Simpson and Pritchard v Steward and Steward
[2011] NSWSC 491
•10 June 2011
Supreme Court
New South Wales
Medium Neutral Citation: Simpson and Pritchard v Steward & Steward [2011] NSWSC 491 Hearing dates: 23 to 25 May 2011 and 27 May 2011 Decision date: 10 June 2011 Before: Ball J Decision: See paragraphs 109 to 111 of judgment
Catchwords: CONTRACTS - construction - identifying contract terms - building and construction contract. TRADE PRACTICES - misleading and deceptive conduct - whether representations made, whether representations were misleading and whether any loss suffered by reason of misrepresentations Legislation Cited: Fair Trading Act 1987 (NSW)
Home Building Act 1989 (NSW)Cases Cited: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 264 ALR 15
Turner v Jenolan Investments Pty Ltd (1985) ATPR 40-571
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221Category: Principal judgment Parties: Peter Simpson (First Plaintiff/First Cross Defendant)
Lyn Pritchard (Second Plaintiff/Second Cross Defendant)
Andrew Steward (First Defendant/First Cross Claimant)
Vivienne Ronda Steward (Second Defendant/Second Cross Claimant)Representation: Counsel:
D P O'Connor (Plaintiffs)
S Goldstein (Defendants)
Solicitors:
Evangelos Patakas & Associates (Plaintiffs)
CCS Legal Pty Limited (Defendants)
File Number(s): 2008/290636
Judgment
These proceedings concern a dispute between the plaintiffs, Mr Simpson and Ms Pritchard, who own a house at Seaforth, and a builder engaged by them, Mr Steward (who carries on business in partnership with his wife, the second defendant, under the name "ASB Constructions") to undertake renovation work to the house. The primary issue in the case is whether the building contract that the parties entered into was a simple costs plus contract as ASB Constructions contends or whether it was a costs plus contract with a cap as the plaintiffs contend. The plaintiffs also allege that ASB Constructions breached a number of express or implied terms of the building contract and engaged in misleading or deceptive conduct in breach of s 42 of the Fair Trading Act 1987 and claim damages in respect of those breaches. ASB Constructions has filed a cross-claim claiming an amount of $97,176.88, which is the balance it says is due to it under the contract.
Factual background
Ms Pritchard approached Mr Steward in about November 2005 to see whether he would be interested in doing the renovation work. A few days later, they met on site and Ms Pritchard gave Mr Steward some concept plans prepared by an architect. Approximately a week later, Mr Steward gave Ms Pritchard an estimate for the work of around $350,000 to $360,000.
In February 2006, an architect recommended by Mr Steward prepared more detailed drawings, consisting of two sheets. Those drawings formed part of the development application that the plaintiffs lodged with Manly Council. Ms Pritchard gave Mr Steward a copy of the drawings at a further meeting they had on site on 2 May 2006. At that time, Ms Pritchard asked Mr Steward to prepare a quote for the work.
Manly Council approved the development application in late July 2006. There was a further meeting between Ms Pritchard, Mr Simpson and Mr Steward on site on 8 August 2006. Following that meeting, Ms Pritchard sent Mr Steward an email dated 8 August 2006 attaching a document setting out additions to the scope of works. Subsequently, on 11 August 2006, Ms Pritchard sent an email to Mr Steward saying:
I spoke with Max [the architect] today and he recommended I ask you to only prepare a budget quote and we will go from there. That saves you a bit of work I believe.
In August 2006, Ms Pritchard engaged Insight Building Certifiers to issue a construction certificate, which was required before construction could commence. Insight wrote to Ms Pritchard on 16 August 2006. In that letter they said:
To assist with your building timetable, we advise the issue of a Construction Certificate will generally take 10-14 days following receipt of all necessary documents, as detailed below.
The letter went on to list a number of required documents.
Mr Steward provided his quotation under cover of a letter dated 28 August 2006. The total contract value was expressed to be $467,318.07. The quote consisted of a summary page, four pages headed "Provisional Sum Items Report", a page setting out special contract conditions and a page summarising the works. The Provisional Sum Items Report broke the work down into various categories and provided what were obviously estimates of costs against each category. There was a note at the top of the page which said:
Please Provisional Sum Allowances are items that we have allocated a budget allowance to which may change (up or down) depending upon the actual cost incurred during the progress of works.
In the covering email, Mr Steward said:
I have allocated all items as Provisional Sum Items as this way you can see everything that's has been [sic] priced clearly.
It is clear that Ms Pritchard read the document closely. It contains a substantial number of her handwritten comments on it.
In preparing the quotation, Mr Steward relied on a computer program known as "MyMate". The program generated the quotation from various assumptions entered into it by Mr Steward.
Mr Steward met Ms Pritchard and Mr Simpson on site on 7 September 2006. During the meeting, Mr Steward said that the work would take 6 months and that it would be possible to do it in such a way as to permit the plaintiffs to remain in the house.
According to the plaintiffs, there was then a discussion about price. Both claim that Mr Simpson said that the price seemed a bit on the high side and that Mr Steward replied that he had been generous in his quote. Ms Pritchard said in her affidavit that the conversation continued in the following terms:
Mr Simpson: OK. But on the other hand I want to make sure the price we agree on covers everything. I want a firm price. I don't want additional charges for unforeseen variations because you have missed something.
Ms Pritchard: Yes. We want to make sure that the price which we agree upon is firm and allows for the finishes and level of finish that we have discussed. We don't want you hitting us with a stack of variations.
Mr Steward: I am confident that I have covered everything. If anything I have been generous in my quote. I have no doubt that I have covered everything because I have inspected the site several times with Lyn [Ms Pritchard]. That, in conjunction with the architectural drawings and the details provided by Lyn is more than enough for me to be confident about my price. I think the best thing for you is for us to sign a cost plus type of building contract which provides for the firm price of $467,000 but which will allow you to benefit from any savings which we can make if the specific works are cheaper than what I have allowed, such as on the ceilings, scaffolding, demolition and site foreman which we have discussed.
Ms Pritchard: How does that work? I do not want this to be a big do and charge.
Mr Steward: No. It's for the agreed price but you can also benefit from savings which we can make by competitive pricing of contractors. I will call for three prices for each trade which we can review together. That way we can engage the most cost effective contractors. Also as I submit regular invoices, you will be able to monitor the costs throughout the project. I will notify you in advance if any of the costs exceed the allowances which I have provided for in my quote.
Mr Simpson gave affidavit evidence in very similar terms.
The plaintiffs say that Mr Steward then handed them a copy of the standard form NSW Residential Building Contract for Works on a Costs Plus Basis (the Costs Plus Standard Terms ) . According to Ms Pritchard, the conversation continued in words to the following effect:
Ms Pritchard: OK Andrew. If we are to agree on a fixed price how can you provide for that in the Costs Plus Contract?
