Carbone v Fowler Homes Pty Ltd; Carbone v Fowler Homes Pty Ltd

Briginshaw (1938) 60 CLR 336; [1938] HCA 34 Brougham v Edwards [2024] SASCA 59 Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021 Cawood v Cawood, in the matter of Cawood [2000] FCA 1786 Clarence City Council v Commonwealth of Australia (2020) 280 FCR 265; [2020] FCAFC 134 Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54 Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33 Cruse v Multiplex Ltd (2008) 172 FCR 279; [2008] FCAFC 179 Davis v Veigel [2011] NSWCA 170 Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 GC NSW Pty Ltd v Galati [2020] NSWCA 326 Giuseppe and Matthew Carbone v Fowler Homes Pty Ltd [2023] NSWDC 29 Hadley v Baxendale (1854) 156 ER 145 Hodder Rook & Associates Pty Ltd v Genworth Financial Mortgage Insurance Pty Ltd [2011] NSWCA 279 Hooker v Gilling [2007] NSWCA 99 Ippolito v Cesco [2020] NSWSC 561 J-Corp Pty Ltd v Mladenis [2009] WASCA 157 Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135; [2002] NSWCA 44 London Steam-Ship Owners' Mutual Insurance Association Ltd v Kingdom of Spain (No 4) [2021] EWCA Civ 1589; [2022] 3 All ER 970 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 Martin v Najem [2022] NSWDC 479 McCrohon v Harith [2010] NSWCA 67 Misthold Pty Ltd v NSW Historic Sites and Railway Heritage Company Pty Ltd (No 2) [2022] NSWSC 561 Palmer-Bruyn and Parker Pty Ltd v Parsons (2001) 208 CLR 388; [2001] HCA 69 Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457; [1981] HCA 7 PNC Lifestyle Investments Pty Ltd v REW08 Projects Pty Ltd (No 2) [2017] NSWSC 993 Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53; [2003] HCA 75 Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 31 Slaveski v Nanevski Developments Pty Ltd [2023] NSWCA 145 State of New South Wales v Spedding [2023] NSWCA 180 Talifero v Asbestos Injuries Compensation Fund Limited as Trustee for the Asbestos Injuries Compensation Fund (No 2) [2018] NSWCA 323 TCN Channel Nine Pty Ltd v Anning (2002) 54 NSWLR 333; [2002] NSWCA 82 Troulis v Vamvoukakis [1998] NSWCA 237 Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 Warramunda Village Inc v Pryde (2001) 105 FCR 437 Wolverhampton Corporation v Emmons [1901] 1 KB 515 Young v King [2016] NSWCA 282 Zavarco Plc v Nasir [2021] EWCA Civ 1217 Texts Cited: P Young, C Croft and M Smith, On Equity (2009, Lawbook Co) Category: Principal judgment Parties: In 2023/00443714 Matthew Carbone (Appellant) Fowler Homes Pty Ltd (Respondent)

In 2023/00443762 Giuseppe Carbone (Appellant) Fowler Homes Pty Ltd (Respondent) Representation: Counsel: P D Herzfeld SC, P M Barham (Appellant in each appeal) V Bedrossian SC, H Stitt (Fowler Homes Pty Ltd)

Solicitors: Simone Legal (Appellant in each appeal) Branston Neville Lawyers (Fowler Homes Pty Ltd) File Number(s): 2023/00443714; 2023/00443762 Publication restriction: Nil Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Citation: [2023] NSWDC 29 Date of Decision: 17 February 2023 Before: Weber SC DCJ File Number(s): 2020/308472; 2020/308483

