Construction & Design Australia Pty Ltd v Robinson - [2024] NSWSC 376 - NSWSC 2024 case summary — Zoe

NSWNSWSC

Construction & Design Australia Pty Ltd v Robinson

[2024] NSWSC 376

Supreme Court of NSW|2024-03-25|Before: Stevenson J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2024-03-25

Before

Stevenson J

Catchwords

[1954] HCA 36 Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9
[2006] NSWCA 238 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
[2006] NSWCA 187 Jones v Schiffmann (1971) 124 CLR 303
[2004] SASC 81 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272

Source

Original judgment source is linked above.

Catchwords

[1954] HCA 36 Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9[2006] NSWCA 238 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592[2006] NSWCA 187 Jones v Schiffmann (1971) 124 CLR 303[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

Judgment (49 paragraphs)

[1]

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)

[3]

JUDGMENT

Nerida Robinson and Mark Bowmer, who I will call the "Owners", purchased a vacant block of land in Kiama in September 2017.
The property is deeply sloping in parts and has spectacular views, including to the Pacific Ocean.
The Owners approached a number of builders concerning the possible construction of a home on the property.
Ultimately, in July 2018, the Owners approached the plaintiff, Construction & Design Australia Pty Ltd, who I will call the "Builder".
The two directors of the Builder are brothers, Daniel Turnbull and Gerard Turnbull.
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.
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".
Work commenced in March 2019.
Work progressed until September 2019, when the Builder suspended works.
By then, the Owners had paid the Builder some $550,000. The lower floor structure works, and ancillary works, including excavation, were then complete.
The Builder terminated the Contract on 6 February 2020.
There is no dispute that the Builder was entitled to suspend the works and terminate the Contract.
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.
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.
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]
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.
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)
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 Owners do not otherwise resist the Builder's claim, save for matters arising from two invoices and an issue arising from the Builder's substitution of "Rediwall" for blockwork, to which I will return.
During the hearing, and by agreement, counsel and I referred to the relevant actors by their given names, Nerida, Mark, Daniel and Gerard. Where convenient, I shall do the same. I intend no disrespect or overfamiliarity.
There is a sharp divergence of recollection between Nerida and Mark on the one hand, and Daniel and Gerard on the other, as to a number of matters, including what was said at meetings on 24 July, 3 August, 30 August, and 16 November 2018. Each presented as being confident of the accuracy of their recollection to which they deposed. Each presented as being articulate and intelligent. None has made a contemporaneous note of what was said. Their recollections are irreconcilable.
I am conscious of the restraint I should exercise in forming a view about the credibility of the witnesses based on their demeanour when giving evidence. Giving evidence is a stressful, alien experience for most people. I have in mind Atkin LJ's aphorism that "an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of the evidence with known facts, is worth pounds of demeanour". [3]
I must weigh my impressions as to demeanour "carefully against the probabilities" and "examine whether the disputed evidence is consistent with the incontrovertible facts". [4]
To determine what probably occurred, it is thus necessary to look at objectively determined matters, particularly from the parties' contemporaneous communications, and the logic of events.
It is also necessary to bear in mind the observations of McLelland CJ in Eq in Watson v Foxman: [5] "…human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience."
These words should not, however, be seen as a demand for unattainable perfection. [6]

[4]

The alleged representations

The Owners allege that the Builder, Daniel, and Gerard, made three representations.
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.
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".
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").
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.

[7]

First communications - July 2018

The first communication between the Builder and the Owners was on 17 July 2018, following a website enquiry by Mark.
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."
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."
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.)
Both sides placed emphasis on what Daniel said in this email.
Mr Klooster, who appeared with Ms Waters for the Builder, drew attention to the "site conditions" of which Daniel wrote, namely the access to the site, the steepness of the site, the existence of the rock shelf, and the cost of running services from the kerb to the likely position of the house. As Mr Klooster pointed out, Daniel stated that the "biggest factors" in determining likely costs "per square metre" would be the site conditions, any "intricacies in design", and the proposed inclusions.
Daniel referred to the site as being "challenging", and to the fact that "typically" the Builder's contracts ranged from around $600,000 through to about $850,000. In cross-examination, Daniel agreed that he meant to convey that the Builder's contracts typically ranged between $600,000 and $850,000 even on "challenging sites".
In oral submissions Mr Crossland emphasised Daniel's statement that "we do our best to design to the budget of our clients".
What, however, must be remembered is that Daniel made the statements in this email before any design for the proposed house had been prepared. Thus, as Nerida and Mark must have understood, he was speaking at a high level of generality and without knowing what Nerida and Mark proposed for the design.
Indeed, it was not until Mark sent Daniel a "rough brief" that "Nerida [had] been working on" on 20 July 2018 that Daniel knew what Nerida and Mark had in mind. The brief included an extensive list of "things we like and want included in the quote" and "things we don't like". The brief comprised 18 pages, including many pages of photographs, under the heading "Visual Inspirations", setting out the "look" that Nerida wished to be achieved. The document shows that Nerida, and I infer Mark, had a very particular vision as to their requirements for the home to be erected on the site, and very particular requirements as to what they would generally wish to be included in their family home.
The brief included, under the heading "budget": "We want a functional house that's easy to live in. We want to spend money on insulation and building materials that will wear well and LOTS OF SPACE, not fiddly details and glamour. We are very happy to choose materials with budget in mind but definitely don't want melamine, vinyl or plastic anything IF IT IS ON SHOW. We're happy to do lots of 'homework/research' to get things in on budget. We're also happy to source and purchase all fixtures and fittings ourselves. Our total budget is $750,000 however that includes design and council fees, driveway, retaining walls, terrace (we want a level grass area), fences and a solar heated pool." (Emphasis added.)

[8]