Mr Steward: I will attach the fixed price details to the contract and also do a revised Quote which will not have the provisional sums items but only the contract price under the works value.
Again, Mr Simpson gave similar evidence.
Mr Steward denies this account of the meeting on 7 September 2006, although he admits that he said words to the effect of:
We can obtain three quotes from contractors on big ticket items such as the windows. You will also receive a job cost report attached to every invoice showing you the cost to date.
On 8 September 2006, Mr Steward sent Ms Pritchard a list of trade rates. At the end of the list was the following note:
Our Cost Plus Contract is a building contract where costs are charged at cost plus an agreed margin to cover our overheads and profit.
On 12 September 2006 Mr Steward sent Ms Pritchard an email offering to answer any questions she had before signing the contract.
Mr Steward went to the site again on 13 September 2006. At that time, he provided the plaintiffs with a revised quotation. It was similar to the previous quotation. In particular, the price of the quotation had not changed. However, the Provisional Sum Items Report was blank. There was a note at the end of the special conditions that formed part of the quotation which stated:
Excluded Contract Items and or Work/Materials Supplied By Client:
All Light Fitting
All Tiles & Pavours [sic] & Landscaping
Any prime cost items not listed in this quote
The original quotation contained a similar statement although, in fact, it allowed $6,800 (excluding GST and a builder's margin) for the installation of 68 downlights and 22 power points.
Mr Steward also took with him to the meeting on 13 September 2006 copies of a contract attachment form which he had printed out from the MyMate software. Item 4(a) of that form was headed "Contract Price (Clause 1)". Under that heading the form stated that "[t]he contract price is $467,318.07" and under that statement were the following words:
WARNING - the contract price may vary under the contract. The reasons for variations to the contract price include:
Clause 10 - a survey being required;
Clause 12 - a consultant being engaged to report on conditions of the site or the land;
Clause 13 - an increase in a tax, charge or levy after this contract is signed;
Clause 17 - variations to the building works;
Clause 20 - a specified material being unavailable; and
Clause 21 - an adjustment for prime cost items and provisional sum items.
The clauses identified bear little relationship to the clauses of the Costs Plus Standard Terms. Clause 1 of those standard terms does not refer to a contract price at all (contrary to the suggestion in item 4(a) of the form). Below item 4(a) is item 4(b), which is headed "Deposit (Clause 15.1)" and under that heading are the words "[t]he deposit is $23,365.90", which was 5 percent of the contract price. Neither cl 15.1 of the Costs Plus Standard Terms nor any other clauses of that document says anything about the payment of a deposit.
Item 12 of the form was headed "Contract Period (Clauses 1 and 9)". Under that were printed the words:
The building works must reach the stage of practical completion no more than 27 ['27' was typed in a box] weeks after the contract period commences, subject to clause 9.
"Contract period" is defined in the Costs Plus Standard Terms to mean "the number of calendar weeks or working days stated in Item 11 of Schedule 1 as extended by Clause 9". The reference to "Item 11" is another example of a cross-referencing error arising from the use of the contract attachment form rather than the appropriate schedule for the Costs Plus Standard Terms.
Item 14 of the form was headed "Other Contract Documents (Clause 1)". The following documents were then listed under that heading:
1. Our quotation dated 13 day of September ...
2. Architectural drawings 1 & 2
3. Engineering TBA.
The following page of the form contained a progress payments schedule. However, a line has been drawn through that page.
Towards the end of the meeting Ms Pritchard, Mr Simpson and Mr Steward signed the Costs Plus Standard Terms, the quotation dated 13 September 2006 and two copies of the contract attachment form. At the bottom of the first page of one copy of that form, Mr Steward wrote:
Warning - the contract price is not known. This is a cost plus contract
Ms Pritchard wrote the identical words at the bottom of the first page of the other copy of the form, although, in her version, the word "warning" is capitalised and underlined. There is a dispute about how the handwritten words came to be written in. Ms Pritchard says they were written in at the request of Mr Steward and that when she queried why he sought to insert them she was told that it was merely a formality because the price "will likely go down". Mr Simpson gives evidence in identical terms. On the other hand, Mr Steward says that the words were inserted at Ms Pritchard's request.
Clause 8 of the Costs Plus Standard Terms relevantly provides:
8.1The builder is to commence the building works within 20 working days after the day that:
(a) the builder receives all necessary building permits and planning approvals for the building works to commence; or
(b) ...
8.2 The contract period commences on the date the builder is obliged to commence the building works under sub-clause 8.1.
Clause 9.1 relevantly provides:
The builder is entitled to a reasonable extension of the contract period if the building works are delayed by the builder suspending the building works under Clause 32 or from a cause beyond the sole control of the builder including:
(a) a variation or a request for a variation by the owner ;
(b) ...
(c) adverse weather ;
...
Clause 9.2 requires the builder to give written notice of a claim for an extension of time and cl 9.3 provides that the owner must dispute any claim for an extension within 5 working days after receiving that notice. The reference to cl 32 appears to be an error. It should be a reference to cl 27, which permits the builder to suspend the building works if the owner is in breach of the contract.
Clause 13 relevantly provides:
13.1 ...
13.2 The owner must pay the price of the building works progressively as claimed by the builder .
13.3 The builder must give the owner a written claim for a progress payment at each progress stage described in Schedule 4.
13.4 A progress claim is to include details of the cost of the building works for the building works carried out, the proportion of the builder's fee claimed and of other moneys then due to the builder pursuant to the provisions of the contract .
13.5 A progress claim is to be accompanied by such invoices, receipts or other documents as may reasonably be expected to support the claim and evidence the cost of the building works being claimed.
13.6 The owner must pay a progress claim within 5 working days of the builder giving the claim.
There is no Schedule 4.
Clause 15.1 provides:
A variation must be in writing signed by the builder and the owner . Either the owner or the builder may ask for a variation.
The builder is not required to carry out a variation. "Variation" is defined to mean:
(a) an omission, addition or change to the building works ; or
(b) a change in the manner of carrying out the building works .
"Building works" is defined to be the building works to be carried out, completed and handed over to the owner in accordance with the contract.
Clause 22 deals with practical completion. In substance, it requires the builder to give a notice of practical completion at least 5 working days prior to the date practical completion is reached. The owner may dispute the notice, and if that dispute is not resolved it must be referred to dispute resolution (in accordance with cl 33). The owner must pay the final progress payment on practical completion. Practical completion occurs when "the building works are complete except for minor omissions and defects that do not prevent the building works from being reasonably capable of being used for their usual purpose" (cl 1.1).
