. Ms Walker elected not to give evidence despite having initially indicated that she would do so.
Ms Choi gave evidence and called evidence from the following:
·Peter Jankovic, a building consultant;
·Ronan Whelan, an engineer from PT Designs;
·Lance Buswell, of B&S Constructions Pty Ltd, who carried out demolition of the work done by Mr McPherson and re-built the project; and
·John Deans, a quantity surveyor.
Background
The garage was to be built at the front of Ms Choi’s property, with the roof connected with what was the existing ground floor level of her house, becoming a veranda. A driveway leading to the garage was to be constructed as were steps to enable access from the floor of the garage to the entrance of the house. The design for the project was prepared by MC Noble Building Designers (‘Noble’) and the engineering plans were drawn up by Ronan Whelan of PT Designs.
Contrary to the provisions of the Building Work Contractors Act 1995, no formal written contract was prepared, nor did Mr McPherson carry a policy of insurance for the project.[1] There was some dispute between the parties as to the document that evidenced the agreement to build the project. Ms Choi said that Mr McPherson, in about March 2012, had presented her with a two page document to sign, the first page of which was a list of the work to be performed and the second with the price and provision for her signature. Ms Choi said she did not recall receiving a copy of the document that she signed.
[1] Section 28, s34.
When she asked for a copy of the document in July 2012, Mr McPherson provided her with a two page document. The first page was on plain paper without a letterhead, listing the work to be performed by Mr McPherson in terms not dissimilar to those on the March document. While page two bore her signature and showed the price she had agreed to, it was dated 19 July 2012, (the ‘July contract’).[2] Mr McPherson was at a loss to explain what document he had asked Ms Choi to sign or when, but appeared to rely on a document on his letterhead, dated 19 July 2012, as the document Ms Choi signed (Exhibit P74). Unfortunately, Mr McPherson had little recollection of what documentation he provided to Ms Choi, or when it had been given to her. He said the dates on documentation was affected by the date of printing.
[2] Exhibit D6.
Ms Choi was dissatisfied with Mr McPherson’s work and contacted the Department of Consumer Affairs. She then sought an opinion from Building Consultant Peter Jankovic, who raised a wide range of concerns about the project. Mr Whelan was asked to conduct investigations to determine whether the work completed by Mr McPherson could be remedied, short of demolition, but concluded that the construction was structurally unsound.
Ultimately the City of Marion (‘the Council’) issued an emergency demolition order in relation to the garage.
Ms Choi contracted with B&S Constructions Pty Ltd, for the demolition and re-building of the project. All that remained of Mr McPherson’s work was the concrete slab at the base of the garage.
Ms Choi sought to establish that the Trust was the party with whom she had made the contract. She alleged the document evidencing the agreement, all invoices she had received from Mr McPherson and the bank account into which she paid Mr McPherson, were all associated with the Trust.
Further, Ms Choi argued the trustees of the Trust held a collective office and a contract entered into by a trustee for the Trust, namely Mr McPherson, was a contract to which, Ms Walker, as co-trustee, was bound.
Ms Choi sought findings that both Mr McPherson and Ms Walker were parties to the contract in their personal capacities and as trustees, and as a consequence, both are entitled to an indemnity from the assets of the Trust.
Mr McPherson said he entered into the contract in his personal capacity, and disputed the need for the garage to be demolished to the extent recommended by Mr Whelan and required by the Council.
EVIDENCE
Maria Choi
Ms Choi had lived in her house in Capella Drive Hackham since late 1987. She and Mr McPherson were neighbours.
In around July 2011 Ms Choi was looking at having her driveway concreted. She spoke with Mr McPherson about a quote and asked for his advice regarding a deck which she intended to construct in the not too distant future. Her plan was to have a large timber deck built with a large area underneath for car parking and a workshop. Mr McPherson asked whether she had ever thought of doing a concrete panel structure and told her he could build a three car garage with a workshop for $40,000.
She understood Mr McPherson arranged for Noble to draw up the design for the project. When Noble attended on site, she was advised that Council would not approve a structure as large as what had been proposed. Ultimately a design for the project was arrived at and the engineering drawings were prepared by Mr Whelan.
Mr McPherson told her that the job had been ‘over engineered’ and was going to cost more than he had quoted. She became upset and told him she felt she had her wasted money. Mr McPherson suggested changing the concrete steps which had been incorporated into the design, to become ‘bush rock’ steps, saving her $12,000. A total price of $58,000 plus GST was negotiated between them.
Mr McPherson gave her documents to sign. Ms Choi described what she had signed as a document of two pages with a list of things that Mr McPherson was going to do. It said the price was $58,000 plus GST and she signed it. Ms Choi said she did not recall keeping a copy of the document nor receiving one at the time. She did not believe the document was dated.
Approval from the Council for the project was received on or about 26 March 2012.
Ms Choi recalled that the work had started by her birthday on 6 July 2012 and by then the steps had been completed. On 19 July 2012 Mr McPherson brought up the issue of ‘rocks’, saying he needed to use rock breaking equipment. Ms Choi said she had expressed surprise as soil tests indicated there was no rock at the site. Mr McPherson produced a document for her to sign which set out charges of $300 a day for the hire of rock breaking equipment (‘the rock breaking agreement’).[3] Ms Choi discussed the issue with Mr McPherson because her recollection was that such costs were covered in the contract price. She asked Mr McPherson for a copy of what she had previously signed and he produced the July contract. Ms Choi said she told Mr McPherson he could have one day in which to complete any rock breaking that was required and she signed the rock breaking agreement.
[3] Exhibit D5.
In late July Mr McPherson again approached her, advising there was an extra $9,000 payable for rock breaking and soil removal. He said he would accept $7,000 if she paid in cash.[4] Ms Choi paid Mr McPherson as he requested, but said she did not recall seeing rock breaking equipment on the property at any time.
[4] T 44.
Ms Choi said she made complaints to Mr McPherson about stability problems with the steps he had installed and of her concern that the first heavy rain would wash away the rocks that were placed at the edges.
On 15 November it was the anniversary of her husband’s death and Ms Choi took the day off work.[5] She received a call from a company saying that they had done the certification for the project but had yet to be paid. On the following Saturday she visited Mr McPherson asking him what was going on. He said ‘you’re costing me money’. He told her ‘fuck you and fuck your job’ and closed the door in her face. As she was distressed and angry she called Consumer Affairs. By this stage she had paid Mr McPherson over $50,000.
[5] T 48.
Not long after, Mr McPherson apologised, saying he had been under a lot of stress and was doing several other jobs. He said he hoped the driveway would be finished by the beginning of December. Thereafter there were other representations as to when the project would be finished. When Ms Choi returned from holidays on 9 January 2013, it looked to her as though work on the driveway had finally started. Ms Choi sent a text to Mr McPherson asking when the job was going to be completed. That afternoon she received an invoice for another $9,000 of extra work.[6] She told Mr McPherson that she had been advised by Consumer Affairs that she should not pay the money until the job was finished. By February the work had not been completed and she contacted Consumer Affairs again. They asked her to prepare a written complaint, which she did. She refused to pay anything more to Mr McPherson.
[6] Exhibit D7.
Ms Choi said she had installed the roller doors on the garage, as it had always been her plan to use the garage for storage.
In the heavy rain small rocks and soil would come out and wash onto the steps. There was no retainer of any kind.
In May 2012 Ms Choi received notification that Mr McPherson was suing her in the Magistrates Court. Ms Choi arranged for Mr Jankovic to inspect the work and retained solicitors who asked Mr Whelan to do the same.
By letter dated 8 July 2014 the Council wrote to her enclosing an emergency order for demolition of the structure that had been built by Mr McPherson. She was required to evacuate the garage which caused her a great deal of inconvenience. A number of plants that she had purchased for the deck area did not survive because of the delay in the work.[7]
[7] T 66.
Ms Choi arranged for B&S Constructions Pty Ltd to demolish and then re-build the project in accordance with the plans. The Council agreed to an extension of time for the demolition work to be done and Ms Choi was required to keep people off the property with no one allowed to enter the garage except to remove items she had placed there in storage. Ms Choi said she kept socially isolated during this period.
Ms Choi said she believed that she had paid around $67,000 to Mr McPherson, including the $7,000 he had asked for in cash.
In cross examination Ms Choi agreed that she had told Mr McPherson the ‘bush steps’ would look nicer as they would not be all concrete.
Ms Choi said Exhibit P74 was not the document Mr McPherson gave her when she asked for a copy of the contract in July 2012.
Ms Choi said she did not know she needed Council permission to put the roller doors on at the time. When the demolishing and rebuilding occurred she asked Council whether or not she had to apply and they told her not to bother. She said she always intended to put a garage door on, right from the beginning.
In making payments, Ms Choi said she used the ABN provided on the invoices and transferred the funds directly by bank transfer.
Peter Jankovic
Mr Jankovic said that Ms Choi had contacted him to inspect the project and look at the design documents. He prepared reports detailing his findings and recommendations.
Report dated 12 July 2013[8]
[8] Exhibit D41.
In this report, Mr Jankovic found a number of areas of concern and made recommendations to Ms Choi that she:
·pay no further monies to the builder,
·forward the matter to the Office of Consumer and Business Services with a request that they investigate,
·seek the services of legal counsel, and
·ask a structural engineer to inspect the work.
Report dated 18 February 2014[9]
[9] Exhibit D43.
This report followed an inspection by Mr Jankovic of the project on 3 and 14 February 2014, wherein Mr Jankovic summarised his findings as follows:
It is my opinion the builder appears to have had a lack of attention to detail when constructing this garage and upper slab and simply ignored the approved documents, specification and engineering details. This in my opinion subject to the engineer’s comments will now affect the longevity of the garage walls if the work is simply left as is.
Mr Jankovic was asked by Ms Choi’s solicitors to advise whether the bush rock steps complied with the Building Code of Australia (‘the Code’).
In his evidence, Mr Jankovic noted that the design drawings depicted sleeper retaining walls with agricultural drains to the base and sides of the steps, leading from the new driveway to the existing house to support moss rocks. Mr Jankovic noted that the retaining walls had not been constructed. Obviously enough, the retaining walls were to stop slippage on the slope particularly during wet weather. Without the installation of a drain as contemplated in the design, water could build and pressure, forcing the retaining wall to collapse. Mr Jankovic noted the concrete panels were porous and soaking in moisture. Essentially, Mr Jankovic described the works as regards the steps and retaining walls as:[10]
…for a start the retaining wall wasn’t there. The agricultural drains weren’t there from what I could see. There was no – in my opinion there was no proper method of installing the rocks to try and prevent them from slipping.
[10] T 234.
For those reasons he described the work as faulty and non-compliant - the approved plan showed a retaining wall; the rock steps that were installed varied greatly in continuity; the rises and goings of the steps all varied in their length and height and had no provisions for a non-slip surface.
Mr Jankovic noted that access between the house building and the garage was only available using the steps. They would be used on a daily basis and must comply with the Code, particularly as they were to provide access from a habitable building to a garage.
Mr Jankovic said that the steps constructed by Mr Buswell were the type of construction that had been specified in the design drawings.
Mr McPherson questioned Mr Jankovic, by reference to the photograph,[11] as to whether the third panel identified on the plans immediately to the right of the concrete steps had been constructed in accordance with the plans. Mr Jankovic said that he was unable to comment because the panel was now buried.
[11] Exhibit D33.
Mr Jankovic agreed that any issue concerning the licensing of Mr McPherson to carry out the works was a matter for the Department for Consumer Affairs.
Ronan Whelan
Mr Whelan has been a practising structural engineer for 19 years. He prepared the engineering drawings for the project. After he was contacted by Ms Choi and her solicitor, he prepared a number of reports detailing his findings on inspection and his opinions. In his evidence he further detailed the deficiencies in the work carried out by Mr McPherson.
At the time of writing his first report dated 18 October 2013,[12] Mr Whelan concluded that despite his list of concerns, it was likely that the suspended concrete slab and panels could remain in place and ‘all rectification works be carried out with them in place’.
[12] Exhibit D14.
Subsequently, Mr Whelan used a reinforcement detector (a cover meter) to detect the position of concrete reinforcement both vertically and horizontally in the panels. The instrument also confirmed how much concrete cover there was to the reinforcements in question. Mr Whelan identified that he was expecting to see vertical and horizontal readings at every 200 mm in accordance with the spacing of bars in a typical square reinforcing mesh sheet. Instead he ‘found erratic readings of 150 mm to 266 mm spacings vertically and minimal to no readings horizontally’. Mr Whelan described various reasons for such results but concluded that the exercise was inconclusive in confirming the panel had the correct reinforcement. The readings however were in his view good enough for him to confirm that there were no dowels in the four panels that were checked.
After excavation of the backfill Mr Whelan was able to confirm that no panel had been installed as per his drawings and specifications. In particular, there were no grout beds under the panel and no dowels connecting the panels to the footing. The non-compliance he said was not in accordance with Australian Standards. The lack of any positive connection to the footings gave rise to the real risk that the panel could move laterally (say if hit by a car entering the garage), and the panel could fall off the footing and result in collapse of the slab above.
Mr Whelan carried out several further inspections with the cover meter in an effort to detect the dowels that were planned. He found no evidence of any dowels being present in any of the panels.
The structure would also he said, most certainly be affected by a lack of waterproof membrane to the external face as well as from a lack of grouting at the bottom of the panels. There was no evidence found to indicate the presence of an agricultural drain.

