BETWEEN : PIERO DI GIOVANNI (t/as TIMBER DIMENSIONS) (ACN 30294515517)

Building contract - Cost plus contract - Representations as to costs - Implied conditions - Turns on its own facts

Fair Trading Act 1987 s 10, s 79

The defendant pay the plaintiff the sum of $267,571.50 plus interest on that sum at a rate of 19.94% per annum from 30 January 2013 until 25 July 2013 being $25,716.50

The defendant pay the plaintiff the sum of $972 together with interest at 19.94% per annum from 9 March 2010 until 25 July 2013 being $655

The defendant pay the plaintiff's legal costs to be taxed if not agreed

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304

Di Giovanni v Dark Horse Developments Pty Ltd [No 2] [2013] WADC 23

Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 180; [1984] 2 FCR 82; (1984) 55 ALR 25

Gould v Vaggelas [1985] HCA 85; (1984) 157 CLR 215

Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572; (2000) 104 FCR 564

Koufos v Czarnikow Ltd (The Herron II); (1969) 1 AC 350

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191

Toll (FGCT) Pty Ltd v Alfapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

1 WAGER DCJ: The plaintiff, Mr Di Giovanni trading as Timber Dimensions, contracted with the second defendant, Mr Brendon Aitken to renovate and build premises for a small bar, The Cabin, in Mount Hawthorn. The parties also contracted to construct and develop a small bar at the site of a café called The Suite in Shenton Park.

2 The parties to the contracts were determined in Di Giovanni v Dark Horse Developments Pty Ltd [No 2] [2013] WADC 23. Both contracts were entered into by Mr Di Giovanni trading as Timber Dimensions and Mr Brendon Aitken. Both contracts were Housing Industry Australian form cost plus contracts with incorporated conditions.

3 Although two small bars were to be constructed the parties agreed to proceed initially with The Cabin so that The Suite could continue to operate as a café providing Mr Aitken with an income stream until The Cabin was in the position to operate as a bar. The building of The Cabin was delayed by unforeseen building requirements, repeated changes to plans and by disagreement, lack of communication and hostility between the parties. Not surprisingly, the relationship between Mr Di Giovanni and Mr Aitken broke down.

4 Mr Di Giovanni's claim is that he constructed The Cabin to the standard and specification requested by Mr Aitken but that Mr Aitken failed to pay him for the work performed under The Cabin contract. Mr Di Giovanni claims that the sum of $279,963.50 remains outstanding for the work that was performed and that, consistent with item 8 of the contract schedule of particulars in the standard form HIA Cost Plus Contract, Mr Aitkin is liable to pay interest on that outstanding sum at 19.94% per annum from the date at which the payment became overdue.

5 Mr Di Giovanni also pleads that he has suffered loss and damage as a result of having to borrow money to pay off the debtors who are mainly sub-contractors who were involved in the construction of The Cabin. He also pleads the impact of the delay and the repercussions of the sum borrowed have had an adverse impact on his private and professional life for which he claims damages. Further, Mr Di Giovanni claims that, consistent with the documents signed by the parties on 11 May 2009, Mr Aitkin is required to pay all of Mr Di Giovanni's outstanding legal costs as indemnity costs.

6 Mr Aitkin pleads that he entered into the contract to build The Cabin with Mr Di Giovanni as a result of Mr Di Giovanni's representation in relation to the estimated cost of building being the sum of $343,882 inclusive of GST. It was a condition of the contract that Mr Aitken would have finance available to meet the costs incurred and Mr Aitkin obtained finance for building in the sum of $350,000 in reliance on Mr Di Giovanni's representation. Ultimately Mr Di Giovanni has claimed $629,693.50 as full cost of The Cabin contract. Mr Aitken claims that despite repeated requests Mr Di Giovanni failed to provide any building schedules and refused to provide an accurate costing or a realistic quotation for the work to be performed on The Cabin construction.

7 Mr Aitken counterclaims that Mr Di Giovanni did not have reasonable grounds for making the representation in respect of estimated building costs. He pleads that Mr Di Giovanni's conduct in providing a quotation that was significantly lower than the ultimate sum charged was misleading and deceptive contrary to s 10 Fair Trading Act 1987 and that he has suffered loss and damage being the difference between the reasonable costs for the work carried out and the amount charged by Mr Di Giovanni.

8 Further Mr Aitken pleads that Mr Di Giovanni was in breach of The Cabin contract because he failed to complete the works as soon as possible resulting in loss and damage. It is also pleaded that Mr Di Giovanni failed to mitigate Mr Aitken's loss given his continued refusal to provide details of the sum expended or likely to be expended on Mr Aitken's behalf. Mr Aitken seeks the following relief by way of counterclaim:

(b) damages pursuant to s 79 Fair Trading Act 1987;

(c) an order varying the terms of The Cabin contract so that the maximum amount payable under the contract is $343,882 (inclusive of GST); and

(d) a declaration that the 11 May 2009 contract variation is void.

9 In respect of The Suite, Mr Di Giovanni pleads that he is owed the sum of the projected builder's fees and a sum for work performed given that the contract did not proceed. Mr Aitken pleads that The Suite contract was void and no building fee or sum expended is due and owing.

1. Was the construction of The Cabin delayed? If so, was Mr Di Giovanni responsible for the delay and was it reasonable in the circumstances?
2. Was all of the work performed by Mr Di Giovanni agreed to by Mr Aitkin?
3. Did Mr Di Giovanni misrepresent the cost of The Cabin contract?
4. Has Mr Di Giovanni proved that Mr Aitken is required to pay the sum alleged to be outstanding?
5. Is Mr Aitken required to pay interest on any outstanding sum at 19.94% per annum pursuant to the HIA cost plus contract? Was a term that Mr Di Giovanni would provide details of the sum claimed to be outstanding implied in The Cabin Contract?
6. Has Mr Di Giovanni proven his claim for damages arising from the debt and the impact of the debt on his business?
7. Is Mr Aitken required to pay Mr Di Giovanni's legal costs.

11 The issue in relation to the proposed construction of The Suite is whether the parties are bound by any contract in respect of its construction and development.

12 In 2007 Mr Aitken was managing The Suite café in Shenton Park when he spoke to a customer, Mr Kinchen who was a designer and director of Evoke Developments Pty Ltd about drawing up plans so that The Suite café could be converted into a small bar. The two agreed to proceed with plans being drawn by Evoke when Mr Kinchen located a second premises that was also suitable for conversion to a small bar being a first floor 1960s dwelling on Scarborough Beach Road, Mount Hawthorn. Mr Aitken decided to develop both premises and engaged Evoke to draw up the plans. He signed a lease agreement in respect of Mount Hawthorn and continued to operate The Suite café business in Shenton Park.

13 Evoke initially estimated the cost of The Cabin construction at $250,000 but said that the cost of construction was likely to be nearer $300,000.

14 Mr Aitken agreed to proceed and through Mr Kinchen was introduced to Mr Di Giovanni, a builder who had approximately 25 years experience and who had been involved in projects of various sizes including renovations. He had not however ever converted a residential home into a small bar.

15 On 24 April 2008 Mr Di Giovanni, in conjunction with Mr Kinchen, provided Mr Aitken with a quotation for construction costs for The Cabin based on the initial planning drawings (exhibit 3). The price quoted was $385,760 exclusive of GST but inclusive of a 20% builder's mark-up and insurance (exhibit 2.2). The quotation included the provision of a disabled lift ($25,000, item 21) and reverse cycle air-conditioning ($8,000, item 20) however it did not include kitchen equipment.

