Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613

Brown Falconer Group Pty Ltd v South Parklands Hockey and Tennis Club Inc [2005] SASC 75

Coleman v Gordon M Jenkins and Associates (1989) ATPR 40-960

Florida Hotels Pty Ltd v Mayo [1965] HCA 26; (1965) 113 CLR 588

Henville v Walker [2001] HCA 52; (2001) 206 CLR 459

Lyons v Jandon Constructions (a firm), unreported; SCt of WA; Library No 980394; 20 July 1998

March v Stramare (E & M H) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506

Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494

Medlin v State Government Insurance Commission (SA) [1995] HCA 5; (1995) 182 CLR 1

Rogers v Whitaker [1992] HCA 58; (1992) 175 CLR 479

South Parklands Hockey and Tennis Club Inc v Brown Falconer Group Pty Ltd [2004] SASC 81

Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74

Wardley Australia Ltd v Western Australia (1992) 175 CLR 512

1 This is an action in respect of the provision of architectural and building services in relation to the construction of a new residence on Lot 9, Blenheim Lane in Mt Claremont. A residence was partially built on Lot 9, as 2 Blenheim Lane. The plaintiff, Mr Edward William Hodgkinson ("Mr Hodgkinson"), and his then wife, Mrs Kelly Hodgkinson ("Mrs Hodgkinson"), had bought the vacant land that was Lot 9, Blenheim Land, Mt Claremont, and had approached the defendant company through its principal, Mr Kimbal Wayne Doepel ("Mr Doepel"), who was known to Mr Hodgkinson. There was a series of discussions, some involving just Mr Hodgkinson and Mr Doepel, and some involving both the latter and Mr and Mrs Hodgkinson. The defendant produced a series of sketch plans. Ultimately, plans were settled. Mr and Mrs Hodgkinson engaged the defendant to provide architectural design services and at least some building supervision services for a new two storey home to be built on Lot 9 Blenheim Lane. The defendant applied for and obtained, first, development approval of the plans, and then a building licence from the local authority on further plans. Construction began. Variations were made to the plans. Relations between the parties began to deteriorate. This deterioration culminated in the defendant suspending its services, and then Mr and Mrs Hodgkinson terminating the defendant's engagement. Mr and Mrs Hodgkinson engaged another firm to provide design and building supervision services and the work continued. However, the work was not completed. Ultimately, the partially completed house and certain goods acquired to go in it were sold for slightly more than the expenditures on the house, the goods and the land.

2 Mr and Mrs Hodgkinson separated on 22 February 2002, and were subsequently divorced. By the terms of the divorce arrangements Mrs Hodgkinson assigned to her former husband all of her interest in the house, and any cause of action in relation to it.

3 The action is for damages principally for negligent advice as to the cost of the work and the time taken for completion; for breach of contract in relation to the services provided and not provided in relation to advice as to that cost and that time; and for contraventions of the Trade Practices Act 1974 (Cth) and the Fair Trading Act (WA) in relation to the services provided and not provided as to advice as to that cost and that time.

4 In the original pleadings by the parties, there was a claim for damages by the plaintiff that was abandoned at trial, and a counterclaim by the defendant that was dismissed prior to trial. There were also some modifications of the statement of claim sought by the plaintiff in other respects. I gave leave for the statement of claim to be amended accordingly.

5 On the case as finally presented, the following issues arise:

• Was there no more than a budget or budgets for the work, or was there also a cost estimate provided by the defendant in respect of it or a part of it which was not borne out?
• Was any such cost estimate negligently made?
• What loss or damage was caused by "the house" cost estimate?
• To what forms of liability does any such loss or damage give rise?
• Did the Hodgkinsons act unreasonably in relation to any such cost estimate or fail to mitigate any such loss?
• What is the measure of any such loss?
• Was there loss caused by any misleading or deceptive conduct by the defendant's failure to inform the Hodgkinsons of certain matters?
• Was there loss caused by a cost estimate representation as to certain walls in the house?
• Was there a representation as to completion time?
• Was there liability for the cost of certain drawings done to replace ones by the defendant?
• Should interest be allowed on damages awarded to the plaintiff and if so for what period?

