McFarlane v Dickson Marine (Refits) Limited
[2013] NZHC 647
•27 March 2013
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
CIV-2012-442-375 [2013] NZHC 647
UNDER District Courts Act 1947
IN THE MATTER OF an appeal against a decision of the District
Court at Nelson
BETWEEN ANDREW ANGUS MCFARLANE Appellant
ANDDICKSON MARINE (REFITS) LIMITED Respondent
Hearing: 19 February 2013
Counsel: P A Cowey for Appellant
J M Fitchett for Respondent
Judgment: 27 March 2013
JUDGMENT OF MILLER J
Introduction
[1] Dickson Marine repaired a large launch, the Akarua, at the request of Mr McFarlane. This appeal from the District Court concerns a sum of $24,746.29 that Dickson won from Mr McFarlane for the work.1
[2] The District Court established that this was a time and materials contract with an agreed hourly labour rate. But Dickson had given estimates, and it had promised to tell Mr McFarlane weekly what stage the work had reached and how much time
had been expended. It did not honour the promise, and it ultimately invoiced
1 Unless otherwise specified, all figures used in this judgment include materials and GST, which was charged at 12.5 per cent until 1 October 2010.
MCFARLANE v DICKSON MARINE (REFITS) LIMITED HC NEL CIV-2012-442-375 [27 March 2013]
Mr McFarlane for about twice the estimates. The question on appeal is this: did the District Court err when it denied Mr McFarlane relief for Dickson’s admitted breach of that promise?
[3] The Dickson estimates that are in dispute - a small portion of the work is not contested - totalled $26,650.38. After work began in February 2010 Dickson initially kept Mr McFarlane informed of progress and cost, but it ceased to do so at the end of April. About mid-May it rendered invoices totalling $29,105.05 for work to 30 April. Mr McFarlane paid $28,309.67. In mid-June 2010 he went to Dickson’s yard to collect the vessel, and found invoices for a further $25,751.07, which he had not anticipated and refused to pay.
[4] It is common ground that the appeal must be allowed in small part, for Dickson conceded in the District Court that it had claimed too much but that concession was not reflected in the judgment. Mr McFarlane’s case goes much further than that, however: he says that he has paid more than the reasonable cost of the work. To prove that, he called expert evidence, a challenge to the admissibility of which has been renewed on appeal.
The narrative
[5] The Akarua is a 20m launch, built in 2002. Through one of his companies Mr McFarlane bought the vessel in 2005. Between 2006 and 2008 he had extensive repair and maintenance work done, some of it by men who gave expert evidence at the hearing. That work cost more than $400,000.
[6] In 2010 Mr McFarlane decided to prepare the vessel for sale. He approached Dickson about necessary repair and maintenance work, explaining why he wanted it done.
[7] Before the vessel was delivered to the yard one of Dickson’s operations managers, Barry Hart, travelled to Queen Charlotte Sound to inspect it and discuss the work needed. Several days later, on 12 February, he emailed three job sheets and
estimates to Mr McFarlane, who had requested them. They included GST and materials:
a) Job 130 involved lifting the vessel, washing its bottom, removing aerials and mast, setting down in the shed and re-launching. The estimate was $1141.88.
b) Job 301 involved repairs to soft caulking on part of the starboard deck, which comprised teak planks laid over fibreglass-coated plywood. The soft caulking material in the affected area was to be removed, the seams cleaned out and new caulking installed, with any loose planks being re-fastened. The estimate, which included sums of $180 and $52.50 for caulking and glue and other consumables, was $3508.50.
c) Job 302 involved repairs to the aft bulwark and paint repairs. It included some sanding and painting the port belting. The initial estimate was
$7,886.98, again including specified sums for labour and materials.
[8] The total of the three estimates was $12,537.36. In a covering letter Mr Hart advised that:
I have attached job sheets that cover all the work we discussed on Monday.