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The appellants, Mr Joe Carbone and his son Mr Matthew Carbone, each entered into contracts with the respondent, Fowler Homes Pty Ltd, for the construction of residential dwellings on land in Oran Park, NSW. The contracts provided for practical completion within 48 weeks, but construction was delayed. The statements of claim of each appellant pleaded statutory unconscionability and deceit. Although the appellants did not in terms plead breach of contract, there was reference throughout trial to questions relevant to a claim in damages for breach of contract, including whether the claim for lost rent was within the reasonable contemplation of the parties. The appellants also claimed that they were entitled to a contractual sum, called a "provisional amount", of $20,000 for s 94 contributions. Mr Joe Carbone also pleaded deceit on the basis that the respondent had acknowledged receipt of $60,000 paid by him in cash but later denied that the sum was paid in discharge of his obligations under the contract. The primary judge did not consider that damages for breach of contract was an issue that arose for determination, and considered that the only claims were for statutory unconscionability and deceit. His Honour rejected Mr Joe Carbone's claim that he had paid $60,000. On appeal, the appellants argued that a claim for breach of contract was either within the scope of the pleadings or was within the scope of the issues litigated at trial such that the primary judge erred in failing to determine that issue. The appellants also argued that the primary judge erred in rejecting the payment of $60,000 in cash, and in directing the referee to not include the $20,000 provisional amount. By cross-appeal, the respondent argued that clause 32.1 of the contract, a liquidated damages clause of some nominal sum for the consequences of the respondent's delay, was exhaustive and precluded any other sum being awarded for any such loss. The Court (Leeming JA, Ward P and Mitchelmore JA agreeing) held, allowing one appeal in part and dismissing the other: (1) The pleaded case did not disclose a claim for damages for breach of contract as opposed to damages for deceit or statutory unconscionability: at [44]-[57]. Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457; [1981] HCA 7; Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135; [2002] NSWCA 44, considered and applied. (2) However, the trial was conducted on the basis that damages for breach of contract was claimed, and the primary judge erred in declining to determine that issue: at [81]-[87]. Hadley v Baxendale (1854) 156 ER 145; Palmer-Bruyn and Parker Pty Ltd v Parsons (2001) 208 CLR 388; [2001] HCA 69; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69, considered and applied. (3) The appellants adduced sufficient evidence, including of comparable leases, to prove damages of lost rent: at [88]-[97]. Troulis v Vamvoukakis [1998] NSWCA 237; Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54; Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31, considered and applied. (4) On its proper construction, the liquidated damages clause complemented, and did not exclude, damages for the respondent's delay: at [98]-[107]. Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021, applied. J-Corp Pty Ltd v Mladenis [2009] WASCA 157, followed. (5) There was no error in the primary judge's rejection of the claim that Mr Joe Carbone paid $60,000 in banknotes towards the price of his dwellings: [108]-[122]. (6) The task for the referee was to determine, in light of the progress payments which had been made, the works which had been done, and the variations to each contract, what amounts ultimately were owed by Fowler Homes to each of Joe and Matthew, including the provisional allowance of $20,000: at [123]-[132]. Discussion by Leeming JA of: (7) The circumstances in which prayers for declarations are appropriate: at [29]-[37]. Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53; [2003] HCA 75; Clarence City Council v Commonwealth of Australia (2020) 280 FCR 265; [2020] FCAFC 134, followed. (8) The meaning of "jurisdiction" in section 149E of the Civil Procedure Act 2005 (NSW) in relation to a transfer of proceedings effected by section 149B of that Act: [39]-[40]. Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559; [2001] HCA 1

JUDGMENT

1. WARD P: I agree with Leeming JA.
2. LEEMING JA: Messrs Giuseppe and Matthew Carbone, who are father and son, and to whom I shall refer for simplicity and without disrespect as Joe and Matthew, bring separate appeals from the dismissal (in the case of Joe) and the substantial dismissal (in the case of Matthew) of actions brought by them in the District Court of New South Wales against Fowler Homes Pty Ltd arising from the delayed completion of the construction of residential buildings on their neighbouring blocks of land. All save one of the grounds of appeal are from the judgment of 17 February 2023, delivered promptly after a five-day trial: Giuseppe and Matthew Carbone v Fowler Homes Pty Ltd [2023] NSWDC 29. The appeal is as of right pursuant to s 127(1) of the District Court Act 1973 (NSW) because those grounds of appeal involve matters in issue amounting to more than $100,000. In those circumstances, the appellants are also entitled to challenge within their appeals a subsequent order made in each proceeding in the course of assessing damages, despite its being worth only $20,000.
3. The scope of the appeals is much narrower than the issues at trial. In particular, no appeal is brought from the dismissal of the two claims which were most prominent at trial, namely, claims of statutory unconscionability within the meaning of ss 20 and 21 of the Australian Consumer Law and (in the case of Joe) deceit at common law. Further, the appellants' written submissions in reply, which unlike their submissions in chief were signed by Mr Herzfeld SC, who had not appeared at trial, advised that around half of the grounds of appeal were no longer pressed.
4. Given the confined scope of the appeals, it is unnecessary fully to summarise the background or the reasons of the primary judge, the large majority of which concerned matters which are not challenged on appeal. However, it will be necessary, and in some detail, to refer to the pleadings and the course of the hearing, because at the forefront of the appeal is the appellants' contention that the primary judge was wrong to fail to consider claims brought by each of them for damages for breach of contract (as opposed to damages for statutory unconscionability or deceit), a contention which embraces both the scope of the pleadings and the way the trial was run.
5. For the reasons which follow, I have concluded that the primary judge was wrong to decline to consider the claim for damages for breach of contract. However, no error has been shown in his Honour's rejection of the most spectacular aspect of Joe's case, namely, that he had paid $60,000 in cash - in $100 and $50 banknotes in a Woolworths plastic bag - to Mr Frank Grippaudo, Fowler Homes' Chief Executive, who neither counted the money nor gave him a receipt but merely took it away. Joe Carbone maintained at trial that Fowler Homes wrongly (and indeed deceitfully) refused to credit him for that payment, but the primary judge rejected that part of his case and I have concluded that no material error has been made out in that respect.

