Opal Construction Group Pty Ltd v Christoff - [2025] NSWCATCD 127

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation: Opal Construction Group Pty Ltd v Christoff [2025] NSWCATCD 127
Hearing dates: 16, 17 and 18 July 2024 (submissions to 27 September 2024)
Date of orders: 3 February 2025 (Amended 22 August 2025)
Decision date: 03 February 2025
Jurisdiction: Consumer and Commercial Division
Before: R C Titterton OAM, Senior Member
Decision:
The Tribunal makes the following amended orders under section 63 of the Civil Administrative Tribunal Act 2013:
(1)   On or before 17 February 2025, the parties are to provide an agreed version of draft short minutes of order which complete the following proposed draft orders in (a), (b), (c) and (d) below in respect of the agreed reliance damages:
(a)   In matter 2023/00390181, on or before 3 March 2025, the respondents are to pay the applicant the sum of $3093.74.
(b)   Matter 2023/00390181 is otherwise dismissed.
(c)   In matter 2023/00390707, on or before 3 March 2025, the respondents are to pay the applicant the sum of $3093.74.
(d)   Matter 2023/00390707 is otherwise dismissed.
(2)   Costs are reserved.
(3)   Any party seeking costs should file submissions and if necessary evidence on or before 3 March 2025.
(4)   The other party may respond on or before 17 March 2025.
(5)   The moving party(ies) may reply on or before 23 March 2025.
(6)   Submissions are to be limited to 5 pages (not including any evidence).

Catchwords:
BULDING AND CONSTRUCTION – expectation damages – whether expert reports have proper factual foundation

Cases Cited:
Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd (2015) 324 ALR 392
Commonwealth of Australia v Amann Aviation (1991) 174 CLR 64
Construction & Design Australia Pty Ltd v Robinson (No 2) [2024] NSWSC 376
Dyna Constructions Pty Ltd v Bocco Developments Pty Ltd [2021] NSWDC 507
Epperson v Dampney (1976) 10 ALR
JLW (Vic) Pty Ltd v Tsiloglou and Others [1994] VicRp 16; [1994] 1 VR 237
Malone on behalf of the Western Kangoulu People v State of Queensland (2021) 287 FCR 240
Mikhail v JJ Built This Pty Ltd [2021] NSWCATAP 159
Nguyen v Cosmopolitan Homes [2008] NSWCA 246
North Sydney Leagues Club Limited v Synergy Protection Agency Pty Limited [2012] NSWCA 168
North Sydney Leagues’ Club Ltd v Synergy Protection Agency Pty Ltd (formerly Joseph Merhi Industries Pty Ltd) t/as Synergy Protection Agency [2011] NSWSC 286
Pacific Wireless Pty Ltd v Breeze Logistics Australia Pty Ltd [2019] VSC 64
R Developments Pty Ltd v Forth [2016] ACTSC 8
Troulis v Vamvoukakis [1998] NSWCA 237
Web Offset Printers Ltd v Independent Media Ltd [1996] CLC 77
Western Kangoulu People v State of Queensland (2021) 287 FCR 240; [2021] FCAFC 176

Texts Cited:
Halsbury’s Laws of Australia, online edition
McGregor on Damages, 22nd Edition
Rawlinsons, Australian Construction Handbook 2023

Category: Principal judgment
Parties: Opal Construction Group Pty Ltd, Applicant
L Christoff and H Rake, Respondents
Representation:
Counsel:

Applicant, A Hopkins
Respondent, S Ipp
Solicitors:
Applicant, Reuben George Lawyers
Respondent, ABW Lawyers

File Number(s): 2023/00390181 (formerly proceedings HB 23/27183)

REASONS FOR DECISION

Introduction

There were two proceedings before the Tribunal.
The first was matter 2023/00390181 (formerly proceedings HB 23/27183) in which Opal Construction Group Pty Ltd (Builder) is the applicant and Mr Louie Christof and Ms Hayley Rake are the respondent homeowners. The second matter is 2023/00390707 (formerly proceedings HB 23/27119) in which the Builder is again the applicant and Mr Nicholas Christoff and Mrs Romy Christoff are the respondent homeowners.
In matter 2023/00390181, the applicants seek an order that the Builder pay them $143,627.00 (plus GST), and costs.
In matter 2023/00390707, the applicants seek an order that the Builder pay them $129,612.00 (plus GST)^,and costs.
I will refer to Mr Louie Christof and Ms Hayley Rake and Mr Nicholas Christoff and Mrs Romy Christoff collectively as the Owners.
Mr Louie Christof and Ms Hayley Rake own unit 1 of a duplex at Carlingford. Mr Nicholas Christoff and Mrs Romy Christoff, who are the parents of Mr Louie Christoff, own unit 2.
On 28 September 2022, each of Mr Louie Christof and Ms Hayley Rake on the one hand, and Mr Nicholas Christoff and Mrs Romy Christoff on the other one hand, entered into contracts with the Builder for the construction of their respective duplexes.
It is not disputed that prior to the Builder commencing the contracted works, the Owners did not pay the deposits due under the contracts, and after the Builder issued Show Cause Notices to the Owners, the Builder terminated the two contracts with effect from 15 December 2022.
Shortly before the hearing commenced on 16 July 2024, the Owners conceded that the Builder had validly terminated the two contracts and agreed to reliance damages in the amount of $6,187.47.
What remains in issue is the Builder’s claim for damages for loss of profits.
The Owners contend that the Tribunal ought to find that the evidence faIls far short of the Builder establishing an entitlement to damages for loss of profits.
For the following reasons, I accept that submission.

Evidence

Builder’s evidence

The evidence of all parties was contained in a Joint Tender Bundle filed by the parties on 9 July 2024 (JTB).
The lay evidence relied on by the Builder were the affidavits of Mr Samir Jammal (Mr Jammal) respectively sworn on 25 September 2023 and 16 February 2024. Mr Samir’s son, Mr Frank Jammal, is the sole shareholder of the Builder and authorised Mr Jammal to swear his two affidavits on behalf of the Builder.

Affidavit of Mr Jammal of 25 September 2023

The affidavit of 25 September 2023 deals with the background to the parties entering into the two contracts, the issuing of insurances policies, the issuing of invoices for those contracts, the Owners’ failure to pay the deposits and the issuing of the Show Cause Notices. The affidavit also sets the works that took place leading up to the execution of the two contracts. Affidavit of Mr Jammal of 16 February 2024
The affidavit of 16 February 2024 responds to the Owners’ evidence. The affidavit also attaches an Excel spreadsheet prepared by Mr Jammal in respect of which he states at [12]:

At page 20 is an excel spreadsheet I prepared for the purpose of these proceedings recording what the Applicant’s actual costs would have been at the time of signing the building contracts. I prepared this spreadsheet based on the quotes set out in Exhibit SJ-1, and the allowances set out in the Respondents’ respective building contracts. The column marked “Trade” contains the various trades that were required to complete the project. The column marked “Price” contains the expected costs for undertaking the build. The column marked “Notes” sets out where I sourced the estimated costings. The Builder’s margin I have applied is approximately 21%.

The affidavit then addresses the issue of failure to mitigate losses. Mr Jammal states:

Mitigation
103.   As deposed to in my Earlier Affidavit, I have been in the building and construction industry for over 30 years. I have been heavily involved in all aspects of construction, including the tendering and pricing stage for a project.
104.   If Hayley is correct that the Applicant could amend its policies of insurance, then in my experience it can take anywhere between 6 months to 18 months to have contracts signed depending on (among other things):-
a)    The complexity of the build;
b)    Whether the registered proprietor has their affairs in order (such as finance, development consent and any other approvals);
c)    The market. In my experience, during periods of high interest rates homeowners are less inclined to undertake builds and borrow money from banks. Furthermore, when the market is saturated with building and construction projects, this also sometimes supply chain issues due to increased demand in materials;
d)    Whether there are any alterations that need to be made to any designs or plans;
e)    Whether there are going to be changes to the specifications, designs or finishes; and
f)    Whether the Applicant was in a position to undertake the work

105. As was the case with the proposed build at the Property, building contracts were not entered into between the Applicant and the Respondents until approximately 11 months after I had first began discussions with the Respondents because of the Respondents’ delays.
106. If the Respondents were ready, able and willing to vary the Applicant’s home warranty insurance to a nominal figure of $20,000.00 per policy (so that the Applicant can proceed to tender for projects), then I still do not expect that the Applicant would be in a position to contract work for at least 6 to 12 months. I form this view based on my experience, and on the matters set out at paragraph 104 above.

Mr Jammal was required for cross-examination. Where relevant I will refer to his evidence below.