Clause 32.1 relevantly provides:
To the extent required by the Home Building Act, the builder warrants that:
(a) The building works will be performed in a proper and workmanlike manner and in accordance with the plans and the specifications attached to this contract;
(b) All materials supplied by the builder will be good and suitable for the purpose for which they are used ...;
(c) The building works will be done in accordance with, and will comply with, the Home Building Act or any other law;
(d) The building works will be done with due diligence and within the time stipulated in this contract ...
Clause 35.1 provides:
Except as provided at law or in equity or elsewhere in this contract , none of the provisions of this contract may be varied, waived, discharged or released, except with the prior written consent of the parties.
One of the notes to drawing no 1 states "window sizes are approximate only & may vary with standards of the selected manufacturer". In fact, the architect did not prepare a windows schedule (referred to as drawing no 3) until after 13 September 2006 and Mr Steward was not provided with a copy of it until later that month. The engineering drawings were not provided to Mr Steward until the end of October 2006.
It is not entirely clear, but it appears that the parties agree that, insofar as the contract was in writing, it was contained in the following documents:
- The Costs Plus Standard Terms;
- The contract attachment form;
- The quotation dated 13 September 2006;
- The drawings numbered 1, 2 and 3 and the engineering drawings;
- The email dated 8 August 2006 sent by Ms Pritchard attaching the additional scope of works;
- Ms Pritchard's email dated 11 August 2006;
- Mr Steward's quotation dated 28 August 2006 (together with the covering email);
- Mr Steward's email dated 8 September 2006 attaching the trade rates;
- Mr Steward's email dated 12 September 2006.
I have proceeded on that basis, although some of these documents - such as the emails dated 11 August and 12 September 2006 - are not obviously contractual in nature.
A construction certificate was obtained on 28 November 2006 and ASB Constructions commenced work on the site on 29 November 2006, although some demolition work was undertaken prior to that time.
The work proceeded and the plaintiffs were invoiced regularly for the work that was performed. Initially, things progressed reasonably smoothly, although it is apparent that Ms Pritchard requested a substantial number of variations. I will say something more about the variations shortly. For the most part, however, the procedures set out in the contract in relation to variations were not followed by the parties, and a substantial number of variations were agreed orally between Ms Pritchard and Mr Steward. In some cases, Ms Pritchard instructed Mr Steward to proceed on the basis of an estimate of the costs of the work involved. In others, no estimate was provided. In addition, ASB Constructions did not obtain 3 quotes for subcontracted work.
As work progressed, the plaintiffs became increasingly concerned about the cost and they also complained about the quality of work and the degree of supervision undertaken by Mr Steward. In early February 2007, the plaintiffs were also becoming concerned about delay and dust. Mr Simpson or Ms Pritchard (there is a dispute between the plaintiffs and Mr Steward about which of them) raised the issue with Mr Steward and there was a discussion about whether the project would move more quickly if the plaintiffs moved out. Mr Steward said that it would. There is a dispute about precisely what he said. According to Mr Simpson, Mr Steward said that, if the plaintiffs moved out, ASB Constructions would be able to complete the job and have them back in the house in 3 months. Mr Steward says that he said to Ms Pritchard:
If you can provide everything necessary to complete the Project on Site and the scope of works is set, then we should complete the internal works in 3 months.
On 15 February 2007, the plaintiffs moved out to rented accommodation, which they had leased for 3 months for $850 per week.
The plaintiffs' concerns reached a head on 25 May 2007 when ASB Constructions sent an invoice for $96,464.89. By that stage, it had invoiced the plaintiffs a total amount of $462,601.80. As at 25 May 2007, there was an amount outstanding of $11,728.40. The plaintiffs did not pay that amount and on, 30 May 2007, ASB Constructions sent a notice of suspension of work and a request for evidence that the amount of $11,728.40 had been paid.
On 31 May 2007, Simon Diab & Associates, solicitors, replied on the plaintiffs' behalf. The letter enclosed a cash management account statement together with proof that the outstanding $11,728.40 had been paid. The letter went on to say that, in relation to the progress claim dated 25 May 2007, that claim did not comply with cl 13.5 of the contract which was said to be "a requirement that is basic to a Cost Plus form of contract".
The parties met on 5 June 2007 and, following that meeting, Ms Pritchard and Mr Simpson paid a further $30,000. On 11 June 2007, Ms Pritchard wrote to Mr Steward. In that email, she said:
As previously advised, we will only accept a progress claim when it is issued in accordance with the contract requirement, that is "accompanied by such invoices, receipts or other documents that may reasonably be expected to support the claim".
On 8 June 2007, Mr Simpson issued a number of letters querying items in prior job cost reports and, on the same day, Mr Steward sent the plaintiffs a letter in which he provided an estimate of the costs to complete the work. The letter said:
This is not a quotation, our contract is and remains cost plus.
On 13 June 2007, Mr Steward sent a further notice of suspension of work. Simon Diab & Associates replied to that notice on 13 June 2007. The details of that letter are not important. What is relevant is the fact that nowhere in the letter does it assert that the contract price was the subject of a cap.
On 14 June 2007, Ms Pritchard prepared some notes for her solicitor. Those notes included the following statement:
Our main complaint is extension of programme due to poor coordination and management of the project and the site.
The notes go on to indicate various instances of delay and the fact that the plaintiffs had moved out of the house. Again, the notes say nothing about an agreed cap on the building costs. Nor do they say anything about the failure of Mr Steward to obtain competitive quotes or 3 quotes for any part of the work.
The parties met on 14 June 2007 with their legal advisers. At that meeting they signed a document headed "Terms of Agreement to resolve Dispute under clause 33, 27 and 28 of the Contract dated 13/09/06". That agreement contained the following terms:
1. The owner shall deposit in the builders $45,000.00 [sic] by close of business 15 th June 2007 on an interim basis.
2. The Owner shall provide all keys necessary to the builder to obtain access;
3. The builder shall re-commence the works at his own costs by 15 th June 2007 in accordance with the contract;
4. The builder shall provide a response to all dispute [sic] raised by the owner on 8 th June 2007 by 10:00 am 20 th June 2007.
5. The owner shall provide payment schedules for progress claim dated 25/05/07 and 8/06/07 by 20 th June 2007.
6. The builder shall complete the works in accordance with the contract by 29 th June 2007.
7. The parties shall have a meeting by 29 th June 2007 to discuss any outstanding disputes.
After that agreement was signed, Mr Steward provided responses to the issues raised by Mr Simpson and a job cost report.
On 26 June 2007, Mr Steward gave notice of an extension of time to the agreed completion date of 29 June 2007 "due to the inclement weather of late".