In his report dated 16 May 2014[13] Mr Whelan referred to a report prepared by SoftScan, who were retained to carry out more sophisticated scanning of the panels. Their findings were consistent with what Mr Whelan had identified.
[13] Exhibit D17.
Mr Whelan deemed the structure in its current form to be structurally inadequate. While he noted it may have been possible to strengthen the panels, such a solution he considered may have left the garage not fit for purpose, given the use Ms Choi intended for the space.
In his report, dated 23 July 2014,[14] Mr Whelan gave advice as to how the garage should be demolished and in what sequence that should occur. Mr Whelan determined that demolition work should not be carried out until the new construction was ready for installation so as to minimize the amount of time the excavated face was exposed and should be carried out no earlier than mid-September to allow for more favourable weather conditions.
[14] Exhibit D18.
Mr Whelan carried out an inspection of the site in the presence of the new builder Mr Buswell. The purpose of the inspection was to examine the condition of the footings and ground slab with a view to determining their use in the rebuilding of the garage structure. Following this inspection Mr Whelan deemed the footings and slab to be structurally satisfactory for use in re-building the project.
A summary of Mr Whelan’s opinions can be found in his report dated 4 March 2015.[15] This report was prepared following the demolition, allowing for inspection of the site and the concrete roof slab and panels. He summarised his findings as follows:
the concrete wall panels, suspended concrete roof slab and associated slab on ground adjacent the front of the existing dwelling were all not constructed in accordance with our drawings and specifications and the result of the defective work carried out in the construction of the concrete walls and roof slab is that the structure was not structurally sound or adequate. I agree with the Council’s demolition order as the structure was not fit for purpose and would likely have failed in time.
[15] Exhibit D18.
In evidence, Mr Whelan confirmed that the construction method used by Mr McPherson did not comply with Mr Whelan’s specifications and he elaborated on his opinion as to why demolition of all but the floor slab was required, detailing the possible consequences if the garage remained as it had been constructed by Mr McPherson.
In this case, without the use of dowels, any soil movement could result in the house and garage moving apart vertically out of alignment, loosening the backfill behind the panels leading to structural failure. Mr Whelan said that while the use of dowels is not the only method available to achieve the appropriate stability, it is the simplest and is what was incorporated into his design. Mr Whelan noted that the plans provided for grout tubes to be cast into the bottom edge of the garage panels, so that when the panels are dropped over the dowel bar that is cast into the footing, some movement on the panel is provided for. The tubes are then filled with grout to lock the panel in place. Without this element incorporated into the construction Mr Whelan explained, the panel can slip, causing the roof slab above to crack.
Any force such as a car connecting with a panel, could cause the panel to fall completely off the footing, causing a collapse of the slab above. Mr Whelan described this as a ‘catastrophic collapse’.
Mr Whelan described the process that ensures a structure has constant and even bearing on top of its footing. When panels are laid down on top of plastic shim or level plates, they create a gap between the bottom of the panel and the top of the concrete footing to account for an uneven concrete pour. The panel is levelled up on the shim plates and then the grout filled in afterwards to ensure the panel has constant and even bearing on top of the footing. If that is not done there may be local stresses on the panel that are not accounted for. In Mr Whelan’s view, the combination of this and the lack of dowelling magnified the potential risk because there was no frictional resistance whatsoever.
When Mr Whelan inspected the site after the excavation of the backfill, he noted he could get in behind the back of the panel at the front edge of the carport. He said he was able to move a ruler underneath the panel to show that no grouting had been applied. In some places, fingers could fit between the bottom of the concrete panel and the top of the footing.
There was he said, a very real risk of collapse of the garage. The lack of grout under the panels and the lack of dowels meant that these were defects that were extremely significant structurally. There was no physical connection whatsoever between the precast panel and the footing below. It was he said ‘but for the grace of God, just sitting there.’
Mr Whelan described Bitumastic membrane as a tar based product that can be painted on in sheets to seal the back of panels from water ingress. This was incorporated in the design to ensure that the internal side of the garage was free from water and to protect the connections from rusting. Mr Whelan explained that without proper waterproofing any steel coming into contact with water or any cracks in the concrete panel could suffer water damage, leading to eventual rusting and possible structural failure.
Mr Whelan said his design also incorporated the installation of an agricultural drain to collect water from behind the panels, where free draining material would allow water to find its way down to the pipe and then exit the property through the usual stormwater drains. Without an agricultural drain, there was a further risk of water building up behind the panel, causing hydrostatic pressure which was not taken into account in the design. Mr Whelan said that on inspection he had noticed there were voids in the backfill behind the panels and was in no doubt the concrete would have failed over time.
Mr Whelan said the ‘bush steps’ constructed by Mr McPherson were not compliant with the Code. In his design, the purpose of a retaining wall alongside the steps was to retain the natural ground on either side given the land was sloping at a different angle to the staircase itself. In some spots the natural ground was higher than the staircase and in some it was lower. The rocks used by Mr McPherson were not what Mr Whelan would describe as ‘moss rocks’, but rather, were small boulders.
When Mr Whelan wrote his original report, he said he thought it likely that the suspended concrete slab and precast panels could remain in place while all rectification work was carried out. His opinion changed in light of subsequent information and investigation.
In the drawings, reinforcement was detailed to be centrally placed in the concrete panel, with the reinforcement in the middle or roughly 75 mm from the surface (in a panel that is 150 mm thick).
Mr Whelan explained that the distance from the external surface of the panel to the reinforcing bar is what gives the panel a bending strength. The bigger that distance, the greater the strength. On scanning, the reinforcement was too close to the outer surface which reduced the bending capacity of the panel and risked the panel bending, cracking and failing. In some areas the panel was completely unreinforced. Concrete requires reinforcement to be structurally sound and without reinforcement the panel cannot sustain any bending stresses.
There was also erratic positioning of the reinforcements. The bars were not in a regular vertical spacing and as a result they could be under reinforced.
Leaving the SoftScan report aside,[16] Mr Whelan said when he inspected the cut panels on demolition, he observed reinforcing bars clumped together with a lot of bar in one spot while some areas were sparsely reinforced. In other words, the reinforcement was not even. While not a concern in itself, he said it was unusual to see. If the reinforcing bar gets too close to the surface of the concrete, water can get through the cracks causing rusting and concrete cancer.
[16] Ms Choi elected not to call a witness from SoftScan nor to rely on their report.
Mr Whelan recommended that demolition should not be carried out until the new construction was ready for installation so as to minimize the amount of time the excavated face was exposed. It was important Mr Whelan said, for the new panels be ready to install straight away to minimize a risk that essentially a cliff face left exposed to weather would cause.
Mr Whelan noted evidence that the slab was not carried out in a single pour and horizontal delamination, which Mr Whelan described as a horizontal crack through the centre of the concrete slab was evident, leading to a loss in structural integrity.
On inspection, Mr Whelan noted there were some dowels to the existing house front footing but they were not correctly fixed. The hole was not deep enough to engage it into the existing footing. The hole was bigger than the size of the bar so the bar placed in the hole could move. There was no positive connection between the bar and the new concrete and the old concrete. This is at the point where the edge thickening meets the existing house front.
In answer to questioning by Mr McPherson, Mr Whelan agreed that dowels have a secondary function to enable the alignment of the panel in the right spot, however, the primary function is to maintain position on the footing.
Mr Whelan agreed he could see agricultural pipe in photographs taken of the site but could not tell where the pipes were installed.
Mr Whelan was asked about the use of a product called ‘Forticon’. He described it as a damp proof membrane placed underneath concrete so that concrete does not come into direct contact with soil and to try and protect it from vapour more so than water. Mr Whelan said it does not act as a waterproof barrier.
Mr Whelan was asked whether the panels could have been saved by some means of bracketing at the bottom of the panel to which he had referred in his report. Mr Whelan confirmed that additional structural steel or concrete would be required inside the garage, rendering the garage unusable and not fit for the purpose that Ms Choi had intended.