They are estimates as I don’t know the full extent of some of the jobs, such as how many teak planks may be loose, or how many metres of caulking is soft. Also, until we open up the aft bulwark, we will not know the full extent of work required. Our charge out rate is $56 an hour plus GST.
However I will give you updates as we go through the job so you are informed of the extent of the work in all areas.
[9] Mr McFarlane replied by email, stating that the estimates were more than he had expected. Mr Hart responded on 16 February, promising that:
... I will closely monitor the work and all materials used and keep you informed weekly of labour hours spent as the job progresses.
[10] Mr McFarlane accepted the estimates, and the vessel was delivered to the yard.
[11] Soon after the work began Mr McFarlane authorised job 303, which involved some deck and hatch work. No estimate was requested, and there is no dispute about the cost.
[12] Mr McFarlane seems to have dealt principally if not exclusively with Brian Bennett, then an operations manager at Dickson, who kept him informed of progress. On 16 April Mr Bennett advised that the transom rebuild was under way, as were the “cosmetics”, and stated:
... I will give you a cost to date, and an estimated cost to completing on
Monday.
[13] Once the vessel was opened up it became easier to assess the work needed. Mr McFarlane visited the yard on 21 April. In meetings with Mr Bennett and Mr Hart he authorised extensions:
a) Job 302 was extended to include repairs to the transom, which was showing signs of rot from a leaking shower unit. The extra work, which was substantial, became job 304.
b) Belting repairs to the port side became job 305. The belting comprised two strips of laminated timber approximately 10m long curved around the widest part of the hull. Paint on the belting had blistered, indicating that water had penetrated the laminations, and it was decided to scrape the paint back, dry the belting, and apply a layer of fibreglass.
[14] Job sheets were prepared for jobs 304 and 305, but it does not appear that they were given to Mr McFarlane or that he received separate written estimates. Mr McFarlane said that he was advised orally at a meeting with Messrs Hart and Bennett that jobs 302 and 304 together would cost about $17,000, while Mr Bennett told him that job 305 would cost $3,000-$5,000. Mr Hart maintained that he did not attend any such meeting and knew nothing of an estimate for job 305, but Mr McFarlane’s evidence finds some confirmation in an internal Dickson spreadsheet which was prepared for trial; it appears that a Dickson accountant made the entry after speaking to Mr Bennett. It recorded that “12k was for superficial
repairs only, confirmed the initial estimate increase from 12k to 17k plus 3k for belting.” As noted, Mr Bennett was not a witness, but the Judge admitted a statement from him, written on 24 September 2010, in which he characterised the work as a “charge up” but also noted it had escalated and the escalations had been discussed with Mr McFarlane. That statement neither confirmed nor contradicted Mr McFarlane’s account.
[15] On 28 April Mr Bennett emailed, advising that the transom was fully rebuilt and ready for fairing, the forward hatch was complete, and the port belting had been stripped and was drying out. Decking was a “can of worms” and the only real solution was to strip the deck, which would not be “realistic price wise”; so Dickson would limit the job to what was obvious unless instructed otherwise. He advised that hours worked “as of end of last week are 275.5”. At $56 per hour that would amount to $15,428.
[16] That email led to a discussion about deck repairs, which Mr Bennett followed up with an email on 29 April. He estimated that a deck rebuild would cost $35,000 and recommended patching and repairing the deck.
[17] It is not now in dispute that Dickson failed to update Mr McFarlane on progress and cost after 29 April. Sometime in May Mr Bennett left Dickson’s employment. Mr McFarlane was not told of his departure.
[18] As noted earlier, invoices rendered in May totalled $29,105.05. It is unclear just when they were sent, but an email of 27 May 2010 suggests it may have been mid or even early May. There were seven invoices, one for each job, and they were fully itemised, including labour. The amounts are recorded in the table below. The itemised details showed that the invoices covered work done to 30 April. One of them, for job 130, included a sum for returning the vessel to water. Job 701 dealt with applying antifoul paint and replacing anodes. It had been done without authorisation; the Judge later found that Dickson had simply decided that the work was necessary.
