Scott Fury trading as Fury Custom Boats v Nasso - [2021] WASCA 171

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   SCOTT FURY trading as FURY CUSTOM BOATS -v- NASSO [2021] WASCA 171
CORAM:   BUSS P
VAUGHAN JA
MORRISON AJA

HEARD:   10 MAY 2021
DELIVERED          :   17 SEPTEMBER 2021
FILE NO/S:   CACV 60 of 2020
BETWEEN:   SCOTT FURY trading as FURY CUSTOM BOATS
Appellant
AND
STEPHEN NASSO
Respondent

ON APPEAL FROM:
Jurisdiction              :   DISTRICT COURT OF WESTERN AUSTRALIA
Coram:   HERRON DCJ
Citation: NASSO -v- FURY [2020] WADC 61
File Number            :   CIV 2830 of 2016

Catchwords:

Contract - Design and construction of a vessel - Proper construction of the contract - Agreed contract price of $275,400 - Agreed contract price payable by a deposit of $15,400, two part payments of $100,000 each and a final payment of $60,000 - The respondent as purchaser paid to the appellant as vendor the deposit and the first part payment totalling $115,400 - The appellant repudiated the contract and the respondent accepted the repudiation and terminated the contract - The respondent sued for the recovery of the $115,400 paid by the respondent under the contract - Restitution - Whether the respondent received or obtained any substantial part of the benefit expected under the contract

Legislation:

Nil

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant	:	Mr C P Shanahan SC & Mr P A Hopwood
Respondent	:	Mr D J Morris

Solicitors:

Appellant	:	Clyde & Co (Perth Office)
Respondent	:	HHG Legal Group

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

Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344
CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232
Foran v Wight [1989] HCA 51; (1989) 168 CLR 385
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

BUSS P :

I agree with Morrison AJA.

VAUGHAN JA:

I agree with Morrison AJA.

MORRISON AJA:

Mr Fury was an expert boat builder by occupation, having designed and constructed boats for about 35 years. In that time he had built 60 to 70 boats. His area of expertise lay in small to medium fibreglass pleasure or recreational vessels.
Mr Nasso was a very experienced mariner and had owned many boats, though he had never built one. He had a good working knowledge of how boats are built and designed, but he did not have expertise in the design and construction of vessels.
Mr Fury had previously built a boat for Mr Nasso, with which Mr Nasso was pleased, and which he still owned when he next engaged with Mr Fury. This time Mr Nasso wanted a particular type of boat, namely a custom‑made dual console fishing boat.
In October 2013 they started a conversation about the possibility of Mr Fury building a dual console boat for Mr Nasso. Mr Nasso sold his existing boat to provide funds for the new one.
Between then and September 2014 Mr Fury prepared design drawings of the boat, using the services of a naval architect. Mr Fury paid for those designs himself, and did not pass that cost on. He sent a number of drawings to Mr Nasso in December 2013, and then after a lull in the communications between the parties, sent revised drawings on 3 September 2014.
On 6 September 2014 they entered into a written agreement under which Mr Fury agreed to build the boat for $275,400. Each of them knew that Mr Fury could not fund the construction out of his own funds, so payments were structured to give him a cash flow from the start.

Mr Fury started to build the boat in November 2014, but things did not end well. By April 2015 Mr Nasso had paid $115,400 and the boat was partly completed. The parties met when Mr Nasso expressed concerns about whether the boat was being built to specification. Mr Fury continued to construct the boat, but did not follow exactly the plan that he considered he had agreed with Mr Nasso.
Mr Fury continued work but there were differences between the vessel he ultimately completed in early 2016 and the vessel he had started building for Mr Nasso. Mr Fury then repudiated the agreement in May 2016, by insisting that Mr Nasso pay an extra $45,000 for the boat. Mr Nasso accepted that repudiation and sued to get his money back.
After a 17 day trial the learned trial judge found that Mr Nasso was entitled to the return of his money as there had been a total failure of consideration. Judgment was entered for $115,400, plus interest of $37,819.28, and costs.
Mr Fury appeals against those orders. The appeal grounds are relatively limited, given the breadth of the trial. There are no challenges to factual findings. There is no challenge to the finding that Mr Fury repudiated the agreement and that Mr Nasso accepted that repudiation, terminating the agreement between the parties. The appeal grounds centre upon the conclusion by the learned trial judge that there had been a total failure of consideration entitling Mr Nasso to receive the $115,400 by way of restitution.
For the reasons which follow, the appeal must be dismissed.