Mr Whelan said the evidence revealed by the SoftScan report provided an indication as to where reinforcement was in the panel which was subsequently confirmed once the panels were demolished. The reinforcement was not at a consistent central 75 mm from the outside face, the rebar did change diameter and the spacings were not even and there were no dowels in the panel. What worried him most he said, was that there were no dowels whatsoever at the bottom of the panels. While he was initially of the belief that the panels might be able to be strengthened and salvaged, the panels when removed showed they were under reinforced in some areas.
Mr Whelan disagreed with Mr McPherson’s position that pressure coming from the compacted soil at the back of the walls was sufficient. Mr Whelan said that may have been the case with respect to the back of the walls but the side walls did not have a full height of retaining soil behind them. Had a car hit one of the leading edges of the precast panels, there would be insufficient soil behind the panel to stop it moving.
Request by Mr McPherson to have Mr Whelan recalled
On the morning of Wednesday 8 February 2017, Mr McPherson made an application to recall Mr Whelan. Essentially Mr McPherson’s application was based on what he said was an inability to achieve an allowance of 75 mm on both sides of the concrete panel given that the panel contains reinforcing mesh. Mr Whelan’s evidence had been that the PT Design drawings detailed reinforcement was to be centrally placed in the concrete panel and should sit in the middle or roughly 75 mm from the external and internal surface. On inspection, these specifications had not been complied with. I refused Mr McPherson’s application on the basis that Mr McPherson’s assertion that he had made a 75 mm allowance on one side did not overcome the difficulty raised by Mr Whelan concerning the importance of the reinforcement being in the middle of the external or internal surface.
John Deans
Mr Deans is a chartered quantity surveyor. He prepared two reports in relation to the project.
Report dated 18 March 2014 ‘Assessment of the quality of excavated material’[17]
[17] Exhibit D23.
This first report was an assessment of the quantity of material that had been excavated from the site by Mr McPherson. A survey was carried out on the property in 2011 before the work was done on site and then again in 2014. By superimposing a survey taken of the property in 2011 over a survey carried out in 2014, Mr Deans calculated what he described as a ‘theoretical calculation’ of the earth that had been excavated.
In his calculations, Mr Deans elected to use a density factor of 1.6 t/m³ of volume. Mr Deans said excavated soil can vary between about 1.3–1.4 t/m³. For something that was a mixture of rock you might be approaching 1.8 t/ m³. If a density factor of 1.6 was not appropriate, the tonnage would change to something above or below that depending on the density factor. He said he nominated 1.6 because that ‘seemed a pretty average sort of tonnage for carting away that sort of material.’ Mr Deans believed that an assessment by an engineer to the effect that the soil profile indicates a layer of limestone over a layer of shale fragments was not inconsistent with the ratio that he had chosen.
In cross examination it became apparent that Mr McPherson alleged that the levels shown on the surveyor’s drawings were higher than where he actually started his excavation.
Ultimately Mr Deans accepted that what had been excavated was less than what he allowed for, but if the material was denser, as Mr McPherson alleged, the density factor could range from about 2.2 – 2.5 t/m³.
Undated report titled Details of Opinion of Reasonableness or Otherwise of B&S Constructions’ Quotation[18]
[18] Exhibit D24.
In this report, Mr Deans addressed the reasonableness or otherwise of a quotation from B&S Constructions for the demolition and reconstruction work. In his report he concluded that considering the degree of difficulty and risks, the quote of $114,199 including GST, was a fair and reasonable price for undertaking the scope of works identified in the PT Design structural inspection report.
Lance Buswell
Mr Buswell is the director of B&S Constructions Pty Ltd. He is a registered building supervisor with considerable experience in building.
Mr Buswell was retained by Ms Choi’s solicitor in relation to carrying out excavation of the site for ‘investigatory purposes’. He excavated the right hand side of the building. No waterproofing membrane could be identified and while two agricultural pipes were found, Mr Buswell said he was not sure how they were going to function as after demolition the pipes were found sitting at least one metre off the ground. On inspection of the bottom of the concrete panels that formed the walls of the garage there was a gap which Mr Buswell said he assumed was some sort of packing wedge. He said he could get his hand underneath and he used a kitchen tool to try and identify any dowels. No dowels were located.
Mr Buswell was asked to quote for the demolition of the work carried out by Mr McPherson and construction in accordance with the design plans and specifications. In arriving at his quote for demolition, Mr Buswell said he took into account the advice and recommendations the engineer gave as to the process and sequence of demolition.
Mr Buswell was subsequently advised that the bottom floor slab of the garage did not have to be removed and his quote was amended to take that into account, totalling $114,199 including GST. Mr Buswell prepared a report with a significant number of photographs attached. Mr Buswell said that after excavating the site it was evident no waterproofing had been applied.[19] The bottom of the precast wall panels clearly showed that dowels were not used nor were grout tubes.
[19] Exhibit D31.
When the southwest panels were removed, an agricultural pipe was exposed but was set 900 mm up from the panel, rather than at the base, below the bottom of the panel. The pipe may have had the effect of simply funnelling water into the bottom portion of the panel which was the very thing waterproofing and agricultural pipes are used to avoid.
On my questioning, Mr Buswell said that the work that he quoted for and ultimately performed was in accordance with the designs that had been provided to him. The only additional aspect was the balustrading and roof structure which was constructed at a later date and separately quoted.
In cross examination, Mr McPherson raised with Mr Buswell, the issue of whether or not a third panel as indicated on the engineering drawings had been installed by Mr Buswell. Mr Buswell was unable to confirm, without access to his contractor whether that was the case. Mr McPherson’s questions sought to establish that the steps as constructed by Mr Buswell were not in accordance with the drawings and were done incorrectly. In essence Mr McPherson was submitting that the construction of the staircase ‘could be negligent’. Mr Hoile indicated that Ms Choi was prepared to accept that there was no full length precast panel installed by Mr Buswell, given that it was now not possible to determine the issue. While Mr Buswell was not prepared to concede that there would be any difference in the amount quoted because of any variation in the construction from the design, he would guess that it would be around $1,000.[20]
[20] Mr Hoile agreed to a reduction of $2,000.
Mr McPherson disputed the demolition cost of $40,000, putting to Mr Buswell a more appropriate figure of the cost of demolition of an ordinary house would be between $8,000 and $10,000. Mr Buswell said that the quote he gave was based on information he had received from his contractors. There were special precautions that needed to be undertaken and the specifications as indicated by the engineers needed to be followed. He said the job could not properly be compared to the demolition of a house.
Mr McPherson referred Mr Buswell to photograph eight in Mr Buswell’s report[21] where machinery was on the balcony slab as an indication that the structure could not have been unsafe. Mr Buswell referred to photographs 17 and 18 which showed that at the relevant time, there was significant steel ‘propping’ in place beneath the roof slab to stabilise the area.
[21] Exhibit D31.
With respect to the product Forticon, Mr Buswell said it is common practice to use such a product in floor slabs, but a waterproofing membrane is usually also required or alternatively, the strength of the concrete, used in the project would need to have been increased.
Mr Buswell did not accept that in demolition the agricultural pipe had lifted as the pipe was at a height before the panels were pulled.
Paul Skoumbros
Mr Skoumbros is a development officer with the Council. In his role he carries out inspections and deals with compliance issues. On behalf of the Council he issued a demolition order in relation to the garage constructed by Mr McPherson.
Mr Skoumbros said that on receipt of a letter from Ms Choi’s solicitor enclosing two reports from Mr Whelan, he forwarded the reports to the Council engineer for his assessment. Two further reports prepared by Mr Whelan and a survey report by SoftScan were also forwarded to the Council’s engineer. On 8 July 2014 Mr Skoumbros issued an Emergency Order pursuant to s 69 of the Development Act 1993 to Ms Choi.[22]
[22] Exhibit D11.
Recitals E – I of the Emergency Order read as follows:
E.I have inspected the garage, and have obtained advice from a qualified structural engineer.
F. I am advised by the engineer that the wall panels of the garage (“the Wall Panels”):
1.   have not been constructed in accordance with the plans and details forming part of the relevant development approval, mainly approval 100/1847/2011;
2.   are not structurally adequate; and
3.   are likely to fail in time.
G.The wall panels cannot be rectified so as to correct the defects above.
H.If the wall panels were to fail, the garage would collapse. This would present a risk of injury or death to persons within, near or on top of the garage (the garage has a pedestrian – trafficable roof).
I.I am of the opinion that the Emergency Order is necessary because of a threat to safety arising out of the condition of the garage.

