Victorian Civil and Administrative Tribunal|2003-07-25|Before: Mr J

Fasham Johnson Pty Ltd v Ware & Saunders [2003] VCAT 885 (25 July 2003)

domestic building - notice of termination - invalidity -

2. I direct the Principal Registrar to relist this matter before me on a convenient date for further directions.

3. The directions referred to in para 2 include directions with respect to the further hearing of this matter on the orders properly to be made on the claim and on the counterclaim and on the making of submissions in that regard and on any question(s) of costs.

1. Relations between the parties in these proceedings soured long ago. It is no wonder, then, that every reasonable endeavour by the Tribunal to encourage them to resolve their differences has failed. Instead they have preferred the course of a lengthy and complex hearing. I consider this folly, as will appear.

2. The proceedings arise out of house construction at 18 Howe Road, Rosebud in Victoria. The Contract to carry out the works (in the form HC-5 Ed 1 1998) was signed between the parties on 27 August 1999. The Applicant ("Fasham Johnson") agreed to construct a new dwelling on the land for $291,792.00 payable by a deposit (of $14,500.00) and staged payments thereafter. The Contract sets a total construction period (including delay days) of 246 days.

3. The proceedings began on 5 June 2002. This is less than 2 months after the Respondents served a Notice of Termination. The Applicant sought against the Respondents the sum of $90,506.00 and sought other orders as well, including a declaration that the Respondents wrongfully or illegally did terminate the contract.

4. The Respondents filed a Counterclaim on 13 January 2003 - some 6 months after the proceedings commenced. They have sought against the Applicant various orders also including an order for payment of a sum of $167,552.00 and for payment of a further sum of $16,400.00. Alternatively, they claim damages in a sum the Tribunal considers fair and reasonable.

5. The Claim and Counterclaim were heard by the Tribunal on various dates, including one block of 10 days, commencing on 30 March 2003 and concluding, with final submissions, on 5 June 2003. Numerous witnesses, giving lengthy evidence, were called by both sides. Principal witnesses for the Applicant included Mr Phillip Barry and Mr Natale Surace while principal witnesses for the Respondents were the Respondents themselves. Expert evidence also was called. But the parties, for all their readiness for the hearing, did not seek a direction, by consent or otherwise, for transcript. So the case went ahead without the added expenditure of a running transcript. There is now no transcript of the proceedings.

6. Fasham Johnson in the Claim alleges loss and damage arising by reason of matters alleged. It alleges breach of a term contained in cl 20.3 of the Contract (para 6) not to unreasonably or vexatiously terminate the Contract. It alleges that in breach of the Contract the Respondents sought to illegally and wrongfully terminate the same (para 8) by serving Notice of Termination on 12 April 2002. It alleges the Respondents have wholly and wrongfully repudiated and put an end to the Contract (para 9) and that in breach of the term contained in cl 11.14 of the same (paras 10 and 11) they did obstruct or hinder it in carrying out works. It alleges breach of a further Agreement dated 24 July 2001 (paras 13, 14 and 15) reached between the parties to resolve their differences following on service of a Notice of Intention to Terminate on 24 October 2000. Other allegations are also made in the Points of Claim, and particulars are given under several.

7. In the Counterclaim, the Respondents' claim that the further Agreement of 24 July 2001 falls prey to s14 of the Domestic Building Contracts Act 1995 in several of its clauses (paras 8, 9 and 10). At the same time, but further or alternatively, they allege that Fasham Johnson failed or neglected to comply with determinations made by a Mr Julian Davies (who gave evidence in the case): see para 16. They allege (para 17) that they served on the Applicant a Notice of Intention to Terminate dated 1 March 2002. This is the second such Notice they served the first being served in October 2000. They allege (para 18) they then served a Notice of Termination of the Contract by which (para 19) they terminated the Contract on the date of the Notice, namely, 12 April 2002. Further or alternatively (see para 20) the Respondents allege that Fasham Johnson evinced an intention no longer to be bound by the Contract and (para 21) thereby repudiated the same. They allege (para 24) that in breach of the Contract the Applicant failed to carry out the works in a proper and workmanlike manner or in accordance with the Contract. They allege generally (para 30) they have suffered loss and damage by reason of the Applicant's breaches of Contract and repudiation. As with the Applicant's Points of Claim, the Respondents' Points of Counterclaim make various other allegations, giving detailed particulars of several.