The 24 July 2018 meeting

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.
First, there is disagreement between Nerida and Mark as to what was said.
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.)
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."
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.)
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".
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.)
Daniel said that he did not at this meeting give any indication as to whether the Builder could build what the Owners "wanted" for $750,000, and gave the following reasons: "(i) I had received no plans of any kind, including architectural or engineering plans. (ii) I was not aware of any consent conditions. (iii) I was not aware of any finishes or fittings the [Owners] wanted. (iv) No design of any kind had been created by [the Builder]. (v) Before the meeting I had only been on the site briefly to view the property. I did not have time to thoroughly inspect it, although I was aware of its general features. (vi) I was supplied a design brief for the proposed works on the 20/7/18. I had not reviewed the design brief in detail and therefore was not aware of the particulars listed within. (vii) I did not know the type of rock or the extent of the rock at the site. (viii) I did not know the cost implications the subterranean water springs would have on construction costs. (ix) I did not know the cost implications the poor access to the site would have on construction costs. (x) I did not know that the site would be classified a 'problem site' by the Geotechnical Engineer. (xi) I did not know that the construction works on the site would be identified as 'high risk to slippage' by the Geotechnical Engineer. (xii) I did not know the requirements in the structural engineering design that would be required for the development to overcome the site's complexities and the findings of the Geotechnical Engineer."
Gerard deposed that Daniel did most of the talking during this meeting but that Daniel did not state that "he could build what they wanted for $750,000 in my presence". Gerard said that at that time: "(i) No plans of any kind, including architectural or engineering plans had been provided. (ii) I was not aware of any consent conditions. (iii) I was not aware of any finishes or fittings Mark and Nerida wanted. (iv) No design of any kind had been created by [the Builder]. (v) I had been onto the site that day for the first time during the meeting. I did not have time to thoroughly inspect it, but I was aware of its general features."
As I have said, Nerida and Mark disagree about what was said on this occasion. Mark agreed that he did not make an enquiry about the cost of building "what we want here". Rather, on his account, he asked whether the Builder could build us "a house" for $750,000.
It appears improbable that either Daniel or Gerard would have offered any opinion as to the likely cost of construction of a particular house (for example, "what we want") at this stage because, as each has pointed out, they were not aware of information which would have been vital to the expression of any such estimate; particularly as to the design of the proposed house and as to the topography and geology of the site.
Indeed, in cross-examination, Nerida gave this evidence: "Q. During this meeting, you said, 'We were hoping to spend 750,000 on the development. Do you think that's realistic?' You did ask that question? A. Yes, I'm sure we would have discussed the budget. Q. In response to that, Daniel says, 'Without a design being done, and without going through the process of quoting the design, I have no idea, especially on a complicated site like this'. A. I don't recall that conversation. Q. As I said, if you don't recall that he said it, it's possible he said it; you just can't remember? A. Correct."
However, it is likely that there were discussions as to whether "a house" could be built for $750,000.
Indeed, Gerard gave this evidence in cross-examination: "Q. At the meeting, [Nerida] made it clear that their budget was $750,000, didn't she? A. That was a discussion of $750,000, yeah. Q. Well, but she was making it clear, as you understood it, that their budget was $750,000. A. Yes. Q. And she said, 'We need a design that's going to come within our budget'. You agree with that? A. I don't specifically recall her saying that. Q. You don't disagree with that, do you? A. I - I don't recall. Q. But what would be the point of mentioning her budget unless she was saying that she wanted a design which would come within it? She did say that, didn't she? You accept that? A. I accept that. Q. And Mr Bowmer asked whether a house could be built on the site within their budget of $750,000, didn't he? A. I believe so, yes. A house. Q. The house. A. Yes. We certainly - you can build anything. Q. And the evidence - what your brother said in answer to that question was, 'It's doable'. A. Yes, you could certainly build a house for $750,000. Q. No, but he said, 'It's doable', didn't he? A. Yes, building a house is doable for $750,000."
On the other hand, Daniel gave this evidence: "Q. But in any case, do you accept that you probably said to Nerida and Mark that building a house for $750,000 on this block was doable? A. No, I exactly know what I - I know I exactly didn't say that. Q. You know you exactly didn't say that. A. Yeah, that's - yeah. Most definitely didn't say that."
I think Mark's and Gerard's recollections are likely to be the more accurate here. It seems likely that it was agreed at the meeting that "a" house could be built on the site for $750,000. This would be consistent with Daniel's statement in his 18 July 2018 email that the Builder's contracts typically range between $600,000 and $850,000 including, as Daniel agreed in cross-examination, on challenging sites; notwithstanding the fact that this email was sent before any design had been prepared.
Contrary to Nerida's recollection, I think it unlikely that Daniel or Gerard said anything to the effect that any particular house could be built on the property for $750,000.
In relation to this meeting, I find that, although Nerida raised the question of whether the build she wanted could be achieved for $750,000, Daniel did not give her the assurance to which she deposed.
However, I find that, contrary to his evidence, Daniel did say that it was "doable" that "a" house (of some kind and with some design) could be constructed for $750,000. It seems obvious that "a" house, of some kind, could have been built on the site for $750,000.
The following day, on 25 July 2018, Nerida sent Daniel an email: "Thanks for your time yesterday - we really appreciate it. Mark & I would love to design and build with you and Gerard. Our big question is about timing. How quickly could the design stage start and if we could get plans done and through council in 6 months (or less), are you able to start early next year? We're really keen to move out of where we are for all sorts of reasons (lifestyle and financial). What's the average time for your builds?"
Nerida made no mention in this email of any statement by Daniel or Gerard about the cost of the build.
Daniel replied the same day saying that he could commence work on a design of the proposed dwelling in a fortnight's time and that he estimated construction would take between 7 to 10 months.
On 30 July 2018, Ms Loren Turnbull, [11] from "CDA Admin", gave the Owners a "fixed price quote for the design phase" of $11,000 including GST.
On 31 July 2018, Nerida wrote: "Many thanks for the design quote. Mark and I would like to chat with Daniel (and or Gerard) again if possible to talk budgets. We want to ensure upfront that our budget and brief can be achieved before we sign on or start designing. We are very keen to start work on designing, building and moving in and want to ensure our expectations can be met. If our expectations are not realistic we need to know before we start. Is anyone free later this week or early next week?" (Emphasis added.)

[9]

The 3 August 2018 meeting

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.
Each of Daniel and Gerard gave a detailed account of what occurred at this meeting.
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.)
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.)
And: "Daniel: It's a really tough site. Nerida: Does that mean it's expensive? Daniel: Yes. There's a lot of excavation and there's rock on the surface in some parts. It will be expensive to try and excavate down. Nerida: Is there any other way? Daniel: We can design the building to sit across the block. This will reduce the amount of sub floor that we will need to dig out. Nerida: Okay. Daniel: It doesn't solve the problem. Steep sites add significant costs. There's a lot of work to be done just to get a level floor. Nerida: How much will that cost? Daniel: I don't know. I can't give you an accurate square metre build price for this site. It isn't much different to sticking a wet finger in the air and picking a number. [Gerard]: On a site like yours, it's impossible to know the cost of getting the building out of the ground. There is no way to tell how long the excavation will take. Daniel: Another big factor is the site access. It will be impossible to get deliveries down to the construction area. We will have to physically carry everything down the hill from the street front or try to crane it up from the road at the bottom of the block. Nerida: Okay. Daniel: It's the old chicken and egg situation. Design first, then we can look at the cost based on the design." (Emphasis added.)
In closing submissions Mr Crossland referred to what he called the "improbably long and detailed" recollection that each of Daniel and Gerard purported to have of meetings with Nerida and Mark. It may be that, as to matters of detail, Daniel and Gerard have deposed to some details of conversation that extend beyond their actual memory as to what was said. They each said they were recalling the substance of what was said. Gerard denied in cross-examination that he had spoken to Daniel about what should be said in their affidavits. He said that he did not know what was in Daniel's affidavits. I see no reason not to accept that evidence. Mr Crossland did not ask Daniel any questions about this. Further, as I set out below, on 18 and 20 September 2019 Daniel wrote very detailed emails setting out his recollection of matters. [12] In cross-examination, Daniel did say that he had "used the documents to refresh his memory". To a very large extent, the emails corroborate the evidence Daniel gave before me about these matters.
Daniel and Gerard agree (with each other) that they told Nerida that $750,000 would not be sufficient to cover everything in Nerida's "brief". Daniel went further and said that the budget was "under fire", if not "shot to pieces".
Both Daniel and Gerard agreed that Nerida said something to the effect of "if we have to go to the bank we will".
In cross-examination, Nerida agreed that, as Gerard had deposed, Daniel had said something to the effect that the plan was to design first and then look at the cost of the build based on that design.
Nerida and Mark otherwise denied the account given by Daniel and Gerard of what was said at this meeting.
I was initially troubled by Daniel's evidence that he not only said that "you won't be able to get all" the matters detailed in Nerida's brief for $750,000, or that $750,000 "won't cover" construction of a house in accordance with Nerida's brief (which is what Gerard said was his recollection of what Daniel said), but that he also said "your $750,000 budget is definitely under fire, if not shot to pieces". Daniel was adamant in cross-examination that he did say this.
Nerida said in cross-examination that "I just wouldn't have continued on with this process if anything like that had been said". Mr Crossland placed great emphasis on that evidence. My initial impression was that if Daniel had spoken in the brusque terms to which he has deposed, it seemed likely that Nerida and Mark would have been taken aback, and given serious consideration to whether they should proceed with the Builder.
However, as I set out below, [13] in his lengthy letter of 18 September 2019, Daniel said: "You asked our opinion on the budget, which, as I am always careful to do, [I] answered in a guarded way but agreed that the budget was very much under fire." (Emphasis added.)
As I explain below, Daniel's 18 September 2019 letter was written in careful and calm language and contains what I see as being a reliable guide as to the truth of what passed between the parties. It persuades me that although Daniel may not have said that Nerida's requirements for the build meant that her budget was "shot to pieces", it is likely that he said that it was "under fire".

