Brett Shearer and Bronwyn Shearer v Urban Constructions

Restitution claims

1. I will now deal with the owners' restitution claims.
2. The owners submit that they paid the sum of $235,000.00 in the mistaken belief that they were obliged to do so, when they were not obliged to do so because of sections 92(2) and 94(1) of the Act.
3. The owners rely upon the decision of the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 in support of the submission. The right asserted by the owners is stated not to depend upon the Act
4. In Field v Dettman [2013] NSWCA 147 Preston CJ of LEC stated in relation to the appellants restitution claim : 'Mr and Mrs Field submitted that a payer, on establishing that monies were paid under a mistake of fact and/or law had a prima facie entitlement to recover the monies paid. It was accepted that, ordinarily, a person who receives such a payment (the payee) may raise any matter or circumstance which shows that retention of the payment would not be unjust, such as that the payment was made for good consideration, or, in reliance upon the payment, the payee, in good faith, has changed its position to its detriment (David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; 175 CLR 353 at 379-380, 385 and Hills Industries Ltd v Australian Financial Services and Leasing Pty Ltd [2012] NSWCA 380; (2012) 295 ALR 147 at [70]- [76], [182]-[183]). Circumstances sufficient to displace the prima facie entitlement are sometimes termed "defences": Hills Industries Ltd v Australian Financial Services and Leasing Pty Ltd at [71].'
5. In these proceedings the owners have not cited any evidence to support the submission at paragraph 20 of their submissions on the their Cross Claim that they made payments to the builder under a mistake of fact and/or law regarding breaches of the provisions of the Act concerning Home Owners Warranty Insurance ('HOWI') as required under section 92(1) of the Act, or the consequences of those breaches. As a result I find that in the absence of such evidence, their claim for restitution fails.
6. Even if the owners do have a right to claim restitution because of payments made in the mistaken belief referred to, in my view such a right is subject to the builder's right to seek payment for the work carried out on a quantum meruit basis on an application made under section 94(1A) of the Act. The builder has made such an application in HB 10/44316 and has obtained an order that it is just and equitable under that section that it recover for the work it has carried out on a quantum meruit basis. This is, in my view, a circumstance sufficient to displace the prima facie entitlement referred to by Preston CJ in Field v Dettman.
7. It may be that owners can recover in restitution for money paid under a mistaken belief in circumstances where a builder is not successful in obtaining a 'just and equitable' order under section 94(1A) of the Act and when the owners have produced evidence to satisfy a Court or a Tribunal that they made payments under a mistake of fact and/or law. However that is not something that I have to decide in these proceedings. That issue awaits other proceedings and other factual situations.
8. For the reasons stated above, I reject the owners' submission that an order should be made in their favour allowing them to recover $235,000.00 in restitution for money paid under an alleged mistake.
9. The owners make an alternative submission that they are entitled to the amount of $65,348.00 on the basis that the amount paid by them, $235,000.00 exceeds the contract price alleged to be $169,652.00.
10. In my view the owners restitution argument alternative submission fails on the same basis as stated above. I reject the owners' submission that an order should be made in their favour allowing them to recover $65,348.00 in restitution for money paid under a mistake.