6 This judgment proceeds by reviewing the facts of this case, before considering these issues and introducing further factual detail as required.

7 Mr Hodgkinson at the trial had been a project manager for land development and a consultant to the Perron Group. For the past 30 to 35 years he had been a project manager and real estate agent. As a project manager for the Perron Group since 1970 his work had been to find and develop tracts of land for the purposes of residential house allotments. As a real estate agent he had employed staff to sell the building lots so developed.

8 Prior to the construction of the house in this case, he had been involved in the construction of two residences, one in 1985 in Mosman Park, and one in 1995, on Earls Court in Mt Claremont. Both residences were for himself. He employed an architect to design, and to engage a builder for, the 1985 house, which had been built with limestone walls, a finish that as will be seen is of some significance to this case. He contracted with Plunkett Homes for it to construct the 1995 house.

9 He had been involved, with his brother, in the construction of a medical centre in Ocean Reef, for which they engaged a firm as architect and an individual as builder. He had been involved in a development of a business park at Mandurah that ultimately did not come to fruition. There is also evidence he had been involved in a property leased to a commercial tenant in Gould Street, Herdsman. I note that it was the evidence of Mr Doepel that he was told by Mr Hodgkinson he had "developed [the building on the Gould Street Herdsman property] in his own right" (examination-in-chief, TS 604). However, Mr Hodgkinson's evidence was that he had bought this property complete with the buildings on it leased to their commercial tenant (examination-in chief, TS 257). This evidence was not challenged, and I find the plaintiff's account to be established.

10 As will become clear below, the extent of the background of Mr Hodgkinson relevant to the work on the house in this case assumes some significance.

11 Mr Hodgkinson had known Mr K Doepel, of the defendant company, Doepel & Associates Architects Pty Ltd, since about 1995. Mr Hodgkinson appears to have become acquainted with Mr Doepel no later than when the latter was working as architect in the development of three service stations, one for Ampol and two for Shell, on three properties, one of which Mr Hodgkinson owned, and the other two of which he leased. Mr Hodgkinson had some dealings with Mr Doepel in relation to the possibility of the development of the business park at Mandurah. The exact nature of those dealings was unclear, but in any event the development, at least as far construction to any designs by Mr Kim Doepel was concerned, did not go ahead, as I have indicated

12 Mr Doepel has bachelors degrees in architecture and has been a registered architect since May 1988. He is an associate member of the Royal Australian Institute of Architects.

13 Mr Doepel is also a registered builder, and is a member of the Australian Institute of Project Managers.

14 He practises as an architect with his company, the defendant. His practice is (examination-in-chief, TS 603):

" ... predominantly in the design of commercial buildings. The design of residential properties is only a very small part of my practice and I generally design residential properties only for my commercial clients."

The Hodgkinsons acquire Lot 9, Blenheim Lane, Mt Claremont

15 On 21 March 1998 Mr Hodgkinson and his then wife, Mrs Hodgkinson, purchased at auction Lot 9, Blenheim Lane, Mt Claremont. This lot at its rear faced over the playing grounds of John XXIII College. The purchase price of this property was $350,000. Stamp duty was $10,775 and transfer costs were $699. The property was purchased to provide a residence for the Hodgkinson family. At the time the Hodgkinsons were living nearby, in the Earls Court home they had had built. Their daughter, then 7 years old, was a student at John XXIII College.

16 Settlement of the sale occurred on 22 April 1998.

The initial meetings between Mr Hodgkinson and Mr Doepel in March 1998

17 At the latest shortly after the purchase of the property on Blenheim Lane, but before settlement, Mr Hodgkinson contacted Mr Doepel by telephone to discuss the preparation of plans for a residence to be built on Lot 9, Blenheim Lane ("the Blenheim Lane project"). This led to a meeting of the two men at the offices of the defendant to discuss the possibility of engaging the defendant to prepare documentation to construct a residence on the property. This meeting was followed by further ones, both at the Hodgkinson residence on Earls Court in Mt Claremont, and at the defendant's offices. There was some dispute whether or not both Mr and Mrs Hodgkinson were involved in any of the meetings at the defendant's offices. In any event there appears to be no dispute that by 26 March 1998 Mr Doepel had agreed to do preliminary plans for the Hodgkinsons' residence. There is some agreement, but also some considerable disagreement, between the evidence of Mr Hodgkinson and Mr Doepel as to what was said at these March meetings by Mr Hodgkinson and his wife in relation to the budget for the work, and what this did, and did not, cover.