16 Mr Aitken decided to contract with Mr Di Giovanni to carry out the building works and the parties met on 1 May 2008 to formalise the contract on that date. Mr Di Giovanni told Mr Aitken that a cost plus contract was appropriate because they were renovating an old property and therefore the precise costs were unknown. Further, money would be saved if variations were needed because it was easier to carry out variations on a cost plus contract. Despite a costing having been reached in respect of initial planning documents no documents were annexed to the cost plus Cabin contract. The HIA cost plus contract in relation to The Cabin construction was signed on 1 May 2008 (exhibit 4). The relevant standard clauses are:

(a) The Builder agrees to execute and complete for the Owner the building work described in Item 3 of the Schedule hereto ('the Works') upon the land described in Item 3 of the Schedule hereto ('the Site') in a proper and workmanlike manner and in accordance with the drawings, plans and specifications (inclusive of all addenda and colour schedules) agreed between the parties and annexed hereto and for the purpose of identification signed by each of them (which said drawings, plans and specifications and colour schedules are hereinafter referred to as 'the Construction Documents') for the consideration as described in Item 5a or 5b of the schedule hereto and upon the terms and conditions herein appearing.

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(b) The Owner warrants that he has the capacity to pay the costs as that term is defined in Clause 6 together with the builder's fee as specified in Item 5 of the Schedule. The Builder may at any time during the period of this contract request written notice from the Owner to satisfy the Builder of the Owner's ability to pay. If the Owner shall fail to do so within FIVE (5) days of receipt of such notice the Builder may determine this contract in accordance with Clause 15 hereof.

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(a) Forthwith upon the execution hereof and until practical completion the Builder shall be entitled to exclusive possession of the Works for the purpose of performance of this Contract and the Owner shall do all that is necessary to confer the same upon the Builder PROVIDED THAT the Owner or his duty appointed representative approved by the Builder shall be entitled to access for the purposes of inspection and viewing the progress of the Works but only at such reasonable times and in such manner as shall not interfere or prevent the Builder from carrying out the Works. After practical completion the Builder shall be entitled to reasonable access to the Site for the purpose of completing his obligations hereunder.

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(b) If a variation of the Construction Documents or the Works is necessary for such compliance the Builder shall notify the Owner in writing giving the reason for such variation and seeking instructions in reference thereto. If instructions are not received in writing from the Owner within FIVE (5) days of receiving such notice the Builder shall carry out the Works required for such compliance and such works shall be treated as a Cost in accordance with this Contract.

(a) The actual Costs of the Works shall include the following:

(i) the costs of labour and services supplied wholly in connection with the Works;

(ii) the net costs of all subcontracts wholly in connection with the Works;

(iii) all fees payable to Statutory Authorities having jurisdiction over the Works;

(iv) fees for licensed surveyor, structural engineer, architect or other professional consultants engaged by the Builder;

(v) the premiums payable for all insurances as specified in Clause 8 hereof;

(vi) the net cost of all building materials including temporary structures used wholly for the Works and including the cost of cartage. The costs shall be normal trade costs and any discounts applicable for prompt or cash payments shall remain with the Builder.

(vii) the cost to rectify any defects as part of the Defects Liability Period, other than making good faulty materials or workmanship;

(viii) costs for plant, equipment and services used wholly for the Works;

(ix) any costs to repair, replace and/or rebuild any damage or loss as a result of causes beyond the control of the Builder. Any amounts recoverable from an insurance claim shall be credited to the favour of the Owner.

(x) any excesses payable for Insurance claims by the Builder; and

(a) If the Owner shall require any variation to the Works or the Construction Documents, he shall supply the Builder with a written request for such variation which the Builder shall comply with. But in any event the Builder shall be entitled to a fee in accordance with Item 6 of the Schedule and any such variation shall be carried out as if it were a part of the Works under this Contract.

(b) if the variation necessitates a deletion from the Works or the Construction Documents, the Builder shall be entitled to be paid forthwith for all work done and materials procured or used for that part(s) of the 'Works' deleted.

(a) The Builder shall be entitled to make claims for progress payments for the Works by notice in writing to the Owner (herein after referred to as 'Progress Claims') at intervals of either:

(i) the number of days specified in Item 7 of the Schedule commencing from the date of commencement of the Works; or

(ii) the value of the Progress Claim exceeding the amount specified in Item 7 of the Schedule.

(b) Such Progress Claims are subject to the following conditions:

(i) the Progress Claim shall identify all Costs incurred by the Builder up to and including the date that progress claim together with the Builder's fee as specified in Item 5 of the Schedule.

(ii) payments shall be payable of the Owner within FIVE (5) days of receipt of any Progress Claim;

(iii) if the Owner shall not within FIVE (5) days of receipt of any Progress Claim notify the Builder of their disagreement with any of the items therein specifying full details of the Owner's disagreement the Owner shall be deemed to have accepted and approved of that Progress Claim as true and correct;

(iv) if any dispute arises as to any item in a Progress Claim the Owner shall pay to the Builder the undisputed portion of that Progress Claim within the period specified in sub-clause 10(b) and the balance shall if not agreed and paid by the date of the next Progress Claim be resolved in accordance with Clause 18; and

(v) if any dispute arises as to any item in a Progress Claim which dispute remains unresolved at the date of the next Progress Claim the Builder may suspend the Works until the dispute is resolved or for any shorter period he may decide without prejudice to either party's rights in accordance with this Contract.

(a) Subject to this Contract the Builder shall commence the Works by the time specified in Item 9 of the Schedule or as soon thereafter as may be reasonably practicable and shall proceed therewith with reasonable despatch and diligence and complete the Works within the time specified in Item 9 of the Schedule provided that:

(i) the Owner shall have complied with any notice given by the Builder pursuant to Clause 2(c) hereof;

(ii) the Builder is satisfied that the boundaries of the Site have been adequately delineated;

(iii) provision has been made for adequate water supply to the Site; and

(iv) the Builder has received approval to the Construction Documents from all relevant authorities.

(b) Notwithstanding provisions to the contrary contained in this Contract the Builder shall not be responsible for any delays caused by any matter or thing over which the Builder shall have no control and including (without limiting the generality thereof):

(i) any event which affects directly or indirectly access to or the condition of the Site or the Works or any person engaged on or material employed in or to be employed in or in relation to the Works including acts of God, fire, explosion, earthquake, civil commotion, theft or acts of vandalism, flooding, inclement weather, strikes, industrial action, lockouts or holidays granted in accordance with industrial awards, fires, vehicle accidents, unavailability of labour, vehicles or equipment or permits required;

(ii) any alterations to the Construction Documents resulting in alterations to the Works;

(iii) any instruction or delay of instruction by or any omission of the Owner;

(iv) any deliberate and substantial prevention of or interference with the Works or the progress thereof caused by the Owner;

(v) any delay in the supply of materials or transport;

(vi) any proceedings being taken or threatened by any disputes with adjoining or neighbouring owners concerning the continuation or variation of delivery to or completion of the Works upon the Site;

(viii) any delay in the commencement of or continuance with the Works, caused by or resulting from an order or directive of a relevant authority;

(ix) any delay caused by proper investigation of any of the above by the Builder or the Owner; and

(x) any delay due to the suspension of the Works by the Builder pursuant to the Builder's powers contained herein.

(c) Upon the happening of any of the events aforesaid the Builder shall notify the Owner thereof and shall be entitled to such extension or extensions of time for completion of the Works as shall in the circumstances be agreed and if there shall be any dispute the provisions of Clause 18 shall apply.

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(a) Practical completion of the Works shall be deemed to have occurred when the same are structurally complete and reasonably fit for habitation and notwithstanding any unfinished work of a minor nature which does not unduly interfere with the free and uninterrupted use of the premises by the Owner.

(b) The Builder shall notify the Owner when the Builder considers that practical completion has occurred and within FIVE (5) days the Owner and the Builder or his representative shall meet at the Works to carry out a pre-handover inspection. If said meeting does not occur the Contract shall be referred to arbitration pursuant to Clause 18 hereof.