Fixed Price Contract

1. Many of the owners arguments depend upon a finding being made in their favour that the builder offered to carry out and complete a certain scope of work on a fixed price basis, such fixed price being $169,652.00.
2. It is appropriate that I determine that claim for the purposes of the proceedings. This section of my reasons is applicable in these proceedings and where appropriate in HB 10/44316.
3. At paragraph 7 of their Amended Point of Cross Claim the owners allege that they entered into a contract with the builder whereby the builder agreed to carry out certain work in consideration of the payment of a fixed price of $169,652.00.
4. The documents stated to constitute the fixed price contract are particularised in paragraph 7 of the Amended Point of Cross Claim. I find that none of the matters particularised are capable of establishing that the parties intended to enter into a fixed price contract, with the exception of the builder's document dated 3 November 2013.
5. In order to decide the nature of the builder's document dated 3 November 2009 entitled 'Quotation', it is necessary in my view to understand its background. The resolution of this issue depends upon whose version of events is accepted.
6. At paragraph 48 of her affidavit Mrs Shearer states that she and her husband had a conversation with Mr Cosco on 27 October 2009 at the residence. She states that there were others present including the architect and an electrician. The architect's evidence confirms that a meeting was held at the residence on that day. In fact minutes of the meeting were produced.
7. Mrs Shearer alleges that she asked Mr Cosco to provide a quote so that the owners would know what the costs would be. She states that Mr Cosco agreed that he would get a quote to her soon. Mr Cosco denies that the conversation took place.
8. At paragraph 66 of her statement, Mrs Shearer refers to a meeting held at the residence with Mr Cosco on 6 November 2009, when what I will describe as the first copy of the 3 November 2009 Quotation was provided by the builder. The document was not complete. Mrs Shearer states that she asked Mr Cosco to complete the quote and that he stated that he was waiting on prices from his subcontractors and that the final quote would be provided soon. Mr Cosco also denies that this conversation took place.
9. At paragraph 74 of her statement, Mrs Shearer refers to a meeting held at the residence with Mr Cosco on 11 November 2009 when what I will describe as the final copy of the 3 November 2009 Quotation was provided by the builder. That document is annexed to her affidavit and is a complete document from the builder which lists a number of work items and a corresponding price. The total of all of the prices was $169,652.00. Nothing is said in connection with GST.
10. At paragraph 75 of her statement Mrs Shearer gives an account of a conversation in which Mr Cosco gives her the quote and she accepts it.
11. Mr Cosco agrees that he gave Mrs Shearer the document that she refers to in paragraph 74. He denies the conversation that Mrs Shearer asserts at the end of paragraph 75.
12. The builder has made detailed submissions in connection with the 3 November 2009 Quotation. I have considered those submissions and do not intend to repeat them in full. In essence the submissions are to the effect that the builder stated that he would perform the work on a cost plus arrangement and that he was assembling a list of quotes from subcontractors. A conversation between Mr Cosco and the architect is referred to which took place on 12 October 2009 in support of this position.
13. I have had regard to paragraphs 13 - 18 of Mr Cosco's 28 February 2011 affidavit and paragraph 77 of his 16 August 2012 affidavit as well as his responses to Mrs Shearer's affidavit.
14. At paragraph 15 of his 28 February 2011 affidavit, Mr Cosco gives a full account of a meeting held with the owners on or about 28 October 2009. I have formed the conclusion that the meeting and conversation that Mr Cosco is referring to is the same as the one that Mrs Shearer is referring to in paragraph 48 of her affidavit. I prefer Mr Cosco's version of that conversation. It is a detailed account of the conversation that was provided fairly early in the proceedings. The detail in the account of what was said causes me to prefer this account of the conversation over Mrs Shearer's evidence on this issue. Mr Cosco refers to arrange of issues discussed, but in essence he alleges that he was asked how he was going to charge for the work and he replied that it would be cost plus 15% on materials and an additional 5% for overhead with 10% GST. He states that there were discussions about the application of overhead components and the margin on materials. The hourly rates the builder would charge were also discussed. Mr Cosco states that an agreement was reached with the owners on a cost plus basis as discussed and the owners stated that the arrangement gave them flexibility with design and timing. Mr Cosco also gives an account of what was said about owner builder licences, plans, council approvals, HOWI and who would take that insurance out. Those issues are not relevant to the issue of the type of contract the parties discussed and I find, agreed upon.
15. The effect of Mr Cosco's evidence is that on 28 October 2009 the parties had discussed the contract and had agreed upon the builder proceeding on a cost plus basis.
16. At paragraph 18 of his 28 February 2011 affidavit, Mr Cosco states that he gave Mrs Shearer a summary of sub contract quotes that he had received. This summary is the complete quotation dated 3 November 2009 to which I have referred to above as the final copy of the 3 November 2009 Quotation. Mr Cosco states that the reason he provided the document was in response to the site meeting on 27 October when he was requested to get quotes from tradesmen.
17. The architect Ms Sissons has given evidence about the site meeting held on 27 October 2009. Relevantly she states that she had not received a response from the builder about changing the contract from cost plus to lump sum and that as a consequence she attached an 'Authorisation of Works Form'. Her email of 28 October 2009 notes that Mr Cosco had met with subcontractors to get quotes for trades and systems. She suggests that before proceeding with an order, a process be put in place whereby proposals and quotes can be reviewed and approved by the client. Essentially she proposes a system to manage costs as they are incurred. To that end the Authorisation of Works Form is attached. This is consistent with a cost plus approach to the building work.
18. This evidence confirms that as at 28 October 2009 a cost plus system of project delivery was contemplated or in place, and procedures were being suggested to manage that process efficiently.
19. In response to Mrs Shearer's evidence, Mr Cosco denies that the 3 November 2009 was anything more than a partial list of prices that he had been receiving from subcontractors since the start of the project. This is consistent with his explanation of the document in his 28 February 2011 affidavit.
20. The builder states in submissions that there was no reason for the builder to change that position from 12 October 2009 to 3 November, more accurately 6 November 2009, when the first copy of the 3 November 2009 quotation was provided. The builder's reference to 12 October 2009 is a reference to a meeting between the builder and the architect referred to at paragraph 10 of Mr Cosco's affidavit of 28 February 2011 and at paragraph 42 of his affidavit of 16 August 2012. Mr Cosco's evidence is that at that meeting he made it plain to Ms Sissons that he did not want to enter into a lump sum contract and would stay with the cost plus arrangement that he believed that he had made with the owners even at that early stage. The builder states in submissions that in cross examination before the Tribunal Ms Sissons confirmed Mr Coscos' evidence. I accept the builder's submission.
21. Based on the evidence referred to I have reached the conclusion that the parties did not enter into a fixed price contract and that it was known to the owners and the builder that the work would be carried out on a cost plus basis. In fact I find that it was the architect who suggested a lump sum contract, but Mr Cosco made it clear that he did not agree to use that form of contractual arrangement.
22. In my view there is no basis upon which the quote from the builder dated 3 November 2009 which was provided to the owners on or about 11 November 2009 can be regarded as providing a fixed price which could not in any circumstances be exceeded. The document is no more than a list of prices un-referenced to a scope of works and lacking any terms or conditions. It formed part of a process that was lamentable in its failure adequately to document the contract for a project that would require a great deal of work to be undertaken for the expenditure of a considerable sum of money.
23. Whatever the contractual arrangements were, in my view it is absolutely clear that the parties did not intend to contract on a fixed price basis.

Damages

1. The owners' claim to be entitled to damages for breach of contract in connection with defective work. I have dealt with these issues in assessing the value of defective work as part of the builder's quantum meruit case in proceedings HB 10/44316. The amount found in the owners favour in connection with defective work is $47,380.14. That amount was deducted from the builder's quantum meruit assessment, as explained in the Reasons for Decision in HB 10/44316.