[19] On 8 June Mr McFarlane paid $28,309.67. He believes that payment covered all of the work he had authorised, including work done after 30 April.
[20] The vessel remained at Dickson’s yard until mid-June. Mr McFarlane explained that by saying that the work was “90 percent finished” at the end of April, some minor tidying up items needed attending to, and he faced a number of demands on his time in that period; further, Dickson was happy for him to leave the vessel at the yard.
[21] On 27 May Mr Hart emailed Mr McFarlane advising that Dickson would be repainting the port side belting the next day and replacing a chrome strip, aiming to complete the work a week later. In June Mr McFarlane was told that the vessel would be put back into the water in the next few days. He arrived to collect it in mid-June. He says he did not expect any more bills, but he found that an envelope had been left for him on a coffee table in the vessel. It contained itemised invoices totalling $25,485.45 for work done between 4 April and 14 June.
301 The following table shows how the total of $54,856.12 ultimately claimed was made up, by reference to the estimates and the invoices. It will be seen that the work done after 30 April is almost all attributable to jobs 301, 304 and 305:
Job Number Estimate ($) May bill ($) June bill ($) Total billed ($)
130 1141.88 1533.38 157.50 1690.88
301 3508.50 5527.91 8069.09 13597.00
302 Nil (originally
7886.98 but combined with
job 304)
8966.42 112.72 9079.14
303 None 908.82 94.50 1003.32
304 With job 302,
17,000
9497.45 6949.90 16447.35
305 3000-5000 1756.01 9842.26 11598.27
701 None 915.06 525.10 1440.16
Totals 26,650.38 (assuming
$3000 for job
305)
29,105.05 25,751.07 54,856.12
[22] I record that after the hearing I asked counsel to help complete this table because differing figures were included in the record and I could not reconcile them. Regrettably, counsel could not agree about the amounts billed in June, and hence the totals column, but the differences are not substantial. I have used the most recent copies of the invoices and my own understanding, based on the record and Mr McFarlane’s evidence, of the estimates finally given.
[23] There is a small dispute about whether upon finding the invoices Mr McFarlane immediately left the vessel to remonstrate with Mr Hart, who did not recall a confrontation, but an email a few days later tends to corroborate Mr McFarlane’s account. He took the vessel and departed.
The District Court proceeding
[24] Dickson filed its claim on 12 January 2011, without benefit of legal assistance. It claimed judgment for $26,186.45 on unpaid accounts, employing the simplified procedure under the District Courts Rules 2009. It filed a notice of claim and information capsule, to which Mr McFarlane, who was represented throughout, filed a response and an information capsule, apparently on 26 May 2011. In the response he claimed that he acted only as agent for the company owner of the vessel, a
defence which was later abandoned. He also claimed that the parties had agreed the price would not exceed $25,000.
[25] On appeal Dickson complained that Mr McFarlane had not signalled his assertion that the price exceeded the estimates and was not reasonable. That claim was not mentioned in the response, but in the information capsule he stated in a section headed “your reply to the plaintiff” that:
There is a clear email trail showing that more extensive repairs (above
$25,000.00 plus GST) were not authorised. The email trail also shows that
at the time of Defendant’s final discussions with the Plaintiff prior to completion of the project the Plaintiff’s hours worked were only 275.5 hours (valued at $15,428.00 plus GST).
The Defendant has acknowledged that there were some increases on the
original estimate, but the Plaintiff’s final claim is for in excess of
$54,400.00. This is a massive increase on the original estimate, and cannot be justified by reference to the work actually done, nor by reference to the email trail, which shows that work of that scale was not authorised.
[26] In a will-say statement which seems to have accompanied the information capsule (it is not entirely clear from the chronology and bundle of documents), Mr McFarlane emphasised that he had not authorised Mr Bennett to do any more work or incur costs in excess of $25,000.
