Construction & Design Australia Pty Ltd v Robinson

6 Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (1924) 20 Ll L Rep 140 South Parklands Hockey & Tennis Centre Inc v Brown Falconer Group Pty Ltd (2004) 88 SASR 65; [2004] SASC 81 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 Watson v Foxman (1995) 49 NSWLR 315 Watts v Rake (1960) 108 CLR 158; [1960] HCA 58 Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327 Texts Cited: Rawlinsons Construction Cost Guide (32nd ed, 2024) R V Miller, Miller's Australian Competition and Consumer Law Annotated (45th ed, 2023, Thomson Reuters) Category: Principal judgment Parties: Construction & Design Australia Pty Ltd ACN 168 477 316 (Plaintiff/Cross-Defendant) Nerida Robinson (First Defendant/Cross-Claimant) Mark Bowmer (Second Defendant/Cross-Claimant) Gerard Peter Turnbull (Second Cross-Defendant) Daniel John Turnbull (Third Cross-Defendant) Representation: Counsel: M Klooster / M Waters (Plaintiff/Cross-Defendants) A Crossland / B Flaherty (Defendants/Cross-Claimants)

Solicitors: ZBA Lawyers (Plaintiff/Cross-Defendants) PDC Law (Defendants/Cross-Claimants) File Number(s): 2020/52689

JUDGMENT

1. Nerida Robinson and Mark Bowmer, who I will call the "Owners", purchased a vacant block of land in Kiama in September 2017.
2. The property is deeply sloping in parts and has spectacular views, including to the Pacific Ocean.
3. The Owners approached a number of builders concerning the possible construction of a home on the property.
4. Ultimately, in July 2018, the Owners approached the plaintiff, Construction & Design Australia Pty Ltd, who I will call the "Builder".
5. The two directors of the Builder are brothers, Daniel Turnbull and Gerard Turnbull.
6. The Owners commissioned the Builder to prepare a design for a home to be constructed on the property. The Builder did so. The local council gave development consent in respect of the proposed dwelling on 31 January 2019.
7. On 15 February 2019, the Builder and the Owners entered into an HIA NSW Residential Building Contract for Works on a Cost Plus Basis (the "Contract"). The Contract obliged the Builder to construct a "two storey dwelling with detached garage, pool, retaining walls and garden shed".
8. Work commenced in March 2019.
9. Work progressed until September 2019, when the Builder suspended works.
10. By then, the Owners had paid the Builder some $550,000. The lower floor structure works, and ancillary works, including excavation, were then complete.
11. The Builder terminated the Contract on 6 February 2020.
12. There is no dispute that the Builder was entitled to suspend the works and terminate the Contract.
13. The Builder claims that the Owners are obliged to pay it a further amount in the order of $270,000, as well as damages for loss of profit, and seeks to recover those amounts in these proceedings.
14. However, the Owners allege that the Builder, by its directors, represented to the Owners that the cost of building the completed dwelling on the property would be around or not substantially more than $550,000, or alternatively around or not substantially more than the Owners' stipulated budget of $750,000.
15. The Owners contend that these representations were as to future matters and made without reasonable grounds, and thus constituted misleading or deceptive conduct within the meaning of s 18 of the Australian Consumer Law ("ACL"). [1]
16. The Owners contend that, but for the alleged representations, they would not have entered the Contract, would have sold the land and, with the proceeds of sale, bought a finished home elsewhere in Kiama. The Owners thus seek to make out both a "no transaction" case and an "alternative transaction" case.
17. The Owners seek damages of $1,039,497.12, calculated in accordance with the attached schedule, which was handed up in opening submissions by Mr Crossland, who appeared with Ms Flaherty for the Owners. Defendants' Quantum of Claim (115907, pdf)
18. There is no dispute that, if established, the Owners' misleading or deceptive conduct case could be raised as an answer to the Builder's case to recover the further amount claimed by the Builder. [2]

The alleged representations

1. The Owners allege that the Builder, Daniel, and Gerard, made three representations.
2. First, the Owners allege that Daniel, and thus the Builder, represented that the cost of building the dwelling on the property, as designed by the Builder, would be about, and not significantly more than, $550,000. This is described as "the $550,000 Representation". This representation is alleged to have been made orally by Daniel in a disputed conversation at a meeting on 30 August 2018.
3. Second, the Owners allege that Gerard, and thus the Builder, represented that the total cost of items listed in a spreadsheet that Gerard sent the Owners on 24 January 2019 would be about, and not substantially more than, the total of $457,000 listed as the "4-month subtotal" in that document. The alleged representations in the spreadsheet are called "the Spreadsheet Representations".
4. Third, the Owners allege that Daniel and Gerard, and thus the Builder, represented that the Builder could build the dwelling on the property within the Owners' budget of $750,000 or alternatively that the sum required to build the dwelling would be about, and not substantially more than, $750,000. These representations (the "$750,000 Representations") are said to arise by "one or more" of the $550,000 Representation, the Spreadsheet Representations, and: 1. a statement by the Builder in a document sent by Gerard to Nerida on 1 February 2019, shortly before the parties entered the Contract, in respect of payment of a long service levy that stated that the "estimated value of work" for the project was "$750,000"; [7] 2. a statement in the Contract that "Total Estimated Funds" was $750,000; [8] 3. a statement by the Builder in a document sent by Gerard to Nerida on 14 March 2019, a month after the parties entered the Contract, stating that the "Contract Amount" of insurance obtained under the Home Building Act 1989 (NSW) was $750,000; [9] and 4. the Builder's alleged failure to disclose or state prior to the parties entering into the Contract that the cost of building the dwelling would be considerably in excess of $750,000 (referred to as "the Silence Conduct").
5. Determination of whether these representations were made and, if they were, whether the Owners relied on them in deciding whether to enter the Contract, requires careful consideration of the considerable body of correspondence between the parties both before and after execution of the Contract.

Decision

1. I am not persuaded that any of the representations was made, save for that at [30(a)] above.
2. However, I am not persuaded that this representation played any role in Nerida's and Mark's decisions to enter the Contract.
3. The Builder has established its case under the Contract, save for its claim for damages for loss of profit.

The Owners' budget and available funds

1. At the time Nerida and Mark met Daniel and Gerard, they were living in a duplex in Kiama that they had bought in 2015, having borrowed 100% of the purchase price.
2. They had by then sold another property in Berry, the proceeds of which were some $1.6 million.
3. Nerida and Mark had used around half of the net proceeds of the Berry property to purchase the subject property and had around $750,000 on deposit.
4. Their ambition, particularly that of Mark, was to achieve construction of a house on the property without further borrowings.
5. It is in those circumstances that there are numerous references in the evidence to Nerida's and Mark's "budget" for the build being $750,000.
6. In a letter of 18 September 2019, sent after relations between the parties had broken down, Daniel acknowledged that "you came to us with a budget of $750k for the house construction and another $100k for the pool". [10] However, as I set out below, it appears that Nerida's and Mark's expectations as to what could be included in the house for that price lie at the heart of the position they now find themselves in.

First communications - July 2018

1. The first communication between the Builder and the Owners was on 17 July 2018, following a website enquiry by Mark.
2. Daniel wrote: "Thanks for sending through the website enquiry. … Typically we design and construct custom homes for our clients. We normally do the design with no obligation to run with us for the build but we build about 90% of our designs. The design phase is a bit of an investment of our time that pays off during the construction stage. Do you have a builder in mind to do the work or are you open to us putting in a quote for the construction phase once the design is passed through council? We are certainly keen to meet up and discuss your project, but if there is no prospect of us doing the construction, we would prefer to focus our resources into projects that are the complete design & construct. We've actually design[ed] a couple of other homes on [the street in which the subject property is located] recently. We have one under construction … being a Hamptons styled home, and another modern home … that we did for a client that already had a builder."
3. Mark replied the same day: "Thanks so much for your comprehensive reply. We are certainly open to using the one person for design and build - in fact, that is probably our preferred option ... I have attached a contour plan of the block. The challenge with this block (and why we suspect the original owners sold) is the 1 metre asset protection zone along the western boundary. It means the build can't go across the slope but, to a certain extent, has to go down it. We have lots of ideas for what we'd like and have written a brief. Our big question before we start however is what sort of price per square metre a build on a block like this would come in at."
4. Daniel replied the following day, on 18 July 2018: "To answer your question of how much to expect per square metre to build on a block such as yours, there are a few factors that come into play. I had a quick walk on your site today and have made the following assessment: - Cost associated with accessing the site for construction would be a little higher than average given the narrow street frontage. … - The steepness of the site would make construction cost higher than a project on a flat site. - There is evidence of the rock shelf being close to the surface. The trick will be to design the house so that there is minimal excavations. If this is done [then] the shallow rock will be a slight advantage as the footing system will be shallower. - The cost of running services from the kerb to the likely position of the house would be higher than average. The biggest factors to the square M rate of the house will be the site conditions mentioned above, the intricacies of the design, the size, and the inclusions in the house. A starting point for a custom built home on a block such as yours would be about $1800/m2 at the lower end, $2000/m2 as an average and upwards from there depending on how far you would like [to] go. Given the nature of the area we commonly build in we have quite a bit of experience in designing on challenging sites. Typically our contracts range from about 600k through to about the 850k mark. We do our best to design to the budget of our clients". (Emphasis added.)