Incomplete work claims

1. The owners incomplete work claims are addressed in their submissions which deal with cost to complete at paragraphs 48 to 56 of their Written Submissions on the Cross Claim.
2. I have found that the parties did not enter into a fixed price contract. It follows, in my view that the parties entered into a cost plus contract. In these proceedings the owners state that there were two contracts, an 'Examinations Contract' and a 'Fixed Price Contract. The owners cost to complete claim does not refer to the Examinations Contract, but is based on the 'Fixed Price Contract' or alternatively on a cost plus contract.
3. I agree with the owners' submission that generally speaking there is no right to suspend performance of work under a contract and the builder's suspension constituted a repudiation of the contract.
4. The owners Amended Points of Claim do not raise the repudiation issue now put forward in submissions.
5. The builder's submissions in reply do not deal with the repudiation issue referred to. All that is said is that when Mr Cosco returned from overseas on 12 February 2010 the owners terminated the builder's services, paragraph 36 of the builder's 7 August submissions. I do not take this as a concession by the builder, despite the fact that it does not take the matter any further in its reply submissions.
6. The owners by their solicitor's letter of 11 February 2010 made it plain that they cancelled the contract with the builder. There is no mention of repudiation on the part of the builder, or an acceptance of it. It is clear in my view that at 11 February 2010 the owners were fully aware of the builder's suspension of work.
7. The position is that the grounds upon which the owners terminated the contract are not in dispute. While I find that the owners did not accept the builder's repudiation constituted by its suspension of the works, they nonetheless terminated the contract for breach. The builder has never disputed the owners' termination, or alleged that it was not justified.
8. I find that the owners validly terminated the cost plus contract and are therefore entitled to such damages as can be established as arising out of the builder's breach. In HB 10/44316, I stated in connection with the owners incomplete works claim, that so far as incomplete work is concerned, a builder will ordinarily be liable to an owner in connection with incomplete work where the contract has been terminated due to the fault of the builder and the cost to the owner to complete incomplete work exceeds the amount allowed for that work under the contract. In those circumstances the builder will be liable to the owner for such excess.
9. Paragraph 55 of the owners' submissions filed in the Tribunal on 25 August 2014 states that the cost to complete the works that were incomplete as at the date of termination was $20,475.00 on the evidence of Mr Daniels and Mr Swarts. The precise reference to Mr Daniels' evidence and to Mr Swarts' evidence is not provided. However, I have added the amounts claimed by Mr Daniels in items A2 - A7 of the Scott schedule and note that the total amount claimed is $20,475.00.
10. The Scott schedule raises a number of incomplete work claims. I will deal with each item in turn.

Item A1 Air Conditioning installation - amount claimed $21,692.00

1. Item A1 of the Scott Schedule claims the sum of $21,692.00 in relation to incomplete work relating to the air conditioning installation.
2. Mr Daniels' report dated 20 March 2013 states that the amount claimed in connection with item A1 is $19,800.00 and such amount is calculated on the basis as set out in item B1, which claims a loss in that amount for defective work. Mr Swarts' report dated 15 June 2011 at paragraph 4.08 states that the cost of rectifying the air conditioning system is $19,800.00 inclusive of builder's margin.
3. The owners have not established what air conditioning work was completed at the time of the termination of the contract and importantly what work remained to be completed, and at what cost, either estimated or actually incurred. They have not supported this item of their claim with any submissions. The amount claimed as referred to by Mr Daniels, in reliance on Mr Swarts' evidence is calculated on a rectification basis.
4. In my view rectification costs are completely different to the costs to complete an item of work.
5. Assuming that the owners are entitled to claim for incomplete work, I find that the evidence does not establish what air conditioning work was incomplete, or the cost to complete it. The statements in the Scott schedule relating to the capacity of the air conditioning unit as installed and its ability to service the entire residence do not go to incomplete work due to the builder's breach of contract leading to a termination by the owners. Such matters go to the question of the scope of the air-conditioning work and breach of statutory warranties.
6. I find that there is no basis for the owners claim in the sum of $21,692.00 for incomplete work relating to the air conditioning installation. I dismiss this item of the owners claim.

A2 Electrical installation and rewiring - amount claimed $10,956.00

1. This item of the owners claim relies upon Mr Swarts' report dated 16 June 2011.
2. Mr Swarts was not requested to comment on incomplete work as indicated in section 1.0 of his report. Nonetheless he makes a comment about incomplete work at paragraph 3.10(d) when he states that Mr Zakos' report is of no use. At paragraph 4.04 Mr Swarts states that incomplete work has a value in the order of $8,000.00. Mr Swarts has not provided any detail of the breakup of the sum of $8,000.00.
3. In his report Mr Swarts refers in a number of places to the work that is incomplete. In particular, I refer to paragraphs 3.03 and 3.07.
4. I am not persuaded that the amount of $8,000.00 assessed by Mr Swarts is the true measure of the owner's loss in connection with incomplete work. The reasons for this are that first, Mr Swarts has not provided a break-down of the cost to complete making it impossible to know the items of work involved and their assessed cost. Secondly and more importantly, the owners have not made an assessment of what they would have paid the builder to complete the electrical work, and then made an assessment of the additional cost that they either have paid, or will be obliged to pay a rectification contractor to complete the incomplete work. This approach is recognised by the owners in paragraph 56 of their submissions on the cross claim.
5. It is also the traditional approach to the assessment of damages for breach of contract as stated in Robinson v Harman (1848) 1 Ex.850: "that where a party sustains a loss by reason of breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed."
6. Because of the fact that the owners have not provided an assessment or produced evidence of the additional cost that they either have paid, or will be obliged to pay a rectification contractor to complete the incomplete electrical work, over and above the sum they would have paid the builder had the work been performed under the contract, this item of their claim is dismissed.

