Ridge v BGC Construction Pty Ltd
[2007] WADC 117
•6 JULY 2007
RIDGE -v- BGC CONSTRUCTION PTY LTD [2007] WADC 117
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WADC 117 | |
| Case No: | CIV:2179/2005 | 21, 22 & 25 JUNE 2007 | |
| Coram: | GOETZE DCJ | 6/07/07 | |
| PERTH | |||
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for plaintiff in the sum of $183,885.21 | ||
| PDF Version |
| Parties: | PETER CARLTON RICHARD RIDGE BGC CONSTRUCTION PTY LTD (ACN 008 783 248) |
Catchwords: | Damages Contract to build domestic home Repudiation of contract by builder Consumer requiring to seek alternative builder against background of increasing building prices Approach to assessment of damages |
Legislation: | Nil |
Case References: | Alcoa Minerals of Jamaica Inc v Herbert Broderick, [2000] BLR 282 Bellgrove v Eldridge (1954) 90 CLR 613 Bevan Investments Ltd v Blackhall & Struthers (No 2) [1978] 2 NZLR 97 Burns v M A N Automotive (Aust) Pty Ltd (1986) 161 CLR 653 Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 All ER 928 Glenmont Investments v O'Loughlin (No 2) (2000) 79 SASR 185 Hadley v Baxendale (1854) 9 Exch 341 McKay & Anor v Hudson & Ors [2001] WASCA 387 Radford v De Froberville [1978] 1 All ER 33 Woodward Pty Ltd v Kelleher, unreported; NSWCA; BC8902118; 30 May 1989 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
BGC CONSTRUCTION PTY LTD (ACN 008 783 248)
Defendant
Catchwords:
Damages - Contract to build domestic home - Repudiation of contract by builder - Consumer requiring to seek alternative builder against background of increasing building prices - Approach to assessment of damages
Legislation:
Nil
Result:
Judgment for plaintiff in the sum of $183,885.21
(Page 2)
Representation:
Counsel:
Plaintiff : Mr I A Morison
Defendant : Mr J R B Ley
Solicitors:
Plaintiff : Solomon Bros
Defendant : Hotchin Hanly
Case(s) referred to in judgment(s):
Alcoa Minerals of Jamaica Inc v Herbert Broderick, [2000] BLR 282
Bellgrove v Eldridge (1954) 90 CLR 613
Bevan Investments Ltd v Blackhall & Struthers (No 2) [1978] 2 NZLR 97
Burns v M A N Automotive (Aust) Pty Ltd (1986) 161 CLR 653
Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 All ER 928
Glenmont Investments v O'Loughlin (No 2) (2000) 79 SASR 185
Hadley v Baxendale (1854) 9 Exch 341
McKay & Anor v Hudson & Ors [2001] WASCA 387
Radford v De Froberville [1978] 1 All ER 33
Woodward Pty Ltd v Kelleher, unreported; NSWCA; BC8902118; 30 May 1989
(Page 3)
- GOETZE DCJ:
Introduction
1 Between February 2004 and June 2005, the plaintiff negotiated with the defendant to construct a house on the plaintiff's vacant lot adjacent to a canal at Halls Head, Mandurah.
2 The plaintiff intended that following the completion of construction by the defendant and the addition to the house of certain ancillary items to be purchased and tasks to be undertaken by himself ("ancillary items") he would lease the house to executives on a short stay basis, thereby gaining rental income.
3 The building contract in its final form required the builder to commence building by 11 July 2005 and for that work to be completed by 12 August 2006. For reasons which have not been explained in evidence, the defendant did not attempt to commence construction, with the consequence that on 6 September 2005, the plaintiff issued a default notice to the defendant. On 23 September 2005, this was followed with a termination notice and, on 28 September 2005, a writ of summons. Then, on 15 December 2005, the plaintiff obtained an unopposed summary judgment. Directions for the assessment of damages pursuant to that judgment were provided on 2 August 2006, following which, the assessment of damages came on for hearing on 21, 22 and 25 June 2007.
The claim for damages
4 The plaintiff seeks damages as follows:
1. the difference between the present day increased building cost to construct the house and the cost contracted for between the plaintiff and the defendant;
2. the difference between the present day value of the estimated increased cost of the ancillary items after the completion of construction of the house and the cost now estimated by the plaintiff therefor; and
3. bank charges and interest.