[27] I observe that the trial Judge found that the informal procedure had resulted in a certain lack of clarity in the precise basis of the defence case, but he accepted that Mr McFarlane had claimed the sum paid was a reasonable price for the work done.
[28] In December 2011 a settlement conference failed, and a hearing date of 6
March 2012 was assigned. It was to be a simplified trial, with just three hours hearing time allocated. Evidence was to be exchanged by 14 February. Neither party complied with the timetable, nor had they completed disclosure by that date. Not until 22 February did Dickson file its affidavits. Mr McFarlane filed one expert affidavit, that of Wayne Foley, on 1 March, and his own on 2 March. These affidavits put both the estimates and the reasonableness of Dickson’s work in issue. A further defence expert affidavit, that of David Lourie, was still outstanding at 5
March, the day before the hearing. Mr Bennett had been identified as a witness for
Dickson, but he was now overseas, so unavailable.
[29] On 5 March a Judge adjourned the hearing over Mr Fitchett’s opposition. A new fixture was subsequently set for 6 May. It was preceded by an objection to the expert evidence, which by then included an affidavit dated 22 March from Mr Lourie, also going to the matter of estimates and the reasonableness of Dickson’s charges. Mr McFarlane’s own evidence included a claim that Dickson had conceded “cost escalations” which needed to be looked into. Mr Fitchett’s objection did not succeed, a Judge ruling on 22 March that admissibility was a matter for the trial Judge and observing that whether or not a witness’s evidence had been sufficiently flagged in an information capsule, the opposing party would be well aware of the proposed evidence by the time of trial.
[30] I received memoranda from both counsel after the appeal about their recollections of what happened next. Dickson did not call evidence to meet Mr McFarlane’s challenge. Rather, it seems that Mr Fitchett renewed his objection at the hearing, the Judge apparently rejecting it on the ground that the affidavits of Messrs Foley and Lourie were admissible as of right because both had been served
more than 15 working days before trial2 and neither witness had been required to
attend for cross-examination (although Mr Foley did appear).3
[31] Mr Fitchett argued on appeal that it was neither appropriate nor feasible to call evidence in opposition; the evidence going to reasonableness had not been foreshadowed so was inadmissible, and there was insufficient time before and at trial. I disagree. When pressed Mr Fitchett did not argue that the District Court lacked jurisdiction to hear relevant evidence that had not been mentioned in an information capsule.4 In any event, I find that the questions of reasonableness and estimates had been raised in the information capsule. They were also clearly signalled in the affidavits of Mr Foley and Mr Lourie and Mr McFarlane. The
adjournment gave Dickson time to call evidence in response. If more time were
needed for the hearing itself, as it may well have been, it was counsel’s
responsibility to ask for it.
2 District Courts Rules 2009, r 2.51.
3 Rule 2.52.
4 The Rules were discussed in Jin v North Shore District Court [2013] NZHC 243.
[32] It is convenient to summarise the expert evidence at this point. Mr Foley is an experienced boat builder. Between 2005 and 2008 he carried out an extensive refit of the Akarua, which included the teak decking. Much of it was replaced, while some was lifted and relaid. About 20 hours were then spent sanding the entire deck, and about 32 hours on oiling it. Dickson’s job was much smaller in scope but he understood that Dickson had invoiced 150 hours for sanding, which could not possibly be correct. He estimated that the time taken to remove and replace the 14 deck planks that Dickson took up should have been about 30 hours, while the time to sand and (I infer) oil the deck would be 20 hours: a total of 50 hours.