Factual background

1. Joe and Matthew owned neighbouring vacant blocks of land at Oran Park in western Sydney. Each man entered into a contract with Fowler Homes for the construction of a duplex home on his block (which is to say, there would be four dwellings in all). Each contract was in materially identical terms, and based on the standard form "NSW Residential Building Contract for New Dwellings" issued by the Housing Industry Association.
2. Each contract specified a "Building Period" of no more than 48 weeks after the building period commenced (item 6 of schedule 1). Fowler Homes did not dispute that although located in a definition, the contract imposed an obligation upon it to achieve practical completion within that period, although that was subject to the provisions governing suspensions. In particular, the contract provided for an automatic extension of time where the owner had failed to pay a progress claim, expense, variation or extra within five days of the due date (special condition 9). The pecuniary consequences of delay were asymmetric. For delay attributable to the owner's act, default or omission, delay damages were stated to be the actual increase in costs to the builder plus the builder's margin (cl 19.4). On the other hand, if the building works did not reach practical completion by the end of the 48-week period as extended, the appellants accepted that the owner was entitled to liquidated damages in the amount of $1 per day. That was brought about because cl 32.1 made provision for liquidated damages in the amount specified in item 11 in the Schedule, and that item in the Schedule was expressed to be "$.00 per working day", and the HIA standard form provided "if nothing stated, then $1". I shall pass over whether, on its true construction, the clause in fact made provision for nil liquidated damages for delay.
3. Work commenced in around August 2018, and therefore, putting to one side extensions, should have been completed by July 2019. I shall very largely pass over the details of the disputes that arose during construction. Joe and Matthew made final payments on 29 January 2020. Proceedings were commenced in October 2020, but on the basis that Joe and Matthew maintained that the contract remained on foot; indeed, they sought orders for specific performance and declarations that Fowler Homes' purported terminations were invalid. Ultimately, possession was given in April 2021. Assuming the claim for damages for lost rent was in play at trial, then Joe's and Matthew's entitlement to damages for breach was governed by the contract, and it was accepted that turned on their establishing that all amounts owed by them had been paid. As will be seen, Matthew established that after 29 January 2020, but Joe has not.

Procedural background

1. The appellants had originally commenced proceedings in October 2020 in the Supreme Court of New South Wales, seeking specific performance of the contracts following a dispute between them and Fowler Homes. Ultimately, it was not necessary for that aspect of the dispute to be litigated because, by agreement and without admissions, Fowler Homes undertook the additional works. It may also be noted that although Fowler Homes contended that amounts remained outstanding from both Joe and Matthew, it brought no cross-claim to recover those amounts.
2. After it became clear that the only issue between the parties was one as to quantification, the proceeding was remitted to the District Court.
3. It seems fairly clear that there were a large number of small matters of dispute in issue between the parties, and that the trial which occupied four days in November proceeded informally on the basis that what would be determined was the large items of whether causes of action in deceit or statutory unconscionability were made out, and whether Joe and Matthew were entitled to damages for lost rent. By "informally" I mean that there appears to have been no order pursuant to UCPR r 28.2 identifying particular aspects of the litigation to be tried separately and in advance of the remaining issues. Instead, the trial proceeded in the expectation, which turned out to be unduly optimistic, that once the principal issues were decided, the parties would be able to work out the extent to which overpayments or underpayments had been made. The principal issues were, as will be seen, expressed without undue precision during the hearing, as was reflected in the reasons published on 17 February 2023. Thus the primary judge said at [9]: The major points requiring resolution as identified by the parties were: (i) how payments of $30,000 made by each plaintiff to Camden Council in respect of section 94 contributions were to be dealt with in the accounting between the plaintiffs and defendant ("the Camden Council Issue"); (ii) whether the plaintiff Giuseppe Carbone made a cash payment to the defendant in the sum of $60,000 which needed to be brought into account in the accounting between the parties ("the Cash Payment Issue"); (iii) whether the plaintiffs are entitled to damages against the defendant on account of rent which was forgone, in the period between when they say they should have been given possession of the duplexes, and when they in fact were given possession ("the Rent Issue").

Should the primary judge have determined a claim for damages for breach of contract?

1. As noted above, the primary judge did not determine a claim for damages comprising lost rent for Fowler Homes' delay in completing the dwellings, regarding it as outside the pleadings. On appeal, Joe and Matthew relied on the pleadings, and, separately, on the way the trial had been conducted. I shall address each in turn.

The declaratory relief sought in the statements of claim

1. The statements of claim commence with 22 (in the case of Joe) and 19 (in the case of Matthew) prayers for relief. The majority (13 or perhaps 14 in the case of Joe) are declarations. This was far too many.
2. Some declarations may be appropriate in a specific performance suit (for example, as to the validity of a notice of termination), but it is difficult to think of circumstances when the majority of the declarations sought by Joe and Matthew could ever be appropriate. They commenced with a prayer for declarations that the parties had entered into the contracts, notwithstanding that they were alleged to be wholly in writing, and as to which there was never any dispute. There followed a series of uninformative declarations, including "Declaration that the defendant has breached the Building Contract", "Declaration that the defendant has engaged in unconscionable conduct within the meaning of section 20 of the Australian Consumer Law", "Declaration that the defendant has engaged in unconscionable conduct within the meaning of section 21 of the Australian Consumer Law", "Declaration that the defendant has committed the tort of deceit", and so on.
3. Then there were declarations involving sums of money. Prayer 12 of Joe's pleading and prayer 11 of Matthew's pleading sought an "[o]rder or declaration that the defendant holds the sum of $70,845 or such other amount as may be calculated as owing by the defendant to the plaintiff after any allowances which may be allowed to the defendant in respect of unsigned variations ("Credit Amount") as money had and received by the defendant to the use of the plaintiff". This paragraph shows real confusion of thought as to the juristic effect of an "order" or "declaration" concerning an amount of money owing by defendant to plaintiff. There followed a prayer for a "[d]eclaration that the defendant has been unjustly enriched by the retention of the Credit Amount".
4. Separately from the above, there were also declarations sought concerning the validity of the purported termination, and an estoppel in respect of one aspect of the parties' rights, to which the criticisms below do not apply.
5. Ironically, counsel for the plaintiffs was at pains at the commencement of the trial to submit that the District Court was unable to grant any of the declaratory relief sought. That too was wrong, like so much of the approach taken by the pleading. None of it arises in this appeal, save insofar as the appellants rely on the declarations that there had been a breach of contract in support of their contention that a claim for damages for breach of contract had been pleaded. Nevertheless, it seems worthwhile making the following basic points.