The pleading

At the hearing before this Court the appellant placed considerable emphasis upon the way in which the agreement between the parties was pleaded. To explain the alleged significance it is necessary to refer briefly to the pleadings themselves.
Mr Nasso's pleading was that the terms of agreement included that:
(a)Mr Nasso would pay Mr Fury the sum of $275,400, defined as the 'Purchase Price', in consideration for the construction of the boat: par 3.1;
(b)the payment of the purchase price would be in four stages, the first being an initial deposit of $15,400, and the second 'a stage 1 payment of $100,000, payable at the start of construction of the hull and deck'; par 3.2;
(c)Mr Fury would construct the boat in accordance with the Design Terms as set out in the contract: par 3.3; and
(d)the parties could agree to modify the Design Terms at any time in the course of construction: par 3.4.
Paragraph 3(b) of the defence responded to that pleading in terms which were emphasised during the hearing and therefore I will set out in full:
… as to paragraph 2 of the Claim, the Defendant:
…
(b)says that:
(i)the Agreement was for the design and construction of a custom-made fishing boat of an entirely new dual console design for the fibreglass deck and cabin superstructure;
(ii)pursuant to the Agreement the Defendant agreed to:
(i)provide design drawings;
(ii)construct and supply a fibreglass hull;
(iii)carry out the work necessary to form up a three-dimensional, full sized physical plug for the fibreglass deck and cabin super structure (the plug work);
(iv)to take or construct a mould from the plug work at his expense;
(v)to use the mould to construct the fibreglass deck and super structure for the Boat; and
(vi)to supply a vessel according to the design drawings and agreed specifications;
('the Work').
The reply and defence to counterclaim on behalf of Mr Nasso admitted that paragraph of the defence.
The contended significance of the admission of par 3(b) of the defence was that the nature of the agreement was one for 'design and construction' of a boat, rather than simply construction. I will deal with the development of that argument shortly.