[10]

The "Key Budget Email"

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".
As this email was sent immediately after the 3 August 2018 meeting, its terms are likely to cast light on what was said.
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.)
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.
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.
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.
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".
But Nerida did not in this email simply "restate" that her budget was $750,000. She was explaining how she and Mark could manage to finance a build costing more than $750,000, evidently in response to an enquiry made at the meeting or in anticipation that such an enquiry might be made. She was acknowledging that she and Mark might need to borrow the funds, and dispose of their "'super' plan" (being the Kiama duplex).
I also do not see these matters as being inconsistent with Daniel and Gerard having said that $750,000 would not "cover all of" the matters in Nerida's brief, or that "you won't be able to get all [of the matters detailed in the brief] for $750,000".
Overall, Nerida's email was acknowledging that $750,000 might not be sufficient to build the house she and Mark wanted on the site. I see that as being consistent with Gerard's and Daniel's evidence that they had said that the house Nerida and Mark wanted, as specified in Nerida's brief, could not be built for their budgeted figure.
Gerard replied on 8 August 2018 stating, "thank you for [all] of that information", but otherwise making no comment about Nerida's 3 August 2018 email.
Gerard was asked about this in cross-examination: "Q. You didn't say in your email, did you, at 509, but Nerida, or words to the effect, 'Nerida, we told you at the meeting on 3 August at Daniel's house that this wouldn't be viable for $750,000 with the prospect of borrowing 100'. You didn't say that in your email, did you? A. I didn't. Q. And the reason you don't say that in the email is because nothing of that sort was conveyed to [Nerida] at the meeting on 3 August, was it? A. I disagree. Q. You were satisfied with her answer in answer to the question of what their funding arrangements were for paying for the project. You were satisfied, weren't you? A. As I said, no design had been created at this stage, so it could have suited a design. Q. You were satisfied with her answer in response to your request-- A. At the time. Q. For details of the funding ability. A. Yes. At the time, yes."
However, and contrary to Mr Crossland's submission, I do not see how this evidence "puts paid" to Gerard's account of what was said on 3 August 2018.
It is true, as Mr Crossland emphasised in oral submissions, that Gerard did not state in his email that, in his opinion, building according to Nerida's design brief could not be achieved for a figure of $100,000 in excess of the $750,000 budget. I will return to this when considering the Owners' case concerning the "Silence Conduct". However, I agree with the observation that Daniel made about this email that "I don't believe there was a question in there".

[11]

The 30 August 2018 meeting

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.
It was at this meeting that Daniel allegedly made the $550,000 Representation.
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".
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.)
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".
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.)
As the passages in this account of the conversation that I have emphasised show, Daniel agreed that the figure of $550,000 was mentioned in the conversation. But he said the figure was mentioned in the context of a comparison with the cost of construction of a house "up the road", which was a "basic house" on a "dead flat site". In that context, Daniel's recollection was that he mentioned $550,000 as being a figure the Owners could expect to be the cost of the "main living area once floor level is achieved".
Again, Daniel has given a lengthy account of what he recalls was said. Again, it may be that Daniel's evidence, as to matters of detail, is beyond his actual memory of the conversation.
But he was adamant that his reference to the figure of $550,000 was only in the context of saying that he expected that the Builder could achieve a similar cost for the main living area of the Owners' proposed building as the Builder had achieved on that site "up the road" on the "dead flat" block.
Contrary to Mr Crossland's submissions, I do not see as inherently "not credible" Daniel's evidence that he referred to the project "we're doing up the road", nor that he would "give a price for only part of a house".
There is no dispute that, as Daniel contends he said at the meeting: 1. the proposed plans showed a large "amount of sub-floor walls and retaining walls that we need to build to achieve floor levels"; 2. the plans showed that the water tank, pool equipment and gardening tools could be hidden in a dug out section of the lower level but at additional cost; 3. there was "a lot of building" involved in the proposed plans; 4. the Builder was in fact engaged in constructing a home "up the road" on a "dead flat site", and that the contract for that project was "around $620,000"; 5. "engineering will play a major factor on this site" because the site was steep and "with a lot of rock"; and 6. "getting to floor level [would be] the element that has the biggest unknowns in terms of cost".
These factors point to the probability that Daniel did address these questions when considering Nerida's question about "price".
Daniel gave this evidence about this conversation: "Q. Before we go, what was in fact said to you at that meeting - what in fact, you said. Mark said to you in this conversation, 'Can you build this for our budget?' He said that to you, didn't he. A. No, he didn't say that. Q. And when he said that to you, you knew that it was a reference to the sum of $750,000. A. He didn't say it. Q. And you said to him in reply, 'I can build it for 550'. A. Incorrect. Q. And you said to him, 'It's a pretty simple construction because of the traditional shape. That means it's cheap to build.' You said that. A. No, I didn't say that. HIS HONOUR Q. Did you regard it as being a pretty simple construction? A. I - I did my best to make it as buildable as I could. The - the site conditions, as I said, to get to floor level was extremely difficult. From that point on, it was designed as a barn style box, which is quite simple. There was not too many large spans in it that didn't require huge amounts of steel to support. The - the - the pitched roof, it was identified I could do that out of a scissor truss, which is a lot cheaper. You know, I - I did my best to design it to be a simple construction, but a site like that there's unavoidable costs."
I see that evidence as being consistent with Daniel having said, as he deposed in his affidavit, that "that part of your project", being the main living area once the floor level was achieved, "is quite a simple construction".
In assessing the probability as to what Daniel's "$550,000" reference was directed to, I have given consideration to the subsequent communications between the parties. As I set out below, until 16 September 2019, on not one occasion did Nerida or Mark refer, in any one of their numerous emails, to Daniel (or Gerard) having said anything about cost of construction of the proposed home being $550,000.
The figure was only mentioned once, and over a year later, when, on 16 September 2019, Mark wrote to Daniel and Gerard stating: "When you presented the plans to us you said the house was simple to construct and could be built for around $550,000."
I deal with Mark's 16 September 2019 email in some detail below. [14] For present purposes, the point is that statement was made when the relationship between the parties was beginning to deteriorate. There was also no assertion in Mark's 16 September 2019 email that whatever was said about the "$550,000" figure was a matter on which Mark or Nerida relied.
Further, and perhaps most importantly, in his lengthy and careful reply to Mark's 16 September 2019 email, Daniel said that Mark had "taken this communication totally out of context" and gave an account of his reference to $550,000 that is consistent with his evidence before me. I return to this below. [15]
It is, of course, for Nerida and Mark to persuade me that their account of what occurred at the 30 August 2018 meeting occurred. And because what was said at the meeting forms a vital part of Nerida's and Mark's misleading or deceptive conduct case, it is necessary that I have an actual persuasion of the mind that the conversation took place as they deposed. I am not so persuaded. Indeed, I think it unlikely the conversation occurred as Nerida has stated. If the conversation had occurred as Nerida and Mark now say they recall it, surely they would have mentioned on at least one of the many opportunities, to which I refer below, available to them between August 2018 and September 2019. My conclusion is that Daniel's account of the conversation is more likely to be accurate.

