Fidgeon v Westpac Banking Corporation [2002] VSC 85

Supreme Court of Victoria|2002-03-27|Before: Byrne J

BANKS AND BANKING - duty to customer - building project - whether duty to supervise the finances of project - whether draw downs properly made - whether authorised by customer. Legal practitioner's duty to client - whether breach of duty.

The plaintiffs appeared in person after 22 November 2001

The land at 2019 Malvern Road, Malvern has been in the Fidgeon family since the 1920s. Until 1995 it comprised a block of land with a frontage of about 50 feet to Malvern Road running in a north-easterly direction nearly 400 feet to the railway reserve. This land is more particularly described in Certificate of Title Volume 5909 Folio 776. A house had many years ago been constructed on this land close to Malvern Road, leaving a large area of land at the rear. Adjoining this land at the rear and on its westerly side is another piece of land which ran south-west from the railway line for about 140 feet. This adjoining property which is accessible from a cul-de-sac, Cairnes Crescent, is known as 45 Cairnes Crescent and is the land described in Certificate of Title Volume 6349 Folio 619. It, too, has a house erected on it.

In 1989 the owners of 2019 Malvern Road, the plaintiffs, Robert George Fidgeon and his wife, Patrice Ann Fidgeon, had in mind to excise the rear portion of the property and to develop that portion by erecting town houses on it. In 1990 they purchased 45 Cairnes Crescent for incorporation in the project. What was then contemplated was that the development would comprise three town houses to be erected on the land at the rear of 2019 Malvern Road and on part of the land comprising 45 Cairnes Crescent. The existing house on 45 Cairnes Crescent would be "tricked up" by the performance of minor renovation work to make it conform with the new units. The units and this house would then be sold off at a profit. The project did not proceed in 1990.

The project was revived in 1994. Meantime, in 1991, Mr Fidgeon had met a builder, Richard Anthony Gould ("the Builder"), in Queensland. The Fidgeons spoke to him about doing the building work for the project. They had at that time no prior experience in such a project nor in the development of land and they appeared to lean upon their friend, Mr Gould, for advice and assistance. He gathered a team for the project. He arranged for an architect, Bruce Marshall, to prepare a design; a quantity surveyor, Geoffrey Moyle of Costworks, to prepare a detailed breakdown of costs; a land surveyor, Russell John Dickson of Chapman Dickson Pty Ltd, to carry out the surveying necessary for the subdivision; an engineer, Mark Hodkinson, to provide engineering input for the design; a soil mechanic, MacGregor Soil Engineering, to do site investigation; and a landscape architect, Landarche Pty Ltd. Although Mr Gould arranged for these various consultants to be retained and he coordinated them, they rendered their accounts direct to the Fidgeons and I am satisfied, that, in each case, they were employed by the Fidgeons, and not by Mr Gould.

The contribution of the Fidgeons, in terms of locating persons for the implementation of the project, appears to have been limited to the introduction of the first defendant, Westpac Banking Corporation Pty Ltd ("the Bank"), to provide finance, and Michael Muir to act as solicitor. Mr Muir had been the Fidgeons' family solicitor for some years. In 1995 he was a member of the second named defendant firm, Darrer Muir Fleiter. Both the Bank and Mr Muir had been involved when the project was first mooted in 1989.

The project as it stood in late 1994 contemplated the subdivision of the two parcels of land, the construction of five two-storey units, which became numbers 47, 49, 51, 53 and 55 Cairnes Crescent, and the renovation of the existing house at 45 Cairnes Crescent. These six properties were then to be sold at an expected profit of over $500,000. Although at trial these units were referred to simply as units 1 to 5, I shall refer to them by their unit numbers and their street numbers as follows: unit 1 will be referred to as 1/55 Cairnes Crescent, unit 2 as 2/53 Cairnes Crescent, unit 3 as 3/51 Cairnes Crescent, unit 4 as 4/49 Cairnes Crescent and unit 5 as 5/47 Cairnes Crescent. I shall refer to the existing house at 45 Cairnes Crescent simply as 45 Cairnes Crescent.

It is no understatement to say that, in hindsight, this project, which was viewed so optimistically in 1989 and again in 1994, has brought upon the Fidgeons disaster, financial, emotional and, I suspect, in other ways. It has involved them in prosecuting or defending no less than nine pieces of litigation, not including this proceeding. Some, but not all, of this disaster will emerge in the pages which follow.

In order to understand this litigation and the personalities involved, it is necessary to touch briefly upon the main events and complaints which bring the parties to court. The work was put in hand by the Builder in November 1994 and was completed in September of the following year. A feature of this case is that the buildings were completed on time and no complaint is made about the quality of the work. The Bank provided funds by making payments direct to Mr Gould and by reimbursing the Fidgeons for payments which they made themselves. By the end of 1995 the funds which the Bank had agreed to provide were exhausted. The Fidgeons then looked into the amounts paid out by the Bank and concluded that the Builder had been overpaid. They have been unable to recoup this overpayment from the Builder and they now seek to recover their loss from the Bank, alleging that it did not verify the claims for payment which the Builder submitted and which the Bank satisfied and, in particular, that the Bank made to the Builder payments to which he was not entitled under the building contract. Their allegations appear in their further amended statement of claim filed on 19 December 2001. I shall return in more detail to these and to their other complaints against the Bank.

The complaints of the Fidgeons against the Solicitors relate to their acts and omissions with respect to a number of specific aspects of the project. In summary, these are the non-registration of the Builder under the House Contracts Guarantee Act 1987 [1] and the steps taken by the Solicitors to rectify this[2]; the drafting of the building contract[3]; the terms of the bank loan[4]; the inclusion of the existing residences in the plan of subdivision[5]; the open space levy imposed by the Stonnington Council[6]; the sale of 5/47 Cairnes Crescent[7] and two allegations of failing to account for the application of trust money[8].

Before I deal with these allegations I shall set out briefly my findings with respect to the principal witnesses and events covered by this litigation. I should highlight at this stage that the account which follows is limited to a selection only of the events which were the subject of evidence at the trial. The plaintiffs have spent a good deal of time giving evidence of and cross-examining witnesses about all manner of matters which appeared to strike them as interesting or anomalous. In making my findings in this case I have had regard to all of the evidence, but in this judgment I shall deal only with the events which bear upon the issues joined in the pleadings.

The principal witnesses were Mr and Mrs Fidgeon, Mr Gould, Colin Scott Kennedy, the Westpac Bank manager and the solicitor Mr Muir. I shall now venture my general assessment of the reliability of the evidence of each of these witnesses.

The events with which I am concerned occurred more than six years ago so that the passage of time has inevitably eroded the detail of their recollections. Mr Gould and the Fidgeons dealt with each other on a fairly informal basis during the currency of the project. Mr Gould said, and I accept, that their relationship was cordial right to the end. None of them kept any contemporaneous written record of their discussions and decisions. The Fidgeons themselves, generally speaking, did not communicate with the other parties in writing. Add to this that the events have been the subject of long and bitter contention between the Fidgeons and Mr Gould in the Domestic Building Tribunal and thereafter, and that, for the Fidgeons at least, the events have consumed and still consume an enormous amount of time, energy and passion. All of this causes me to approach the uncorroborated evidence of each of these witnesses with a great deal of caution and with a suspicion that it may be the subject of reconstruction.

In addition, Mr Gould has admitted that he was prepared to make a false statement to the City of Stonnington and to the Housing Guarantee Fund regarding the value of work where it suited him. Furthermore, passages in his sworn evidence before the Domestic Building Tribunal were admitted by him to have been false. Further, he said that he no longer had his files or records to support his recollection. In any event, it was apparent that his administration of the project was not as careful as it might have been so that such records as may have existed may not be comprehensive or even reliable. Finally, as I observed him in the witness box, I formed the view that his recollection on many matters was a good deal less confident than his answers would suggest.

An assessment of the reliability of the evidence of the two Fidgeons must start from their remarkable and illuminating reaction to the discovery in late 1995 that their project was well over budget. This must have been a disturbing, even distressing realisation, but, even so, this cannot fully explain their response. Witnesses spoke of conversations with Mrs Fidgeon where she was hysterical. She, herself, told me that in February 1996 she attempted suicide. In their conduct of this trial they, and particularly Mrs Fidgeon, appeared to be determined to pursue every small issue without regard for time, cost and often without regard to whether it advanced their cause. I say this after making allowance for the fact that they lacked the normal restraint and guidance of proper professional legal advice.

Mr Fidgeon, who was the first witness, impressed me as a man who had no detailed recollection of the events he described. His answers were often qualified and tentative. It may have been that this was his way of achieving a compromise between his loyalty to his wife and his own sense of integrity, or it may simply have been the impact of the passage of time upon the memory of a man who did not appear to feel as passionately as his wife the injustice of their misfortunes. It causes me, nevertheless, to doubt the reliability of his evidence where it was not supported by contemporaneous records.

Mrs Fidgeon is a woman who, over the past years, has become obsessed by the project and its consequences. According to Mr Muir she was the moving spirit behind the project. When, in late 1995, she realised the project was over budget her reaction was to attribute the cause of this to anything but a neglect by herself or her husband of their own interests. She is a woman who has been successful in her profession as a journalist. Notwithstanding the impression she sought at times to convey in court of being innocent and naïve, the evidence showed her to be an astute, intelligent and determined woman in the conduct of the project. For example, she was quick to correct the Bank when in its letter of offer of 17 February 1995 it overstated the interest to be charged by 0.25%. Mr Muir said that she appeared to have a firm grasp of the commercial aspects of the project and was ready to ask questions when she did not understand something. Her close involvement in the project and its aftermath means that she has a very detailed knowledge, yet she struck me on many occasions as a person who hears and sees only what she wants to hear and see. I was pressed by the defendants to take into account in my assessment of her as a witness, the fact that she conducted the trial in a capable way following the withdrawal of counsel for the plaintiffs. I decline to do so. My assessment of her as a witness arises from the evidence. I approach the testimony of Mrs Fidgeon, for these reasons, without confidence in its reliability unless it is supported by other more reliable evidence.

Mr Kennedy was the bank officer who negotiated the bank facility in late 1994 and early 1995. He managed the loan from the North Melbourne branch until he was moved to the Camberwell branch on about 15 April 1995. Thereafter, his only involvement was the conduct of inspections of the project in the course of construction in May, August and September of 1995. He left the Bank in 1998. As will appear, his administration of this loan in its early stages left much to be desired in terms of his observance of the agreement which he had made with the Fidgeons and of his superior's instructions. He struck me as a man who displayed considerable self-confidence but tended to place little store on detail. Moreover, he appeared to have been prepared to cut corners, in terms of the Bank's procedural requirements, where this seemed to be of assistance to the customer. I mention this, not in criticism of him, for his abiding concern appeared to be the interests of the customer, but as an indication of the sort of person he appeared to be. He appears not to have kept much in the way of diary records of meetings with the Fidgeons when the terms of the loan were being negotiated and explained to them. It was apparent, too, from the manner in which he gave his evidence, that he had little independent recollection of events which were not documented. My impression of him, nevertheless, was of a man trying honestly to recall these routine events of many years ago. Subject to my general caution with respect of the evidence of so long ago, I treat his evidence as reliable.

Mr Muir was, during the period of the project, the solicitor acting for the Fidgeons. He impressed me as a cautious man who maintained careful records upon which he lent heavily. He was not afraid to acknowledge his lack of recollection where he lacked this support. My general assessment of him was that he was a reliable witness but, given the passage of time, I have looked about to see if and to what extent his recollection is corroborated by those and other contemporary documents.

I select 9 February 1995 as a convenient date ending the first period because it was on that date that the building contract was executed by the Fidgeons and the Builder.

The project, as I have mentioned, dates from 1989; it did not proceed at that time due to the uncertainties of the property market in 1990. It is nevertheless convenient to start at that time because it was then that the Fidgeons consulted Mr Muir as their family solicitor for advice about legal aspects of the project. At this time Mr Muir was a solicitor with Brian Ward and Partners. It was at this time, too, that he wrote to them an important letter of advice dated 22 March 1989.

Prior to January 1995 the Fidgeons maintained four bank accounts with the Bank, excluding any credit card accounts:

[diamond] A joint cheque account in the names of Mr and Mrs Fidgeon. This account had been established some time previously. At the end of January 1995 it was operated as account No. 10 2854 from the South Yarra branch of the Bank and its balance stood at $411.53 O/D. The statement showed that the account was operated within its overdraft limit of $2,000 until it was closed in August 1997.

[diamond] A cheque account in the name Robert Fidgeon Pty Ltd as Trustee for the Robert Fidgeon Family Trust. This account No. 78 0375 had been established some time previously. On 18 January 1995 the account, then conducted at the West Melbourne Branch, had a balance of $10,531.23 O/D. It was brought into credit by a deposit of $15,000 on 23 January 1995, presumably from the personal loan account. The Fidgeon trust account was transferred in February 1996 to the North Melbourne branch as account No. 11 4764. It was closed in August 1996.