The contract

The learned trial judge found that the contract was entered into on 6 September 2014. There is no challenge to that finding. Nor is there any challenge to the factual circumstances leading up to the signing of the document.
In 2013 Mr Nasso met with Mr Fury and spoke to him about building a custom‑made fishing boat. On 9 December 2013 Mr Fury sent preliminary drawings of the boat that he was to build.
Further drawings were sent by Mr Fury on 12 December 2013, 14 December and again on 16 December 2013.[1] On 19 December 2013 Mr Fury sent to Mr Nasso an email with an itemised list for the proposed boat, with an estimated cost of $255,600.[2]
[1] Reasons below at [110], [114], [115]
[2] Reasons below at [117].
There was then a break in communications, the parties resuming email contact on 6 April 2014. Mr Nasso announced that he was going overseas for a period of time. The next communication occurred in August 2014 when Mr Nasso sent text messages saying that he was still looking at going ahead with the boat that they had discussed.[3]
[3] Reasons below at [122].
Mr Fury responded the following day advising he was keen to make the boat and would send costings and drawings. He warned that there might be some cost increases.[4]
[4] Reasons below at [123].
Thereafter communications continued by email. Mr Fury's emails enclosed itemised specification sheets, details of a price increase, warnings that the timeframe for completion was difficult to estimate and an invitation for Mr Nasso's input into the construction process.[5]
[5] Reasons below at [125].
Mr Nasso's emails listed a number of changes he wished to make to the layout and amendments to the quote.[6]
[6] Reasons below at [127] ‑ [131].
Mr Fury drew up an alternative design[7] which he sent to Mr Nasso on 3 September 2014.[8] Those drawings contained alternative layouts and were titled 'General Arrangement Designs'.[9]
[7] Reasons below at [132].
[8] Reasons below at [139].
[9] Reasons below at [140].
On 5 September 2014 Mr Fury sent an amended specification sheet together with a 'Sales Agreement', asking Mr Nasso to sign the agreement and email it back. Once again he advised that it was difficult to put a firm date on the completion of the work, but said he would do his best to get it done as soon as possible. The specification sheet was for a total price of $275,400, inclusive of GST.[10]
[10] Reasons below at [144].
Some final issues about the specifications were dealt with in emails on 6 September 2014. Mr Nasso also asked '… if I sent you the $10,000 will that serve as acceptance of the agreement for now'.[11]
[11] Reasons below at [145].
At 5.27 pm on 6 September 2014 Mr Fury responded agreeing to the payment of $10,000. He also advised that he had made adjustments to the specification sheet in response to the issues Mr Nasso had raised.[12]
[12] Reasons below at [147].
During the course of negotiations leading to the contract, Mr Nasso and Mr Fury discussed that the vessel under construction would be the first dual console boat to be designed and constructed by Mr Fury. Each understood that Mr Fury would retain the rights over any plans and drawings, and also retain the rights over the mould that he developed for the dual console designed vessel. Mr Nasso understood that Mr Fury intended to use the building of Mr Nasso's vessel as a basis for constructing and selling further dual console vessels to other customers in the future.[13]
[13] Reasons below at [418].
It was agreed below, and before this Court, that the contract between Mr Nasso and Mr Fury was made on 6 September 2014, constituted by the initial documentation[14] forwarded on 5 September 2014, and the amended specification sheet sent on 6 September 2014.
[14] Excluding the initial specification sheet.
The document which was agreed to be the form of contract was in these terms:
CONDITIONS OF SALE
1. FORMATION
The signing of the Contract by the Purchaser means an offer to purchase the boat/engine/trailer on the terms and conditions stated in this Contract.
The Contract is binding when the Purchaser and Builder sign the Contract.
The Purchaser may withdraw from the Contract before the close of business on the next normal working day after the signing of Contract. Deposit is not refundable.
Any changes or modification to the vessel after handover must be approved by the Builder otherwise Warranty may become null and void.
During construction, the Purchaser is welcomed to view the vessel under construction but must be by appointment only.
2. THE PURCHASE PRICE
All payments to Builder by the Purchaser must be made within 7 days of request.
Prior to handover the Purchaser will pay the Builder all money owing. The vessel remains at the workshop of Builder until the final payment is made via Bank Cheque or Electronic Funds which is confirmed by the Builder.
The Contract may be adjusted with the addition and deletion of items to the vessel which need to be paid at the discretion of the Builder.
3. DELIVERY
Delivery of the boat/engine/trailer to the Purchaser will take place at the premises of the Builder. It is the responsibility of the Purchaser to transport the vessel after purchase.
4. WARRANTY
The vessel will be fit for use and in working order as required. Warranty will be given on the vessel on condition that the vessel is used in a safe and sensible manner, according to its intended use. Any risk of loss or damage is transferred to the Purchaser when the Purchaser receives delivery of the vessel. A five year Structural Warranty is given on the hull and deck only. The Warranty for parts and electrical components are covered by the respective manufacturers.
_________________________________________________________
Signed by Purchaser   Date
DETAILS OF CONTRACT
BUILDER
Fury Custom Boats
…
PURCHASER'S NAME: Stephen Nasso
…
PRICE OF VESSEL   $ 275400.00
Deposit receipt of   $   15400.00
BALANCE   $ 260,000.00
…
PAYMENT SCHEDULE
BUILDER  Fury Custom Boats
Scott Fury
…
PURCHASER                 Mr Stephen Nasso
DEPOSIT   In receipt of _$15400.00
Date Received
STAGE 1   In receipt of _$100000.00
(start of hull & deck)         Date Received
STAGE 2   In receipt of __$_100000.00
(Hull and deck assembled,) Date Received
ON COMPLETION         In receipt of $_60000.00
(prior to handover)            Date Received
Any adjustments from the Spec Sheet will be added or deducted from the above amounts.