(c) During the pre-handover inspection the parties shall agree to a list of items which require completion or rectification. If the parties do not agree the contract shall be referred to arbitration pursuant to Clause 18 hereof.

(d) Subject to Clause 13(e) the final payment shall be due within FIVE (5) days after practical completion and upon payment thereof the Builder shall hand the keys of the Works to the Owner or to such persons as the Owner may direct and on acceptance of the keys the Owner shall be deemed to have entered into possession of the Works and to have acknowledged that they have been completed by the Builder in accordance with this Contract and the Builder shall thereupon be relieved and discharged from all responsibilities under the Contract other than his obligations pursuant to Clause 14.

(e) Subject to Clause 13(g), if the Owner shall take possession of the Site, permit work outside this Contract or deliver goods or chattels to the Site without prior written consent of the Builder, before practical completion or before the paying of all monies due and payable hereunder (whichever is the earlier), such action shall constitute an absolute waiver, release and discharge to the Builder from the Owner of any and every claim which the Owner had or might have against the Builder hereunder and the Builder shall thereupon be discharged, released and relieved absolutely from all of his obligations and responsibilities under this Contract (other than his obligations pursuant to Clause 14 - Defects Liability Period) and all monies payable under this Contract shall become immediately due and payable together with any interest thereon for late payment at the rate specified in Item 8 of the Schedule calculate from the date of the Owner taking such action.

(f) The Works shall be at the risk of the Owner from the date the Owner takes or is entitled to take possession.

(g) Possession of part of the works may be granted by the Builder in writing without prejudice to either party's rights under this Contract.

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(a) The Builder may, in addition to any other rights under this Contract, terminate this Contract in any one of the following events:

(i) substantial damage to or interference with the Works or access thereto by any cause beyond the control of the Builder including (but without limiting in any way the generality thereof) water, flood, fire, storm, tempest, rioting, earthquake, civil commotion or industrial action;

(iii) if the Owner shall make any assignment for the benefit of or enter into any arrangement or composition with his creditors or go into liquidation (whether voluntary or compulsory except for the purpose of reconstruction or amalgamation) or have a Receiver appointed or commit an act of bankruptcy or if a sequestration order is made against his estate;

(iv) any deliberate and substantial prevention or of interference with the Works or Progress thereof caused by the Owner; or

(v) any failure by the Owner for FIVE (5) days after the due date thereof to pay any monies pursuant to Clause 10 of this Contract.

(a) The Owner may, in addition to any other rights under this Contract, terminate this Contract in any of the following events:

(ii) if the Builder shall make an assignment for the benefit of or enter into any composition with his creditors or go into liquidation (whether voluntary or compulsory except for the purpose of reconstruction or amalgamation) or commit an act of Bankruptcy or have a Receiver appointed or if a sequestration order is made against the Builder's estate.

(a) In the event of any dispute, disagreement or difference between the Owner and the Builder at any time whatsoever as to any matter arising hereunder or in any way concerned or connected herewith or relating to the construction of this Contract then notwithstanding the rights of either party to apply to the Builders' Registration Board of Western Australia, or other relevant Statutory Bodies, either party may give to the other notice of such dispute, disagreement or difference and at expiration of FIVE (5) days thereafter and in the absence of any settlement may be referred by either party to arbitration which will be conducted in accordance with the Commercial Arbitration Act, 1985, by:

(i) a single arbitrator appointed by mutual consent; or

(ii) in the event that agreement of the appointee is not reached within FIVE (5) days a single arbitrator shall be appointed by the President or his nominee of the Housing Industry Association (Western Australia Division). Such appointee shall be an Arbitrator approved by the Institute of Arbitrators (Western Australian Chapter). At the time of application for such appointee the party applying shall deposit with the Housing Industry Association such sum as may then be required by way of security for costs of the arbitration proceedings and further sums so contributed whether by direction of the arbitrator or otherwise (but always in equal shares) shall be applied in accordance with the directions of arbitrator.

(b) The conduct of the Arbitrator shall be in accordance with and subject to the provisions of the Commercial Arbitration Act 1985 and the decision of the single arbitrator appointed shall be final. The rights and obligations of the parties under this Contract shall be modified only to the extent made necessary by such arbitration.

17 The following special conditions were added to cl 25:

1. Allow full access to the entire property and associated areas until full and final payment has been made.
2. All materials and services rendered remain the property of the Builder until full payment has been made.

18 The schedule of particulars annexed to The Cabin contract set out the name of the builder as Piero Di Giovanni and the owner as Brendon Aitken. The works were described as 174 Scarborough Beach Road, Mount Hawthorn, 6016. The consideration was stated as 'percentage fees shall be calculated at the rate of 20% of the costs of the works'. A variation fee of 20% was agreed to be calculated at the rate of the cost of the variation works.

19 Clause 10 progress payment claims were agreed 'at a minimum period of seven days and a minimum value of $100'. Interest for late payment was set at the rate of 19.94%.

20 The time to commence works subject to cl 11(a) was 'TBA' as was the time of completion subject to cl 11(b).

21 An HIA cost plus contract was also signed by the parties in respect of the construction of The Suite. The contract was in identical terms except that the property on the schedule of particulars was described as 210 Nicholson Road, Shenton Park, 6008.

22 After the cost plus contracts were signed Mr Kinchen and a team from Evoke produced the interior design schedule for The Cabin dated 13 June 2008 (exhibit 7.1), a 10-page detailed document setting out each item that would be required, its location, description, colour and additional comments. Details of the supplier, the number required and the date of 12 June 2008 were also recorded. The interior design schedule did not include a costing.

23 Mr Aitken was concerned about the cost of The Cabin contract and was keen to reduce the sum of the initial quotation. He made it clear to both Evoke and Mr Di Giovanni that he wanted to keep costs to a minimum. The Evoke team then produced construction drawings prepared for The Cabin building licence application dated 3 June 2008. These drawings were more detailed than the original planning drawings for which Mr Kinchen and Mr Di Giovanni had provided the estimated price of $385,760 exclusive of GST however no additional price estimate was provided in respect of the more detailed construction drawings.

24 On 18 June 2008 Mr Di Giovanni sought confirmation of finance in respect of both contracts and provided Mr Aitken with an estimate cost for construction of The Cabin of $343,882 and of $233,530 for The Suite.

25 Mr Aitken received confirmation of funding from the National Australia Bank on 16 July 2008. The loan approval for The Cabin construction was for $350,000 together with two equipment loans being $50,065 and $54,660 and a National Business Access card with a limit of $25,000 for contingencies.

26 The loan approval for construction on The Suite was in the sum of $230,000 with National Equipment Loans for $46,300 and $48,974 and a National Business Access card for contingencies in the sum of $15,000. The approvals were provided to Mr Di Giovanni on 16 and 17 July 2008. The sums applied for and granted were consistent with Mr Di Giovanni's cost estimate provided on 18 June 2008.

27 Final approval to commence work on The Cabin was received from the Town of Vincent on 18 June 2008. On 25 August 2008 a meeting was held at The Cabin site with Mr Aitkin, Mr Di Giovanni and Mr Kinchen present.

28 After satisfying himself that $5,000 deposit had been paid in respect of both contracts Mr Di Giovanni commenced demolition on 1 September 2008. Internal demolition was completed by 21 September 2008.

29 Two days later on 23 September 2008 Mr Di Giovanni sent the following letter to Mr Aitkin:

Re change of conditions for 'The Cabin - Wine Bar'

Dear Brendon

It seems that the agreed format of this contracted building project has changed since our last meeting at the above office on 18 July 2008. At that meeting it was agreed that the budget was the only important detail to be adhered to as much as possible. That meant the timeline was no longer valid and an opening date was not the crucial point.

This seems to have changed since you were away therefore I now require an authority to proceed with A Cost Plus program. This requires no quoting and the works are carried out as I see fit, so as the project can move forward without delays.