5 The real legal issue arising from the trial is the time at which damages should be assessed ie, either as at the date of termination of the building contract in September 2005, or now, as at the trial date, which, in either event, requires a forecast of likely increases in building costs during
(Page 4)
- the proposed construction period. Likewise, a similar forecast is required with respect to the deferred purchase price of the ancillary items.
The facts
6 The plaintiff purchased vacant land being Lot 531, Picaroon Place, Halls Head in or about 2003. He approached the defendant to construct a house on it and a building contract dated 10 February 2004 was signed between the parties. There were variations to this contract on 2 March 2005, 11 May 2005 and 22 June 2005. Building work was required to commence on 11 July 2005. Construction was to be completed by 12 August 2006. The building licence, issued on 20 August 2004, was:
"Void if work covered by it is not substantially commenced within twelve (12) months and completed within twenty four (24) months of the date of the issue of the licence, unless otherwise approved in writing by the Building Surveyor."
7 The plaintiff intended to fund the cost of construction of the house, together with all further ancillary works, as might be required to ensure that the house came up to standard for rental purposes, as follows:
Plaintiff's cash to hand $168,000.00
Plaintiff's borrowings from the bank $530,000.00
Cash available $698,000.00
Building contract price (after $9,000 credit) $451,821.50
$246,178.50
Ancillary costs claimed 20 March 2007 $245,693.00
Surplus $485.50
8 Although the plaintiff sought and obtained funding to assist in the construction of the house from his bank, the contract was declared to be not subject to finance, so that, it cannot be said on the evidence, that, the defendant was aware of any financial restrictions facing the plaintiff.
9 The plaintiff's former wife was also to be a mortgagor. I have not however been advised of the reason for her being included as a mortgagor and I do not have any evidence of her financial circumstances or whether she was to contribute to the mortgage payments. She was not a registered proprietor of the subject land.
(Page 5)
10 As it happens, the relationship between the plaintiff and his former wife deteriorated, such that on 1 August 2005, he moved out of the home they shared and in November 2005, the relationship terminated. However, in February 2006, the plaintiff formed a new relationship with another person and they commenced living together in July 2006. Again, there is no evidence before me as to the financial circumstances of the new de facto wife.
11 In January 2006, the plaintiff estimated his income to be $47,826.04 net per annum, whilst his expenditure was estimated to be the sum of $71,932.84 per annum.
12 In his affidavit dated 20 March 2007, the plaintiff provided details of his budget for the house and the ancillary items required upon the completion of construction as follows:
"5.1 Building contract $410,736.00
5.2 Variations 1 $ 36,205.00
5.3 Variations 2 $ 3,880.00
5.4 Swimming pool & Spa $ 30,248.00
5.5 Tile cost and laying – balconies
and all rooms other than bathrooms
and bedrooms $ 31,115.00
5.6 Jetty $ 16,386.00
5.7 Retaining walls at back garden $ 14,820.00
5.8 Heaters and Installation x 2 $ 7,377.00
5.9 Fence Bricks and laying
(6930 bricks x $1 per brick) $ 10,908.00
5.10 Garden Gates $ 5,870.00
5.11 Carpets $ 5,750.00
5.12 Blinds $ 4,760.00
5.13 Security $ 5,629.00
5.14 Reticulation $ 1,689.00
- 5.15 Recyclit – Home waste
management system $ 1,641.00
5.16 Paving $ 10,000.00
5.17 Garden $ 10,000.00
5.18 Airconditioning $ 17,500.00
5.19 5 x Bedroom suite $ 10,000.00
5.20 2 x Lounge fitout $ 10,000.00
5.21 Kitchen $ 2,000.00
5.22 2 x Bathrooms and 3 x Toilets $ 5,000.00
5.23 Video and Sound system $ 10,000.00
5.24 10 x Ceiling Fans $ 2,000.00
5.25 Light fittings (over 30 x $100ea) $ 3,000.00
5.26 Curtains $ 15,000.00
5.27 Contingencies/cost over runs $ 15,000.00
TOTAL $696,514.00"
13 The contract price by which the defendant was to construct the house for the plaintiff was the sum of $460,821.50 of which $9,000 was paid. Accordingly, for the purpose of these reasons, I will refer to that price as $451,821.50 so as to allow for the sum to be paid by the plaintiff on the building contract.
