Rural Building Company Pty Ltd v Butcher - [2007] WADC 91

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: RURAL BUILDING COMPANY PTY LTD -v- BUTCHER & ANOR [2007] WADC 91

CORAM: KEEN DCJ

HEARD: 19-23 MARCH 2007

DELIVERED : 6 JUNE 2007

FILE NO/S: CIV 2505 of 2004

BETWEEN: RURAL BUILDING COMPANY PTY LTD
Plaintiff
AND
RICHARD BUTCHER
First Defendant
HELEN BUTCHER
Second Defendant

Catchwords:

Building contract - Breach - Misleading or deceptive conduct - Turns on own facts

Legislation:

Builders Registration Act 1939
Fair Trading Act 1987 (WA)
Trade Practices Act 1974 (Cth)

Result:

Claim allowed
Damages awarded
Counterclaim dismissed

Representation:

Counsel:

Plaintiff:     Mr R D Shaw
First Defendant             :     Mr P G Clifford
Second Defendant         :     Mr P G Clifford

Solicitors:

Plaintiff:     Lavan Legal
First Defendant             :     Cahill Billington
Second Defendant         :     Cahill Billington

Case(s) referred to in judgment(s):

Foran v Wight (1989) 168 CLR 385
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
Gould v Vaggelas (1984) 157 CLR 215
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514

KEEN DCJ:
The plaintiff is a designer and builder of residential homes. The defendants were, at material times, the owners of Lot 30 Coulston Road, Boya (the Property).
The plaintiff's claim arises out of a contract (the "contract") made between the plaintiff and the defendant for the plaintiff to build a house on the Property. The plaintiff's claim is that the defendants wrongfully repudiated the contract which repudiation was accepted by the plaintiff. The plaintiff claims damages in respect of its losses arising out of that repudiation.
The defendants deny the plaintiff's claim. They allege that the plaintiff, through its representative, represented that the Property was suitable for the building by the plaintiff of its Durack Design or a Custom Durack Design (Durack). The defendant also claims that there were further representations made by the plaintiff's representative as to the stockpiling of material excavated from the Property, the driveway at the Property, and the footings to be used in the construction of the house.
The defendants claim that in reliance on those representations they purchased the Property and/or entered into the contract.
The defendants further say that the plaintiff was in breach of the terms (express or implied) of the contract and they were entitled to terminate the contract, which they did. The defendants also claim that the various representations were false and that the plaintiff engaged in misleading or deceptive conduct contrary to s 52 Trade Practices Act 1974 (Cth) or s 10 Fair Trading Act 1987 (WA) or both.
The defendant also claims that prior to entry into the contract the plaintiff and the defendant entered into what is known as a "Preparation of Plans Agreement" (the Plans Agreement) whereby for the sum of $2,000 the plaintiff agreed to arrange for a contour survey of the site on the Property, conduct an inspection of the site, arrange preparation of engineer's drawings and prepare drawings, specifications and estimates for the construction of the proposed dwelling. It is said that there was an implied term of the Plans Agreement that the drawings and specifications prepared by the plaintiff for the proposed dwelling would be for a dwelling suitable for the site.
The defendant claims that the plaintiff breached that Plans Agreement in a number of respects relating to the driveway, the embankment created in front of where the house was to be situated and in the design of the footings of the house.
As a result of those breaches of contract, the Plans Agreement and as a result of the misleading or deceptive conduct the defendant claims to have suffered damages.

The Plaintiff's Claim

Apart from the background as previously stated, the plaintiff's claim can be put quite simply. It is a claim that the defendants have wrongfully terminated the contract and that the plaintiff is entitled to damages. Those damages were particularised as costs incurred in the performance of the contract up to the date of repudiation in the sum of $22,916.94. In addition the plaintiff claims loss of profit as a result of the defendants' wrongful repudiation of the contract in the sum of $49,726 and interest pursuant to the contract.

The Defendants Claim

Having regard to what has been said previously, the defendants' claim can be boiled down to one whereby the defendants' claim that the contract was validly terminated, firstly, by reason of false representations allegedly made by the plaintiff and, secondly, by reason of substantial breach of contract on the plaintiff's part. The defendants claimed damages particularised in the sum of $151,631.70. A claim for the difference in value of a house constructed on the site and the amount realised for the sale of the site less the costs of construction was disallowed by me during the course of the trial on the basis of late delivery of particulars thereof and expert evidence in relation thereto.