[33] Mr Lourie is a marine painter who repainted the Akarua in 2006. He explained that the vessel has a fibreglass hull with laminated timber belting. The paint on the belting having blistered, it was necessary to remove a stainless steel rub rail, remove the offending paint, allow the rail to dry, fibreglass the top side of the rail, repaint and replace the rail. The work should have cost $3,000-$4,000, consistent with Dickson’s estimate for job 305. The belting repair was not worth more than $4,000. I assume this estimate excluded GST. He did not accept that the scope of such a job should change; it was exterior work and small-scale.
[34] Messrs Foley, Lourie and Hart agreed that estimates matter in the shipbuilding industry, although they are sometimes difficult to give because the extent of the work is not always apparent at first. The witnesses agreed that it is normal practice to speak to the owner if and when it becomes apparent that the work will cost more. Mr Lourie suggested that there is usually an opportunity to deal with the work in another, less costly way.
[35] Mr Hart and Dickson’s other witness, Anita Gardner, the firm’s general manager, conceded at trial that some of the time billed was excessive. Specifically, Ms Gardner accepted 12.5 hours had been billed for stainless steel work when only about two hours were justified, and Mr Hart conceded that 40 hours could be taken off the claim for sanding and painting the belting. There was evidence, in the form of an email from Mr Bennett, that the workers had gone too far when sanding; they did not confine themselves to the belting but sanded up onto the hull, which accordingly had to be painted too. The total value of this “excess” work, excluding
GST, was $3,150. Mr Fitchett conceded that he could not support the judgment below to that extent.
[36] The judgment was delivered on 1 August 2012. After reviewing the facts the Judge rejected the claim that a maximum price had been agreed; there was no contemporaneous documentary evidence of it, and the parties’ behaviour was inconsistent with it. He found that Mr McFarlane authorised the work (with one exception, job 701) in general terms, and that the work was done on a time and materials basis, with time being charged at $56 per hour plus GST. The estimates could not be converted into fixed price quotations. Nor was there any basis for the price to be based on what was reasonable; the parties had agreed that the work would be done on a time and materials basis.
[37] The Judge observed that:5
Mr McFarlane’s real complaint and the major cause of his dissatisfaction is that the costs far exceeded the estimates he was given and, in breach of its promise, Dickson’s failed to keep him advised of the rapidly increasing costs, at least after 30 April. That meant he lost the opportunity to control them. The question is whether there is any remedy for that in this proceeding.
[38] He recognised that an action in negligence may be available if an estimate is negligently given, but there was no such pleading here. Absent a counterclaim, he held, the Court could not address such arguments.
[39] Accordingly, the Judge found, Dickson was entitled to payment on all its invoices except those for job 701, which Mr McFarlane had never authorised. That reduced the amount payable to $24,746.29. He made no mention of the element of unreasonableness which Dickson’s witnesses had conceded. He refused interest, reasoning that Dickson had undertaken to provide regular updates of costs including weekly reports of time expended. Had Dickson complied with that undertaking, he found, litigation likely would have been avoided.
Do estimates and promises to report regularly on progress and cost matter?
5 At [40].
An estimate’s significance in law
[40] The leading authority is J & JC Abrams v Ancliffe, a 1981 judgment of the Court of Appeal.6 A builder got judgment at first instance for building work, but the award was offset by damages in negligence for a carelessly handled estimate. He had failed to respond to the owner’s repeated requests for a final price at a time when he ought to have known that the price would greatly exceed the estimate. On appeal Cooke J held that:7
... if there was a contract, it must have entailed a duty on the builder to take such steps to safeguard his client’s interests as would be taken by a reasonably careful builder in his shoes and in all the circumstances. If there was no contract, there would be a like duty in tort.
Damages were considered appropriate because the owner had lost the opportunity to abandon the job without loss.
[41] This Court also held in Ross W Thrupp Ltd v Meredith and Cormack that damages would be awarded in contract for failing to keep the owner informed that costs were exceeding estimates.8 Losses there took the form of additional costs arising from termination of a building contract and delay in having the work completed.