14 The plaintiff had obtained quotations for only some of the ancillary items as follows:
Swimming pool 8 September 2004
Ceramics 16 February 2004
Floor tiles 9 April 2003
Jetty 2 April 2003
Airconditioning 2 March 2005
Stonework 28 March 2004
(Page 7)
- Heating date unknown
Brick paving 7 April 2003
Fencing 9 April 2003
Carpets date unknown
Blinds 5 April 2003
Security system 8 April 2004
Reticulation 19 March 2004
15 All other costs not supported by quotation and referred to above by way of ancillary items are really just "guesstimates" on the part of the plaintiff. There is no evidence identifying the claimed costs of those items not supported by quotations having ever been estimated by the plaintiff prior to his affidavit sworn on 20 March 2007. Further, although some quotations are now more than four years old, nothing was introduced into evidence by way of updated costing in respect of any of the amounts thereof.
16 The cost of all these intended ancillary items amounts to $245,693, including $15,000 for "Contingencies/cost overruns".
17 The defendant admits that it breached the contract and that it is required to pay to the plaintiff such sum of money as will compensate him for his increased building costs subsequent to its breach of the contract The defendant says that those costs should be assessed as at the September/December 2005 period, because the plaintiff should then have instructed another builder to construct the house for him. The plaintiff previously accepted September/December 2005 as being the time when damages should be assessed, but he now seeks to have damages assessed as at the present date.
18 As noted above, the building contract between the plaintiff and the defendant was terminated by notice dated 23 September 2005. The plaintiff issued a writ of summons on 28 September 2005 and the defendant filed a memorandum of appearance on 3 October 2005. The plaintiff could have entered judgment by default in the absence of a defence from the defendant, but he did not do so. Instead, on 17 October 2005, the plaintiff issued a chamber summons seeking summary judgment which was obtained on 15 December 2005, without any objection from the defendant.
19 The plaintiff says, that, by reason of a quotation he had obtained from Domination Homes, dated 30 May 2005, in the sum of $576,697, he
(Page 8)
- did not believe he could afford to brief another builder to construct the house at that time and he has not since done so.
20 However, the instant case is not one like Bevan Investments Ltd v Blackhall & Struthers (No 2) [1978] 2 NZLR 97 which involved disputed liability and uncertainty as to whether any judgment the plaintiff might eventually recover would be capable of being enforced against the defendant. There is no suggestion, that, in this case, the judgment obtained by the plaintiff cannot be recovered from the defendant. Counsel for the defendant submitted that therefore, the plaintiff could, and should, have immediately briefed another builder to construct the house, because any increased cost in the building price suffered by the plaintiff will be recovered from the defendant.
21 This therefore gave rise to the major factual issue in the trial, ie, whether the plaintiff ought reasonably to have briefed another builder to construct the house immediately upon the defendant repudiating its contract with the plaintiff. The determination of such factual issue is also determinative of whether the assessment of the plaintiff's damages should be assessed as at September/December 2005 when the contract was terminated and judgment was obtained against the defendant, or whether damages should be assessed as at June 2007, when the assessment of damages was heard.
The law to be applied
22 The High Court in Bellgrove v Eldridge (1954) 90 CLR 613 at 617 - 618 said that:
"Subject to a qualification to which we shall refer presently the rule is, we think, correctly stated in Hudson on Building Contracts, 7th ed. (1946), p. 343. 'The measure of the damages recoverable by the building owner for the breach of a building contract is, it is submitted, the difference between the contract price of the work (1954) 90 CLR 613 at 618 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'. …
The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt."
(Page 9)
23 I must therefore, in the circumstances of this case, consider what was "a reasonable course to adopt" in order "to produce conformity" with the building contract between the plaintiff and the defendant. This concept is referred to in the following statement from Radford v De Froberville [1978] 1 All ER 33 at 56:
"The question then, as it seems to me, comes down to one of the reasonableness of the steps actually taken by the plaintiff and, in my judgment, the proper approach is to assess the damages at the date of the hearing unless it can be said that the plaintiff ought reasonably to have mitigated by seeking an alternative performance at an earlier date, in which event the appropriate measure would seem to me to be the cost of the alternative performance at that date.
24 In the later case of Dodd Properties (Kent) Ltd v Canterbury City Council[1980] 1 All ER 928 at 933, Megaw LJ said:
"The general principle, referred to in many authorities, has recently been recognised by Lord Wilberforce in Miliangos v George Frank (Textiles) Ltd, [1976] AC 443 at 468), namely that 'as a general rule in English law damages for tort or for breach of contract are assessed as at the date of the breach'. But in the very passage in which this 'general rule' is there stated, it is stressed that it is not a universal rule. That it is subject to many exceptions and qualifications is clear.