The Evidence

Much of the evidence in this case as to how the parties came together and what transpired leading to the formation of the contract is not in dispute.
Harry James Harrison, a representative employed by the plaintiff, gave evidence that he received an email inquiry from the defendants and telephoned them. They invited him over to their house in Subiaco to view their furniture and to obtain a feel for the type of house that they liked. The meeting was held at the defendants' home. He observed the type of furniture that they had and advised them that the plaintiffs had a style of home called the Durack which would appear to suit their furniture. The defendants then went to have a look at a display home of the Durack. They liked the style of the house and the next stage in the process was for Mr Harrison to go with them to see the block that the defendants were interested in at Boya.
Mr Harrison attended with the defendants at the block and looked over the block with them and told them that if they liked everything about the block and all aspects of it, the house (the Durack) would fit on it. The defendants told him that they had another block in mind and Mr Harrison agreed that he would look at that with them the following day. He never got there because that following day he received a phone call from Mrs Butcher advising that the defendants had made an offer on the Property at Boya.
Further discussions took place between Mr Harrison and the defendants and a scaled-down version of the Durack home was suggested.
Mr Harrison went to the property again with a post hole digger to dig some holes to get a feel for the engineering that would be required on the property. He decided that this would be a clay site and in his site costs he allowed for an M1 engineer's detail with MA detail. He said that he told the defendants that the property had a chance of being a clay site and there would be some implications for site costs.
Mr Harrison said that the Plans Preparation Agreement was signed. It is dated 17 June 2003. The second page of that Plans Agreement contains a list of site allowances, including $10,000 for earthworks.
A further costs schedule was prepared and signed and dated 3 February 2004. Mr Harrison said that he was not involved in that document and he did not see the defendants again.
As to the allegation that Mr Harrison had represented that the site was suitable for the building of the Durack, Mr Harrison said that he said to the defendants (along the lines) that if they liked everything about that block and if they liked where it was, the Durack would fit on the block.
Mr Harrison said that he did not have any discussions with the defendants about stockpiling any materials excavated from the site. As to the footings to be used, he said that he told the defendants that he expected the site to be a clay detail and was going to allow for M1 engineering detail. He said that he did not describe the footings as "the heaviest footings and foundations" nor the strongest or more rigid.
Under cross‑examination Mr Harrison accepted that the property was on a very steep slope and at the meeting at Subiaco, that the defendants' furniture and style would fit in beautifully with the Durack style house.
Mr Harrison agreed that he said that the house would fit on the block and at the meeting on the block paced out where the house would be. He said that there was really only one position where the house could fit on the block. Because the block was also long and narrow and the house was long and narrow and there was only one option; that the house ran down the block.
Mr Harrison agreed that a driveway would be required and that it would be a fairly steep driveway. His understanding was that the driveway was to be relatively straight. He acknowledged that there would have to be some deviation, left to right, to get into the carport depending upon the positioning of the carport. Mr Harrison agreed that it was not sensible to be backing out of the Property onto the road but that he had nothing to do with the design of the driveway.
Mr Harrison was also asked about the earthworks at the property. He said it was obvious that there was going to need to be a cut and "a fair bit of earthworks". He said that this was discussed with the defendants.
He agreed that something would have to be done with the material that was removed. He said that he never had a discussion at the time with the defendants about stockpiling that material. He said that there was no discussion about where the material would go, nor where the material that was disturbed to construct the driveway would go.
Mr Harrison said that once he had signed the defendants to the Plans Agreement he was never called upon to have any further input, although he was aware that the defendants were unhappy.
Todd Russell Whitfield is a draftsman employed by the plaintiff.
Mr Whitfield confirmed that the site was a bush site with very reactive clay soil and sloped and it was difficult to build on.
He became involved in the redesign of the Durack style home. The living areas were moved towards the back of the house to take advantage of the view.
He said that he had discussions with the defendants in respect of the driveway. He acknowledged that the driveway was steep because of the nature of the block. He did not recall discussing any specific gradient, but his discussion was about something that would work and subject to council approvals.
Rosemary Costen is a new homes administrator with the plaintiff. Her role is to become the client liaison throughout construction. In that role she came into contact with the defendants. She recalls that they were unhappy with the positioning of the house on the block and as a result she brought Mr Whitfield into the matter to look at the design and the location of the house on the site. She confirmed that by that stage Mr Harrison's role in the matter had ended, and another sales representative, Gaynor Armstrong, had come on the scene.
It was Ms Costen who arranged for the execution of the contract documents, being the lump sum contract building contract dated 3 February 2004, the costing schedule of the same date, plans, addenda to specification and specifications and engineer's certificate and drawings, all to be found in Exhibits 1 and 2.
Ms Costen also dealt with variations from time to time and entered into correspondence with the defendants. She received an email from the defendants dated 25 July 2003 (Exhibit 1, Tab 13) in terms:
"Harry has informed me that the heavier foundation is required for our house. This foundation estimated has been based on the fact that clay is present at the site. My company Dempers & Seymour conducted preliminary test work and determined that clay was not present at the site. Obviously both sets of site investigation data conflict. Therefore I am officially requested (sic) that the copy of the site investigation is reviewed by my company's geotechnical engineers. In this request I would be grateful if you would forward the site investigation report to me for review."
Ms Costen believed that she had sent the site investigation report being a report of Structerre dated 15 July 2003 (Exhibit 3, Tab 1) to the defendants.
Ms Costen was also taken to the costing schedule dated 3 February 2004 (Exhibit 1, Tab 2) at which it is recorded at 2.1:
"Remove trees within 1.5 m of building area and stockpile on site. Please note that all excess soil will be stockpiled on site to reduce costs."