Pursuant to s 69(2) of the Development Act, Mr Skoumbros directed Ms Choi to:
1 Evacuate the garage on or before Friday 22 August 2014.
2Not allow any person to enter within or upon, or remain within or upon, the garage except insofar as necessary to comply with these directions.
3 Demolish the garage on or before Friday 22 August 2014.
Furthermore, he prohibited occupation of the garage.
In answer to questions by Mr McPherson, Mr Skoumbros said that the Council engineer did not inspect the works. Mr Skoumbros agreed that in order for Ms Choi to install garage doors further Council approval would have been required.
Stephen McPherson
Mr McPherson was at some pains to emphasise that the contract that was entered into was between himself in the capacity as a builder and Ms Choi, not as a Trust employee.
He said he told Ms Choi money could be saved by putting bush steps in and also making the panels on site, rather than having them manufactured.
Mr McPherson said that agricultural pipe had been installed and the photographs were misleading in that when the panel was extracted from the site and lifted, given that it had been in place for some 12 months and the soil had had time to settle against the panel. He admitted that the front panel on the right hand side contained no agricultural pipe. He said that was going to be done at a later date.
Mr McPherson tendered photographs that he had taken of the works.[23] He described the process of construction of the panels which meant that he could only achieve coverage of 75 mm on one but not both sides.[24] Photograph Exhibit P66 showed the installation of Forticon membrane. In his evidence, Mr McPherson described Forticon as a waterproofing membrane sufficient to waterproof at 2000 gauge. He described it as a ‘thicker’ type of Forticon.
[23] Exhibits P64 and P65.
[24] T 274.
With respect to the installation of dowels, Mr McPherson said that ‘we did it a different way’. He said:[25]
The actual tilt or panel wasn’t sat on the top of the floor as in the drawing. We actually inserted it 150 mm down to sit on the foundation. Either side of that would have been 150 mm of concrete, so you can’t go either way. The front of the panel can’t go that way because of the concrete driveway. The back of the house was stable because it’s been there 14 years and it hasn’t collapsed.
[25] T 271.
Mr McPherson described his experience in the building trade. He said he was an apprentice trade joiner from the age of 14 and had been in the building trade for all his life. He had worked for two large concreting companies in the British Isles. He said he had now handed in his licence because he had ‘had enough’. He had done the sort of work that he was being asked to do by Ms Choi before and in particular, had done form concrete work like the stairs designed in this project.
When I asked Mr McPherson what he could tell me about the discussions that he had with Ms Choi regarding the stairs he said, ‘the only discussion is that I wanted to keep the job’[26] At that point, Mr McPherson became distressed. When we resumed, Mr McPherson detailed his experience on moving to Australia, working for the Australian Government in South Australia doing housing developments and then starting ‘Steve McPherson Building Maintenance’ which operated for approximately five years. He also worked for other building contractors.
[26] T 272.
Mr McPherson said that it is only his name on the building licence. Neither the Trust name nor his wife Julie’s name are on the licence. He entered the contract with Ms Choi purely on his name only.[27]
[27] T 274.
In the course of his evidence, Mr McPherson abandoned the claim he had made in the Magistrates Court which had started the proceedings between the parties.
As regards payment Mr McPherson said that:[28]
… regarding the cheques that were made payable, Ms Choi said they were paid to the ABN but every invoice had my personal bank account at the bottom of it and the money came into …
[28] T 276.
In his evidence, Mr McPherson said that the ABN on the tax invoices he gave to Ms Choi was for Steve McPherson Building and Excavation and Steve McPherson Building Maintenance. It was not related to the Trust.
Mr McPherson said the bank account ending 733[29] is in the name of Stephen McPherson and Julie Walker as individuals and was the account Ms Choi paid into.[30] The account ending 946 was the account for the café his wife ran under the name Julie Walker and Stephen McPherson trading as ‘Cheezy Grinz’.
[29] Exhibit P70.
[30] T 277.
Mr McPherson gave evidence that his three bank accounts worked independently:
There was the building account, the units and the cafe. All the accounts, although they’ve all got the same ABN, did work each individually. There was no money moved from one account into another one.
In relation to the contractual documents, Mr McPherson said as follows:
Unfortunately the computer had all the paperwork in it, it got some form of virus. It just wiped everything all out, every invoice, everything, all letters, correspondence.[31]
[31] T 279.
Mr McPherson said he was unable to recall when it was that he gave to Ms Choi a copy of Exhibit P74 which included his business letterhead and details.
With respect to Ms Choi’s evidence regarding him having provided her with the July contract, he said:[32]
I have no explanation regarding that. As far as my memory goes there was my name and that on top of the billing.
[32] T 279.
When Mr McPherson was asked whether the document to which he was referring was provided to Ms Choi when she had requested it as in accordance with her evidence or at an earlier time, Mr McPherson said, ‘I’m not sure, I can’t recall’.[33]
[33] T 279.
Mr McPherson accepted that there were no dowels that connected the vertical panels of the garage to the slab. He did not dispute that the vertical panels on each outer side of the garage were not hooked into or connected into the slab by means of dowels, but said there were other ways of attaching the panels.[34]With the assistance of photographs,[35] Mr Hoile attempted to demonstrate that there was no granite in the area where the excavation work conducted by Mr McPherson had been carried out. The quality of the photographs however, did not provide a satisfactory answer to the question of whether or not granite was present and the use of rock breaking equipment was required.
[34] T 285.
[35] In particular, Exhibits P64, D72, P66 and photographs 57 and 59 of Exhibit D31.
It was Mr McPherson’s evidence that granite comes in patches. It is not at one level and granite is renowned at Hallett Cove, to be scattered all over. Mr McPherson said that he took the granite away from the site in his truck.
Mr McPherson denied that Ms Choi had spoken with him expressing her surprise that rocks needed to be broken because the soil report only found limestone and shale.
Mr McPherson said that he did not recall Ms Choi telling him she had either lost or never received a copy of the document that she had signed some months earlier. Further, he could not recall telling her that he would get her a copy and return it to her. He denied giving Ms Choi page one of the July contract.
Mr McPherson was asked about the ABN that appears on the rock breaking agreement.[36] Mr McPherson said the computer had been set up to do the name and address telephone number general licence and ABN to appear on such documents.
[36] Exhibit D5.
Mr McPherson was asked about the Trust Deed of Settlement.[37]. He said he asked the accountant at the relevant time to set up the Trust, and agreed the ABN for the Trust was 92448163199 (‘ABN:199’). Mr McPherson agreed that he held a different ABN in his own name, that is, ABN: 83758874979.[38] A search with respect to that particular ABN revealed two trading names, Stephen B McPherson Building Maintenance and Stephen B McPherson.
[37] Exhibit D44.
[38] Exhibit D47.
In reference to the invoices that Mr McPherson rendered to Ms Choi,[39] Mr McPherson confirmed that ABN 199 is the number for the Trust and not his personal number. Furthermore, he agreed that the invoices he rendered showed an account number in the name of Stephen McPherson and Julie Walker in their own right and as trustees for the Trust.
[39] Exhibit D48.
Ultimately Mr McPherson agreed the account into which Ms Choi made payments was an account held in the name of Stephen Broderick McPherson, Julie Walker as trustee for Stephen McPherson and Julie Walker Family Trust.
With respect to Exhibit P74, Mr McPherson said he did not recall when the document was prepared. While he prepared the list set out on page one, his son may well have done the typing. As to why the document would be dated 19 July, Mr McPherson said as follows:[40]
Unfortunately, from what I can recollect is that whenever we ask the computer to create an invoice or try and find a specific thing, it went on that specific date. It must have had a calendar inside its head so every time I asked it to put today’s date on it, so if I asked tomorrow, it would have put the previous day’s date on it. I’ve no idea.
[40] T 300.
It was plainly evident that page one of the July contract differs to page one of that exhibit to page one of Exhibit P74. Not only are the company details and address of Ms Choi missing from the July document, it is in a different type face and is subtly different in some respects in terms of its content. Mr McPherson was at a loss to understand where page one of the July contract had come from.
Mr McPherson conceded that there was no contract document which had actually been signed by him. In response to a question as to his awareness of the requirements of the Building Work Contractors Act, Mr McPherson gave the following evidence:
Q.Do you have an awareness that a provision of the Building Workers Contractors Act requires that written contracts be prepared by builders to be signed by clients.
A.    Yeah, yeah, we tried to get that. That was part of the warranty for the building -
Q.Just one thing at a time. So you have an awareness that there's an obligation under the legislation that builders prepare written contracts.