Indeed, where, as in the present case, there is serious structural damage to a building, it would be patently absurd, and contrary to the general principle on which damages fall to be assessed, that a plaintiff, in a time of rising prices, should be limited to recovery on the basis of the prices of repair at the time of the wrongdoing, on the facts here, being two years, at least, before the time when, acting with all reasonable speed, he could first have been able to put the repairs in hand. Once that is accepted, as it must be, little of practical reality remains in postulating that, in a tort such as this, the 'general rule' is applicable. the damages are not required by English law to be assessed as at the date of breach.
The true rule is that, where there is a material difference between the cost of repair at the date of the wrongful act and the cost of repair when the repairs can, having regard to all the
(Page 10)
- relevant circumstances, first reasonably be undertaken, it is the latter time by reference to which the cost of repairs is to be taken in assessing the damages. That rule conforms with the broad and fundamental principle as to damages, as stated in Lord Blackburn's speech in Livingstone v Rawyards Coal Co ((1880) 5 App Cas 25 at 39) where he said that the measure of damages is—
'that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.' "
"In the present case, unlike [East Ham Corporation v Bernard Sunley & Sons Ltd [1966] AC 406] the work of completion of the building had not been done. In effect the Judge took the costs ruling as at the date of trial as the measure of the actual cost of repairs and then considered whether or not Bevan Investments had failed in its duty to mitigate damages by not having the work done at an earlier stage. He thought that in the context of mitigation of damages the impecuniosity of a plaintiff could properly be taken into account …"
26 Richmond P succinctly summed up the position as follows at p 115:
"[The trial Judge], in effect, took as his starting point the actual costs of scheme C as at the date of trial and then considered whether or not there was any such unreasonable conduct on the part of Bevan Investments as would require the Court to take some earlier date for the purpose of calculating costs. In principle this approach seems to me to be in accordance with the general basis on which damages for breach of contract are to be awarded. As at the date of trial the factual situation was that it would only be possible to give to Bevan Investments the equivalent in money of a properly designed building erected at 1968 prices by means of a judgment which would enable the work of completion to be carried out at 1972 prices."
(Page 11)
27 The plaintiff's duty to mitigate his loss has been recognised by the High Court in Burns v M A N Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 658, Glenmont Investments v O'Loughlin (No 2) (2000) 79 SASR 185 at 278, Woodward Pty Ltd v Kelleher, unreported; NSWCA; BC8902118; 30 May 1989 and Alcoa Minerals of Jamaica Inc v Herbert Broderick, [2000] BLR 282 at 285. That this is the approach to take can be seen also from McKay & Anor v Hudson & Ors [2001] WASCA 387 at [95].
28 Hadley v Baxendale (1854) 9 Exch 341 at 354 is authority for the proposition that damages which an innocent party can recover for breach of contract are such as may fairly and reasonably be considered either to have arisen naturally from the breach itself or to have been in the contemplation of both parties at the time they made the contract as the proper result of its breach.
The time required for pre-construction work and the house construction
29 The plaintiff called Mr Paul McEvoy, a quantity surveyor, to give evidence on his behalf as to the likely time and cost of another builder, in lieu of the defendant, constructing the subject house. By his report dated 26 April 2007, Mr McEvoy said:
"A pre-start period of between 6 and 9 months is likely prior to the construction period of a contract. The construction period is likely to be a minimum of 15 months. The pre-start period will vary from builder to builder and is dependent on the extent of work to which he is committed. During 2005 and continuing through 2006 building activity has been frenetic and an unqualified commitment to a program is difficult to secure."
30 It was acknowledged that this was hearsay evidence on the part of Mr McEvoy. Such evidence carries little weight.
31 The plaintiff also called Mr Stephen Griffiths, a registered builder, who indicated in a schedule to a statement of the substance of his expert evidence that the pre-start time frame is normally 34 to 38 weeks. However, he conceded that the pre-start period to construct the subject house could possibly be much less than normal because this house was "not starting from scratch".