She said that the plaintiff only removed excess soil from suburban metropolitan blocks because there is no room or if an owner specifically asked to have it removed and for which the owner would pay extra.
Ms Costen was asked about the excess soil and said that she did not discuss the quantity of excess soil with the defendants.
Ms Costen also confirmed that the final amended plans, dated 1 June 2004, are Exhibit 2, Tab 13.
Steven Jarman is a licensed land surveyor. He attended at the Property and carried out observations and recorded and mapped various gradients of driveways of a number of properties in the immediate vicinity. His report is to be found at Exhibit 3, Tab 2. The report compares a number of other properties in the vicinity with the Property. The Property is shown to have a grade ratio of 1:-5.14 (being a negative gradient, ie downhill from the road). The other properties compared have gradients from as steep as 1:-3.62 to as shallow as 1:6.71 (being a positive gradient, ie uphill from the road). In relation to Lot 740 which had the gradient of 1:-3.62 Mr Jarman was not able to say when that driveway was approved for construction or when it was constructed, nor was he able to say what sort of vehicles were using that driveway. He was similarly unable to answer questions in relation to the other driveways surveyed. He did see standard medium‑sized sedans using one of the drives which had a grade of 1:6.43.
Gervais Purich is an engineer and a member of the firm Structerre Engineers (Structerre). Structerre was engaged by the plaintiff to provide engineering services for the plaintiff. One of the specialties of that firm is residential construction and clients of the firm build approximately 65 per cent of Perth homes.
Mr Purich gave evidence about classification of sites and as to whether they were sandy sites, slightly reactive, moderately reactive, highly reactive or extreme sites and also other sites which are particular sites. He said that the "M" classification which the Property was given was for a site having an expected surface movement of between 20 and 40 milllimetres. That means that the site is moderately reactive. Mr Purich said that the purpose of the classification was to provide a footing design for the site and a level of performance within Australian Standard AS 2870. He said that the Standard was widely referenced in Western Australia.
Having regard to the certificate of inspection provided by Structerre (Exhibit 3, Tab 1) Mr Purich said that he was required to provide a design to give a satisfactory performance for the house. He said that he asked for a sand pad to be 800 mm above the cut level. He said that the purpose of this is that once the clay is replaced with sand, the anticipated surface movement is less.
He then said that a plastic membrane should be placed over the entire clay base and tracked into subsoil drains. That is to control the moisture fluctuations between summer and winter and the depth to which moisture variations occur is less because the plastic stops the rain from getting into the clay and evaporation coming from it. It keeps the clay more stable.
In providing the M1 design, Mr Purich said that this was more robust than one would have for a sandy site.
The certificate of inspection also provided for the base (once cut) to be inspected and approved by an engineer from Structerre. Mr Purich said the reason for this was to confirm the quality of the works and it provides an opportunity for the engineer to review what has been issued (the certificate of inspection) and to provide advice about subsoil drainage and the like.
Mr Purich saw a report from Messrs Airey Ryan and Hill Consulting Engineers, dated 13 July 2004 (Exhibit 4, Tab 3), in which Mr Airey said the site was complex. Mr Purich did not agree with him. He went to inspect the site and considered that the design for footing detail, being the M1 detail, together with the sand pad and plastic membrane and the recommendations (in the Certificate of Inspection) called for were adequate. He said that AS 2870 for an M site provides for a footing detail to be placed directly into clay because the site has 20 to 30 millimetres of surface movement. He noted that with the plastic membrane and the sand pad and the recommendations which control the surface membrane the movement on this pad would be 5 millimetres or less.
Mr Purich was asked why he would not use as a standard an M3 design rather than M1. He responded that there was a question of money and that everything that is designed has to be economically responsible. He said that is the reason that the code outlined expected performances as to movement. Mr Purich said that minor foundation movements occur on nearly all sites and it is impossible to design a footing system that will prevent a house from movement from all circumstances.
Mr Purich was asked by the plaintiff to provide answers to a number of questions set out in a letter dated 28 July 2006 (Exhibit 3, Tab 1). The first of such questions was whether or not the site was suitable for the construction of the house shown on the contract drawings. His response was "Yes, subject to normal procedures and precautions being adopted". In evidence he said:
"The site was suitable to build whatever you want have built on it, including a double brick house."
Next, he was asked whether the site or the house was subject to flooding. His response was that it was no more subject to flooding than other houses if built properly with the right procedures in place. Next, he was asked whether the embankment to the front of the house shown on the plan, subject to normal trimming by the earthworker, would be considered stable. He answered in the affirmative. He said that it would be normal for the earthworker, as part of preparing the subsoil drains, to batter the banks so there was an angle rather than being vertical. The final question put to him was whether it was possible to construct a driveway which could be used safely. His answer to that question was again in the affirmative. He noted that other sites in the street have done so. He did not think that there would be a problem with normal family sedans bottoming out but a low-slung car probably would.
Mr Purich had been advised that Airey Taylor Consulting had classified the site as a P site. Mr Purich disagreed. He said that no testing had been done on the soil to determine what the expected surface movement was. He said that the worst case that the house is to be exposed to should be considered and the design should be for the worst case.
In a report dated 5 February 2007 (Exhibit 3, Tab 1) Mr Purich carried out a number of calculations in relation to expected surface movement. It is not necessary for me to go into detail here, save to say that in evidence he said that the expected surface movement on the site after placement of the sand pad and plastic is 5 millimetres and that on that basis one could get away with a lot lighter design than that which was issued and the design that has been issued is probably heavier than it needs to be. He noted that the footings were not going directly into the clay. In cross-examination Mr Purich accepted that the design of footings should take account of the most severe surface movement for the entire site. However, whilst accepting that there were different clays on the site, he did not agree that the site was complex. He noted that the difference between him and Mr Airey was as to the complexity of the site and, as he put it, Mr Airey's inability to recognise that there would be a sand pad on the site and plastic to mitigate the expected surface movement.