Declarations should be clear on their face

1. Declarations should be clear on their face. A bare declaration that a party has committed a tort or contravened a law should not ordinarily be made, and if it is sought, the party propounding it ought to be able to explain what is special in the circumstances of the litigation to warrant that unusual course being taken. Some of the declarations sought were relevantly identical to those deprecated in very strong language in the joint judgment of Gummow, Hayne and Heydon JJ in Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53; [2003] HCA 75 at [89]-[90]. There, dealing with bare declarations that parties had contravened various sections of the Trade Practices Act, which were identical in form to those sought by the appellants concerning ss 20 and 21 of the Australian Consumer Law, their Honours said: These declarations provide a bad precedent and were of a kind which the trial judge should not have agreed to make even if urged to do so by the parties. Close attention to the form of proposed declarations, particularly those "by consent", should be paid by primary judges.
2. In cases where it is appropriate for declaratory relief to issue, the declaration should "specifically and succinctly identify the gist of the relevant conduct and its relationship to contravention", to use Allsop CJ's language in Australian Securities and Investments Commission v Youi Pty Ltd [2020] FCA 1701 at [69].
3. A declaration that merely serves to record the outcome of proceedings, or of a cause of action in proceedings, is unlikely ever to be appropriate. "The remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment": Warramunda Village Inc v Pryde (2001) 105 FCR 437 at [8], approved in Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378; [2012] FCAFC 56 at [35] and Brougham v Edwards [2024] SASCA 59 at [105]. True it is that there is authority to the effect that there may be utility in declaring contraventions of a statute "in order to define and publicise the type of conduct that constitutes a contravention of the Act and to set out clearly the foundation on which the consequential orders by way of injunction and pecuniary penalty, including those based on accessorial liability, are grounded": Cruse v Multiplex Ltd (2008) 172 FCR 279; [2008] FCAFC 179 at [53], approving Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd [2004] FCA 693; (2004) 207 ALR 329 at [21]. I respectfully agree. But no such utility was present in the present proceedings, which were private litigation to recover money.

Declaratory as opposed to executory judgments

1. The declarations concerning particular money sums exhibit a different misconception. It was not asserted that any property was held on trust, or otherwise gave rise to rights or was subject to obligations. It follows that no useful purpose could be served by a declaration that an amount was money had and received, or a declaration that Fowler Homes had been unjustly enriched in a particular dollar amount. An "order" that money is owing is likewise problematic, begging the question as to its juristic nature. Instead, what should have been sought in the event of success on those causes of action was judgment in an amount against Fowler Homes, which could then, if necessary, be executed.
2. Axiomatically, a declaratory judgment is not an executory judgment. As was observed by Jagot, Kerr and Anderson JJ in Clarence City Council v Commonwealth of Australia (2020) 280 FCR 265; [2020] FCAFC 134 at [90] (an appeal was dismissed, without doubting the correctness of the following), referring to the enforcement of contractual obligations: The "enforcement" of such obligations for these purposes entails that the enforcer will obtain a judgment capable of being judicially enforced by execution, which is otherwise known as an "executory judgment". And, importantly for the present case, an "executory judgment" may be contrasted with a "declaratory judgment". This is explained as follows in Zamir & Woolf's The Declaratory Judgment at pp 1-2: A declaratory judgment is a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs. It is to be contrasted with an executory, in other words coercive, judgment which can be enforced by the courts. In the case of an executory judgment, the courts determine the respective rights of the parties and then order the defendant to act in a certain way, for example, by an order to pay damages or to refrain from interfering with the claimant's rights; if the order is disregarded, it can be enforced by official action, usually by levying execution against the defendant's property or by imprisoning him for contempt of court. A declaratory judgment, on the other hand, pronounces upon a legal relationship but does not contain any order which can be enforced against the defendant. ... In other words, the declaration simply pronounces on what is the legal position. The same point is made in P Young, C Croft and M Smith, On Equity (2009, Lawbook Co) at 1076.