The 24 July 2018 meeting

1. Nerida and Mark met Daniel and Gerard at the site on 24 July 2018. There is disagreement as to what was said. Nothing said at this meeting is relied on as forming part of any of the representations on which the Owners rely. However, the meeting provides important context for what followed.
2. First, there is disagreement between Nerida and Mark as to what was said.
3. According to Nerida, the following conversation took place: "Nerida: We need to stick to our budget of $750K inclusive of everything. We don't want to waste time because delay means more mortgage payments, office rent and storage fees. We need a design that's going to come in within our budget. Daniel: That's doable. Mark: You can build what we want here for $750,000? Daniel: Yes. [Mark]: Does that include the pool? [Gerard]: Yes." (Emphasis added.)
4. Mark's account of the conversation was that he and Daniel said: "Mark: We understand it is a steep site and we're looking to get a fair bit into our budget as per the brief Nerida's prepared. Daniel: We work on 2 bases. We can do a cost plus or a standard contract. Because Kiama is notorious for its rocky ground, it's very difficult to know how much groundworks cost so if we go with a standard contract we always have to include a buffer to cover ourselves for unknowns. A cost-plus contract will probably end up cheaper for you because you only end up paying for the actual costs."
5. Mark said that the meeting concluded with this exchange: "Mark: So, you can build us a house for $750,000? Daniel: Yes. [Mark]: Does that include the pool? [Gerard]: Yes." (Emphasis added.)
6. Mark agreed, in answer to questions from me during cross-examination, that he would not have asked Daniel and Gerard whether they could build what "we [wanted] for $750,000" because "Gerard and Daniel didn't then know what [we] wanted".
7. Daniel gave a very different account of the conversation, as follows: "Nerida: How does your company operate? Do you work on a fixed price contract, or do you do cost plus? [Daniel]: We are happy to do either, it is up to you. Which way [would you] like to go? Nerida: We're not sure. [Daniel]: When you have a complicated site such as this one it can often work out cheaper for you to work on a do-and-charge basis. For a fixed price contract, we need to price [for] the worst case scenario to cater for the unknowns. Most of our projects are done under a fixed price contract. Nerida: We were hoping to spend 750k on the development, do you think that is realistic? [Daniel]: Without a design being done and us going through the process of quoting the design, I have no idea, especially on a complicated site like this. At this point I haven't been through your design brief in detail. Nerida: We knew that we were buying a tricky site. My brother who is in the construction industry told us not to buy this block. We just couldn't go past it with these views. What do you see as being the main factors that will make this a tough build? [Daniel]: The obvious one is how steep the site is. Excavation costs are higher, there's a heap of rock that I can see already, who knows what we will find when we dig. There are access problems as well, the narrow frontage will make deliveries tough. The site is far too steep to drive trucks down. Basically, everything will need to be dropped up at the kerb and carried down by hand. Mark: What sort of rates do you work on? [Daniel]: On cost plus we just have our set rate of $65/hr for us and the boys and charge a 12.5% builder's margin on top. If it is a fixed price we apply the same rates, it is a matter of estimating how much time each task will take and applying the rates. We also include some allowances for contingencies. We can give you a total price for the project after it's gone through Council. Nerida: How long does that take? [Daniel]: A realistic time frame for the design process is six months." (Emphasis added.)

The 3 August 2018 meeting

1. That led to a meeting between Nerida, Mark, Daniel, and Gerard at Daniel's home. There is disagreement as to what was said although, once again, nothing said at this meeting is relied on by the Owners as forming part of the alleged positive representations.
2. Each of Daniel and Gerard gave a detailed account of what occurred at this meeting.
3. Daniel's account of the meeting was as follows: "[Daniel]: I've reviewed the design brief in detail, this is not just a four-bedroom house. You want additional rooms, high-performing windows and building materials incorporated with an efficient solar system and a swimming pool. Nerida: I know. [Daniel]: The budget won't cover everything you've detailed in the brief. To this point you have been referring to a four-bedroom home. A standard four-bedroom home that most of our clients ask for consists of four bedrooms, two living areas with two and a half bathrooms and a laundry. You have detailed so much more in your design brief. You won't be able to get all of that for 750k. Nerida: I had a feeling you would say that. We know we are asking to squeeze a lot of building into the budget. [Daniel]: It's not uncommon for clients' expectations to exceed their budget. Nerida: Can you give any indication on cost? [Daniel]: I can't give you an estimate for the project until the design is done and properly costed. I have been doing this long enough to know not to just take a guess. Your 750k budget is [definitely] under fire, if not shot to pieces. How much by I can't say at this point. Nerida: Our budget is 750k because that is how much cash we have on hand after the sale of our last property and purchase of this land. We were hoping to finish up the development and be mortgage free. This is going to be a forever home, so we have put a lot of thought into what we want and how we want to live in the house. [Daniel]: It's a tough site so any development is going to be costly. Nerida: We made compromises to keep costs down that we regretted when we built our last house. If being mortgage free isn't realistic and we have to go to the bank, we will. We are keen to get moving." (Emphasis added.)
4. Gerard gave this account of the meeting: "Daniel: The design brief is more than a standard house. Typically, this would include 2 living areas, four bedrooms, a main bathroom and a powder room, an ensuite, and a laundry. Nerida: Yes. Daniel: The brief details a number of additional rooms, multiple recreation areas, extensive landscaping, a pool, and a number of high-end inclusions to make the house as energy efficient as possible. $750,000.00 won't cover all of that. Nerida: We know we are asking a lot. This is going to be our forever home. The budget is $750,000.00 because that's how much cash we have left over from the sale of our house in Berry after buying this block. If we have to go to the bank, we will. Daniel: It's a very tough site. Nerida: I know, we need to get moving. We've already wasted a year with another builder." (Emphasis added.)

The "Key Budget Email"

1. Following the 3 August 2018 meeting, Nerida sent Daniel and Gerard an email that Mr Crossland and Ms Flaherty described as the "Key Budget Email".
2. As this email was sent immediately after the 3 August 2018 meeting, its terms are likely to cast light on what was said.
3. The email included: "We're very happy to answer any questions about our finances etc. As we mentioned - we have $750,000 in the bank left over from the sale of our Berry property last September. We are ok with borrowing for fences, landscaping and the pool - but no more than $100,000. We bought the duplex we are living in … three years ago and moved straight into it - renting out Berry. We borrowed 100% for the purchase of the duplex however it has gone up in value, so if we have to, after we move to [the property], we could sell the duplex and probably clear $120,000 to cover any borrowings for pool etc. We'd prefer not to as we bought it as our 'super' plan." (Emphasis added.)
4. Nerida's reference to being "very happy to answer any questions about our finances" suggests that there was some discussion at the 3 August 2018 meeting as to how Nerida and Mark would fund the construction. Gerard agreed that he had asked Nerida and Mark about "their ability to pay for the project". Daniel said he had not done so, but in a context that did not, contrary to the tenor of Mr Crossland's submissions, involve an implicit assertion that such an enquiry had not been made at all.
5. Nerida's reference to the possibility of selling "the duplex" to "cover any borrowings" to the extent of $120,000 suggests two things. First, that there had been a discussion at the meeting as to whether $750,000 would be sufficient to cover all of the matters specified in Nerida's design brief: design, council fees, driveway, retaining walls, terrace, fences and a solar-heated pool. This is consistent with the evidence given by both Daniel and Gerard that they had stated at the meeting that $750,000 would not cover everything in Nerida's brief.
6. Second, Nerida's 3 August 2018 email also suggests that she and Mark were contemplating that they may have to borrow funds to complete the build, albeit on the basis that any borrowing would be temporary and able to be cleared from the proceeds of the sale of the duplex.
7. Mr Crossland submitted that it would be unlikely that Nerida would "have written an email restating that her budget was $750,000" if, as Daniel said, he had stated that the $750,000 budget is "definitely under fire, if not shot to pieces".