[42] It has also been variously suggested that where an estimate is given the final price ought not to exceed it by more than 10 percent9 or perhaps one-third.10
Counsel cited those cases, but I do not think they apply here. In this case the estimates could not be treated as near-quotes; when the estimates were given the scope of repairs was known to be inexact, so these parties dealt with the risk that prices would exceed estimates by agreeing that Dickson would report weekly.
What sort of obligation was assumed here?
6 J & J C Abrams Ltd v Ancliffe [1981] 1 NZLR 244 (CA).
7 At 245.
8 Ross W Thrupp Ltd v Meredith and Cormack HC Auckland A130/85, 19 August 1986.
9 Judge Broadmore in Absolute Plumbing Drains & Gas Ltd v De Sylvia DC Wellington CIV-
2007-085-1066, 4 October 2007.
10 Fraser v Stacey HC Wellington CP898/88, 12 October 1990, per McGeehan J.
[43] In my opinion the promise that Mr McFarlane would be told weekly of labour hours spent as the work progressed was a term of the contract. It preceded formation of the contract, which occurred when the estimates were accepted and the vessel was delivered to Dickson’s yard. It was an express promise, made as part of the negotiations over price, and it induced Mr McFarlane to enter the contract, as I
explain below.11
Must Mr McFarlane file a counterclaim to rely upon Dickson’s breach of its obligation?
[44] The Judge concluded that only by a counterclaim, apparently in negligence, could Mr McFarlane put the accuracy of the estimates and Dickson’s failure to report to him in issue. Before me Mr Fitchett did not support that conclusion. It seems to me that by invoking in the information capsule and in his evidence Dickson’s promises to keep him informed and the disparity between the estimates and the bills, Mr McFarlane raised an affirmative defence to the claim. He clearly intended it as a defence, for he did not seek judgment for any sum by way of counterclaim. It was available as a defence, to limit the amount recoverable or to set off against it a sum calculated as damages for breach of the obligation.
What did Mr McFarlane lose?
[45] That brings me to what Mr McFarlane may be said to have lost by Dickson’s conduct. It is not in dispute that Mr McFarlane might at any time put a stop to the work, or that he might exercise that right if he learned that the work would cost him more than the estimates or if he considered some of the work unnecessary for his purpose of preparing the vessel for sale. Dickson’s failure to keep him informed of how much it was going to cost effectively denied him that right, as the Judge concluded.
[46] Mr McFarlane’s losses might take several forms. First, he may have lost the
opportunity to change the methodology or the scope of work; I note Mr Lourie’s
11 Contractual Remedies Act 1979, s 6.
evidence that there are usually alternative ways of getting a job done. Second, he may have lost the ability to negotiate a fixed price for completion of any given job once its scope had been established, which would have shared the risk of cost over- runs with Dickson; I note that the firm is said to have been short of work at the time. Third, he may have lost an opportunity to sell the vessel without having all the repairs done, at the same price that it ultimately fetched. Finally, he may have lost an opportunity to put the capital expended on repairs to a better use. The last two of these options can be discounted on the facts.
[47] What merit do the first two options possess? Dickson says that the time was spent, the contractual basis of remuneration was time and materials, and that is all there is to it. But Dickson did not have the right to define the scope of work and spend as many hours as it thought appropriate to complete the work to the required “good” standard. Rather, its obligation to keep him informed allowed Mr McFarlane to manage a risk assigned to the customer under a time and materials contract; that is, the risk that the final price will be higher than expected. Faced with the necessity to report weekly to its customer, Dickson might have done the same work more efficiently (that is, in fewer hours), or it might have taken greater care to control the scope of work, or it might have negotiated a modified scope of work. That greater efficiency was possible is confirmed by Dickson’s concession that its staff spent more time than was reasonable on some jobs. The evidence of negotiations about replacing the deck also demonstrates that Dickson had a strong incentive to have Mr McFarlane authorise more work. He was concerned about cost, which suggests that in return for authorisation Dickson might have to negotiate a firmer price or narrower scope for any given job.