Builder’s expert evidence

The Builder’s expert evidence was the report of Mr David Madden of MBMpl Pty Ltd dated 28 March 2023. A letter of instructions was provided to him on 14 November 2022 (Letter of Instructions) by the Builder’s solicitors.
The Letter of Instructions relevantly states:

Issues that require your expert opinion
8.    The Contracts between the Builder and the Homeowners are presently on foot. However, no construction works have been undertaken to date by the Builder (due to non-payment of the deposits under the Contracts).
9.    The Builder anticipates that the Homeowners will fail, refuse and/or neglect to comply with N & R Show Cause and L & H Show Cause. As such, the Builder intends to quantify its entitlement to damages if/when the Contracts are terminated.
10.    Please prepare an expert witness report (in anticipation of litigation) recording answers to the following:-
a.    What would be the fair and reasonable costs for the Builder to undertake the building and construction works in accordance with the Contracts having regard to the Architectural Plans, the Structural Drawings, the Stormwater plans and the Geotechnical report; and
b.    Having regard to the Builder’s margin in the Contracts, what would be the fair and reasonable profit for the Builder to undertake the building and construction works in accordance with the Contracts.
11.    The Builder and our office are of the view that, given that no building works have been undertaken at the Property to date, an inspection of the Property will not be required. Please confirm whether you share that view and if not, whether you will require access to the Property.

Enclosed with the Letter of Instructions were the Tribunal Expert Witness Code of Contract; the two contracts; the architectural plans for the properties; the structural plans for the properties; the stormwater plan plans for the properties; the “Geotech Report” for the properties and the two Show Cause Notices.
In section 4.0, Mr Madden states:

4.0    ASSUMPTIONS & EXCLUSIONS
4.1.    I have made the following general assumptions in preparing my building costings:
a.    That the works are of medium-high standard and quality based on the information and specification given in the Contract/s (Internal Fit-out & Services Schedule), plans and drawings as listed in Section 3.0.
b.    That the work would be constructed, managed, supervised and co-ordinated to a suitable standard.
c.    That all work would be completed during normal working hours.
d.    That the prices in the Contract/s do not include the removal of unidentified hazardous materials and excavation and removal of rock.
e.    That the site conditions are normal and there are no restrictions imposed on the site and access to site.
f.    That the Builder would be granted access to the Property and would adopt normal, suitable and reasonable economical methodologies.
g.    That the prices in the Contract/s do not include additional works and costs arising out of site latent conditions
h.    That the prices in the Contract/s do not include professional fees, authority fees and any fees, other than the construction costs for the Builder to undertake the works in accordance with the Contract/s and its overheads and profit.
i.    That the works under the Contract/s would commence soon after the execution of the Contract/s and within 2022.
j.    The base price of the Contract/s is based on 2022 Fourth Quarter Prices, when the Contract/s were established.
k.    Any increase in the costs of labour and/or material during the course of the works incurred by the Builder shall be reimbursed to the Builder by virtue of Clause 2 of Deed of Variation dated 24 September 2022 contained in the Contract/s.
l.   My Cost Estimate and Assessments are based upon the following allowances:
i.    Costs are based upon prices at the commencement of 2023.
ii.    An allowance of 10.4% for site preliminaries (based on the approximate percentage of preliminaries for Town House 2 Storey High Standard as indicated in Estimating - Elemental Costs of Buildings in the Rawlinsons Australian Construction Handbook 2023 (Rawlinsons 2023)).
iii.    The prices or costs directly adopted from Rawlinsons 2023 have included the Builder’s head office overheads and profits at 5%.
iv.   The costs of the works include all trade costs and site preliminaries, which include site supervision and overheads, but exclude the Builder’s head office overheads and profits.
…

Mr Madden explains his methodology for his report as follows:

5.0   METHODLOOGY
…
5.2   I have based on [sic] the Rawlinsons Australian Constriction [sic] Handbook 2023 (Rawlinsons 2023) for my costings of the costs of the works under the Contract/s. I consider the rates and costs published in the Rawlinsons Australian Constriction Handbooks (all editions over the years) are well representative of the typical and average rates and costs in the market for the construction work in the past and currently. ….
5.3.    I have adopted the Building Costs per Square Metre methodology (the Costs/m2 Method) in estimating the building construction costs. As described in Rawlinsons 2023 (Page 20), the Costs given (based on Costs/m2 method):
a.    should be used for initial feasibility studies only.
b.    are average prices for typical buildings at December 31, 2022 within the metropolitan areas including allowance for Preliminaries and Builders profit and overheads (ADD additional allowances for increased costs) (refer Anticipated Building Price Adjustment page 15) and when referring to country areas.
c.    should be adjusted to take account of such factors as sloping sites, foundation problems, high wall to floor ratios, unusual shape and any special design factors where costs can vary considerably from the range given.
d.    are based on the total floor area of all levels measured between the inner faces of external walls.
e.    can provide no more than a rough guide to the probable cost of a building, and whilst in many instances a single rate is sufficient to indicate this ruling average cost, there are many other instances such as banks, function centres, theatres, churches, residential buildings, where costs can vary considerably from the range given.
f.    EXCLUDE parking areas.
g.    EXCLUDE land, demolitions, balconies, covered ways, external services outside 3.0m from the outside face of the building, external works other than those immediately adjacent to the building, loose or special equipment, furniture, furnishings, legal and professional fees.

5.4. Despite that the Costs/m2 Method has certain limitations in presenting an accurate estimate of the building costs (as noted in Paragraph 5.3a, b and e), I am of opinion that this method does in fact provide fairly accurate estimates of costs for typical simple residential and light industrial developments.
(emphasis added)

Relevantly, Mr Madden concludes:

7.0    BUILDER’S MARGIN AND PROFIT
7.1   I am instructed to provide my opinion on the fair and reasonable profit for the Builder to undertake the building and construction works in accordance with the Contract/s, having regard to the Builder’s margin in the Contract/s.
7.2   The builder’s margin allowed by the Builder in Schedule 1 of both Contract/s is 10% (as opposed to the nominal 20% as set out in the standard form of HIA NSW Residential Building Contract for New Dwellings). This builder’s margin applies to the costs of additional/ extra works arising out of variations, execution of provisional sum items and site latent conditions.
7.3   Based on industry practice, the builder’s margin covers head office/corporate overheads and profit. It does not cover site office which is included in the building and construction costs and is usually included as part of the cost of preliminaries.
7.4   The tender or contract price includes the building and construction costs and the builder’s margin allowed by the builder. The builder’s margin allowed by the builder in the tender or contract price does not necessarily have relationship or consistence with the builder margin set out in the contract. The simple way to work out the builder’s margin allowed in the tender or contract price is to deduct the tender or contract price with the building and construction costs.
7.6   Based on the contract price of the Unit 1 construction, which is $1,359,657.24 (excl GST) and the costs of the building and construction works of $1,140,785.81 (excl GST) for Unit costs, based on my estimate, the builder’s margin allowed in the Contract for the Unit 1 construction would be $218,871.43 (excl GST). This equates to approximately 19% of the building and construction costs, which is within the commercial expectation of the builders in the house construction market and is deemed to be fair and reasonable.
7.7   Based on the contract price of the Unit 2 construction, which is $1,290,176.56 (excl GST) and the costs of the building and construction works of $1,109,278.11 (excl GST) for Unit costs, based on my estimate, the builder’s margin allowed in the Contract for the Unit 2 construction would be $180,898.45 (excl GST). This equates to approximately 16% of the building and construction costs, which is within the commercial expectation of the builders in the house construction market and is deemed to be fair and reasonable.
…
7.9   As noted above, the builder’s margin includes the builder’s head office overheads and profit expected to be covered and/or achieved through the execution and completion of works under the Contract/s. The termination of the Contract/s results in the builder being deprived of opportunity of obtaining the builder’s margin allowed and anticipated, which is deemed to be entitled by the builder.
7.10   I do not have an opinion in respect of the split of the head office overheads and profit in the margin as assessed above. The head office overheads vary significantly among builders. Head office overheads, which might include property costs, finance charges on loans, insurances, staff and/or directors wages, taxes, accounting and external advisors costs, marketing and tendering activities costs, etc., are commonly calculated as a percentage against project costs by the builders. Based on my knowledge and the recognition of the industry, for the majority of the builders, this percentage is somewhere between 2.5% and 10% depending on the establishment and turnover of the builders.
(emphasis added)

Owners’ evidence

Mrs Christoff, Mr L Christoff and Mr N Christoff each swore affidavits respectively dated 15 September 2023, 19 September 2023 and 20 September 2023.
Ms Rake swore two affidavits respectively dated 16 September 2023 and 31 October 2023.
None of the Owners were required for cross-examination.
The Owners’ expert evidence was that of Mr George Zakos of G L Zakos & Associates Pty Ltd dated 23 October 2023.
In his report, Mr Zakos gives his opinion as to the reasonable cost of the building works and a fair and reasonable profit for the Builder to undertake those works.

As to Unit 1, Mr Zakos says that:

a contract price ranging between $1,453,023.74 and $1,605,973.60 would be considered fair and reasonable. In this instance, the contract price for Unit 1 was $1,495,622.98 which is within the acceptable range of a fair and reasonable price;

a profit margin of 7.57% has been included in the contract sum.