[diamond] A housing loan account in the names of Mr and Mrs Fidgeon. This account No. 37 0210 had been established at the West Melbourne branch in 1991 with a loan of $310,000, presumably for the purchase of 45 Cairnes Crescent. In January 1995 the balance stood at $260,971.70 O/D, showing monthly repayments of $3,634. In February 1996 the account was transferred to the North Melbourne branch as account No. 37-0210. It was closed on 16 July 1996.

[diamond] A personal loan account in the names of Mr and Mrs Fidgeon. This account No. 37 0544 was established in January 1994 by a loan of $16,000. On 17 January 1995 the balance stood at $13,310.80 O/D. It rose later in the month to $28,485.02 O/D mainly as a result of a debit of $15,000 on 23 January 1995. The statements show monthly repayments of $330 until the account was closed on 16 July 1996. This account was transferred to the North Melbourne branch in February 1996 as account No. 11 3390. The statements show that interest charged on this account during 1995 to 1996 was at the rate of 10.75% up to 1 June 1995 and thereafter at 10.4%.

As security for these facilities, the Bank held mortgages over the titles to 2019 Malvern Road and 45 Cairnes Crescent.

The project was revived in 1994 after Mr Fidgeon had met Mr Gould in Queensland. Mr Gould, who had carried on a business as a Builder on the Gold Coast, expressed interest, if not enthusiasm, in and for the project and he told Mr Fidgeon that he could carry it out. As I have mentioned, Mr Gould undertook the task of gathering and instructing the necessary consultants so that the Fidgeons were spared the burden of attending to this themselves.

I interrupt myself to observe that their readiness to spare themselves these responsibilities is understandable given their lack of experience in land development. Their readiness to pass to others all financial control of the project is less so, as it exposed them to great risks. Entirely inexplicable is their failure to perform promptly, or in some cases, at all, the few tasks that were entrusted to them. I mention by way of example their failure to pay the surveyor's and solicitor's accounts which were required to be paid in order to enable further steps to be taken, and their delay in placing advertisements to enable the s. 60 application to proceed. Having regard to the pitfalls and complexities of property development, the wonder of this case is that the project went so well. The building work was finished on time and without serious defect; four units were sold within months of completion and these sales were completed without financial penalty by April 1996. The present disappointment of the Fidgeons is the product of a lack of any real financial control over the project, the fact that the sale prices of the units were less than they expected and, above all, their stubborn and unreasoning refusal in and after 1996 to address in a commercial, responsible and realistic way the consequences of these factors. This has had the consequence of converting a modest achievable profit into a financial disaster for them.

I return to the events of 1994. A significant date is 20 June which is identified by a diary note of Mr Muir who had by then left Brian Ward & Partners and become a member of Darrer Muir Fleiter. On that date, according to Mr Muir, Mrs Fidgeon telephoned him, "out of the blue", as he put it, to tell him that the project was moving forward and that she required his assistance to overcome a title difficulty which the surveyor had discovered. I accept his evidence that this was the first contact he had with the revived project and that he had not previously had any dealings with Mr Gould or the consultants. This is an important finding in the case against the Solicitors because they were not involved in what had gone before.

And what had gone before included the engagement of the various consultants. It also included the decision to incorporate 2019 Malvern Road and 45 Cairnes Crescent in the plan of subdivision so that they represented units within the body corporate. This decision appears to have been taken on economic grounds in early June following a letter from Melbourne Water of 31 May 1994 addressed to Mr Gould. The author of this letter, Matthew Robert Wick, said that the cost of constructing sewage to the units within the subdivision might vary depending upon whether they were served by reticulation from an existing sewer or whether each sewer was served by a separate branch from the sewer main. The former, which was less expensive, would be permitted only if all units were within the same body corporate. Mr Dickson said that he advised Mr Gould that the extra cost of sewer construction was of the order of $15,000 to $20,000 and, based on this, Mr Gould immediately decided to opt for the reticulated system using the existing sewer connection. Mr Wick said in evidence that, as an "elastic ball park figure", the costs might be $2,000 to $10,000. But, in any event, the figure was not insignificant. This decision carried with it, also, the decision to prepare a seven lot plan of subdivision including, in addition to the five new units, 2019 Malvern Road and 45 Cairnes Crescent. It would seem that, in acknowledgment of the fact that 2019 Malvern Road was a freestanding independent property, its unit entitlement and liability should be 2 only, compared with 50 units for each of the other six lots. It may be that this decision was taken with or without consulting the Fidgeons. Of this I make no finding, for it is irrelevant. For my purposes, it is sufficient that I find, as I do, that Mr Muir and the Solicitors had no involvement in it and he had no reason to suspect that they were or might be unhappy with it.

By July 1994 or thereabouts, the number of townhouse units had grown to five. The Fidgeons also planned to carry out minor works on 45 Cairnes Crescent so that it, too, might be sold, as well as carry out some renovations to their own home which they would retain on its reduced site. To this end, the architect, by July 1994, prepared a design for the units, but not for the renovations, and this design was costed in August of that year by Costworks, at $799,500.

A handwritten costing of the project prepared by Mr Gould was in evidence as Exhibit 20. The date of this document is uncertain but I accept the evidence of Mr Gould that it was prepared in July 1994 or perhaps a little earlier. It shows the total cost of the project as $631,713, including the cost of construction of five units, each of 15 squares, for a total cost of $527,845. A copy of this document obtained from the architect's file shows the make-up of this construction cost on a further document which bears a fax header imprint dated 21 May 1994. This may put the date of Exhibit 20 somewhat earlier than Mr Gould would have it. In any event, the then envisaged cost of renovating 45 Cairnes Crescent is shown in Exhibit 20 as $15,000. Mrs Fidgeon sought to rely on this document as showing the work which the Builder included in his contract made in February the following year. I reject this; the contract, which does not incorporate this document, speaks for itself.

Over the weeks following July 1994, attempts were made to reduce the cost of building the units to about $650,000. This involved a good deal of work by the architect and the Builder and a number of meetings with the Fidgeons in which these matters were discussed. By October this objective had been achieved. The size of each of the units was reduced to 14 squares including carport and the construction cost to $640,780. The final design of the five units appears from the following drawings: a ground floor plan dated 1 October 1994, a first floor plan dated 1 October 1994, elevations dated October 1994 and four engineering drawings, S1, S2, S3 and S4, all dated September 1994. The break-up of the figure is set out in the Builder's quotation of 24 October 1995. It was put by the Fidgeons that this sum represented not only the cost of constructing the units, but also that of carrying out the renovations to 45 Cairnes Crescent and that they discussed the quotation on this basis. I reject this contention and their evidence upon which it is based. It is clear that at this stage the construction of the five units was the immediate objective. The quotation itself makes it clear that this is what it concerned.

As I have mentioned, the surveyor had, some months previously, discovered a discrepancy in the titles which required the Solicitors to apply for a vesting order and a new title for a sliver of land of about 105 m2, called in evidence "the hiatus land", which was not covered by the two certificates of title. The rectification of this discrepancy involved more surveying and legal work and consequential cost. By March 1995 the Office of Titles was ready to issue a title for the hiatus land and on 9 June 1995 the Solicitors wrote to the Fidgeons with a request that they attend to the necessary advertisement in the newspaper and on the land. For some reason which was never explained by them, the Fidgeons neglected to attend to this for some months. It was not until 14 September 1995 that the necessary statutory declaration was executed so that the new title for the hiatus land did not issue until 16 October 1995. As will be seen, this inexplicable neglect of their own interests is characteristic of their participation in the project. Happily it does not seem to have caused delay in the marketing of the units or any loss to them.

Following the preparation by the architect of the schematic design for the five units, an application was lodged with Stonnington Council in August 1994 for a planning permit to use the land for multi-residence development. This planning permit, No. 199/941, was duly granted, notwithstanding an objection by a neighbour, Mr Blumberg. It seems that the program for the projected work received a set-back when Mr Blumberg on or about 17 October 1994 lodged an appeal against the planning permit. The Fidgeons responded to this, and to the inevitable delay that it involved, by rescheduling the project. They decided with the Builder that he should start work first on 45 Cairnes Crescent. In his fax dated 26 October 1994, but probably transmitted to the Fidgeons on 25 October, the Builder enclosed a sketch of the proposed first floor plan for the kitchen and laundry at this property. The architect prepared a drawing of this layout also dated 25 October and on 19 November 1994 he produced a set of drawings for the renovations to this property. Meantime, the Builder on 7 November 1994 prepared a quotation for the work at 45 Cairnes Crescent. The quoted cost of this was $51,048. The Fidgeons contend that this quotation was merely an indication of the possible cost of the work which they might undertake at this property and not a second quotation for this part of the project. The Builder said of this quotation that he prepared it as a break-down of the work to be done at 45 Cairnes Crescent and that it formed the basis of a discussion with the Fidgeons in early November as to what they wanted to be done. I accept Mr Gould's evidence on this matter. All of the witnesses agreed that most of the items in the quotation were agreed to be done but that some only were to be left out. It appears, however, that most of the items in the quotation were in fact carried out and that the Builder's invoices for the work were prepared by reference to the prices in this quotation.

On 23 November 1994, the Builder applied and obtained from the City of Stonnington a building permit for the work at 45 Cairnes Crescent. The application gives as the estimated value of the work, $8,000. Mr Gould accepted this figure was false and explained that it was inserted to reduce the permit fee payable. There is no doubt that this estimate was false, as was his estimate in February 1995 to the Housing Guarantee Fund that the value of the work was $18,000, and the figure of $20,000 which was contained in the blue contract for this work which he submitted in December 1995 for execution by the Fidgeons. In fact he charged the Fidgeons for this work and was paid by them a sum of the order of $60,000. The architect's drawing for the work at 45 Cairnes Crescent bears the Stonnington Building Department stamp dated 23 November 1994.

For some reason, no written contract for the performance of the renovation work at 45 Cairnes Crescent was prepared or executed before it was commenced. In early December 1994, Mr Gould prepared and submitted to the Fidgeons a draft building contract but this was only for the construction of the units. This document, together with the Builder's quotations of 24 October 1994 and 7 November 1994, as well as the Costworks cost plan of August 1994, was delivered to Mr Muir in December for his advice. His letter containing this advice is dated 19 December 1994. It is the subject of some criticism on behalf of the Fidgeons and I shall return to it.[9]

For present purposes, it is sufficient that I note that in this letter Mr Muir advised his clients that the draft contract related to the five units only, and that a separate contract would be required for the renovations to 45 Cairnes Crescent. The Fidgeons did not implement this advice nor did they query it.

And so the work at 45 Cairnes Crescent was put in hand without a formal contract. The Builder submitted for this work four invoices, three of which were in evidence. The first invoice, dated 30 November 1994, was for $13,305. This included four items which were not included in the 7 November quotation, including $2,400 for "clean up and cut unit site". This invoice was paid by the Fidgeons from the Fidgeon trust account on 2 December 1994. The second invoice is of interest, not only because it shows that the claimed value of the work to date was then $37,418, but also because it shows that most of the items in the November quotation had been completed. The total claim for payment in this invoice was $23,917, which was paid on 17 December 1994, also from the Fidgeon trust account. The third invoice is not in evidence. The fourth invoice, which is dated 2 February 1995, is for $16,849 including the sum of $7,674 being the unpaid balance of the third invoice. This fourth invoice was paid on 8 March 1995 in circumstances which I shall later explain.[10]

There is no evidence that the Fidgeons queried any of the items in any of these invoices. It would seem, therefore, that the Builder charged and was paid without demur over $57,000 for this renovation work in respect of which he had quoted $51,048. In addition, the Fidgeons themselves paid some $6,000 to suppliers directly for goods provided for 45 Cairnes Crescent and had also paid fees for architectural services on this property. They now say that the Builder overcharged them for the work. Whether this be correct, I do not say. What is clear is that, in their administration of this first part of the project, they failed to maintain any financial control over the expenditure. Not only did they spend more than the $15,000 included in the costing of July 1994 contained in Exhibit 20, and the $51,048 contained in the quotation of 7 November 1994, but, having done so, they instructed the Builder in March 1995 to install at 45 Cairnes Crescent central heating, which cost $2,280, and to renovate the downstairs bathroom, at a cost which appeared as $5,975 in the Builder's final invoice of September 1995.