In relation to cracking of the building, Mr Purich said that it was almost inevitable that houses on clay sites crack but that he was disturbed that Mr Airey was saying that he could provide a design which could guarantee a crack‑free house. His view was that there would be cracks, but they would be such as to fall within the obligation of a homeowner to maintain the house.
On the subject of the driveway, under cross-examination, Mr Purich accepted that in giving his view that certain vehicles would bottom out "[B]ut they would be the lowest lying sports car type", he had not carried out measurements or calculations and had not looked at the driveway to be constructed closely. He formed his opinion by the eye and experience.
In re-examination, in relation to cracking, Mr Purich said that the issue was to ensure that the cracking did not exceed allowable limits which he defined by reference to AS 2870.
Philip David Faigen is an architect and registered builder. He provided a report dated 1 March 2007 (Exhibit 3, Tab 3) dealing with a number of the issues between the parties.
In particular Mr Faigen was asked whether the site was suitable for construction of a house of the type shown in the drawings. His opinion was that the site was suitable for such a brick and tile house on a sand pad. There were alternatives for steep sites, namely pole‑framed houses, which might avoid site costs and he noted that it was personal choice of the owner as to which way the owner wished to build.
Mr Faigen was also asked about stockpiling of excavated materials and was of the opinion that material could be stockpiled and could be collected or dispersed at a later date.
One of the major areas considered by Mr Faigen was in relation to the construction of a driveway at the property. He said that it was preferable for the position of the driveway to be shown on the final plans, especially in sites which have a potential for difficult access. Mr Faigen's view was that if a driveway was any steeper than 1:4, it would be necessary to consider that driveway with the client to see what the client's requirements were. He noted that care had to be taken at the top and bottom of the gradient so that cars did not bottom out. Mr Faigen noted that according to Australian Standard 2890 the maximum gradient should be 1:4.
Mr Faigen took a number of photographs and prepared and produced appendices to his report showing typical sections through driveways taking various options for such driveways. There were three options, the first being a straight driveway along the northern side of the property, the second being a driveway commencing at that side of the property and curving as it rises up to the road towards the eastern side of the property. The third option was similar to the second option but with a greater curve across the property.
In Option 1, Mr Faigen depicted the straight driveway which, allowing for an initial "owner's gradient" of 1:6 at the carport and at the other end of the driveway at the crossover and transition, the balance of the driveway was at a gradient of 1:4.24. This is to be seen in Appendix 4.
In Appendix 5, again allowing for the owner's gradient and the transition gradient, Option 2, being a driveway which curved its way across the site, resulted in a gradient of 1:5.2. Option 3 which provided for a curved driveway further across the site and to the eastern edge of the site, again allowing for the owner's gradient, produced an overall gradient of 1:6.7.
In each of those options Mr Faigen provided for a reversing bay to enable vehicles to either change direction and reverse into the carport or vehicles to reverse out of the carport into the reversing bay and then proceed up the slope of the site towards the road in a forwards direction.
Mr Faigen described the gradient in Appendix 5 as being more comfortable and in Appendix 6 as the best gradient possible.
Mr Faigen was of the view that had the defendants proceeded with the contract the plaintiff could have constructed a driveway with a gradient of 1:6.
Mr Faigen was also taken to the embankment formed in front of the site for the house and created by the cutting of the site for construction. He was of the view that an embankment would not reduce the amount of light to the windows on the front of the property. He depicted the position in Appendix 8 to his report which showed a notional section of the house relative to the embankment and relative to the site itself.
With regard to the embankment and plotting it on his drawing, he showed it to be greater than 40 degrees and said that it did not appear to be unstable.
In cross-examination in relation to the stockpiling of excavated materials on the site Mr Faigen agreed that there would be a cost involved in removing that excavated material and it would require a degree of expertise when looking at the plans to know how much material was to be excavated and that a normal person (an owner) would not be able to do that.
In relation to the driveway, Mr Faigen in his report at par 40 said:
"In cases such as this it would be expected that the owner would assist in establishing the exact profile of the driveway."
Under cross-examination he said that he would have expected on this particular job that the client would be invited to come to site in the presence of the earthworker and builder and to consider his options. He acknowledged that people have different levels of skill and expertise in driving motor vehicles. He also acknowledged that it would be preferable to use the reversing bay (to turn the vehicle) to avoid backing out on to the road from the driveway.
On the subject of reversing bays Mr Faigen acknowledged that there would need to be retaining walls on the side of the reversing bay and at the carport side of the reversing bay. Nevertheless, he thought that notwithstanding those walls the operation (of using the driveway) was manageable.
Terrence Myers is the group building manager for the plaintiff and a registered builder. He first became involved in this matter when there was a dispute between the engineers as to the engineering requirements on the site. He referred to a meeting between the engineers which had not resolved the matter and was then asked:
"Where did it all end up after that meeting?---That meeting I put forward a possible resolution to look at an alternate design. I reiterated the fact that I was a registered builder for the group and took responsibility for the finished product."
Mr Myers wrote on 16 September 2004 to Mr Don Marquis of Thomson Marquis (Exhibit 1, Tab 114) in relation to a number of matters that had arisen in relation to this contract including the driveway, drains, embankment and stockpiling of excess soil and also in relation to the foundations and footings for the building. In that letter he said:
"If you prefer the advice of your consulting engineer over our preferred engineer, which we stand by and will accept his advice, Peter Airey had indicated that there was a minimal cost option that you may wish to consider. Please advise immediately of your intentions with regard to this matter.
In respect to all other matters, the contract is valid and binding and in the absence of any specific instructions to terminate the contract, works shall recommence on site on Wednesday, 15 September 2004."
Mr Myers said in evidence that it never got to that and the contract was terminated.
Mr Myers produced an expert report (Exhibit 3, Tab 4). In that report he dealt with the suitability of the site for the Durack house. At 7.2 of that report he said:
"The site is suitable for building the Durack Design or the Custom Durack Design. Those designs are masonry on concrete floor slabs. It is a reasonably typical building site in the Hills area and we commonly build such designs on such sites."
When questioned about that Mr Myers acknowledged the fact that it is a sloping site and, in any case, hill sites represent some sort of problem. However, he went on to say there were no problems with that house and there was no reason why the house could not have gone ahead as contracted for.
With regard to the spoil on the site he dealt with this in his report and said there was no reason why the spoil could not be stockpiled on the site and the material could be used for bunding around the Ecomax system. He noted there was considerable saving to the owner from the stockpiling of the materials on site. He noted in examination that the site was a large site and it was often the case on rural lots that to minimise costs the spoil would be retained on the site and utilised for landscaping. He noted that it was a significant cost to remove spoil from the site.
Also in his report he dealt with the question of the driveway. He noted that to get a suitable gradient for the driveway the plans were redrawn to show the curved driveway to the roadway at the front of the house. He said that a driveway could be safely constructed on the site and cars would not "bottom out". Even with a gradient of 1:5.14 vehicles would be able to access and negotiate the driveway safely. In examination he said that it was not unusual to have a 1:4 gradient and the only concern is the transitional period to get clearance between the underside of the vehicle and where there was a change in gradient. He said that there were no problems achieving that on this site.
As to the embankment, Mr Myers noted that the defendants had been alarmed at the extent of the cut and thought that the plaintiff had over-cut the site and undermined the tree which was to be left on site. He noted that at that time the imported sand fill (800 millimetres) had not been introduced. He said that there was quite a considerable difference between what they were actually viewing and that which was contracted for because that imported sand fill had not brought it up to the finished levels.