[12]

Further emails

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.
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."
Nerida made no reference in this email to the alleged $550,000 Representation.
On 1 October 2018, Nerida wrote a lengthy email to Gerard making a number of comments about the proposed plans.
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.)
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.
The preliminary plans sent to the Owners on 30 August 2018 were revised in the following weeks.
On or about 7 November 2018, the Builder lodged a development application with the Local Council.
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."
On or about 13 November 2018, the Builder engaged D&M Consulting Pty Ltd as structural engineers for the project.
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.)
Nerida made no mention here of the alleged $550,000 Representation. Nerida's comment that she and Mark would like "some idea of costings before we start" appears to be inconsistent with Daniel having already said that the cost would be $550,000.
Daniel replied later that day: "Great, I'll get the engineers into action. Cost plus is definitely the fairest way for everyone. As you can appreciate on a fixed price contract we have to cover ourselves to a certain degree to cater for worst case scenario. Sometimes we win, sometimes the client wins… With cost plus the client is charged exactly what the project is worth and the builder makes his fair days pay for a fair days work. Once the engineering is complete I can run the project through my estimating software to get a ball park on cost. In the meantime I can send through the plans to various trades such as window manufacturers, plumbers, kitchen design, roofers etc. so that we can get some accurate trade pricing for the estimation. You guys may like to start thinking about what kind of finishes and inclusions you may like to incorporate." (Emphasis added.)
Nerida replied the following day, on 14 November 2018: "Mark and I are still trying to decide [what finishes and exclusions should be incorporated]. I know we have to decide before we go to engineering however if I'm correct, we can't get a ballpark for the total build cost until after engineering… so it's hard to know if we can afford it." (Emphasis added.)
Once again, Nerida made no mention of the alleged $550,000 Representation. Her statement concerning not being able to get a "ballpark" figure "for the total build cost until after engineering" appears to be inconsistent with Daniel already having said the build could be achieved for $550,000.
Nerida gave this evidence: "Q. So you accept 'ballpark', it denotes a level of imprecision? It's a range. A. Yes, it's a range. Q. You're saying you can't even get a range for the total build costs until after engineering. A. Not where we sit within that range, no. How much the engineering would push it up from the 550 and equally, you know, how much extra a concrete floor would be over a timber floor. Q. I'll be direct. The reason you say that you acknowledge that you can't get a ballpark for the total build cost is because you were never told that the house could be built for 750 or 550. That's right, isn't it? A. No. Q. You were never told that. A. No, not true. We were told 550, and I think Daniel has even admitted it in an affidavit. Q. You were told that you could get the main living area built for 550. That's what you were told. A. No - no. We were told that it would cost - the plans that were presented to us would cost 550."
Nerida contended in cross-examination that what she meant by "ballpark" here was "where we were sitting between the [$550,000] and the [$750,000]".
However, Nerida made no such qualification in her email, a natural reading of which suggests that Daniel and Gerard had not then given any indication of the likely cost of the build. And Nerida's reference to what Daniel had "admitted in an affidavit" was not correct. What Daniel said in his affidavit was, as I have set out, that he mentioned the figure $550,000 as the cost of the "main living area once floor level is achieved". [16]

[13]

The 16 November 2018 meeting

On 16 November 2018, Daniel met Nerida at her home.
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.)
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.
Daniel's account is also consistent with the email he sent Nerida and Mark on 20 September 2019. [18] As I set out below, this is a pointer to the probability that Daniel's recollection is correct.
In these circumstances, I think it likely that the conversation occurred as Daniel has deposed.

[14]

14 January 2019

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.)
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.
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"
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."
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 Spreadsheet was in the following form:
The Owners contend that the Spreadsheet Representations arise from these documents; namely that the costs of each of the items specified in the Spreadsheet would be about, and not substantially more than, or alternatively less, or substantially less than, the costs indicated for those items; and that the total of those costs would be about, and not substantially more than, or alternatively less, or substantially less than, the total of $457,600 specified in the Spreadsheet.
I return to the Spreadsheet below. [19]
Nerida responded to Gerard's 24 January 2019 email later that day: "Thank you so much for doing this - it is truly appreciated. We've kept the $450,000 accessible. And the remaining $290,000 ish has been stashed away for 4 months. The process and cost analysis are very clear. I'm somewhat familiar with the HIA contract, so I'm confident we could sign off with no problems."
On 31 January 2019, Kiama Municipal Council issued a Development Consent for the proposed dwelling.

[15]

The long service levy

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".
Nerida paid the levy fee on 1 February 2019.
The attached screenshot was in the following form:
As can be seen, that screenshot stated that the "Estimated Value of Work" was $750,000.
This statement is said to be one of the elements giving rise to the $750,000 Representations.
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."
There is no suggestion in the evidence that Nerida or Mark was aware of these matters.
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.
Further, not once in all their subsequent communications, including those in September 2019 after relations between the parties had broken down, did Nerida or Mark assert they placed any store on the statement in the long service levy screenshot.
On 14 February 2019, Daniel wrote to Nerida saying that he had spoken to the engineer and that "they are about 80% complete on the structural plans".

[16]

The Contract

On 15 February 2019, the parties executed the Contract.
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.)
Clause 8 of Schedule 1 was headed "Sources of funds" and was in this form:
Gerard agreed that the figure "750,000" appeared to be in his handwriting.
This statement in the Contract is relied upon by the Owners as constituting part of the $750,000 Representations.
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."
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."
There was no cross-examination of Nerida, Mark or Gerard about these matters.
I do not find it necessary to resolve this dispute.
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.
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.
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.
And, once again, in their numerous communications with the Builder, Nerida and Mark did not once assert any reliance on this statement as a representation. As I discuss below, on 16 September 2019, Mark asserted that the house was "contracted for $750,000". [20] Mr Crossland accepted that this was a misconception on Mark's part.

[18]

The Home Warranty certificate

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.
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.)
The statement in this email appears to be inconsistent with Daniel having earlier said that the build could be achieved for $550,000.
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.)
My attention has not been drawn to any response from Nerida or Mark asserting the existence of any of the representations now relied on.
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'."

[19]

The substitution of blockwork by Rediwall

The Contract specified that blockwork be used for the "contract/masonry" elements of the construction referred to in the 24 January 2019 Spreadsheet.
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.)
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.)
Nerida's evidence about this was as follows: "Between 8 May 2019 and 10 May 2019, there was correspondence between me, my brother, Bernard Robinson, Daniel and Gerard about subsoil drainage management. … I am not aware of any other correspondence about the use of Rediwall in the construction. I did not have a conversation with Daniel or Gerard about the use of Rediwall." (Emphasis added.)
In cross-examination, Nerida was asked about the passage in this evidence that I have emphasised. She said that she was "probably talking about a particular point in time".
Her evidence continued: "Q. Is it your evidence today that you did or did not have a conversation with Daniel or Gerard about the use of Rediwall? A. Not in terms of complete construction, no. Q. What do you say the conversation with Daniel and Gerard was about the use of Rediwall? A. It was in an email, so the first time we saw the word Rediwall was in an email as it related to water ingress into the site which we were concerned about, and so it was my understanding that Rediwall was going to be used as a sort of a second wall, as a waterproofing wall behind those areas. Q. Do you understand the question that I asked? A. Yes. Q. Can you please answer it? A. Yes. Q. I asked you what is your version of the conversation you had with Daniel or Gerard about the use of Rediwall? A. But I didn't have one. Q. Do you stand by that evidence? A. Yes, I do." (Emphasis added.)
Mark's evidence about Rediwall was: "I recall that part way through the build in about late June or July 2019, we went down to the site one afternoon to look at progress. At this time Daniel and Gerard were both still on site so we went down to say hello and had a conversation to the following effect: Mark: What's the plastic stuff going up for the walls? I thought we were using masonry blockwork? Daniel: That is masonry. It's Rediwall. It's the way of the future and is a lighter product that is faster to build with and watertight. Definitely better than blockwork. Mark: Is it more expensive? I can't recall exactly what Daniel said in reply to my question, however I do recall Daniel gave a detailed response comparing the Rediwall to blockwork, the cost of laying blockwork and said that the Rediwall would work out cheaper to use in the end."
In cross-examination, Mark was adamant that this conversation did not occur in April but, rather, in late June or early July 2019.
On 10 May 2019, Daniel wrote to Nerida: "As mentioned at our last onsite meeting, I intend on using 'Redi Wall' instead of the blockwork. We will be constructing the walls as per the Rediwall Installation Manuals which I have included a link to below [for your information]. To alleviate Bernard's concerns, points that will interest him are: - There is a water stop placed in the centre of the wall to stop the water ingress between the footing and wall junction - The footing is set 250mm below floor level - There is a 100mm unimpeded cavity between the retaining wall and internal wall" (Emphasis added.)
"Bernard", referred to in Daniel's email, is Nerida's brother Bernard Robinson, to whom Nerida referred in the passage at [192] above.
Later on 10 May 2019, Nerida sent Bernard a copy of Daniel's 10 May 2019 email under cover of the question "what do you think about the below?"
Bernard replied to Nerida the following day, on 11 May 2019, stating, amongst other things: "Sounds good … Free standing Redi Wall with a water stop is a great option."
It is obvious from these communications that, contrary to Nerida's evidence and Mark's evidence, Daniel and Gerard did in April 2019 raise with Nerida and Mark the suggestion that the blockwork be substituted by Rediwall. Daniel said so in his email to Nerida of 10 May 2019. Nerida forwarded that very email to her brother, and sought his advice about the matter that had, as the email stated, been "mentioned at our last onsite meeting". Nerida received Bernard's advice that Rediwall was a "great option". It is hard to see how, in these circumstances, Nerida could have maintained, so adamantly, her position that she had no conversation with Daniel about this matter.
I find that the conversations about Rediwall took place substantially as deposed to by Daniel and Gerard, and that Nerida and Mark did agree to the change from blockwork to Rediwall.
It is also hard to see why there was any controversy about this matter. The parties' engineering experts, Mr Knightley for the Owners and Mr Dockrill for the Builder, agreed that the "core filled walls are structurally adequate and no rectification is required". [22] There was thus no dispute that Rediwall was an adequate substitute for blockwork. There may be aesthetic considerations arising from the use of Rediwall, although I was told during the experts' concurrent evidence that is it customary to conceal raw Rediwall with a coating or cladding.