On 28 June 2007, Simon Diab & Associates provided a schedule setting out details of the items which were disputed by the plaintiffs and which had been the subject of the dispute notices that had been served by Mr Simpson on 8 June 2007. The letter including that schedule said in part:
We further note that the owners dispute the charge out rate for ASB Constructions tradespeople and apprentices on the basis that it does not comply with the 'costs plus' contract and we once against call on the builder to amend to reflect actual cost plus or substantiate that the charge out rates are cost plus.
Again, there was no mention of a cap in the letter.
On 6 July 2007, Simon Diab & Associates wrote to Mr Steward saying:
We confirm to [sic] your verbal assurance today that practical completion had been attained as at today's date and that the owners were free to move in.
There was then further correspondence between the parties in an attempt to resolve the outstanding issues between them. As part of that correspondence, Mr Steward prepared a detailed costs report and Evangelos Patakas & Associates, who replaced Simon Diab & Associates as the plaintiffs' solicitors, served on CCS Legal, ASB Constructions' solicitors, a schedule of defects. The parties, however, were unsuccessful in resolving their disputes and, on 17 January 2008, Mr Steward and his wife commenced proceedings in the District Court to recover the sum of $97,176.88. That amount comprises the total costs claimed by ASB Constructions of $563,807.05 less the amount paid by the plaintiffs. At about the same time, the plaintiffs commenced these proceedings. The District Court proceedings were transferred to this court and the two proceedings were consolidated.
The issues
The plaintiffs put their case in various ways. First, they say that Mr Steward made a number of representations before the contract was entered into. It is not necessary to set out each of the pleaded representations. In essence, they amount to the following:
(a) That the plans and drawings numbered 1, 2 and 3 dated February 2006 were sufficient to enable Mr Steward to provide a quotation for the works;
(b) That the amount of $467,318.07 was more than sufficient to carry out the building works and the price charged by ASB Constructions would likely be less than that amount;
(c) That the costs for each category of work identified in the quotes dated 28 August 2006 and 7 September 2006 would not exceed the amounts identified in the quotes (plus a 15 percent margin and GST);
(d) That Mr Steward would ensure that all costs would be competitively priced and would obtain sufficient quotations in order to obtain such competitive pricing;
(e) That Mr Steward would consult with the plaintiffs, obtain their approval before carrying out any part of the work and keep the plaintiffs informed of progress against the quotes given;
(f) That ASB Constructions would complete the building works within approximately 6 months from the date of the contract;
(g) That the plaintiffs could continue to reside at the property during the course of the building works and that the property would remain habitable;
(h) That the contract was a costs plus contract with a cap.
Each of these representations was said to be oral and to have occurred "at various meetings between about December 2005 and 13 September 2006".
Second, the plaintiffs say that the contract contained a number of express or implied terms. Again, it is not necessary to set out the precise way in which those terms are pleaded. In essence, they amount to the following:
(a) That the defendants would carry out the building works for the lesser of the amount determined on a costs plus basis or the contract price and that the costs for each category of work identified in the quotes dated 28 August 2006 and 7 September 2006 would not exceed the amounts identified in the quotes (plus a 15 percent margin and GST);
(b) That ASB Constructions would complete the building works within 27 weeks from 13 September 2006;
(c) That the prices charged to the plaintiffs would be competitively priced and would be determined by ASB Constructions obtaining a reasonable number of quotes;
(d) That the building works would be carried out with due diligence;
(e) That Mr Steward would consult with the plaintiffs, obtain their approval before carrying out any part of the work and keep the plaintiffs informed of progress against the quotes given.
(f) That the plaintiffs would be entitled to remain in occupation of the property;
(g) That the work would be carried out in a proper and workmanlike manner and that ASB Constructions would rectify all defects within the defects liability period;
(h) That ASB Constructions would carry out variations in accordance with cl 15 of the Costs Plus Standard Terms;
(i) That ASB Constructions would provide the plaintiffs with certification by the defendants' subcontractors for all work undertaken by the defendants' subcontractors and their compliance with applicable building legislation.
Again, insofar as the terms are said to be oral, they are said to have been agreed "at various meetings between about December 2005 and 13 September 2006". Insofar as they are said to be implied, they are to be implied "by the circumstances of the parties and their dealings and by operation of the Home Building Act (the "HBA" ), Environmental Planning and Assessment Act ( EPA Act ), Environmental Planning and Assessment Regulations ( EPA Regs ), the Building Code of Australia and other legislation and law applicable to residential building works".
Third, the plaintiffs say that Mr Steward made representations to the following effect after the contract was entered into:
(a) That if the plaintiffs were to vacate the property, ASB Constructions would complete the building works within 3 months - that is, by 15 May 2007;
(b) That if the plaintiffs undertook certain work themselves, mainly associated with carpentry and joinery, that would reduce the contract price by an amount equivalent to the amount that ASB Constructions would otherwise have charged the plaintiffs for that work.
Fourth, the plaintiffs say that the representation referred to in 47(b) above gave rise to a collateral contract.
Fifth, the plaintiffs alleged that ASB Constructions owed a duty of care in effect:
(a) To make a reasonably accurate estimate of the price of the works;
(b) To obtain competitive prices by obtaining a reasonable number of quotes;
(c) To carry out the building works with due diligence and in a proper and workmanlike manner.
Sixth, the plaintiffs allege that ASB Constructions failed to comply with ss 7 and 92 of the Home Building Act 1989 and that, as a consequence, the defendants cannot claim more than the sum of $467,318.07.
The plaintiffs plead that they suffered various type of damage. Essentially those damages fall into the following categories:
(a) The amount overpaid by them for the work that was done;
(b) The costs of completing the work;
(c) The costs of finding alternative accommodation;
(d) The costs of rectifying defects.
The parties agree that, in the event that I find in favour of the plaintiffs on any aspect of their claim, the quantification of the plaintiffs loss and the determination of matters such as whether a particular item is a defect should be the subject of a reference.
I should also mention that, originally, the plaintiffs pleaded that, in the event that on its proper construction the construction contract was not a costs plus contract with a cap, then it should be rectified so as to have that effect. That case was abandoned at the hearing.
It is convenient to deal with the issues in the following order:
(a) The contractual issues;
(b) The representations said to have been made during the course of the contract and the claim based on a collateral contract;
(c) The pre-contractual representations;
(d) The remaining issues.
The contractual issues
Was the contract a costs plus contract with a cap?
The plaintiffs put their case in relation to this issue in two ways. First, they say that the discussion that occurred on 7 September 2006 in relation to a cap formed part of the terms of the contract and it is clear from those discussions that the parties agreed that the costs would be capped at $467,318.07. Second, they say that, in any event, on the correct construction of the written terms of the contract, the contract price was subject to a cap. I do not accept either of those submissions.