As to Unit 2, Mr Zakos says that:

a contract price of ranging between $1,385,375.13 and $1,531,204.09 would be considered fair and reasonable. In this instance the contract price for Unit 2 was $1,419, 194.25 which is within the acceptable range of a fair and reasonable price;

a profit margin of 7.06% has been included in the contract sum.

Joint Expert Evidence

On the second day of the hearing, namely 17 July 2025, the parties provided the Tribunal with a document titled “Quantum Conclave” signed by each expert and dated 17 July 2023 (Conclave Schedule).
In the Conclave Schedule, the experts quantified the total claim against the Owners in the amount of $300,563 (including GST) being:

the Builder’s claim for loss of profit damages in relation to Unit 1 at $143,627.00 (excluding GST);

the Builder’s claim for loss of profit damages in relation to Unit 2 at $129,612.00. (excluding GST).

When the Conclave Schedule was provided to me on the second day of the hearing, Mr Hopkins observed that the experts would no longer be required and no “hot tub” would be necessary. Mr Ipp said he held a “completely different position” and “most certainly” did need a hot tube, but given he had just been handed a copy of the Conclave Schedule, Mr Ipp proposed that the Conclave Schedule take place the following day.
Mr Hopkins said he opposed that course, noting that the Conclave Schedule was a joint opinion of the experts and there was no longer any disagreement between them, and what Mr Ipp “no doubt” proposed to do was to cross-examine his own expert in order to get concessions, in an attempt to “go behind” the Conclave Schedule.
There followed an unedifying argument between counsel, which continued in post-hearing written submissions. I enquired what was the purpose of the hot tub. Mr Ipp indicated that it was “simply because” the Tribunal should not be required to accept the agreed position of the experts. Mr Ipp submitted that his clients would be “severely prejudiced” were he not allowed to put propositions to the Builder’s expert Mr Madden. He described the Builder’s submission that there be no hot tub, and hence he be denied the opportunity to cross-examine Mr Madden, as “astonishing”.
Mr Hopkins made further submissions, reiterating that Mr Madden had calculated the loss of profits at a particular figure (being approximately $400,000), Mr Zakos had “come in at” a lower figure (being approximately $185,000), and the experts had now compromised at somewhere in between (being $300,563 including GST).
Mr Hopkins submitted that it would not be in accordance with the guiding principle to hold the proposed hot tub, and it was not appropriate for the Owners, since there were no differences between the experts, to manufacture some, “which is blatantly what this is”.
Cognisant that ultimately the Tribunal is not bound by the expert evidence, even if no opposing expert opinion evidence is adduced, (a matter I return to below), my ruling was to allow the hot tub to take place the following day, the main purpose was to allow Mr Ipp to cross-examine Mr Madden. In addition, as the Conclave Schedule containing no reasoning of why the experts had agreed on the various items, I thought that I would be assisted by hearing from the experts.
At the beginning of the third day, Mr Hopkins renewed his application that the hot tub not be permitted to be held. He referred me in particular to Garofali v Moshkovich [2021] NSWCATAP 242 where the Appeal Panel stated:

70 It is well established that a Court or Tribunal may reject evidence of an expert witness who has resiled or changed his or her opinion from what was agreed at a joint expert witness conclave and may reject any additional expert evidence adduced after the conclave (Lucantonio v Kleinert [2009] NSWSC 929; Giovas v F.E.V. Mono Constructions Pty Ltd [2015] NSWCATCD 16; Long & Fitzpatrick v Wollongong Homes Pty Ltd [2015] NSWCATCD 141).
71 It fundamentally undermines the principles underlying joint conclaves (where experts are, after they have prepared their respective reports, required to confer and attempt to narrow disagreements and clearly articulate what they agree upon and disagree upon); the duties of experts under the NCAT Expert Witness Code of Conduct; the principles of the Tribunal under s 36 of the NCAT Act; and the credibility of an expert witness; if an expert witness resiles from an agreed opinion expressed in the joint conclave report unless there are compelling reasons to explain the change of opinion. The Tribunal is entitled to disregard or give no weight to the purported change of opinion and the further evidence it is based upon.
(emphasis added)

Mr Hopkins addressed this authority at some length, noting that Mr Ipp was “obviously unhappy” that the experts had sat down and narrowed the issues, and that what Mr Ipp now wanted to do was “to have a conclave to essentially inject uncertainty”, and that if Mr Zakos now had a different opinion to that set out in the joint report, then Mr Zakos’ obligation was to prepare a supplementary report under the Tribunal’s Procedural Direction 3 “Expert Evidence”.
Mr Hopkins submitted that there were two ways forward. If Mr Zakos was resiling from his opinion as expressed in the Conclave Schedule, the Builder was entitled to a supplementary report. If that was not going to happen, then the fundamental rule is that a party cannot cross-examine their own witness. Mr Hopkins further submitted, “and I make no bones about it”, that Mr Ipp was “throwing his toys out of the pram because he’s got a joint report he doesn’t like”.
After this, I asked Mr Hopkins directly what his application was. He said it was to reconsider my decision of the previous day to allow a hot tub, failing which, while there was no right to a hot tub, Mr Ipp could cross-examine Mr Madden, but not the Owner’s expert Mr Zakos.
In response, Mr Ipp that he was entitled to procedural fairness to test the opinions expressed by Mr Madden, and would not seek to have Mr Zakos resile, change or alter his opinion. This he submitted would assist the Tribunal in its fact finding. Further, Mr Zakos could assist the Tribunal in this regard, but this would be a matter for the Tribunal.
I ruled that it was appropriate that Mr Ipp cross-examine Mr Madden and the cross-examination proceeded. In time, Mr Hopkins then cross-examined Mr Zakos.
Therefore, I was somewhat surprised to subsequently read in the Owners’ submissions that I had denied procedural fairness to the Owners. That is a matter on which I express no view. It is an issue that can be explored in another place if and when there is an appeal from this decision.
I should note that, in preparing these reasons, I was not initially provided with any form of transcript, despite telling the parties that if anyone had a transcript prepared, they were to provide me with a copy. Neither party did so, but the Owners’ submissions were replete with transcript references. Accordingly, I asked for a copy of that transcript to be provided and one was. However, it was very incomplete and appeared to have been prepared “in house”, rather than being sent to an independent transcribing source. The upshot of this was that I had to spend many hours listening to the sound recording, which accounts somewhat for the delay in delivering these reasons.

Relevant facts

Given the manner in which the proceedings unfolded, the relevant facts can be stated relatively concisely.
In late 2021, the Owners’ architect introduced them to Mr Jammal, a builder and developer. Mr Jammal was a director of a building company Eminence Construction Group Pty Ltd (Eminence).
In late 2021, Mr Jammal proposed that the Owners engage Eminence to redevelop their property at Carlingford (Property) and build the duplex homes on the Property.
On 10 February 2022, Mr Jammal sent a written estimate of the project cost to Mr L Christoff totalling $2,914,817.23 (Estimate) on behalf of Eminence.
In about July 2022, Mr Jammal proposed that the Owners enter into contract with the Builder rather than Eminence due to limitations with Eminence’s home warranty insurance.
On 28 September 2022, Mr L Christoff and Ms Rake entered into a residential building contract with the Builder for the construction of a duplex home at the Property (Unit 1 Contract).
Also on 28 September 2022, Mr N and Mrs R Christoff entered into a residential building contract with the Builder for the construction of a neighbouring duplex home at the Property (Unit 2 Contract) (collectively the Contracts).
For present purposes those contracts were in identical terms and relevantly provided that:

Schedule 1
2(a)     Contract Price
…
WARNING - The contract price may vary under this contract. The reasons for variations to the contract price may include:
Clause 5 - planning and building approvals;
Clause 6 - a survey being required;
Clause 14 - a consultant being engaged to report on the site conditions;
Clause 15 - an increase in a tax, charge or levy after this contract is signed;
Clause 18 - variations to the building works;
Clause 20 - an adjustment for prime cost items and provisional sum items.
13   Builder’s Margin
The builder’s margin is 10%
Clause 3. Owner’s Obligations
3.1   The owner must pay the contract price and other money that becomes payable under this contract in the manner and at the times stated in this contract. ‘
3.2    If there is more than one owner:
(a)    the obligations in this contract apply to each of them individually and to all of them as a group;
(b)    a quote, notice, claim or any other communication to the owners has only to be given to one of the owners; and
(c)    only one of the owners has to sign a quote, notice, instruction, direction or other communication to bind all of the Owners. It is not disputed that prior to the Builder commencing the Contract works the Owners did not pay the deposits due under the Contracts and after the Builder issued show cause notices to the Owners, the Builder terminated the Contracts with effect from 15 December 2022.

Clause 17. Progress Payments
17.1   The owner must pay the deposit stated in Item 2(b) of Schedule 1 on the later of the day that:
(a)    this contract is signed by the owner; and
(b)    warranty insurance described in Schedule 6 is in force and the owner is provided with a certificate of insurance for such insurance.