8. The Respondents' Defence to the Claim is dated 19 December 2002. Various admissions and denials are made. In particular (see para 18) though, the Defence alleges that the Applicant failed to remedy the breaches specified in the Notice of Intention to Terminate dated 1 March 2002. They further say that the Contract between the parties was terminated under cl 20.2 of the same by the Notice of 12 April 2002. Alternatively, they say that, by that date, the Applicant had repudiated the Contract and that the repudiation was accepted and that the Applicant's employment at common law was determined by that Notice. They claim a set off of the loss and damage to be set out in a Counterclaim subsequently to be filed (and which was filed subsequently).

9. Fasham Johnson's Defence to the Counterclaim is dated 23 February 2003. It too sets out various admissions and denials of the matters in the Counterclaim. In particular (see para 22) Fasham Johnson says that it denies the validity of the Notice of Termination of 12 April and says that the Respondents wrongfully and illegally terminated the Contract. However the Applicant (Respondent to the Counterclaim) admits that the Respondents did serve both that Notice and the earlier Notice of Intention to Terminate. So, the formal matter of service is not therefore in issue.

10. At times, the course of the evidence in the case appeared to stray well far from the perameters set by the Points of Claim and Counterclaim. This was, I suppose, to be expected given, in particular, the conversational way in which various paragraphs in the Respondents' documentation was expressed. In many places, the Respondents' Points of Defence and Points of Counterclaim fail the test of setting out only the material facts relied upon, or of doing so clearly. Instead, in various areas, they descend into particularities which are unwarranted. The effect of doing this, though, is to lengthen the hearing: matters must be traversed in evidence which either are not relevant or are of not sufficient relevance. But they are matters which must be traversed because they have been raised as if they were all material facts when, plainly, not all of them are, or ever could be. Contributing also to the length of the hearing were the various points and objections taken at various stages during its course by both parties. Many of the objections, though, were well founded.

11. It appears from questioning of Counsel, that the central issue in the whole proceeding is the question of termination: which party - the Applicant or the Respondents - acted lawfully to terminate the Contract? This, however, itself has further sub-issues: was the Notice of Intention to Terminate of 1 March 2002 valid or not?: was the Notice of Termination of 12 April 2002, sent subsequently, itself valid or not?: what is the effect of either Notice not being valid?: may the Respondents maintain a right to terminate at common law if not having validly terminated under the Contract?: may the Applicant, on the other hand, maintain a right to claim repudiation by the Respondents if they have not validly terminated? These are complex and difficult questions.

12. These are the sub issues which arise under what I detect as the central issue. Following on from these, however, there are numbers of other issues which arose upon the evidence. Who, of the parties, is entitled to claim loss and damage?: what is the loss or damage which is claimed?: has either party any other lawful entitlements? Much of the technical evidence in the case, and lengthy evidence at that, was devoted to these issues of a follow on nature.

13. The central issue in the case is - which party acted lawfully to terminate the Contract? In my view this calls up the contractual validity of the Respondents' Notices - the Notice of Intention to Terminate the Contract and the Notice of Termination. Provision is made for the issuance of those Notices in clause 20 of the Contract which is as follows:

"20. OWNER'S RIGHTS TO TERMINATE CONTRACT

20.1 Owner's right to serve notice of Intention to terminate contract

* fails to produce to the Owner a copy of the relevant insurance policy of certificate of currency setting out details of the required insurance under the Building Act 1993, as required by Clause 5; OR

* fails to proceed with the Works with due diligence or in a competent manner; OR

* unreasonably suspends the carrying out of the Works; OR

* refuses or persistently neglects to remove or remedy defective work or improper Materials, so that by the refusal or persistent neglect the Works are adversely 3 affected; OR

* refuses or persistently neglects to comply with this Contract -(including the requirements of municipal or other authorities); OR

* is unable or unwilling to complete the Works or abandons the Contract; OR

the Owner may give written notice by registered post to the Builder:

* describing the breach or breaches of the Contract by the Builder; AND

* stating the Owners intention to terminate the Contract unless the Builder remedies the breach or breaches of this Contract within a period of fourteen (14) Days after the Builder's receipt of the above notice.

20.2 If builder fails to remedy breach owner may terminate contract

If the Builder fails to remedy the breach or breaches of this Contract as stated in any notice served by the Owner under Clause 20.1 THEN the Owner may, without prejudice to any other rights or remedies, give further written notice by registered post to the Builder immediately terminating this Contract.

20.3 Owner may not terminate contract in certain circumstances

The Owner may not terminate this Contract unreasonably or vexatiously or if the Owner is in substantial breach of this Contract.