The first limb of the plaintiffs' argument depends on the court preferring the evidence of the plaintiffs over the evidence of Mr Steward. However, I prefer the evidence of Mr Steward on this aspect of the case for a number of reasons.
First, I accept the submission of Mr Goldstein, who appeared for ASB Constructions, that the evidence of the plaintiffs must be treated with considerable scepticism because, despite their denials, it is clear that each prepared his or her affidavit with the benefit of knowing what the other would say. Mr Goldstein produced a striking example in final submissions of a substantial passage taken from an affidavit of Ms Pritchard and an affidavit of Mr Simpson who each gave evidence of the conversation between them and Mr Steward on 13 September 2006 in virtually identical words, despite the fact that the conversation occurred approximately three years before the affidavits were prepared and neither kept any real file notes of the meetings that they had with Mr Steward. As Mr Goldstein pointed out, the affidavits of Ms Pritchard and Mr Simpson contained a substantial number of similar examples. When cross-examined on these passages, Ms Pritchard and Mr Simpson could only explain the remarkable coincidences on the basis that they were both present when the conversations occurred. Having regard to the time that had elapsed, I find that explanation implausible. It is made more implausible by the fact that Ms Pritchard, and Mr Simpson in particular, had a poor recollection of the conversations with Mr Steward when giving evidence in the witness box.
Second, in my opinion, it is inherently implausible that Mr Steward would have agreed to a cap. Mr Steward described it as "betting against himself". That is, perhaps, not the most apt description. But I do think it is unlikely that Mr Steward would have agreed to a cap on a costs plus contract. Mr Steward prepared a quote on the basis of incomplete drawings. Necessarily, then, the quote was an estimate. On the plaintiffs' case, they received all the benefits in the event that quote proved to be an over-estimate but ASB Constructions took all the risk in the event that the quote proved to be an under-estimate. In my opinion, it is unlikely that Mr Steward, who was an experienced builder, would have agreed to an arrangement of that type.
Third, there is a large amount of written material, much of which formed part of the contract, to the effect that the contract was a costs plus one and that the price could go up or down. ASB Constructions' original quote, which was sent on 28 August 2006 and on which the plaintiffs place considerable emphasis, specifically made that point. The warning written in hand by Ms Pritchard on the contract attachment form said that "the contract price is not known". There is a dispute about who suggested that that warning be included and the reasons for its inclusion. The likelihood in my opinion is that Ms Pritchard suggested that the warning be included because she wanted to emphasise that the price was not fixed at $467,318.07. That conclusion is consistent with the fact that the plaintiffs had originally been presented with an estimate that the costs of the work would be about $350,000 to $360,000 and that they thought that the quote of $467,318.07 was on the high side - a view which may have been reinforced by comments made by Mr Steward (an issue to which I return below). It is also consistent with the fact that Ms Pritchard emphasised the warning on the copy of the contract attachment form on which she wrote by underlining and capitalising the word "warning". The important point in this context, though, is that Ms Pritchard wrote the words. If the point of the words was that the price was not known but that it would not exceed an agreed amount, then the likelihood is the words that were written would have been qualified in that way.
Fourthly, at no time prior to 22 November 2007 did the plaintiffs suggest that the contract price was subject to a cap. There is a question concerning the extent to which subsequent conduct can be taken into account in this context. It is clear that it cannot be taken into account in interpreting a contract: see Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 264 ALR 15. However, in County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 Spigelman CJ expressed the view (at [20]) that it could be taken into account in determining the terms of the contract and McColl JA (at [162]) (with whom Beazley JA agreed) said that subsequent conduct could be taken into account as constituting an admission of the state of the parties rights.
In the present case, the question is whether Mr Steward said that a cap applied to the contract price. Had he done so, it would have been natural for the plaintiffs to remind him of what he said when ASB Constructions sought to charge more than that cap. The fact that they did not do so, in circumstances where they had engaged solicitors and were disputing the amount claimed by ASB Constructions, is strong evidence that Mr Steward did not make the statement that they say he made.
Fifthly, it is not clear how the cap was intended to work in relation to variations. In the case of a costs plus contract, it is not normally necessary to know the precise scope of works or to know whether particular work is a variation or not, since the owners are generally liable for the costs of the works (together with the builder's margin) whatever those works happen to be. However, where the contract is subject to a cap, the underlying assumption must be that the cap will be increased by the additional cost of any agreed variation. But in order for that mechanism to work, it is necessary to determine the scope of works precisely in order to determine what is a variation and by how much the cap is to be increased. It is clear, however, that the scope of works was not determined precisely at the time that it is said that the parties agreed to a cap. In particular, drawing no 3 and the engineering drawings had not been prepared by that time. It is difficult to believe that the parties intended the figure of $467,318.07 to operate as a cap in those circumstances.
It follows that it was not an oral term of the contract that the price was subject to a cap. In the absence of an oral term, I do not think a term to that effect was included in the contract. Mr O'Connor, who appeared for the plaintiffs, submitted that the contract should be interpreted as including such a term because of the terms of the contract attachment form. He submitted that that form must have come from the Particulars of Contract which were part of the standard form Building Contract for Renovations & Additions, which is a standard form fixed price contract. Given the similarities between the contract attachment form and the standard form Particulars of Contract, there is some force in the submission that the latter document was the ultimate source of the former. However, according to Mr Steward, he obtained the form from the MyMate software. There is no reason to doubt that evidence and I accept it. In any event, the fact that the source of the document was a standard form fixed price contract does not shed any light on the correct construction of the contract of which it forms part. It is agreed that that contract is a costs plus contract and the question is whether that costs plus contract contained a cap. The answer to that question is to be determined by construing the contract as a whole. The contract attachment form stated that the contract price was $467,318.07. However, as I have said, the parties wrote at the bottom of that form that the contract price was not known and that the contract was a costs plus one. No other provisions of the contract suggest that the contract price was the subject of a cap. The Costs Plus Standard Terms suggest otherwise, since they simply provide, in cl 13, for the payment of progress claims. Clearly, there is a miss-match between the contract attachment form and the Costs Plus Standard Terms. But that does not mean that the parties intended to impose a cap on the amount that ASB Constructions could charge. It simply means that they chose the wrong schedule to record the terms they had agreed. In my opinion, the explanation for the fact that the parties chose to specify a contract price is that they also agreed that the plaintiffs would pay a deposit. Under s 8(2) of the Home Building Act , ASB Constructions was not entitled to charge a deposit of more than 5 percent of the contract price. Consequently, it was necessary for the parties to agree a contract price in order to fix the amount of the deposit. That is what they did. But I do not think that it follows that they intended that contract price to operate as a cap.