The 30 August 2018 meeting

1. On 30 August 2018, Nerida and Mark visited Daniel at his home. By then Daniel had a completed a design of a proposed home for the property.
2. It was at this meeting that Daniel allegedly made the $550,000 Representation.
3. Nerida deposed that, "Daniel showed us the design on a computer screen at his house. It was not what we were expecting but we liked it".
4. Nerida gave this account of what was said at the meeting: "Mark: Can you build this for our budget? Daniel: I can build it for $550,000. Mark: Really? Daniel: Yes, it's a pretty simple construction because of the traditional shape. That means it's cheap to build." (Emphasis added.)
5. Mark said that, after looking at the proposed plans he said to Daniel, "so, you can build all this for $750,000", and that Daniel replied, "I can build it for $550,000".
6. Daniel gave a very different account of the conversation, that included: "[Daniel]: What do you think? Nerida: It's not what we were expecting but I like it. [Daniel]: There's a huge amount of sub-floor walls and retaining walls that we need to build to achieve floor levels and level grounds due to the steep site. I've done my best to minimise it but on a site like this cost is unavoidable. Nerida: What do you mean? [Daniel]: Take this area underneath the office as an example. By the time you set the garage at natural ground level on its entry side and then project the depth of the garage and the depth of the office, the supporting walls below are as tall as a full storey because of how steeply the land drops away. You have basically paid for the shell of a room that does not get used. Mark: If we need to pay for it anyway then how about we turn it into a room? I could possibly use that for my music room. That looks like a fantastic spot for a man cave. [Daniel]: Sure, if you'd like. Mark: Is that lower section under the garden the same situation? Could we dig that out level as well so that we can hide the water tank, pool equipment and put some of my gardening tools in there? [Daniel]: Can do. It still will add costs though. Mark: Yeah, but to have my own space for my guitars and woodworking tools that is separate to the office/garage and being able to hide the water tank and pool gear would be money well spent. [Daniel]: We can incorporate whatever you want, we do have to be conscious of the size, there is a lot of building here. Any other changes? Mark: I'd like a lap lane in the pool, could we bring one across the front of the deck here? [Daniel]: Sure, any other adjustments? Nerida: I don't think so. What about the price? [Daniel]: Engineering will play a major factor on this site so it's hard to estimate the cost for this build. It's a steep site with a lot of rock. I just don't know how much it will cost to get it out of the ground. This will be where a lot of the money will be spent. Nerida: Is there any way you can give us a ballpark figure? [Daniel]: If you wanted to compare it to a house we are doing up the road to get a feel for current construction costs, the contract for it is around $620,000.00. It's on a dead flat site and is a basic house. Nerida: That sounds reasonable. [Daniel]: Hold on, getting to floor level for your project is going to be the element that has the biggest unknowns in terms of cost. The size of the house up the road is equivalent to just the main living area of your house. You can expect a similar cost for your main living area once floor level is achieved, maybe around $550,000.00. Mark: Really? [Daniel]: That part of your project is quite a simple construction, it's getting to that point that is the difficult part. Nerida: Right, so around $550,000.00? [Daniel]: At a guess, but you still have all the cost to get the ground floor slab down, and the $550,000.00 is only for the main living section of the house. You still have the cost of the garage and office pavilion, all the retaining walls, your pool, the decks, the suspended garden area and the driveway. If you add all your floor areas up, your project is nearly double the size of the one up the road. Nerida: I know how it goes; everything is way more expensive than you expect. If we need to sell the unit and go to the bank to fund the project, we will. It's a fantastic block with the views and its location. I've spent a lot of time thinking about this house and don't want to compromise." (Emphasis added.)

Further emails

1. Shortly after the meeting, Daniel emailed to Nerida a copy of the "preliminary plans for your project". These were slightly, but not substantially, different from those Daniel showed Nerida and Mark on his computer at the meeting.
2. Later, on 30 August 2018, Nerida wrote to Daniel: "I can't begin to tell you how grateful we are for the effort you've put into this and how excited we are about the plans and the build. We also really appreciate how quickly you're getting it all done."
3. Nerida made no reference in this email to the alleged $550,000 Representation.
4. On 1 October 2018, Nerida wrote a lengthy email to Gerard making a number of comments about the proposed plans.
5. Gerard replied on 5 October 2018. In relation to Nerida's enquiry about a matter of detail, Gerard said: "There's no need to nominate that sort of stuff at this stage but we will keep it in mind when it comes to quoting and specifications after Council approves the project." (Emphasis added.)
6. Gerard's statement about keeping matters in mind "when it comes to quoting" appears to be inconsistent with Gerard or Daniel having earlier given any quotation for the cost of the build.
7. The preliminary plans sent to the Owners on 30 August 2018 were revised in the following weeks.
8. On or about 7 November 2018, the Builder lodged a development application with the Local Council.
9. On 9 November 2018, Daniel wrote to Nerida and Mark: "As I'm sure you know, Gerard has submitted your plans to council this week … The next step to progress the project is to do the structural engineering. I have sent your plans through to our engineers for a fee proposal which we will receive shortly. They have identified the need for a geotechnical assessment to be done on the site in order for them to be able to complete their structural design."
10. On or about 13 November 2018, the Builder engaged D&M Consulting Pty Ltd as structural engineers for the project.
11. On 13 November 2018, Nerida wrote to Daniel approving a quotation for the engineering costs and continued: "At this stage we're thinking we'd like to work on cost + 12.5% for the build (if we're remembering the two options accurately). As long as we get some idea of costings before we start we're happy to tweak and adjust items to keep within our budget as we go." (Emphasis added.)

The 16 November 2018 meeting

1. On 16 November 2018, Daniel met Nerida at her home.
2. Daniel gave this account of the meeting: "[Daniel]: Now would be a good time to begin a cost estimation. Without the engineering it will be a best guess for a lot of it, but we can get a ballpark on cost. We can make adjustments to this once we have the engineering. This will give you a chance to make reductions to the scope if the costs are shaping up too high. Nerida: Honestly, there really isn't anything that we would be willing to compromise on. We have put a lot of thought into this, and it is exactly what we want. What is involved for you to do the cost estimation? [Daniel]: To do an accurate material take off which we can apply some rates to, would be about five days' work for both Gerard and me. We usually put an allowance into a fixed price contract of about $5,000.00 to cover tender costs, if you guys still want costs plus we will just charge you an hourly rate for the time we spend on it. Nerida: I don't think you should waste your time or go to the expense. We don't want to change anything, so it is what it is. We are just going to have to make smart [choices] along the way to build what we want as economically as possible. [Daniel]: Are you sure? Nerida: Yes, when the time comes for us to go to the bank we will. I have a friend that is a broker, it will be easy to get the money. [Daniel]: Okay. Nerida: We'd prefer a cost plus contract. I know you need to cover yourself if you are doing a fixed price. I feel on a block like ours if we are just paying for the work that gets done then we would probably get more bang for our buck. [Daniel]: Yes, you most likely would. Nerida: Mark and I have decided that we would like to go with a concrete slab for the upstairs floor. [Daniel]: No worries, I'll let the engineer know. (Emphasis added.)
3. Nerida denied that this conversation took place. Daniel's account in the first emphasised passage about beginning a cost estimation is, however, consistent with the statement in Daniel's 13 November 2018 email about using his estimating software to get a "ball park on cost" and Nerida's response on 14 November 2018. [17] Daniel's account in the second emphasised passage about Nerida going to the bank is consistent with Gerard's and Daniel's earlier evidence concerning what Nerida and Mark had said about that topic, and with Nerida's 3 August 2018 email.