20.4 Owner's right to engage another builder to complete the works

If the Owner terminates this Contract in accordance with this Clause 20, the Owner may then engage another builder to complete the Works; and:

* if the reasonable cost to complete the Works exceeds the unpaid balance of the Contract Price, then the excess amount shall be a debt due and payable by the Builder to the Owner; OR

* if the reasonable cost to complete the Works is less than the unpaid balance of the Contract Price, then the remaining amount of the unpaid balance shall be a debt due and payable by the Owner to the Builder."

14. The first question which arises in my view is whether the Notice of Intention to Terminate served on 1 March 2002 is valid or not. That Notice asserts that:

(i) has failed to proceed with the Works under the Contract with due diligence or in a competent manner;

(ii) has refused or persistently neglects to remove or remedy defective work or improper Materials so that by the refusal or persistent neglect the Works are adversely affected;

(iii) is unable or unwilling to complete the works; and

15. The submissions of the Applicant in this regard were directed to saying that the grounds for issuing the Notice did not exist when it was served. Reference was made also to remarks of Moffitt J in Re Arbitration between Stewardson Stubbs & Collet Pty Ltd and Bankstown Municipal Council [1965] NSWR 1671 at 1675. The Respondents maintained a position that the grounds were made out - including the ground that Fasham Johnson had failed to proceed with due diligence or in a competent manner.

16. In my view, the Notice does not comply with the Contract and lacks contractual force in consequence.

17. I am prepared to accept, and to find, that when the Notice was served ground (i) at least existed, namely, that the Applicant had failed to proceed with the works in a diligent or competent manner. This would follow, if from nothing else, from the Applicant's concession in final submissions that there were defects in the works but I consider that the evidence otherwise justifies this finding in any event. A contributory factor leading to this conclusion I consider were impasses between the parties contributed to by both of them.

18. As to ground (iii), I could not be, and am not, satisfied on the evidence that the Applicant was "unable" to complete the works. There was no evidence at all of Fasham Johnson's inability, in the sense of financial or other incapacity, to complete the works.

19. As to the alternative in ground (iii) (unwillingness to complete), I consider I did detect a note of uncooperation in the evidence of the Applicant but I consider I detected that in the evidence of both parties. But is uncooperation the same thing as unwillingness to complete? And can I be satisfied that, as at 1 March 2002, the Respondents had a right to call for completion? Although the Contract of August 1999 would indicate otherwise, the Agreement of 24 July 2001 specified in cl. 4.1 that the dwelling "will be completed as soon as possible in accordance with the terms of this Agreement". This seems to leave completion rather open-ended and foolishly so.

20. As to ground (ii), I am prepared to accept again that, as at the date of the Notice, there was defective work. I am unable to make any finding though that the Applicant had refused or persistently neglected to remove or remedy such work or improper materials. However, there may have been occasions of conflict between the parties where this may have appeared to be so. I refer to the evidence of Mr Julian Davies in this regard, though, which was to the effect that the Applicant had substantially complied with the determinations which he had issued, or made under, the July 2001 Agreement. I accept his evidence. Even, however, if I could be satisfied that Fasham Johnson had engaged in a refusal or persistent neglect to remove or remedy, which is what is required by ground (ii), I could not be, and am not, satisfied on the evidence that by reason of this "the works [were] adversely affected". Whilst I might agree, in a general way, that works left standing may deteriorate, as may even a completed dwelling, there was nothing in the case for the Respondents which specially dealt with this point, as I recall.

21. As to ground (iv), I am unable to be satisfied on the evidence that as at the date of the Notice, the Applicant was in "substantial" breach of the Contract. There were defects in the works, which I accept, and there were difficulties in the Respondents dealing with Fasham Johnson, which I also accept, and vice versa I should add, and there were incomplete items, but these matters do not lead to a finding of "substantial" breach. And of course what was required by the Contract must be seen in the light of the Agreeement of July 2001 and, in that regard, I mention again the evidence of Mr Davies, which again I say I accept, that Fasham Johnson had substantially complied with the determinations he had issued from time to time under the latter. The fact is that when the Notice was served, construction of the house was well under way. Of course there were incomplete items - the house had not been completed. And there were defects in the works undertaken. But this does not take the case into the area of "substantial" breach by Fasham Johnson. Even being satisfied of breaches, how could I be satisfied of "substantial" breach? What is a "substantial" breach for this purpose? I cannot recall being specifically addressed on this point by the Respondents. In summary I am unable to be satisfied on the evidence that ground (iv) was established when the Notice was served.