Timing of the works
It is clear from the contract attachment form that ASB Constructions agreed to complete the works within 27 weeks. The plaintiffs suggested in submissions that that 27 weeks commenced to run from the date of the contract. The basis of that suggestion was never explained and, in my opinion, the suggestion cannot be correct. Clause 8.2 of the Costs Plus Standard Terms provides that the contract period commences on the date the builder is obliged to commence the building works. The builder is obliged to do so within 20 working days after receiving all necessary permits. One necessary permit was the construction certificate. The plaintiffs were responsible for obtaining that certificate. They did not do so until 28 November 2006. ASB Constructions commenced work the following day. The fact that it had undertaken some demolition work before then does not alter the position. It follows that the date for completion of the building works was 4 June 2007. By that time, a dispute had arisen between the parties. That dispute concerned a number of issues including the plaintiffs' complaints about costs, delay and inadequate explanations for the costs that were claimed and ASB Constructions' complaints about the number of variations that the plaintiffs had requested. Those disputes were resolved in part on 14 June 2007. The agreement that was reached on 14 June 2007 did not resolve all the issues between the parties. However, I think the agreement did resolve the question of when the building works would be completed. As I have said, at the time that agreement was reached, the plaintiffs position appears to have been that the 27 weeks ran from the date of the contract. Their complaint, among other things, was that the work was running substantially late. On the other hand, one of ASB Constructions' complaints was that it had been delayed by variations requested by the plaintiffs, although many of those variations were not agreed in writing and there was no agreement on an extension of time in respect of them. In my opinion, the parties' agreement on 14 June 2007 should be interpreted as resolving this aspect of the dispute by an agreement that the building work would be completed by 29 June 2007. Subsequently, ASB Constructions sought a short extension of time due to bad weather. There is no suggestion that it was not entitled to that extension of time. Nor is there any suggestion that the building works were not complete by 6 July 2007, at least in the sense that the plaintiffs were able to move back into the house.
For similar reasons, I do not think that it could be said that ASB Constructions breached the warranty to complete the work with due diligence.
It follows that the plaintiffs are not entitled to recover any damages for breach of contract in respect of delay to completion of the building works.
The obligation to obtain competitive prices
This is one of a number of issues which is inadequately particularised in the pleadings, on which Mr O'Connor made no submissions, but which nonetheless Mr O'Connor said the plaintiffs did not abandon. It appears that the basis for the allegation is the statements said to have been made by Mr Steward at the meeting on 7 September 2006 that he would obtain 3 quotes for all work.
In my opinion, the contract did not contain a term to the effect pleaded by the plaintiffs.
For the reasons I have given, I think the evidence of Ms Pritchard and Mr Simpson must be treated with considerable scepticism. In addition, in my opinion, Mr Steward's account of the relevant conversation is more plausible. It is unlikely that Mr Steward would have said that he would obtain 3 quotes for all work or, indeed, that ASB Constructions would obtain competitive quotes for all work. It is hard to see how that could be justified where the work was minor in nature or where a particular tradesman had already worked on the site and that tradesman's work was satisfactory. It is more plausible that Mr Steward offered to obtain competitive quotes where the plaintiffs requested him to do so and suggested that 3 quotes could be obtained for big ticket items. That conclusion is reinforced by the fact that, when the dispute broke out between the parties, the plaintiffs did not complain that ASB Constructions had failed to obtain competitive quotes for any of the work. The likelihood is that they would have done so if Mr Steward said what he is alleged to have said.
The obligation to keep the plaintiffs informed and to carry out the work in a proper and workmanlike manner
Again, Mr O'Connor made no submissions in relation to the source of the obligation to keep the plaintiffs informed as it is pleaded; and it is not easy to understand how it is said that this obligation became a term of the contract. Nor is it easy to understand how the plaintiffs are said to have suffered any loss as a consequence of a breach of this alleged term.
Clause 13.5 of the Costs Plus Standard Terms required ASB Constructions to provide material to support a claim for payment. In addition, by cl 32.1, ASB Constructions warranted that the building works would be performed in a proper and workmanlike manner and in accordance with the plans and specifications attached to the contract. Although no plans or specifications were physically attached to the contract, it is clear that drawings numbered 1, 2 and 3 and the engineering drawings formed part of the contract and the warranty was given in relation to them.
It follows that, to the extent that the plaintiffs allege that the particular work was not done in a proper and workmanlike manner or was defective or, leaving the question of variations aside, it was not done in accordance with the drawings (including engineering drawings), the plaintiffs are entitled to make a claim for damages in respect of those items. That is an issue that should be the subject of the reference.
The plaintiffs' right of occupation
There is no dispute that ASB Constructions agreed that the plaintiffs could continue to reside in the premises during construction of the building works. Nor is there any dispute that they did so between 13 September 2006 and about 15 February 2007. The question is whether a breach of the contract occurred when the plaintiffs moved out. In my opinion, it did not.
There is a dispute about whether Mr Steward suggested that they move out or whether the suggestion was raised by one or other of the plaintiffs. However, it is not necessary to resolve this dispute since it is clear that the plaintiffs moved out as a consequence of an agreement between Mr Steward and them that they do so. Mr Steward did not require them to move out. The plaintiffs agreed to move out partly because of the dust and partly because Mr Steward said that the building work would proceed more quickly if they did so.
The position may be different if the premises were uninhabitable at the time that the plaintiffs moved out. It might be argued that an agreement that the plaintiffs could remain in the house during the building work carried with it an agreement that the house would remain habitable. However, I do not think that the evidence establishes that the house was uninhabitable because of the dust. In her affidavit evidence, Ms Pritchard says the following in relation to problems with dust:
158. As agreed on the site meeting on 18 January 2007, we had vacated the lounge, dining and part of the kitchen areas to the ground (middle) level. However, despite Andrew's agreement at the 18 January site meeting that if we allowed work on part of the mid level ASB would put in place dust sealing, the dust sealing done by ASB was inadequate because dust constantly came into our designated living areas covering everything and making it impossible to keep hygienic.
159. On about Thursday 8 February 2007 ASB removed a section of the external and internal brick work to the kitchen in the mid level to expose the existing water pipes which ASB did not cover once the opening was made. As a result dust from the external demolished balcony on the mid level was blown into the kitchen through this hole and then into the family room which we had converted into our living area. All parts of the kitchen and the living room were covered in dust and it took me and Peter (after he arrived home) the rest of the afternoon and most of the night to clean. I was extremely upset.