Work performed pursuant to the contract

Considerable emphasis was placed upon the work performed by Mr Fury under the contract with Mr Nasso. The contention was that a considerable component of the work involved design of the dual console boat, in which Mr Nasso participated, and in respect of which Mr Nasso received a benefit. These contentions centred largely on the findings by the learned trial judge in [195] and following of the reasons below. Therefore, in the following synopsis the facts are drawn from those unchallenged findings.
The learned trial judge dealt firstly with the pre‑contract events, largely as has been summarised in paragraphs [20] to [29] above.
The work done after the contract was signed was focused on construction.
Mr Fury used a mould for a hull which he had previously built and used in the construction of other vessels. He did not charge Mr Nasso for using the hull mould. Construction of the mould for the hull took about six or seven months to complete.
Construction started on 11 September 2014 in respect of the plug for the upper deck, and Mr Fury worked at a varying pace through to July 2015.
Mr Fury commenced 'laying out' the hull in October 2014, at which time he notified Mr Nasso that he was about to start work on the hull. On 29 October 2014 Mr Nasso paid $50,000 of the $100,000 called for under the contract, with the balance of $50,000 being paid by 1 January 2015.
While working on the hull Mr Fury realised that he could use parts of another design as the basis for the new vessel. That was discussed with Mr Nasso, as were other matters such as increasing the size of the fuel tank.
Between January 2015 and April 2015 Mr Nasso went to the workshop on three or four occasions, inspecting the progress of the construction work. On the first of those occasions they discussed matters such as reducing the console length and the siting of the cabin. Following the first meeting Mr Fury spent some time adjusting the plug to move the cabin back as far as he could, and reduce the length of the console.
By late April 2015 Mr Fury estimated he was about two months from completing the plug work and the cost of material to get the boat to that stage was approximately $30,000.
From time to time Mr Fury sent photographs showing various parts of the construction, and the construction progress. For example, on 17 April 2015 Mr Fury sent a photograph showing the plug of the cabin and a cardboard mock‑up of the stainless steel structure necessary to support the roof. The photograph was sent to show that Mr Fury was intending to fit the roof, and inviting Mr Nasso to provide any input as to its positioning.
By that time Mr Nasso had become concerned that Mr Fury was not building the boat he wanted. They arranged to meet one another. In an email exchange which followed the meeting questions were raised about delaying the building of the boat so that Mr Fury could first complete a demonstrator dual console boat. By about that time Mr Fury understood that Mr Nasso had told him he could build the boat that he wanted from that point on, and was therefore no longer his customer.[15] From that point he did not send any further requests to Mr Nasso for payment under the contract, or provide him with any further progress updates. He considered that Mr Nasso was no longer his customer and whilst he continued to work on the vessel, he did not have a particular purchaser in mind.
[15] Reasons below at [330] and [352].
After April 2015 Mr Fury continued to construct the boat, but did not follow exactly the plan that he considered he had agreed with Mr Nasso. He included a range of additional features which attracted additional costs for labour and materials, totalling about $33,000. Those costs were paid for by Mr Fury.
By mid‑March 2016 the vessel was completed and ready for sale. It differed from the vessel he had been building for Mr Nasso.
Finally, on 16 May 2016 Mr Fury sent an email in which he made it plain that the boat he was building was not for Mr Nasso, but nonetheless he was prepared to discuss the pricing of a new boat.[16]
[16] Reasons below at [386] - [387].
Ultimately, the learned trial judge found that Mr Fury repudiated the contract by informing Mr Nasso that he was not prepared to build a dual console fishing vessel for the agreed contract price of $275,400, and was not prepared to build the vessel unless Mr Nasso paid a further $45,000.[17]
[17] Reasons below at [489].

Approach of the trial judge

Mr Nasso's claim at first instance was for damages or restitution. Having found that an entitlement to damages had not been proved,[18] his Honour turned to the question of restitution.
[18] Reasons below at [529].
At trial, the case put on behalf of Mr Nasso was that the agreement reached was an entire contract for the construction and delivery of a boat at an agreed price of $275,400. By 'entire contract' it was meant that the agreement was for indivisible, in-severable scope of works to be substantially completed. The contention was that the monies paid by Mr Nasso were paid in accordance with a contractual obligation to pay at certain agreed points of construction, but Mr Fury was not entitled to retain the payments unless the entire contract had been performed, that is, until total consideration was provided by completing construction and delivering the boat.[19] It was argued that there had been a total failure of consideration.
[19] Reasons below at [539].
The case for Mr Fury at trial was that the contract was akin to those involving ship-building contracts, in that (i) payments by instalment were linked to various stages in the design and construction process, and (ii) accrued rights under such a contract are not destroyed by subsequent cancellation of the contract prior to delivery.[20] Answering the case based on a total failure of consideration, it was contended that unless the contract was 'separable', a mere partial failure of consideration would not give rise to a right of restitution. Further, there was not a total failure of consideration because Mr Fury had complied with the terms of the contract by designing and substantially constructing the boat, and the benefit obtained by Mr Nasso was the 950 hours worked by Mr Fury.[21]
[20] Reasons below at [540].
[21] Reasons below at [549] ‑ [552].