A.    Yep.
Q.    And have them signed up between themselves and -
A.    Yep.
Q.    - clients.
A.    Yep, yep.
Q.    Well, you didn't do that in this case, did you.
A.    No.
Q.    Is there any reason for that.
A.    Pardon?
Q.    Is there any reason for you not doing that.
A.I'm not sure, Mr Hoile, I don't know. I thought that there was a contract but you've now pointed out to me that there was no contract.
Q.Are you aware also of any requirement that you carry building indemnity insurance.
A.    Yes.
Q.    Where do you think that obligation stems from.
A.The obligation comes between the contractor and the client. Now who pays for it is the clients because we try to get indemnity insurance, we virtually fill the forms in with Long Langdon, we put in the application for the indemnity insurance, Ms Choi wouldn't pay Long Langdon then.
Q.    Sorry, you said Ms Choi wouldn't pay.
A.Ms Choi would not pay for the indemnity insurance. I asked Long Langdon how we could get it through council, he said 'Pay the CITV levy and I don't think there'll be any problem', which I paid. I believe Ms Choi may have paid. I think it was $245.
Q.    You didn't arrange any building indemnity insurance.
A.    I tried to get it.
Q.    What prevented you.
A.    For some unknown reason Ms Choi wouldn't pay for it.
Q.    Why do you say she wouldn't pay for it.
A.Because she wouldn't pay for it. I asked her for the levy, I said 'That's the only way that you're going to get it through'.
HER HONOUR
Q.    When was this, Mr McPherson.
A.    Yeah.
Q.    When was this.
A.    Well, this would have been right at the beginning of the -
Q.    You say 'would have been', do you have a recollection.
A.    Before the job started, it's got to go to council to get past.
XXN
Q.Just to follow up on her Honour's questions, are you saying that the question of building indemnity insurance was discussed with Ms Choi at some time.
A.    Yes.
Q.And what are you saying that she said about that. Forget what time it was but what was the substance of what you claim.
A.This is a payment, I think it is a percentage of what you've got to pay. All I can remember vaguely is that we had to pay the CITV levy, which was round about $245.
Q.    How did the topic come up between you and Ms Choi, do you remember that.
A.Because Long Langdon sent a letter saying that the building indemnity was required.
Q.    Well, we've established that you didn't, in fact, take any out.
A.    That's correct.
Q.    So there's no insurance available, is there, for Ms Choi in relation to this job.
A.    No, no.
Q.    Is that right.
A.    Yep.
When further pressed, Mr McPherson said as regards what he discussed with Ms Choi about indemnity insurance, ‘I can’t remember now, its four years ago’.[41]
[41] T 307.
In answer to my questions on the issue of indemnity insurance Mr McPherson gave the following evidence.
Q.Mr McPherson, surely this was a very important concern for you. You had no   money or limited money at the time, I assume.
A.    Yep.
Q.You had a client who wasn't prepared to, you say, pay for the indemnity insurance.
A.    Yes ma'am.
Q.    Which was 200-odd dollars. And you were prepared to go ahead with the building.
A.    Long Langdon said if we pay the CITV levy it would get planning.
Q.    And - what does that mean.
A.    Well, it would go through for planning.
Q.    But planning is not indemnity insurance.
A.    No, ma'am.
Q.    Why were you prepared to proceed on this project without insurance.
A.    I've no idea, your Honour, we didn't have any work and -
By reference to Mr McPherson’s personal taxation return for the financial year ending 30 June 2013 (the financial year in which most of the job was done for Ms Choi and in which she paid most of the money) the return provided that Mr McPherson was employed by McPherson and Walker Family Trust ABN:199 as a construction project manager,[42] and his total income for that year was said to be $20,000.
[42] Exhibit D50.
Mr McPherson’s individual tax return for the year ending 30 June 2014[43] also showed that he was employed by McPherson and Walker Family Trust, ABN 199. The return disclosed only an income from Mr McPherson’s spouse in the sum of $276. Looking at the financial statements for the Trust for the year ended 30 June 2013[44] sales for the year totalled $611,264. Mr McPherson said that income would have been through all three businesses namely his personal endeavours through building excavation, rents from a property he owned in Lonsdale and income from a business run by Julie Walker called ‘Cheezy Grinz’. I note for the year ending June 2014, sales for the Trust were $689,892.[45]
[43] Exhibit D51.
[44] Exhibit D57.
[45] Exhibit D58.
Mr McPherson accepted that he was the owner of the rock breaker. When asked why it was that he needed to hire a rock breaker Mr McPherson explained that if machines go on site they go with three buckets. The claws and any additional specialist equipment would be charged out at an hourly rate on hire.
Mr McPherson did not dispute Ms Choi’s evidence about accepting $7,000 in cash for soil removal and rock breaking.
He agreed that he had told Ms Choi, after the plans had been received that ‘this is all over engineered and it could not be done for less than $80,000’. He agreed that a few days after that discussion he went back to Ms Choi with words to the effect that he had thought of a way to save her $12,000. Ultimately, Mr McPherson said he advised Ms Choi that there possibly may be alternatives by changing the staircase just to rock steps and she said ‘that won’t be too bad. I don’t want a concrete jungle’.
Mr McPherson said:[46]
The plans and the engineers had nothing to do with me so Ms Choi engaged Mr Noble to do the drawings and the engineer. I didn’t. So I thought once we spoke about the steps, that she would notify Mr Noble and the engineer of the changes.
[46] T 320.
Mr McPherson said that he was not aware the rules of the game were that a change to a plan such as what was changing regarding the steps, needed council approval. He conceded that he had not had much experience with councils and council approval. He had thought it may have to go back to the engineer and Noble, not the council.
Mr Hoile asked Mr McPherson to identify an invoice for the $7,000 cash that she had paid. Mr McPherson acknowledged that Ms Choi did not receive a receipt for that cash. In relation to an invoice Mr McPherson rendered on 22 January 2013, which related to rock removal,[47] Mr McPherson accepted that this was in addition to the $7,000 cash. Later in cross examination, Mr McPherson produced a bundle of documents he said supported this invoice and the $7,000 paid to him in cash.
[47] Exhibit D7.
He explained the invoice set out a brief breakdown of the tonnage of the rocks and the actual costs. He produced a flyer from Adelaide Organic Recyclers showing the usual cost of dumping but indicated that as a regular user he was charged $28.60 /t. A receipt showed payment to Adelaide Organic Recyclers for 28 t delivered on 8, 9 and 14 January 2012.
Also produced was a handwritten document that set out the cash payments made by Ms Choi and the dates these payments were made, totalling $7,000. Mr McPherson described this as the note he prepared when he received cash payments from Ms Choi.
Analysis
The evidence in support of Ms Choi’s claim that the work performed by Mr McPherson was defective and non-compliant was overwhelming. I indicate that I have accepted, without exception the evidence of Ms Choi and her witnesses. In particular, Mr Whelan gave his evidence in a helpful, completely straightforward and balanced way. His criticisms of the work Mr McPherson performed, were supported in a number of respects, by that of Mr Jankovic and certainly by implication, the Council engineer.
On the other hand, I had a number of concerns about the evidence of Mr McPherson. He had a very poor recollection of the events. I take into account that he was unrepresented at trial however he was simply unable to provide any adequate response to the criticisms levelled at his work, causing me to question whether, despite what he described as extensive experience in the building industry, he had the requisite skill for the project. The fact that he maintained the garage was structurally sound was troubling. He could provide no proper explanation for his decision to proceed with the project despite his failure to have in place a properly drafted and executed building contract or building insurance. His apparent ignorance of what was required of him was most striking. It appeared Mr McPherson’s most pressing concern had been to secure the project at a time when he had little work on the go.
Furthermore, Mr McPherson’s difficulty in accepting that the account referred to in his documentation and into which Ms Choi made payments, was also held in in the name of the Trust, added to my concerns about the credibility and reliability of his evidence. While he did ultimately make the proper admissions, they were some time coming.
I have found that the work carried out by Mr McPherson was defective and non-compliant. It was necessary to demolish all the work other than the floor slab. Furthermore, I am satisfied that the work quoted on by Mr Buswell, for demolition and then rebuilding the project was reasonable in view of Mr John’s evidence to that effect. I reduce the amount claimed by $2,000 as agreed by Mr Hoile, in relation to the installation of a third panel in accordance with the designs.
Who were the contracting parties?
It is unfortunate that Mr McPherson was unable to locate the original of Exhibit P74. Clearly the original date of that document could not be 19 July 2012, in that page two of the document contemplates building approval and certification and I accept the document was signed by Ms Choi well before that date. The conversation with respect to rock breaking would obviously have to have occurred once work had commenced on the site and rock apparently discovered, well after the original document was signed.