22. Of all the grounds specified in the Notice, in my view, only ground (i) is, I consider, made out to any degree. This means that the Notice is not justified to any extent beyond that point. The further difficulty is that the grounds are expressed conjunctively. If this means they all stand together or all fall together if one or more of the grounds is not established, then they all fall in my view.

23. Moreover, the Notice fails to be self-contained and on that basis fails in my view to "describe" the breach or breaches in conformity with cl.20.1. As appears in the Notice (C), in order to ascertain the "specified defects and incomplete items" there being referred to, it is necessary to consult the Buildcheck Report of 14 February. But that document did not accompany the Notice at all. In my view it is a failing in a Notice to have to consult a document that does not accompany a Notice. It appears in fact that it was sent 2 or 3 days later - apparently by agreement between the solicitors. This was sought to be excused, unsuccessfully in my view, on the basis of provisions in the Contract. The Buildcheck Report, when it is consulted however, happens to be a complex and lengthy document which is difficult to follow without several readings.

24. A notice under cl.20.1 should be such as to prompt the builder into action to remedy breaches. That is why it calls upon the builder to remedy. But the builder must be able to know, by a Notice, what the other party wants remedied. The Respondent's Notice fails this test also. It does not clearly bring home to anyone reading it, what must be done to remedy the breaches alleged. Only the general allegations, echoing cl. 20.1 of the Contract, are made. The breaches to be remedied could be any or all of those anywhere in the Buildcheck report. The Notice is not self-contained and does not speak for itself. It fails to achieve its contractual objective.

25. There is, in my view, this further difficulty with the Notice. Clause 20.1 is quite clear that a Notice must state the owner's intention to terminate unless the builder remedies the breach or breaches "within a period of fourteen (14) Days after the Builder's receipt of the ...notice." This is what the parties agreed upon but the Respondent's Notice fails to do this. For some reason or other it errs on the side of generosity and specifies a period of 35 days. This means, to my mind, that the Notice lacks contractual force, for that reason alone. It should have followed the contractually mandated period, yet it fails to do so. It was that period which was agreed upon, and no other, and the Contract was never altered in that respect. It would be different if the parties had agreed upon a different period, but they did not do so. It is not expecting too much to hold them to their bargain.

26. Even if I could be satisfied that grounds (i) to (iv) in the Notice were made out, therefore, I still could not be satisfied that the Notice was not a nullity or had contractual effect.

27. Clause 20 must be read as a whole to provide for a scheme whereby a Notice of Termination follows a Notice of Intention to Terminate in the circumstances set out. I cannot see that a cl.20.2 notice can stand alone. It should follow a failure to remedy as set out in the cl. 20.1 notice. This is made clear also by cl. 20.4. On its own, though, a cl. 20.21 notice does nothing: but it does set in motion a contractual procedure for termination to be followed up by a cl. 20.2 notice. But if a cl. 20.1 notice lacks contractual effect, then, it seems to me, so too must a cl.20.2 notice founded on it. I have formed that view of the Respondents' cl.20.1 notice for the reasons I have given. I am of the view therefore that their cl.20.2 notice fails also. It is founded on a notice which has no contractual effect, and, as such, collapses.

28. However, even if this were not so, and a cl. 20.2 notice can have independent contractual effect, I am of the further view that the Respondents' Notice of Termination fails of its own accord in any event. As before, I am not satisfied on the evidence that "the Breaches" of the Applicant, referred to and maintained in Recital 6 of the Notice, are made out although I accept there were defects in the works at the premises and incomplete works. Moreover the formulation adopted there is that "the Builder has failed and/or neglected" to remedy those "Breaches" whereas cl. 20.2 itself mentions only a builder who "fails" to remedy breaches. It does not introduce, as a separate element, a builder "neglecting" to remedy breaches. In referring to "the Breaches" mentioned in the cl. 20.1 Notice, the cl. 20.2 Notice is, in my view, quite ambiguous. It is not made very clear whether it is referring to the so-called breaches set out in grounds (i) to (iv) of the former or whether it is referring to those set out in the Buildcheck report of 14 February or whether it is referring to both. Again, the Buildcheck Report does not accompany the Notice - this time it is earlier - if it is the Buildcheck Report breaches that are being referred to. And that Report is a long and complex document not confined to defects. The Notice, in summary, does not make the matter plain at all. See Brenmar Building Co Pty Ltd v University of Newcastle (1977) 15 BCL 467.