It was also contended that Mr Fury's right to retain the payments was not conditional upon delivery, as the agreement was for the design and construction of a custom‑made fishing boat, and he had designed the boat and partly built it.[22]
[22] Reasons below at [560] ‑ [567].
As the battle lines were drawn at trial, the argument was whether the contract was severable or whether it was an entire contract. The point of difference was neatly expressed by the learned trial judge:[23]
The stark point of contention between the parties is whether the contract was severable or whether it is to be regarded as an entire contract. The plaintiff says it is an entire contract. Although the contract stipulated the payments to be made by instalments at certain stages of the construction of the boat, the defendant boat builder was not entitled to retain those payments unless full consideration was provided by the completed boat being delivered to the purchaser plaintiff.
The defendant says the contract is severable by which the defendant is entitled to payment for performing the works required by each stage when the contract stipulates payment must be made. Providing the work for which the payment was made was completed, the defendant boat builder, it is submitted, is entitled to retain the payment he has received even though he has not discharged his entire obligations under the contract by delivering the boat.
[23] Reasons below at [568] ‑ [569].
As will become apparent, that difference in approach ceased to be relevant in the way in which the case was presented before this Court.
Observing that the question whether Mr Nasso was entitled to restitution for the money which he had paid, but for which he had not received anything, depended upon whether the contract was an 'entire contract' or whether it was severable, his Honour observed that the question resolved on construction of the contract. Having examined the terms of the contract his Honour concluded that:[24]
In my view, the contract entered into between the parties, properly construed is an entire contract requiring Mr Fury to perform the whole of the agreement by constructing and delivering a completed vessel to Mr Nasso for the agreed lump sum contract price of $275,400. It is not a severable or divisible contract by which Mr Fury, as the boat builder, had accrued a contractual right to payment under the contract at the time of the completion, or near completion, of the plug work for the upper deck mould. Mr Fury's contractual right to receive and retain payment was dependent upon him performing the whole of the contract by completing construction of the vessel and delivering it to Mr Nasso.
Therefore, as a matter of law, Mr Nasso is not prevented by the terms of the contract by seeking restitution of the monies paid to him pursuant to the contract where there has been a total failure of consideration because a completed vessel has not been delivered to him. I do not accept the submission of defence counsel that for the monies he paid, Mr Nasso received 950 hours of work performed by Mr Fury. Mr Nasso received nothing for the money he paid. In effect he funded the construction of an upper deck mould which, as was always intended by the parties, was retained and used by Mr Fury to construct and sell further dual console boats. Mr Fury has profited from the monies paid by Mr Nasso but Mr Nasso has not received anything in return.
[24] Reasons below at [593] - [594].
Then, dealing with the contention advanced below that there was a distinction between classic construction contracts under which progress payments are made, and contracts for the delivery of a specific physical object, his Honour observed:[25]
There were two purposes for Mr Fury entering into the contract with Mr Nasso. The first was to design, build and sell to Mr Nasso a dual console fishing boat. The second was to build an upper deck mould which he intended to retain and use for the construction of future dual console vessels where he would be the only person in Australia building such vessels. Mr Fury was himself unable to fund the construction works for the dual console upper deck mould. He depended on Mr Nasso to fund those works. Mr Nasso funded the construction of the upper deck mould which Mr Fury has retained and used to build other dual console vessels. Mr Fury has therefore fulfilled the second purpose of entering into the contract. As to the first purpose, although Mr Fury did not complete the construction of and deliver the boat Mr Nasso wanted, he did complete construction of a vessel, using Mr Nasso's funds which he sold to another customer.
Mr Nasso bargained for the construction and delivery of a dual console fishing boat. He did not bargain to fund construction of a dual console upper deck mould so Mr Fury could keep the mould for his own use to build future dual console vessels without building and delivering Mr Nasso's fishing boat to him.
[25] Reasons below at [608] - [609].
Finally, the learned trial judge dealt with the question of whether restitution could be made of the deposit of $15,400. He dealt with that in rather short terms:[26]
Although in cl 1 of the written terms of the contract the deposit of $15,400 is described as 'not refundable' the meaning of that expression must be construed in the context of the contract being an entire contract. In my view Mr Fury is only entitled to retain the deposit if he wholly performs the contract by completing construction of the vessel and delivering it to Mr Nasso. Therefore I am further satisfied Mr Nasso is entitled to restitution of the $15,400 deposit payment made by him on the grounds that consideration for that payment has totally failed.
[26] Reasons below at [613].