In my opinion, this evidence is inadequate to establish that the house was uninhabitable. The problem appears to have occurred over a 3 week period and have affected part of the house in which the plaintiffs were living. There is no evidence of what attempts, if any, were made to improve the dust sealing. The complaint in para 158 is expressed in such generalised terms that I do not think that it establishes that the house was uninhabitable. The incident described in para 159, which it appears triggered the decision to move out, was an isolated one.
Variations
It is not in dispute that cl 15.1 of the Costs Plus Standard Terms required the variations to be agreed in writing. Nor is there any dispute that many variations were not in writing. Nonetheless, the plaintiffs do not dispute that they are liable for the costs of variations where they requested or agreed to a variation and accepted ASB Constructions' quote in respect of that variation. However, they dispute amounts claimed in respect of a number of variations on various grounds - such as on the grounds that the work was not authorised, no quote was provided for it or the work was within the original scope of works.
In my opinion, if the plaintiffs requested or authorised a variation and ASB Constructions performed the relevant work in a proper and workmanlike manner and in accordance with the request that was made, it is entitled to be paid a reasonable price for that work on restitutionary grounds: Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221.
That leaves open the questions whether particular work was requested or authorised, whether it was performed in a proper and workmanlike manner and whether it was performed in accordance with the request or authorisation that was made and, if so, the reasonable cost (including a 15 percent margin and GST) of performing that work. Those matters should be determined by the referee. However, I do not think that the plaintiffs are entitled to refuse to pay for the work because the variation was not agreed in writing or because ASB Constructions did not provide a quote for doing the work. Nor do I think that it is necessary to determine whether the work was part of the original scope of works. That would only be necessary if the work falling within the original scope of works was the subject of a cap. I have held that it was not.
The provision of certifications
Mr O'Connor did not make any submissions in relation to this allegation and it is not possible from the plaintiffs' Amended Technology and Construction List Statement to know the basis for it.
The Costs Plus Standard Terms do not impose an obligation on ASB Constructions to provide "relevant certification"; and it is not clear what other basis could exist for the obligation. In those circumstances, in my opinion, the plaintiffs have failed to make out this aspect of their case.
Representations made during the course of the contract
Two representations are identified in the Amended Technology and Construction List Statement. The first is that the building works would be completed within 3 months if the plaintiffs moved out. The second is that the contract price would be reduced by the value of work undertaken by the plaintiffs.
In my opinion, the plaintiffs have failed to establish that they are entitled to any damages arising from these alleged representations.
As to the first, I do not accept that the representation was made in an unqualified form. It is inherently unlikely that Mr Steward would have said that he would complete the works within 3 months come what may. I prefer his evidence that he said that ASB Constructions should complete the internal works in 3 months if the scope of works did not change and if the plaintiffs did all they needed to do in order to enable that to happen. The plaintiffs have not established that those conditions were satisfied.
In addition, in my opinion, the plaintiffs have not established that they suffered any loss as a consequence of this representation. Both Ms Pritchard and Mr Simpson were cross-examined on whether they would have moved out of the house if the representation had not been made. Both said that that was a hypothetical question which could not be answered. However, it is apparent that their main concerns were with dust and a desire for the building work to progress more quickly. Having regard to that fact, I think the likelihood is that they would have decided to move out of the house whether or not the representation was made. In those circumstances, they suffered no loss by reason of it.
As to the second representation, there is nothing to suggest that that representation was false. The contract was a costs plus one. If the plaintiffs undertook particular work, then it follows that it would be unnecessary for ASB Constructions to undertake that work. Since ASB Constructions only charged for the work that it did, that would necessarily mean that the contract price would be reduced. In my opinion, a representation in terms of that pleaded conveys nothing more than that.
There are difficulties in the plaintiffs' claim that the second representation gave rise to a collateral contract. Mr O'Connor made no submissions on matters such as when the contract was made and what consideration was given by ASB Constructions under the agreement. In any event, for the reasons I have given, I do not think that there is any basis for suggesting that the contract was breached. The effect of a costs plus contract is that ASB Constructions is only entitled to be paid for work that it did. To the extent that it is alleged that it charged for particular items of work that it did not do, that is a matter that should be determined by the referee.
Pre-contractual representations
Representations in relation to the drawings
In my opinion, nothing flows from this representation. Mr Steward did prepare a quotation for the works based on drawings numbered 1 and 2. It is far from clear for what reason the representation is pleaded. Certainly, Mr O'Connor offered none in submissions. In those circumstances, I think it can be put to one side.
Representation in relation to price
In my opinion, Mr Steward made a representation to the effect alleged by the plaintiffs that the amount of $467,318.07 was more than sufficient. In cross-examination, Mr Steward accepted that at the meeting on 7 September 2006 he said in relation to the 28 August 2006 quote that "I have been very conservative about that quote and, if anything, the price may come down".
On the other hand, I do not think that there is any evidence to suggest that Mr Steward made a representation that each category of work identified in the quotes would not exceed the amounts identified in respect of that category. There is no evidence that Mr Steward made a statement to that effect. Nor do I think that a representation to that effect can be inferred from the quotes that he provided. The quote that Mr Steward provided which contained the breakdown made it clear that the relevant estimates could go up or down.
There is a question whether the representation made by Mr Steward in relation to the total price should be treated as an expression of opinion or as a statement about the future to which s 41 of the Fair Trading Act applies: see, eg, Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [33]. If the statement was an expression of an opinion, it carries with it a representation to the effect that the opinion was actually held and had an adequate foundation: Turner v Jenolan Investments Pty Ltd (1985) ATPR 40-571. The onus is on the plaintiffs to prove that the statement was misleading because the opinion was not actually held or did not have an adequate foundation. On the other hand, if the statement was a statement about the future, then s 41 applies. That section provides:
(1) For the purposes of this Part, where a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) The onus of establishing that a person had reasonable grounds for making a representation referred to in subsection (1) is on the person.
It is not, however, necessary to resolve the question of who bears the onus of proof in this case. Mr Goldstein submitted that the statement made by Mr Steward was not misleading because Mr O'Connor conceded during the course of final submissions that a reasonable estimate of the contract work was $465,827.01, which was very close to the estimate given by Mr Steward of $467,318.07. However, in my opinion, this is not an answer to the plaintiffs' case, since what is alleged is that ASB Constructions represented that the $467,318.07 was more than sufficient and was likely to come down, and Mr Steward effectively conceded that he made a statement to that effect. There is nothing to suggest that Mr Steward did not honestly hold that opinion at the time. However, there is no evidence to suggest that it was a reasonable opinion. Mr Steward did not explain why he thought that his estimate was a conservative one. The actual costs of the project (leaving aside variations) suggest that Mr Steward's estimate was a reasonable one, not that it was one that was likely to come down. In the absence of any other evidence, I think that what actually occurred is the best evidence of what was likely at the time the estimate was given.