A3 Installation of Double Glazing - Amount claimed $7,000.00

1. This item relates to unfinished or incomplete work.
2. Mr Daniels states that there is no evidence of the installation of double glazing and no record of the work being performed. Mr Daniels goes on to state that he is in agreement with the price or assessment for double glazing put forward by the builder in its 3 November 2009 document.
3. The conclave notes state that 'The experts agree work is incomplete. If found the experts agree $7,000.00 is a reasonable amount. $7,000.00 includes margin & GST. LDQA'
4. As mentioned, in HB 10/44316 I stated in connection with the owners incomplete works claim, so far as incomplete work is concerned, a builder will ordinarily be liable to an owner in connection with incomplete work where the contract has been terminated due to the fault of the builder and the cost to the owner to complete incomplete work exceeds the amount allowed for that work under the contract. In those circumstances the builder will be liable to the owner for such excess.
5. This approach is supported and based upon the traditional approach to the assessment of damages for breach of contract as stated in Robinson v Harman (1848) 1 Ex.850: "that where a party sustains a loss by reason of breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed."
6. Where the builder did not perform the double glazing work and did not charge for that work, and there is no suggestion that it has, the owners will sustain no loss where the experts assess that the cost to have that work performed by others will cost the same amount as it was assessed to cost if performed by the builder. For this reason I dismiss the owners' claim.

A4 Installation of Bulkheads to Master Bedroom - amount claimed $530.00

1. This work is referred to in the builder's scope of works dated 23 August 2009. The complaint is that the lining is missing from the new bulkheads.
2. The builder's submission is that no design requirement or building code requirement has been identified which mandates the need to add a plasterboard lining.
3. I accept the builder's submission and find that in connection with this item, the owners have not established that the scope of works that the builder was required to carry out required a plasterboard lining.
4. This item of the owners' claim is dismissed.

A5 Skirting missing - West wall of Master bedroom - amount claimed $480.00

1. The evidence in relation to this item is that it is agreed that the skirting is cut short. The builder submits that the skirting was kept in a partially incomplete state to allow installation of the wardrobes, which are omitted from the scope of works.
2. I accept the builder's submissions. There is no evidence that this work formed part of the builder's scope of works. The most cogent explanation explanation for this item is that the work awaits installation of the wardrobes by others.
3. This item of the owners' claim is dismissed.

A6 Works to En - Suite Bathroom - amount claimed $290.00

1. This item is for uncompleted work. I will consider it as part of the owners' case for uncompleted work as indicated above.
2. The incomplete work is described in the Scott schedule as being that the wall area on the west wall is not rendered or tiled and a Caesar stone bench is not installed to the eastern ledge behind the toilet suite.
3. At the conclave the experts agreed the value at $290.00.
4. The photos' to Mr Daniels' report clearly show areas of the en-suite which are not finished.
5. I accept Mr Daniels' evidence that the builder was to complete this work, which I find was within its scope of work, on the basis stated in Mr Daniels' report, that the owners were to supply tiles and PC items.
6. The owners will be successful in obtaining an order in the agreed sum of $290.00.

A7 Missing plasterboard ceiling - amount claimed $250.00

1. The owners' expert claims that the soffit to the attic staircase within Bedroom 1 is missing.
2. The builder's submission is that no design requirement or building code requirement has been identified which mandates the need to provide a soffit. Further, the builder's expert states that he has been informed that the soffit was left off because the owners intended to place a wardrobe in the space where the soffit has been omitted. I have not been referred to any evidence which would make good that assertion.
3. The provision of wardrobes does not come within the builder's scope of work. Nonetheless, I accept Mr Daniels' evidence that the soffit is missing as shown in the relevant photograph of his report.
4. In my view this item is different to item A4 which relates to linings.
5. There is no evidence to support the evidence of the builder's expert and the builder has not referred to any such evidence in its submissions.
6. I find that the owners have established the omitted work. The experts have agreed on quantum.
7. The owners will be successful in obtaining an order in the agreed sum of $250.00.