Contentions before this Court

There were three grounds of appeal advanced on behalf of Mr Fury. The first was that the learned trial judge erred in law when he found that Mr Fury's right to receive and retain the deposit and the first stage payment made under the contract was conditional on his performing the whole of the agreement, by constructing and delivering the completed vessel for the agreed price. This was a reference to the findings in [593] of the reasons below: see paragraph [54] above.
The second ground concerned the finding at [594] of the reasons below, that there had been a total failure of consideration because Mr Fury had not delivered the completed vessel. The contention here was that there was not a total failure of consideration because 'Mr Fury had completed the first stage of the Agreement such that he had developed a design for the construction of a dual console fishing vessel and commenced fabrication and was therefore in a position to construct such a vessel for the first time, thus meeting his obligations under the agreement and providing the relevant benefits bargained for by [Mr Nasso]'.
The third contended that there was an error in the finding at [613] of the reasons below (see paragraph [56] above), that Mr Nasso was entitled to repayment of the deposit, given that the parties had expressly agreed that the deposit was 'non‑refundable'. This ground turned purely on the construction of the contract.
The appellant's contentions before this Court, both in the written outline and in oral address, can be summarised in this way:
(a)it was important to appreciate that the vessel bargained for was to be both designed and built by Mr Fury because it was a 'bespoke' boat and the first of its kind to be constructed in Australia;
(b)the feature which made the dual console element a novel design was the upper deck; the agreement included the development of a special deck design by Mr Fury and 'made provision as part of the consideration for Mr Fury to enjoy the benefit of that design work in his future construction of other boats for different clients';
(c)Mr Nasso was also to benefit from the design in respect of the vessel to be constructed;
(d)the amounts charged under the agreement were not for any drawings, or the use of the hull mould, but for development of the new design of the upper deck;
(e)the deposit was non‑refundable in all circumstances;
(f)the first payment of $100,000 was for the design work in respect of the plug/mould of the upper deck, and included some costs of construction of the hull;
(g)the agreement was a staged contract, and no term in the agreement made either the deposit or stage payments conditional upon delivery of the complete vessel;
(h)in the early stages of its execution, the agreement contemplated that the work was primarily about the design of the new dual console deck and the design and construction of the hull; the design work was for the benefit of both parties; in respect of Mr Nasso, the benefit was that it was the design he wanted and bargained for, but would otherwise have to import, no doubt at a premium to the contract price; in respect of Mr Fury, the benefit was that it added to the range of customised vessels he could produce;
(i)because Mr Fury was required to provide services, perform work and incur expense during performance, in the absence of any manifest intention to the contrary, it would be both non‑commercial and objectively unreasonable to find the right to retain payments was conditional upon complete performance; the trial judge's construction of the contract was unreasonable because it resulted in a contract under which, even if it was validly terminated shortly before the delivery of the vessel, Mr Fury would be obliged to return all instalment payments and would receive nothing for his work;
(j)this was not a case of total failure of consideration; where there is partial failure of consideration there is no right to recover moneys paid; there was no issue that Mr Fury did not perform the contractual obligations to which the first payment related; further, the benefit of the design was always to be retained by Mr Fury; in that respect, the learned trial judge was wrong to analyse the position on the basis that Mr Nasso did not receive 'a boat, or some physical construction' in return for the moneys paid; that approach was to apply a concept of consideration not known to the law; and
(k)in response to what was said by Mason CJ in Baltic Shipping Company v Dillon,[27] namely, that if incomplete performance results in the innocent party receiving and retaining any substantial part of the benefit expected under the contract, there will not be a total failure of consideration, Mr Nasso did receive a substantial part of the benefit expected under the contract, namely that he had participated in designing the boat with Mr Fury, had therefore 'workshopped' the design he might require for a boat in the future, and retained that benefit because he could use that knowledge to his own purposes.
[27] Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344, 350.
The submissions for Mr Nasso contended that the conclusions of the learned trial judge were correct, for the reasons he gave. Considerable reliance was placed on what was said by Mason CJ in Baltic Shipping Company v Dillon,[28] as whether incomplete performance meant a total failure of consideration.
[28] Baltic Shipping Company v Dillon (350).