29. In these ways in my view the Notice of 12 April fails to be a straightforward Notice of Termination. Terminating a contract is a serious matter and, the party on the receiving end should be entitled to insist that the Contract's provisions be followed. But the Notice goes far beyond what is contractually authorised by cl. 20.2. In a sense, it exceeds the necessity of the occasion. In para A it asserts a right to give notice of "immediate termination" whereas in para B it goes on, in the alternative, to assert a common law repudiation of the Contract which it "hereby" accepts. Only the former bears a relation to cl. 20.2: the latter is nowhere mentioned. The Notice gives notice of both, and not only of the former; yet the former is the only contractually provided for initiative. In my view, the Notice is not only confusing and unclear: it is one not contemplated by cl. 20.2 by reason of this added element. It thus fails as an exercise of the power given by that provision.

30. Nor, in my view, is the Respondent's Notice saved from a lack of contractual effect by the words in cl. 20.2 "without prejudice to any other rights or remedies". Those words, whatever else they may achieve (see below), cannot give contractual effect to a notice otherwise lacking contractual effect. It that were not so, there would be no need ever to specify a contractual scheme for notices which is to be followed. A failure to follow out the scheme, by sending a notice lacking contractual effect, could always be ignored. Yet that would overlook what the parties have agreed should apply.

31. Nor in my view is the Notice of 12 April effective as an acceptance of any repudiation by Fasham Johnson.

32. As I have indicated, I agree that at the time of the Notice of 12 April, and at the time of the earlier Notice of 1 March, there were defects in the works at the premises and there were uncompleted works too. By the date of either Notice I accept, also, that any sense of co-operation between the parties had disappeared. But these things are far from saying that as at 12 April Fasham Johnson had repudiated its obligations under the Contract.

33. Repudiation occurs where a defaulting party "evinces an intention no longer to be bound by the contract...or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way": Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 625-6. Or it may arise if the party indicates an intention to perform under the contract only when it suits the party: see Carr v JA Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327 at 349. In whichever way it is alleged to have arisen, repudiation "is not ascertained by an inquiry into the subjective state of mind of the party in default; it is to be found in the conduct, whether verbal or other, of the party in default "which conveys the relevant meaning: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 647. In that case Deane and Dawson JJ said that, for the doctrine of repudiation to operate, it suffices "that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it": at p658.

34. In the first place I am not persuaded that it was open to the Respondent to adopt a course of alleging repudiation by the Applicant when they had chosen to go down the contractual path of serving a notice under cl. 20.2. The problem, it seems to me, lies in this consideration. At the same time as they purport to terminate under the Contract, they cannot claim they are accepting a repudiation whereby the Contract is at an end. They cannot, on the one hand, use a mechanism under the Contract which will allow other contractual provisions to take effect and, on the other, treat the Contract as over. Compare per Ashley J in Wilson v Kirk Contractors Pty Ltd (1991) 7 BCL 284.

35. It may be, however, that the words in cl. 20.2 ("without prejudice to any other rights or remedies") do enable this to happen. This view is, to some degree, one supported by the decision in Mazelow Pty Ltd v Herberton Shire Council (2002) 18 BCL 272 (to which I was not referred as I recall). The difference between that case and this one, though, is that the contract in that case (AS 124-1992) expressly provided in cl. 44.1 for the preservation, and exercise, of rights other than contractual rights of termination. Clause 20 of the present Contract is nowhere near as plain.

36. I am prepared to assume in favour of the Respondents, though, that at the same time as they sought to terminate under the Contract they were not prevented from accepting a repudiation by the Applicant. The difficulty, in the second place, then, is this. I am not satisfied that as at the date of the Notice (12 April) the Applicant had evinced any repudiatory intention at all. The evidence does not satisfy me that as at that date Fasham Johnson had demonstrated an intention no longer to be bound by the Contract or was prepared to abide by the Contract only on terms and conditions it laid down. Impasse between the parties may be enough to demonstrate an intention of that kind in a case, but it does not demonstrate it in this case, in my view. Already I have mentioned the evidence of Mr Davies regarding Fasham Johnson's attitude to following out his recommendations under the Agreement of July 2001. Contributing to any impasse between the parties in this case was, in any event, in my view conduct on the part of both parties but including Mr Ware. There was no evidence before me, I should indicate also, to show that Fasham Johnson lacked the capacity to carry out its obligations under the Contract as might be suggestive of an intention no longer to be bound by the same. Nor was there anything express in the case in the way of a disavowal of the Contract by Fasham Johnson. Any repudiatory intention by Fasham Johnson could only be found in light of the facts in the case but the facts do not, in my view, lend support to that inference either at all or to the degree required to be satisfied to make that as a finding. Nor am I satisfied at the relevant time that the Respondents had in fact the capacity to go on with the Contract if they did not accept its alleged repudiation by Fasham Johnson: see Foran v Wright [1989] HCA 51; (1989) 168 CLR 385. Their financial position has been a difficult and unfortunate one, it would appear, involving, so I was told, deprivations and certain family sacrifices.