It is worth pausing a moment at this point to examine the implications of this in the broader context of the litigation. The Fidgeons say that the Builder overcharged them, that he "robbed us blind". It is clear that the Builder submitted to them an itemised quote of 7 November 1994 for the work at 45 Cairnes Crescent. It is clear, notwithstanding the initial reservations of Mrs Fidgeon, that most of the items in this quotation were in fact carried out. It is clear, too, that the Builder, before the Bank became involved, received from the Fidgeons payment in respect of the first two invoices to a total value of $37,418. These invoices, it will be recalled, covered the bulk of the work by reference to the items in the 7 November quotation. If the work was not done, then the conduct of the Fidgeons in paying the invoices represents an astounding neglect of their own commercial interests, but they do not say this. If the work was done, they can hardly be heard to complain about serious overcharging because most of the charges were in accordance with the quotation. Nor can they say that in some way all of this happened without their appreciating it or its significance, because, in January 1995, they told Mr Kennedy that they had already spent $50,000 or so of their own money on the work. The inescapable conclusion to be drawn from this part of the project is that the Fidgeons spent more on this part of the work than, at the end of the project, they thought was appropriate. The Fidgeons' reaction in 1996 was to seek to put the blame upon anyone other than themselves. They fastened upon the Builder's admitted later understatements of the value of the work on 45 Cairnes Crescent to contend that it was very much less than the sums in fact paid so that the fault for the cost overrun must lie with the Builder and ultimately with the Bank rather than with themselves. This lack of reality seemed to permeate much of the case which the plaintiffs sought to place before the Court.

On 23 January 1995, when the work at 45 Cairnes Crescent was well advanced, Mr Blumberg's appeal against the planning permit was dismissed by the AAT. There was now no impediment to the commencement of work on the units. Naturally enough, the Fidgeons were keen to make a start. There had occurred a meeting with Mr Kennedy, the Bank manager, and themselves accompanied by their accountant, Walter Chelotti, at the Bank on 20 January 1995. Topics discussed included the loan amount sought and the best way of structuring it. It was agreed that the Fidgeons should ask for $780,000, representing $650,000 for the building work, $50,000 for any cost overruns, $50,000 for interest and $30,000 to pay out their personal loan. This advance was to be made by a business finance loan with interest at 11%. Interest was to be calculated on sums drawn down from time to time and capitalised so that it would be paid out of the proceeds of sale. The period of the loan was fixed at 12 months on the basis that the units would be marketed in September and the sales settled by the end of the year.

According to the Fidgeons, at this meeting and indeed at a meeting with Mr Kennedy in the preceding October and December, they had discussed how the draw downs would be processed. Mr Fidgeon told me, and I accept, that Mr Kennedy said that the Bank would carry out periodic inspections of the work to ensure that the work was done. Under the terms of the draft contract, the Builder was to be paid a deposit on signing and five instalments payable respectively at base stage, frame stage, lock-up stage, fixing stage and completion. These are, of course, the stages for progress payments fixed under the House Contracts Guarantee Act 1987. The achievement of these stages required inspection. Mr Kennedy told the Fidgeons that, since the project site was on his way home and in order to minimise delay in payment, he himself would carry out these inspections.

The Fidgeons rely upon these statements in support of their contention that the Bank undertook the task of financial supervision of the project which would otherwise be their responsibility as developers. Mr Fidgeon said that, in response to his enquiry of Mr Kennedy whether this meant that he, Kennedy, would count the nuts and bolts of the building work, he was told "Yes that's my end". Mr Kennedy denied that this exchange took place. I accept his evidence that this was not said. I find that he told the Fidgeons that he, on behalf of the Bank, would inspect the work in progress to ensure that the stage for which payment was sought had in fact been achieved. The Fidgeons would have me conclude from this that the Bank assumed responsibility to check that the Builder's claims were in accordance with the building contract in the sense that sums claimed as variations and prime cost items and provisional sums were in fact properly authorised, that they were properly payable and properly costed. Although no witness said that Mr Kennedy stated that the Bank would engage a quantity surveyor to perform this task, the Fidgeons contended before me that this was the contractual obligation which the Bank assumed. This contention appeared to be based upon the mention of a quantity surveyor in the Bank's internal documentation with respect to the loan and on the evidence of their witness, Keith Anderson Irwin, himself a quantity surveyor, who said that it was a not uncommon bank practice to engage a quantity surveyor to assess progress claims. In short, the Fidgeons contended that the Bank should protect them from any overcharging by the Builder. Mr and Mrs Fidgeon say that this is what they understood Mr Kennedy to be saying and that this obligation was part of their contract with the Bank.

It is necessary at this point that I underline three principles of law which are fundamental to this case. First, in order to determine whether two parties have entered into an agreement and, if so, what are its terms, the Court does not act upon the belief of the negotiating parties as to this matter. The existence of an oral agreement is established by the inference of the Court from what was said and done by the parties in the negotiations. This inference is as to what a reasonable bystander would make of this conduct. The test is therefore an objective one. If the reasonable bystander would infer that the parties had concluded an agreement then the contract is proved. Likewise, the terms of an oral contract are to be inferred on the same objective basis, including, where appropriate, such terms as may as a matter of law be implicit. In the present case, therefore, I put to one side as irrelevant for present purposes what Mr Kennedy or the Fidgeons actually thought or understood was their agreement and reach my conclusion as to what the reasonable bystander would make of their words and conduct in the course of their negotiations.

The second principle of law is that, where parties to a contract reduce their agreement to writing, the terms of their contract are, in general, to be found in the document and not in the negotiations which led to it. This principle means, for example, that in construing the building contract, I must look at the document and not at the antecedent discussions or documents which led to it.

Third, it is sometimes possible to include in an oral or written contract a term or an obligation which is to be inferred from facts known to the parties at the time of contract or which are so notorious in the field of commerce that the contracting parties are taken to have dealt on that basis. But in the latter case there must be a very widespread acceptance of the applicability of such a term in order to imply it in a contract which on its face does not include it.

I mention these matters because, in her final submissions, Mrs Fidgeon placed considerable reliance upon the fact that Mr Kennedy said in evidence before the Domestic Building Tribunal that he accepted that the project being financed by the Bank included the renovation work at 45 Cairnes Crescent. I put this to one side except insofar as it provides evidence to challenge his account of what was said at the meetings in 1994 and January 1995 about this matter. Likewise, I put to one side the mention in the Bank internal documentation that an independent quantity surveyor was to be engaged to verify progress payments. The evidence, including that of Mr Irwin, does not show that the retainer by a bank of a quantity surveyor for this purpose was sufficiently widespread to give rise to an obligation in the Bank to do so for this project without some express term or provision.

The reaction of Mr Kennedy to the project in January 1995 must have been very positive because the Fidgeons and the Builder went ahead in anticipation of the Bank's approval. On 2 February, the City of Stonnington granted building approval for the construction of the five units; the drawings bear its stamp of that date. On the same day, the Builder submitted to the Fidgeons a draft building contract executed by him with an invitation that they too execute it. Mrs Fidgeon on 3 February 1995 forwarded this agreement to Mr Muir for his consideration and advice. He gave his approval by telephone on 9 February and on that day the document, including the drawings and specifications, was executed by the Fidgeons at 45 Cairnes Crescent in the presence of Mr Gould. It was dated 2 February 1995. Mr Gould retained one copy, a copy of which became Exhibit 3.

The other copy of the building contract with the accompanying drawings and specification was sent to the Bank in early February but, it seems, these documents were soon mislaid there. It seems, too, that the Fidgeons did not retain for themselves an executed original or a copy. Two different copies of the building contract executed by both parties are in evidence; an original and a Court Book copy. The building contract, as is usual, identifies the drawings and specification in which the work to be performed is described. The copy specification which is in evidence as Exhibit 42 is executed by both parties. Although an executed copy of the drawings is not in evidence, I am satisfied that the eight architectural drawings dated October 1994 and the four structural drawings dated September 1994 which were tendered as Exhibit 232 are the documents identified in the building contract as forming part of the contract.

A matter of great controversy in this case was whether the works to be performed by the Builder under this building contract include the work at 45 Cairnes Crescent. I repeat the principle of law that, where the parties have reduced their agreement to writing, the terms of their agreement are, in general, to be found only in the documents. In the present case the documents are the building contract, the twelve drawings and the specification. An examination of these documents shows without a shadow of doubt that the contract works do not include the renovations to 45 Cairnes Crescent. On page 4 of the contract, the works are generally described as "5 two-storey town houses". The works depicted in the drawings and specification show this to be the case. Reliance was placed on the facts that the land is described in the contract as 2019 Malvern Road and 45 Cairnes Crescent and that the title particulars are given as the two certificates of title for those two pieces of land. This however does not carry the Fidgeons' contention home, for the units are located on part of both these two properties.

The Fidgeons further placed reliance upon the provenance of the price shown in the building contract, $640,780 which is derived from the quotation of 24 October 1994. For reasons which I have mentioned, I do not think that this is a legitimate way of construing the contract because the quotation is not a contractual document. Nevertheless, it verifies the conclusion that I draw from the contractual documents. The quotation was for $643,180. I am satisfied that this was for the construction of the units which, at that time, or at least when at the time the quotation was prepared, was the first and principal work to be undertaken. When the contract was prepared in January 1995, $2,400 was deducted from this quoted price and a reduced sum of $640,780 inserted as the contract price. The amount deducted was for site work for the units which had been done previously as part of the renovation work, and already paid for by the Fidgeons. It follows from this that the contract price, too, was for the work of conducting only the five town houses.

Finally, I am satisfied that the Fidgeons themselves were aware that the work described in the document they executed on 9 February 1995 did not include the renovations to 45 Cairnes Crescent. I make this finding notwithstanding that it is, as a matter of law, not relevant for the purpose of construing the agreement for the reasons mentioned above. I do so, however, because Mr and Mrs Fidgeon appeared to place much store on their professed belief as to this matter. It will be recalled that[11]

in his letter of 19 December 1994, Mr Muir drew attention to the need for a separate contract for the work at 45 Cairnes Crescent. This was not queried by the Fidgeons. In the same letter he suggests that cl. 18(e), regarding builder's trade discounts, be discussed with the Builder. In his advice of 9 February 1995, he again raised this query and Mrs Fidgeon said that she would speak to Mr Gould about it. This would have involved her revisiting the solicitor's letter of advice of 19 February 1994. It is inconceivable that, if it was important for her, she would not have raised with the Builder the question of the work covered by the building contract before she and her husband executed it. Indeed, this matter was next raised some 12 months later when, at a meeting at the office of the accountants for the Fidgeons on 29 January 1996, the fact that the building contract dealt only with the building of the units was again mentioned by Mr Muir. Again, this met with no adverse comment or query from the Fidgeons. The same comment was made next in a fax from the Solicitors to the Fidgeons dated 9 February 1996. Again no query or challenge to it was made. In short, I reject the assertion of the Fidgeons as merely an opportunistic allegation based on documentation of which they became aware very much later.

This conclusion which I have reached is consistent with the fact that most of the work at 45 Cairnes Crescent was complete when the building contract was executed and largely paid for. The parties may well have thought, as Mr Gould said, that there was no pressing need to document a contract which was substantially completed on 9 February 1995.

Events from 9 February 1995 to 29 September 1995

This is the period of the construction of the units. It ends on 29 September 1995, the date by which the plan of subdivision was certified by the Stonnington Council and upon which the Council issued the planning permit for the subdivision.

Following the 20 January 1995 meeting, Mr Kennedy submitted to the Bank Credit Committee a credit proposal review dated 24 January 1995. This was supported by a copy of the building contract, the drawings, the Costworks costing of August 1994, and a letter from real estate agents Carmichael & Weber dated 13 February 1995. In this proposal Mr Kennedy informed the committee that the Fidgeons sought a $780,000 facility, comprising $650,000 for the construction of the units, $50,000 for interest capitalisation, $50,000 for cost overruns and $30,000 for legal costs of the appeal. This last statement was false, unless it be the fact that the Fidgeons had applied part of the personal loan account for the payment of this expense. The agreement reached with the Fidgeons in January was that the $30,000 would be used to pay out their personal loan account.

On 14 February 1995 the Bank's Credit Committee approved the Fidgeons' application for the $780,000 business loan. This approval was subject to a number of conditions and directions including the following:

(1) A valuation of the land on "as is" and "as completed" bases, including commentary on various matters.

(2) All builder's claims for payment were to include a certificate from an independent and impartial quantity surveyor.

On 17 February 1995 Mr Kennedy sent to the Fidgeons the Bank's formal letter of offer of the business loan of $780,000. Its expressed purpose was "to assist with the construction of five units", making no mention of renovations to 45 Cairnes Crescent. The letter included a reference to the provision of $30,000 as part of the business loan to be used for the repayment of the Fidgeons' personal loan as had been discussed and agreed in January. It erroneously stated that the interest was currently 11.25% instead of 11%. Mrs Fidgeon picked this up when she examined the letter and, following her complaint, the matter was corrected by the Bank's letter dated 27 February 1995. The letter of offer contained no requirement for a quantity surveyor's certificate to accompany payment claims as stipulated by the Credit Committee.

The provision for the capitalisation of interest included a statement that "[t]he interest will capitalise up to a maximum of $50,000.00". The Fidgeons take this to mean that in no circumstances could the Bank charge a sum for interest greater than $50,000. This is a nonsense. What is clearly stated in the letter is that, up to that figure, interest would be capitalised. Presumably, interest in excess of that amount is to be paid monthly.