32 By way of example, Mr Griffiths indicated that there would be less need to liaise with the client to finalise the brief and the price (two weeks), seek written evidence of finance and ownership
(Page 12)
- (two weeks), and receive the deposit, sign the contract and submit plans to council (two weeks). I also note from his schedule, that, Mr Griffiths allowed eight to ten weeks for the local government authority to approve the building, whereas, in the instant case, the building licence had already issued on 20 August 2004. There was provision for it to be extended. Further, Mr Griffiths indicated that if a geotechnical report was not required by a structural engineer, then, six weeks could be removed from his schedule. I was not told whether such report was required in this case, but, it is the fact that after the last variation of contract was agreed between the plaintiff and defendant on 22 June 2005, work was required to be commenced by 11 July 2005. I also note, that, the subject property was the subject of a canal development such that it is possible that a geotechnical report was to hand in any event which may indicate why the defendant was able to agree to commence work almost immediately after all variations to the building contract had been agreed. On the other hand, the defendant did not so commence construction.
33 Mr Griffiths indicated that a pre-start period for this contract of six months would not be unreasonable. Mr Griffiths also indicated, that, many of the tasks set forth in his pre-start time frame could be conducted simultaneously, thereby reducing the pre-start time frame.
34 The defendant called evidence from Mr Trevor Parton, a building estimator for a building company. Part of his duties requires him to forecast times for house construction so as to profitably estimate construction costs. He "assumed that it would likely take a builder, as from December 2005, six months for pre-start … and 15 months to construct the Home".
35 In the circumstances, it seems to me that it is more probable than not, that, a pre-start period of up to six months for this particular house was required as at September/December 2005. Indeed, absent the need for a geotechnical report and council approval, the period could well be reduced to a shorter period.
36 The plaintiff's expert allowed for a minimum 15 month construction period. The defendant's expert "assumed" a 15 month construction period. The contract between the plaintiff and the defendant provided for a 13 month construction period. I prefer Mr Parton's assumption because he is employed to determine, amongst other duties, the estimation of construction times when determining construction costs and because the defendant contracted for a 13 month construction period which must have some commercial relevance.
(Page 13)
The plaintiff's financial ability to proceed with construction as at September/December 2005 and to later pay for ancillary costs
37 It is then necessary to examine the likely cost of construction of the house by a builder other than the defendant as at September/December 2005. If the plaintiff did not have the financial ability to proceed with construction in September/December 2005, then I will need to consider construction costs at a later time. In this respect, the plaintiff's expert Mr McEvoy opined that such cost would be a minimum of $588,000 and a maximum of $657,000. The defendant's expert, Mr Parton, gave evidence that the cost would be $593,177. Each of these costs has been estimated as at December 2005 with a construction period of 15 months.
38 The reason for the range provided by Mr McEvoy is that his lower sum relates to a six month pre-construction period and the lowest end of the tender range, whereas his higher sum relates to a nine month pre-start period and the highest end of the tender range. In this regard, Mr McEvoy said that tenders received in a normal competitive market vary by at least 10 per cent between the lowest and the highest. Mr McEvoy indicated, that, a builder desirous of work would provide a low quote, whereas a builder who had plenty of work at the time would provide a high quote.
39 I must also at this point mention the quotation obtained by the plaintiff from Domination Homes, dated 30 May 2005, for the sum of $576,697. This quotation was received into evidence without the author thereof being produced for cross-examination and it is not known upon what basis that quote was prepared. It has not been tested in any way, but, it is reasonably close to Mr McEvoy's lower figure and to Mr Parton's figure.
40 It, is however, apparent on any view of the matter, that, as at September/December 2005, the plaintiff had available to him the sum of $698,000 with which to carry out the construction of his house whether I take Mr Parton's cost of $593,177 or even the upper end of Mr McEvoy's range of $657,000. Both are less than the $698,000 which the plaintiff had available. The defendant had never opposed either default or summary judgment being entered against it and it is not suggested that the plaintiff will not be able to recover the judgment obtained by him.
41 The plaintiff had anticipated that the assessment of damages would have occurred by mid-2006 so that, had he proceeded to brief another builder in September/December 2005 and then proceeded with construction, that would have meant that this claim as anticipated by the plaintiff should have been finalised by trial at some early point during the
(Page 14)
- construction process. Although the assessment of damages did not come on for hearing until June 2007, and indeed, it must be mentioned that there were two attempts at earlier hearings, it is the plaintiff's anticipated view as at September/December 2005 with respect to trial in mid-2006 that I pay regard. On my findings however, it would not matter if the plaintiff did not anticipate recovery of his judgment sum until June/September 2007. This will be explained below.
42 It seems, that, on the basis of a six month pre-start period and a construction period of approximately 15 months, that, had the plaintiff acted promptly to instruct a new builder during September/December 2005, then he could have expected construction of the house to have been completed no earlier than the June/September 2007 period. Only upon completion of construction will the plaintiff have to incur the cost of installing the ancillary items referred to in his affidavit of 20 March 2007, as set out above.