Clause 27. Ending the Contract – Breach
…
27.2 A substantial breach of this contract by the owner includes but is not limited to if the owner:
(a) fails to pay any amount by the due date;
…

27.3    If a party is in substantial breach of this contract the other party may give the party in breach a written notice stating:
(a)    details of the breach; and
(b)    that, if the breach is not remedied within 10 working days, that party is entitled to end this contract.

27.4   If 10 working days have passed since the notice of default is given and the breach is not remedied then the party giving the notice of default may end this contract by giving a further written notice to that effect.
27.5   All notices to be given under this Clause must be given by registered post or personally.
29.    Effect of the Builder Ending the Contract
29.1   If the builder ends this contract under Clause 14, Clause 26, Clause 27 or Clause 28, then at the election of the builder, the owner must pay as a debt due and payable either:
(a)    the greater of the cost of or the market value of the building works to date including the cost of any materials on the site or already ordered from suppliers and the cost of quitting the site less the amount already paid by the owner; or
(b)    damages.

On 15 July 2024, the Owners’ solicitors sent a letter to the Builder’s solicitors relevantly stating:

We are instructed that, in the interests of narrowing the issues in dispute between the parties the:
a.    First and Second Respondents admit liability for breach of the First Building Contract (as defined in the Points of Claim), in particular, they admit paragraphs 18, 19, 22, 23 and 24 of the Points of Claim in their entirety.
b.    Third and Fourth Respondents admit liability for breach of the Second Building Contract (as defined in the Points of Claim), in particular, they admit paragraphs 25, 26 and 29, 30 and 31 of the Points of Claim in their entirety.
Further, in so far as the Applicant’s claim for loss is concerned, the Respondents:
c.   admit that the Applicant is entitled to recover costs and expenses incurred and paid prior to the Applicant terminating the First Building Contract and the Second Building Contract totalling the amount of $6,187.47; and
d.    otherwise continue to deny that the Applicant is entitled to recover the quantum of its claim for loss and damage (in excess of $6,187.47).

Remaining Issues to be determined

The first issue to be determine is the amount (if any) payable to the Builder as damages for loss of its bargains.
The second issue is, if do find in favour of the Builder on this first issue, has the Builder failed to mitigate its loss such that any damages should be reduced?

Submissions

Both parties’ counsel made extensive oral submissions on the final day of the hearing. Both parties supplemented their counsels’ oral submissions, the Owners by submissions (32 pages) dated 9 September 2024 and the Builder by submissions in reply (25 pages) dated 27 September 2024. I summarise the parties’ written submissions as follows. By and large, the written submissions amplified the oral submissions.

Builder’s submissions

The Builder accepts that:

it bears the onus of proving damages;

to satisfy that onus it must persuade the Tribunal, on balance, that its expectation that it would generate profit had a likelihood of attainment rather than being mere expectation;

the Builder’s subjective expectation (in this case Mr Jammal’s costings) must be objectively determined to be likely to have been obtained (in this case by the objective costings undertaken by the experts).

The Builder submits that, contrary to the Owners’ submissions, there is ample evidence upon which damages can be calculated, being:

the Builder’s own calculations as to its profit expectation, this being the evidence of Mr Jammal which is based on contemporaneous quotations obtained for the build and the builder’s calculations which were done for the purpose of costing the contracts;

the Conclave Schedule;

the Builder’s expert’s calculations; and

the Homeowner’s expert’s calculations.

The Builder submits that, ultimately, there is no reason to not accept the Conclave Schedule, but even if there were that would not have the effect that the expert’s individual reports would be discarded.
After briefly setting out the “Contractual Mechanism for Termination”, the Builder then sets out various authorities on which it relies, including Mikhail v JJ Built This Pty Ltd [2021] NSWCATAP 159 at [50] — [52].
Then, over some 12 pages, the Builder sets out its response to Owners’ submissions that the Tribunal should conclude that there was no loss.
The Builder then addresses its alleged failure to mitigate its loss, and the Owners’ submission that they were ready, willing and able to perform the contracts.
Finally, the Builder submits that GST should be included because the profits would have been eared on a taxable supply: Airloom Holdings Pty Ltd v Thales Australia Ltd [2011] NSWSC 1513.

Owner’s submissions

The Owners’ submissions may be summarised as follows.
First, the relevant legal principles can be stated as follows:

damages awarded for lost profits are the net profit retained by the plaintiff, being the difference between gross receipts and the payment of expenses necessary to perform the work: Commonwealth of Australia v Amann Aviation (1991) 174 CLR 64. A builder’s measure of loss is the contract price less the cost to the builder: McGregor on Damages, 22nd Edition, paras 32-022, p 1048;

for a builder to recover damages for a loss of profit, the builder must discharge the onus of proving that on the balance of probabilities it would have made a profit on the project. The plaintiff must prove the fact of loss and the amount of damages on the balance of probabilities: JLW(Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 241.

Secondly, for the Builder to succeed on its claim for loss of profits it must prove that its costs of performing the contracts would have been less than the contract price of the contracts. The Owners submit that the Builder has failed to discharge its onus of proof with the consequence that the Builder’s claim for damages for loss of profits ought to be dismissed.
Thirdly, the Builder has failed to prove its claim because:

the Builder’s expert evidence is not evidence of the Builder’s estimated costs but that of a hypothetical builder;

the Builder failed to lead any evidence of its operating expenses or offsite overhead expenses;

the Builder’s calculation of loss of profits failed to properly account for any “head office overheads and profit”;

the methodology adopted by the Builder’s expert to estimate the costs of completion of the contract works is unreliable;

the Builder’s subjective evidence of its claim for loss of profit is to be rejected;

the contracts were always loss making so that the Builder was never going to make a profit.

Here the Owners rely on Dyna Constructions Pty Ltd v Bocco Developments Pty Ltd [2021] NSWDC 507; Construction & Design Australia Pty Ltd v Robinson (No 2) [2024] NSWSC 376; Troulis v Vamvoukakis [1998] NSWCA 237.
Fourthly, the Builder’s submission that because there was an expert agreed figure for a builder’s profit, the Tribunal should simply accept that evidence and find for the Builder, was incorrect as a matter of law or, alternatively, had no factual basis due to the flaws of Mr Madden’s approach and is therefore to be rejected: Western Kangoulu People v State of Queensland (2021) 287 FCR 240; [2021] FCAFC 176.
Fifthly, the Tribunal cannot have any confidence in Mr Jammal’s spreadsheet as reliable evidence of the Builder’s estimated costs of completion of the Contract works as the spreadsheet is materially unreliable, self-serving and lacking a factual basis. The Owners submit that the Tribunal should reject the spreadsheet in its entirety.
Sixthly, the evidence discloses that the Builder was never going to make a profit.
Finally, the Owners submit that if the Builder makes out its claim for loss of profits, the Tribunal should find that the Builder is disentitled to recover damages for its failure to mitigate its loss.

What amount (if any) is payable to the Builder as damages for loss of its bargains?

Relevant principles

I commence by noting the following statements of principle.
In JLW (Vic) Pty Ltd v Tsiloglou and Others [1994] VicRp 16; [1994] 1 VR 237, at 241, Brooking J said (omitting citations):

A plaintiff cannot recover substantial as opposed to nominal damages unless he proves both the fact and the amount of damage: .... If he proves the fact of the loss but does not call the necessary evidence as to its amount he cannot be awarded substantial damages ...: he must put the tribunal in the position of being able to quantify in money the damage he has suffered: ... It is often said that the amount of the damage must be proved with certainty, but this only means as much “certainty” as is reasonable in the circumstances: .... Where precise evidence is obtainable, the court naturally expects to have it; where it is not, the court must do the best it can.

As was said by Mason CJ and Dawson J in Commonwealth of Australia v Amman Aviation (1991) 174 CLR 64; [1991] HCA 54:

23.   The general rule at common law, as stated by Parke B in Robinson v Harman (1848) 1 Ex 850 at 855; 154 ER 363 at 365, is: ‘that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.’
…
24.   The award of damages for breach of contract protects a plaintiff’s expectation of receiving the defendant’s performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as ’expectation damages’. The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff’s expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.
25.   In the ordinary course of commercial dealings, a party supplying goods or rendering services will enter into a contract with a view to securing a profit, that is to say, that party will expect a certain margin of gain to be achieved in addition to the recouping of any expenses reasonably incurred by it in the discharge of its contractual obligations. It is for this reason that expectation damages are often described as damages for loss of profits. Damages recoverable as lost profits are constituted by the combination of expenses justifiably incurred by a plaintiff in the discharge of contractual obligations and any amount by which gross receipts would have exceeded those expenses. This second amount is the net profit.
(emphasis added)

Halsbury’s Laws of Australia, online edition, says at [65-2155] (citations omitted):

Where the proprietor has wrongfully determined the contract prior to its completion, the contractor who treats this as a repudiation of the contract and determines the contract by accepting it, has the choice of one of two alternative remedies:
(1) to recover the value of the work performed before determination; or
(2) to recover damages.
The measure of damages, in accordance with the compensation principle, is the benefit which the contractor would have received under the contract including profit, less any savings to the contractor as the result of not having to complete the work. Alternatively, the measure may be the costs incurred by the contractor in performing the work before determination plus profit on the whole of the work. In each case, allowance must be made for benefits received.