On 1 March 1995, Mr Fidgeon left with the Solicitors a copy of the Bank's letter of offer with a request that Mr Muir consider its terms and advise on them. This Mr Muir did and he informed Mr Fidgeon on the same day that the terms appeared reasonable. Mr Muir said, and I accept, that he was not told by the Fidgeons of any particular agreement previously reached with the Bank on matters not included in the letter of offer. Mr Muir had no conversation with the Bank itself about the letter of offer. He had, in particular, not been told of any arrangement under which the Bank was to act as a financial supervisor of the project.

Meantime, Mr Kennedy on 16 February 1995 wrote to Walstab & Brady, valuers, instructing them in terms of the Credit Committee's direction to value the property. Their valuation, on an unimproved basis as at 2 March 1995, was $490,000. The expected gross realisation on completion of the project was $240,000 for each of four of the five units, $230,000 for the fifth and $260,000 for 45 Cairnes Crescent, a total of $1.45M.

The formal loan agreement executed by the Fidgeons is dated 8 March 1995 and the Business Loan Account commenced to operate on that day.

It is convenient that I record at this stage that Mr Kennedy left on holidays at the beginning of March 1995 and his replacement, John Stewart Harvey, did not pay out the Fidgeons' personal loan from the business loan as had been agreed. This is a matter of complaint by the Fidgeons in this proceeding and it appears clear that their complaint is well-founded. The consequence, however, was that they had $30,000 unused in the business loan upon which they paid no interest so long as it remained unused. The interest payable by them on the personal loan, however, was 10.75% simple, compared with 11% compound on the business loan, so that the failure of the Bank to comply with the January agreement caused them no loss other than the repayment each month of the capital component of the monthly instalment made by them under their personal loan account. And, as it turned out, this capital component was small because, for some reason, the Bank did not increase the monthly repayments from $330 to $650 when this loan was increased, as was required in its letter of 20 January 1995. In truth, the Bank's error conferred a benefit upon them, at least until they drew down the $30,000 which they ought not to have had available to them.

I have mentioned that the Bank mislaid the original building contract, including the drawings and specifications executed by the Fidgeons. This further example of poor administration by the Bank of this account excited a great deal of interest on the part of the Fidgeons at trial. According to Mr Harvey, these documents together with the quantity surveyor's report and the Walstab valuation, would in the ordinary course be returned to the branch when the Credit Committee had approved the facility and, in due course, be forwarded to the Victorian Loans Centre. Whether or not they were returned to the branch, it appears that these documents did not accompany the documents sent to the Loans Centre on 8 March 1995 because from time to time up to 16 May, the Loans Centre forwarded memoranda to the branch requesting the building contract and other documents. They were not provided and no witness has explained what became of them.

The construction work on the units proceeded between February and September 1995. Under the terms of the building contract, the Builder was to receive a deposit and five progress payments at stipulated stages of the work. These and the amounts actually paid are as follows:

Other payments made in respect of the project, I shall deal with later.[12]

Before each of the payments, other than the deposit, was made, the work was inspected by a manager of the Bank. These inspections were carried out on 16 March 1995 by a Mr Smith from the Malvern Branch and otherwise by Mr Kennedy. His inspections took place on 30 March 1995, 9 May 1995, 30 May 1995, 14 August 1995 and 6 September 1995. In his reports of these inspections, Mr Kennedy recorded that the frame stage was complete on 9 May, lock-up stage on 30 May, fixing stage on 10 August and completion on 6 September. It is significant that on his inspection of 30 March he recorded that the frame stage had not yet been achieved and no progress payment was authorised or made at that time. The significance of this is that it shows that his inspections were no mere formality. At none of his inspections did Mr Kennedy attempt to assess the actual value of the work performed. It was sufficient for his purposes and for the purposes of the building contract that the specified stage had or had not been achieved.

It will be seen from the table above that the sums paid did not accord with the sums payable at the various stages under the payment schedule in the building contract. This was the consequence of two factors: the claims included extras for variations and, in some cases, there were deductions because payments had been made direct to suppliers by the Fidgeons. The details of these adjustments appear in the Builder's invoices to which I now turn.

The Builder's first invoice for a deposit of $19,200 was delivered to Mr Fidgeon on or about 2 February 1995. This was the date on which the contract was sent to the Fidgeons for execution and the date of the Builder's invoice 4 for the renovations at 45 Cairnes Crescent. Mr Kennedy said, and I accept, that on about 17 February 1995, Mr Fidgeon telephoned him saying that funds were urgently required for the project to pay council utilities. On that date, the business loan had been approved but the documentation was not in place to permit a draw down. Mr Kennedy nevertheless authorised the payment and a bank cheque for $22,000 was drawn in favour of the Builder upon receipt of a fax from Mr Fidgeon authorising this payment "to cover fees for SEC, Melbourne Water, Malvern drainage and council fees for the unit development at Cairnes Crescent, East Malvern". According to Mr Gould, this amount represented the $19,200 deposit plus an amount which was outstanding in respect of the work on 45 Cairnes Crescent. Since the amount then outstanding was $16,849 as per invoice No. 4, and since this amount was treated as still unpaid on 8 March 1995, this explanation is not convincing. None of these matters was brought to the attention of Mr Kennedy, who was content to act on the instructions of Mr Fidgeon.

The Builder's second invoice dated 10 March 1995 was for $122,946. Mr Smith had inspected the work and reported that the base stage had been achieved, so that $128,156 was payable under the building contract. There was a further charge totalling $7,650 for a blinding layer under the footings and for concrete pump hire, two amounts which were included as contingencies in the 24 October 1994 quotation but which were, at best, extras under the building contract. From this there was made a deduction of $12,860 because concreting for the driveway had been deferred. Mr Gould presented this invoice to Mr Fidgeon asking for payment. For some reason Mr Fidgeon thought that the Business Loan Account was not yet in place, so he telephoned Mr Kennedy and was told that, if he drew a cheque on the Fidgeon trust account, the Bank would pay it notwithstanding that there were insufficient funds in that account. This is puzzling because Mr Kennedy was still on holidays until 20 March and, further, because the loan account was already in place and had been used as recently as 8 March. In any event, Mr Fidgeon drew the cheque on 13 March and on 17 March this account was credited with $122,946 by a transfer from the Business Loan Account.

I interrupt this account to deal with a complaint by the Fidgeons of the Bank's treatment of variations claimed by the Builder. It was contended that the Builder was not entitled to payment for extra work or for excess costs in respect of prime costs items or provisional sums without authorisation in writing. Absent such documentation, the Bank ought to have refused to pay any claim for these items. As to this contention a number of things might be said. First, the Bank undertook no such obligation. Second, under the building contract payment is not contingent upon documentation. Insofar as a builder is prevented by s. 19 of the House Contracts Guarantee Act 1987 from recovering in a court the extra cost of variations, a proprietor is not precluded from making a voluntary payment and will commonly do so where, as here, the contract is being administered in an informal and amicable way. There is no reason for the Bank to have treated the matter on any other basis or to have assumed that its customer was dealing otherwise with the Builder. Finally, the Bank is entitled to act upon the instructions of its customer. In the case of this, the second progress payment, there is the further consideration that Mr Fidgeon was prepared to make the payment sought first from his own family trust. It would be very surprising if, having done so, he would contend that the Bank acted improperly by failing to reimburse him or his trust.

The Builder's third invoice dated 9 May 1995 was for $58,635.04. Mr Kennedy had inspected the work on this date and was satisfied that the frame stage had been achieved. Under the building contract the Builder was then entitled to $96,117. The amount of the Builder's claim was arrived at by the addition of $7,794.69 for extras, including $118.00 for brickwork to the garage at 2019 Malvern Road and $2,280 for ducted heating at 45 Cairnes Crescent, and after deduction of two sums totalling $45,276.65 which had been paid direct by the Fidgeons. These two sums were $3,000 for site clearance which had been done and paid for in December 1994 and $42,276.65 which the Fidgeons had paid to Cronin's Timber for materials which were properly the responsibility of the Builder. Payment of the amount claimed of $58,635.04 was authorised in writing by Mr and Mrs Fidgeon and the sum was duly paid to Mr Gould on 10 May 1995. As to the propriety of the Bank paying for these extras, I make the same observation. If the Fidgeons chose to use the Business Loan Account for part of the work done at 45 Cairnes Crescent and for work done to 2019 Malvern Road and the Bank was content that they do so, this gives rise to no cause for complaint from them.

The Builder's fourth invoice dated 25 May 1995 was for $224,273. Mr Kennedy inspected the work on 30 May and was satisfied that lock-up stage had been achieved so that this sum was payable under the schedule of payments in the building contract. I find, notwithstanding their evidence to the contrary, that this invoice was given to the Fidgeons. Mr and Mrs Fidgeon signed an authority written by Mr Gould to pay this amount on that day and the payment was duly made from the Business Loan Account on 30 May 1995.

The Builder's fifth invoice was for $154,024. It bears the surprising date, 31 June 1995, but it may well have been delivered in early August for it was not acted upon until then. On 14 August Mr Kennedy inspected the work and found that it was complete except for landscaping, carpets and cleaning. The Builder was, therefore, entitled under the building contract to receive $128,156, since the work had achieved fixing stage. In his invoice Mr Gould claimed this sum and a total of $25,868 for eleven "variations (as quoted)". It may be that certain of these items are not in truth variations for they include prime cost items and claims for work done at 45 Cairnes Crescent, but there is no significance in this. Again, I repeat what I have already written with respect to the Bank's entitlement to pay for variations. By authority dated 4 August 1995, Mr and Mrs Fidgeon authorised the Bank to pay to the Builder the sum claimed and the bank statement shows that it was debited to the Business Loan Account on 15 August.

The Builder's sixth and final invoice dated 4 September 1995 was for $57,636. On 6 September Mr Kennedy had inspected the work and saw it to be complete. On this occasion, too, he sighted certificates of occupancy. Certificates of Occupancy for Units 1, 2, 3 and 4, each dated 30 August 1995, and that for 45 Cairnes Crescent, dated 31 August 1995, are in evidence. Pursuant to the building contract, the Builder was entitled to receive on completion the balance of the agreed price, namely $44,855. Invoice Number 6 appears to contain the Builder's final breakdown of the contract sum of $640,780 as adjusted for variations, prime cost sums and provisional items. It is, however, a confusing document as it is set out and it is essentially inaccurate.

The amount of $57,636 claimed in the invoice appears to be calculated by deducting from the contract price of $640,780, the first five progress payments as per the contract schedule totalling $583,042 leaving a balance of $57,738 outstanding. From this is deducted an adjustment of $102 being the difference between the prime cost and provisional sum allowance of $79,537 which appears in the 24 October 1994 quotation and which was reproduced in the contract specification, and the actual claimed cost of those items totalling $79,435. This gives the net claim of $57,636.

The difficulty is that the amounts so calculated entirely ignore the overpayment of $2,800 in respect of invoice 1, the variations in invoices 2, 3 and 5 and the further variations totalling $16,018 which are included in this final claim. The variations as they appear in the three earlier claims require a net deduction of $16,823. When the extras in invoice 6 are brought to account, the net deduction is $805. Bringing to account the over payment in respect of invoice 1, the net deduction should have been $3,605. Assuming all of the items and the figures to be correct, the final payment should have been $57,636 less $3,605, that is $54,031.

Mr Gould said that he had some difficulty explaining to the Fidgeons how the amount claimed was arrived at and, in particular, how the prime cost items and provisional sums were adjusted. He said that, notwithstanding this, the Fidgeons agreed to pay the amount he claimed on the basis that there might be an adjustment and repayment if necessary at a later date. Mrs Fidgeon said that she was unhappy with the claim and that there was an argument between them. Whether this be correct is of no consequence for my purposes. It is clear that she and her husband authorised payment of the amount claimed and faxed the authority to the Bank on 7 September 1995. Mrs Fidgeon said that she did so at Mr Harvey's insistence but nothing turns on this. She and husband were well able to stand their ground if they considered this appropriate. The Bank acted on their authority and the sum of $57,636 is shown as having been paid from the Business Loan Account to the Builder on 7 September.

This brought to $639,514 the total of the payments from this account to the Builder in response to the six invoices. This sixth progress payment and three further payments in September, also meant that the total draw downs from the account then totalled $778,607.22 which was almost the full amount of the facility. It is this extra sum of nearly $140,000 which provides the basis for the Fidgeons' principal claim against the Bank. Bank charges and interest deducted to 15 September 1995 total $26,101.05 so that there were further miscellaneous payments totalling some $113,000 which are made up as follows:

In addition, according to part B of the schedule prepared by Mrs Fidgeon, she and her husband themselves made payments towards the project totalling $16,676 from their joint account between January 1994 and October 1996 and $58,437.67 from the Fidgeon trust account between December 1994 and February 1996. For these payments totalling $75,113.67 they were not reimbursed from the Business Loan Account. There was no evidence that the Bank was ever told of these expenses. This takes the total cost of the project to more than $850,000 plus an amount of over $60,000 spent on renovating 45 Cairnes Crescent.