14 January 2019

1. On 14 January 2019, Nerida wrote to Daniel and Gerard: "Mark and I are trying to find a good place to 'park' our building fund while we build so we can maximise the interest - we're currently on a rubbish rate! To help us decide what amounts we can put where, and for how long, we were wondering if you could possibly give us a rough idea of ● Total build costs ● What amounts we will need and when These don't have to be exact. We'd like to park some of the funds in a 4 month account but can't touch that amount, so maybe even an idea of what amounts we will need in the next 4 months would be great." (Emphasis added.)
2. Although in this email Nerida enquired as to obtaining a "rough idea" of "total build costs", she made no mention of the alleged $550,000 Representation. The fact that Nerida asked for a "rough idea" of the cost appears to be inconsistent with Gerard or Daniel having earlier given any assurance about likely cost.
3. At about this time, the Builder engaged a geotechnical engineer. On 15 January 2019, Daniel sent the geotechnical engineer's report to Nerida under cover of an email: "Please see attached the Geotech report for your property. The results were as expected. In summary: - Expect to hit rock between 0.5m - 0.9m - Footing system to be designed for 'moderate reactive soil' - Site classified as 'P' site (problem) due to steepness - The proposed dwelling and pool is suitable for the site"
4. On 18 January 2019, Nerida wrote to Daniel, with a copy to Gerard, under the heading "Approx payment schedule": "Any chance of getting an idea of what funds we'll need in the next 4 months yet … or an approx. payment plan? Even knowing what we'll need between now and end May would be great."
5. Gerard replied on 24 January 2019: "Thanks for your patience on this one. In order to do this we needed to figure out a rough work schedule and quantities which is pretty involved. It's also somewhat subject to change due to the engineering not having been completed yet and the early stages are heavily influenced by it. To help you understand the expected costs we need to set out the way the Cost Plus contracts work. I think we've discussed this in the past that our builders margin is 12.5%. This is applied to all the costs that we incur for the build including labour and all invoices. The labour rate for our boys (meaning all the carpenters plus Daniel and myself) is $65/hr plus GST. All other sub-contractors invoice us for their time and materials, so those will be passed on at cost plus. … More relevant to your question though is what costs you will be up for in the next four months. I've put together a spreadsheet showing the rough estimates for the upcoming months. I've gone pretty heavy on the rates so I'd expect it to come in lower than shown in the table. I think if we prepare for worst case $450K in the next 4 months, that should be heaps. In reality I think it would be less than $400K. The numbers for February should stack up pretty accurately and there should be a fair bit of fat in the remaining months." (Emphasis added.)

The long service levy

1. On 1 February 2019, Gerard wrote to Nerida stating that "we'll need a receipt showing payment of the long service levy" and asking Nerida to complete payment by going to a website address embedded in the email and "[copying] the details shown in the attached screenshot".
2. Nerida paid the levy fee on 1 February 2019.
3. The attached screenshot was in the following form:
4. As can be seen, that screenshot stated that the "Estimated Value of Work" was $750,000.
5. This statement is said to be one of the elements giving rise to the $750,000 Representations.
6. Gerard explained this entry as follows: "(a) The fee for long service levy charges is calculated on what the Applicant for the Development Application writes down under estimated job costs. The higher the figure, the higher the charge. (b) At the time I filled out the form I did not have any engineering plans. The estimated cost of works can only ever be a guesstimate. (c) I tried to keep the figure as low as possible without the service officer at Council questioning it in order to keep the fee charges low for Mark and Nerida. (d) No detailed costing was undertaken by [the Builder] for the project. (e) No estimated quantifying or costing was undertaken by [the Builder] for the project. (f) Any job costings were heavily dependent on the engineering. Mark and Nerida were informed of this on multiple occasions … [(g)] I wrote $750,000.00 and managed to get it through with the officer at the Council. I did this to keep the fee as low as possible."
7. There is no suggestion in the evidence that Nerida or Mark was aware of these matters.
8. Although both Nerida and Mark asserted that they relied on this document when entering the Contract, I do not accept that this is so. By now, as I have set out, Daniel had told Nerida and Mark that he did not think the house could be built for $750,000. He had also offered on 13 November 2018 to use his estimating software to get a "ball park cost", but had been told by Nerida not to do so at the 16 November 2018 meeting. Nerida paid the relevant levy within 20 odd minutes of receiving the email. It is in any event unlikely Nerida gave the document much thought as it required from her no more than the ministerial act of paying the relevant fee. And, within a few days, she and Mark willingly executed the Contract in the face of the "warning" appearing on its face and to which I turn shortly.

The Contract

1. On 15 February 2019, the parties executed the Contract.
2. The Contract stated, prominently at the outset, under the heading "Schedule 1 Particulars of Contract": "WARNING - The contract price is not known. This is a cost plus contract. Any estimate provided is only an 'estimate' and not a representation of the contract price." (Emphasis in original.)
3. Clause 8 of Schedule 1 was headed "Sources of funds" and was in this form:
4. Gerard agreed that the figure "750,000" appeared to be in his handwriting.
5. This statement in the Contract is relied upon by the Owners as constituting part of the $750,000 Representations.
6. Nerida deposed that she saw Gerard hand write the figure of "750,000" and that, as he was doing so, there was an exchange as follows: "Gerard: Funds, I'll just put in 750. Nerida: Well, that is the budget."
7. Gerard gave a different account of the conversation as follows: "Gerard: This section deals with the source of funds for the project. I've left that for you since I don't know the details of your finances. Mark: Well, we have $750 cash, when it's time to go to the bank we will."
8. There was no cross-examination of Nerida, Mark or Gerard about these matters.
9. I do not find it necessary to resolve this dispute.
10. The statement in the Contract resulting from the insertion of the figure "$750,000" is that the "owners' ability to pay for the building works will be funded by" a "total estimated funds" amount of $750,000. No doubt this reflected the fact, known to all the parties, that the Owners had $750,000 in cash available to fund the works. That must be how Nerida and Mark understood it. They did not suggest otherwise.
11. As this statement appeared on the page following the "Warning" referred to above, I cannot see how it could constitute a representation by the Builder that the cost of the works would be or would not be substantially more than $750,000.
12. In any event, I do not see how Nerida and Mark could have relied on the statement when deciding to enter the Contract. On Nerida's own account of it, she only saw the statement when Gerard inserted the figure, at which time she and Mark were set on executing the Contract. That is why they were present. I cannot accept that the insertion of the figure played any role in their subsequent execution of the Contract.

Commencement of building work

1. As I have said, [21] building work commenced in March 2019.
2. Thus, on 14 March 2019, Nerida sent Gerard the executed "Notice of Commencement of Building Works".
3. Nerida wrote: "Now that we're rolling, would it be possible to sit down sometime to go through a few things like underfloor heating, pool heating, solar panels, outside blinds for downstairs bathroom blah blah. I don't think we're really across all the details that were in the plans. No hurry, I just want to make sure we don't bring things up after it's too late to incorporate it!"
4. Nerida's email made clear that the full scope of the works was not yet agreed.

The Home Warranty certificate

1. Earlier that day, Gerard had sent Nerida an email attaching a copy of the "Home Warranty Insurance Certificate for your records". That certificate recorded that a contract of insurance had been issued for the purposes of ss 92 and 96 of the Home Building Act and stated that, for the purpose of that contract of insurance, the "Contract amount" was $750,000. This is said to be one of the elements of the $750,000 Representations. However, the "Contract amount" was plainly not $750,000. The Contract was a "cost plus" contract. The figure of "$750,000" was only mentioned in the context of the "source of funds". In any event, by now, Nerida and Mark had entered the Contract. Mr Crossland suggested in argument, albeit without much enthusiasm, that but for this alleged representation, Nerida and Mark would have sought to terminate the Contract. However, Mr Crossland was unable to say upon what basis this could have been done. I do not see this aspect of the matter adding anything to the Owners' case.
2. On 2 April 2019, Nerida wrote to Gerard making enquiries about using solar energy. She said: "Is it possible at this stage of the build to get a sense of how far our $750K will stretch? Is it crazy to be looking at slab heating and more solar?" (Emphasis added.)
3. The statement in this email appears to be inconsistent with Daniel having earlier said that the build could be achieved for $550,000.
4. On 18 April 2019, Gerard wrote to Nerida: "A quick update on the progress onsite: it's been pretty slow going with the rock saw but it hasn't been too different than we expected. The rock there is super hard to cut but we are getting there. … Budget: It's still a little early to make the call on how the budget is tracking. We will still need to get the engineers out to do another inspection to see what they think of the footings etc. I think once we're ready to start setting up the ground floor slab we'll be able to give you a better idea." (Bold emphasis in original; italicised emphasis added.)
5. My attention has not been drawn to any response from Nerida or Mark asserting the existence of any of the representations now relied on.
6. Indeed, on 26 April 2019, Nerida wrote to Gerard: "BUDGET. Yes, we're definitely going with the external blinds on the kitchen and both sides of the downstairs bathroom. We look forward to info on where we're sitting with the budget once we're 'out of the ground'."