Under cross-examination Mr Myers was examined about the stockpiled excavated material on the site and whether that would have to be moved in order to put the Ecomax system in place. He said that there has to be a natural batter so there was further work in removing the deleterious material and pushing it further back down the hill. He accepted that the site of the house was already a fair way down the hill, but he said that on this site it could go back further, and one could do a multitude of things. He noted that the plaintiff was simply contracted to install the Ecomax and there was no reason why the plaintiff could not have continued to do that, albeit that they may have had to move some of the material further to ensure that adequate cover was on the Ecomax system. He took the view that there was no necessity for the spoil to be removed from site.
The defendant Richard James Butcher gave evidence and said that he and his wife had a budget of approximately $270,000 for land purchase and to build their house. They had a certain amount of flexibility. They had decided to build in a rural setting in the Hills in Boya and had contacted the plaintiff having seen the plaintiff's web site on the Internet.
The defendants had a meeting with Mr Harrison and subsequently visited the property at Boya with him.
Before that visit the defendants were aware that there was the potential for problems with clay in the Hills, having been advised of the same by their mortgage broker. Mr Butcher said that relying on his experience in mining he was quite concerned that there could be clay in the hills. He was aware of the effect of erosion on the top of the Hills and decomposition at the bottom. He made inquiries of geologists and was advised that there could be clay in the Perth Hills.
When viewing the site with Mr Harrison Mr Butcher said that Harrison said that the Durack would fit nicely on the site but it would have to be modified. There was some discussion about a shorter version. Mr Butcher broached the question of clay and Mr Harrison told him there could be clay and that was a condition that could be encountered in the foothills. Mr Harrison told him that "our engineers tend to take a very conservative viewpoint on that". Mr Butcher said that that put his mind at rest. Mr Butcher also said at that meeting there was a discussion about the footings. He said that Mr Harrison told him that the plaintiff would not only take a conservative approach but also they have the skills to do it and would give the defendants the "heaviest footings".
Whilst at the site there was some discussion about the slope. Mr Butcher, from his experience in mining, said that declines were designed to reduce the gradient by going in a zigzag or spiral fashion. He thought that was the way in which the gradient problems would be combated.
At the time the defendants were looking at another site which they had arranged for Mr Harrison to see on another occasion. The defendants decided that they did not like this other block and, it is common ground, Mr Harrison did not visit it. Mr and Mrs Butcher purchased the property at Boya. The contract for sale (Exhibit 1, Tab 1) was signed by the defendants on 11 June 2003.
Mr Butcher said at a second meeting at the block there was a discussion about excavation. Mr Butcher said that as a result of his experience as a mining engineer on open cut mines at least 50 per cent of the cost is in haulage of material away. He said that Mr Harrison said that the material would be "temporarily stockpiled at the site" and would be used for construction.
Also at that second meeting at the site, Mr Butcher said that the question of access was discussed. He said that there was a "hump" at the site and it had a convex profile near the road. He said to Mr Harrison that they would probably need a sloping drive to get up there. He said that Mr Harrison said that the plaintiff would construct an access track which could be used as a drive later. Mr Butcher said that he understood it was not just an access track but it was going to be the actual drive.
Mr Butcher was asked about the Plans Agreement (Exhibit 1, Tab 3) and said that he discussed this with Mr Harrison. He said that $46,000 had been allowed for site allowances and that was "a fair whack of money" and that struck him because Mr Harrison had discussed giving the heaviest foundations possible. He also said there was an allowance of $2,500 for the access track for construction use and that his understanding of this was that:
"in mining terms that's probably equivalent to moving 1,000 cubic metres of rock at the super pit, so that's a fair amount of money and that's what really, really alerted me, the fact that we weren't just getting a goat track for the builders to use".
Mr Butcher was taken to Exhibit 1, Tab 11, which was a copy of the Certificate of Inspection by Structerre dated 15 July 2003. That copy contains a series of notes in Mr Butcher's own hand. Those notes were made in the presence of Mr Dempers, a partner in the mining firm in which Mr Butcher was involved. Those notes relate to the various bore holes that were referred to in the certificate and also referred to the presence of clay and contained a note "(1) Clay sample required – serious clay." Mr Butcher then had a discussion with Ms Costen and said that he was concerned that there might be rock on the site as he had never seen clay which had actually refused or stopped an auger. It is for these reasons that he consulted Mr Gary Dempers. He then said that he spoke to Mr Purich within a matter of two or three hours. He says that he referred to the clay refusing an auger and was told that the refusal does not mean the actual drill has stopped penetrating. He also asked about rock, and was told there was no rock on site. It was about this time that Mr Butcher wrote his email of 25 July 2003 (Exhibit 1, Tab 13). I pause to note that all of this occurred after the defendants had contracted to purchase the property.
Mr Butcher went on to describe his meeting with Ms Costen and Mr Whitfield and how the layout of the house was reconfigured. According to Mr Butcher, Ms Costen had acknowledged that the house was unsuitable. The tenor of his evidence was that the use of that word "unsuitable" was in relation to the layout which was reorganised.
Mr Butcher gave evidence about further changes that were made to the plans and on 19 February 2004 he had a discussion with Mr Whitfield about adjustments to the driveway. In particular Mr Butcher was concerned about a straight driveway and being able to get up it as "the slope was extremely steep". He said there was some discussion about retaining walls and he asked for a design to be looked at in relation to the carport and the driveway to try to reduce the number of retaining walls and the cost. He wanted to go through several options to make sure that the defendants got the best design in terms of access and economies.
As time progressed there were continuing problems. Mr Butcher alleged that the plans were wrong and disputes arose over the cost of the house (see Exhibit 1, Tab 58). A meeting was held at the plaintiff's offices and a number of matters relating to delays and costs were discussed. Mr Holloway of the plaintiff company was in attendance and, according to Mr Butcher, Mr Holloway admitted that the house was unacceptable and critically questioned how the plaintiff could actually allow this to happen. As a result, according to Mr Butcher, Mr Holloway said that the plaintiff would revise their cost estimate and come up with a compromise.
On 23 June 2004 Mr Butcher wrote to Mr Holloway (Exhibit 1, Tab 74). In that letter Mr Butcher asked a number of questions about the design work and foundations for the house and pointed out that there were significant design errors in the drawings, plans and specifications, resulting in a house and earthworks design that was impracticable. He stated that the earthworks in the carport would have to be redesigned and the house position changed. He referred to an excessive amount of cut and spoil being produced. He alleged that the earthworks profile and finished floor level of the dwelling were incompatible with the site topography and earthworks profile. He also complained that the foundation design was not suitable for the site conditions and that the technical design work conducted to date was of questionable professional standards and did not conform to good engineering practice and Australian Standards. He required that excessive spoil at the rear of the house should be removed at the plaintiff's expense, that the front of the house, drive and carport and earthworks should be redesigned at the plaintiff's expense and the foundation design should be modified at no cost to the defendants. Mr Butcher said he did not receive a response to that letter.
Mr Butcher had had a series of photographs taken after the site had been excavated and these became Exhibit 1 at Tab 163. These were sent to the plaintiff. It is not necessary for me to dwell on these photographs as they are self‑explanatory. Suffice it to say they show a bench cut in the site as the initial earthworks. That excavation is of some depth which is demonstrated by Mr and Mrs Butcher's appearance in the photographs and their height relative to the height of the cut. The photographs also show the tree at the front of the excavation which also became the subject of evidence which I will deal with later. It is worth noting at this point those photographs demonstrate the position prior to 800 millimetres of sand fill required in accordance with the Certificate of Inspection of Structerre.
According to Mr Butcher, about two weeks later (approximately 17 August 2004) he heard from Mr Holloway. He said that Mr Holloway had said that if the plaintiff had known that the land had the fall that it has, the plaintiff would never have designed the house like it was.
It appears that the plaintiff came up with two options, Option A and Option B. Option A showed the dwelling as it was proposed by the contract and with a driveway having a gradient of 1:5.14. Option B provided for a split‑level house raising the front of the house and reducing the driveway gradient to 1:6.72. In a letter dated 16 August 2004 (Exhibit 1, Tab 101) from the plaintiff to the defendants the plaintiff pointed out that Option B would incur additional costs should the defendants choose that option. Mr Butcher said that Option B was acceptable to the defendants but that the plaintiffs would have to pay for it and that there was no agreement as to this.