37. I should wish to mention here an argument by the Respondents that the Agreement of July 2001 - one they entered into voluntarily and upon advice - is invalid by reason of s14 of the Domestic Building Contracts Act 1995. I could not see the point of this argument. Presumably one aspect of it was, though, that I could not take into account Fasham Johnson's compliance with the recommendations of Mr Davies. But the submissions of the Respondents on the point were not developed well and I must say did not seem to lead any where. Or, it was not made clear to me where they did lead. In any event I cannot see how the Agreement infringes s14. It does not seem to me that Mr Davies in making determinations under its terms was acting as an arbitrator or carrying out an arbitral function. Furthermore it does not seem to me that the Agreement was one which "requires" disputes under it to be referred to arbitration. I would note, too, that the parties were free to go to mediation instead, so it is difficult to see how any element of compulsion (arising out of the word "requires" in s14) to arbitrate could arise. In any event, even if the Agreement is outlawed by s14, why can I not have regard to Mr Davies' determinations and to Fasham Johnson's responses? I note the Respondents themselves rely upon this matter in the Counterclaim (para 16).

38. However, in serving the Notice of 12 April, I consider that the Respondents, in plain terms, sought to bring the Contract with the Applicant to an end. They made this very clear in para A of the same by which they said they give notice "of immediate termination of the Contract". By doing this they must have intended also to end their obligations under the Contract. Yet the Notice, as I have indicated, in my view lacks contractual force and effect. Therefore, it seems to me, that the Notice achieves an objective only of evincing an intention by them no longer to be bound by the Contract. By serving the Notice - one lacking contractual force and effect - it was they who repudiated the Contract in my view. And they did this by their conduct in serving the Notice even though they may have had a subjective state of mind which was different. Their subjective intentions, in this regard, are irrelevant as the authorities show. Or they showed this as their intention in purporting to accept a repudiation by the Applicant which, I find on the facts, was not something which had arisen to accept.

39. The net result, therefore, is this. The Respondents' Notice under cl. 20.2 lacks, in my view, contractual support. It is not saved from being itself repudiatory by the device of it being expressed as an acceptance of the Applicant's repudiation. The evidence simply is not there to prevent this being its fate. It is repudiatory also in purporting to accept an alleged repudiation by the Applicant.

40. I consider also that the Applicant has acted to accept the Respondent's repudiation. It did so, and communicated the fact, by commencing proceedings in the Tribunal on 5 June, less than 2 months after the cl. 20.2 notice was served. A period of delay of that duration, given all the circumstances of the case and of a Contract executed in August 1999, I do not consider significant or unreasonable. Nor am I satisfied that as at or before 12 April the Applicant lacked the capacity to go on with the Contract despite an element of uncooperativeness which I can detect existing between both parties (but including, obviously, Fasham Johnson).

41. On the principal issue of termination, therefore, I find in favour of the Applicant for the reasons I have given. I consider that cl. 20.3 of the Contract applies, in consequence. Indeed, I have earlier rejected a view that ground (iii) of the cl. 20.1 Notice is made out. There was no evidence before me that the Applicant lacked the "wherewithal" to proceed, so to speak. See again Foran v Wright, above.

42. It follows, that I am satisfied that the Respondent did wrongfully terminate the Contract with the Applicant. I am able to make a declaration accordingly.

43. As a result of such conduct, in accordance with usual principles, I am satisfied that the Applicant is entitled to recover damages in respect of its loss. What is its "loss" in this regard? Loss under this head usually contains two elements - expenditures and profits. The Applicant is entitled to recover in respect of expenditures actually made in performing or preparing to perform under the Contract which have not yet been reimbursed. This is subject, in my view, to a notion of reasonableness and also to a duty to mitigate. The expenditures actually made would need to have been made by the Applicant, not in a general way, but appropriated to the particular project with the Respondents. The Applicant is also entitled to recover a loss of profits on the Contract wrongfully terminated. This is often called a sum representing the "loss of the contract". I refer to remarks of Fullagar J in Carr v JA Berriman Pty Ltd, above, at p352:- "On the other hand, the builder having lawfully rescinded the contract, is entitled to recover damages for loss of the contract and for any particular loss suffered by it through any breach of contract committed by the building owner before recission."