The jurisdiction of the transferee court

1. Thirdly, although the plaintiffs disavowed all declaratory relief in the District Court, they did so not because all of the declarations sought were poorly framed or alternatively of no utility having regard to the compromise earlier reached, but on the basis that the District Court lacked power to make them. That was wrong. They were right not to ask the District Court to make the declarations sought, but not for the reasons which were given.
2. The transfer from the Supreme Court to the District Court was made pursuant to s 149B of the Civil Procedure Act 2005 (NSW). Section 149E provides that "the transferee court has, and may exercise, all of the jurisdiction of the transferor court in relation to any proceedings to which a transfer order relates, including jurisdiction to determine any question arising in such proceedings". Unlike s 44(1) of the Judiciary Act 1903 (Cth), which provides for the remitter by the High Court to another court "that has jurisdiction with respect to the subject-matter and the parties", a transfer under 149A carries with it a conferral of jurisdiction if that is necessary, as was observed in Young v King [2016] NSWCA 282 at [15] (instead the position resembles remitters under s 44(2) or (2A) of the Judiciary Act, to which the conferral or investment of jurisdiction effected by s 44(3) applies).
3. Although s 149E refers to jurisdiction rather than power, I think that in the present context the provision must be understood as not observing a strict distinction between the authority to decide a controversy, and the power to make an order. Any other view leads to absurdities. Take for example a proceeding which sought purely declaratory relief. Section 149A would confer jurisdiction if the proceeding were remitted to the District Court, but there would be no power to grant the only relief sought. Bearing in mind that "the distinction between jurisdiction and power is often blurred" and "'jurisdiction' and 'power' are not discrete concepts" (both quotations are found in the reasons of Gleeson CJ, Gaudron and Gummow JJ in Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559; [2001] HCA 1 at [64]), s 149E must be understood not only as authorising the transferee court to decide the controversy, but also to empower it to make such orders as are appropriate consequent upon that decision, to the extent that such power might be lacking. The sustained generality of "all of the jurisdiction of the transferor court in relation to any proceedings" makes that construction a natural one. A familiar example, mentioned during the hearing, is defamation actions in which a final injunction is sought, and I note that that is how the provision has been understood to operate by the District Court ("Where such a transfer occurs, the powers of the Supreme Court travel with the claim"): see Martin v Najem [2022] NSWDC 479 at [126]. It is unnecessary for present purposes to express any views about the powers of the District Court in relation to matters which have not been transferred to it.

Other prayers for relief

1. Separately, the statements of claim also sought injunctions under the Australian Consumer Law, orders for specific performance, an order for exemplary damages, interest, costs and "such further or other order as this Honourable Court may deem fit", and, importantly, prayer 18 (16 in the case of Matthew): "further or in the alternative, an order that the defendant pay the plaintiff damages pursuant to section 236 of the ACL, and/or at law, in an amount to be assessed".
2. As will be seen, the order seeking damages was a key aspect of the submissions that the pleadings extended to a claim for damages for breach of contract. Reliance was also placed on the concluding prayer which sought "such further or other order" as might seem fit.

Allegations of material facts

1. Joe's pleading took the following structure. Paragraphs 1-5 identified the parties and the contract. Paragraphs 6-13 identified certain "Credit Representations" that were said to engage s 18 of the Australian Consumer Law. Paragraphs 14-31 addressed variations and payments which were said to constitute the "Overpayment" which Fowler Homes had refused to repay, as a result of which the plaintiffs had suffered loss and damage and claimed restitution. Paragraphs 32-54 addressed the receipt for $59,543 (this relates to the cash payment of $60,000) and in substance maintained that its retention by Fowler Homes was both unconscionable conduct within the meaning of the Australian Consumer Law and amounted to deceit. Paragraph 55 stated that "the plaintiff claims exemplary damages in respect of his common law claims other than breach of contract". Paragraphs 56-57 set out the basis for a claim for an order for specific performance, including an allegation that by failing or refusing to complete the building contract in accordance with its terms, Fowler Homes was in breach of the building contract. Matthew's pleading was in substantially similar form, save that there was no allegation concerning the $60,000 payment nor a claim in deceit.

Did the statements of claim disclose a claim for damages for breach of contract?

1. It is clear that a claim for breach of contract had originally been intended to be claimed, at least as an element of a claim for specific performance. But that is to no avail. The pleaded claim of specific performance was disavowed at the commencement of the trial. Accordingly, I shall pass over (a) the difficulties confronting orders for specific performance of the obligations in a construction contract, which are often regarded as paradigm examples where such relief is not available: see Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [105]; Ippolito v Cesco [2020] NSWSC 561 at [66]-[77]; Misthold Pty Ltd v NSW Historic Sites and Railway Heritage Company Pty Ltd (No 2) [2022] NSWSC 561 at [372] and (b) the controversy concerning the status of the exceptions to the general principle stated by Romer LJ in Wolverhampton Corporation v Emmons [1901] 1 KB 515 at 524-525.
2. Less unpromising is the fact that when making an allegation for exemplary damages - something which was never disavowed - the pleadings expressly exempted that remedy being ordered for breach of contract. That is a more powerful indication that a claim for damages for breach of contract was in play.
3. It was on those bases that it was said in this Court (it never seems to have been put thus in the District Court) that a claim for the New South Wales equivalent of Lord Cairns Act damages pursuant to s 68 of the Supreme Court Act 1970 (NSW) was alive. Counsel's submissions identified particular paragraphs in the pleading, which, if taken together, were said to demonstrate that a cause of action for damages for breach of contract was being propounded, including the particulars of damage under the allegation of deceit that Joe had been intending to rent out the property for $500 per week: But the basic point is that if one looks at this pleading, one has an allegation of breach of contract for non-completion of the building work, seeking specific performance. That claim necessarily includes an entitlement and a power to award damages, which is most naturally measured by a loss of rent.
4. Indeed, it was submitted that "the Supreme Court always retains a discretion to award damages in lieu of specific performance". As I understood it, this aspect of the submissions was focussed on the prayer for specific performance which had led to the proceedings being commenced in the Supreme Court, about which there could be no misapprehension, and it was said that when without admission Fowler Homes undertook to complete the construction, there could likewise have been no misapprehension that the claim for Lord Cairns Act damages in lieu of specific performance was in play.