On the other hand, in my opinion, the plaintiffs have not established that they suffered any loss by reason of the representation. They give no evidence of what they would have done if Mr Steward had said that a reasonable estimate for the costs of the works was $467,318.07 (rather than that was a very conservative price and the price, if anything may come down). In some cases, where it is clear that a representation is made to induce a particular course of conduct, it may be possible to infer that the representation had that effect. However, I do not think that an inference of that type can be drawn in this case. The important figure was the figure of $467,318.07. Consistently with what Mr Steward told the plaintiffs, they must have believed that there was at least a possibility that the work would cost that amount when they signed the contract. It is hard to believe that they would have behaved differently if they had been told that that was a reasonable estimate rather than a conservative one, particularly when they give no evidence to that effect. For that reason, this aspect of the plaintiffs' case must fail.
Representation in relation to competitive pricing
I have already dealt with this allegation. The conclusion I have reached is that the statement made by Mr Steward in this context was that ASB Constructions was willing to obtain competitive quotes and 3 quotes on large items. The plaintiffs, and Ms Pritchard in particular, were often consulted about particular items of work, often in connection with a variation, but did not once ask Mr Steward to obtain an additional quote. Ms Pritchard accepted in cross-examination that that was the position. In those circumstances, there is no reason to think that any representation made by Mr Steward in relation to competitive quotes was misleading or deceptive.
Representation concerning consultation
Again, I have already dealt with this allegation. I do not accept that any statement was made by Mr Steward in the terms alleged.
Representation in relation to completion
In my opinion, this representation was not made by Mr Steward. ASB Constructions agreed to complete the works within 27 weeks from the date that it commenced work. This agreement was not the subject of a separate representation; and certainly not a representation that the work would be complete within approximately 6 months from the date of the contract.
Representation that the plaintiffs could reside in the property
This representation was made. However, for the reasons I have given, I do not think that the plaintiffs have established that it was misleading or deceptive. The plaintiffs were permitted to reside in the property. I do not think that the evidence led by them establishes that it was uninhabitable.
Representation concerning the cap
The contract was not the subject of a cap. No representation to that effect was made and any representation to that effect would have been false.
It follows that the plaintiffs fail in relation to their claim that they are entitled to damages by reason of misleading or deceptive conduct on the part of ASB Constructions.
Other issues
The allegations based on breach of an alleged duty of care add nothing to the other claims made by the plaintiffs. Even assuming that ASB Constructions owed a duty of care in the terms alleged, the claim based on an allegation that it was breached must fail for the reasons I have already given.
Although Mr O'Connor was not prepared to abandon the claim based on the Home Building Act , he did not explain its basis and it is not easy to discern it.
Section 7(1) of the Act provides:
A contract must be in writing and be dated and signed by or on behalf of each of the parties to it.
Subsection (2) sets out the information the contract must contain. Subsections (4) and (5) provide:
(4) If the contract price is known, it must be stated in a prominent position on the first page of the contract.
(5) If the contract price is not known or may be varied under the contract, the contract must contain a warning to that effect and an explanation of the effect of the provision allowing variation of the price. The warning and explanation must be placed next to the price if the price is known.
Section 92 provides that the contract work must be insured. Its relevance to the plaintiffs' argument is unclear.
As best as I can understand it, the plaintiffs' argument in relation to s 7 of the Act is that the contract provides for a price of $467,318.07 and does not explain the effect of the provision allowing a variation to the price. If that is the argument, I do not accept it. The warning handwritten by Ms Pritchard made it clear that the price was not known and that the reason that it was not known was that the contract was a costs plus one. In my opinion, that satisfies the requirements of s 7.
That leaves two other issues.
First, one head of damage claimed by the plaintiffs is the cost to complete the works. ASB Constructions maintains that the plaintiffs are not entitled to claim damages on that basis since the contract is a costs plus one so that ASB Constructions only gets paid for the work that it did. If it did not do the work, then it is not entitled to be paid and consequently the costs of completion do not arise.
In my opinion, the position is not that simple. ASB Constructions agreed to complete the works described in the documents which comprise the contract on a costs plus basis. If it failed to do so and if the plaintiffs incurred costs additional to those that they would have incurred if the work had been completed under the contract, then they are entitled to recover those additional costs. If the plaintiffs make any claim of that type, it should be dealt with as part of the reference.
Secondly, Mr O'Connor took objection to a number of paragraphs of Mr Steward's affidavit in which Mr Steward provided estimates of the costs of undertaking certain work which he claimed involved a variation to the scope of works. Originally, Mr O'Connor took objection to those paragraphs on the basis that Mr Steward was not qualified to give the relevant opinions and did not, at least in some cases, explain the basis of his opinion. I did not rule on those objections and gave Mr Goldstein an opportunity to lead evidence in chief that went to Mr Steward's qualifications to express the opinions he did. During the course of cross-examination, however, it emerged that matters on which Mr Steward had expressed an opinion were matters that were the subject of actual records. Mr Steward gave estimates of the costs as an alternative to expending time and costs searching for those records.
In my opinion, it is a matter for the referee to determine the best way of assessing the amounts that ASB Constructions are entitled to recover in respect of disputed variations. Mr Steward is qualified to express the opinions he does. Whether the referee relies on those opinions or requires other evidence to justify the amounts claimed is a matter for him or her, bearing in mind always that the referee should adopt an approach which is most likely to result in a just, cheap and quick resolution of the issues that are to be determined.
Orders
I have held that a number of the outstanding substantive factual issues should be the subject of a reference to an expert referee for determination and quantification. Those matters are:
(1) Whether the work carried out by the defendants (including the work on any variations) was defective or not carried out in a proper and workmanlike manner.
(2) Whether the work carried out by the defendants was carried out in accordance with the drawings (including the engineering drawings).
(3) Whether variations to the work carried out by the defendants were requested or authorised by the plaintiffs (regardless of whether they were agreed to by the plaintiffs in writing, orally or otherwise, or whether they were contained in the original scope of works or not).
(4) Whether, where requested or authorised, the variations were carried out in accordance with that request or authorisation.
(5) Whether the defendants charged for items of work they did not perform.
(6) Whether the plaintiffs incurred additional costs in completing work that fell within the scope of the contract above what they would have incurred if the work had been completed by the defendants under the contract.
(7) The quantification of any amounts owed to either the plaintiffs or the defendants arising out of the above determinations.
The parties should bring in orders for a reference consistent with this judgment. If the parties can agree those orders, I will make them in chambers. If the parties cannot reach agreement on the orders within 14 days, the matter should be listed for further argument.
I will hear the parties in relation to costs once the referee's report has been lodged with the court.
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Decision last updated: 10 June 2011
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