I return to the miscellaneous payments made from the Business Loan Account. It will be seen that eight of these payments totalling $37,589.93 were made to the Fidgeon trust account in reimbursement for payments made from this account by the Fidgeons themselves. Add to this the two payments of $6,640 to the Fidgeon joint account and $1,000 to their MasterCard account and a $300 cash drawing by Mr Fidgeon. The total of these payments made to the Fidgeons themselves totalled $45,529.93. Other than the cash drawing and the MasterCard payment, they were made to reimburse the Fidgeons for payments made by them as follows:

It must be taken that the Fidgeons were aware of receiving those sums of money. I did not understand the Fidgeons to say that the Bank should have refused their requests to pay these sums to them.

One of these miscellaneous payments was that of $18,915 to the Builder on 8 March 1995. It will be recalled that the Builder's invoice 4 in respect of the work at 45 Cairnes Crescent dated 2 February 1995 was for $16,849[13]. There is in evidence a document in Mr Gould's writing which Mr Fidgeon said he received in March 1995. This document shows the amount in invoice 4 to be still outstanding and includes three further charges which appear to relate to work done at 2019 Malvern Road. It also shows a credit of $900 for rental payable by Mr Gould to the Fidgeons up to 4 March 1995. The balance outstanding is shown as $18,915. On 8 March 1995 the Fidgeons, or at least Mr Fidgeon, was at the Bank. He produced an invoice for $3,600 payable to WBCM Group for the planning appeal in January, some Cronin's Timber invoices for $2,397.04 and, as I infer, the Builder's handwritten document, Exhibit 75. He, or perhaps they, also signed the loan agreement on this day. The Bank drew three cheques in favour of the three invoicees. The inference is irresistible that the payment to the Builder of $18,915 was made at the request of the Fidgeons and with their authority.

The remaining miscellaneous payments were by cheques drawn on the Business Loan Account in favour of various consultants and suppliers in relation to the project. The largest sum in total was paid to Cronin's Mitre 10 for timber for the units. Three payments totalling $28,036.10 were made direct to this supplier and $2,695.00 for curtains. Other direct payments were made to the following consultants:

The remaining payment was to Bryson Curtains, $2,695. All payments were made at the request of the Fidgeons; they were supported by invoices from the payees and they were for materials and services for the project.

What in essence the Fidgeons contend is that the Bank should have satisfied itself at the time of each payment first, that it was for building work done on the project and, second, that it ought not to have permitted the payments for the work to exceed the contract price of $640,780. It is convenient to deal with these two matters separately. It will be recalled that the Fidgeons' position was that the project for this purpose included the work on 45 Cairnes Crescent. This means that all of these payments with the exception of $300 cash drawing and the transfer to the MasterCard account satisfied this requirement. In any event, insofar as the Fidgeons asked the Bank to make a payment for some other purpose and the Bank was content to do so, they cannot be heard to complain that the Bank implemented their instruction which, after all, substituted their liability to the supplier for an equivalent liability to the Bank.

The second contention is even more remarkable. It involves a number of factual assumptions, all of which are false, most of them patently so. First, the assumption that the price of $640,780 in the building contract was immutable. The contract contained provision for adjustment to the contract sum for variations and for provisional sums and prime cost items. Second, that the contract sum of $640,780 covered the cost of the consultants engaged for the project such as the architect, the engineer, the quantity surveyor, the town planners, the soil engineer and the Solicitors. It obviously did not. Third, an assumption whose falsity operates in favour of the Fidgeons, that the $640,780 was to include the work at 45 Cairnes Crescent. I have found this not to be the case. Fourth, that the Bank was to maintain a running account of these draw downs insofar as they concern the work covered by the $640,780 price and to have refused to pay others or any requested draw downs when the total exceeded that sum. Had the Bank followed this course, it would have continued to honour payment requests until about 15 August 1995 when the amount of the draw downs from the Business Loan Account exceeded $640,780. Payments would then have stopped. The Builder's sixth claim would have been refused as would the Fidgeons' own later requests that they be reimbursed for expenses they had themselves incurred. The absurdity of this is compounded by the further contention of the Fidgeons that the Bank should in some way have brought to account in this exercise the expenses which they themselves had incurred and of which they had not told the Bank.

This contention that the Bank had failed to maintain financial control over them and their project was in some way bound up with the inspection issue. It will be recalled that the Fidgeons said that Mr Kennedy told them that he would inspect the project from time to time, to count the nuts and bolts. I have rejected this evidence but it became associated in their minds with the failure of the Bank to insist that the claims for payment were accompanied by the certificate of an independent quantity surveyor. It was never clear what the Fidgeons contended that this independent quantity surveyor was to certify. Under the terms of the building contract, the Fidgeons were obliged to make stipulated progress payments when each of the stages had been achieved. This was verified by Mr Kennedy. But the quantity surveyor complaint disappears as soon as one appreciates that the project was completed. This means that the Builder became in September, entitled to the whole of the contract sum as adjusted in accordance with the contract. It matters not therefore, even if it were the case, that a progress payment had been made before a specified stage had been achieved. I should add, too, that it matters not that the cost of $640,780 for the work, or indeed any other cost, was or was not excessive. Mr and Mrs Fidgeon, as adult competent persons, voluntarily entered into a contract with the Builder to pay this amount. They must accept responsibility for this. For this reason, I make no further mention in this judgment of the evidence of Keith Anderson Irwin. His opinion as to the fair market value of the work performed in construction of the units and the renovations to 45 Cairnes Crescent is, whether it be correct or not, simply irrelevant.

And so it all comes back to the Fidgeons' fundamental contention that the Bank should have exercised financial control over the project and curbed their own financial irresponsibility. I use this expression advisedly because they embarked on this project in the second half of 1994 with the expectation of making a profit of some $500,000, according to Mr Gould's rough 1994 analysis, which is exhibit 20. The analysis of their forensic accountant, Robert Neil Welch, puts this expectation at $567,312, including the cost of acquisition of 45 Cairnes Crescent. His calculation of the actual profit is $148,314. Many valid criticisms could be directed at these figures, but they show, as was the case, that the cause of the Fidgeons' loss lay in their lack of control of the costs associated with the construction of the project.

The position, then, as things stood on 29 September 1995, may be summarised as follows. The five units and 45 Cairnes Crescent were completed ready for sale. Certificates of occupancy had been issued on 30 August and 31 August 1995. The planning permit for the subdivision had been issued on 22 September and the plan of subdivision certified by the council on that date, or perhaps 29 September 1995. While the sales could not be completed until the plan of subdivision had been registered, there was no impediment to the sale of the units or of 45 Cairnes Crescent. The Solicitors had prepared the contracts and the s. 32 statements by this time or by the first week of October. Carmichael & Weber had been engaged as selling agents. They had received an offer of $200,000 for 5/47 Cairnes Crescent but the sale did not go ahead. The advertising for the auction of 45 Cairnes Crescent on 7 October must have been well underway. It seems that the Fidgeons were content with the position and hopeful of making a tidy profit except for the fact, which they must be taken as knowing, that they had at that stage overspent their budget by some $200,000.

This is the period in which the units and 45 Cairnes Crescent were marketed and in which the Fidgeons came to appreciate the total of the money they had spent. It is the period in which they sought to retrieve their position.

Difficulties were encountered in selling the units and 45 Cairnes Crescent. In August, the Fidgeons authorised the firm of estate agents, Carmichael & Weber, to auction 45 Cairnes Crescent and to offer the units for sale for $229,000 each on a 30 -or 60-day contract. The agent put 45 Cairnes Crescent to auction on or about 7 October 1995 but, according to Mr Fidgeon, no bid was received. Less than a week later, the agent's authority was terminated prematurely by the Fidgeons for reasons which are not clear on the evidence before me.

A fresh agent, Marshall White, then offered 45 Cairnes Crescent for auction later in October but with no better result. This property was then withdrawn from sale and later leased until it was finally sold in mid-1998.

Different agents were used for the sale of the units. All but one were sold by the end of the year as follows:

4/49 Cairnes Crescent was leased for 12 months and sold in about August 1996 for $199,000. The Fidgeons disputed this sale and unsuccessfully sought to resist an action for specific performance by the purchaser brought in this Court. Their resistance was unsuccessful and the sale was settled in late December 1996. The Bank as mortgagee of the title declined to discharge its mortgage to enable settlement to proceed unless the proceeds were applied in discharge of the Fidgeons' debt to it. This debt by this time was in dispute and the then solicitors for the Fidgeons, William Abbot & Associates, agreed with the solicitors for the Bank to lodge $86,000 in an interest bearing deposit in the names of the Fidgeons and the Bank pending resolution of their dispute. This sum is the amount referred to in the Bank's counterclaim in this proceeding.[14]

The next piece of litigation produced by this sale was the Fidgeons' complaint against William Abbott & Associates to the Legal Ombudsman, the Lawyers RPA and ultimately to the Legal Profession Tribunal regarding their conduct of the sale. This complaint did not, however, produce an award of compensation for the Fidgeons.

I shall deal with the sale of 5/47 Cairnes Crescent in some detail later.[15]

On 13 June 1998 the Fidgeons sold 45 Cairnes Crescent to a Mr and Mrs Hooper for $320,000. This property and its sale has been the cause of further unhappiness for the Fidgeons. It will be recalled that the plan of subdivision which was registered in early 1996 was a seven lot plan of subdivision including this property as Lot 6 and 2019 Malvern Road as Lot 7. The Fidgeons, in 1996, took the position that this should not have happened and they refused to pay the administration and other fees imposed on lot owners by the body corporate. On 17 April 1997, the body corporate sued them in Magistrates' Court proceeding No. K01155891 for these fees, which then totalled $927.15. This proceeding was settled on 13 November 1997 on the basis that the claim was dismissed without costs and that Lot 6 (45 Cairnes Crescent) and Lot 7 (2019 Malvern Road) would be removed from the plan of subdivision. All members of the body corporate agreed to do what was necessary to give effect to this compromise, with the Fidgeons agreeing to bear any expenses payable to the City of Stonnington or Yarra Valley Water to achieve this. This is a broad summary of the effect of the terms of settlement which are in evidence as Exhibit 163.

It was a term of the contract of sale of 45 Cairnes Crescent that the property be removed from the plan of subdivision before completion, as had been agreed previously. The parties, notwithstanding this, settled the contract on 17 August 1998 without the plan of subdivision having first been amended. The application for amendment lodged in the Office of Titles was and remains stopped because the requirement of Yarra Valley Water that new sewerage reticulation be installed has not been satisfied. All of this appears from a writ in proceeding No. 8159 of 2001 which has been brought by the Hoopers against the Fidgeons and the solicitors acting for them on the sale, seeking relief for their failure to give effect to the agreement to remove Lot 6 from the plan of subdivision. This is but another legal proceeding which this project has spawned.

Returning to 1996, the terms of the sales of 1/55 Cairnes Crescent, 2/53 Cairnes Crescent, 3/51 Cairnes Crescent and, probably at first, 5/47 Cairnes Crescent, provided for completion on the date set out in the schedule to the contract, in each case or 14 days after notification that the plan of subdivision had been registered, whichever was the last to occur.

The plan of subdivision which had been issued to Chapman Dickson on 2 October 1995 and received by the Solicitors on 12 October 1995 was not lodged by them in the Office of Titles for registration until 11 December 1995. There were various reasons offered for the fact that the plan of subdivision was not received until 12 October 1995 but none of them was due to any act or omission of the Solicitors so I do not concern myself with them. The delay of some two months in lodging the plan of subdivision in the Titles Office was in part due to the fact that the Bank as mortgagee did not consent to the dealing until about 20 November 1995. This in turn was a product of the Bank's insistence that the Fidgeons grant a mortgage over the hiatus land, the title to which did not issue until 16 October 1995. The delay was also in part due to the neglect of the Fidgeons to put the Solicitors in funds. On 28 November 1995, the Solicitors had asked the Fidgeons to pay their account of 31 October which included $693 for the lodging fee of the plan of subdivision. The Fidgeons did not pay this until about the end of November, in response to a reminder of 28 November 1995. At this time they had still failed to pay to the Solicitors the aggregate amount of over $5,000 due under eight accounts previously rendered. Indeed, a feature of the project was the frequent failure of the Fidgeons to pay accounts for most or all of their consultants.

Mr Dickson said that the Titles Office would normally require a period of about three to eight weeks from the lodgment date to register the plan of subdivision. This would mean that registration might ordinarily have occurred by the end of January 1996. It did not occur until 7 March 1996 for reasons to which I now turn.