43 In the instant case, there is an explanation from the plaintiff that he did not have the funds necessary to have the house built by another builder, but, I do not accept that explanation on the basis that the plaintiff was in a financial position to commission the building work with another builder and that this was the "reasonable course to adopt".
44 Bearing these matters in mind, there is no apparent reason, other than the plaintiff's say-so, as to why, in September/December 2005, the plaintiff could not have instructed a builder, other than the defendant, to construct the house in the cost range provided by the experts for each party and Domination Homes. Had the plaintiff done so, then, as he anticipated, damages would have been assessed by mid-2006 and he would have recovered his judgment against the defendant. As it happens, the damages have not been assessed until now, but, even with that delay, had the plaintiff proceeded to brief another builder in September/December 2005 and to have then proceeded with construction of the house, that construction would only now be approaching finality, at which time, the plaintiff could expect to begin to incur the cost of the ancillary items. The delay in the assessment of damages is therefore not of any consequence.
45 The difference between the increased construction cost with a new builder and the cost set forth in the building contract between the plaintiff and the defendant would have diminished the $698,000 in funds available to the plaintiff. This would be the measure of the plaintiff's damages. Such damages arise naturally from the breach itself and fit within the first
(Page 15)
- limb of the principle in Hadley v Baxendale (supra). Recovery of the judgment sum will replenish any depleted funds, such that in financial terms the plaintiff will be put "in the same position as he would have been in if he had not sustained the wrong for which he is not getting his compensation" as per Megaw LJ in Dodd Properties (Kent) Ltd v Canterbury City Council(supra) citing Lord Blackburn in Livingstone v Rawyards Coal Co with approval. As I have already mentioned, there is no suggestion that the plaintiff will not recover on the judgment which he already has, but which is now being assessed.
46 It follows, that, the plaintiff is limited to the damages which are assessed on the basis of the increased price to a second builder for the construction of the subject house as at September/December 2005. The plaintiff had the financial ability to proceed with construction of the house using another builder once the defendant repudiated the contract with the plaintiff in September 2005. His recovery of the judgment sum will replenish his extra building cost such that he can then still pay for his estimated cost of the ancillary items which would or will not, on my view, have been required until June/September 2007 in any event.
47 I do not know if the plaintiff's matrimonial circumstances resulting in separation from his wife in November 2005 caused him to defer construction in that there is no evidence before me, that, his wife contributed or was to contribute in a financial sense. True it is that she was to be named as a mortgagor, but she was not a registered proprietor of the subject land and as I have said, there is no evidence before me that she was to contribute to the financing of the construction of the home or the purchase of the ancillary items. In any event, in February 2006, the plaintiff formed a new relationship. Again, evidence relating to her financial circumstances is not to hand.
48 However, it is appropriate at this stage, to consider also the plaintiff's claim for the increased cost of the ancillary items as part of the plaintiff's decision that he could not afford to brief a second builder. Given that the plaintiff engaged the defendant to construct a mere shell of a house, then it is reasonably apparent that before the plaintiff could rent it out as executive short-term accommodation, or indeed use it for any form of accommodation, he would require to complete the house with at least some of the curtains, carpets and other essential requirements being the ancillary items outlined above. However, the plaintiff did not claim such ancillary costs in his writ and statement of claim or in any of the various affidavits filed by him, until, his affidavit dated 20 March 2007.
(Page 16)
49 It should be noted that when the plaintiff swore his affidavit on 17 October 2005 in support of the summary judgment application, he did so on the basis that, relevantly, he sought:
"The difference between the cost of the works at current market prices and the price for the works provided for in the (building) Agreement".
50 The increased cost of the ancillary items is only now claimed because it is said that the cost of such items has risen since the date of completion stipulated in the building contract ie, 12 August 2006, and the trial. Those costs will continue to increase until the construction is complete and the expense is incurred. The plaintiff said that originally he did not pursue the increased cost of the ancillary items because he thought that his damages would have been assessed by mid-2006.
51 Had the plaintiff proceeded with the construction of the house in the September/December 2005 period in anticipation of his claim being resolved by mid-2006, or even by now, and the construction of the house being completed by about June/September 2007 then, the plaintiff could have reasonably expected the defendant to pay the outstanding shortfall after mid-2006, or this trial, such being before he will be required to spend money on the ancillary items in any event. Further, under the contract with the defendant, the building contract was required to be completed by 12 August 2006 and so it would not have been until then in any event that the plaintiff would have been required to spend money on the ancillary items. And that timing coincides with his estimation of when he anticipated his damages would be assessed.