Mr Jammal’s expectation and his spreadsheet

In my view, the starting point is the expectation of the Builder itself, as expressed in Mr Jammal’s spreadsheet. As noted, in his second affidavit ,he states that for the purpose of these proceedings he prepared an Excel spreadsheet “recording what the [Builder’s] actual costs would have been at the time the contracts were signed”. Mr Jammal says that the spreadsheet was based on quotations and the allowances set out in the contracts.
The spreadsheet appears at p 1474 of the JTB. Mr Jammal estimated the Builder’s margin as $502,259.78.

The Owner’s submissions

As noted above, the Owners submit that the Tribunal cannot have any confidence in Mr Jammal’s spreadsheet because it is “materially unreliable, self-serving and lacking a factual basis”. The Owners submit that the Tribunal should reject the spreadsheet in its entirety because:

in closing oral submissions Counsel for the Builder described his client’s builder’s margin figure in the spreadsheet as an “aspirational figure” and submitted that “ it would only be the figure if everything went to plan”, and that Counsel for the Builder’s assessment of the evidentiary value of his client’s spreadsheet makes it clear that Mr Jammal’s spreadsheet is not evidence from which the Tribunal may make a positive finding that the Builder suffered any loss of profits at all;

the Tribunal should give the spreadsheet no weight at all for it is otherwise ordinarily inadmissible evidence and grossly prejudicial to the Owners and expressly prepared by the Builder for the purpose of the proceedings;

there is no evidence before the Tribunal of the calculations used to arrive at the figures in the spreadsheet or the supporting materials used to carry out the calculations (other than certain quotations). As there is no bill of quantities, no take-off (the process of quantifying the materials necessary to price the cost completing a project), no explanation of the trade breakdown, no workings for the prime cost items, no schedule of rates, no rates for the cost of labour, and no reference anywhere to off-site overheads and profit, the spreadsheet is simply a statement of speculation;

Mr Jammal’s calculation of the Builder’s loss of profit in the spreadsheet (or builder’s margin) was partly based on nine quotations referenced in the spreadsheet. Although Mr Jammal stated in his second affidavit that “I prepared this spreadsheet based on the quotes set out in Exhibit SJ-1,” the spreadsheet refers to only nine quotations, and not the totality of the quotations included in Exhibit SJ-1, being some 25 quotations. In any event, the Tribunal ought to find that the quotations are an unreliable source of the estimated cost of performing the Contract works due to many of the quotations having significant exclusions or additional charges and being preliminary in nature;

to the extent the spreadsheet refers to the cost of prime cost items. Such costs were provisional only and subject to change as recognised by the contract mechanism in cl 20 of the Contracts: \\.

The Builder’s submissions

In response the Builder submits, that:

Mr Jammal was an impressive and honest witness;

Mr Jammal readily made concessions but was otherwise not seriously challenged on his evidence;

the thrust of the cross-examination of Mr Jammal was that the various quotations he referred to on their face had certain conditions and exclusions, which to his credit he readily accepted;

the fact that quotations relied upon as part of Mr Jammal’s assessment were limited by time and potential increases in costs is hardly surprising, these being quotations and not some form of expert evidence;

it would be perverse for the Tribunal to reject this evidence on the basis that it is possible that there may have been certain price escalations with respect to the quotations, and that is no doubt why the joint expert opinion produced a more conservative view of the likely profit;

the Owners’ objections that the document contained hearsay should be rejected because there is no hearsay rule in the Tribunal, the spreadsheet is not hearsay and no objection was taken to the spreadsheet when it was tendered as part of the JTB.

Consideration

In my view, the Owners’ submissions, when considered cumulatively, have substance, and I do not accept, in and of itself, the spreadsheet, which is Mr Jammal’s “compilation … of the various elements required to complete the contract, and at times is simply a tallying of quotes received which are in evidence” (to rehearse the Builder’s own submission) is a proper basis for me to conclude that the expectation damages claimed are anywhere near the region stated by Mr Jammal. Too many justified criticisms are made of the document by Owners and it is difficult to conclude that the document is little more than a “wish list” and is simply “aspirational” (again repeating the Builder’s submission).
I accept entirely the Owners’ submission that there is no evidence before the Tribunal of the calculations used to arrive at the figures in the spreadsheet or the supporting materials used to carry out the calculations (other than certain quotations). As there is no bill of quantities, no take-off (the process of quantifying the materials necessary to price the cost completing a project), no explanation of the trade breakdown, no workings for the prime cost items, no schedule of rates, no rates for the cost of labour, and no reference anywhere to off-site overheads and profit, I agree that the spreadsheet is simply a statement of speculation.
In addition, Mr Jammal could hardly be considered to be an independent witness.
Further, the Owners’ submission that the quotations were unreliable has substance, and I note that, to give but four examples:

the quotation of AJR Electrical & Data for electrical works in the amount of $66,225.50^[1] is described as a:
1. JTB, p 1144

“rough quotation … (potentially could be more or less)”;

the quotation of Pyramid Plumbing Systems Pty Ltd in the amount of $49, 194.86^[2] for sanitary drainage and water services contains the following notation and disclaimer
2. JTB, 1150

Note 1:    no allowance for any gas pipework
Note 2:    No allowance for construction of osd tanks
Note 3:    No allowance for green dashed stormwater line on plan assumed it is existing
Note 4:    allowance for poly pits only
Note 5:    no allowance for basement stormwater pump out pits and pumps
Note 6:    no allowance for ag drain installation
Note 7:    no allowance for supply of driveway grates
This quote DOES NOT INCLUDE tapware, hws, pump, tank, vanities (etc) and is valid for 1 month from the above date and is subject to the conditions noted herein.
DISCLAIMER REGARDING COSTS FOR CONSTRUCTION WORK
Please note prices quoted for construction work cover ‘normal’ conditions expected to be discovered during construction work.
Where ‘abnormal’ conditions are encountered, such as:
Rock, requiring heavier construction equipment;
Asbestos, requiring specialised removal;
Ground artefacts of any of any historical or cultural significance;
Significant tree root intrusion;
Water charged ground, requiring dewatering equipment;
Significant or unexpected utility services (e.g. stormwater pipes, optic fibre, underground power, etc)
Steep ground or working at heights; and
Unexpected regulatory fees;

Pyramid Plumbing Systems will endeavour to notify clients upon site inspection if any of the above conditions are suspected

the quotation of Skillz Plumbing in the amount of $41,140.00^[3] for plumbing and drainage services made no allowance for:
3. JTB, p 1199

OSD tank
Pc times
Rock excavation
Rain tanks
How water units

the quotation of ACE Group in the sum of $348,150.00^[4] for the installation of structural steel excludes:
4. JTB, p 1218

Traffic control and council permits and fees
Onsite core drilling
Pockets in concrete and demolition works
Fire rating
Handrails and balustrades
Light steel framing and top hats
Tilt up panel connection plates
Metalwork and timberwork
Weekends (Saturday & Sunday), Public Holidays etc.
Scaffolding over 3 metres
Steel not noted in the Structural Drawings (architectural drawings used for reference only)
Slab scanning• Use of any third party software.

In addition, in relation to the quotation of C R Glass & Aluminium Pty Ltd in the amount of $62,261.00^[5] for aluminium structural columns, a company officer by email on 3 February 2022 asked Mr Jammal “What section sizes are SC4 & SC5?”, and then notes that the quotation would be reviewed and recompleted on “conformation of section sizes”.
5. JTB, p 1153
Many other examples can be given.
All that said, I do not conclude that no weight can be put on Mr Jammal’s spreadsheet for the purposes of determining expectation damages, and reject the Owner’s submission that no weight whatsoever can be placed on it. Nevertheless, while I accept that Mr Jammal hoped and expected to make a profit from the two contracts, I do not accept that the spreadsheet alone establishes that the Builder’s expectation “had a likelihood of attainment”, rather than being a “mere expectation” (Amann at [24]), in the amount claimed.

The expert evidence

I turn now to the expert evidence. As noted above, even if the Conclave Schedule is excluded or otherwise found unreliable, the Builder relies on Mr Madden’s report. I will firstly consider the Owners’ criticisms of that report.

The Owners’ submissions

The Owners relevantly submitted that:

the Builder’s expert evidence is not evidence of the Builder’s estimated costs, but that of a hypothetical builder;

the Builder failed to lead any evidence of its operating expenses or offsite overhead expenses;

the Builder’s calculation of loss of profits failed to properly account for any “head office overheads and profit”;

the methodology adopted by the Builder’s expert to estimate the costs of completion of the contract works is unreliable.

I will consider each party’s submissions on these matters and then state my consideration.