The substitution of blockwork by Rediwall

1. The Contract specified that blockwork be used for the "contract/masonry" elements of the construction referred to in the 24 January 2019 Spreadsheet.
2. Daniel gave evidence that on 26 April 2019 he had a discussion with Nerida and Mark about this. Daniel's account of the conversation is: "[Daniel]: I wanted to talk to you about the potential change to Rediwall instead of blockwork for the subfloor walls and retaining walls. Mark: Sure. [Daniel]: We are already using it for the walls above the slab. I feel there are some significant advantages in using it for the whole job. Mark: Like what? [Daniel]: I'm concerned about the water flow coming out of these excavated banks. Rediwall is an interlocking PVC product which is its own waterproof system. There is no need to apply a membrane to the back of it. You reduce the amount of excavation through this rock as you don't need to over excavate to gain access to apply a membrane. This would save a lot of time and expense. Mark: That sounds good. [Daniel]: The footings become simpler as well as we don't need to bench in steps for a level footing. You can pour the footing on a rake and cut the bottom of the Rediwall to fit the footing. Mark: So, it would work out cheaper? [Daniel]: Rediwall is more expensive to buy but cheaper to install, especially on this site where it is so steep, and we have access issues. It's lighter and easier to handle, substantial saving in labour time. It goes up so much quicker than blocks. Mark: Sounds like a good idea. I am happy to run with it. Nerida: How is it finished? [Daniel]: The renderer does a polymer render coat that has whatever Dulux colour you choose. The colour is premixed into it. I will send you some product spec when I get a chance. Nerida: So, it would be just a flat even finish in whatever colour? [Daniel]: Correct. Nerida: That would be a good backdrop for the rest of the cladding. We haven't decided yet, but the cladding will either be the Colourbond with vertical lines or the fibro with the vertical lines, I was worried that all the finicky lines in the block joints would clash. [Daniel]: You're probably right. Nerida: Let's run with the rendered Rediwall." (Emphasis added.)
3. Gerard gave a similar account of the meeting as follows: "Mark: Looks like you've done a fair bit. Daniel: Yeah. I need to talk to you about a change to Rediwall for all of the subfloor walls and retaining walls. Mark: Sure. Daniel: Rediwall is a product that could really help for this site. Mark: How? Daniel: It has its own waterproof system. You don't have to apply a membrane on the back of it. That means less rock excavation as we don't need to gain access to apply the membrane. It will be cheaper overall. Mark: Okay, are you sure? Daniel: Way less time excavating, plus the engineer says we only need to get 300mm deep for the footings for the Rediwall, blockwork is twice the depth. It's a lot less work for the excavators, and for our boys when we do the steel and concreting. Smaller crane is cheaper too. Mark: You lost me a little. I'm hearing it will be easier and cheaper. Daniel: Yes. You need it for this site, I've seen springs coming out of the rock. Mark: Sounds like a good idea. It'll be cheaper right? [Gerard]: Rediwall is more expensive to buy but cheaper and quicker to install on site. Nerida: Sounds like it is the way to go." (Emphasis added.)

Further emails

1. On 11 June 2019, Nerida wrote to Daniel: "The block is looking pretty exciting! … And now a 'how long is a piece of string' question. The lease on our office … is up for renewal in August and the agent wants us to sign on for another year. We're giving up the office as soon as the house is finished so we were wondering if you had any idea at this stage when completion may be…and how we're heading budget-wise. Mark and I did say we'd do internal painting if we had to i.e. if the budget wasn't stretching as far as we'd hoped - so I guess we'd have to allow for that in the timing." (Emphasis added.)
2. Again, although Nerida asked Daniel if he had "any idea" about "how we're heading budget-wise", she made no mention of the representations on which the Owners now rely.
3. The following day, on 12 June 2019, Gerard wrote to Nerida: "Speaking of budget, it's still a bit too early to tell. As you know we had a second excavator on site with the rock saw for a number of weeks. We're still waiting on the invoice for the first stage and we will need to get him back when we do the garage and upper retaining walls. Once we have that done we can run through the remaining items and come up with an estimate for you. With regard to timing, August is only 7 weeks away. The goal was to shoot for Christmas but again it is a bit early to tell. The excavation for the house was slow going and it will be the same for the garage area. We will be able to give you an accurate timing estimate when we do the cost estimate." (Emphasis added.)
4. On 14 July 2019, Nerida wrote to Gerard: "Would it be possible to get a rough idea from you on when you're expecting the foundations to be at a stage where we will have some idea of the remaining budget. I know we shouldn't be stressing however the costs to date have been a bit scary and we're floundering a bit with decision making etc. If we knew that in x weeks we'll know where we stand budget wise it would really help. I know you can't give an exact date but an idea would be great." (Emphasis added.)
5. Again, Nerida made no reference here to the representations on which the Owners now rely. Nerida's request to get a "rough idea" of when "we will have some idea of the remaining budget" appears to be inconsistent with Daniel or Gerard having earlier made the representations for which Nerida and Mark contend.

Gerard's "back of the envelope" estimate of the cost to complete

1. Nerida and Gerard met at Gerard's home on 29 August 2019.
2. Nerida gave this account of what occurred: "On 29 August 2019, I met Gerard at his house in order to discuss materials and the remaining prime cost items. By this stage, the ground floor slab of the house, the gym/music room slab and the path between the buildings had been completed. During this meeting Gerard and I had a conversation to the following effect: Nerida: The invoices that have come through mean that we've already spent about $540,000, a pretty big chunk of our budget. I am starting to get pretty worried. Gerard: You've definitely already paid for significant parts of the build. I'll just do some rough calculations on what we have left. Gerard then used the back of an envelope to write down items and associated costs that were still to come. These added up to $515,000. I was very upset. This was the first time that Gerard or anyone else from [the Builder] had informed us that the price of the works would be more than $750,000. It had never even been communicated to us as a risk. It was exactly the situation we were trying to avoid."
3. Gerard agreed that he provided "rough estimates for some of the remaining significant construction items on the back of an envelope totalling $515,000". He said: "This figure was calculated on the fly and was not intended by me to be an estimate of total job costings remaining for the project. It was prepared without taking any measurements or quantities and without any input from contractors, suppliers, or anyone else."
4. Gerard added: "I deny this was the first time Nerida had been informed [that] the price of the works would be more than $750,000, the first instance being at our meeting of 3 August 2018, which was prior to commencement of the design work."
5. Later that day, Mark wrote to Daniel and Gerard: "Nerida's just filled me in on the outcomes from your meeting this morning, including the estimate on where we sit on total cost. By my reckoning, we're staring down the barrel of a total build cost of $1.1 - 1.2 million (based on $527k spend to date, plus Gerard's estimate of about 515K to go, excluding pool, fences, landscaping, a/c, stairs, timber railings). No surprise that's come as a big shock and is much more than we anticipated (based on our original discussions and budget of 750K + pool). Bottom line for us, it's much more than we can afford so we need to reel in as much cost as we can. To that end, would you consider letting us order and pay direct for as many materials and following trades as we can to save on the margin? For examples, things like tiles, kitchen company, pc items where we can get them cheaper? We also need some suggestions from you as to where and how we can rein in costs."

The 4 September 2019 meeting

1. The parties met on 4 September 2019. Again, there is disagreement between Nerida, Daniel and Gerard as to what was said.
2. However, even on Nerida's account of it, she made no assertion that Daniel and Gerard had made the representations that are now contended for. Nerida's account of the conversation is as follows: "Nerida: We're concerned that the very next stage of building is going to lead to an invoice that we can't even pay. Our budget has always been $750,000 and we don't have that much room to move. For any further work we can only proceed if we can get a quote to complete, a fixed price contract in place and borrow extra funds based on that contract. Gerard: The next stage of work is the upper level slab and that is going to cost about $45,000. Daniel: The cost plus contract has always meant that you had to pay whatever it cost. I've never been working on this project on a budget."
3. Daniel said that he and Mark also had this exchange: "Mark: We knew that we were spending more than the $750,000.00 when we added the extra rooms and changed to a suspended slab but [we] figured that would be no more than $80,000.00 to $100,000.00 or so. [Daniel]: Those items may cost an additional $80,000.00 or whatever but no-one ever said that $750,000.00 was the starting point. We have never priced this job, so we haven't discussed an expected build price. I did specifically tell you that $750,000.00 would not cover everything in your design brief. When I offered to do a job estimate Nerida told me not to waste the time or go to the expense."