This means that your budget will not be adhered to or be a valid point of interest.

All works will be carried out in a professional manner and charged.

This produces a faster build and will give you a more realistic timeframe for building. But this does not guarantee a Christmas opening time.

Please sign below along with your father - Peter Aitkin.

30 Mr Aitkin chose not to sign the letter. He confirmed that he required Mr Di Giovanni to obtain three quotes before proceeding with the cheapest quote for the works on site and referred to his limited budget and the need to ensure that costs were kept to a minimum. Despite this, Mr Di Giovanni still considered it to be almost impossible to obtain three quotes because of the demands that he perceived were on sub-contractors in Perth in late 2008. Mr Aitkin offered to obtain the quotes on Mr Di Giovanni's behalf however Mr Di Giovanni rejected this proposal. The majority of work on site ended up being performed by tradespeople known to Mr Di Giovanni. Three quotes were rarely obtained by Mr Di Giovanni nor were three quotes shown to Mr Aitken.

31 On 19 October 2008 Mr Di Giovanni sent an email to Mr Aitkin advising that a gas oven that had been salvaged from the original kitchen at The Cabin site had been taken from the demolition site without his permission. Mr Di Giovanni said:

I will not tolerate theft from my sites by anyone and this will be reported to the police on Monday morning.

32 Mr Aitkin replied that he had taken the gas oven for a photo shoot for Scoop magazine and apologised for his actions. Mr Di Giovanni however refused to accept the apology and refused to return to work stating that his refusal to do so was because he would not work on a site where 'theft' had occurred.

33 Although Mr Di Giovanni did not remove his equipment, he was off the site from Sunday 19 October 2008 until 17 November 2008. Nothing happened on the site in the intervening period of approximately one month however the relationship between Mr Aitkin and Mr Di Giovanni became more and more hostile.

34 On 22 October 2008 Mr Aitken requested an updated bill schedule however this was not provided by Mr Di Giovanni. By email dated 11 November 2008, Mr Aitken advised Mr Di Giovanni that he was prohibited from going on site and he demanded the return of $20,000 that had been paid to Mr Di Giovanni for work to be performed. However neither Mr Aitken nor Mr Di Giovanni terminated the contract.

35 Ultimately the parties apologised to each other and Mr Aitkin suggested the terms upon which Mr Di Giovanni could return to site. Mr Di Giovanni adopted some of the conditions that were proposed by Mr Aitken and wrote to Mr Aitkin on 17 November 2008 in the following terms:

This agreement will be between Brendon Aitkin (Darkhorse) and myself, Piero Di Giovanni (Timber Dimensions) with Steve Kinchen (Evoke) being informed fully on what has been agreed to. These conditions will form part of the cost plus contract which was signed at The Suite in Shenton Park on 1st May 2008. They will form part of the special conditions section 25 of said contract.

• All works to re-commence immediately. All quotations have been agreed and signed off. Proceed with current quotations seen and agreed upon.
• All orders to be placed for any outstanding items. (bricks, blackbutt etc)
• Brendon and Piero to manage a professional and honest working relationship throughout the entire project between Darkhorse and Timber Dimensions. Steve Kinchen from Evoke to be included in the working relationship.
• All communications to come through Brendon Aitkin and all authority required to purchase or sign off quotes also to come through Brendon Aitken.
• Where Brendon is not available Peter Aitkin will assume responsibility in his place.
• Larger items still outstanding will be quoted with all smaller works being completed without quoting to speed up works.
• Darkhorse is to have working capital in credit at all times as agreed to at initial contract signing. Delays in providing working capital could delay works to the above project.
• Piero Di Giovanni to be informed of financing issues for plant. As Timber Dimensions can issue full invoices including all information required by your bank in regards to makes and serial numbers.
• Brendon to restore relationship between Landlord - Anthea Kannis-Pitsikas and Piero Di Giovanni which was affected during past issues. This is critical otherwise ill feeling could slow or make difficult issues which require co-operation from Lavender Blue staff, ie electrical board repair/replacement.
• Weekly site meeting to be organised between Darkhorse, Piero and Evoke. Proposed every Monday morning at 10.30 am onsite (if time suits all parties)
• All site visits to be co-ordinated via builder.
• No items to be removed from site without prior consent of Builder.
• Any issues that may arise during the construction to be dealt with at weekly meeting, or if urgent via clear communication between all parties.
• Due to upcoming Christmas and New Year breaks, construction of The Cabin will be completed as soon as possible. We all understand the financial burden of this project. But some things are out of the control of the builder. Contractors normally do not work over these periods.
• Shenton Park - The Suite to be determined at or near completion of 'The Cabin'. If all parties are happy with the 'The Cabin', then Timber Dimensions will build Shenton Park.
• Timber Dimensions to remain as Builder subject to the cost plus contracts and above points being agreed to.

36 By signing the letter on 17 November 2008 Mr Aitken agreed to incorporate these conditions into the HIA cost plus contract for The Cabin.

37 Although Mr Di Giovanni returned to site the remaining demolition and construction did not proceed smoothly. The landlady for The Cabin ran a retail gift shop on the ground floor underneath The Cabin site. Mr Di Giovanni fell out with her over noise, access to premises and interference to trade. Their relationship broke down to such an extent that the only way the landlady would communicate with Mr Di Giovanni was by passing information through to her real estate agent who would then pass it on to Mr Aitken who would in turn pass it on to Mr Di Giovanni. Any message to the landlady would be received by her following the same process but in reverse.

38 Evoke changed the drawings in respect of the kitchen layout, the placement and opening of doors and windows, the location of the staff amenities and the details of lighting. Variations of plans were provided directly by Evoke to Mr Di Giovanni on various dates from December 2008 through until approximately April 2009.

Variations, unforeseen work and increased costs

39 Mr Aitken was aware of the following additional sums for variations, unforeseen work and increased costs and approved the work and the costings after signing the HIA cost plus contract but before handover:

1. Changes to the size, style and number of windows

After obtaining a quotation on 8 October 2008, changes were made to the planning drawings showing structural supports required to take aluminium windows and doors.

A quotation was received from PBR Plumbing on 9 February 2009 for labour only in the amount of $29,000 and a quotation was received from Beri Distributors for fixtures on 4 February 2009 in the sum of $9,538.40. These prices were higher than had been estimated. The prices were approved by email dated 4 February 2009.

1. Raising the platform of kitchen, bar and female w/c

A grease trap was required by the Water Corporation and this meant that the floor had to be raised. Changes were made to the construction drawings and approval was given orally and by email in February 2009.

The prices originally quoted were consistent with the prices estimated in the relevant Rawson's Construction Guide. The quotation exceeded the estimate due to unforeseen price rises. Receipt of a quotation of $35,500 plus GST from Westline Ceilings on 28 January 2009 was communicated to Mr Aitkin who did not respond. Given that Mr Aitken had been notified Mr Di Giovanni proceeded because the changes to the ceiling had been prompted by the design team.

A cost of $65 per sqm was estimated based in the Rawson's Construction Guide. A quotation of $100 per sqm however was received on 8 October 2008 by Muravito. This quotation was approved by Mr Aitkin who requested that the balcony be polished. A waterproof seal was approved by Mr Aitken in 2009.

The tiles originally chosen were not ordered in 2008. These tiles were then no longer available in 2009. It is unclear from the evidence whether the Evoke team or Mr Di Giovanni had the responsibility of ordering the tiles. The area to be tiled was increased in the Evoke revised plan of December 2008 and January 2009 (exhibit 43). The greater area to be tiled increased the cost of purchasing the tiles and of laying them. By email dated 24 March 2009, Mr Aitkin approved the rate of $60 per sqm for normal wall tiles, $100 per sqm for mosaic and floor tiles and $25 per sqm for screeding.