44. Try as I might, I am not in a position, however, to order the actual amount(s) involved. The submissions analyse this issue in terms of the unpaid contract balance. This was put at $126.992.00 after taking into account payments made by the Respondents (of $152,161.00) and other items (including adjustments). The original contract price was, as I have noted, $291,792.00. Later, though, as I recall, the adjusted contract price was put at $95,020.00 after making certain allowances and adjustments. In the Points of Claim, though, a figure of $90,506.00 is specified, as I have noted. Further and Better Particulars of Loss and Damage I have found difficult to follow.

45. I need to know what figure(s) to specify in my order. I need to be clear about why such figure(s) should be specified in preference to any other(s). In the absence of that detail, there is a risk of me doing an injustice by ordering too little or too much. If sub-figures are involved, I need to know what they relate to, because if they have not been admitted they could concern matters I have not heard evidence about. But a figure around $90 - $95,000.00 all up may be involved.

46. This issue of quantum, I look back, was, I consider, hurried through. This is not a criticism, I wish to make clear. But in a case of this complexity, with no transcript, and with the fragmentation of the hearing, the issue needs to be considered or re-considered. I require, in other words, Fasham Johnson to make fresh or renewed submissions, adequately detailed in writing. These should be sent to the Respondents.

48. I have found against the Respondents on the principal issue of who wrongfully repudiated the Contract. This does not mean, however, that the Respondents are not entitled to recover in respect of defective works at their premises due to Fasham Johnson. I refer to Mazelow Pty Ltd v Herberton Shire Council, above, at p275. Other authorities might equally be referred to, however.

49. In final submissions it was learnt that the Applicant "conceded that the Respondents are entitled to an amount for the rectification of defects". This, as I recall, had not been conceded before. There was no concession, of course, that the Respondents were entitled to claim for the cost of completion of works. No such concession could be justified in light of my finding in any event. It was the Respondents who in my view wrongfully repudiated the Contract. The Respondents, in my view, have no right to claim the cost of completion from Fasham Johnson.

50. The concession of the Applicant about defective works is put as low as $10,670.00. This figure, it seems to me, is far too low having regard to the evidence of Mr Atchison. In his report of 28 February 2003, as far as I can detect it, he would put the figure at $42,685.00. The initial claim of the Respondents in this regard was for $52,474.00. I accept the evidence of Mr Atchison. I do not consider he was seriously weakened in cross-examination in any respect. His evidence was unexceptional in my view. I considered the report of Mr Laurie Sims and admitted it into evidence but I was unable to give it any weight because Mr Sims died and could not be cross-examined. His report, therefore, was not tested. The reports of Mr Atchison, though, were searchingly tested. But I make the observation that they do not, in places, adequately distinguish between defects and incomplete works.

51. Once more though, and try here as I might too, I am not in a position, however, to order the actual amount(s) involved. I have no transcript to refer to and the hearing has been fragmented. Also I found the Respondents presentation on the question of quantum very difficult indeed to follow and their written submissions did not assist. There was a tendency, here as well, to hurry through this aspect of the case. I do not criticize them on this score though. There was a tendency, also, simply to put figures before me - very detailed figures at that - and expect me to work it out. That, of course, is not in accordance with the traditional onus of proof in matters of this kind. The Respondents, on their Counterclaim, have the burden of proving their losses. I have indicated the losses I am prepared to allow, and I do so further below. But it is not merely a matter of referring to documentation and hoping the Tribunal will perform the necessary task. I need to be taken through the amount(s), and not any others, which should be allowed. For, as with the Applicant, there is a risk of me doing an injustice by ordering too little or too much.

52. I consider the Respondents are entitled to recover in respect of defects at their premises attributable to the workmanship of Fasham Johnson as at 12 April 2002. I would think, having heard the evidence, some delays would be allowable in terms of liquidated damages. Often, though, as I have indicated, it is quite apparent that delays were the product of impasses between the parties and often those impasses could not be said to be the responsibility of the Applicant.