[20]

Further emails

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.)
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.
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.)
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.)
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.
On 1 August 2019, Nerida wrote to Daniel and Gerard concerning house cladding and said: "HOUSE CLADDING. We DEFINITELY want standing seam walls on the house. If we can't do that we'd rather go boards than custom orb. Roof we'd also prefer standing seam as long as it's appropriate for the degree slope but here is where the cost comes in. It would be great to know the price difference between standing seam and cheaper profiles for the ROOF ONLY but I have to say, this is an area we would want to invest in to get the look we want. Colorbond is something Mark will spend money on - go figure!" (Capitalised emphasis in original; italicised emphasis added.)
This appears to show that, notwithstanding Nerida's references to "the budget", she and Mark were prepared to "invest" so as "to get the look we want".
Nerida's email also contained detailed specifications as to "garden fencing" and "bath" and "outdoor lighting", suggesting that the Owners' specifications as to what was to be included in the construction were evolving.
On 28 August 2019, Gerard wrote to Nerida: "Thanks for your call. You probably saved me about half an hour wordsmithing an email that we'll end up just discussing in person tomorrow now. Here's the spreadsheet. No pressure to read through it. We'll cover it all tomorrow."
The attached spreadsheet was headed "Project Specification" and listed seven pages of detailed components on the construction, with headings "Finish", "Size", "Quantity", "Supplier", "Model" and "Notes".

[21]

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

Nerida and Gerard met at Gerard's home on 29 August 2019.
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."
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."
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."
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."
Later, Nerida wrote to Gerard: "Thanks for your emails and your time today. Mark and I probably just need a day or two (or maybe even three or four) to get our heads in order re costs and budget. Initial conversations with the bank to increase our borrowings have not been encouraging. Obviously we have to press on so we'll just have to find an alternate way of financing the rest of the build. We still have around $105 left in the kitty so we should have it sorted by the time we've spent that."
Nerida's email continued with some suggestions as to proposed inclusions in the building.
If ever there was an occasion for Nerida and Mark to assert the existence of the representations on which they now rely, this was it.
On their account, Gerard had informed them, for the first time, that the likely total cost of the build would be in the order of $1.1 million. If, as they contend, they understood that Daniel and/or Gerard had represented to them that the cost of the build would not be significantly more than $550,000 or $750,000, I find it impossible to understand why they did not say something to that effect at this point.
Gerard wrote to Nerida the next day, 30 August 2019: "Sorry to spring the number on you in person. I'm sure it was a shock and I would have liked to do it via email so you could process it privately."
On 3 September 2019, Nerida wrote to Gerard: "Mark and I have just discussed where we are financially. After last night's invoice, we have $25,000 left of available funds before we start paying interest on funds used. We do not want to be paying interest on where we're living plus [the subject property] with its future so uncertain. To that end we respectfully request the following: ● Please do not spend any time (or budget) on comparisons or analysis of anything other than the following information we require. ● Obviously we have spent money on scaffolding and don't want that to be wasted. Can you please advise what the next sensible stage to get to on the build is and let us know ASAP the exact cost of that (including labour and all associated costs) and where it gets us to. We do not want to waste money already spent. ● If possible, please put a hold on the window order. If the build is to sit there for a while as we work out the best way forward, we don't think it's wise to have expensive windows in an empty building. ● Please put a hold on all orders and stop all work until we can work out the best way forward. We want to be pragmatic and move forward in the best possible way. We can't move forward on a cost plus contract. We hope you understand that with the costs to date we just don't see that as an option. With last night's invoice, we've spent 83% of our budget. We'd very much like you to provide a fixed price quote to get us to lock up and one to get us to completion so we can work out the best way forward. We can't keep building until we have received these costs. Would you be willing to then move on to a fixed price contract? These last few days has been enormously stressful. It is what it is and we don't want to navel gaze, analyse or spend time and money looking back. We do want to find a better way forward." (Emphasis in original.)
Again, Nerida made no mention in this document of the representations on which she and Mark now rely.

[24]