Was the trial run on a broader basis than had been pleaded?

1. Alternatively, the appellants maintained that, notwithstanding their pleading, the case had been run on the basis that a claim for damages for breach of contract was in play. When Mr Barham opened the case for the plaintiffs, he repeatedly said, at the commencement of his short opening, that one of the issues before the primary judge was whether damages were too remote. Thus he said that "there is a real issue in the case concerning whether or not the claims for lost rent are damages which are within the reasonable contemplation of the parties". Following a submission that the intention to rent the premises was in the actual contemplation of the parties, counsel then added "but really, to say that it wouldn't be within the reasonable contemplation of the parties that somebody builds a house and might rent it out is an ambitious submission in my respectful submission". (I interpolate that there were no written submissions in advance of trial, although there had been a mediation. It is not clear from the appeal books on what basis counsel was alerting the primary judge to the issues which would arise, but what was said proved to be accurate.)
2. "Reasonable contemplation of the parties" is the language of the test for remoteness in Hadley v Baxendale (1854) 156 ER 145 for damages for breach of contract. It is not the test for remoteness for damages for deceit: see Palmer-Bruyn and Parker Pty Ltd v Parsons (2001) 208 CLR 388; [2001] HCA 69 at [13], [64]-[65] and [114]. In this Court, Spigelman CJ, with whom Mason P and Grove J agreed, in TCN Channel Nine Pty Ltd v Anning (2002) 54 NSWLR 333; [2002] NSWCA 82 at [100] and [102] treated Palmer-Bruyn as standing for the proposition that with intentional torts, "reasonable foreseeability is not an element of the test for recoverable damages". More recently, it has been said in relation to intentional torts that "foreseeability of harm has no role to play in limiting the injured party's damages": State of New South Wales v Spedding [2023] NSWCA 180 at [291]. Likewise, the rules in Hadley v Baxendale do not circumscribe the damages available following a contravention of the Australian Consumer Law. Speaking of s 82, the joint judgment of McHugh, Hayne and Callinan JJ observed that "[i]t contains no stated limitation of the kinds of loss or damage that may be recovered and contains no express indication that some kinds of loss or damage are to be regarded as too remote to be recovered": Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at [34], which is consistent with the provision extending to a wide range of contravening conduct, including each of innocent, negligent and fraudulent misrepresentation.

Consideration

1. Fowler Homes said that the case that was run did not extend to one which included a claim for damages for breach of contract. Further, Fowler Homes contended that considerable legal significance attached to the decision not to seek an amendment. It is convenient to deal with this latter point immediately.
2. Fowler Homes said that Joe and Matthew should have made the application to amend, as a result of which there would have been a ruling, from which the disappointed party could appeal. It is true that the failure to make an application meant that there was no ruling, but I cannot agree that the forensic decision not to make the application stands in the way of, or indeed in any way affects, the answer to either aspect of this ground. In particular, I do not accept Fowler Homes' submission that "by then not making the amendment application, that can also be understood as the plaintiffs accepting that that part of the claim was not part of the pleaded case". As was pointed out by members of this Court at the hearing, and by Mr Herzfeld in reply, either the pleadings disclosed a cause of action for damages for breach of contract or they did not, and if they did not, then either the trial had been conducted in such a way that that case was in play or it was not.
3. It is tolerably plain that counsel for Fowler Homes regarded as a live issue whether foregone rent was recoverable damages, or something which was outside the scope of what the company had promised. In addition to opening on the point, he cross-examined on that basis, and even after the exchange of written submissions and after his opponent had been confronted by the primary judge with the proposition that it was outside the pleadings, continued to address on why there could be no contractual obligation to pay damages for lost rent.
4. Conversely, at no stage was it said on behalf of Fowler Homes words to the effect that "although my opponent keeps referring to Hadley v Baxendale, we are here to defend the claims advanced on the pleadings, which are claims for damages based on statutory unconscionability and, in the case of Joe, deceit, and there is no claim for damages for breach of contract". To the contrary, Fowler Homes engaged with the issues of reasonable foreseeability, in opening, in cross-examination and in closing address.
5. "Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted": Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 287; [1990] HCA 11. Here, each counsel explicitly opened and cross-examined on the basis that whether foregone rent was within the parties' expectations was in issue. That question was unequivocally referable to a claim for damages in that amount for the delayed performance by Fowler Homes.

Was the lost rent proven?