The original planning drawings did not show that the carpark was retained by limestone blocks. This was altered in subsequent plans. The addition of the grease trap also required a variation to the carpark plans and an increased cost in respect of earthworks. Mr Aitkin does not specifically recall being notified of increased costs however he was aware of the need for a grease trap and continued to instruct Evoke to assist with the plans both internally and externally and to liaise with Mr Di Giovanni on his behalf.

Following demolition it was discovered that the ground was not level and additional asphalting was required to blend two areas. Costs increased as a result of unforeseeable price rises. $19.60 per sqm plus GST was approved by Mr Aitkin on 14 April 2009.

Mr Aitkin approved bricks at a cost of around 80 cents per brick plus delivery on 5 November 2008. A variation of plans for the fireplace that required brickwork increased in size and some walls were found to be structurally unsound, requiring replacement of bricks. The cost approved by Mr Aitken was greater than that originally quoted.

Mr Aitkin chose to use oak flooring which was more expensive than flooring quoted in initial estimates. Mr Aitkin confirmed his choice of flooring by email dated 6 November 2008.

Mr Aitkin requested that a second unit be installed in order to cool the kitchen. A quote of $13,570 was provided to Mr Aitkin by email dated 24 October 2008. It was envisaged that the cost of air-conditioning would be covered by the equipment loan rather than the construction loan although it was disputed that Mr Di Giovanni's 20% for supervision applied to the air-conditioning component. Mr Aitken now concedes to 20% applies to the air conditioning component.

The disabled lift was to be funded by the equipment loan plus Mr Di Giovanni's 20% builder's fee. The cost increased as a result of unforeseeable price rises by the contractors. The quotation did not include infilling that was performed by Mr Di Giovanni with Mr Kinchen's knowledge and approval.

Mr Aitkin requested a front door of a higher quality and price than that originally quoted.

The landlady required insurance to be taken out to cover any damage to her retail business. This was approved by Mr Aitkin.

The existing eaves were in a poor state and were made of asbestos. Mr Peter Aitkin approved the removal of the asbestos and repairs on behalf of Mr Aitkin on or around 15 September 2008.

Mr Aitkin arranged for the refrigeration contract with Arcus, internal painting and the provision of some fittings. The 20% builder's fee applies

Finishes that differed from those on the original plans were chosen once windows and fascias had been installed in order to save costs however the plastering required for the variation differed from that shown in the earlier planning drawings and the construction drawings. Additional plastering was required to enable the variation to proceed.

The front steps had to be replaced. The steps were not part of the planning drawings and, as a result of demolition, temporary steps had to be hired. The actions in relation to the front steps were approved by Mr Aitkin.

The concrete floor in the back room was not up to the required standard for a modern building and accordingly had to be replaced. Mr Aitken concedes the floor had to be installed in order for the small bar to comply with its licensing requirements.

Fire sprinklers required by Fire Emergency Service Australia had not been included on the planning drawings prepared by Evoke Design.

Consistent with Evoke Design drawing A1004 (exhibit 7.2), the northern and western walls of store 1 were unstable and had to be rebuilt.

Flashing on the roof was in a poor condition and had to be replaced.

Evoke Design plans (exhibit 7.2) show a bench in the main area of The Cabin. This was removed from the final plans (exhibit 43) requiring brackets that had been installed to be removed.

Due to a breakdown in communication between Mr Aitken and Mr Di Giovanni it was not until 12 March 2009 that plumbing was commenced in relation to the water feeds required for the coffee machine.

Numerous changes were made to the design plans (exhibit 7.2) in relation to plumbing. These variations added to the cost of construction and did not reflect the plumbing drawn in the initial plans (exhibit 3).

The Town of Vincent required spoon drains to be installed to stop stormwater run-off down the side lane. This was required prior to council inspection on 8 May 2009.

The vinyl flooring was drawn in the June 2008 plans (exhibit 7.2). This was a variation from the original plan that was not re-costed. A quote from Malco Floor Coverings dated 18 February 2009 for $5,637.50 was provided to Mr Aitken by email from Mr Di Giovanni on 17 March 2009 and was approved by email dated 24 March 2009 (exhibit 29).

Mr Aitken requested a stainless steel bench top. A quotation and the amount of $930 plus GST was approved on Mr Aitken's behalf by email to Mr Di Giovanni dated 24 March 2009 (exhibit 29).

Planning drawings changed from June 2008 (exhibit 7.2) until January 2009 (exhibit 43). The original quotation was approved but because the plans had changed the cost of installation was greater. The additional costing was based on the updated plans provided to Mr Di Giovanni directly by Evoke Design.

Although the fit-out was not part of the construction design, Mr Aitken requested that two carpenters assist with the finishings to the bar and requested that Mr Di Giovanni perform fit-out work such as shelving, mirrors and taps for the sink.

As a result of an inspection on 8 May 2009 the Town of Vincent required the addition of carpark wheel stops. This was approved by Mr Peter Aitken on behalf of Mr Brendan Aitken (exhibit 57).

The Town of Vincent required a handrail to be erected down the middle of the external concrete stairs. This was also approved by Mr Peter Aitken on 11 May 2009 (exhibit 57).

Bench seating was shown in the construction drawings (exhibit 7.2) of June 2008, however it was not in the original planning drawings (exhibit 3). Mr Di Giovanni advised Mr Aitken of a quote of $1,200 plus GST from Ideal Kitchens on 24 March 2009. This was approved by Mr Aitken by email on 24 March 2009 (exhibit 29).

By email dated 25 March 2009 Mr Aitken requested that Mr Di Giovanni install connections for the telephone and EFTPOS machine (exhibits 58.1 and 58.2).

Due to miscommunication the electrician installed a set-up that was not able to take the automated CBUS system. Mr Aitken contracted with Agenda Lighting Consultants to provide a design that required the installation of the CBUS (exhibit 22.2).

Approval was given by Mr Aitken by email 29 April 2009 (exhibit 32).

Once exterior walls were removed in the demolition process it was discovered that the concrete slab was not level and required filling.

Mr Aitken approved sign works. This request was cancelled, however the work had already been commenced so that payment was required (exhibit 59).

Evoke together with a design sub-contractor drew up numerous changes to the original plans (exhibit 3) and the construction drawings (exhibit 7.2).

40 Mr Aitken continued to raise concerns with Mr Di Giovanni and with Evoke about the cost of construction and repeatedly requested that the parties do what they could to reduce the costs.

41 By email dated 8 December 2008 he advised Mr Di Giovanni that the delay in building was costing him in excess of $25,000 per month (exhibit 84). He raised concerns after the Christmas break period and, by email dated 13 January 2009, requested a schedule of works for the next phase (exhibit 86) and requested updated estimates for remaining items of partitioning, cabinet making, carpentry and the floor. In an email dated 21 January 2009 (exhibit 87) he stated 'It is also vitally important that we have adequate funds to complete the work ...'

42 By emails dated 22 January 2009 (exhibit 88) and 29 January 2009 (exhibit 89) Mr Aitken said it was impossible for him to budget without estimations and said 'Please please can you arrange to get this information to me as soon as possible'.

43 Mr Aitken attempted to obtain bookings for functions to be held at The Cabin in 2009 and advised Mr Di Giovanni of possible bookings on 2 February 2009 (exhibit 90) and 15 April 2009 (exhibit 96), however Mr Di Giovanni said it was too early to set up bookings and did not provide a completion date.

44 By email dated 12 February 2009 Mr Aitken said he needed to know if there were sufficient funds to finish the job (exhibit 92).

45 Mr Di Giovanni did not respond to any requests for details of future costings nor did he set a time for completion, however on 16 February 2009 he provided a document that he described as a rough estimate of costings being $387,547.60. This estimate of costings set out details of invoices that had already been paid by Mr Di Giovanni, the last invoice being 13 February 2009. It did not set out any details of future costings nor the anticipated sum required to cover future invoices for work performed but not yet received.