53. I am prepared to accept also that the Respondents may have incurred certain additional miscellaneous expenses, which they should be able to recover, in respect of relevant defects. I am entitled to inform myself on any matter as I see fit and the Tribunal is not bound by the rules of evidence. It is true that evidence of expenditures in this regard may not have been matched by evidence called from persons who were paid sums. But if the expenses related to defects of the kind I have mentioned, I am not troubled by that in the overall context of the case. With Mr Atchison's evidence, and with evidence of this kind (if it meets the criterion of being related to defects) a figure on quantum for the Respondents all up of $60 - $65,000.00 may be involved if I make an allowance for liquidated damages also. But this figure deliberately does not allow anything for a new roof at the premises. On the evidence, I could see no entitlement to a new roof. A responsibility on the part of the Applicant for a new roof at the premises, or for the cost(s) of the same, was not, in my view, established on the evidence. The Respondents, in my view, have no right to claim for that from the Applicant.

54. I need therefore to reconvene the Tribunal for these purposes also. At the reconvened hearing, I need to hear renewed or fresh submissions on this question of quantum from the Respondents also adequately detailed in writing. A copy should be forwarded to the Applicant.

55. Another matter which they, and the Applicant, will need to address is the stature to be given to amount(s) due to them in respect of defects. The Respondents make their claim on a Counterclaim. They have also, however, claimed in their Defence, an earlier document, a set-off of the loss and damage to be set out in the counterclaim. Why should I not proceed to set off as they have asked? What was the advantage they sought to gain out of pleading in this way? It may be because they expected to recover an amount on the Counterclaim which would exceed the amount on the Applicant's claim. If they had that expectation, it was erroneous, as it turns out.

56. I asked the parties to address me on costs in their final submissions. I had hoped I could avoid having them attend again. However, they will need to re-attend in any event. There may be other matters on costs I need to address in any case.

57. Section 109(1) of the Victorian Civil and Administrative Tribunal Act 1998 indicates that, in the first instance, each party must bear its own costs in relation to a proceeding. Costs do not follow the event in the Tribunal. Under s109(2) the Tribunal is able to depart from this initial position only if satisfied it is fair to do so having regard to s109(3) of the Act. Other provisions also may apply.

58. I will need to be persuaded on the return date that I should depart from s109(1) and order costs in the proceeding at all.

59. Considerations relevant to the discretion on costs include these:-

* Neither party has wholly succeeded but neither party has wholly failed.

* The Applicant has succeeded on the central issue but only at a late stage conceded there were defects in the works at the premises. Time could have been saved if that concession was made earlier.

* On the other hand the Respondents freely entered into the Agreement of July 2001 but then sought to argue its invalidity. Arguing its validity or alleged invalidity also took hearing time.

* Each party's costs, if ordered, may possibly be in the vicinity of the same amount.

* Neither party has provided me with the detail I need in order to be able to make final orders in favour of that party and there is a need (which should not have occurred) to reconvene the Tribunal. Or, the materials are not sufficiently clear in the case of both parties.

* The conduct of both parties has from time to time been less than worthy. On occasions, on site, Mr Ware (the First Respondent) was clearly disagreeable. On other occasions, the Applicant was clearly disagreeable also. I mention two matters in the evidence in particular: the way in which Mr Ware came to dismiss Mr Davies: the attitude of Mr Barry, insisting that the Respondents pay for an air conditioning unit that has never been used and has only gathered dust.

60. Also I must draw attention again to the way in which the Respondents pleaded their case which was destined to add to the length of the hearing. There is also the lack of transcript which the parties should have arranged. Lastly, I would mention the inaccurate assessment of a 10 day hearing.

61. In all of such circumstances, I might ask, why should either party get its costs? In all of such circumstances, why should s109(1) not be left to operate according to its terms?

62. Nevertheless I will hear further from the parties.

63. I direct that this matter be returned before me on a convenient date for the purposes mentioned including any questions of interest arising under statute. The parties are at liberty, to seek final orders by consent taking into account the various things I have said. I would encourage them to follow this course. Particularly, in light of what I have said about costs. They should be concerned to avoid further expenditures.

64. I would hope that these parties will see their way now to providing consent orders.

65. I make a declaration and directions accordingly.

Fasham Johnson Pty Ltd v Ware & Saunders [2003] VCAT 885

At a glance

Court

Decision date

Before

Source

Judgment (98 paragraphs)

Fasham Johnson Pty Ltd v Ware & Saunders [2003] VCAT 885 (25 July 2003)

Parties

Cases Cited (4)