Misleading and deceptive conduct

1. I will now deal with the owners claims for misleading and deceptive conduct. In considering these claims I have had regard to the parties written submissions.
2. The owners counsel has made extensive submissions regarding this aspect of the owners' case. Neither of the owners has given evidence that they relied upon any of the representations alleged to have been given by the respondents. The owners' submissions have referred to a number of cases in connection with this. I have been referred to Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd 36 NSWLR 242 in connection with the extent to which I may infer that the owners have placed reliance on the representations that are alleged to have been made. In Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd it was held that: 'Failure to elicit from a witness in chief evidence of some essential fact does not necessarily entail that that fact cannot be found to exist on the basis of inference from other evidence.'
3. I have had regard to the judgement of Rolfe A-JA. In that judgement his honour refers to the judgement of Gould v Vaggelas (1985) 157 CLR 215 and the judgements in that case. I have had regard to the passage in Brennan J.'s judgement where he stated: 'An inference of inducement may be drawn when a party enters into a contract after a material representation has been made to him, but it is no more than an inference of fact and it is settled law that such an inference may be rebutted by the facts of the case: Holmes v. Jones [1907] HCA 35; (1907) 4 CLR 1692, at pp 1707,1711; Smith v. Chadwick (1884) 9 App Cas 187, at p 196. The tribunal of fact may infer that such a material misrepresentation induced the representee to enter into the contract and the fact that there were other inducements to him to do so does not necessarily preclude the drawing of that inference. The relevant question for the tribunal of fact to answer on all the evidence is whether the misrepresentation alone, or with or notwithstanding other things that accompanied it, was a real inducement, or one of the real inducements to the plaintiff to do whatever caused his loss'
4. Wilson J stated in connection with the question of the parties respective onuses: 'There is no reason to doubt the correctness of these statements. They accord with sound principle, namely, that a plaintiff carries the burden of establishing every element of his cause of action. At the same time, one can readily understand why it is in cases of deceit that a tribunal whose duty it is to find the facts may require a defendant to make some answer to the case that is put against him. Such cases are of a kind where in the general experience of mankind the facts speak for themselves. Where a plaintiff shows that a defendant has made false statements to him intending thereby to induce him to enter into a contract and those statements are of such a nature as would be likely to provide such inducement and the plaintiff did in fact enter into that contract and thereby suffered damage and nothing more appears, common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract. However, it is open to the defendant to obstruct the drawing of that natural inference of fact by showing that there were other relevant circumstances. Examples commonly given of such circumstances are that the plaintiff not only actually knew the true facts but knew them to be the truth or that the plaintiff either by his words or conduct disavowed any reliance on the fraudulent representations. It is entirely accurate to speak of an onus resting on a defendant to draw attention to the presence of circumstances such as those I have described in order to show that the inference of the fact of inducement which would ordinarily be drawn from the fraudulent making of a false statement calculated to induce a person to enter into a contract followed by entry into that contract should not in all the circumstances be drawn. But it is no more than an evidentiary onus - an obligation to point to the existence of circumstances which tend to rebut the inference which would ordinarily be drawn from the primary facts. When all the facts are in, the fact-finding tribunal must determine whether or not it is satisfied on the balance of probabilities that the misrepresentations in question contributed to the plaintiff's entry into the contract. The onus to show that they did is a condition precedent to relief and rests at all times on the plaintiff.
5. I have had regard to the fact that the passages set out above relate to representations that induce a party to enter into a contract, and also the statements that it is the function of the fact finding tribunal, when the facts are in, to make the relevant determinations.

The Examinations Representation

1. The first representation alleged by the owners is described as the 'Examinations Representation' as referred to in paragraph 15.1 of the Amended Point of Cross Claim. The owners allege that it was represented to them that the builder would 'examine the underlying condition of the Property and commence initial minor works' which activities are defined in the Amended Point of Cross Claim as the 'Examinations' on a cost plus 15% basis.
2. The builder in its written submissions has referred to the full conversation referred to in Mrs Shearer's affidavit which is relied upon in support of the 'Examinations Representation'. I also have had regard to Mr Cosco's version of the conversation. He refers to it at paragraph 5 of his 28 February 2011 affidavit and at paragraphs 34 and 146 of his 16 August 2012 affidavit.
3. It is common ground that a conversation took place between Mrs Shearer and Mr Cosco on behalf of the builder on 8 August 2009. However I find that during that conversation Mr Cosco did not make the Examinations Representation as referred to in the owners' written submissions and as pleaded in paragraph 15.1 of the Amended Point of Cross Claim. The conversations on 8 August were in my view preliminary discussions. Mr Cosco stated that he would assemble some costs which would take time and that if he were to carry out work he would do so on a cost plus 15% margin basis.
4. I find that the so called Examinations representation as defined was not made by Mr Cosco on behalf of the builder.

Realistic Budget Representation

1. This representation is based on the builder's document of 23 August 2009 which states 'I would predict your estimate figures to be realistic'.
2. The owners state that the reference to 'your estimate figures' is a reference to the budget of $200,000.00 as referred to in Mrs Shearer's email to Mr Cosco, among others, on 22 August 2009.
3. In my view the builder was referring to the owners $200,000.00 estimate for stage 1 of the works when it stated 'I would predict your estimate figures to be realistic' in its document of 23 August 2009. The architect and the builder were specifically asked to comment on that and in my view the builder did so.
4. I am of the view that the statement was a representation that the sum of $200,000.00 was realistic.
5. The owners state in their submissions that the Realistic Budget Representation induced entry into the fixed price contract. This submission must fail in my view on the basis of my finding that the parties did not enter into a fixed price contract.
6. Mrs Shearer states that on 31 August she responded to Mr Cosco thanking him for his list which I take to be his scope of works dated 23 August 2009, asking him to liaise with the architects to clarify it.
7. Further Mrs Shearer states that at the beginning of September 2009, she discussed the builder's scope of works with the architect, in effect checking that scope with the architect.
8. Based on these facts I have formed the view that the owners did not place reliance on the builder's 23 August scope of works such as to induce them to contract. I find that after receipt of the scope the owners were proceeding to organise their renovation and were at that time more reliant upon their architects than the builder.
9. I decline to infer as submitted by the owners that they would not have entered into the so - called 'Fixed Price Contract' but for the 'Realistic Budget Representation'. I find that at the time of receipt of the scope of works, the owners were still in a project delivery mode, and it was important for them to have their architect confirm the builder's scope.