Suspension of work

1. On 12 September 2019, Gerard wrote to Nerida: "We've come to the conclusion that we need to manage our risk and have no choice but to stop work immediately. We've had to lay off 4 people this evening and will be calling the frame and window manufacturers tomorrow to see if there is any way to put a pause on production until we sort out the funding issue. We are reluctant to spend the time developing an accurate cost to complete without any communication from a bank that has indicated their interest in providing funds. Normal protocol with a new client that is relying on bank finance is to already have a pre-approval based on a rough estimate. Once that letter has been provided we then proceed with the detailed quote. You mentioned you have been talking with a broker, but has there been any communication from a bank that is interested in lending and has provided a list of requirements for approval? … Our number one priority here is still to find the best way forward for everyone involved while mitigating risk as much as possible."
2. The Builder ceased work on the site on or about this date.
3. As I have said, there is no dispute that the Builder was so entitled.

The subsequent exchange of emails

1. Mark replied on 16 September 2019: "Throughout this process we have made our financial situation abundantly clear. We have a build budget of $750,000 and were prepared to borrow an additional $100,000 based on equity in the property we currently live in if it was needed. This was to cover all costs including fencing, window coverings, landscaping, turf etc. … Let me make this clear. The problem here is not with our communication or our financing. The problem is the almost complete lack of communication from you regarding any budget issues you were having and the enormous gap between the amount you contracted to build the house for and the invoices that have been presented by you to date. … … At no point prior to the last 2 weeks has anyone from [the Builder] said this house could not be built for close to our budget. In fact, the opposite is true. At the beginning of this project you assured us you could build this house for our budget. Indeed in an email from Daniel on 18th July last year you stated: 'A starting point for a custom built home on a block such as yours would be about $1800/m2 at the lower end, $2000/m2 as an average and upwards from there depending on how far you would like [to] go. Given the nature of the area we commonly build in we have quite a bit of experience in designing on challenging sites. Typically our contracts range from about 600k through to about the 850k mark. We do our best to design to the budget of our clients.' This translates as $743,000 for the size of our build including garden sheds - estimated at the upper end of your quoted costs. When you presented the plans to us you said the house was simple to construct and could be built for around $550,000." (Emphasis added.)
2. Mark then referred to the Spreadsheet that Gerard had sent on 24 January 2019. He continued: "Our issues are not only with invoices to date, but the unknown costs to complete. Not even a reliable estimate. Indeed you don't seem to know how much this house will cost to complete. In a meeting with Gerard a few weeks ago, he did a rough calculation on the back of an envelope which came to $515,000. Since then we've been billed an additional $108,767, presumably leaving a further $406,000 to go. Your email last Thursday claims you need us to secure a further $550,000 in funding. Are you now telling us we need the original $750,000 plus $550,000? It is frustrating that the thing that is causing us the greatest stress is that we are part way through a build (and a good chunk of the way through our budget) and your communication prior to the last few weeks led us to believe we were within $100 of the budget. At NO POINT until last week did you tell us this would go hundreds of thousands over. We listened and read very carefully every time you communicated on budget and kept tabs of extra costs. As Nerida stated in a previous email, you had communicated less than $100K more than our $750 budget. We will not spend over $1m on a house that was contracted for $750,000. Nor will we entertain your suggestion that you get an investor involved to finish this house and 'send it to market'. You do not have our permission to take an agent onto our property. I repeat, the problem is not one of financing. It is purely and solely an issue of your inability to build to budget, provide reliable costings for anything or provide an accurate estimate to complete this project." (Capitalised and underlined emphasis in original; italicised emphasis added.)

Cost to complete

1. Ultimately, on 31 October 2019, Daniel prepared a "Trade Summary" estimating that the cost to complete the build was $727,469.72 including GST.

Termination of the Contract

1. On 8 January 2020, the Builder issued a Notice of Dispute under the Contract.
2. On 17 January 2020, the Builder issued a Notice of Default under the Contract, asserting that the Owners' failure to pay outstanding progress claims was a breach of the Contract.
3. On 6 February 2020, the Builder issued a Notice of Termination under the Contract.
4. As I have said, there is no dispute that that termination was effective.

The alleged representations - principles

1. There was no dispute before me as to the relevant principles. Both sides referred to McHugh J's observations in Butcher v Lachlan Elder Realty Pty Ltd that: [25] 1. whether conduct is misleading or deceptive is a question of fact; 2. the test is objective; 3. the relevant course of conduct must be examined as a whole, taking into account the relevant surrounding facts and circumstances; 4. the effect of any relevant statements or actions or any silence or inaction must be considered in the context of the whole of the course of conduct; 5. where the alleged contravention relates primarily to a document: 1. the effect of the document must be examined in the context of the evidence as a whole; and 2. the Court must have regard to all the conduct of the maker in relation to the document including the preparation and distribution, and any statement, action, silence or inaction in connection with the document.

The alleged Silence Conduct

1. The alleged Silence Conduct was the Builder's alleged failure to inform the Owners that the cost of building the proposed dwelling would be considerably in excess of $750,000.
2. I have found that, on 3 August 2018, Daniel told Nerida and Mark that their $750,000 budget was "under fire" and that they would not be able to have a house built in accordance with Nerida's brief for $750,000. [26]
3. Further, as I have set out, on numerous occasions Nerida made enquiries of Gerard or Daniel about the likely cost of the build without asserting any understanding that it could be achieved for $750,000.
4. In those circumstances, I am not persuaded that the Builder engaged in the alleged Silence Conduct.

The alleged $550,000 Representation

1. I have found that, on 30 August 2018, Daniel did not state that the cost of building the dwelling on the site would be $550,000. Rather he stated that $550,000 may be sufficient for the main living area of the house. [27]
2. The Builder did not make the $550,000 Representation.

The alleged Spreadsheet Representations

1. I have set out the terms of the Spreadsheet and Gerard's email of 24 January 2019 above. [28]
2. The Owners allege that, by these documents, Gerard, and thus the Builder, represented that the total cost of items listed in the Spreadsheet would be about and would not substantially be more than the figure of $457,000 stated as being the "4-month subtotal".
3. In closing submissions, Mr Crossland and Ms Flaherty said that the representations alleged to have been made in the Spreadsheet are "not something that the Owners allege they relied on in entering the Contract and keeping it on foot" but that "they relied on the document in relation to cost". How Nerida and Mark so relied on the alleged representations in "relation to cost" was not developed, and is not apparent to me from the evidence. If Nerida and Mark did not rely on the Spreadsheet when deciding to enter or keep on foot the Contract, I fail to see how it can be relevant.
4. Assuming that it is relevant, Mr Klooster accepted that what was stated in the Spreadsheet was a representation as to a future matter.
5. It follows, by reason of s 4 of the ACL, that the statements in the Spreadsheet are taken to be misleading if the relevant person, here Gerard, did not have reasonable grounds to make the representation.
6. Section 4 of the ACL is in this form: "4 Misleading representations with respect to future matters (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation." (Emphasis in original.)

The alleged $750,000 Representations

1. As I have set out above, the $750,000 Representations is alleged to have been made by reason of four matters.

The long service levy statement

1. The first is the figure "750,000" that Gerard included in the long service levy screenshot as the "Estimated Value of Work".
2. I accept that Gerard's statement amounted to a representation that the "Estimated Value of [the] Work" was $750,000.
3. But, for the reasons I have set out above, [36] and for the further reason that Daniel had on 3 August 2028 made clear that the likely value of the work would exceed $750,000, I am not persuaded that Nerida or Mark relied on it when deciding to enter the Contract.

The "Total Estimated Funds" statement

1. The second is the statement in the Contract, under the heading "Source of funds", that the "total estimated funds" was $750,000.
2. For the reasons I have set out above, [37] I am not persuaded that this amounted to a representation that the Builder could build a dwelling on the property for $750,000, nor that Nerida or Mark relied on the statement when deciding to execute the Contract.