Mr Butcher's evidence was interposed by references to various documents within the exhibits. There was no questioning of Mr Butcher about these documents at that time and no objection taken by the plaintiff to this procedure. In effect those documents were left to speak for themselves but as part of Mr Butcher's evidence. The following is a narrative of those documents.
On 20 August 2004 the defendants wrote to the plaintiff (Exhibit 1, Tab 103) advising that the contract could not be performed in accordance with the original drawings and specifications and that the plaintiff was in breach and unless the parties could agree to variations, the contract would be terminated. That brought about a response dated 23 August 2004 from the plaintiff to the defendants (Exhibit 1, Tab 105) dealing with a number of matters but essentially advising the defendants that Option A demonstrates what had been contracted for and could be achieved. The letter went on to say that the plaintiff could build the house in accordance with the site plans and specifications and that the plaintiff was satisfied with the engineering detail provided by Structerre. The letter pointed out that the house could be constructed as proposed in the contract documentation and the defendants had no grounds for terminating the contract.
By email dated 31 August 2004 (Exhibit 1, Tab 107) Mr Butcher complained that the problems with the project were due to the plaintiff's design error resulting in excessive cutting of the site slope and potential problems mentioned in previous correspondence. He said that he was not prepared to accept the situation, nor that the problems could be corrected at the defendants' costs.
By email dated 1 September 2004 (Exhibit 1, Tab 108) Mr Butcher acknowledged receipt of the plaintiff's letter of 23 August 2004 and advised that it had been sent to his lawyers.
A further meeting took place on 7 September 2004 and minutes of that meeting were prepared as was a letter from Thomson Marquis dated 8 September 2004 (Exhibit 1, Tabs 109 and 110 respectively). In the letter of 8 September 2004 Thomson Marquis requested a response to various items relating to the gradient of the driveway, the stability of the earth embankment and the tree on it, the potential for flooding, retaining walls, the earth stockpile and its stability and aesthetics, the construction of the Ecomax system and the foundation design. The letter noted that there was a difference of opinion between Structerre and Airey Ryan and sought to determine how the plaintiff would address the defendants' concerns on cracking/movement of the building structure. Mr Myers for the plaintiff responded by letter dated 16 September 2004 (Exhibit 1, Tab 114) in which he dealt with each of the matters raised and, amongst other things, in that letter, the plaintiff advised that the driveway could be constructed so that a vehicle could negotiate it. It was also pointed out that the contract provided for excess soil to be stockpiled and the site works quoted for this. It was pointed out that it was the plaintiff's responsibility to install the septic system which would be installed according to regulations. Mr Myers pointed out that the plaintiff had conducted the work as contracted for. He concluded with the words:
"If you prefer the advice of your consulting engineer over our preferred engineer, which we stand by and will accept his advice, Peter Airey had indicated that there was a minimal cost option that you may wish to consider. Please advise immediately of your intentions with regard to this matter.
In respect to all other matters, the contract is valid and binding and in the absence of any specific instructions to terminate the contract, works shall recommence on site on Wednesday, 15 September 2004."
That letter brought about a further response from Thomson Marquis dated 17 September 2004 (Exhibit 1, Tab 116) whereby the defendants requested a further response in respect to the driveway gradient, stability of the embankment and tree, the potential for flooding and the consequences of moving the house 3 metres towards the rear of the block. A quote was also requested to remove the stockpile of excavated material. Confirmation was requested that all guarantees, including the 10 year structural guarantee, would be provided in accordance with the plaintiff's obligations. The letter also requested confirmation that the plaintiff would construct the alternative structural footing design proposed by Peter Airey should the defendants prefer not to accept the plaintiff's engineering advice. Finally, the letter noted that the works should not recommence until the responses had been received and considered.
The plaintiff's response was dated 28 September 2004 (Exhibit 1, Tab 119). That dealt with the question of the driveway, relocation of the house and removal of the excess material. It stated that the issues concerning the driveway gradient and embankment had previously been addressed and relocation would incur further delays and expense and removal of the excess soil would also create problems in the area of the sand pad. Accordingly, the plaintiff did not approve the requests for the removal of the stockpile. The plaintiff requested alternate details of the footings for costing and approval.
By letter dated 1 October 2004 Messrs Cahill Billington on behalf of the defendants wrote to the plaintiff (Exhibit 1, Tab 124). That letter restated the various issues between the parties and alleged breach on the part of the plaintiff. It pointed out that the plaintiff was to provide a driveway gradient of 1:6 and that the defendants were not prepared to accept a driveway gradient of 1:5.14 as it is too steep. It pointed out that the defendants would accept Option B as a modification but at the expense of the plaintiff. The letter advised that if the plaintiff did not agree with the proposal by close of business on 6 October 2004 or propose another option acceptable to the defendants, the defendants would terminate the contract pursuant to cl 13.4 of the contract. The plaintiff responded by letter dated 6 October 2004 (Exhibit 1, Tab 124) again setting out its version of events. The plaintiff denied that it had specified any gradient for the drive on the plans, the only gradient being for the first 6 metres of the drive. The plaintiff pointed out that it was responsible for providing an access track for construction purposes only. The letter pointed out that the design for the house had not changed and that the defendants' main issue was with the driveway gradient not being 1:6. The plaintiff was not prepared to cover the additional costs of redesigning the house to Option B. The plaintiff denied that it was in breach.
Further correspondence ensued between the defendants' solicitors and the plaintiff (Exhibit 1, Tab 124) culminating in a letter from the defendants' solicitors to the plaintiff dated 20 October 2004 in which the defendants terminated the contract pursuant to cls 13.4 and 1 of the contract. By letter dated 22 October 2004 from Phillips Fox to Cahill Billington (Exhibit 1, Tab 126) the plaintiff alleged that the termination was a wrongful repudiation which was accepted by the plaintiff and made a claim for damages.
Mr Butcher was cross-examined about his discussions with Mr Harrison concerning clay on the site and the size of the footings. He said that Mr Harrison had said that it might be probable there might be clay and that the defendants might need to have "heavier" foundations. Mr Butcher said that this was not an issue of budgetary constraint but of getting the right foundations for the house so that the defendants would not be left with damage to the house. He said that that was the case throughout the whole of the course of the contract and it never changed. He was then challenged as to why he had given evidence as to Mr Harrison saying that the defendants needed the "heaviest" foundations to which Mr Butcher responded:
"To me by heavy or heaviest foundations would mean that you would need a substantial foundation. Whether they were heavy or heaviest I wasn't – I was concerned they would be fit for the purpose."
When pressed as to whether or not Mr Harrison had used the expression "heaviest foundations", Mr Butcher said "He did". There was further dialogue on the distinction between "heavier" and "heaviest" and Mr Butcher maintained that Mr Harrison had said that the defendants would have the "heaviest foundation". In his mind that would mean they would have a heavy foundation. Following that dialogue Mr Butcher was taken to Exhibit 1, Tab 13 being his email to Rosemary Costen of 25 July 2003. The following exchange occurred:
"Is that an email that you sent Rosemary Costen?---It is.
Again, you used the words, 'Heavier foundation required for our house'. You don't use the word 'heaviest'. Why is that?---The reason why was that Harry said that we would actually – Harry said at the time we would have the heaviest foundation, have the heaviest foundations possible after speaking to Gary Dempers. He had indicated to me on the diagram that the foundations indicated in the Structerre certificate may not be fit for purpose and we may have to upgrade those."
This email also said that preliminary tests had determined that clay was not present. Under cross-examination Mr Butcher accepted that it was quite clear that clay was present on the site but denied that he was angling for budget reductions.
Mr Butcher was also cross-examined about the style of the home and said that it was a great home, that he had made his offer on the block in Boya about a week after speaking to Mr Harrison. He had some costings from Mr Harrison to show that it was within their target figure. He said that they bought the block for a combination of reasons including it was a block that they liked, it was suitable for the Durack and Harrison had indicated that it could be done for their target figure, although they did have provision for cost increases.
Mr Butcher acknowledged that he expected there to be considerable earthwork costs and he also was aware that there would not be extensive views from the front of the house.