The Builder’s expert evidence is not evidence of the Builder’s estimated costs but that of a hypothetical builder

Owners’ submissions

The Owners submit that:

the Builder has failed to satisfy its onus of proof because it has not proved its estimated costs of performing the Contract works. The Builder’s expert evidence is not evidence of the Builder’s estimated costs but that of a hypothetical builder;

the authors of Hudson’s Building and Engineering Contracts (Hudsons) state:

The contractor must be able to establish that the contract prices for the remaining work would as a fact have been profitable. This will depend primarily on the adequacy of the Contractor’s original estimating and pricing of the cost of the contract, rather than any profit percentage used when pricing.
(emphasis added)

the requirement that the “Contractor’s original estimating and pricing of the cost of the contract” is reinforced by R Developments Pty Ltd v Forth [2016] ACTSC 8 at [170] where the Court stated:

Similarly, in relation to the profit margin adopted by the expert quantity surveyors as one which a builder might expect to make on a job, what must be demonstrated is that this builder would have made that level of profit on this job. No evidence has been given sufficient to support a conclusion that this job would have been profitable for the Builder.
(emphasis as in original)

in Forth, the Court found that the builder was not entitled to damages as it had not lawfully terminated the contract. Nevertheless, the Court went on to consider the builder’s claim for damages, as a “contingent assessment”. The builder’s claim for damages for loss of profits was put on two bases:

first, it was based on a 20% builder’s margin pursuant to a nominated percentage in the contract. The Court dismissed this claim;

secondly, it was based on expert evidence of quantity surveyors who agreed that that the builder’s margin was 21%. The quantity surveyors arrived at this figure after estimating the costs of construction using actual business records of the builder, unlike the present case where Mr Madden did not rely on any business records of the Builder. Despite this, the Court found that the quantity surveyors had not demonstrated the profit the builder would achieve but rather what “a builder might expect to make on a job”. The Court made this finding as “[n]o evidence has been given sufficient to support a conclusion that this job would have been profitable for the Builder”;

like the quantity surveyors in Forth, the quantity surveyors in this proceeding have opined as to what “a builder might expect to make on a job”. This is not a basis to find that the Builder would have made a profit on this job of any amount. However, rather than using business records of the Builder, Mr Madden has relied solely on Rawlinsons. Mr Madden’s reliance solely on Rawlinsons as a basis to prove the estimated costs of this Builder to perform the Contract works and the profit allegedly lost on the job is entirely misconceived and not a proper foundation for the Tribunal to find that the Builder has satisfied its onus of proof.

The Owners then notes that the precise questions Mr Madden was asked to opine on. These are set out above at [20].
The Owners then submit, footnotes omitted:

24. The questions asked of Mr Madden did not direct him as to how he was to carry out his estimate of fair and reasonable costs of the Builder undertaking the Contract works. That was left to Mr Madden to determine. Mr Madden elected to carry out his estimate of costs, not by a trade-by-trade detailed breakdown of costs but instead using Rawlinsons Australian Construction Handbook 2023 (Rawlinsons) which includes indicative average prices for certain types of projects. …
25. Importantly, no attempt was made in the Letter of Instructions to have Mr Madden consider, let alone, focus on, the Builder’s “original estimating and pricing of the cost of the contract” as directed by Hudsons …. Instead Mr Madden based his opinion of the Builder’s fair and reasonable costs to perform the works under the Contracts solely by reference to “Rawlinsons Australian Construction Handbook 2023 (Rawlinsons 2023). Mr Madden states that he considers the rates and costs published in the Rawlinsons Australian Construction Handbooks (all editions over the years) are well representative of the typical and average rates and costs in the market for the construction work in the past and currently.”
(emphasis as in submissions)

The Owners then submits that the Letter of Instructions to Mr Madden:

does not contain a single fact about the business of the Builder;

did not inform Mr Madden as to “a single fact” concerning the Builder’s operating expenses;

did not seek to have Mr Madden consider the implications of Eminence having carried out the Estimate, which was the basis for the costing of performing the Contract works, and the fact that not only was the Builder a different corporate entity, but it was, unlike Eminence, a first-time builder;

The Owners submit that:

instead of analysing available evidence of the Builder’s estimated costs of performing the Contract works, Mr Madden limited his estimate of the Builder’s costs to “the typical and average rates and costs in the market” using Rawlinsons;

* Unmatched double quotation marks in next paragraph

the Builder’s reliance on Mr Madden’s approach is fundamentally flawed because “the typical and average rates and costs in the market” is indicative only [based on Rawlinsons] and most importantly, it is not evidence of the Builder’s estimated costs;
in order for Mr Madden to give his opinion as to what would be the fair and reasonable profit for the Builder, a “most basic” requirement of that exercise was that Mr Madden be provided with the Estimate so that he could interrogate Eminence’s estimate of its builder’s margin and compare it to Mr Madden’s own properly reasoned estimate of the builder’s margin; therefore, the Tribunal is deprived of that comparable evidence;
furthermore, because the Builder failed to lead evidence of any of Eminence’s workings that supported the calculation of its 10% builder’s margin, the Tribunal does not have evidence before it of the breakdown of the individual components of Eminence’s builder’s margin of 10% in the Estimate;
there was a raft of available evidence that the Builder could have adduced and provided to Mr Madden, to enable him to estimate the Builder’s costs of performing the Contract works with highly relevant business records of the Builder and Eminence, but it did not do so;
the Builder made no attempt in its evidence to establish that any of this evidence was unavailable. Instead, the Builder relied on Mr Madden’s costing based on Rawlinsons, which is a costs guide of indicative costs only. As stated above, this is not evidence of the Builder’s estimated costs so that the Builder has failed to prove its estimated costs of performing the Contract works through the expert evidence of Mr Madden.

Builder’s submissions

The Builder’s short submission in response was that:

This submission is misconceived in circumstances where the purpose of the expert evidence in such a case is to objectively determine whether the Builder’s subjective expectation is objectively reasonable, as opposed to conducting a subjective assessment. In other words what the Applicant here has done is what was held in Amann to be the proper way for such a claimant to prove loss — i.e. to put forward evidence of the subjective expectation and demonstrate objectively that such an expectation was commensurate with an objective ascertainment. In other words the expert evidence provides an objective “check and balance” to the subjective expectation based upon the builder’s own costings and experience.

Consideration

While I consider that there is inevitably an element of hypothesis when calculating lost profits for incomplete projects, nevertheless I consider that the Owner’s submissions on this issue have substance, particularly when considered cumulatively.
In this the case, the Builder did not provide Mr Madden with relevant business records, facts about the business of the Builder including operating expenses and therefore Mr Madden relied on Rawlinsons. am not satisfied that this approach actually provides a proper foundation for the Tribunal to find that the Builder has satisfied its onus of proof. I accept that in order for Mr Madden to give his opinion as to what would be the fair and reasonable profit for the Builder, Mr Madden should have been provided with the Estimate so that he could interrogate Eminence’s estimate of its builder’s margin and compare it to Mr Madden’s own properly reasoned estimate of the builder’s margin. I further accept that there was evidence available that the Builder could have adduced and provided to Mr Madden, to enable him to estimate the Builder’s costs of performing the Contract works with relevant business records of the Builder and Eminence, but it did not do so.
In my view, this factor supports the Owners’ submission that the Builder has filed to satisfy its onus of proof.

The Builder failed to lead any evidence of its operating expenses or offsite overhead expenses

The Owners’ submissions

The Owners submit, in summary:

the Builder failed to lead any evidence of its operating expenses, such as rent or estimated off-site overheads, such as salaries;

there was no evidence capable of a finding as to the Builder’s estimated off-site overheads;

instead, the Builder relied on Mr Madden’s opinion regarding operating expenses based solely on Rawlinsons, as explained below.

Mr Madden’s approach in relation to operating expenses was to firstly, apply a nominal figure of 5% for “head office overheads and profit” taken from Rawlinsons, secondly, to deduct that 5% from his estimate of the costs of performing the Contract works as “based on industrial practice, the builders’ head office overheads ad profits do not form part of the costs for the building and construction works”;

the Builder’s reliance on Mr Madden’s use of a nominal figure of 5% for head office overheads and profit based on Rawlinsons is fundamentally flawed because it is not evidence of the actual costs of the Builder. The nominal figure of 5% for head office overheads and profit has no factual foundation. It is a nominal, artificial and entirely speculative figure.

The Owners conclude:

The entire calculation by Mr Madden of the Builder’s estimated costs is infected by this flaw because a nominal, artificial and entirely speculative figure is used to arrive at the estimate of the Builder’s costs of performing the Contract works. As a result, the Builder has not proved its costs of performing the Contract works. Accordingly, the Builder has not established that it suffered a loss of profit.