The fundamental question is who were the parties to the contract? I indicate that where Ms Choi’s evidence conflicts with that given by Mr McPherson I accept without reservation, the evidence of Ms Choi. That is, I accept her evidence that in around March 2012 Mr McPherson came to her home with a document concerning the planned works which she signed. She either did not receive a copy of that document from Mr McPherson or mislaid it. On 19 July 2012 Mr McPherson attended at Ms Choi’s home and provided her with the rock breaking agreement following a discussion regarding the use a rock breaker. Given Ms Choi’s concern as to the need for such equipment to be used, Mr McPherson retrieved and provided her with the July contract. I find that the July contract is not the document that Ms Choi was asked to sign back in March 2012.
As ultimately accepted by Mr McPherson, the ABN for the Trust is incorporated in the document. The document contains no signature on behalf of any party other than Ms Choi. At the end of the document it reads: ‘Yours faithfully, SP McPherson’.
The invoices provided to Ms Choi all provide the same ABN and require payment to a bank account shown to be held in the names of and operated by, Mr McPherson and Ms Walker as Trustees for the Family Trust.
As set out above, Ms Choi sought to establish that Mr McPherson entered into the contract as trustee of the Trust, and it is the trustees of the Trust in their capacity as trustees, who are the parties to the contract.
A contract involving personal skill may be held on trust.[48] The Trust Deed[49] names Mr McPherson and Ms Walker as Trustee and provides that the Trustee has the power to ‘engage in any business’ in the following terms:[50]
To acquire carry on or join in carrying on any business either alone or in partnership or as a joint venture, and whether or not as an agent franchisor franchisee or licensee with another or others during such period as the Trustee thinks appropriate with power for that purpose to employ such part or parts of the Capital and employ as its manager any person or persons (whether Trustees or a Trustee of or otherwise interested in the Trust Fund or not) or to leave the entire management of such business to any partner or joint venturer and to renew such business relationships and generally to act in all matters relating to such business or businesses as if the Trustee were beneficially entitled thereto and without responsibility for loss.
[48] Don King Incorporated v Warren (2000) Ch 291 at 320-1; McGowan v Commissioner of Stamp Duties (2002) 2 Qd R 499 at [14].
[49] Exhibit D44.
[50] Clause 7.1(d)(v).
The Trustee has power to deal with the assets of the Trust[51] and open and operate bank accounts,[52] and provides for the employment of employees or agent to transact all or any business required to be done pursuant to the Deed.[53]Furthermore, a Trustee acting in good faith:
…will be entitled to be indemnified out of the Trust Fund in respect of all liabilities incurred relating to the execution of any powers duties authorities or discretions vested in the Trustee, under the provisions of the Deed.
[51] Clause 7.2(a).
[52] Clause 7.3(a).
[53] Clause 8.1.
It is clear from the banking records and the financial statements of the Trust that Mr McPherson was paid a salary by the Trust. All money paid by Ms Choi and all money Mr McPherson received from those for whom he was doing work, was paid into the account held in the name of the Trust. In setting up the Trust, Mr McPherson and Ms Walker can draw no relief from the fact that they were, it seems, acting on the advice of their accountant.[54]
[54] Friend v Brooker (2009) HCA 21 at [88-90].
Mr McPherson as one of the trustees acts on behalf of Ms Walker as co-trustee. Any lack of knowledge about the contract with Ms Choi, does not assist Ms Walker. In this regard Jacobs J in the decision In the Estate of William Just, Deceased (No.1.)[55] observed as follows:
In the case of co-trustees of a private trust, the office is a joint one. Where the administration of the trust is vested in co-trustees, they all form, as it were, but one collective trustee and therefore must execute the duties of the office in their joint capacity.
[55] (1973) 7 SASR 598 at 513.
Mr Hoile gave an alternative analysis leading to the same conclusion by application of the principles of law of agency and of ‘undisclosed principal’. I accept that in this case, Mr McPherson disclosed his principal by the use of the Trust’s A and accordingly, both he and Ms Walker are bound in their personal capacity and in their capacities as trustees of the Trust.
The defendant also relied in particular, on the decision of the NSW Court of Appeal of Dennis Pethybridge v Stedikas Holdings Pty Ltd.[56] The case concerned a building contract and whether it was made with a company Torpoint Investments Pty Ltd or a director of that company, Dennis Pethybridge, who was registered as proprietor of the business name of C & D Asphalt Service. The trial judge found that it was Mr Pethybridge who was a party to the contract. Correspondence between the parties was on letterhead bearing the business name and signed by Mr Pethybridge’s son, who was an employee of Torpoint. It appeared that at all relevant times, the respondent was unaware of the identity of the appellant. In his judgment Campbell JA, with whom Beazley JA and Basten JA agreed, examined the authorities concerning the identity of the party to a contract and found[57] that:
[T]hese cases establish that, in circumstances where the registered proprietor of a business name is not in fact carrying on the business that is carried on under that name, and has not conferred an actual or ostensible authority on the person who is actually conducting the business to act on his behalf, a person who enters a contract with whoever it might be that is carrying on business under the business name does not contract with the registered proprietor of the business name.
[56] [2007] NSWCA 154.
[57] At [39].
In conclusion, Campbell JA said:
Identification of the parties to the contract must be made in accordance with the objective theory of contract; Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65 at 262-266] it was the respondent who bore the legal onus proving that the appellant was the other party to the contract that had undoubtedly been entered for the performance of the work on the two carparks. It was relevant, for that purpose to establish who was carrying on business under the name C & D Asphalt Service. That is because the correct conclusion to draw from the objective evidence is that a reasonable observer of the communications that led to the entering of the contract, together with the background facts known to the parties, would conclude that the parties intended that the contract would be with whomever it was that was carrying on business under the name C & D Asphalt Service.
In FloMin Inc v Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Ltd)[58] Einstein J observed that:
Identification of the parties to [the contract in issue] must be made in accordance with the objective theory of contract.
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’. The terms of the contractual arrangement are to be determined objectively by reference to the text of any documents passing between the parties, the surrounding circumstances known to the parties and the purpose and object of the transaction and its genesis, and the background, context and markets in which the parties were operating.
The court determines the parties to the contract by asking what a reasonable observer would conclude from the objective elements of the communications that led to the entry into the contract, together with the background facts known to the parties.
(authorities omitted)
[58] [2011] NSWSC 585 at [20]-[22].
In Pethybridge the use of the ACN raised a presumption that the company was the contracting party. The presumption however can be rebutted. Ultimately the court found that the presumption was rebutted by other evidence, that is, that the weight of the other objective indicators was such as to enable a finding that notwithstanding within whose name the business name is held, in fact the business was carried on by the company.
Mr Hoile submitted that the same initial presumption arises in this case created by the use of the ABN. That is, that the contracting party was the holder of that ABN, namely the trustees of the Trust.[59] The critical question becomes, on the reasoning advanced in Pethybridge, who in fact ran the business? Mr Hoile submitted that there is only one answer to that, namely the trustees of the Trust. There is he said in fact no evidence to the contrary. Mr McPherson did not in his own name run a business. True it is that Mr McPherson had his own ABN but that number was not used on the documentation and the account held in his name did not receive payments for his work.
[59] Exhibits D45 and D46.
In my view, there is no evidence to rebut the presumption that the business was run by the Trust. From an examination of the Trust taxation records and financial statements, at the relevant time, it is evident that the Trust received all of the income from all of the activities undertaken by Mr McPherson including the monies paid by Ms Choi. The Trust paid all of the expenses that went into Mr McPherson’s activities and owned all of the assets that were deployed in the work. I accept that the only proper conclusion is that there was only one legal entity which conducted business and that is Mr McPherson and Ms Walker as trustees of their family Trust. In his taxation returns, Mr McPherson declared that he is a wage and salary earner and that his employer is the trustees of the Trust. Even accepting that Mr McPherson held a builder’s licence in his name and the number was included on the documents he provided to Ms Choi, there is no evidence before me that Mr McPherson carried on business personally.