The home warranty insurance certificate

1. The third is the statement made by Gerard in the 14 March 2018 home warranty insurance certificate that the "contract amount" was $750,000.
2. For the reasons I have set out above, [38] I do not accept that this statement constituted a representation that the dwelling could be built for $750,000. In any event, it was made after Nerida and Mark had executed the Contract.

The Silence Conduct

1. I have found that the Silence Conduct has not been established. [39]

Conclusion as to the alleged representations

1. Nerida and Mark have failed to establish any of the alleged representations save, perhaps, for that arising from the long service levy screenshot. But Nerida and Mark have failed to establish that any such representation played any role in their decision to enter the Contract.
2. Accordingly, Nerida and Mark's misleading or deceptive conduct case fails.

Damages

1. It is therefore not necessary to consider what loss Nerida and Mark have suffered "because" of the conduct of which they complained. [40]
2. However, as the parties devoted much time to this question, I will do so.

The alleged "alternative transaction"

1. The Owners' allegations as to what they would have done but for the alleged representations is contained in this paragraph of their cross-claim: "If the [Builder] had not made the $550,000 Representation, the Spreadsheet Representations or the $750,000 Representations (separately or in any combination) or had not engaged in the Silence Conduct, the [Owners]: (a) would not have entered into the Contract with [the Builder]; (b) alternatively, would have entered into a fixed price contract with [the Builder]; (c) alternatively, would have entered into a fixed price contract for $750,000 with a different builder to construct a suitable dwelling on the Property; (d) alternatively, if the [Owners] could not obtain an alternate builder willing to build a dwelling suitable to the [Owners] for about $750,000 on the Property, they would have: (i) abandoned their plans to build the dwelling on the Property; and (ii) sold the Property; and (iii) invested or otherwise dealt with the funds that were used to purchase the Property and/or fund the costs of the dwelling by purchasing another property."
2. In their opening submissions, Mr Crossland and Ms Flaherty described the Owners' case as a "no transaction" case. In closing, Mr Crossland said "it is primarily a no transaction case, but is supplemented by the pleading [set out in the preceding paragraph]".
3. Nerida's initial evidence in support of that case was: "If I had then been informed by [the Builder] or Gerard or Daniel that the price of the design we had agreed on would or be in excess of $750,000, I would have asked [the Builder] to do a different design for a good quality four-bedroom house within our budget. If [the Builder] or Gerard or Daniel had informed us that [the Builder] could not build a good quality four bedroom house on the land for no more than $750,000, I would have sought to engage a different builder. If we could not find a builder who was able to give an estimate to that effect, I would have taken steps to sell the land. If I had been informed by [the Builder] or Gerard or Daniel that there was a risk that the price of building a house as per the agreed design would be more than $750,000, I would have insisted on a fixed-price contract for not more than $750,000. If [the Builder] (or any other builder we would have engaged) had refused to enter into a fixed-price contract for $750,000, I would have taken steps to sell the land."

The alleged "no transaction" case

1. There is no dispute that the purpose of an award for damages under s 236 of the ACL for a contravention of s 18 is to compensate the relevant party, here, the Owners, for the prejudice or disadvantage they have suffered as a result of the misleading or deceptive conduct. The purpose of an award of damages under s 236 is to put the Owners in the position in which they would have been had the misleading or deceptive conduct not occurred. This requires identification of the prejudice or disadvantage suffered by the person "because of" the impugned conduct, and of any countervailing benefits. [41]
2. Here, the Owners contend that, but for the alleged representations, they would not have entered the Contract.
3. The prejudice or disadvantage they have suffered by entering the Contract is that they have paid the Builder $550,000 and are liable to pay the Builder a further sum in the order of $245,000, taking into account my findings below concerning two disputed invoices and the Builder's concession that an amount must be allowed in the Owners' favour by reason of a part of the Rediwall that has bowed. The total disadvantage is thus in the order of $795,000. [42]
4. What divides the parties is the proper measure of the countervailing benefit that has accrued to the Owners by reason of entering the Contract.
5. The Builder contends that this benefit is the value of the works performed by the Builder. The unchallenged evidence of the Builder's expert, Mr Tobias Seeto, is that this is just under $800,000, some $5,000 more than the figure at [309].
6. The Owners contend the benefit is the extent to which the value of the property has increased by reason of the works. The parties' valuation experts agree that the present market value of the land with its unfinished building work is $1,310,000 and the current value of the land without improvements is $1,150,000. Thus the value of the work carried out by the Builder is the difference between these two figures: $160,000. This takes into account the unfinished state of the works on the property and, evidently, the fact that those works have been subject to the elements since around September 2019: well over four years. The Owners contend that it is this figure, $160,000, that should be deducted from the figure at [309] to assess the damage they have suffered by reason of the Builder's alleged misleading or deceptive conduct. The resultant damages figure is $635,000. [43]

The Rediwall issue

1. In their defence to the Builder's claim, Nerida and Mark allege that "in breach of the Contract … the subfloor and ground floor walls were constructed using clad 'Rediwall'" and that the Builder "is not entitled under the Contract to payment for [that alternative method]".
2. I have held that Nerida and Mark agreed to the change from blockwork to Rediwall. [47] That agreement was evidenced in Daniel's email of 10 May 2019. [48]
3. However, cl 16.1 of the Contract provided that "a variation must be in writing and signed by the builder and the owner".
4. Further, there was implied into the Contract a provision to the same effect by the combined effect of s 7E and Sch 2, Pt 1, cl 1(2) of the Home Building Act.
5. The effect of these provisions was that the Builder could not have sued the Owners for the costs of the varied works. [49]
6. But the Owners do not raise this point in answer to the Builder's claim for the unpaid invoices. That is because, I assume, the Owners have already paid the Builder's invoices relevant to the Rediwall construction.
7. Rather, the Owners rely on the fact that the blockwork was substituted by Rediwall in their cross-claim and seek damages sufficient to replace the Rediwall construction with blockwork.
8. It is in answer to that cross-claim that the Builder relies on what I have found to be the agreed variation to the Contract to substitute blockwork with Rediwall.
9. That agreed variation was not in writing and signed by both the Owners and the Builder. But that does not mean that it has no effect. In particular, it does not mean that the Owners can "deny the effectiveness of the variation and claim damages for the Builder's failure to construct the works in accordance with the original contract". [50]
10. As Handley AJA said in the same case: [51] "A contract in writing that is varied informally ceases to be 'a contract in writing'. The contract as varied was not enforceable by the builder, and the informal variation may have prevented him enforcing the original written contract because 'the contract' was no longer in writing. It is clear however that a contract still exists in such a case which is fully enforceable by the owner. The Act does not prevent the builder relying on the contract as a defence because that does not involve its enforcement. Although the contract is not enforceable by the builder the owner cannot recover moneys paid under it unless there has been a total failure of consideration."

The bowed Rediwall

1. It is common ground that there is one part of the Rediwall that has bowed and must be rectified. The cost is agreed at $26,206.95. The Builder accepts that this amount must be deducted from its claim against the Owners.

The two disputed invoices

1. The Owners raised a dispute about two invoices.
2. The only dispute pressed by the Owners relating to these invoices is the labour charges.
3. In Invoice 14296 there is a labour charge of $24,408.48. That figure is particularised in 10 line items stating that between three and eight "CDA men" performed a specified number of hours of work on specified dates between 23 August 2019 and 5 September 2019, and that, at some time during that period, Gerard performed 16 hours of work and Daniel performed 10 hours work. The particulars do not state what building works were performed by the individuals during these hours, although the invoice does give particulars of the materials supplied during the period (for example formwork, scaffolding, concrete and Rediwall). The Owners do not question the latter particulars.
4. Invoice 14297 makes a labour charge of $22,902.88 and provides similar particulars to those in Invoice 14296.
5. The Owners do not dispute that building work was carried out during the periods specified but, when exercising the dispute resolution provisions under the Contract, stated that they required "further evidence from [the Builder] to substantiate this claimed labour charge".
6. In cross-examination, Gerard was not able to identify what particular work was done by what particular person during the periods specified in the invoices. This is hardly surprising, it being over four years later.
7. The Owners pointed to cl 15.5 of the Contract which provides that a progress claim must be "accompanied by such invoices, receipts or other documents as may reasonably be expected to support the claim and evidence the cost of the building works being claimed".
8. In my opinion, the detailed specification of the labour utilised during the periods referred to in the invoices is as much as could be reasonably expected by the Owners, notwithstanding the fact that the invoices do not specify, in relation to each hour spent, what work was done. The invoices as a whole make sufficiently clear what work was performed.
9. The Builder also relies on Mr Seeto's unchallenged evidence that the charges were "fair and reasonable".
10. The Owners submitted that Mr Seeto's evidence "plainly cannot be relied on" for two reasons. The first was that Mr Seeto has done "no more" than assert that the costs were reasonable. But Mr Seeto's evidence was admitted without objection, and he was not challenged during the concurrent evidence in relation to these matters. Further, the Owners contended there is "logical evidence that the quantum meruit figure [advocated by Mr Seeto] is not safe" because Mr Seeto's opinion as to the cost to complete the works in accordance with the plans, assuming that the existing structure was not demolished, was in the order of $1.45 million, whereas his opinion as to the cost to complete the works, assuming the existing works needed to be demolished, were in the order of $1.18 million. I see no tension between those opinions: the latter appears to assume that the existing works have a value which would mean that the cost to complete the work without any demolition would reduce the overall cost.