The Builder’s submissions

The Builder submits that the submission that the Builder has failed to lead any evidence of its operating expenses or offsite overhead expenses misconceived for a variety of reasons because, amongst other reasons, there is no general principle that general operating expenses/overheads should be deducted from a loss of bargain damages award: North Sydney Leagues Club Limited v Synergy Protection Agency Pty Limited [2012] NSWCA 168 at [46]; Web Offset Printers Ltd v Independent Media Ltd [1996] CLC 77 at 80H-81A; North Sydney Leagues’ Club Ltd v Synergy Protection Agency Pty Ltd (formerly Joseph Merhi Industries Pty Ltd) t/as Synergy Protection Agency [2011] NSWSC 286 at [39]; Pacific Wireless Pty Ltd v Breeze Logistics Australia Pty Ltd [2019] VSC 64 at [65].
It is not necessary to repeat the Builder’s other submissions.

Consideration

The Court of Appeal decision of North Sydney Leagues Club Limited illustrates clearly the point made by the Builder. At [46] Beazley JA, with whom MacFarlan and Whealy JJA agreed, stated:

These authorities are clear that, in respect of a claim for expectation damages, there is no absolute principle, as submitted by the appellant, that account must be taken of overhead expenses. Nor, in my opinion, as a matter of general principle, is the alternate approach for which the appellant contended, correct. That approach requires that overhead expenses be taken into account proportionately, that is, proportionate to the value of the contract to the overall business, unless the evidence demonstrates some different deduction should be made. The appellant’s reliance on McHugh J’s judgment in Dart Industries was misconceived. The true principle is, as the trial judge found, that a plaintiff is entitled to such damages as place it in the same position as it would have been had the contract been performed.
(emphasis added)

It is a fact that the Builder failed to lead any evidence of its operating expenses, such as rent or estimated off-site overheads, and Mr Madden expressly stated in his report that he had no opinion of “the split of the head office overheads”.
In my view, this factor is a neutral one when it comes to considering whether the Builder has proved its claim for damages for loss of profits. This is because, while it is correct that the Builder failed to lead any evidence of its operating expenses, the authorities are clear that, in respect of a claim for expectation damages, there is no absolute principle, that account must be taken of overhead expenses.

The Builder’s calculation of loss of profits failed to properly account for any “head office overheads and profit”

Owners’ submissions

The Owners make the following summary submission:

In summary, in calculating his estimate of the Builder’s “builder’s margin” or loss of profit, Mr Madden:
a.   did not refer to or consider any business record of the Builder;
b.   assumed that his calculation of loss of profits (builder’s margin) takes into account an amount for the cost of “head office overheads and profit” but did not state what the precise amount for “head office overheads and profit” is and did not apply the same 5% figure for that same component of offsite overheads and profit that he adopted from Rawlinsons and excluded from his calculation of costs of performing the Contract works;
c.   stated that the amount for “head office overheads and profit” varies “significantly among builders”;
d.   stated that the percentage of “head office overheads and profit” ranges depending on establishment and turnover of the builders, about which Mr Madden had no information whatsoever.

Thus the Owners submit that, in circumstances where Mr Madden’s calculation of lost profits includes a calculation of “head office overheads and profit” that has no factual basis at all, his calculation of the builder’s alleged lost profits is infected with error and is patently flawed: Dyna Constructions Pty Ltd v Bocco Developments Pty Ltd [2021] NSWDC 507; Construction & Design Australia Pty Ltd v Robinson (No 2) [2024] NSWSC 376.
As is explained in Mr Ipp’s submissions, in Dyna at [150] the District Court of NSW:

rejected a builder’s claim for damages for breach of contract on two grounds firstly, his Honour found that there was no binding agreement^[6] and secondly and relevantly for present purposes, his Honour found that if he was wrong on the first ground, the builder had failed on its onus in circumstances where there was no evidence as to the profit component of the builder’s margin or as to how that could be calculated. There was no evidence as to the overheads that had to be paid from this amount, such as wages, rent or operating expenses.^[7] Scotting DCJ considered that even if he assumed the builder would have made a profit, the amount of that profit would be based only on speculation and not evidence.^[8]
6. Dyna at [109]
7. Dyna at [148]
8. Dyna at [149]

The Owners submit that, in this matter, there is no evidence as how the “head office overheads and profit” component in the Builder’s margin is calculated. As was the case in Dyna, there is no evidence before the Tribunal as to the overheads that had to be paid from this amount, such as wages, rent or operating expenses. Accordingly, to award loss of profit damages would be to do so based on speculation and not evidence.
Hence the Owners submit:

51 Before this Tribunal, there is not even an assertion in correspondence by the Builder as to the amount of its overheads (as there was in Dyna) but simply Mr Madden’s assumption that some unstated amount for the Builder’s overheads is included in his calculation of the builder’s margin … This proceeding, like Dyna, is not a case where “precise evidence is not available”, and the Builder made no attempt in its evidence to suggest that it was. Mr Jammal, as the sole witness giving evidence for the Builder conceded that the Builder did not lead evidence of this kind.
52. The Builder failed to lead any evidence of comparable overhead and profit figures achieved by Eminence on other projects or by the Builder on subsequent projects to the Contracts.

Finally, the Owners relied on Troulis v Vamvoukakis [1998] NSWCA 237 where the Court referred to the judgment of Deane J in Amann at [24] where he stated:

the limitations of the curial process, or the nature of the subject matter in question, often mean that the task of assessing damages involves a pragmatic exercise of a kind traditionally left to the good sense of a jury.

The Court of Appeal then went onto comment:

Where, however, what is involved is the valuation of the goodwill of a business, and the plaintiff fails to adduce either reliable evidence of the trading results of the business, or evidence as to how one goes about valuing such a business, then there is an absence of the raw material to which good sense may be applied. Justice does not dictate that, in such a case, a figure should be plucked out of the air.

Builder’s submissions

The Builder submits that the Owners’ submission that the Builder’s calculation of loss of profits failed to properly account for any head office overheads and profit, “is simply a reformulation of the above complaint, and for the same reasons should be rejected”.

Consideration

In my view the matter is not so simple as the Builder suggests. But I agree that there is significant overlap between these second and third factors. However, as discussed, as there is no absolute principle that account must be taken of overhead expenses, I do not accept that this factor in and of itself is a basis for concluding that the Builder has failed to satisfy its onus of proving expectation damages. It may however be a basis for reducing the expectation damages claimed.
I also reject the Owners’ submission that there is a complete absence of raw material, given the fact of Mr Jamal’s spreadsheet. But as I have found, very little weight should be given to it. Overall, in relation to this factor, I consider this factor somewhat neutral when it comes to considering whether the Builder has proved its claim for damages for loss of profits.

Consideration

The methodology adopted by the Builder’s expert to estimate the costs of completion of the contract works is unreliable

Owners’ submissions

The Owners submit that the methodology that Mr Madden adopted to estimate the costs of completion of the Contract works is unreliable for two reasons.
First, it is based solely on Rawlinsons, which provides an indicative guide only to costs.
Secondly, Mr Madden did not apply a more accurate method of estimating by preparing a bill of quantities. Instead, Mr Madden adopted an estimating methodology referred to in Rawlinsons as the “Cost Per Square Metre” method to estimate the Builder’s costs of completing the contract works, in circumstances where Rawlinsons warns against the use of the methodology for projects other than “feasibility studies”.

Builder’s submissions

The Builder submits that the Owners’ submissions should be rejected for the following reasons.
First, Mr Madden was an “excellent witness”, and the Tribunal would be confident that his estimates are reliable in circumstances where the Owners’ expert adopted the same approach and made no criticism of Mr Madden’s methodology.
Secondly, criticisms that Mr Madden based his costings solely on Rawlinsons are without merit given:

Rawlinsons is an accepted industry source and was also used by the Respondents’ expert, Mr Zakos;

Mr Madden did not base his opinion solely on Rawlinsons as he made adjustments to the “costs per square metre method” in order to provide a more detailed opinion;

Mr Madden in the Conclave Schedule accepted further adjustments that were proposed by Mr Zakos.

Thirdly, the criticism that the method is not appropriate beyond a feasibility study is “rather bizarre”, given the purpose of that evidence was to estimate the feasibility of the Builder’s subjective profit expectation as provided by Mr Jammal.

Consideration

I accept that Rawlinsons is an industry standard and regularly referred to this Division’s work. Nevertheless, for the same reasons as set out at [101], I consider that this factor favours the Owners when it comes to considering deciding whether or not the Builder has proved its claim for damages for loss of profits.

Conclave Schedule

I turn now to the Conclave Schedule.

Builder’s submissions

Counsel for the Builder made a series of submissions in closing oral submissions to the effect that because there was an agreed figure for a builder’s margin, the Tribunal should simply accept that evidence and find for the Builder.

Owners’ submissions

The Owners submit, in summary, as follows.
First, a similar submission made in Malone on behalf of the Western Kangoulu People v State of Queensland (2021) 287 FCR 240 was rejected; see too Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd (ACN 005 357 522) (2015) 324 ALR 392 at [228]; Epperson v Dampney (1976) 10 ALR 227 at 240; Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [60].
Secondly, the Builder’s submissions should be rejected because:

there is not a proper factual foundation for the opinions expressed by the quantity surveyors in the Conclave Schedule;

Mr Madden has misapplied the requisite methodology;

the necessary facts or assumptions have not been proven.