It is clear that Ms Choi was under the belief that she was contracting with Mr McPherson independently from any other entity. I note from Pethybridge what Campbell JA said at [60] as follows:
The trial judge’s finding about whom Mr Watton believed he was contracting with is of no significance to the result. Mr Watton’s belief is a subjective matter, and cannot be taken into account in accordance with the objective theory of contract, save to the extent that that belief has been manifested in his words and actions that are known to the other contracting party. Likewise, any beliefs that were manifested by Mr Watton in his communications with the Respondent cannot enter into any consideration of who the contracting parties were, when those communications with the Respondent were not themselves known to the other contracting party.
The Court of Appeal in Pethybridge left open the question of whether it is permissible to look at post contractual communications and conduct to determine whether a contract with a particular party existed.
I note at [59], Campbell JA said:
It was argued that, in the present case, even on that more restrictive view, it is permissible to look to the subsequent communications, because the question of whether the contract was entered into with the Appellant or with Torpoint, is, in substance, no different to a question of whether there was a contract entered into with the Appellant at all.
The Court did not proceed to determine the argument given that even looking at the subsequent communications, would lead to no different conclusion.
As observed by Mr Hoile in submissions, had Mr McPherson used his own ABN on the documents, then there may have been some greater complexity. However, while the initial presumption would favour a finding that Mr McPherson was personally the party with whom Ms Choi contracted, objective analysis as described in Pethybridge, showing that Mr McPherson did not conduct any business and was an employee of the Trust, would likely result in the same conclusion.
Ms Choi seeks a declaration, that Mr McPherson and Ms Walker are personally bound to the contract in their own right and as trustees, and that they have a right of indemnity from the Trust. In Psevdos v Commonwealth of Australia (No.2),[60] Mr Psevdos, in seeking to appeal a sequestration order sought to argue with respect to a transaction entered into in his capacity as trustee of a trust, that the recovery was limited to the assets of the trust. Charlesworth J helpfully sets out the general principles regarding liability of a trustee to pay the debts of the trust as follows:
53The general principles governing the liability of a trustee to pay the debts of the trust are well settled. They are not disputed by Mr Psevdos. They are, in short:
(1)   a trust is not a separate legal entity, nor does the common law recognise a trustee as having assumed an additional or qualified legal personality: Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193 at 253 (Gummow J); Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 186 FCR 450 at [111] (Perram J); Heydon JD and Leeming MJ, Jacobs’ Law of Trusts in Australia (8^th ed, Butterworths, 2016) at [1-01];
(2)   as the legal owner of trust property, a trustee is personally liable for debts he or she incurs in performing the trust, such that the trustee’s liability is not limited by the extent of the trust assets: In re Johnson; Shearman v Robinson (1880) 15 Ch D 548 at 552;
(3)   accordingly, an individual trustee may be bankrupted in respect of a debt incurred in the performance of the trust: Heydon JD and Leeming MJ, Jacobs’ Law of Trusts in Australia (8^th ed, Butterworths, 2016) at [21-02];
(4)   a trustee may have recourse to trust property to satisfy debts properly incurred on the trust’s behalf, and may also enforce an indemnity against trust beneficiaries of full capacity for reimbursement; Trustee Act 1936 (SA), s 35(2); Vacuum Oil Company Proprietary Limited v Wiltshire (1945) 72 CLR 319 at 335—336; Octavo Investments Proprietary Limited v Knight (1979) 144 CLR 360 at 367; Balkin v Peck (1998) 43 NSWLR 706 at 710; and
(5)   depending on the terms of the trust, a trustee may discharge liabilities directly out of the trust property, rather than expending his or her own funds and subsequently seeking reimbursement: Holden v Black (1905) 2 CLR 768.
[60] [2017] FCA 19.
I find that Mr McPherson and Ms Walker are each bound by the contract in their own right and as trustees, and can rightfully be indemnified by the Trust.
DAMAGES
Ms Choi is to be put in the position that would have resulted from performance of the contract with Mr McPherson. She is entitled to the cost of demolition and rebuilding.
In Bellgrove v Eldridge[61] the plurality of the High Court, in discussing the measure of damage in an action for breach of contract where the builder had substantially departed from the specifications requiring demolition, held that the damages could, prima facie:
…be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building of her land which is substantially in accordance with the contract.[62]
[61] (1954) 90 CLR 613 at 617.
[62] At 617.
Subject to the qualification that the work undertaken must be ‘necessary to produce conformity’ and must be a ‘reasonable course to adopt’[63] the measure of damages recoverable by the building owner for breach of a building contract was held to be:
The difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract, with the addition, in most cases, of the amount of profits or earnings lost by the breach.
[63] At 619.
I reduce the amount Ms Choi paid to B&S Constructions Pty Ltd by the $2,000 agreed by Mr Hoile.
I am, however, prepared to accept that Mr McPherson is entitled to the sum of $6,249.70 in relation to the invoice dated 22 January 2013 as it related to the work done to remove rock and rubble from the site. I have found the document originally signed by Ms Choi in around March 2012, was that which appears as page two of Exhibit D6, and includes an exclusion for the cost of soil or rubble removal or rock breaking. Neither the photographs Mr Hoile referred to Mr McPherson, or Ms Choi’s evidence to the effect that she did not see rock breaking equipment on site, establish that contrary to Mr McPherson’s evidence, granite was not found at the site. In the absence of evidence to the effect that the soil test conclusively excluded granite, I am unable to conclude the amounts Mr McPherson invoiced for were not genuine. I do however allow Ms Choi to be credited the sum of $7,000 she paid in cash to Mr McPherson. Ms Choi was never invoiced for the $7,000 and the documents produced[64] by Mr McPherson do not provide a satisfactory basis upon which such a claim for payment was made.
[64] Exhibit D73.
Ms Choi is entitled to interest. I allow the sum of $15,500.
Ms Choi also claims damages for ‘distress and inconvenience’. I note the discussion in Cheshire and Fifoot’s Law of Contract,[65] and in particular the general rule that damages for breach of contract are not awarded for distress.[66] Mr Hoile pointed to the exception concerning an award to a building owner against a builder for physical inconvenience and mental distress arising from the builder’s breach of contract, where such inconvenience and distress is directly related to the inconveniences caused by the breach.[67] Ms Choi gave evidence of the inconvenience she had suffered by virtue of the delay in completion and also in relation to the loss associated with plants she had purchased that did not survive because of the delay. In my view, there is insufficient evidence to support the claim in relation to the loss of plants and in view of Ms Choi’s admission to the effect she is not a particularly good gardener, I dismiss that component of her claim.
[65] 9^th ed, Butterworths (2008) at 23.19.
[66] Fink v Fink (1946) 74 CLR 127 at 1423.
[67] See Boncristiano v Lohmann [1998] 4 VR 82.
As regards damages for inconvenience, I note that there was a lengthy period where her property was a building site. However, without meaning to be critical, photographs showing Ms Choi’s property before the project commenced show her property to be very untidy and overgrown. I am unsure whether the ‘building site’ that she lived with could be said to be of such a great concern. I do agree however, that Ms Choi is allowed something for the physical inconvenience and allow $1,500 in this regard.
I allow $7,782 on account of the expert fees paid in respect of the investigations to determine the necessity and scope of the rectification works.
I attach a Summary of the award of damages I have made.
The Court orders that:
1The plaintiff’s claim is dismissed.
2There will be judgment for Maria Choi in the sum of $145,871.05.
The Court declares that:
3Stephen McPherson and Julie Walker entered into and performed the Building Contract as collective trustees of the Stephen McPherson and Julie Walker Family Trust.
4Stephen McPherson and Julie Walker are jointly and severally liable to Maria Choi in the sum of $145,871.05.
5Stephen McPherson and Julie Walker are entitled to an indemnity from the assets of the said Trust in the sum of $145,871.05.
I will hear the parties as to costs.
Summary of Award of Damages