46 No projected costs nor information about future costing was provided to Mr Aitken.

47 Mr Aitken paid $193,415 for work performed to 5 March 2009. He does not dispute that Mr Di Giovanni was working on site in March and April 2009. He acknowledges that Mr Di Giovanni was very busy during this period and that contractors were brought in.

48 On 17 April 2009 Mr Aitken asked Mr Di Giovanni why the bill had gone over the original estimates. He wrote 'maybe you have that information ... I do require all this information ...' (exhibit 104). The information was required for his personal accounting and because the National Australia Bank were unhappy about forwarding money when they had not received confirmation of payment nor details of progress claims and future projections.

49 Mr Di Giovanni continued demanding that further funds he paid to ensure that sub-contactors and supplier invoices could be paid. Both parties were very stressed and the relationship between them was tense as a result of their respective financial positions and time constraints.

50 Finally, Mr Aitken accepted a booking for a function that required The Cabin to be operating as a bar by the end of May 2009. Financially he could not afford to cancel the function and he needed to provide work for his staff. Mr Aitken considered that if the small bar at The Cabin did not start business in May 2009 it would fail prior to opening.

51 Mr Di Giovanni did not want to hand over the premises to Mr Aitken because practical completion had not been reached and he feared, given the relationship between the two, that once Mr Aitken was able to run the bar Mr Di Giovanni would not be paid for outstanding invoices nor for ongoing work. Mr Di Giovanni wrote a letter dated 11 May 2009 addressed to Darkhorse Developments Pty Ltd, the company set up to run the small bars. The letter was signed by Mr Brendan Aitken and Mr Peter Aitken on behalf of Darkhorse Developments Pty Ltd (exhibit 61).

Before I can give early handover of 'The Cabin' to Darkhorse Developments Pty Ltd, that is before all invoices are paid for in full. I require this renewal of our contract agreement signed.

• That all invoices relating to the construction of 'The Cabin' be paid in full as per out Cost Plus agreement
• Timber Dimensions retains full ownership of all material and services relating to the above property until paid for in full
• Timber Dimensions has full access to the above property until all invoices and debts are paid for
• In the event of any legal action taken to recover unpaid invoices, that all costs of said legal shall be charged to and paid for by Darkhorse Developments Pty Ltd

This early handover is designed to be helpful to Darkhorse Developments Pty Ltd to raise revenue for payment of present, past and future works. As well as being for income to Darkhorse Developments.

No future works shall commence while there are unpaid invoices retaining to 'The Cabin' to Timber Dimensions.

This is confirming our previous agreement on The Cost Plus contracts signed on 1st May 2008.

53 Following handover Mr Aitken refused to allow Mr Di Giovanni to return to site. Mr Di Giovanni requested further funding to cover outstanding and future costs both verbally and by emails dated 26 May 2009 (exhibit 60), 2 June 2009 (exhibit 62) and 9 June 2009 (exhibit 65.1), however hostility between the parties had reached a stage where they could no longer communicate with each other. Mr Di Giovanni claimed that Mr Aitken had been rude to contractors and demanded that Mr Aitken have no contact with contractors onsite until all works were finished. On 29 June 2009 Mr Di Giovanni said 'If (a named) contractor cannot calculate the sum of work ... the higher figure will be used to create an invoice which you will be paying for in full'.

54 By the end of 2009 the relationship had completely broken down.

The issues - was the construction of The Cabin delayed?

55 Mr Di Giovanni commenced demolition work on 1 September 2008, soon after receiving Town of Vincent approval and after Mr Aitken had complied with the conditions set out in the HIA cost plus contract. The demolition proceeded at a reasonable pace until the shutdown for the five week period in respect of Mr Di Giovanni's response to the removal of the oven which was salvage property. Although Mr Di Giovanni's response was out of proportion to the issue, both parties ultimately resumed communications and Mr Di Giovanni returned to site in mid-November. Following early notice the site closed down for Christmas for a two week period which, in the circumstances, was a reasonable break.

56 From January to May 2009 the construction continued at a reasonable pace in light of the many variations to the original plans.

57 The evidence of Mr Brady, engineer of Tracey Brunstrom and Hammond, Project and Strategic Management Services (exhibit 81) that on the drawings (exhibit 3) the build should have taken 15.4 weeks to complete and on the plans (exhibit 7.2) a period of 15.8 weeks was not disputed, however Mr Brady did not take into account the period of a shutdown for seven weeks and the time taken in the variations to the plans.

58 Although The Cabin contract took approximately one year to complete, the time taken was, in the circumstances, not unreasonable.

Was all of the work performed by Mr Di Giovanni agreed to by Mr Aitken?

59 It was orally agreed that three quotations should be obtained by Mr Di Giovanni before the sub-contractor who presented the lowest quotation was engaged.

60 Although Mr Di Giovanni attempted to vary the contract by removing the requirement for three quotations, Mr Aitken did not agree to the variation. However, almost every time a quotation was received it was a single quotation and Mr Aitken approved it. On a few occasions Mr Di Giovanni proceeded to carry out works from a single quotation without consulting Mr Aitken and without obtaining his approval however, Mr Aitken did not challenge Mr Di Giovanni on these occasions. The plaintiff submits that because Mr Aitken had waived the right to have three quotations on almost all occasions, alternatively he is estopped from demanding these three quotations should have been received in respect of sub-contracting work because Mr Di Giovanni proceeded to his financial detriment.

Legal principles - is Mr Aitken estopped from claiming three quotations should have been obtained?

61 Dixon J set out the rationale for the principle of estoppel in Grundt v Great Boulder Goldmines Limited [1937] HCA 58; (1937) 59 CLR 641, 674:

The principle upon which estoppel is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. This is, of course, a very general statement. But it is the basis of the rules governing estoppel.

....That justice of an estoppel is not established by the fact in itself that a state of affairs has been assumed as the basis of action or inaction and that a departure from the assumption would turn the action or inaction into a detrimental change of position. It depends also on the manner in which the assumption has been occasioned or induced. Before anyone can be estopped he must have played such a part in the adoption of the assumption that would be unfair or unjust if he were left free to ignore it.

62 Mr Aitken stressed to Mr Di Giovanni that the construction must proceed at a reasonable pace and, when asked for approval, approved single quotations.

63 Although on occasion a single quotation was not specifically approved I find Mr Aitken is estopped from claiming that he did not approve the quotation. It would be unfair or unjust for Mr Di Giovanni not to be remunerated for the sum he expended all work performed by subcontractors.

64 Mr Aitken asserts that he was unaware of the content of Evoke's plans because they were provided directly to Mr Di Giovanni and that he therefore did not approve the variations that were depicted in the plans. Evoke were engaged by Mr Di Giovanni to prepare, design and draw plans and to liaise with Mr Di Giovanni in the building process. Mr Aitken instructed Evoke as his agent to liaise with Mr Di Giovanni. On the evidence, the agency relationship between Mr Aitken and Evoke continued for the whole of The Cabin contract period.

65 I find that Mr Aitken approved the variations drawn by Evoke on his behalf.

66 Mr Aitken claims that even if he is required to pay part of the sum claimed by Mr Di Giovanni that sum should not include Mr Di Giovanni's labouring costs at $60 per hour plus 20% GST because it was never agreed between the parties that Mr Di Giovanni would charge for his labour and, if he was entitled to charge for his labour, there was no agreement as to a particular charge out rate.

67 Invoice A120 dated 18 March 2009 has been paid by Mr Aitken and was the subject of neither a dispute nor an email complaint. The invoice includes a claim by Mr Di Giovanni for labour at $60 per hour plus 20% plus GST. Given that this sum was approved without challenge, there is no reason why Mr Di Giovanni would have considered that the provision of labour and the sum charged for it would be disputed on future invoices so long as the work had been performed.