Sequencing of work representation

1. The owners submit that another representation arises from the builder's 23 August scope of works. Such representation is that the builder would concentrate on finishing completely all bedrooms, bathrooms, temporary kitchen and laundry before any other work would be commenced.
2. I agree that such a representation was made by the builder in its 23 August 2009 scope of works.
3. For the reasons stated in connection with the 'Realistic Budget Representation', I find that the owners did not rely upon this representation to induce them to contract.

Timing representation

1. The owners submit that another representation arises from the builder's 23 August scope of works.
2. Such representation is that 'the work would take seven to eight weeks from the date of commencement to be finished, but that the painting may take a little longer'.
3. While I agree that such a representation was made by the builder, for the reasons stated in connection with the 'Realistic Budget Representation', I find that the owners did not rely upon this representation to induce them to contract.
4. In relation to the alleged Realistic Budget Representation, the Sequencing of work representation and the Timing representation such as arose out of the builder's 23 August scope of work, in my view these matters were part of preliminary discussions between the parties regarding the organisation of the owners renovation. They did not in my view, for the reasons stated, induce the owners to contract with the builder.

Christmas is coming

1. The owners allege that on a number of dates from early October 2009 to 21 December 2009 the builder represented that the phase 1 works would be completed by Christmas 2009.
2. The first such representation is alleged to have been made in early October 2009.
3. The owners do not specifically refer to the evidence they rely upon in connection with this representation. However the builder's counsel has referred me to paragraph 32 of Mrs Shearer's affidavit in which she refers to a conversation with Mr Cosco held in or about early October 2009 in which she says she asked whether the house would be livable by Christmas. According to her, Mr Cosco agreed that it would be.
4. I do not accept this conversation as a representation that the phase 1 works would be completed by Christmas 2009. In that regard I accept the builder's reply submissions at paragraph 142 in connection with the October 2009 conversation.
5. In paragraph 96 of her affidavit Mrs Shearer refers to a long conversation held on 4 December 2009 in which she alleges that Mr Cosco confirmed that the works would be done in time for Christmas. At paragraph 109 of her affidavit Mrs Shearer refers to another conversation with Mr Cosco in which she alleges that he stated the same thing.
6. The owners allege that in reliance on the 'Christmas is coming' representation they entered into the so called 'Fixed Price Contract'.
7. The owners Amended Point of Cross Claim allege that the so called 'Fixed Price Contract' came into existence on or around 11 November 2009. On that basis I cannot see the relevance of the alleged representations made in December 2009.
8. I have found that the October 2009 conversation does not form the basis of the so called 'Christmas is coming' representation.
9. For these reasons I find that the builder did not make the October 2009 Christmas is coming' representation. Anything said by the builder in December 2009 did not induce the owners to enter into any contract with the builder.

Insurance Representation

1. It is alleged in paragraph 15.10 of the Amended Point of Cross Claim that Mr Cosco represented that the builder had in place the necessary insurance for the works to the residence.
2. The basis for this representation is found in paragraph 41 of Mrs Shearer's affidavit where she states that the relevant conversation took place on 19 or 20 October 2009. Mr Cosco denies that the alleged conversation occurred.
3. I have found that Mrs Shearer's evidence lacks the specificity to establish that HOWI was specifically raised with the builder. As stated there are many types of insurance that are required before a builder may commence work.
4. The owners submit that in reliance upon the alleged representation, they entered into the so called 'fixed price contract'. I have found that the parties did not enter into a fixed price basis. To the extent that this representation relies upon the entry into such a contract, it must fail.
5. I do not accept that a representation was made by the builder on 19 or 20 October 2009 which was to the specific effect that HOWI was in place. Further, I do not accept that the owners have established their reliance upon the builder's statement that insurance had been taken out as a basis for allowing the contractor to commence and undertake work at the residence. It is open on the evidence to conclude that the builder had suggested to the owners that they take out an owner builder licence and themselves obtain HOWI.
6. The owners have not put on any evidence that had they known that HOWI was not in place they would have taken a different course of action.