1.    Builder’s Charges

1.1     Invoice 2027 (16/6/14)

·   Prepare quote for remedial work - $250.00

·   Conduct investigation & excavation - $611.00

·   Public Liability insurance - $277.00

·   Concrete driveway and council path - $6,057.00
$7,195.00

1.2     Invoice 2080 (28/10/14) $22,840.00

1.3     Invoice 2102 (16/12/14) $28,549.75

1.4     Invoice 2135 (6/2/15) $28,550.00

1.5     Invoice 2153 (11/3/15)

(NOTE: this invoice includes development application fee plus boundary survey fee)
$35,204.00 $122,338.75

2.   $7,000.00 Cash Payments for Soil Removal The return of $7,000 cash payments $7,000.00

3.   Interest for Payments Made to Builder $15,500.00

4.   Expert Fees for Rectification
Expert Fees paid in respect of investigatory work to determine rectification works
$7,782.00

5.   General Damages
$1,500.00

Less amount agreed by Mr Hoile
Less invoice dated 23/1/13

Sub Total

($2.000.00)
($6,249.70)

TOTAL

$154,120.75

- $8,249.70

$145,871.05

1. Builder’s Charges
1.1 Invoice 2027 (16/6/14) · Prepare quote for remedial work - $250.00 · Conduct investigation & excavation - $611.00 · Public Liability insurance - $277.00 · Concrete driveway and council path - $6,057.00	$7,195.00
1.2 Invoice 2080 (28/10/14)	$22,840.00
1.3 Invoice 2102 (16/12/14)	$28,549.75
1.4 Invoice 2135 (6/2/15)	$28,550.00
1.5 Invoice 2153 (11/3/15) (NOTE: this invoice includes development application fee plus boundary survey fee)	$35,204.00	$122,338.75
2. $7,000.00 Cash Payments for Soil Removal	The return of $7,000 cash payments	$7,000.00
3. Interest for Payments Made to Builder	$15,500.00
4. Expert Fees for Rectification	Expert Fees paid in respect of investigatory work to determine rectification works	$7,782.00
5. General Damages	$1,500.00
Less amount agreed by Mr Hoile Less invoice dated 23/1/13	Sub Total ($2.000.00) ($6,249.70) TOTAL	$154,120.75 - $8,249.70 $145,871.05