Therefore, the Tribunal cannot be satisfied that it has a sufficiently sound basis on the expert evidence to make a finding as to the accuracy of the quantum of the estimated costs of performing the Contract works. In the circumstances, the Tribunal is not bound by the opinions expressed the Conclave Schedule.

Consideration

It is plainly incorrect that just because there is an agreed position between the experts the Tribunal should simply accept that evidence (and here find for the Builder). As the Owners submit, a similar submission was made in Malone. In a joint judgment of White and Stewart JJ, their Honours rejected such a submission, stating at [227]:

In our view, the proposition advanced by counsel has only to be stated to be seen to be unsound. In the absence of agreement by the parties, it would vest the determination of issues in the litigation to witnesses and, further, would give binding effect to an agreed opinion reached independently of the parties themselves and without the parties even being present or being heard with respect to it. It would mean that, even when it was plain that the experts had overlooked a relevant matter, misconceived the law or misapplied the requisite methodology, the jointly agreed position would remain binding. Such a position is unsound.

Further, in ACCC v ANZ, the Full Court of the Federal Court stated at [228]:

as with all expert opinion evidence, the relevance and weight to be given to the opinion evidence will depend, to a large extent, on the correctness or otherwise of the assumed or proved facts. And, as with all expert evidence, the judge, as tribunal of fact, is not bound by the expert evidence, even if no opposing expert opinion evidence is adduced. The weight to be given to the economist’s expert opinion is a matter for the judge and will depend, to a large extent, on whether the opinion is based on facts or assumptions that are proved to be accurate or correct.
(emphasis added)

Further still, Epperson v Dampney (1976) 10 ALR 227 was a custody case in which child psychiatrists had given evidence about the probable effect on the children of awarding custody to a particular parent. Street CJ stated at [228]:

The topic is to be evaluated against the background that our system of jurisprudence does not, generally speaking, remit the determination of disputes to experts. Some questions are left to the robust good sense of a jury. Others are resolved by the conventional wisdom of a judge sitting alone. In the course of elucidating disputed questions, aids in the form of expert opinions are in appropriate cases placed before juries or judges. But, except on purely scientific issues, expert evidence is to be used by the court for the purpose of assisting rather than compelling the formulation of the ultimate judgement.
(emphasis added)

Finally, in Nguyen, the Court of Appeal stated at [60] (footnote omitted):

60 In a particular case, expert evidence may assist the court to find causation in fact; but the court is not bound by an expert’s expression of an opinion that, on the balance of probabilities, a causal relationship has been established. See Heydon JA in Makita (Australia) Pty Limited v Sprowles (2001) 52 NSWLR 705 at 729 [59] (citing Lord President Cooper in Davie v Lord Provost, Magistrates and Councillors of the City of Edinburgh (1953) SC 34 at 39 – 40); and note his Honour’s observations at 745 [87], [89]. The court does not abdicate its responsibility to an expert; an expert’s opinion cannot be determinative, particularly in relation to ultimate facts. See Callinan J in Brodie v Singleton Shire Council (2001) 206 CLR 512 at 639 [355], citing his Honour’s earlier observations to the same effect in Naxakis v Western General Hospital (1999) 197 CLR 269 at 306.
(emphasis added)

The Conclave Schedule was not in any way an expert report, and contains no reasoning of either expert. Even Scott Schedules usually reproduce a summary of each expert’s primary reports, and then provides a commentary on each. The Conclave Schedule is simply, by and large, a list of items claimed and a $ figure of the agreed “Conclave Position”.
But fundamentally, any conclave position in my view must suffer from the same issues of Mr Madden’s (and indeed Mr Zakos’) primary reports, namely those set out at [101] above, namely, there is no proper.

Conclusion

When the submissions of the Owners are considered cumulatively, in my view there was no proper factual foundation for the opinions of Mr Jammal, in his spreadsheet, or the experts (either individually or in their Conclave Schedule), as to the Builder’s expectation damages.
It follows that I am not satisfied that the Builder has established its entitlement to expectation damages.
It is not necessary to consider the additional submission of the Owners that the Builder would never have made a profit on the two contracts.
Nor is it necessary to consider whether or not the Builder failed to mitigate it losses.
I will direct the parties to bring in agreed short minutes of order to reflect their agreement on reliance damages.

Costs

Costs are reserved.
Any party seeking costs should file submissions and if necessary evidence within 14 days of the publication of these reasons. The other party may respond within a further 14 days. The moving party(ies) may reply within a further 7 days,
Submissions are to be limited to 5 pages (not including any evidence).
I propose to deal with the question of costs on the papers and without a hearing: Westerweller v The Owners Strata Plan No 18482 [2023] NSWCATAP 113 at [85]. If either party opposes that course they should address that issue in their submissions.

Orders

The Tribunal orders that:

On or before 17 February 2025, the parties are to provide an agreed version of draft short minutes of order which complete the following proposed draft orders in (a), (b), (c) and (d) below in respect of the agreed reliance damages:

In matter 2023/00390181, on or before 3 March 2025, the respondents are to pay the applicant the sum of $3093.74.

Matter 2023/00390181 is otherwise dismissed.

Matter 2023/00390707, on or before 3 March 2025, the respondents are to pay the applicant the sum of $3093.74.

Matter 2023/00390707 is otherwise dismissed.

Costs are reserved.

Any party seeking costs should file submissions and if necessary evidence on or before 3 March 2025.

The other party may respond on or before 17 March 2025.

The moving party(ies) may reply on or before 23 March 2025.

Submissions are to be limited to 5 pages (not including any evidence).

**********

Endnotes

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 27 October 2025

Medium Neutral Citation:	Opal Construction Group Pty Ltd v Christoff [2025] NSWCATCD 127
Hearing dates:	16, 17 and 18 July 2024 (submissions to 27 September 2024)
Date of orders:	3 February 2025 (Amended 22 August 2025)
Decision date:	03 February 2025
Jurisdiction:	Consumer and Commercial Division
Before:	R C Titterton OAM, Senior Member
Decision:	The Tribunal makes the following amended orders under section 63 of the Civil Administrative Tribunal Act 2013: (1) On or before 17 February 2025, the parties are to provide an agreed version of draft short minutes of order which complete the following proposed draft orders in (a), (b), (c) and (d) below in respect of the agreed reliance damages: (a) In matter 2023/00390181, on or before 3 March 2025, the respondents are to pay the applicant the sum of $3093.74. (b) Matter 2023/00390181 is otherwise dismissed. (c) In matter 2023/00390707, on or before 3 March 2025, the respondents are to pay the applicant the sum of $3093.74. (d) Matter 2023/00390707 is otherwise dismissed. (2) Costs are reserved. (3) Any party seeking costs should file submissions and if necessary evidence on or before 3 March 2025. (4) The other party may respond on or before 17 March 2025. (5) The moving party(ies) may reply on or before 23 March 2025. (6) Submissions are to be limited to 5 pages (not including any evidence).
Catchwords:	BULDING AND CONSTRUCTION – expectation damages – whether expert reports have proper factual foundation
Cases Cited:	Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd (2015) 324 ALR 392 Commonwealth of Australia v Amann Aviation (1991) 174 CLR 64 Construction & Design Australia Pty Ltd v Robinson (No 2) [2024] NSWSC 376 Dyna Constructions Pty Ltd v Bocco Developments Pty Ltd [2021] NSWDC 507 Epperson v Dampney (1976) 10 ALR JLW (Vic) Pty Ltd v Tsiloglou and Others [1994] VicRp 16; [1994] 1 VR 237 Malone on behalf of the Western Kangoulu People v State of Queensland (2021) 287 FCR 240 Mikhail v JJ Built This Pty Ltd [2021] NSWCATAP 159 Nguyen v Cosmopolitan Homes [2008] NSWCA 246 North Sydney Leagues Club Limited v Synergy Protection Agency Pty Limited [2012] NSWCA 168 North Sydney Leagues’ Club Ltd v Synergy Protection Agency Pty Ltd (formerly Joseph Merhi Industries Pty Ltd) t/as Synergy Protection Agency [2011] NSWSC 286 Pacific Wireless Pty Ltd v Breeze Logistics Australia Pty Ltd [2019] VSC 64 R Developments Pty Ltd v Forth [2016] ACTSC 8 Troulis v Vamvoukakis [1998] NSWCA 237 Web Offset Printers Ltd v Independent Media Ltd [1996] CLC 77 Western Kangoulu People v State of Queensland (2021) 287 FCR 240; [2021] FCAFC 176
Texts Cited:	Halsbury’s Laws of Australia, online edition McGregor on Damages, 22nd Edition Rawlinsons, Australian Construction Handbook 2023
Category:	Principal judgment
Parties:	Opal Construction Group Pty Ltd, Applicant L Christoff and H Rake, Respondents
Representation:	Counsel: Applicant, A Hopkins Respondent, S Ipp Solicitors: Applicant, Reuben George Lawyers Respondent, ABW Lawyers
File Number(s):	2023/00390181 (formerly proceedings HB 23/27183)