Fixed Price Representation

1. At paragraph 15.2 of the Amended Point of Cross Claim the owners allege that the builder represented that the phase 1 works would be carried out for a fixed price of $169,652.00 subject to additional costs for any additional works carried out at the request of the owners in connection with wardrobes, carpet laying painting works to the fireplace and French Polishing.
2. The reasons in this section are similar to the reasons stated in connection with the issue of the 'Fixed Price Contract'. However they are repeated to avoid unhelpful cross referencing of paragraphs.
3. This alleged representation arises out of the builder's document dated 3 November 2009 entitled 'Quotation' which was provided to the owners on 11 November 2009.
4. The builder denies the document was a representation as alleged by the owners, or constituted a fixed price contract as also alleged by the owners.
5. In order to decide the nature of the builder's document dated 3 November 2009 entitled 'Quotation', it is necessary in my view to understand its background. The resolution of this issue depends upon whose version of events is accepted.
6. At paragraph 48 of her affidavit Mrs Shearer states that she and her husband had a conversation with Mr Cosco on 27 October 2009 at the residence. She states that there were others present including the architect and an electrician. The architect's evidence confirms that a meeting was held at the residence on that day. In fact minutes of the meeting were produced.
7. Mrs Shearer alleges that she asked Mr Cosco to provide a quote so that the owners would know what the costs would be. She states that Mr Cosco agreed that he would get a quote to her soon. Mr Cosco denies that the conversation took place.
8. At paragraph 66 of her statement, Mrs Shearer refers to a meeting held at the residence with Mr Cosco on 6 November 2009, when what I will describe as the first copy of the 3 November 2009 Quotation was provided by the builder. The document was not complete. Mrs Shearer states that she asked Mr Cosco to complete the quote and that he stated that he was waiting on prices from his subcontractors and that the final quote would be provided soon. Mr Cosco also denies that this conversation took place.
9. At paragraph 74 of her statement, Mrs Shearer refers to a meeting held at the residence with Mr Cosco on 11 November 2009 when what I will describe as the final copy of the 3 November 2009 Quotation was provided by the builder. That document is annexed to her affidavit and is a complete document from the builder which lists a number of work items and a corresponding price. The total of all of the prices was $169,652.00. Nothing is said in connection with GST.
10. At paragraph 75 of her statement Mrs Shearer gives an account of a conversation in which Mr Cosco gives her the quote and she accepts it.
11. Mr Cosco agrees that he gave Mrs Shearer the document that she refers to in paragraph 74. He denies the conversation that Mrs Shearer asserts at the end of paragraph 75.
12. The builder has made detailed submissions in connection with the 3 November 2009 Quotation. I have considered those submissions and do not intend to repeat them in full. In essence the submissions are to the effect that the builder stated that he would perform the work on a cost plus arrangement and that he was assembling a list of quotes from subcontractors. A conversation between Mr Cosco and the architect is referred to which took place on 12 October 2009 in support of this position.
13. I have had regard to paragraphs 13 - 18 of Mr Cosco's 28 February 2011 affidavit and paragraph 77 of his 16 August 2012 affidavit as well as his responses to Mrs Shearer's affidavit.
14. At paragraph 15 of his 28 February 2011 affidavit, Mr Cosco gives a full account of a meeting held with the owners on or about 28 October 2009. I have formed the conclusion that the conversation that Mr Cosco is referring to is the same as the one that Mrs Shearer is referring to in paragraph 48 of her affidavit. I prefer Mr Cosco's version of that conversation. It is a detailed account of the conversation that was provided fairly early in the proceedings. The detail in the account of what was said causes me to prefer this account of the conversation over Mrs Shearer's evidence on this issue.
15. At paragraph 18 of his 28 February 2011 affidavit, Mr Cosco states that he gave Mrs Shearer a summary of sub contract quotes that he had received. Mr Cosco states that the reason he provided the document was in response to the site meeting on 27 October when he was requested to get quotes from tradesmen.
16. The architect Ms Sissons has given evidence about the site meeting held on 27 October 2009. Relevantly she states that she had not received a response from the builder about changing the contract from cost plus to lump sum and that as a consequence she attached an 'Authorisation of Works Form'. Her email of 28 October 2009 notes that Mr Cosco has met with subcontractors to get quotes for trades and systems. She suggests that before proceeding with an order, a process be put in place whereby proposals and quotes can be reviewed and approved by the client. Essentially she proposes a system to manage costs as they are incurred. To that end the Authorisation of Works Form is attached.
17. This evidence confirms that as at 28 October 2009 a cost plus system of project delivery was contemplated and that procedures were being suggested to manage that process efficiently.
18. In response to Mrs Shearer's evidence Mr Cosco denies that the 3 November 2009 was anything more than a partial list of prices that he had been receiving from subcontractors since the start of the project. This is consistent with his explanation of the document in his 28 February 2011 affidavit.
19. The builder states in submissions that there was no reason for the builder to change that position from 12 October 2009 to 3 November, more accurately 6 November 2009, when the first copy of the 3 November 2009 quotation was provided. The builder's reference to 12 October 2009 is a reference to a meeting between the builder and the architect referred to at paragraph 10 of Mr Cosco's affidavit of 28 February 2011 and paragraph 42 of his affidavit of 16 August 2012. Mr Cosco's evidence is that at that meeting he made it plain to Ms Sissons that he did not want to enter into a lump sum contract and would stay with the cost plus arrangement that he believed that he had made with the owners even at that early stage. The builder states in submissions that in cross examination before the Tribunal Ms Sissons confirmed Mr Coscos' evidence. I accept the builder's submission.
20. When parties do not enter into standard form or bespoke contracts for the performance of building work, they expose themselves to uncertain and unpredictable outcomes regarding the manner in which a court or Tribunal will view their contracting arrangements.
21. As a result of the reasons given above, I reject the owners submissions regarding the Fixed Price Representation.

Horse before the Cart Representations

1. At paragraph 15.9 of the Amended Point of Cross Claim the owners allege that the builder represented that it would not commence or complete any phase 2 works without first obtaining development approval from the council.
2. The basis of this representation is said to be in a conversation between Mrs Shearer and Mr Cosco referred to by Mrs Shearer in her affidavit at paragraph 79. Mr Cosco denies the content of the conversation but refers to other conversations he had with Mrs Shearer where he states that parts of the matters raised by Mrs Shearer were discussed on other occasions.
3. I am not persuaded on the evidence that Mr Cosco actually made the representation alleged. I am also not persuaded that even if I am wrong and the representation alleged was given, that the owners relied upon it and in so doing allowed the builder to continue working on the property as alleged.
4. The builder has referred to an email between the owners dated 16 November 2009 which it submits is evidence that the owners had authorised the works and anticipated that the work would be carried out in their absence. I agree that the email suggests that the owners knew full well that the downstairs bathroom was to be built. Mrs Shearer was seeking to finalise design details before construction. This email and its content is sufficient in my view to negate any inference of reliance that may be drawn in favour of the owners, assuming that the representation was made by Mr Cosco.
5. For the reasons stated, this aspect of the owners misleading and deceptive conduct case is dismissed.
6. As with the preceding representation, the owners have not put on evidence of what they would have done had they known that the builder planned to commence phase 2 work without development approval being obtained.