68 Mr Aitken does not challenge the fact that Mr Di Giovanni performed the work nor the quality of the work performed. I find that Mr Aitken is now estopped from claiming that Mr Di Giovanni did not seek approval for his labouring work at the charge out rate of $60 plus 20% plus GST and that these outstanding sums are due and owing.

Did Mr Di Giovanni misrepresent the costings in relation to the cost of The Cabin contract

69 The initial costing for The Cabin contract was provided by Mr Kinchen on behalf of Evoke. Mr Di Giovanni's first estimate of costs was $385,760 exclusive of GST but inclusive of 20% builders mark-up and insurance (exhibit 3). Following receipt of this quotation and after signing the cost plus contract, Mr Aitken approved the costs of variations and of unexpected work and increased costs [39].

70 Mr Di Giovanni provided estimate costings on 18 June 2008 and 24 November 2008, however these costings related to sums that had already been expended or were likely to be expended and did not set out any future costings. Accordingly, a costing including the initial sum claimed of approximately $258,000 exclusive of margin and GST was never provided to Mr Aitken.

71 Mr Aitken pleads that he obtained finance in reliance on the representation of a costing of $343,828 and entered the contract because Mr Di Giovanni represented The Cabin contract would cost approximately this sum. He asserts that Mr Di Giovanni did not have reasonable grounds to make the representation in relation to the cost of construction and that Mr Di Giovanni's conduct in asserting the work would cost approximately $345,827 in total was misleading and deceptive. Mr Aitken claims that he has suffered loss and damage as a result of the deception.

Legal principles - misleading and deceptive conduct

72 In claiming that Mr Di Giovanni did not have reasonable grounds to make the representation in respect of a quotation for $343, 828 Mr Aitken relies on a breach of s 10 Fair Trading Act 1987. Section 10 provides that a person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

73 A misrepresentation is a representation that induces or is capable of inducing error: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191; Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572; (2000) 104 FCR 564 [63].

74 Whether a representation induces or is capable of inducing error is to be determined objectively in the context of the evidence of the alleged representation and the relevant surrounding facts and circumstances: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [102]. A representation can amount to a misrepresentation even though the person making it did not intend to mislead the representee: Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 180; [1984] 2 FCR 82; (1984) 55 ALR 25 [16] - [17]; Johnson Tiles Pty Ltd Esso Australia Ltd [66].

75 If a misrepresentation induces a person to enter a contract they may elect to rescind the contract. For the misrepresentation to give rise to a right of rescission, the representee must have relied on the misrepresentation. The misrepresentation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract: Gould v Vaggelas [1985] HCA 85; (1984) 157 CLR 215, 236.

76 If a party rescinds a contracts and the court subsequently declares the contract to be void from the beginning, the court can make such indemnification orders as are necessary to achieve substantial restitution.

Did Mr Di Giovanni engage in misleading and deceptive conduct?

77 Prior to signing the HIA cost plus contract, Mr Di Giovanni advised Mr Aitken that a renovation may face costs that could not be anticipated and that variations would be required. Mr Aitken did not challenge that this could occur more easily with a cost plus contract. The sum of $343,828 was never incorporated into the HIA cost plus contract nor was it a condition of the contract.

78 Mr Aitken did not call any evidence in relation to the cost of construction that he alleges would be consistent to the cost of the restoration between the parties of the status quo. There is no evidence that the sum claimed by Mr Di Giovanni was not a sum that was reasonable value for the work that was performed.

79 Mr Aitken has not proven that Mr Di Giovanni engaged in conduct that was likely to mislead or be deceptive.

Has Mr Di Giovanni proven that Mr Aitken is required to pay the outstanding costs for the work performed?

80 Mr Di Giovanni carried out work consistent with the HIA cost plus contract subject to the variations approved by Mr Aitken. Mr Aitken did not issue any notices of dispute in respect of the invoices pleaded. Neither party referred the matter to arbitration pursuant to cl 18 nor did either party seek to terminate the contract pursuant to cl 16.

81 Accounts for the following sums were sent by Mr Di Giovanni to Mr Aitken:

82 I have had the opportunity to compare the invoices with the receipts in respect of materials purchased and payments to sub-contractors.

83 Having carried out this process, I am satisfied that most of the invoices sent by Mr Di Giovanni to Mr Aitken are for work that was performed. I note however that invoice 127 dated 22 July 2009 includes a cost of $5,000 for the oven which was the subject of the dispute between the parties in 2008. This sum should not be claimed as the value has not been established. An item recorded on 3 July 2009 Westec Electrical invoice 3049 is noted at $26,200. This is an error. The correct sum is $20,600. The 20% plus GST figure for the Westec Electrical invoice is $27,192.

84 The sum of $102,850.75 with a deduction of $5,000 being $97,850.75 and $108,808.30 with a deduction of $7,392 being $101,416.30 reflect the appropriate sums to be paid by Mr Aitken once the individual invoices have been scrutinised. The total sum for invoice 127 is $199,267.05.

85 I find the total outstanding sum to be paid by Mr Aitken to Mr Di Giovanni is $267,571.50.

Is Mr Aitken required to pay interest on the outstanding sum at 19.94% per annum consistent with the HIA cost plus contract?

86 Mr Di Giovanni claims interest of $19.94% per annum being the agreed rate of interest pursuant to the HIA cost plus Cabin contract. Mr Aitken does not dispute that the interest rate applies to the contract, but claims that Mr Di Giovanni failed to account to him in respect of the costs of The Cabin contract because he failed to provide details of the sums expended thereby breaching an implied term of the contract.

87 In Hudson, Alfred A, Hudsons Building and Engineering Contracts (Sweet and Maxwell, 11th ed, 1995) vol 1, 3-045 the author discusses the nature of a cost plus contract:

Costs-based contracts involve reimbursement of the contractor's total costs, plus a stipulated fee or profit, often expressed as a percentage. These contracts will normally be used only where the extent and nature of the work is not known with sufficient precision at the time of contracting to enable prices to be obtained, since they have a number of unavoidable disadvantages which well-advised owners would not usually accept. The principal objection to such contracts is the greatly reduced incentive to economy or speed of construction, since no really effective sanctions to enforce these can be provided, although no doubt terms will be implied in almost all such contracts preventing payment for wasteful or uneconomic use of labour, materials or plant and for due diligence in carrying out the work. Other disadvantages from an owner's point of view include the absence of any useful comparison of tenders in order to select a contractor, the budgetary uncertainties, and the need for far more expensive day to day professional administration and supervision of the contracts simply to check satisfactorily the expenditure on labour, materials or plant qualifying for payment, which would be unnecessary in a priced contract. Indeed the accurate ascertainment of a contractor's costs is an extremely difficult task for an outside person, however well qualified, so that such contracts can be easily abused.

88 Although the HIA contract allowed for invoices to be forwarded by the builder at a minimum of seven days and for a minimum sum of $100 the invoices prepared by Mr Di Giovanni were very large, the largest involving a sum of over $200,000, and were supplied months after the work had been performed. Mr Aitken did not challenge the fact that work had been performed, but he did request a breakdown of the invoices so that he could ensure that they were accurate and he made it clear he needed to clarify precisely what work the invoice related to. Mr Aitken made requests for the individual invoices repeatedly. Given the limited information, Mr Aitken did not challenge that the work had been performed nor has he ever challenged the quality of the work performed.

89 Mr Aitken agreed to pay for the photocopying of the invoices, however due to the breakdown of the relationship between the parties no payment was made and the invoices were not supplied.

90 Mr Di Giovanni was well aware of Mr Aitken's repeated requests for the individual invoices however he did not provide copies of the individual invoices to enable Mr Aitken to check them against the builders invoices until about 30 January 2013.