Consideration

There are a number of reasons why, in my respectful opinion, the contentions for Mr Fury must fail.
First, at the heart of the competing contentions is the proper construction of the contract. Properly construed it does not support the contentions that the deposit and the Stage 1 payment was for, and could be retained for, design work, or construction work progressively done.
There was no dispute before this Court as to the principles applicable when construing a contract. It will suffice for present circumstances to refer to what was said in by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd:[29]
This court in Pacific Carriers Ltd v BNP Parabis (2004) 218 CLR 451, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have lead a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (Pacific Carriers Ltd v BNP Parabis (2004) 218 CLR 451 at 461 ‑ 462).
[29] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40].
There are a number of observations which can be made about the text of the written document itself.
The document is entitled 'Conditions of Sale', and in it Mr Nasso is defined by the word 'Purchaser', and Mr Fury by the term 'Builder'.
The first section of the document deals with 'Formation', which in context plainly means the formation of the contract. The opening sentence of section 1 stipulates that the signing of the contract by the purchaser 'means an offer to purchase the boat … on the terms and conditions stated in this Contract'. Thus it is that from the outset of the document it reflects the parties' intention that it is a contract for sale of a boat under which Mr Nasso is the purchaser.
After referring to the fact that the contract was binding upon being signed,[30] the next provision in the contract states:
The Purchaser may withdraw from the Contract before the close of business on the next normal working day after the signing of Contract. Deposit is not refundable.
[30] Though it was not actually signed, the parties took no point about that.
In my respectful view, the way in which section 1 'Formation' is structured points to its proper construction. Section 1 deals with a number of topics: first, that signing is an offer to purchase; secondly, when the contract becomes binding; thirdly, withdrawal by the purchaser; fourthly, changes and modifications to be approved; and fifthly, the entitlement to view the boat while under construction.
In section 1 each new topic commences on a new line, that is, the next topic does not immediately follow on without a break.[31] Further, all of those topics are within the provision dealing with the formation of the contract. That leads, in my view, to the conclusion that the words 'Deposit is not refundable' apply only to the situation where the purchaser withdraws before the close of business on the next normal working day. The provision is a form of a cooling off period, allowing the purchaser to walk away from the contract notwithstanding that it was signed and therefore binding. In that circumstance the parties provided that the deposit would not be refundable.
[31] The same structure is evident in section 2, ‘The Purchase Price’.
No such words (or similar words) accompany the reference to the deposit in the Payment Schedule. That adds support for the conclusion that, objectively viewed, the deposit was only non‑refundable in the one event, namely if Mr Nasso withdrew in the cooling off period specified in section 1 of the contract.
Section 2 of the contract is headed 'The Purchase Price'. Use of that phrase reinforces that the contract, objectively viewed, was one for the sale and purchase of a boat, rather than what might be thought of as a typical construction contract. Section 2 goes on to provide that 'Prior to handover the Purchaser will pay the Builder all money owing'. That, together with the next sentence which stipulates that the boat will remain at the workshop 'until the final payment is made', plainly evidences an intention that the purchaser has no right to possession of the boat until the entire purchase price has been paid. That purchase price is specified on p 2 of the contract under the heading 'Price of Vessel'. It lists the all-up price of $275,400.
Section 2 of the contract also recognises, as the parties did themselves, that there might be adjustments during the course of construction. Those adjustments are also reflected in the Payment Schedule, which specifies that adjustments to the specification sheet 'will be added or deducted from the above amounts'.
Section 3 is entitled 'Delivery', and provides that 'Delivery of the boat … will take place at the premises of the Builder'. Whilst that deals with the place where handover is to occur, when seen in the context of the requirement that all of the purchase price had to be paid prior to handover, and the provision in section 4 that any risk is transferred to the purchaser 'when the Purchaser receives delivery of the vessel', it becomes apparent, in my view, that whilst the purchaser is entitled to proper performance of the contract, the purchaser has no right to possession of the boat, or any part of it, until the whole of the purchase price has been paid and delivery occurs.
That section of the contract entitled 'Details of Contract' continues to identify Mr Nasso as the purchaser of a vessel, and the all-up price of the vessel[32] is stipulated as a fixed sum of $275,400.
[32] Subject, of course, to additions agreed in the course of construction.
One then turns to the Payment Schedule. Once again it identifies Mr Nasso as the purchaser. The next thing to note is that the first payment required under the contract is the deposit, in the sum of $15,400. As noted earlier, there are no words at this point suggesting that the deposit is non-refundable. Then, a payment of $100,000 is required at 'Stage 1 (start of hull & deck)'. The second payment of $100,000 is at 'Stage 2 (hull & deck assembled)'. The final payment of $60,000 was said to be due 'on completion (prior to handover)'.
In my view, the wording in respect of each payment (other than the deposit) stipulates when payment is due, rather than what the payment is for. That is derived from the fact that in no part of the contract is there any provision equivalent to a schedule of rates and charges for work or for time spent during the construction The contract provides an all-up price for a vessel, possession of which remains with the seller until the total price has been paid. There is no provision which would permit the price to be increased simply because Mr Fury took much longer to do some section of the work than was anticipated, or that the price of the component parts increased beyond what he anticipated. Such additions could only be made by agreement. Thus, if it took significantly longer to get to the point of starting the hull and deck, or the costs of the materials to get to that point increased significantly more than Mr Fury anticipated, the payment required at Stage 1 would still be $100,000. The same comments apply to Stage 2, when the hull and deck were assembled. In my view, that lends strong support for the conclusion that the references to 'Stage 1', 'Stage 2' and 'On Completion' were simply to stipulate the timing of the payment, rather than to make the payment reflect the value of the construction that had actually occurred.
Secondly, it follows that the proper construction of the contract does not support the contention that the deposit was non‑refundable in all circumstances. To the contrary, it was only non‑refundable where the purchaser opted out of the contract during the cooling off period. Once that period had passed, the payment of the deposit was governed by the contract in the same way as it governed other payments made.