[48] The expert evidence confirms that the wrong caused loss, in the form of more, and more expensive, work than necessary. The loss is the difference between the value of time and materials actually expended by Dickson and the reasonable price for the work commissioned by Mr McFarlane. When set off against the claim, it may result, subject to considerations of proof, in a reasonable price being paid for the work. That is so because, as Mr Fitchett conceded, it is reasonable to assume that had the obligation been met, the scope of work and methodology used would
have been reasonable having regard to the purpose of preparing the vessel for sale, and Dickson would have done the work as efficiently as it was reasonably able to do.
Alternative liability under the Consumer Guarantees Act?
[49] A claim based on the Fair Trading Act 1986 was dismissed in the District Court and effectively abandoned on appeal. Mr Cowey could not point to evidence justifying an inference that the estimates were not genuine when made, or that Dickson had no intention of keeping Mr McFarlane informed about progress. However, Mr Cowey did pursue an argument that under the Consumer Guarantees Act 1993, Mr McFarlane need pay no more than a reasonable price for the work. Section 31 of that Act provides:
31 Guarantee as to price
(1) Subject to section 41 of this Act, where services are supplied to a consumer there is a guarantee that the consumer is not liable to pay to the supplier more than a reasonable price for the service in any case where the price for the service is not—
(a) Determined by the contract; nor
(b) Left to be determined in a manner agreed by the contract;
nor
(c) Left to be determined by the course of dealing between the parties.
(2) Where there is a failure to comply with the guarantee in this section, the consumer's right of redress is to refuse to pay more than a reasonable price.
(3) Nothing in this Part of this Act confers any other right of redress.
[50] It is arguable that s 31 adds nothing to Mr McFarlane’s rights, for the price, which includes valuable consideration in any form, was “determined by the contract”: $56 per hour plus materials. Mr Fitchett took that stance. It is also arguable that s 31 should be interpreted purposively, to allow a court to intervene where the total amount of money to be paid for the work is determined not only by the hourly rate agreed ex ante but also by how much work the supplier chooses to do ex post, when performing the contract. On the view I take of the case, I need not answer this interesting and seemingly authority-free question. Nor is it necessary to
decide whether the Dickson promise should be taken into account when deciding whether the price was determined by the contract. I consider that the Act adds nothing to Mr McFarlane’s rights in contract, for the reasons given at [48] above. It would also be unwise to address these questions; it would require that I survey the legislation without benefit of argument.
Did Mr McFarlane rely on the estimates and promises?
[51] Mr Fitchett’s principal argument was that Mr McFarlane did not rely on the estimates. He pointed to three aspects of the evidence: both parties possessed expertise, Mr McFarlane because of his prior experience with repairs; Mr McFarlane was asked to sign and return the original three job sheets, but did not; and in June Mr McFarlane paid without complaint sums exceeding the estimates.
[52] I reject these submissions. Mr McFarlane’s knowledge of the vessel is not material, for he was not on site and Dickson was better placed to assess just what work needed to be done once the vessel was opened up and how it might be done most efficiently. He insisted on estimates because he had been warned that Dickson might overcharge him, and when he questioned the estimates he was persuaded to accept them by Mr Hart’s promise to keep him informed of progress weekly. That he did use them cannot be disputed; he authorised the work in the job sheets. His willingness to pay a little more than the amended estimates is largely explicable by additional work that he approved, some of it (job 303) done without an estimate. Initially Dickson did keep him informed. It is true that he did not ask in May why he had not been given any updates recently, but his evidence was that he thought the work was nearly complete and the May invoices tended to confirm that. His evidence was that the June group of invoices was unexpected, and the unusual manner in which they were delivered invites the inference that Dickson’s managers expected that he might be taken aback. His evidence was that when he asked why he had not been kept informed Mr Hart simply apologised for not keeping in touch.
What is the reasonable price for the work?