The subsequent exchange of emails

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.)
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.)
Mark was specific about the complaints made in this passage. His points were that: 1. Daniel and Gerard did not, "until last week", state that the cost of the build would be "hundreds of thousands over" the Owners' budget; 2. the house was "contracted for $750,000"; [23] and 3. the problem was "purely and solely" because of the Builder's alleged "inability to build to budget" or provide "reliable costings" or an "accurate estimate" of the cost to complete.
Mark did state that "when you presented the plans to us" (which was obviously a reference to the 30 August 2018 meeting), "you said the house … could be built for around $550,000". Mark did not assert that he and Nerida had relied on this alleged statement when entering the Contract. His email refers rather to an assurance the Builder allegedly gave that the house could be built "for our budget", and the Builder's alleged inability to "build to budget".
On 18 September 2019, Daniel and Gerard sent Nerida and Mark a detailed response to their communications, being a letter with seven closely typed pages. The terms of the letter suggest it was written by Daniel.
Critically, Daniel said: "Yes, we acknowledge and confirm that you came to us with a budget of $750k for the house construction and another $100k for the pool. However, what your recent emails have not mentioned is that in our very first meeting you acknowledged, and were the ones to point out, that your scope was huge and budget was small. By your own admission, you said to us that you expected you would need to extend your budget to achieve your scope … You asked our opinion on the budget, which, as I am always careful to do, answered in a guarded way but agreed that the budget was very much under fire. Given that it is impossible to pluck an accurate number or even a ball park number out of the air, all I could offer you were some indicative square metre rates that can be applied to the size of construction. You have quoted by email dated 18th July 2018 discussing m2 rates. I note this email predates our quote for design of the project by some 2 weeks. At the time of that email we had not yet begun the design. … While several discussions were had about the importance of the $750k + $100k budget at the preliminary stage of our dealings, as the design developed, the inclusions set out in the design brief were conveyed by you as essential to the final product. As a designer, I did my best to incorporate everything you wanted and package it in a way that I thought, based off my building and design experience, would be both aesthetically pleasing and best suited to minimise the complexities of a difficult site. As the design was being finalised, further discussions were had about budget and, while we could not give you an exact figure, we did indicate to you that it would likely be outside of budget. Your response to this were words to the effect of 'we absolutely love the design, there is not a thing we want to leave out or compromise on. It is what it is. The budget was $750k; because that is how much cash we have in the bank left over from the proceeds of selling our property in Berry. If we have to go to the bank, we will.' You state in your email to us written 16th September that I told you that 'the house was simple to construct and could be built for around $550k.' I'm afraid that you have taken this comment totally out of context. Your reference does not include the rest of the conversation where I begin by saying that looking at the house alone (meaning not the pool, decks, suspended garden bed, music room, gym, office, garage structure, level lawn structure or driveways etc) that once out of the ground (meaning after we have excavated and constructed walls to floor level) the house could be built for around $550k. I continue in the conversation by explaining my tactics in designing a slender house going across the block which minimises the effect of the steepness of the site. I explain that by doing this the flow on effect to the construction of the house makes for smaller spans for roof and floor constructions which makes for an economical build. Shortly after the design was completed and submitted to council for assessment, and in a period that predated any engineering work being done on the proposed development by some three months, I met with Nerida at your home to discuss options for floor constructions. During the meeting I suggested to Nerida that we should run the proposed project through our quoting templates to try and ball park a construction cost. Nerida and I had a conversation with words to the effect: N 'How long will that process take?' D 'At least 5 days or so.' N 'Why waste your time, we love the house. It is what it is from this point. We just need to make smart choices along the way to keep the cost down'." (Underlined emphasis in original; italicised emphasis added.)
The parties exchanged further emails on 20 September 2019 in which they, in effect, repeated their positions as stated in earlier emails, save that Daniel also said: "We followed your explicit direction to run up fees costing the project which you decided because 'it is what it is, we don't want to change a thing' … Our last discussion of budget was when I was at your house where I suggested that we should at least run an estimate on the project before we [incurred] the cost of engineering …. You directed us not to."
Daniel is clearly referring in these passages to his meeting with Nerida on 16 November 2018. As I have set out above, [24] Daniel deposed that, at that meeting, Nerida said words to the effect that Daniel set out in this letter. The fact that as early as 20 September 2019 he made an assertion to this effect is a pointer to the probability that his recollection is correct.
As I have explained earlier, I see Daniel's emails of 18 and 20 September 2019 as having significance in the case. Unlike the emails to which they respond, they appear not to have been written in anger. Their terms are calm and considered. Daniel was not challenged in cross-examination about their contents.
As I have discussed above, they provide confirmation that, as Daniel and Gerard deposed in their affidavits: 1. earlier discussions between the Owners and the Builder concerning the Owners' budget of $750,000 were followed by a continued evolution of the project in which the Owners, Nerida in particular, added components to the design; 2. on 3 August 2018, Daniel did tell Nerida that the budget of $750,000 was "under fire"; 3. on 30 August 2018, Daniel did not represent that the project as outlined in Nerida's brief could be built for $550,000 but rather stated that the main living area of the house alone, once the site had been excavated and constructed to floor level, could be built for around $550,000; and 4. on 16 November 2018, Nerida rejected Daniel's suggestion that he begin a "costs estimation" because, as Daniel reported Nerida as saying, "we don't want to change anything".

[30]

The alleged Spreadsheet Representations

I have set out the terms of the Spreadsheet and Gerard's email of 24 January 2019 above. [28]
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".
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.
Assuming that it is relevant, Mr Klooster accepted that what was stated in the Spreadsheet was a representation as to a future matter.
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.
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.)
Section 4 is an evidentiary provision only and does not reverse the legal or persuasive burden that, here, the Owners bear of establishing that reasonable grounds for making the representations did not exist. [29]
The effect of s 4 has been summarised as follows: "• Unless the person making the representation as to a future matter adduces some evidence of reasonable grounds for making the representation the representation will be taken to be misleading: ss 4(1) and 4(2). • The person will not be taken to have reasonable grounds merely because such evidence is adduced: s 4(3)(a). • On the other hand, the person who adduces such evidence does not bear the onus of establishing that they had reasonable grounds for making the representation: s 4(3)(b). • Even if reasonable grounds are established, that does not mean that the conduct was not misleading: s 4(4)." [30]
There will not be reasonable grounds for making a representation if, at the time of making it, the representor did not have facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation. [31]
As I have set out above, the background to Gerard making the representations in the Spreadsheet is that: 1. on 13 November 2018 Nerida asked Daniel for "some idea of costings before we start"; [32] 2. on the same day, Daniel replied to Nerida stating that "once the engineering is complete I can run the project through my estimating software to get a ball park on cost"; [33] 3. on 14 November 2018, Nerida wrote to Daniel acknowledging that "we have to decide before we go to engineering" and that "we can't get a ballpark for the total cost until after engineering … so it's hard to know if we can afford it"; [34] and 4. on 14 January 2019 Nerida asked Gerard for a "rough idea" of "total build costs", which "don't have to be exact", but would be "an idea of what amounts we will need in the next 4 months". [35]
In those circumstances, Gerard sent Nerida the Spreadsheet under cover of his 24 January 2019 email describing the Spreadsheet as a "rough work schedule" which was "subject to change due to the engineering not having been completed yet".
The Spreadsheet itself was highly qualified. Five of the figures are described as being "approx" and five are described as being "rough". Two significant figures, for excavation and windows, are described as being "just a guess".
On the other hand, as Mr Crossland emphasised in closing submissions, Gerard's covering email, while describing the Spreadsheet as obtaining "rough estimates", said that he had "gone pretty heavy on the rates", expected "it to come in lower" and suggested that "we prepare" for a "worst case $450K in the next four months" but that "in reality I think it would be less than $400K".
Nonetheless, the representation constituted by the Spreadsheet was cautious and qualified.
It was by no means a forecast as to the cost of completion of the build.
Nerida said that once the work set out in the Spreadsheet had been done, the house would be "ready to be clad and the roof put on, because the walls [would be] there".
But Nerida agreed that she understood that, once the work referred to in the Spreadsheet was done, there would be no cladding, gyprock, roof sheets, joinery, kitchen, wet areas, stairs, windows (other than a quote for their cost), floor coverings, lining, driveway, shed, solar panels, floor heating, air conditioning or blinds.
In fact, it appears that the Spreadsheet underestimated the cost over the four month period to which it referred. The Builder incurred $429,156.13 from the beginning of construction in mid-March 2019 through to the end of July 2019, being the first five months of construction and six months from the issue of the Spreadsheet.
Gerard gave this evidence as to how he prepared the Spreadsheet: "(c) I prepared the [S]preadsheet by myself without any assistance from anyone else. It took me about an hour to prepare it. I had not seen any engineering plans. At this stage the structural engineer had not been engaged. I also had not read the geotechnical engineer's report. (d) I made best guess assumptions about engineering requirements and back costing similar construction methodologies on past projects. I took measurements using our CAD drawing and guesstimating for labour. (e) I assumed that the order of works that would take place was in the order set out in the [S]preadsheet. When construction works actually occurred, the engineer required the pool to be constructed with the house foundation. This was a significant cost that did not appear in the [S]preadsheet. (f) At the time of writing the [S]preadsheet, the garden shed was not included in [the Builder's] scope of works. Nerida later added this in the early stages of construction. This was also a significant cost that did not appear in the [S]preadsheet. (g) I qualified a lot of the figures in the S]readsheet using phrases such as 'guess at this stage'; 'rough lineal metre rate'; 'just a guess'; 'approx,'. I did this because at the time the [S]preadsheet was prepared development consent had not [been] issued and no engineering plans existed. I also included further qualifications in the email attaching the [S]preadsheet which states that the figures are 'subject to change due to the engineering not having been completed yet and the early stages are heavily influenced by it'."
In my opinion, the steps that Gerard took were a reasonable response to Nerida's request for a "rough idea" of what the build cost would be. Consistently with being asked to prepare such a "rough idea", Gerard adopted a somewhat rough and ready approach using "best guess assumptions", the Builder's CAD drawings and "guesstimating for labour".
In these circumstances, the Builder has adduced "some evidence of reasonable grounds" for making the representations referred to in the Spreadsheet.
In support of the proposition that the representations in the Spreadsheet were misleading, Mr Crossland handed up a schedule said to show that "the likely actual cost of the major works (and hence the total cost of the works in the [S]preadsheet) was vastly in excess of what appeared in the [S]preadsheet". The schedule contrasted the predictions of the cost of the various items in the Spreadsheet with the "actual cost per invoices rendered" of those items in the case of completed works, including invoices in the period from July to September 2019 or the "projected cost" of those items, as set out in Daniel's 31 October 2019 "Trade Summary" to which I referred at [242] above.
But the Spreadsheet did not purport to predict the "likely actual cost of the major works". It forecast a "4-month sub-total" of those costs. The analysis in Mr Crossland's schedule is thus beside the point.
I am not persuaded, in these circumstances, that the Owners have established that the Builder engaged in misleading or deceptive conduct by sending the Spreadsheet, nor that the Spreadsheet had any other relevant consequence in the proceedings.