About this time there emerged three matters which assumed great importance at the trial. First was the realisation by the Fidgeons that they had used all of their funds. Second was the requirement of the council that the Fidgeons pay an open space levy of $15,200; third was the fact that there was no housing guarantee in force with respect to the Builder's work. The continuance of the second and third of these matters precluded settlement of the contracts of sale until the matters had been resolved.

By the end of September 1995, the Business Loan Account had been drawn to the full extent of the facility. Interest accruing thereafter could not be capitalised without permitting the loan to exceed its limit of $780,000, notwithstanding the Bank's agreement in its letter of offer that the borrowers did not have to repay principal until March 1996. None of the units had then been sold; the first unsuccessful auction of 45 Cairnes Crescent lay a week or so in the future, as was the change of selling agents. Drawings on this account had since June 1995 been approved, not by the North Melbourne branch, but by an account management centre under the Bank's "best bank" system. But as Mr Harvey pointed out, there was very little activity in the account after the payment of the Builder's sixth invoice on 6 September 1995, other than the deduction of bank charges and interest. Accordingly, there was no occasion for the Bank to query or to dishonour cheques drawn when the account was then over the limit.

In accordance with the bank statement production cycle explained by Kellie Jane Harris, the Fidgeons would have received a statement for the Business Loan Account on 8 September 1995, six months after it was opened. They had also requested and been provided with a statement of this account on 24 May 1995.

The chronology of the dealings between the Fidgeons and the Bank in the last three months of 1995 is obscure. It is, however, clear that the Bank took the view that all of the Fidgeons' accounts were out of order and that no further drawings should be permitted. Mrs Fidgeon spoke of a meeting between her husband and Les Warden, the relieving manager at the North Melbourne branch when Mr Warden said that their accounts were frozen. In her witness statement she places this very close to Christmas 1995 and she describes an embarrassing incident on Christmas Eve when they had to request a small advance of $100. Mr Kennedy recalled this incident, describing Mrs Fidgeon as quite hysterical because the Bank had frozen her account. He said that he took it upon himself to authorise a withdrawal of $100 only, pending his investigation of the problem. He said that she went to the branch and sought $200, the refusal for which caused difficulty and embarrassment for Mrs Fidgeon.

In his memorandum of 12 January 1996, Mr Warden, who was not called as a witness, speaks of having had discussions with each of the Fidgeons. On the same day, he wrote to Mrs Fidgeon enclosing a revised interest calculation on the Business Loan Account and offering to convert the Fidgeons' home loan account to a Basic Options Loan.

By this time, the Fidgeons were attempting to discover how it was that they had overspent their budget. Their prime suspect was, of course, the Builder and it was in this context that, according to Mrs Fidgeon, she telephoned Mr Gould accusing him of robbing them blind and ruining their lives. She told him she was going to kill herself and hung up on him. Mr Gould recalled this conversation as taking place over the Christmas break but did not mention her threat of suicide.

The difficulty then facing the Fidgeons appeared to be that they had no copies of the contract, drawings or specifications to enable those advising them to determine the correctness of the Builder's charges. Nor was the Bank able to assist, since it had mislaid its copy.

The stress which this imposed on the Fidgeons was exacerbated by their need to find $22,486 to satisfy the requirements of the Stonnington Council before it would issue a notice of compliance. In the scale of things, this sum was not great but it was beyond their means. Of this amount, $5,326 for the drainage levy and $1,960 for United Energy were the responsibility of the Builder and he paid them or reimbursed the Fidgeons for these payments shortly prior to 13 February 1996. This did not therefore explain any delay in settlement of any of the contracts of sale.

The remaining portion of the sum required to satisfy the requirements of the City of Stonnington was $15,200 for the open space levy, a topic to which I now turn.

By s. 22(1)(b) of the Subdivision Act 1988, a plan of subdivision cannot be registered at the Office of Titles until the local council provides a statement of compliance. By s. 21(1)(b), the statement of compliance must be issued where all requirements under Part 3 of the Act and under the Planning and Environment Act 1987 which relate to public work have been met or there is in place an agreement to secure compliance with them. Part 3 includes s. 18(1)(b) under which the responsible authority may require an applicant for subdivision to pay a percentage of the site value of the land not exceeding 5% in lieu of setting aside open space. Payment of such an open space levy must be made or an agreement for payment entered into before a statement of compliance issues.[16] It was the non-issue of a statement of compliance for non-payment of the open space levy and non-payment of fees payable for the electricity charge and the drainage levy that caused difficulty in the settlement of the contracts of sale of the units.

The facts relating to the imposition of the compliance requirements and, in particular, to those in respect of the open space levy in this case are remarkably obscure. Planning permit No. 142/95 for the subdivision was issued by the City of Stonnington on a date which is not disclosed on the evidence. Mr Dickson said it was issued a few days before 22 September 1995 and, later, that he had no recollection of ever seeing it. On 14 September 1995, the council wrote to Mr Dickson advising him that the plan of subdivision had been certified. By letter dated 22 September 1995, the council advised him that, due to a clerical error, a Melbourne Water condition had been left out of the permit and it enclosed an amended permit No. 142/95 dated 22 September 1995. Mr Dickson said he did not receive this letter and the enclosure until some weeks later and, later, relying upon a contemporaneous note, said that he did not receive it until after 16 November 1995. The amended planning permit which is enclosed in the letter of 22 September is of interest because it contains a requirement that the owner of the land pay a 4% open space levy.

The date of issue of this amended planning permit is important because it is this date from which begins to run the 60-day period for the Fidgeons to appeal against the open space levy requirement. If, as counsel for the Solicitors contended, time runs from 22 September, the appeal period expired on 21 November 1995. The Fidgeons were not informed of the levy or of their right of appeal by Mr Dickson when he learnt of the requirement. It will be recalled that he said that he did not receive the permits until after 16 November, less than a week before the expiry of the appeal period. On 21 November 1995, Mr Dickson sent to the Solicitors a three-page fax enclosing a copy of the council quantification of the levy in the sum of $15,200. On that day the appeal period expired and, in any event, Mr Muir did nothing with the document or the information contained in it. There is no evidence that the Fidgeons were told by anyone about the open space levy or the other requirements of the amended planning permit or of their rights of appeal.

The difficulty is that each of the persons who might have been expected to bring this matter to their attention maintained an ignorance of the terms of the planning permit. Mr Dickson, who said he did not see the amended planning permit until after 16 November, maintained that the document which met that description in the Court Book, and which became Exhibit 228, did not contain the omitted Melbourne Water condition which is referred to in the council letter of 22 September 1995. No amended planning permit containing such a condition was ever produced. In a letter dated 11 December 1995, Mr Muir stated that he had not seen the planning permit and he told me that he wrote this letter after examining his file. It does, however, appear that about a month later, on 25 January 1996, a copy of the permit was on his file. Mr Muir was unable to say when he received this permit or whether he overlooked it when he wrote his letter of 11 December 1995.

The question when this matter was brought to the attention of the Fidgeons is even more difficult. Mrs Fidgeon said that Mr Muir did not send her a copy of the open space levy assessment of 16 November 1995. She said, and I accept, that in some way she discovered from the Stonnington Council that she and her husband had to pay the levy of $15,200 and other levies of about $7,000 for electricity and drainage. This must have been before 19 January 1996 because it was on that date that she spoke with Mr Muir about them. This was a problem because, by this time, the Bank had taken the position that the Fidgeons had used all of their facilities and were refusing to advance the funds necessary to pay these levies. In short, they could not satisfy the council requirements from their own money.

The resolution of this matter caused great anxiety for the Fidgeons. The money for the electricity and drainage levy was by 13 February 1996 obtained from the Builder whose responsibility they were. It is a little puzzling how the payment of $15,200 open space levy was such a problem. It is true that the Bank declined to advance funds to the Fidgeons to enable them to make the payment. It is true that Mr Muir on 24 January 1996 made representations to the council with the object of persuading it to waive the levy but was unsuccessful. The council officers did, however, agree to defer the payment until settlement of the first sale. It would have been open, as Terence Matthew George Montebello, a solicitor with considerable experience in this area of law, suggested, for the council to have reached an agreement pursuant to s. 18 Subdivision Act 1988 with the Fidgeons that the levy be paid from the proceeds of sale. This was not necessary, however, because the purchaser of 2/53 Cairnes Crescent, whose settlement was then overdue, had agreed with the Fidgeons to advance the $15,000 required and to accept repayment of this advance by adjustment upon settlement. This was done. Mrs Fidgeon paid the levy on 29 February 1996 and the statement of compliance was issued on 4 March 1996. The agreed adjustment was included as part of the settlement of the sale of 2/53 Cairnes Crescent which took place on 23 March 1996.

Pursuant to the House Contracts Guarantee Act 1987, s. 5(1), a person must not carry out domestic building work unless a guarantee is in force. Such a guarantee is available only where the work is performed by an approved builder. By s. 3(1), "approved builder" is defined to mean "a builder approved by the approved guarantor under its rules". The evidence showed that when he commenced the work for the Fidgeons, Mr Gould was an approved builder, but only for the purpose of constructing two houses at the one time. At some unspecified time later, his registration was extended to five dwellings at the one time. It appears, too, that at no time prior to the completion of the work, did Mr Gould obtain a guarantee. This is, of course, ordinarily a matter between the Fidgeons and the Builder; it would not concern the Solicitors or the Bank.

Complaint, however, was made that the Solicitors informed the Fidgeons in a letter of advice dated 19 December 1994 that:

"We have spoken with the Housing Guarantee Fund which has confirmed for us that Richard [Gould] is an approved builder with the Housing Guarantee Fund. This means that his workmanship is the subject of a seven year guarantee. This is important to you as there are strict provisions governing the sale of a residence which has been built other than by an approved builder."

Mr Muir confirmed in evidence that he did in fact speak with the Housing Guarantee Fund prior to writing this letter and that he received the information which is set out in the first quoted sentence. It seems that the information was correct, so far as it went. He did not inquire as to any limitation upon the work which the Builder might carry out within the terms of his approval. All of this occurred before work started on the units.

When the units were completed, Brightfields, the solicitors for the purchasers of 5/47 Cairnes Crescent, wrote to the Solicitors seeking a copy of the guarantee or information as to when it was to issue. They insisted upon and obtained a term in the contract of sale of 15 November 1995 that such guarantee be provided prior to settlement.

On 13 February 1996, a qualified certificate of guarantee was issued in respect of 5/47 Cairnes Crescent. The qualification was that no guarantee was in force unless the contract was completed. This qualification was therefore of no significance, for the work had been completed months previously. The guarantee then contained the following note:

"Please Note - Because this contract involves more than two residences there is no guarantee by Housing Guarantee Fund Ltd against the builder going bankrupt or failing to complete the construction. See Sec 7(8) of House Contracts Guarantee Act 1987."

Section 7 of the Act sets out the nature of the guarantee which is given under the legislation. By s. 7(1), it is provided that a guarantee for work such as the builder had performed in this case was:

"... a guarantee to the building owner and the owner's successors in title of the performance of the builder's obligations under the domestic building work contract."

Under the statutory guarantee, the guarantor is therefore liable to "make good loss or damage suffered by the building owner or purchaser or a successor in title of the building owner or purchaser" on account of the builder's failure to perform its obligations or an account of a defect caused by bad workmanship that appears within the guarantee period.[17] The subsection referred to in the note to the guarantee is in the following terms:

"7(8) Despite anything to the contrary in this section if - (a) an approved builder enters into a domestic building work contract under which the builder agrees to construct... three or more dwelling-houses for a person..., the approved guarantor does not, for the purposes of this Act, guarantee to that person the performance of the builder's obligations under the domestic building work contract..."

It will be noted that this provision imposes no qualification upon the entitlement of the successors in title. In short, because the building contract had been completed, the purchasers from the Fidgeons lost none of the statutory protection afforded by the legislation.

Similar qualified guarantees were in evidence in respect of 1/55 Cairnes Crescent and 4/49 Cairnes Crescent. It may be supposed that similar guarantees were issued with respect to the remaining properties. The purchasers of 1/55 Cairnes Crescent, 2/53 Cairnes Crescent, 3/51 Cairnes Crescent and 5/47 Cairnes Crescent settled without complaint or financial adjustment on account of any deficiency in the guarantee. Nor did the delay in issuing the guarantees cause any delay in settlement of the contracts, for these could not take place until the plan of subdivision was registered on 7 March 1996.

Although the need for a guarantee for each of the units was known by the Solicitors by the end of October 1995, the task of obtaining these documents does not appear to have been addressed until early December of that year. Indeed, Mr Muir said that it was not until about 4 December 1995 that the problem came to his attention. It was on this date that Karen Anne Jones, a first year employee solicitor who was handling the conveyancing file, received a telephone call from the Housing Guarantee Fund regarding a request for production of the guarantee for 2/47 Cairnes Crescent. She was told that no guarantee was in place, but that this might be remedied by the production of the building contract. She spoke to Mr Fidgeon on the following day, impressing upon him the urgency of the matter and he told her that he would have a copy of the contract in her hands in the course of that day. This he did not do. Mr Fidgeon must have spoken to the Builder because, on 6 December 1995, Mr Gould wrote by fax to Mr Muir saying that the required information would be sent to the Fidgeons on the following day. Mr Gould added that it would be necessary for them to execute a contract for the renovation work at 45 Cairnes Crescent. He, Muir, was not, he said, overly alarmed about this because he had been informed by the Housing Guarantee Fund that it only required production of the construction agreement.