[53] Mr McFarlane’s case was that the reasonable price for all of the work is not more than $28,309.67, the amount that he has already paid. He relied on the evidence of Messrs Foley and Lourie to the effect that reasonable prices for jobs 301 and 305 were $3,600 plus GST and $3,000-$4,000 respectively.
[54] I approach the calculation by beginning not with the estimates but with the total amount invoiced, for several reasons. First, this was a time and materials contract. Second, I have already held that Mr McFarlane cannot invoke an implied term that the work would not exceed estimates by more than a given percentage. The parties recognised that the scope of work would evolve, which is why they agreed that Mr McFarlane would be kept informed. He must have known that the estimates would likely be exceeded. Third, I do not understand him to deny that Dickson did spend the time and use the materials that it claims.
[55] I then make necessary deductions, beginning with what Mr McFarlane has paid ($28,309.67) and the amount claimed for job 701 ($1,440.16, which it will be recalled was disallowed in the District Court). That reduces the amount from
$54,856.12 to $25,106.29.
[56] The question is whether any further deductions should be made for time that would not have been spent at all had Dickson honoured its promise to keep Mr McFarlane informed. (Materials are not now in dispute.) The onus matters. Mr McFarlane has advanced an affirmative defence, so he must prove how much should be deducted. The evidence takes him only so far.
[57] I begin with job 301, the deck, for which the total invoiced was $13,597 including GST and materials. As noted earlier, Mr Foley estimated that 50 hours would be ample to lift and replace planks, caulk them, and sand and oil the deck. I accept that estimate as reasonable, based on his experience in general and his knowledge of this vessel in particular.
[58] It has proven curiously difficult despite timesheets and detailed invoices to establish just how much time Dickson spent. Mr Foley had been told that 150 hours had been invoiced for sanding, which may have included sanding on other jobs. It
was put to him in cross-examination that Mr McFarlane had conceded that Dickson spent only 28 hours on sanding, but I do not read Mr McFarlane’s evidence as a concession. I asked counsel to assist me after the hearing. Mr Cowey calculated that Dickson had invoiced 191.5 hours for sanding and deck work. Mr Fitchett calculated 96.5, but conceded that he excluded entries that refer to caulking, which was a necessary part of the work. On invoice 8957 alone, those entries total 35.5 hours. Dickson ought to be able to verify the hours spent. In the circumstances I will adopt Mr Cowey’s figure. Accordingly, the difference between Mr Foley’s estimate of 50 hours and the hours actually invoiced is 141.5. That results in a deduction of $8,914.50 (including GST) at the hourly rate of $56.
[59] I turn to job 305, the belting, for which the total invoiced including GST and materials was $11,238.27. Mr Lourie was not called for cross-examination, as noted earlier. Like Mr Foley, he is very experienced generally and familiar with this vessel. With respect to the belting, there is the added consideration that Dickson concedes having spent more time than was necessary. I adopt Mr Lourie’s evidence, the effect of which is that $4,000 plus GST was the reasonable price. So a further
$7,098.27 (including GST) must be deducted from the total invoiced. These deductions include the sums which Dickson conceded were overcharged.
[60] As noted, the evidence only takes Mr McFarlane so far in his quest to show that he has already paid all the work is worth. It does not justify any deductions other than these. The end result is that the judgment sum must be reduced by
$15,652.77, resulting in an award of $9,093.52.
Cross appeal as to costs
[61] I record that Mr Fitchett abandoned a cross-appeal as to costs.
Decision
[62] The appeal is allowed. The judgment is set aside. Dickson will have judgment for $9,093.52.
[63] Having succeeded in part, Mr McFarlane will have costs in this Court on a 2B basis. Counsel must seek agreement on costs. The District Court decision as to costs is unaffected.
Miller J
Solicitors:
Parry Field Lawyers, Christchurch for Appellant
Rout Milner Fitchett, Nelson for Respondent
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