The evidence of Mrs Helen Butcher largely reflected that of her husband. She was present in court while he gave his evidence.
As to the footings she was present at the site on the first meeting with Mr Harrison and her evidence was that her husband and Mr Harrison discussed the driveway and the presence of clay. In relation to the latter, she said that Mr Harrison had said that it wasn't a problem, that the plaintiff was familiar with building in the Hills and their engineers were very conservative and that the plaintiff would give the defendants the "heaviest footing". In relation to the driveway, her recollection was that Mr Harrison paced it out and said that the plaintiff would build an access track in the same position as the final driveway and all that the defendants would have to do was to pave it.
In cross-examination she was taken to the costing schedule (Exhibit 1, Tab 5), in particular Item 2.1 relating to the removal of trees and the stockpiling of excess soil. It was put to her that she understood that the trees were to be stockpiled on the site. She said that she had not picked up on that.
Barry Knowles is the manager of Better Homes Assured and produced a report dated 16 November 2004 in relation to the driveway at the property (Exhibit 4, Tab 1) and a report dated 9 January 2007 in relation to the suitability of the site, stockpiling of material, the driveway, the embankment and other general considerations (Exhibit 4, Tab 2).
Mr Knowles has been a registered builder since 1981. He was a consultant inspector with the Builders Registration Board.
Mr Knowles' first report had annexed to it drawings representing a curved driveway at the property and also a section through the centre line of that driveway. Those drawings plotted the driveway with gradients of 1:6 and 1:5.14. The driveway is shown going from the carport to the kerb at the roadway. The drawings were prepared by Synergy Drafting Design on behalf of Mr Knowles apparently using some computer program for this purpose.
The drawings shows an initial grade of 1:6 immediately outside the carport and then proceed to the road at the two gradients to which I have referred. According to the evidence of Mr Knowles, when the gradient of 1:6 is plotted for the length of the driveway, the drive finishes approximately 1 metre below the kerb at the roadside. On the gradient of 1:5.14 his evidence was that the drive finished at the kerb. However, he noted that such gradient finishing at the kerb is in excess of that allowed by the council being 1:6.
The diagram shows a reversing bay and depicts a motor vehicle in the reversing bay and in various positions turning from the bay to head up the driveway. According to Mr Knowles, reversing from the carport into the turning bay would create an unsafe situation unless the driver is very capable and experienced because he would not have a clear view of the hardstand area, ie the reversing bay. Further, driving out of the turning bay is also difficult because of the sharp radius. In his report Mr Knowles referred to the need for a retaining wall which he described as being on the right-hand side and on the radius that he described.
In his second report Mr Knowles opined that the site was unsuitable for the Durack and set out a number of factors in support. He also said that the site was more suited to a different type of structure, being a framed construction, either timber or steel or a mixture of both.
As to stockpiling, he was of the view that the excavated material could not be temporarily stockpiled as the only place to stockpile it is at the rear and there would be no access to the rear of the site, save over the building envelope. He said that the stockpiled material could not be used for construction purposes. He also formed the view that the volume of material from the excavation would prevent the Ecomax waste treatment system being installed in the location shown on the plans. He also stressed further matters in relation to the stockpile.
In this second report he again addressed the question of the driveway. He discussed common industry practice with regard to showing the driveway on the plans. Further, he stated that it was his opinion that a safe driveway gradient for the site would be 1:7. He opined that to access the site safely, the design as set out of the proposed dwelling would need to be changed.
In answer to a question whether the gradient of the driveway design was shown on the final plans for the site, he noted that a 1:6 gradient was shown for the first 6 metres in front of the carport. However, he noted that no gradient was shown on the drawings for the remainder of the driveway to the front boundary. He noted the notation on Sheet 6 of the drawings approved by the local authority to the effect "Note: construct driveway gradients and transition to allow safe movement of vehicles" and "Note: crossover grade not to exceed 1:6".
He took the view that if the gradient was 1:5.14, a standard family sedan would not be able to access or negotiate the driveway. He said that the vehicle would bottom out. He also said that the maximum gradient at the crossover of 1:6 could not be achieved and that would increase the gradient of the driveway within the site. He also said that ingress and exit of the reversing bay would be totally impractical and unsafe due to the tightness of the corners and the steepness of the gradient would deny adequate vision of the driveway when entering the site and reversing into the reversing bay. He said that it would not be possible to drive out of the driveway and carport on the site safely in a standard family sedan.
In relation to the embankment created in front of the site at the house, he said in his report that it was inevitable that an embankment would be created in the construction of this house. His opinion was that the impact on light in those front rooms would be considerable and there would be no view from the windows. He also expressed the view that the cut had potentially compromised the stability of the tree. However, I did not form the view that Mr Knowles had the expertise to deal with such a matter.
Mr Knowles acknowledged that the height of the cut would be reduced by the laying of the 800 millimetre sand pad and was further of the opinion that the embankment in front of the dwelling required some further battering to a 45° angle.
Under cross-examination Mr Knowles was asked whether driveways were built on sites such as this one and worse and he acknowledged that it can be done. He said that he was familiar with AS 2890 which provided for gradients of 1:4 for domestic dwellings but said that that did not allow for the configuration of this driveway where there are sharp bends.
Mr Knowles was taken to the drawings of Mr Faigen and in particular Appendix 5 to his report (Exhibit 3, Tab 3) and agreed that if there was an appropriate transition (at the kerb) then a vehicle would not bottom out.
Mr Knowles acknowledged that his assumption was that the retaining wall would be on the boundary of the driveway. Subject to battering back and drainage, he agreed that the retaining wall does not have to be along that kerb line. Ultimately, having regard to the possibility of widening the shape of the driveway and Mr Faigen's report, it was put to Mr Knowles that you would make it work if you were a builder. He responded "You may be able to – I don't know".
Mr Knowles was further questioned about the suitability of the site for the Durack design. Having acknowledged that there were other brick and tile houses on concrete slabs in the area, it was suggested to him that his opinion as to unsuitability of this design was more based on expense than anything else. Initially he did not agree. However, counsel for the plaintiff took him through a number of the reasons why Mr Knowles had said that the site was not suitable and Mr Knowles agreed that a large number were costs issues. Ultimately, he was asked:
"Assume for the present purposes appropriate access is available for a driveway, is there anything other than cost that's a factor affecting suitability of this site?---Possibly not."
With regard to the spoil and the installation of the Ecomax waste treatment and Mr Knowles' opinion that the sheer volume of material from the excavation stockpiled on the site prevents the waste treatment system being installed, he thought that it could not be installed with the spoil in place. He was then asked:
"That's right, so if the builder is obliged to put it in, what would the builder have to do?---He would have to relocate it.
Yes, and that's just the builder's problem, isn't it?---Well, to move it around you have to move it away. You can't leave it there."
In relation to the embankment, Mr Knowles acknowledged that there was still the 800 mm sand fill to be placed on the site. He agreed there was no view to be had from the front of the house. He agreed that light would still get to the windows at the front of the house, but was unable to determine how much. Mr Knowles was then taken to Appendix 8 to Mr Faigen's report and agreed that the embankment was shown by the dotted lines on that report.
In re-examination Mr Knowles gave further information about the reversing bay, that it would need to be relatively level.
Peter Airey is a civil engineer of some many years standing. He produced two reports in this matter dated 13 July 2004 (Exhibit 4, Tab 3) and 5 December 2006 (Exhibit 4, Tab 5).
In his first report Mr Airey refers to his inspection of the site revealing that after benching operations the soils were of at least three types. He said that each of those soils had a different linear shrinkage characteristic. He said in examination‑in‑chief that he saw a complex range of soils and some rock. He said that the rock which was visible was dolerite and the clay associated with that was montmorillonite. Adjacent was some white clay which he took to be kaolinite. Further away there was a clay of a different character. He said that the effect of laying a slab was complex. He said that to build a house over a clay soil profile has a level of complexity even if the clay is even in character. Where the clay varies in character, the complexity is compounded.