[38]

The alleged "alternative transaction"

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."
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]".
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."
As to the matters in (b) and (c) of the passage set out at [291], there is no evidence that the Builder, or any different builder, would have entered a fixed price contract with the Owners to build a home on the property. No such suggestion was made in submissions.
As to the matter in (d) in the passage set out in [291], Nerida supplemented her evidence in a later affidavit as follows: "In [my] affidavit, I give evidence that I would have taken steps to sell the land. I would have bought an existing house in the Kiama area (or Kiama Local Government Area) for around but probably no more than $1,600,000, assuming we made some profit on the sale of the … Property (which we could then put towards the purchase of a new house) and assuming there had been a general increase in property prices in the Kiama area since we last looked at buying an established house in about July 2017. If I had made the decision to sell, I would have taken steps to do that more or less immediately and would have been looking for a completed house at the same time. I would not have wanted to waste more time and energy trying to build the type of house I wanted on the … block. I was keen to settle into a new home."
Mark gave evidence to similar effect.
Thus, he deposed: "If a house with these features could not be [built] for $750,000, or if I had been told that there was a real risk that such a house would eventually cost more than $750,000, I would have sold the land and bought an existing dwelling in the Kiama area with a value of between $1,500,000 and $1,600,000. Although in July 2017 I had not been willing to pay $1,600,000 for [a different property in Kiama] … I would have been willing to pay more for a house in, say, December 2018 than I had been in July 2017. In giving that evidence I assume that we would have achieved a capital gain on the … Property (assuming a decision to sell it) and therefore would have had more money to spend on a new house. My evidence that I would have been willing to pay more in December 2018, is also based on the fact that I would have factored in any general rise in house prices in the Kiama area in the period July 2018(sic) to December 2019(sic)."
I allowed that evidence only as evidence of Nerida's and Mark's state of mind. In any event, such evidence could only be probative of Nerida's and Mark's intention.
In substance, what the Owners sought to establish was an "alternative transaction" case, namely that, but for the alleged representations, they would not have entered the Contract but would have purchased a completed home elsewhere in Kiama and thereafter enjoyed a capital gain on that purchase.
Nerida gave detailed evidence of the sort of "good quality, four bedroom house" she had in mind. But that evidence cannot be used to prove whether such a house was available, let alone at what price.
In closing submissions, Mr Crossland and Ms Flaherty placed great emphasis on the fact that the evidence I have set out was not challenged in cross-examination. But this begs the question of what this unchallenged evidence was capable of proving. It was not capable of proving that, in fact, Nerida and Mark could have or would have purchased a suitable home in Kiama, let alone that they would thereafter have enjoyed a capital gain.
The difficulty is that neither Nerida nor Mark have adduced evidence showing that they could have bought an existing house in the Kiama area that would suit them for around $1.6 million, nor as to what the value of any such property would now be.
Thus, in closing submissions, Mr Klooster submitted: "… there's absolutely no evidence for your Honour about what that alternative transaction would look like, whether it could be done, what the contract price may be. There's none of the counter-factual evidence required, or there's no evidence before your Honour to prove the counter-factuals."
The design brief that Nerida sent Daniel on 20 July 2018 makes clear that she and Mark had very particular requirements for their family home. Yet they have not adduced any evidence as to whether they did locate, or could have located, a home in the Kiama area that would have met those detailed requirements, or such other requirements as might have satisfied them, for the funds that they had available.
Both parties adduced expert evidence as to growth rates for the market for houses in Kiama although, in closing submissions, neither counsel addressed any submissions in relation to that evidence.
Nerida and Mark have not made out an "alternative transaction" case. They are left with their "no transaction" case.

[39]

The alleged "no transaction" case

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]
Here, the Owners contend that, but for the alleged representations, they would not have entered the Contract.
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]
What divides the parties is the proper measure of the countervailing benefit that has accrued to the Owners by reason of entering the Contract.
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].
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]
Untutored by authority, I would have concluded that the Owners' contention should be accepted, as any increase in value of the property resulting from the works appears to me to be the "real value" to the Owners of that work. Otherwise, all they have now is an unfinished building. That is the test favoured by White JA in a similar context in Mills v Walsh. [44]
However, the majority in Mills v Walsh came to a different conclusion.
Thus, Brereton JA, with whom Bell CJ agreed, said: [45] "… the benefit to a proprietor under a building contract is not any enhancement in the capital value of the land, but the value of the works. Unless defective, this will typically equate with the cost of the works. The benefit is to be seen in the performance of the service, rather than in the end product which the service may or may not produce. Under a building contract, the proprietor receives labour and materials, and the value of what the proprietor receives is the value of that labour and those materials. Works under a building contract do not necessarily enhance capital value." (Emphasis added.)
The facts in Mills v Walsh were different from those in this case, in that the parties in the position of the Owners were induced to enter a building contract by the builder's misrepresentation that he was insured, rather than a statement concerning the likely cost of the works. But that difference does not affect the generality of the statement made by Brereton JA.
Accordingly, were it necessary to decide the question of what loss the Owners have suffered by reason of the Builder's alleged misleading or deceptive conduct, the answer would be that there was no loss, calculated as follows: Total amount paid or payable by the Owners: $818,847.65 [46] Less admitted defect re bowed wall: $26,206.95 Less value of works as determined by Mr Seeto: $797,456.35 Total: ($4,815.65)

[40]