Unpaid progress claims

1. Apart from the two invoices to which I have referred, the Owners do not dispute the Builder's progress claims.

Interest on non-paid progress claims

1. The Owners did not dispute the Builder's entitlement to interest on its unpaid progress claims.

Loss of profit

1. There is no dispute that the Builder lawfully terminated the Contract on 6 February 2020.
2. The Contract was a "cost plus" contract. The Builder's margin was 12.5%.
3. The Builder is entitled to damages reflecting its loss of the opportunity to make the profit reflected by that Builder's margin.
4. Mr Klooster pointed to the following uncontroversial legal principles: "(a) The mere fact that assessment of damages might be difficult and attended by uncertainty does not relieve the Court from the responsibility of attempting to assess those damages as best it can. [62] (b) Sometimes, the assessment of damages of necessity involves guesswork on the part of the Court rather than estimation. [63] (c) The party asserting loss is to put the Court in the position of being able to quantify, in money, the damage it has suffered. [64] However, where precise evidence is not available, the Court must do the best it can to assess the damages. [65] (d) Although the amount of damage must be proved with some certainty, all that is required is as much certainty as is reasonable in the circumstances." [66]
5. The parties' experts agree that the cost to complete the building as at July 2021 was $1,100,712.20.
6. Using Rawlinsons Construction Cost Guide, [67] the equivalent figure for cost to complete as at February 2020 is $1,027,618.03.
7. In opening submissions, the Builder contended that its loss of profit was 12.5% of this figure.
8. However, as Mr Crossland and Ms Flaherty pointed out, such calculation would reveal the gross amount of the Builder's margin, but not take into account the overheads that the Builder would incur in order to achieve that gross sum.
9. The only evidence of the Builder's overheads to which Mr Klooster pointed was an assertion made by Daniel and Gerard in a letter sent on 4 November 2019 to the Owners' solicitors (containing an offer to complete the proposed works) in which it is stated: "[The Builder] has reduced the usual profits and overhead margin of 12.5%, to an overhead charge of only 5% for future works."
10. Leaving aside the question of whether that letter is subject to without prejudice privilege, I allowed it only as evidence of the fact that a document in that form exists. It was not received as evidence of the truth of its contents. In any event it could not provide a basis upon which I could conclude that, as a matter of fact, the Builder's overheads were 5% of its costs.

Gerard's email of 8 August 2018

1. At the conclusion of Gerard's email of 8 August 2018, [68] he said: "We don't often offer this and please burn this email after [reading] so the tax man doesn't get us haha, but if you would like to save the $1000 GST component of our design fee we could [accept] cash for the design. Let us know if this is preferable to you."
2. Nerida responded later that day: "Thanks so much. I will drop the signed quote and $5000 cash in this afternoon - as a small business owner I am more than happy to pay cash - thank you."
3. I drew this matter to the parties' attention and said that I would invite submissions, at the conclusion of the hearing, as to what, if any, steps I should take in relation to it.
4. Since then, Gerard has sworn a further affidavit in the following form: "4. During the course of the final hearing of these proceedings, it came to my attention that payment of $10,000.00 received in about August 2018 had not been recorded in [the Builder's] Business Activity Statement (BAS) for December 2018. 5. I have instructed [the Builder's] accountant to make the necessary amendments to correct [the Builder's] tax assessment for the period in which the $10,000.00 payment was received. 6. I have signed a letter of engagement from [the Builder's] accountant to proceed with making the necessary amendments to the December 2018 BAS. 7. Annexed hereto and marked 'A' is a true copy of the letter of engagement from [the Builder's] accountant." (Emphasis in original.)
5. In those circumstances, I received the following further submission from Mr Klooster: "14.1 A decision 'to refer papers' to some regulatory or policing agency (or on occasion the Australian Taxation Office) is, as the judge noted 'an independent administrative decision by the court' and not part of the judicial process. [69] 14.2 There may be circumstances in which, for example, the parties to litigation appear to have been involved in a scheme designed to defraud the revenue. It is likely to be in the interests of neither for the attention of the Australian Taxation Office to be drawn to the circumstances revealed in the litigation. In such cases it may be appropriate for the Court to arrange for the Registrar to send a copy of the judgment to the ATO, or take any other more formal step in that regard. [70] 14.3 The evidence of Mr [Gerard] Turnbull reveals that steps have been taken to lodge amended returns to ensure that the appropriate amount of tax is paid. In short, the Builder is self-reporting to the ATO. 14.4 In this particular case no independent administrative decision should be made to draw the correspondence to the [attention of the] ATO for the following reasons: (a) First, active steps have been taken by the Builder to ensure that all tax is paid and any previous returns are amended. (b) Second, the Builder will bear the additional burden of the payment of tax in the amount of $1,000.00 to [account] for GST even in circumstances where it has only received $10,000.00 and not $11,000.00 from Mark and Nerida. (c) Third, whilst the offence is not trivial, little damage appears to have been done. (d) Fourth, the offence disclosed, whilst not endorsed in any way, is on the lower end of objective seriousness."

Conclusion

1. The parties should confer and agree on the orders necessary to give effect to these reasons. If there is any dispute about what orders should be made, the parties should agree a timetable for short submissions. I will deal with any dispute on the papers, unless either side seeks an oral hearing.

Endnotes

1. Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law.
2. See Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238 at [90]-[104] (Basten JA, Hodgson and Tobias JJA agreeing).
3. Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (1924) 20 Ll L Rep 140 at 152.
4. Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 at [27] (Ipp JA, Mason P and Tobias JA agreeing).
5. (1995) 49 NSWLR 315 at 319.
6. Kane's Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 at [125] (Jackman J); followed in Gan v Xie [2023] NSWCA 163 at [122] (White JA; Simpson and Basten AJJA agreeing).
7. See [156]-[164] below.
8. See [168]-[178] below.
9. See [183] below.
10. See [237] below.
11. Daniel's and Gerard's sister.
12. See [236]-[238].
13. See [236]-[237].
14. See [232]-[235].
15. See [236]-[237].
16. See [109]-[110] above.
17. See [135]-[136] above.
18. See [238]-[239] below.
19. See [254]-[277].
20. See [234(b)] below.
21. See [8] above.
22. With the exception of a bowed wall that, it is common ground, must be rectified: see [336] below.
23. As I have said at [178] above, Mr Crossland accepted that this assertion was an error by Mark: the house was not "contracted" for $750,000.
24. At [142].
25. (2004) 218 CLR 592; [2004] HCA 60 at [109].
26. See [89] above.
27. See [110]-[122] above.
28. See [151]-[154].
29. GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser (Australia) Pty Ltd (No 2) [2018] FCA 1 at [137] (Foster J); Australian Competition and Consumer Commission v Woolworths Ltd [2019] FCA 1039 at [90] (Mortimer J).
30. R V Miller, Miller's Australian Competition and Consumer Law Annotated (45th ed, 2023, Thomson Reuters) at [ACL.4,180].
31. Lin v Zheng [2023] NSWCA 174 at [36] (Payne JA, Bell CJ and White JA agreeing) citing Australian Competition and Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114 at [100] (Gilmour, McKerracher and Gleeson JJ).

Amendments 11 April 2024 - Coversheet - hearing dates inserted 03 May 2024 - Coversheet - party details updated 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 May 2024