Don't worry, we'll fix it representation

1. At paragraph 15.9 of the Amended Point of Cross Claim the owners allege that the builder represented that it would rectify damage caused by it to the downstairs laundry, bathroom and kitchen wall, and other damage to the property.
2. The basis of this representation is said to be in a conversation between Mrs Shearer and Mr Cosco referred to by Mrs Shearer in her affidavit at paragraphs 96 and 98. Mr Cosco denies the content of the conversations referred to.
3. Mr Cosco gives an account of events that occurred on the return of the owners at paragraphs 103 - 105 of his 16 August 2012 affidavit.
4. On the evidence available, I am not persuaded that the representation alleged by Mrs Shearer described as the 'Don't worry, we'll fix it representation' was made by the builder.
5. For the reasons stated, this aspect of the owners misleading and deceptive conduct case is dismissed.
6. If I am wrong about the 'Don't worry, we'll fix it representation' having been made by the builder, I have in any event dealt with the defects referred to in paragraph 189 of the owners submissions in the treatment of defects as a factor to be taken into account in the valuation of the builder's quantum meruit claim.
7. Further, If I am wrong about the 'Don't worry, we'll fix it representation' having been made by the builder, the owners have not stated what they would have done if they knew the builder would not rectify damage caused by it to the downstairs laundry, bathroom and kitchen wall, and other damage to the property.

Nearly Finished Representation

1. At paragraph 15.8 of the Amended Point of Cross Claim the owners allege that the builder represented to them on 21 December 2009 that only minor works were left to be carried out in order to complete the phase 1 works.
2. The basis of this representation is said to be in a conversation between Mrs Shearer and Mr Cosco referred to by Mrs Shearer in her affidavit at paragraph 109. Mr Cosco denies that the conversation took place.
3. I accept Mrs Shearer's evidence in connection with this representation.
4. The owners allege that in reliance on the representation, they permitted the builder to continue to undertake work at the property.
5. I accept that the owners did rely upon this representation as stated in evidence by Mrs Shearer.
6. The owners' assessment of damage calculation is based upon Mr Daniels estimate of the value of the works on a cost plus basis. That valuation has not been accepted. Taking the value that has been accepted, the sum of $452, 600.17, less defects and uncompleted work, yields a net figure of $404,680.03. Following the calculations at paragraph 157 of the owners' submissions, one takes a figure of 36% of $404, 680.03 which is $145, 684.81 and then deducts $120,000.00 from that amount.
7. Using Mr Daniels figures that produced a loss of $67,771.56. Using Mr Zakos' figures there is no loss, but a surplus of $25,684.81
8. I find that the owners have not sustained loss as a result of this representation. No monetary order is made in their favour.
9. In Doepel & Associates Architects Pty Ltd -v- Hodgkinson [2008] WASCA 262 Martin CJ stated as follows at paragraph 48: 'The conventional principles applicable to cases of this kind are well established. They establish that a party who has been subjected to misleading and deceptive conduct or negligent misrepresentation is entitled to be put in the position in which he or she would have been but for the breach of statutory or common law duty (Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1). So, where it is established as a fact that a different course of action would have been taken but for the breach of statutory and/or common law duty, the measure of damages is the sum required to put the innocent party, in this case Mr Hodgkinson, in the position in which he would have been but for the relevant breach of duty. Gates (at [13]) sets out the proposition that if a claimant establishes that but for the relevant breach or duty, he or she would have entered into a different contract upon which he or she would have made a profit, that profit may be recovered on the basis that it is part of the loss which has been suffered in consequence of the relevant breach (also see Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd [2005] WASCA 174 at [96]); Havyn Pty Ltd v Webster [2005] NSWCA 182 [117]).' (Italics added)
10. In these proceedings the owners have not put on any evidence of what they would have done, or any different course they would have taken if they knew that an alleged representation would not be made good by the builder. In my view the lack of evidence that the owners would have taken a different course of action is a further factor in dismissing their claims for misleading and deceptive conduct.

Costs

1. Either party is at liberty to make a costs application in these proceedings.
2. Any costs application pursuant to section 53 of the Consumer, Trader and Tenancy Tribunal Act 2001 or regulation 20 of the Consumer, Trader and Tenancy Tribunal Regulation 2009 must be lodged in the Tribunal and served on the costs respondent within 21 days of the date of this order either attaching or referring to the documents relied upon in support of the application.
3. The costs respondent will have 21 days after the date of receipt of the costs application referred to above, to lodge in the Tribunal and serve on the costs applicant the submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.
4. The cost applicant will have 14 days after the date of receipt of the cost respondent's submissions to lodge in the Tribunal and serve on the costs respondent the submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.
5. The Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal D Goldstein Senior Member Civil and Administrative Tribunal of New South Wales 10 February 2015 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 March 2015