52 As I have said, it is not suggested that the plaintiff may have difficulty in recovering the judgment sum. Accordingly, the cost of the ancillary items was not a financial impediment preventing the plaintiff from proceeding with construction in September/December 2005.
53 In these circumstances, it seems reasonable to extrapolate the increased cost to the plaintiff of the ancillary items from the time when he anticipated the building would have been completed under his contract with the defendant ie, by 12 August 2006, to say June/September 2007, when it might reasonably have been anticipated that construction might have been completed had the plaintiff instructed another builder with reasonable promptitude to proceed after default by the defendant in September/December 2005.
(Page 17)
The increased cost of construction
54 As previously noted, the plaintiff's expert, Mr McEvoy, produced a range of $588,000 to $657,000 depending on a six to nine month pre-construction period and the lowest and the highest range of tenders to be obtained from builders. Mr Parton, the defendant's expert, opined that the construction cost was $593,177. These evaluations of construction costs were determined as at the September/December 2005 period with a 15 month construction period.
55 The plaintiff's expert Mr McEvoy was provided with the drawings and plans of the subject house. He measured the quantities therefrom and applied rates or prices to such quantities which he obtained from the 24th edition (2006) of "Rawlinsons Australian Construction Handbook". This is a publication of a company of which Mr McEvoy is a director. Included in the rates or prices is a margin of 5 per cent as to which, Mr McEvoy would add a further 10 per cent for the builder's overheads, such amounting to a profit margin of 15 per cent to which 10 per cent must be added by way of GST. In his report, he determined the base rate to be the sum of $543,428 and by adding to that the 15 per cent profit margin and 10 per cent GST and allowing for a six month preconstruction period and a minimum 15 month construction period, then, the lowest end tender range was the sum of $588,000. In arriving at this figure, Mr McEvoy also applied the price index for project homes detailed in the Australian Bureau of Statistics 6416 Table 3 – Perth so as to determine the cost of constructing the house in December 2005.
56 Rawlinsons' figures cover a wide range of buildings throughout Australia, including schools and prisons. The ABS figures retrospectively show building construction cost increases and they relate solely to project homes, but the fact is that the subject house is not a project home. In April 2007, Mr McEvoy was able to apply then known figures on a retrospective basis, but these figures would not have been known to a builder in September/December 2005. He further was able to use such published data to assist him to project the future cost of the house construction to the extent that figures were not then available.
57 Mr Parton is an estimator. He prepared his estimate just as he would any estimate when asked to quote on a house for his employer, Delstrat Pty Ltd trading as Seacrest Homes. It is his responsibility to estimate the cost of construction of houses. To this end, his employer has a computerised programme named the "Building Estimating and Management System". Apparently, on Mr Parton's evidence, this system
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- is used by other estimators in Western Australia and is sold locally by a Mr Peter Fonti. Mr Parton has had knowledge of this system since he was employed at Plunkett Homes between 1997 and 1999. Mr Parton gave evidence, that, when updates on the computer programme are made available by Mr Fonti, he sees the names of other builders who use that same system. The system brings with it a series of prompts to enable estimators to use it and Mr Parton has been trained on the system.
58 Within the system, the cost of quantities and labour are categorised and detailed. There is a default system which provides for current day costs and there is a further procedure for estimating rates on materials and labour into the future so as to enable the estimator, at any time, to determine the cost of a future building contract.
59 In the instant case, Mr Parton took the quantities from the drawings and plans as did Mr McEvoy. He applied the rates for a future building contract estimated as at December 2005, which he obtained from his computer system. This produced a figure of $468,915.25 which does not provide for the builder's profit margin or GST. When 15 per cent is added for profit and 10 per cent for GST, the figure becomes $593,177.78.
60 The profit of 15 per cent is therefore common to both experts, as is the provision for GST. In the case of Mr Parton, it is the fact that he himself does not determine the actual cost to be charged to the property owner. Rather, his superior does this in conjunction with him. However, by adopting the common 15 per cent profit ratio and GST, the two experts' values are comparable. The plaintiff was critical of Mr Parton's estimate because the final price is determined by his employer having regard to the particular job at hand however, Mr Parton is involved in that decision making process.