Legal principles - was the provision of invoices an implied condition of the contract

91 The contract must be interpreted from the words used in the agreement as having the meaning and effect that a reasonable person in the position of the contracting parties would have understood their meaning and effect to be: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11]; Toll (FGCT) Pty Ltd v Alfapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40].

92 A term must not be implied into a contract unless the term is:

1. reasonable and equitable;
2. necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
3. so obvious that it 'goes without saying';
4. capable of clear expression; and
5. must not contradict any express term of the contract.

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20, 26.

93 By the time Mr Aitken received an invoice from Mr Di Giovanni, a period of many months (on one occasion nearly half a year) had passed. The single invoices contained multiple pages of entries. It is therefore not clear what is being claimed nor when the work was performed. It was open to Mr Di Giovanni to either show Mr Aitken the individual invoices and receipts that were summarised on the builders' invoice or to have copies of each invoice provided to him and to charge a nominal disbursement for the provision of the paperwork. Mr Di Giovanni refused to do either.

94 By refusing to provide any additional detail of the costing over and above the name of the supplier, the amount and the date, Mr Di Giovanni denied Mr Aitken the opportunity of checking the sums and clarifying the claims. Mr Aitken was left in a position where he did not know what he was being asked to pay for, nor whether Mr Di Giovanni's summary was accurate.

95 The dangers of failing to provide the individual invoices are illustrated by the innocent mathematical and typographical error in invoice 127 in relation to the item recorded as 3 July 2009 Westec Electrical invoice. This is an example of an occasion when, had Mr Aitken been given the opportunity to look at the original invoice, he would have seen that the sum was recorded by Mr Di Giovanni as $26,200 in error and that the correct sum was $20,600. He would have then been able to pay the correct sum.

96 I find that access to view the original invoices and accounts was necessary to give business efficacy to the contract and that it is so obvious that it goes without saying that the party who is required to pay is entitled to be advised of what it is that he is being requested to pay for.

97 I find Mr Di Giovanni was in breach of an implied condition of the contract in that he failed to provide details of the sums that comprised the builders invoices. However, once the invoices were provided and Mr Aitken was given an opportunity to determine the accuracy of the builder's invoices, Mr Aitken was required to pay the accurate outstanding sum.

98 Given the breach of the implied term, Mr Aitken is not required to pay interest at the rate of 19.94% per annum on the sum of $267,571.50 until the date of compliance.

99 I find that interest of 19.94% per annum applies to the sum of $267,571.50 from 30 January 2013 until the date of judgment.

Has Mr Di Giovanni proven the damages arising from the debt and the impact of the debt on his business?

100 Where two parties have made a contract, which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract, should be:

... such as may fairly and reasonably be considered either arising naturally that is according to the usual course of things from such breach of contract itself or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as a probable result of the breach of it.

Hadley v Blaxendale [1854] EngR 296; (1954) 9 Exch 341, 354; 156 ER 145, 151.

101 The crucial question is whether on the information available to Mr Aitken when the contract was made, he should, or a reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation: Koufos v Czarnikow Ltd (The Herron II); (1969) 1 AC 350.

102 The HIA Cabin contract entitled Mr Di Giovanni to charge a fee of 20% in respect of all goods purchased and services provided in the construction of The Cabin. The contract was a commercial dealing between a builder and his client. The cut and thrust of business dealings mean the parties to commercial contracts may have to carry debt as a result of that contract. I am not satisfied that the impact of being in debt has been proven by Mr Di Giovanni as anything other than a usual business cost.

103 The loss to Mr Di Giovanni is too remote and was never contemplated by the parties at the time that they made the contract as being a probable result of a breach of that contract.

Is Mr Aitken required to pay Mr Di Giovanni's legal costs?

104 Mr Aitken, together with his father Mr Peter Aitken signed the letter dated 11 May 2009 in order to enable Dark Horse Developments to commence business as a small bar at The Cabin from 11 May 2009, however to the extent that the agreement related to the outstanding costs of The Cabin construction, Mr Aitken signed the letter on his own behalf (Di Giovanni v Dark Horse Developments Pty Ltd [No 2]).

105 Mr Di Giovanni required the letter dated 11 May 2009 to be signed because of his concern that once Dark Horse Developments commenced operating The Cabin as a small bar, the invoices in respect of construction would not be paid. Mr Di Giovanni's concerns were well-founded because after Mr Aitken took possession of The Cabin and Dark Horse Developments had started operating the small bar no further payments were made.

106 Although the letter states 'In the event of any legal action to recover unpaid invoices, (that) all costs of said legal shall be charged to and paid for by Dark Horse Developments Pty Ltd' the outstanding sum of $267,571.50, the subject of these proceedings, relates to the cost of construction and not to the cost of running the small bar. It was a condition of taking early possession that Mr Di Giovanni's legal costs in respect of recovering the outstanding sums due and owing on The Cabin contract would be met. By agreeing to this condition Mr Aitken received the benefit of early handover and Dark Horse Developments was able to run the small bar as a business.

107 Mr Di Giovanni is entitled to his legal costs in respect of this claim. He has provided the following details in respect of the costs:

108 The costs are not sufficiently particularised for me to make a final order in relation to the sum Mr Aitken must pay. I order that Mr Aitken pay Mr Di Giovanni's costs consistent with the agreement of 11 May 2009 to be taxed if not agreed.

109 After signing the HIA cost plus contract for the construction of The Suite on 1 May 2008, both parties decided that the works would not proceed until The Cabin had been completed or was near completion.

110 By letter dated 11 May 2009, signed by both parties, the agreement reached was that the contract in relation to The Suite was to be determined at or near completion of The Cabin. 'If all parties are happy with The Cabin then Timber Dimensions will build Shenton Park.'

111 Given the hostility that arose between the two parties after 11 May 2009 that descended into threats, abuse and protracted legal proceedings, the parties clearly were not happy with The Cabin. Mr Aitken wrote to Mr Di Giovanni by letter dated 13 October 2009 requesting that work proceed but confirmed on 17 November 2009 that it should not proceed.

112 I find Mr Di Giovanni had no intention of proceeding with The Suite contract as a result of the letter dated 13 October 2009. He had not received payment for an outstanding sum of over $250,000 and was unable to communicate civilly with Mr Aitken. The relationship had broken down to such an extent that the contract could not proceed.

113 I reject Mr Di Giovanni's claim. The condition of 'happiness' was not met. The Suite contract is void.

114 Mr Di Giovanni claims that he is entitled to a 20% fee for projected costs for construction. Given that a costing was never annexed to The Suite HIA cost plus contract there was no agreed sum projected in respect of the proposed renovation work.

115 I also note that a condition of the contract adopted on 11 May 2009 was at no further works shall commence while there are unpaid invoices retaining (sic) to 'The Cabin'.

116 The only work performed by Mr Di Giovanni on The Suite between 1 May 2008 and 11 May 2009 was the installation of an electrical sub-board at a cost of $972. Payment was requested by Mr Di Giovanni on 9 March 2010. Interest on this sum is claimed at 19.94% from that date if payment was not received by that date. Mr Aitken accepts that the electrical sub-board was installed and does not dispute the cost of $972. I order that interest in the sum of 19.94% per annum on $972 payable from 9 March 2010 until the date of judgment applies.

1. The defendant pay the plaintiff the sum of $267,571.50 plus interest on that sum at a rate of 19.94% per annum from 30 January 2013 until 25 July 2013 being $25,716.50.
2. The defendant pay the plaintiff the sum of $972 together with interest at 19.94% per annum from 9 March 2010 until 25 July 2013 being $655.
3. The defendant pay the plaintiff's legal costs to be taxed if not agreed.
4. The defendant's counterclaim be dismissed.
5. The plaintiff's claim otherwise be dismissed.