Evidence was received from John Steven Glaister, a quantity surveyor. He produced two reports for the defendants dated 24 November 2006 (Exhibit 5, Tab 5) and 21 February 2007 (Exhibit 4, Tab 6).
In the first report Mr Glaister said that an average profit on a building contract of a similar nature would have been, at that time, approximately 15 per cent. He thought that the sum claimed (at that time) of $47,726 was an unreasonable profit and that based on 15 per cent profit margin the value should have been $28,598.
In that report Mr Glaister also dealt with whether or not there would be increased costs given the steep slope and other site conditions and he noted that those were already allowed for in the increased costs in the contract sum so the profit would not be reduced by those sums. He was also asked to comment upon the cost of works undertaken to date but in view of the matters set out above it is not necessary for me to canvass that further.
In his second report he noted that commissions paid by the plaintiff in the sum of $6,419.46 would have come from overheads.
Also in that second report he dealt with a breakdown of building costs. He first of all prepared what he said was a standard price breakdown making an allowance for a "slush fund" of $1,000. Deducting GST, he then came to a true profit margin of 33.25 per cent. He then went on to do a separate calculation, again allowing a slush fund and deducting GST. On this occasion he calculated the margin at 15 per cent and utilised the balance of the moneys to constitute overheads at 7 per cent and preliminaries at 9 per cent.
He noted that preliminaries covered site setup and running costs of supervision, insurances, scaffolding, power connections and the like. He said that overheads covered overhead office costs of administration, commissions and the like.
In his evidence Mr Glaister said that the plaintiff's costs had not made allowances for preliminaries and overheads. He said that:
"The preliminaries are for certain items that would hit at certain stages during the job, and obviously a lot of the costs that are on this project would have come from the preliminary items. Some of it would have been obviously costs of the job and the other would be preliminary. And the overhead element, I agree that a proportion of that would be applicable to the project at that stage."
When dealing with overheads and preliminaries he noted the distinction between pure profit and what the builder would have lost. In answer to a question as to where the income comes from to pay the preliminaries and overheads, he said:
"It comes out of the contract sum, yes, the overall contract sum. You have a net cost and then you add on your preliminaries. From there you add on your overheads and margin."
Further under cross-examination he was asked whether it was just one or two of those costs that might not have been incurred (at this stage of the contract) to which he responded:
"What you have got in there is the item for the commissions paid, that would have come out of overheads which has already been dealt with elsewhere."
He was then asked whether any other costs would come out and he said:
"A good $5,000 or $6,000 of the costs. I haven't got them in front of me at the moment, but a good $5,000 or $6,000 of these costs would have been preliminary items. Out of those original costs, there would be something like $12,000 or $13,000 would have been in preliminaries and overheads."
He was then further asked:
"So from the builder's point of view, if the contract didn't proceed from that point onwards, you are saying that it would have saved itself some $12,000 or $13,000 from what that margin of 33.25 per cent is?"
He responded in the affirmative, but he was unable to say exactly what those costs were.
In his final submissions, counsel for the plaintiff said that Mr Glaister had got the overheads and preliminaries position wrong. He said that he had not taken into account that the contract was live from 3 February 2004 to 22 October 2004 and that once the plaintiff had taken the job on, it had fixed internal costs and fixed overheads. He suggested that the evidence of Mr Smelter should be preferred as to the total amount of damages payable.
It is unfortunate that these items were not canvassed in detail with Mr Smelter. Accordingly, I am left to do the best that I can with the information before me. I note that the base cost of the standard house at $113,025 is made up of a number of items which are set out in Exhibit 1, Tab 167 at pp 494‑503. There is no reference in that document, as far as I can see, to preliminaries and overheads. Accordingly, I must deduce that these would be an additional impost to the plaintiff on the standard house price.
My findings in this matter are that I accept the costs to date at $22,136. As to the loss of profits, I accept the calculations carried out by Mr Smelter. Whilst there may be a difference of opinion between Mr Glaister and the plaintiff as to the level of profit to the plaintiff in this matter, when it comes to awarding damages I am directed to s 15.2 of the Contract which provides that loss of profits means the contract price less the budgeted costs of construction of the work but which cost excludes marketing costs, supervision and overheads, unless any such costs are a direct cost of the works. I find that the matters to which Mr Glaister referred are direct costs of the works. It is not necessary for me to make any finding as to whether or not the profit margin suggested by the plaintiff is reasonable or not, having regard to the figure proposed by Mr Glaister. In the end there is little difference between the two parties when an allowance is made for preliminaries and overheads. I accept that there should be some reduction for preliminaries and overheads which would have been incurred had the contract proceeded. It did not and therefore there is a saving because of the early termination of the contract. It is difficult for me to carry out the calculation, but Mr Glaister's evidence is reasonably clear in that there would have been a saving of some $12,000 or $13,000. However, the commissions have in fact been paid in the sum of $6,419.46. Doing the best that I can, I would put that finding in respect of other preliminaries and overheads in the sum of $6,000.
Accordingly, allowing for this saving, the net figure for loss of profit on this job is $39,197. This results in a net figure in respect of the plaintiff's claim of $61,333.
The plaintiff also claims interest pursuant to cl 3.2 of the contract. Clause 3.2 of the contract provides for interest (as set out in the schedule) at the rate of 18 per cent per annum. However, that is payable under the contract on progress payments due and not paid as provided for in the contract. It is not expressed to be interest payable on damages flowing from termination of the contract. Accordingly, I do not allow the sum as claimed. Nevertheless, I do exercise my discretion under s 32 Supreme Court Act to award interest at the rate of 6 per cent per annum from the date of termination, namely 22 October 2004, to the date of delivery of these reasons. That is a period of approximately 2 years 7.5 months, resulting in (in round terms) a net figure of $9,800. Accordingly, the total sum is $71,133.
It is necessary for me to say a few words about the defendants' claim for damages on its counterclaim. There was no argument on the individual figures in items 1 to 8 and 10 of the defendants claim, making up a quantum of $71,359.70. I had previously disallowed a claim in respect of the difference in value of the property with the house constructed on the site and the amount realised on the sale of the property in the sum of $80,272.
Notwithstanding my findings on liability, I do not accept the plaintiff's arguments in closing that the defendants would have suffered no loss had there been a repudiation on the part of the plaintiff. Nevertheless, in view of my findings that there was no reliance by the defendants on the plaintiff, items 1, 3 and 5 of the defendants' claim fall away. Further, in view of my findings that there was no breach of contract on the part of the plaintiff, items 2, 4, 6, 7, 8 and 10 also fall away.

Conclusion

There should be judgment for the plaintiff on the claim for $71,133 and the counterclaim should be dismissed.