The Rediwall issue

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]".
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]
However, cl 16.1 of the Contract provided that "a variation must be in writing and signed by the builder and the owner".
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.
The effect of these provisions was that the Builder could not have sued the Owners for the costs of the varied works. [49]
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.
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.
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.
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]
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."
His Honour was there referring to the effect of s 10 of the Home Building Act, but the same must apply to the relevant provision in the Contract and to the provision, to the same effect, implied into the Contract by the combined effect of s 7E of the Home Building Act and reg 59 of the Home Building Regulation 1997 (NSW). [52] Thus, in Wright v Foresight Constructions Pty Ltd, Basten JA held that the term implied into building contracts by s 7E and reg 59 should not be construed as to prevent any form of variation not in writing. [53]
The Owners sought to draw in aid the observations of Fagan J in Paraiso v CBS Build Pty Ltd. [54] However, his Honour was considering a claim by a builder to enforce an oral variation rather than the circumstances here, where the Builder is seeking to resist a claim by the Owner in respect of work that is the subject of an oral variation.
The Owners also pointed to the observations of Harrison AsJ in Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange. [55] Her Honour there observed that the express term in the contract considered by the Court of Appeal in Wright v Foresight Constructions Pty Ltd was not expressed in mandatory terms. However, that is beside the point because, as I have pointed out, Basten JA also considered what the effect would be of a term implied into a building contract by the combined effect of s 7E of the Home Building Act and reg 59 of the Home Building Regulation. [56]
Accordingly, the Owners' claim concerning the Rediwall fails.
In any event, as the experts all agree that Rediwall is structurally adequate, and there is no evidence that the use of Rediwall has any different function or reduced any amenity to the property, I would have held that replacement of the Rediwall by blockwork would be a remedy "out of all proportion to the achievement of the contracted objective" in a Bellgrove v Eldridge sense. [57]
The measure of damages for defective building work is the reasonable costs of rectification, so as to give the plaintiff "the equivalent of a building … which is substantially in accordance with the contract". [58] The work must be "necessary to produce conformity" with the contract and also "must be a reasonable course to adopt". [59] These are questions of fact to be examined in each case.
Such work will only be considered unreasonable in "fairly exceptional circumstances", such as where the innocent party is "merely using a technical breach to secure an uncovenanted profit", [60] or where the cost of the "proposed rectification is out of all proportion to the benefit to be obtained". [61]
Replacement of all the Rediwall with blockwork here would be out of all proportion to the benefit that the Owners would thereby obtain.

[42]

The two disputed invoices

The Owners raised a dispute about two invoices.
The only dispute pressed by the Owners relating to these invoices is the labour charges.
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.
Invoice 14297 makes a labour charge of $22,902.88 and provides similar particulars to those in Invoice 14296.
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".
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.
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".
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.
The Builder also relies on Mr Seeto's unchallenged evidence that the charges were "fair and reasonable".
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.
For these reasons, my conclusion is that the Builder is entitled to recover the labour charges referred to in these two invoices.

[45]

Loss of profit

There is no dispute that the Builder lawfully terminated the Contract on 6 February 2020.
The Contract was a "cost plus" contract. The Builder's margin was 12.5%.
The Builder is entitled to damages reflecting its loss of the opportunity to make the profit reflected by that Builder's margin.
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]
The parties' experts agree that the cost to complete the building as at July 2021 was $1,100,712.20.
Using Rawlinsons Construction Cost Guide, [67] the equivalent figure for cost to complete as at February 2020 is $1,027,618.03.
In opening submissions, the Builder contended that its loss of profit was 12.5% of this figure.
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.
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."
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.
It follows, in my opinion, that the Builder has not established loss of profit. This is not a case where "precise evidence is not available". The Builder must be able to produce evidence of what its overheads are. Simply pointing to an assertion in correspondence is not sufficient.
The Builder has not established its claim for loss of profit.

[46]

Gerard's email of 8 August 2018

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."
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."
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.
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.)
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."
Mr Crossland and Ms Flaherty agreed.
I accept that Gerard has taken the steps he has described. But this has only occurred because I drew attention to the significance of the invitation in his 8 August 2018 email.
I propose to refer this aspect of the judgment to the Australian Taxation Office. It will be a matter for the Commissioner of Taxation to determine what, if any, further steps should be taken.

[48]

Endnotes

Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law.
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).
Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (1924) 20 Ll L Rep 140 at 152.
Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 at [27] (Ipp JA, Mason P and Tobias JA agreeing).
(1995) 49 NSWLR 315 at 319.
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).
See [156]-[164] below.
See [168]-[178] below.
See [183] below.
See [237] below.
Daniel's and Gerard's sister.
See [236]-[238].
See [236]-[237].
See [232]-[235].
See [236]-[237].
See [109]-[110] above.
See [135]-[136] above.
See [238]-[239] below.
See [254]-[277].
See [234(b)] below.
See [8] above.
With the exception of a bowed wall that, it is common ground, must be rectified: see [336] below.
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.
At [142].
(2004) 218 CLR 592; [2004] HCA 60 at [109].
See [89] above.
See [110]-[122] above.
See [151]-[154].
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).
R V Miller, Miller's Australian Competition and Consumer Law Annotated (45th ed, 2023, Thomson Reuters) at [ACL.4,180].
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).
See [133] above.
See [135] above.
See [136] above.
See [146] above.
See [156]-[160].
See [166]-[178].
See [183] above.
See [248]-[251] above.
ACL, s 236.
See, for example, Mills v Walsh [2022] NSWCA 255 at [109]-[110] (Brereton JA, Bell CJ agreeing).
Although doubtless there would be a set off so far as concerns the amount due, but not yet paid.
Subject to the set off to which I referred at fn 39.
Supra at [10].
Mills v Walsh (supra) at [140], citing Australian Development Corporation Pty Ltd v White [2001] NSWCA 9 at [67] (Handley JA, Sheller and Stein JJA agreeing).
Being the total of the Builder's outstanding invoices of $268,848.16 and the amount in the order of $550,000 already paid by the Owners to the Builder.
See [201]-[203] above.
See [197] above.
Home Building Act, s 10.
Per Giles JA in Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327 at [7].
Ibid at [56]-[57].
The Home Building Regulation 1997 (NSW) preceded the current Home Building Regulation 2014 (NSW). The equivalent provision now lies in Sch 2, Pt 1, cl 1(2) of the Home Building Act.
Wright v Foresight Constructions Pty Ltd (supra) at [46]. The equivalent provision now lies in Sch 2, Pt 1, cl 1(2) of the Home Building Act.
[2020] NSWSC 190.
[2019] NSWSC 897 at [146]-[154].
The equivalent provision now lies in Sch 2, Pt 1, cl 1(2) of the Home Building Act.
(1954) 90 CLR 613; [1954] HCA 36 (Dixon CJ, Webb and Taylor JJ).
Ibid at 617.
Ibid at 618.
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 at [17] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ), citing Radford v De Froberville [1977] 1 WLR 1262 at 1270 (Oliver J).
Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 at [82]-[88] (Tobias JA, Giles and McColl JJA agreeing), citing Casbee Properties Pty Ltd v Patoka Pty Ltd [2003] NSWCA 361 at [56]-[60] (Giles JA, Mason P and McColl JA agreeing) and South Parklands Hockey & Tennis Centre Inc v Brown Falconer Group Pty Ltd (2004) 88 SASR 65; [2004] SASC 81 at [90] (Debelle J); see Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 at [81] (Macfarlan JA; McColl and Basten JJA agreeing); Ellis's Town House Pty Ltd v Botan Pty Ltd [2017] NSWCA 20 at [42] (Gleeson JA, Leeming and Simpson JJA agreeing).
Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83 (Mason CJ and Dawson J), 102 (Brennan J), 125 (Deane J); [1991] HCA 54.
Ibid at 83 (Mason and Dawson JJ), citing Jones v Schiffmann (1971) 124 CLR 303 at 308 (Menzies J); [1971] HCA 52.
Watts v Rake (1960) 108 CLR 158 at 159 (Dixon CJ); [1960] HCA 58.
Commonwealth of Australia v Amann Aviation Pty Ltd (supra) at 83 (Mason CJ and Dawson J).
Gerrard v Slamar [2004] WASCA 253 at [32] (Em Heenan J, Steytler and Le Miere JJ agreeing), citing JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 241-2 (Brooking J).
Rawlinsons Construction Cost Guide (32nd ed, 2024).
See [100] above.
Rafidi v Commonwealth Bank of Australia Ltd [2017] NSWCA 96 at [16] (Basten JA, Emmett AJA agreeing), citing the earlier decision of Commonwealth Bank of Australia v Rafidi [2016] NSWSC 1931 at [11] (Ball J).
Ibid.

Construction & Design Australia Pty Ltd v Robinson

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (49 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (37)

Cited By (3)