About this time, too, the Builder sent to the Fidgeons a fax enclosing a contract for their execution in respect of the work which had been performed at 45 Cairnes Crescent. This contract, which was printed on blue paper, is exhibit 189 and was referred to in the trial as "the blue contract". When received by the Fidgeons, it had been executed by the Builder, backdated 16 November 1994 and showed the price of the work to be $20,000. Mrs Fidgeon said that this was the first she had heard of any problem with the housing guarantee. It may be that this is correct, if the fact be that her husband did not tell her of the conversation he had had with Ms Jones a few days previously. In any event, the Fidgeons refused to execute the document.

There followed a month or more of confusion, if not paralysis, on the part of the Fidgeons. The Housing Guarantee Fund on 29 December 1995 inquired of Ms Jones when the contracts were to be sent to them. The Solicitors on 4 January 1996 wrote to the Fidgeons stating that they had not received the contracts and asking them to contact the office about it. On 8 January 1996, Mr Gould told the Solicitors that he had forwarded the contracts to the Fidgeons prior to or just after Christmas. On 16 January 1996, Ms Jones was told by Mr Fidgeon that he thought Mr Gould had sent the contracts to the Solicitors or HGFL but that he would look for them at home. Whatever be the location of the documents, it appears from the Solicitors' letter to the Builder of 25 January 1996 that the Fidgeons had by then produced to them the building contracts and unspecified Housing Guarantee Fund documents.

In this letter, prepared by Ms Jones and signed by Mr Muir, the Builder was requested by the Solicitors to amend the building contracts of February 1995 in a number of respects. These included the description of the works to include the renovations to 45 Cairnes Crescent and details as to the breakdown of the contract price of $640,780. It seems that no one consulted the Fidgeons about this letter or its contents.

The contracts were received by Mr Gould and returned by him to the Solicitors some time before 13 February 1996 without his making any of the suggested amendments. Mr Muir on that day spoke to Mr Gould. The incorrect inclusion of 45 Cairnes Crescent in the February contract was discussed. Mr Gould authorised Mr Muir to amend the contract to include his Housing Guarantee approval number and to include the descriptions of the five units. This was seen by Mr Muir as a significant conversation, for he took the trouble to record in his memorandum the fact that Ms Jones was present.

Following this conversation, the building contracts executed by the Fidgeons and the Builder on 9 February 1995 were amended in these two respects. Two copies of the contracts are in evidence. Exhibit 3 was amended by Ms Jones and exhibit 129 by Mr Muir. Neither of these persons sought instructions from the Fidgeons to do this nor did they inform the Fidgeons at the time that the amendments were made or were to be made. Mr Muir told me that he did not do so because he thought the changes were immaterial and did not have the potential of adversely affecting his clients' interests. He said, and I accept, that at this time he was unaware that the Fidgeons had taken the position that the renovations to 45 Cairnes Crescent were included in the work to be performed under the building contract of February 1995. Ms Jones had no recollection of these events.

On 13 February 1996, Mr Muir wrote to the Fidgeons telling them that Mr Gould had authorised the changes to the building contract and enclosing a copy of the amended contract. Mrs Fidgeon replied with an angry telephone call. It will be recalled that at this time the Fidgeons, and in particular Mrs Fidgeon, were very much overborne by the situation in which they found themselves following the exhaustion of their funding. Mrs Fidgeon had been so depressed that she had actually attempted suicide on 8 February 1996. It may well be that she saw the conduct of the Solicitors in amending the building contract without her authority as yet another betrayal following that of the first real estate agent, the Builder and the Bank. This led her to respond emotionally and not rationally to the actions of the solicitor which, albeit ill advised, were evidently intended for her benefit and certainly caused her or her husband no disadvantage. It caused no delay to the settlement of the contracts of sale, no financial disadvantage nor indeed any other disadvantage.

In any event, the amended contracts were delivered to the Housing Guarantee Fund and on the same day, 13 February 1996, the qualified guarantees were issued and this impediment to the settlement of the four contracts of sale disappeared.

The circumstances attending the sale of this unit in November 1995 and the settlement of the sale on 2 April 1996 were the subject of much evidence. This is surprising because the complaint of the Fidgeons against the Solicitors in relation to this is that their dereliction of duty caused the Fidgeons to lose $1,230 only. When this claim was opened, I inquired whether such a modest sum warranted the expenditure of much time at trial, which I estimated was then costing the parties, collectively, about $50 per minute to conduct. The claim nevertheless went ahead, occupying much time. I assume that the issue was seen by the parties was being one of high principle and I treat it as such.

A contract for the private sale of this unit was presumably in the hands of Carmichael & Weber. Following the determination of their engagement, the property was given to Noel Jones & Associates and they set about selling the units in October 1995. It seems that they found purchasers who initially offered $185,000, then $186,000 and ultimately $187,000. A six-page letter from Messrs Brightfields Masterson Harcourt, the solicitors for the purchasers, dated 27 October 1995 addressed to the agent, sets out the terms of the offer of $185,000. Brightfields noted that the contract which had been proffered did not contain a Housing Guarantee Fund certificate. This alerted the Fidgeons and the Solicitors to this matter, which became a matter of importance in December 1995 and January and February 1996. For present purposes, Brightfields' letter required the insertion in the Contract of Sale of a number of new provisions. First, the settlement date was to be moved to 21 days after the notification of registration of the plan of subdivision or after receipt of the certificate of occupancy or after the receipt of the housing guarantee certificate, whichever occurred last. The purchasers were to have the right to withdraw if these events had not occurred within three months or within an extension of that period. The purchasers also required that a subject to finance clause be inserted and a new cl. 8 relating to the obtaining of consent under the Foreign Acquisitions and Takeovers Act 1975. They also required the insertion of a new cl. 9 under which the vendors were to provide an exhaust fan over the stove, fly screens to the upper level bedrooms and three remote control devices to operate the gates. It was cl. 9 which gave rise to the difficulties.

The agent passed the Brightfields letter to the Fidgeons; they spoke of discussing its contents with him. They told me that they made it clear to him that cl. 9 was unacceptable to them. The agent was not called. This must have taken place before 3 November 1995 because it was on 31 October 1995 that Mrs Fidgeon sent to Mr Muir an eight page fax in which she simply states "Here's the offer and the conditions he wants". Only the last two pages of the transmission, including that containing cl. 9, are in evidence. I infer that this fax included all seven pages of the Brightfields fax of 27 October. In it Mrs Fidgeon made no comment about the proposed new terms; she does not indicate that any of them was unacceptable.

Another copy of the Brightfields fax was sent to the Solicitors on 3 November, this time by the agent. The cover sheet merely states:

"We have received an offer for Lot 5 subject to various amendments to the contract previously prepared by you. The purchaser requests a new contract be prepared which she will immediately sign."

The enclosed Brightfields fax of 27 October contains a number of handwritten notations, apparently made by the agent. One notation suggests that the price was raised to $186,000 on 3 November. There is no notation beside cl. 9.

Mr Muir said that he had no involvement in this transaction other than a supervisory one. He did not discuss the letter with Mrs Fidgeon; he passed it to Ms Jones who then prepared a response to Brightfields' letter of 27 October, which was signed by Mr Muir and sent on 8 November 1995 or perhaps the following day. The letter confirms the vendors' agreement to the Brightfields suggestions, with certain immaterial exceptions. The terms so confirmed included the subject of finance clause and cl. 9. Ms Jones said that she did not recollect speaking to Mrs Fidgeon about this. Mrs Fidgeon maintained that she was not consulted by the Solicitors about cl. 9. I accept this to be the case. On the same day, 8 November, Ms Jones prepared amended contracts and forwarded them to the agent, who passed them to Brightfields on the afternoon of the same day. An examination of the executed contract shows that, subject to a minor drafting amendment, Ms Jones amended the contracts to incorporate all of the Brightfields suggestions and the further modification noted by the agent in his fax of 3 November.

Later on the same day, the agent sent a fax to the Solicitors in which he requested that they address further questions raised by Brightfields arising out of the amended contracts and which concerned the expected time for the fulfilment of the settlement preconditions. It does not appear when, if at all, Ms Jones responded to this enquiry. By this time, the vendors had submitted their counter offer of $187,000.

The contract was executed by the parties on 15 November 1995. It seems that the execution of the document by the Fidgeons was procured by the agent in an unusual and, if I may say so, unsatisfactory way. Three of the pages from the bound copy, which the Fidgeons were required to sign or initial, were photocopied and sent to each of them at their place of work in Sydney and Melbourne respectively. Mr and Mrs Fidgeon signed and returned the pages to the agent in the same way. The agent then stapled these loose pages and the bound contract. A copy of the contract, including the executed pages, was faxed to the Solicitors and retained on their file.

A further matter is that there appears on the Solicitors' copy of the contract of sale, but not on the copy from the agent's file, certain handwritten words beside cl. 9. These were written by Ms Jones on a date and in circumstances which she did not recollect. Mr and Mrs Fidgeon said that they were written in the Solicitors' boardroom and in their presence. The word "No", which was written once beside each of sub-cl. (1) and (2) of cl. 9 which provided for the exhaust fan and the fly wire screens, was written in each case by Ms Jones as the Fidgeons instructed her that the provisions were unacceptable. Beside sub-cl. (3) relating to the remote control is written "one per unit", which the Fidgeons said also recorded their instructions. Mr Fidgeon said he thought that the conversation took place before the contract was executed on 15 November 1995. Mrs Fidgeon was unable to recall when it would have taken place. I find that the conversation which Mr Fidgeon described and which is corroborated by Ms Jones' writing on the contract occurred after 15 November 1995. I so find notwithstanding his tentative evidence to the contrary. First, because the copy of the contract on which the writing appears is the copy from the Solicitors' file, including the executed pages. This was not returned to the Solicitors until 17 November 1995. I so find, too, because I accept the evidence that Ms Jones did not consult the Fidgeons regarding the amended contract and because I find it improbable that she would have permitted the amended contract to be engrossed in the face of the clients' contrary instructions. I am satisfied that the amended contract was prepared and forwarded to the agent for him to arrange execution on the basis of the agent's written instructions to the Solicitors, and that Ms Jones accepted that the agent gave those instructions with the authority of the vendors.

The story now moves forward to the end of March 1996. Ms Jones said that it was not until then that she became aware that the Fidgeons were unhappy with the presence of cl. 9 in the contract. If this is correct, the notations on the contract must have been made by her and the boardroom meeting must have taken place at about that time. Notwithstanding the unsatisfactory evidence from those involved, I find that Ms Jones' evidence on this is to be accepted.

The three events which were to signal the time for completion had all occurred and settlement was fixed to occur on Tuesday 2 April 1996. Ms Jones spoke of a final inspection of the property by the purchasers following which they drew attention to the vendors' failure to provide the cl. 9 items. Brightfields raised the matter with Ms Jones and the Solicitors appear to have agreed on a without prejudice basis that $1,230 might be allowed on settlement for these items. This is mentioned in a letter from Brightfields to the Solicitors dated 22 March 1996, which is enclosed in a fax sent by them to the Solicitors at 8 pm on Thursday 28 March 1996. It is an important letter notwithstanding that the author was not called as a witness. It shows the state of negotiations at this time. It speaks of a meeting between Mr Fidgeon and one of the purchasers on the property on 27 March, so the letter must have been written on or after that date. The letter opens with an acknowledgment of receipt of a fax from the Solicitors dated 22 March. This is not in evidence. The letter encloses a statement of adjustments and a settlement statement in which the purchasers are credited with $1,230 for the cl. 9 items. The letter then deals with these items in the following terms:

"As discussed, we have allowed on a without prejudice basis, the sum of $1,230.00 in our client's favour to take into account the matters contained in Special Condition 9 of the Contract."

Ms Jones was unable to recall these discussions. Presumably, the allowance was described as being "without prejudice" to deal with the fact that no agreement had yet been reached as to the allowance. Having explained how the sum of $1,230 is made up, the purchasers' solicitor continues:

"We confirm Ms Sung [one of the purchasers] was advised by Mr Fidgeon whilst obtaining the quotes at the Property on 27 March 1996 that 2 remote controls will be provided to her at settlement and the costs of each remote control is $20.00."

Mr Fidgeon confirmed that such a meeting took place and that he was then maintaining the position that he would not provide the cl. 9 items. On the balance of probabilities, I find that the boardroom meeting and Ms Jones' notations on the contract occurred about this time.