Thirdly, the proper construction of the contract does not support the proposition that part of the bargain for Mr Nasso was the opportunity to help design or 'workshop' a design for a future boat. The contract was for the sale of a dual console fishing boat, for the sum of $275,400. Of course it was the case that because the boat did not then exist, it had to be constructed by Mr Fury so that he could deliver it. And, it is also the case that in order to construct it, there had to be a design. However, no part of the contract reflects one under which the bargain was for design work which would enure to the benefit of the purchaser, even if the purchaser did not receive the boat resulting from that design work.
Fourthly, the fact that Mr Nasso would have an input into changes made to the design once the contract was signed is not to the point. Each of the parties knew that Mr Fury had completed, at his own cost, the substantive design work prior to the contract being entered into. Several sets of drawings had been provided during the discussions leading up to the contract, involving the participation of a naval architect. What was left after the contract was signed were the individual alterations and amendments that the parties contemplated would inevitably flow in the course of construction. In those circumstances, no reasonable person would conclude that the bargain on Mr Nasso's part was to participate in the design of some novel concept. Moreover, no reasonable person would have concluded from what was said before, or in the contract document, that the contract included a bargain on Mr Nasso's part for the benefit of having joined in that design, separate from receiving the promised boat.
Fifthly, as the parties knew, Mr Fury was to retain the rights to the design. He intended to use it to construct further vessels in the future, the boat for Mr Nasso being the first of its kind to be constructed in Australia. Mr Nasso was not, under the contract or by any understanding, to retain any rights to the completed design. Of course, Mr Nasso would have possession of the physical object which was the product of that design, but that is not the same thing.
Sixthly, as was implicitly acknowledged by Senior Counsel for Mr Fury, unless there was a benefit by way of Mr Nasso's participation in the design process and workshopping the design for his own future purposes, then Mr Nasso had received nothing in return for the money he paid. By contrast, Mr Fury had received the money ($115,400), kept the boat, and sold it for a profit (the sale price being $295,000). That it was at a profit may be inferred from the fact that Mr Fury was not doing Mr Nasso a favour by contracting to construct the boat, as he adjusted the price of the boat from time to time during the negotiations leading to the contract being signed. Whilst it was the first dual console boat to be built by Mr Fury, and he intended to build more in the future, it is unreasonable to conclude that he was doing so on a break‑even basis, or even on a loss basis. Nothing of that kind is suggested in the findings of the learned trial judge.
Seventhly, where a purchaser under a contract for the sale of goods has paid part of the purchase price as a deposit, the vendor subsequently repudiates the contract and the purchaser accepts the repudiation and terminates the contract, the purchaser may ordinarily recover the deposit by way of restitution. See Foran v Wight.[33] Alternatively, the purchaser may ordinarily recover the amount of the deposit by way of damages consequent upon the repudiation. See CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd.[34]
[33] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, 438 (Deane J).
[34] CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232 [10] ‑ [11].
Eighthly, in my respectful view, the answer to the contention that Mr Fury's incomplete performance of the contract does not give rise to recovery of the money paid by way of restitution is given by what was said by Mason CJ in Baltic Shipping Company v Dillon:[35]
The concept of an entire contract is material when a court is called upon to decide whether complete performance by one party is a condition precedent to the other’s liability to pay the stipulated price or to render an agreed counter-performance. If this were a case in which the appellant sought to enforce a promise to pay the cruise fare at the conclusion of the voyage the concept would have a part to play; then, if the appellant’s obligations were entire, on the facts as I have stated them, the appellant’s incomplete performance of its obligations would not entitle it to recover.
When, however, an innocent party seeks to recover money paid in advance under a contract in expectation of the entire performance by the contract-breaker of its obligations under the contract and the contract-breaker renders an incomplete performance, in general, the innocent party cannot recover unless there has been a total failure of consideration. If the incomplete performance results in the innocent party receiving and retaining any substantial part of the benefit expected under the contract, there will not be a total failure of consideration. (emphasis added)
[35] Baltic Shipping Company v Dillon (350).
On no reasonable view has Mr Nasso received or retained any substantial part of the benefit expected under the contract. The supposed inner satisfaction of having participated in the design, and the romancing notion that he thereby had the benefit of the design in his head for future reference, need only be stated to see the error. Restitution therefore follows as the appropriate remedy.

Disposition

The appeal should be dismissed.
The parties should be heard in relation to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AHM
Research Associate to the Hon President Buss
17 SEPTEMBER 2021