1. These grounds of appeal may be addressed much more concisely. They have two components. The first concerns a challenge to the rejection by the primary judge of the entirety of affidavits sworn by Mr Nick Alexopoulos in each proceeding. He was an experienced real estate agent operating in the area who purported to give expert evidence of the likely rentals which the completed dwellings would achieve. His opinions were scarcely supported by reasoning, and mentioned no comparables. The entirety of his report was excluded on the basis that no reasoning was disclosed, in accordance with Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305.
2. In this Court, it was not suggested that there was error in rejecting that evidence as expert opinion evidence. Instead, Joe and Matthew submitted that Mr Alexopoulos was more than an expert witness. It was said that substantial parts of his evidence should have been admitted as evidence of primary fact. For Mr Alexopoulos said that he had met the appellants in around 2013 when he had acted as the selling agent for Joe on a property. He said "Joe and I quickly became friendly and have stayed in touch since". He gave evidence of a conversation in January 2019 where he gave an estimate of the likely rentals for two duplexes on each of the properties which were "going to be four bedders with two bathrooms and single garages" but with high level finishes. He also gave evidence of his conduct in actually marketing the properties for rent in April 2021, and annexed leases which had been entered into over the properties.
3. In this Court, Joe and Matthew contended that so far as the real estate agent gave evidence of what in fact had happened, both before and after the dwellings had been completed, that was evidence that bore upon the likely rents: in the case of the evidence before, as admissible evidence bearing upon the rents to be achieved, and in the case of the leases, at least insofar as they were arms-length transactions, they were capable of bearing upon the rentals that would have been achieved had completion occurred in accordance with the contract. No such submission was made at trial.
4. Further, in this Court - in contrast to the position below - it was conceded that the properties had some value for rent. Mr Bedrossian, who led Mr Stitt in this Court and had not appeared below, conceded candidly: In our written submissions we accept that, and I'll be blunt about this, his Honour was wrong to reject the leases as being irrelevant. I accept that. There were fundamental problems with that affidavit as an expert report but the leases themselves were at least some identification of the value of the properties. I accept that. I also accept, as I hope we fairly have done in our written submissions, that it would be absurd to say that the properties when finalised had no rental value.

The liquidated damages clause

1. By notice of contention, Fowler Homes sought to rely upon the liquidated damages clause of $1 per day, if Joe and Matthew were regarded as having run a case for damages for breach of contract and have proven substantial damages. For the reasons indicated above, I have concluded that Joe and Matthew have established both of those premisses.
2. No point was taken that the effect of upholding the notice of contention would not, strictly, be to affirm the decision on grounds other than those relied on below, without seeking "a discharge of variation of any part of the orders of the court below", within the meaning of UCPR r 51.40. Acceptance of this point would have the effect of substituting for Fowler Homes' complete success on this issue a judgment in the order of $600 or $400 ($1 per day from either July 2019 or January 2020 until April 2021). But the basic principle is that the rules of court are the servants of justice, not its masters (see for example Hodder Rook & Associates Pty Ltd v Genworth Financial Mortgage Insurance Pty Ltd [2011] NSWCA 279 at [38]). The notice of contention was a perfectly appropriate way of flagging what was an alternative defence to the substantial entirety of Joe's and Matthew's claim.
3. The liquidated damages clause had not been pleaded. Joe and Matthew said that it could not be relied upon in the appeal, because if it had been relied upon, it would have been contended that it was unenforceable pursuant to the Contracts Review Act 1980 (NSW), and that would have required the Court to make factual inquiries which were not made. I think that point is sound. Prima facie, a clause which disentitles a party from claiming substantial damages from its builder for the builder's breach is capable of being "unjust" within the meaning of the Contracts Review Act, there is no reason to doubt that Joe and Matthew would have responded in some way to a claim that any damages to which they were entitled for delay were limited to $1 per day, and if they relied on the Contracts Review Act there is a range of factual considerations in s 9(2) regard to which would have been mandatory. They included the extent to which this aspect of the contract was negotiated, whether or not it was practicable to do so, whether the clause was reasonably necessary for the protection of the legitimate interests of Fowler Homes, and whether the effect of the clause was explained to Matthew and Joe. All of this would have affected the testimonial evidence of Joe, Matthew and the cross-examination of Mr Grippaudo; cf Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33.

Was there error in rejecting Joe's claim that he paid $60,000 in cash?