Now Ms Jones was taking leave from Monday 1 April and she was keen to tidy this matter up before she left the office on Friday 29 March. It should be noted that Ms Jones had poor recollection of these, and indeed most, events and leant very heavily on contemporaneous letters and diary notes. One such note appears to be a memorandum prepared late on Friday 29 March in which she records the state of the file for the benefit of the person who was to be handling it the following week. As to cl. 9, Ms Jones observed that settlement instructions were incomplete because negotiations were on foot as to the amount to be allowed for non-compliance with its requirements. I note that her query is as to the amount to be allowed rather than whether any amount should be allowed at all. Although it does not appear that there remained unresolved the question as to the vendors' liability to perform the work, I am satisfied that this was still a live issue. There then appears in Ms Jones' memorandum the following, which she verifies as an accurate record:

"I spoke to Robert Fidgeon on morning of 29/3/96 about the works and he was going to speak to Patrice about it and get back to us."

Ms Jones then told me that she rang Mr Fidgeon back later to seek his instructions. She said he was reluctant, but when pressed, he agreed to settle on the basis of the proposed allowance. She made no note of this, nor did she tell Mr Muir that she had these instructions. I mention, too, that in the particulars given under paragraph 15D of their defence of 2 March 2000, the Solicitors make no mention of any instruction to her. This may be explicable, as counsel suggested, by the fact that Ms Jones was no longer employed by the Solicitors and she may not have been interviewed on this matter when the pleading was prepared.

I conclude, however, on all the evidence on this matter, that the second conversation on 29 March 1996 described by Ms Jones did not take place. I reach this conclusion principally because I find it improbable that she would not have recorded or mentioned to Mr Muir such an important matter.

It was Mr Muir who took over the file on Monday. He was unaware that the matter had been resolved because in his fax to Brightfields enclosing answers to requisitions on title, he says that he is currently seeking instructions on it. And so, he telephoned Mr Fidgeon on the Monday or the Tuesday, before settlement. He gave the following account of the conversation:

"Question: Did you have any discussion prior to settlement with Mr Fidgeon in relation to that matter? Answer: Yes I did. Question: What was the discussion which you had and when? Answer: It was either the day before settlement or the day of settlement. I spoke to Mr Fidgeon by telephone and discussed with him the purchasers' solicitor's requirement that there be an adjustment of $1,230 in their clients' favour if settlement were to proceed. I discussed with Mr Fidgeon the fact that the contract of sale that I had received from the agent contained a special condition that obligated Mr and Mrs Fidgeon to provide those items. Question: This is what you told him? Answer: Yes. Mr Fidgeon said to me that he had never agreed to that special condition and it had been inserted in error. I advised Mr Fidgeon that the contract which I had received from the agent that was signed by him did contain the special condition and in no circumstances - I felt that if he had an argument it would probably be best that he argued with the selling agent who put the contract together and arranged for its signing rather than delay this settlement where the purchaser was relying on the contract which contained that special condition, so I encouraged Mr Fidgeon to proceed to settlement. He was reluctant to do so but ultimately said that he agreed that we had no other option and he instructed me to proceed to settlement".

Mr Fidgeon denied this conversation took place when it was put to him. Mrs Fidgeon said that no one sought her authority to make the allowance. Upon settlement on 2 April, the sum of $1,230 was in fact deducted. There was, for some reason, perhaps directed to Mr Muir's credit, some controversy as to whether he or another employee solicitor in fact attended the settlement. I make no finding as to this. By letter dated Thursday 4 April 1996, the Solicitors reported the settlement to the Fidgeons and provided details of the adjustments, including this allowance. Mrs Fidgeon responded by telephone on Thursday, 11 April. In this conversation she complained, significantly, not about the allowance, but about the fact that the balance of the purchase price had been paid to the Bank. Mr Muir responded to this complaint by fax dated 12 April and there the matter was left, at least until the Solicitors sued for unpaid fees and the question of the allowance on settlement was raised by way of defence to this claim in September 1996.

The evidence, therefore, shows a direct conflict between the account of Mr Muir and that of Mr Fidgeon. If it were merely a contest between the two witnesses I would have no hesitation of preferring the evidence of Mr Muir. But I was pressed with the probabilities and inferences to be drawn from the surrounding circumstances. Against Mr Muir's account, there is the absence of any file note. This is surprising; Mr Muir is a man who is generally careful about such matters. On his behalf, I was impressed with the improbability that a solicitor would run the risk of contravening a client's specific instructions, even on such a small matter, especially as the Fidgeons were difficult clients. Having given anxious consideration to all of the evidence on this topic, and generally, I conclude that Mr Muir's account is to be preferred. It is to my mind very significant that the complaints of Mrs Fidgeon in the following week did not include this matter. The evidence, generally, shows that she would not at this time have overlooked such a matter of complaint if it existed. Indeed, the account of the want of instructions which appears in the particulars of defence filed 23 October 1996 on behalf of the Fidgeons in the Solicitors' Magistrates' Court proceeding shows that the Fidgeons by that stage were so aggrieved by the incident that they provided an account which was much more extravagant than that which they presented to me.

I conclude, therefore, that before settlement of 5/47 Cairnes Crescent, Mr Fidgeon instructed Mr Muir to allow the sum of $1,230 upon settlement and this he did.

The Fidgeons in January 1996 engaged specialist construction lawyers to investigate their position with respect to the Builder and to recover any overpayment. A mention of this dispiriting episode is necessary because the enormous cost of this forms part of the Fidgeons' claims for damages.

In 1996 the Fidgeons commenced a proceeding against the Builder in the Domestic Building Tribunal. The hearing, which took place in May 1997, occupied 13 days and resulted in a determination favourable to them. They were awarded $83,157 together with interest and costs, which costs were fixed at $78,629.60. The Builder was unrepresented at this hearing. It appears that the costs of certain witnesses were ordered to be paid by the parties equally.

The order of the Tribunal was not satisfied and the Builder became bankrupt on his own application. Mr Gould did not pay his share of the costs of two witnesses and they looked to the Fidgeons for payment. When this was refused, two further Magistrates' Court proceedings were brought against the Fidgeons to recover these costs. In these proceedings the Fidgeons incurred legal costs of $4,870.51 and $8,750,81 respectively. Meantime, the Fidgeons believed that the Builder had used some of the payments he had received on their project in the purchase of real estate in Queensland. They, therefore, funded the official trustee to conduct a public examination of the bankrupt at a cost to them of a further $59,146.13. This turned out to be a fruitless exercise. The Fidgeons seek to recover all these legal costs in this proceeding.

The Fidgeons' contentions against the Bank were put as breaches of the finance agreement entered into between them and the Bank in or about January or February 1995[18] and, in the alternative, as breaches of s. 51A and s. 52 of the Trade Practices Act[19] and, in the further alternative, as breaches of a duty of care which the Bank owed to them "not to cause them economic loss and damage"[20]. The case was conducted as a contest of fact rather than one of legal principle and I am content to deal with it on that basis. I must observe, however, that a duty of care of the generality alleged in paragraph 11A of the statement of claim was never established.

The representations relied upon as the foundation of the misleading and deceptive conduct claim were pleaded as a repetition of the contractual terms of the loan agreement and I shall deal with them together. I can do so briefly in light of the findings of fact which I have already set out.

(a) Westpac would inspect the development as it progressed.

(b) The Bank would verify the costs of the development and the work performed by the Builder before making payments to the Builder.

This is not correct. Mr Kennedy said only that he would satisfy himself that the project had been brought to the stipulated stage before he would approve and make the progress payment which was then to be made under the building contract.

(c) The Bank would generally supervise the carrying out of the development by the Builder.

Mr Kennedy made no such representation and the Bank undertook no such obligation.

(d) The Bank would lend to the plaintiffs the sum of $780,000, to be made up as follows: (1) $650,000 towards payment of construction costs; (2) $50,000 for interest payable to the Bank under the financial agreement; (3) $50,000 as a contingency for cost overruns; (4) $30,000 to cover sundry expenses including a variable rate personal loan with Westpac.

This is correct except that the $30,000 component was to be applied to pay out only the Fidgeons' personal loan account.

(e) Interest on the borrowings under the financial agreement would not exceed the total amount of $50,000.

This was not said nor was it ever agreed to by the Bank.

(f) All of the Fidgeons' other borrowings with the Bank, then existing, would be rolled into and included in the finance agreement related to the development.

This was not said nor was it ever agreed to by the Bank. It was agreed only that $30,000 of the business loan would be used to pay out the Fidgeons' personal loan account. Other borrowings were not to be paid out.

There are in paragraph 7 of the statement of claim seven allegations of breach of contract or non-fulfilment of promissory representations. These, and my conclusions as to them, are set out below.

(a) The Bank did not inspect the development or alternatively did not adequately inspect the development as it progressed.

Mr Smith and Mr Kennedy on behalf of the Bank made all of the inspections which the Bank undertook to make. None of their inspections was inadequate.

(b) The Bank made payments to the Builder without verifying the costs of the development and work performed by him.

All payments made by the Bank to the Builder were sufficiently verified in terms of the Bank's obligation to do so.

(c) The Bank did not generally supervise or alternatively did not adequately supervise the carrying out of the development by the Builder.

(d) The Bank made payments to the Builder over and above the payments due under the building contract without any authority from the Fidgeons.

Payments made by the Bank to the Builder totalled $639,514.[21] This is less than the $640,780 mentioned in the building contract as the cost of the work. If the allegation is intended to include, not only payments to the Fidgeons, but also payments to suppliers and consultants, the total payments made by the Bank from the Business Loan Account, according to Mrs Fidgeon's schedule produced on day 3 of the trial and marked as exhibit 141, is $751,926.57. This total includes a cash advance to Mr Fidgeon of $300 and $1,000 paid to their MasterCard account. The total also includes certain payments for the renovations at 45 Cairnes Crescent. Accepting that the contract sum was to be adjusted pursuant to the terms of the building contract, I am not satisfied on the evidence before me, that the amounts paid exceed the sum payable to the Builder.

I should add that, although the order of the Domestic Building Tribunal was in evidence, its reasons and findings were not. They were not admissible. My task is to make findings on the evidence before me and this evidence did not involve any detailed examination of the Builder's entitlements. The conclusion which I have reached is that all payments made by the Bank were authorised and that none of them was shown to have been not due to the Builder under the contracts.

(e) The Bank charged interest under the finance agreement over and above the total of $50,000 interest agreed as the maximum to be charged by the Bank pursuant to the finance agreement.

(f) The Bank did not roll in other borrowings which the plaintiffs had with the Bank into the finance agreement and charged the plaintiffs additional and higher rates of interest in respect of such other borrowings.

It is correct that the Bank did not use $30,000 of the business loan to pay out the Fidgeons' personal loan. Otherwise, the Bank had no such obligation.

(g) The Bank failed to make payments in accordance with the finance agreement and the building contract resulting in the Fidgeons having to make payments to the Builder which should have been included in the $640,780 payable to the Builder under the building contract.

The only payments made by the Fidgeons to the Builder were those for the work at 45 Cairnes Crescent and that made in March in response to the Builder's invoice 2 and for which they were reimbursed from the Business Loan Account. It was not suggested at trial nor was there any evidence to support a finding that any of these payments was made for the reason alleged.

There are 19 allegations of breach of duty of care in paragraph 11B of the statement of claim. I will not prolong this judgment by dealing with each in turn. Allegation (o) (Failing to use the Business Loan Account to pay out the Fidgeons' loans) and (h) (Failing to make proper inspections) have been dealt with. Allegation (m) (Demanding payment out of the proceeds of sale of 4/49 Cairnes Crescent) I shall consider when I deal with the counterclaim.[22]

The remainder I shall consider under a number of general headings.

Improper Payments from the Business Loan Account

Under this heading, I group allegations (a), (b), (d), (e), (f), (g), (k) and (q). These allegations are all predicated on the Bank having assumed an obligation to verify the claims for payment and their application in terms of the Fidgeons' contractual relationship with the Builder. I have made findings on this alleged obligation and I will not repeat them. Lest it be thought that I have overlooked any aspect of this, I specifically find that the Bank owed to the Fidgeons no duty of care or other duty to require a certificate of a quantity surveyor or other person before making any payment; to require from the Builder evidence that he had incurred expenses of a particular kind or made payments to a particular payee; or to keep any running account of money expended by others on the project or on any other project or to deduct any such expenditure from the Builder's progress claims. For my present purposes I have found that it is sufficient that the Bank received a request for payment from the Builder of a sum which did not exceed the progress payment to which he was then entitled for completing the project to the particular stage and that the Bank was satisfied that the project had achieved that stage. The Bank is entitled, if it is so minded, to make further payments on request of the customer. None of the payments made by the Bank was improper in these terms.

At a glance

Court

Decision date

Before

Source

Judgment (244 paragraphs)

Parties

Legislation Cited (4)