61 On balance, I prefer the reasoning behind Mr Parton's estimate noting that:
1. Mr Parton actually prepares costs for homeowners in a commercial setting, whereas Mr McEvoy does not. Mr Parton's estimates must therefore be within current market values, failing which, his employer will not succeed in business.
2. Mr Parton uses a computer system common to other builders in Perth such that I can find it to be of commercial acceptance in Perth. The data entered into that system is
- provided by those with knowledge in the building industry of charges being made for materials and labour.
- 3. Mr Parton's estimated cost is based on the computer programme as at December 2005. Although his report was prepared retrospectively, he used actual December 2005 figures such that they are the figures that would have been used in December 2005 to quote to build the subject house. They are commercial figures. On the other hand, Mr McEvoy's range in the building price has been taken from figures which could only have been obtained after December 2005 and which he obtained and utilised on a retrospective basis and which therefore have an air of artificiality about them.
4. Mr Parton's figures relate to the one-off house to be constructed by the plaintiff. The Rawlinsons' figures relate to all forms of building. The ABS figures relate to project homes. Mr McEvoy's figures therefore do not exactly relate to the subject house.
The increased cost of ancillary items
62 The plaintiff now claims that, by reason of the increases in both the building cost and the initial total cost of the ancillary items as estimated by him, that, the increased cost of such ancillary items will exhaust the surplus funds that were available to him, even after allowing for the fact that they will not be required until construction is complete at some time in the future.
63 I have set out above the proposed ancillary items and costs above, only some of which costs have been evidenced by some form of invoice. Many items have not been supported by invoice. To the extent that some of the items claimed have been supported by an invoice, there is nothing by way of updated invoice to indicate any increase in the cost of such items. This lack of evidence is compounded for those items which are not supported by any invoice at all. The increased costs claimed by the plaintiff must be regarded as being mere speculation on the part of the plaintiff, or a guess upon the initial "guesstimate".
64 In the circumstances, I therefore have nothing other than the fact that the plaintiff has set forth estimates of the cost of the various ancillary items totalling $245,693, being almost the shortfall ($246,178.50) between the total funds available to him in 2005 of $698,000 and the cost to the plaintiff of the defendant constructing the house of $451,821.50.
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65 Mr McEvoy has determined a value for the increased cost of the ancillary items using the Australian Bureau of Statistics Building Index (6416 Table 3). Although this may be a guide for some of the ancillary items with a building component, it is not helpful for other items without such a component and which are really just the purchase of household items. The problem is that there is no evidence of the increase, if any, in the cost of the various ancillary items. Mr McEvoy's valuation is therefore of little assistance. The defendant did not offer any evidence as to the increased cost of the ancillary items.
Quantum of damages
66 There is not much difference in construction costs between Mr Parton's figure of $593,177.78 and Mr McEvoy's escalated figure of $588,000 based on the lower end of the tender range and the six month start-up period. The difference between Mr Parton's quotation of $593,177.78 and the original building contract of $451,821.50 is $141,356.28. I will allow that as the plaintiff's damages for the increased building costs.
67 The plaintiff seeks $53,161 - $61,365 for increased ancillary costs based on Mr McEvoy's calculations that the original completion date of August 2006 will be extended until March - June 2009 for a six to nine month pre-start contract from now. As previously explained, there is little information in this respect to assist in this aspect of the assessment of damages. Doing the best I can, I will allow an additional approximate 10 per cent being $25,000. This should cover any increases from 12 August 2006 to completion which could have been achieved in or about June/September 2007 had the plaintiff acted with reasonable promptitude.
68 The plaintiff also claims certain costs relating to his bank loan as set forth in his affidavit sworn 21 August 2006. These are nominal amounts of interest totalling $58.91 together with stamp duty in the sum of $2326.78 and $6.78 interest. Had the plaintiff proceeded with reasonable promptitude to instruct another building contractor, then, the stamp duty would not have been lost, nor would the interest paid by him on his loan fees. I will therefore not allow these costs.
Judgment
69 I will therefore assess the plaintiff's damages in the sum of $166,356.28, calculated as follows:
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- Increased building cost $141,356.28
Increased cost of ancillary items $25,000.00
$166,356.28
70 I will also allow interest on the judgment sum at the rate of 6 per cent per annum from termination of the building contract, ie, 23 September 2005 to 6 July, being $17,528.93. Accordingly, there will be judgment for the plaintiff in the sum of $183,885.21.
71 I will hear from the parties as to costs.
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