1. Joe at all times maintained that he had paid part of the consideration, in the amount of $60,000, in cash. In his affidavit, he described a conversation at the beginning of July 2018, in which he and Mr Grippaudo agreed that $60,000 would be paid in cash, following which, a few days later, Mr Grippaudo visited him at home where Joe had the cash ready to hand in $10,000 bundles, comprising four bundles of $100 notes and two bundles of $50 notes, which he placed in a plastic bag from Woolworths. He said that Mr Grippaudo did not want to count it, and that on around 27 November 2018, he received a receipt, in the amount of $59,963.95.
2. Joe said that he had told Mr Grippaudo that he would need a receipt "because I need to show the bank that I paid the deposit". Joe Carbone said that he had considerable amounts of cash from time to time because he was a member of various casinos, where he was considered a "high roller". Annexed to his affidavit were photographs of the displays of poker machines, showing substantial amounts in credit. All were undated save for one, which showed a payout from Crown Casino Melbourne of $14,300 in March 2017.
3. Mr Grippaudo denied receiving any cash payments from Joe Carbone. He said that some clients did pay amounts in cash, although never as much as $60,000, and he invariably banked those amounts.
4. Such strength as there is in Joe's allegation derives from an email dated 27 November 2018 by Ms Michelle Franic, whose email signature described her as a "team assistant" with Fowler Homes, to Matthew annexing, among other things, a receipt of the same date, referring to the land owned by Joe and stating that $59,963.95 described as "part payment received for frame" had been received. The email advised that Ms Franic had completed the progress payment request form required by RAMS, and they were attached. It also stated that: Also attached is a receipt for your part payment of $59.963.95 towards the Frame invoice - this will need to be provided with your Frame Invoice & Progress Payment Request Form to RAMS to prove you have paid your contribution as per your progress payment schedule. (emphasis in original)
5. By letter dated 10 August 2018, RAMS (the non-bank lender which had promised to fund Joe's and Matthew's construction costs) had advised Joe that he could authorise his builder to commence construction. RAMS had approved a building contract in the fixed price of $651,541, and was providing $559,000 for construction. The balance to be provided by Joe, of $92,541, comprised a deposit of $32,577.05 and a partial payment for the frame of $59,963.95.

The provisional amounts

1. These final grounds in each appeal concern amounts of $20,000 which were originally included as a "Provisional Allowance" in each contract. The "New Homes Tender" was incorporated into the contracts, and that document identified a "Provisional Allowance" of $20,000 for a range of matters including s 94 contributions. It was common ground in this Court that the s 94 contributions, which were in fact of $30,000, were paid by Joe and Matthew directly, and not by Fowler Homes. Joe and Matthew said that they should have had the benefit of the $20,000 provisional amounts when the referee was preparing his report. Joe and Matthew said that they should have been included, and were not included because of an incorrect direction from the primary judge.
2. The referee's report stated: His Honour ruled the plaintiff should not receive the credit for a provisional allowance of $20,000. The Judgement dated 17 February 2023 (refer to Attachment B paragraph 44) set out his Honour's comments in relation to the $20,000 provision.
3. Paragraph 44 of the principal judgment is as follows: The conclusion that the s 94 contributions never formed part of the Building Contract in my view is clear, as what I have referred to as a grossed up provisional allowance of $20,000 in clause 34 of the New Home Tender could never be dealt with under the procedures set forth in clause 20.6 of the contract. This is so as there is no specific provisional allowance sum to which the s 94 payment could be attributed, as was the mandatory requirement under clause 20.5.
4. On that basis the referee excluded the $20,000 provision from the calculations which led to an amount to which Matthew was entitled.
5. The respondents did not seek to defend this aspect of the reasons of the primary judge. They made two points in response. The first was that the inclusion of an amount by way of "provisional sum" created no contractual entitlement, and "[a]bsent an invoice from the Respondent seeking payment of that $20,000 amount, there was no obligation against which any credit could be (or would need to be) applied. There was no evidence of any such invoice". Secondly, by way of notice of contention, they submitted that the contract had been varied by Building Variation 7 (in the case of Matthew) and Building Variation 11 (in the case of Joe). The effect was to delete item 34 from the scope of the contract. Consequently, it was submitted that "[t]he conclusion reached by the learned Trial Judge at PJ [44] was correct, albeit also for a reason different to that identified by his Honour."

Orders

1. The appellants' primary case was that damages for lost rent should accrue from July 2019, on the basis that thereafter Fowler Homes was in breach. It was said that the fact that after the parties fell into dispute there were disputes about payment was the wrong counterfactual, and instead the Court should ask what position Joe and Matthew should have been in had everything been performed properly and completed by July 2019. I do not accept this.
2. First, it is clear that Joe was in breach of his obligations to pay progress payments. It is sufficient to point to the email of 27 November 2018 attaching the receipt which was to be used to cause RAMS to make the next payment. The email commences: As discussed with Matthew, I have spoken with your broker regarding outstanding payment of your invoices.
3. It goes on to say: (emphasis in original) We would appreciate you doing this as a matter of urgency as payment is well overdue. Senior Management have kindly provided an extension in order for you to complete and return all necessary paperwork. Should you not assist in forwarding all necessary paperwork as above, your job will be placed on hold.
4. The contract draws a distinction between the automatic extension of time given to Fowler Homes whenever a progress payment was not made within five days of the due date (special condition 9) and the power of the builder to suspend work under cl 25. The latter required notice (cl 25.2) while the former was automatic.
5. Further, the referee observed that from his review "Joe consistently paid the defendant's claims late".
6. I am unpersuaded that Joe paid all of the amounts required to be paid by him on time. It is not quite clear to me whether the primary case advanced on behalf of Joe was independent of his achieving success on the payment of $60,000 in cash; my impression was that case was advanced, but only relatively lightly. Once Joe's claim that he paid $60,000 in cash is rejected, it is tolerably clear that he was in breach of his obligations to make payments, and the automatic extension of time effected by special condition 9 applied. (I am likewise unpersuaded that Fowler Homes waived its entitlement to an automatic extension under special condition 9, a point I mention only for completeness because I did not understand this to be made by way of fallback.)

Amendments 03 September 2024 - file number of earlier proceeding in coversheet changed from "2023" to "2020". 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: 03 September 2024