18 As to the March meetings, Mr Hodgkinson's evidence is that he had said what the Hodgkinsons wanted was a two storey residence on the property and he had indicated a budget for the residence. The residence was to include (his examination-in-chief, TS 156):

"During these early meetings with Doepel I stated to him words to the effect that I required the design to include a flat roof, external walls to be constructed in limestone and Donnybrook stone in some areas, the internal walls to be brick and plaster, triple rafts to be located at the front of the residence, a swimming pool to be built across the block and a cabana to be built as part of the residence, a rammed earth division wall on the ground floor.

Timber flooring of good quality would be installed in all areas except bedrooms 3 and 4, the TV room and the office. Indoor benches and cupboards, central airconditioning. Benchtops and splashbacks in the kitchen and cabana areas would be made of granite. There would be marble walls and floors in the main en suite, guest toilet and floor of the entrance to the house. All other bathrooms and the laundry would be tiled and wood be full height. There would be a security system."

19 As to the budget, Mr Hodgkinson testified he had indicated to Mr Doepel it was $400,000, and also testified as to what it covered and did not cover, as follows (his examination-in-chief, TS 152):

"I stated to Doepel at the first meeting words to the effect that the budget for the construction of the residence, not including a swimming pool, soft furnishing, landscaping, special equipment and furniture, was 400,000.

I decided to exclude the items in the previous paragraph because I did not want to pay a fee to Doepel for procuring these items and I also wanted the opportunity to choose the items and to shop around and get the best price I could. I did not have unlimited funds available to construct the residence.

I had a budget of 400,000 to construct the house and 100,000 for items mentioned above to finish the house."

20 There is some dispute as to whether or not Mr Hodgkinson told Mr Doepel of the allocation to the excluded items. I will return to that dispute below.

21 Mr Doepel's evidence was that Mr Hodgkinson told him the following, as to the house Mr Hodgkinson wanted (examination-in-chief, TS 606 - TS 608):

"In March 1998 Ted said the house he wanted was to have a limestone exterior with some feature Donnybrook stone on the front entry with a brick inner loop, feature walls inside of either limestone or Donnybrook stone, a master bedroom, a double garage, a large office, because Ted works a lot from home, a kitchen, a meals room flowing into the family room, a formal sitting room and a cellar under the stairs. The first floor was to have three bedrooms, a rumpus room, an ensuite off one of the bedrooms, a bathroom and a balcony.

...

The main bedroom was to have an ensuite and a walk in robe. There was to be a powder room, a pool, an outdoor shower with hot and cold water and a garden shed. The house was to be two storey. All the bedrooms were to be double sized bedrooms. Double size bedrooms are a minimum of three metres by 3.6 metres so that a double bed can fit in the room.

Kelly's daughter was to have a bedroom located on the first floor of the house. It is the only bedroom on the first floor with an ensuite. There was to be reverse cycle airconditioning to both floors, a security system and a large capacity hot water system.

Ted said that he would organise the landscaping. He said he proposed to have Epcad Landscaping do this as he had used them on his other projects. Ted said that Epcad was a trade he used for his commercial developments. I did not know them. Ted said that he would be responsible for the pool, airconditioning, security system, landscaping, special equipment, fixtures and fittings which were not part of my brief. I was responsible for the hot water system, which is a standard inclusion in normal houses.

Ted said he also wanted the house to include special fixtures and fittings. However, Ted was to organise these items separately with the help of an interior designer. Ted said that the special fixtures and fittings would include all the appliances: the whitegoods, the light fittings, the door handles, the furnishings, floor finishes and window treatments.

Ted said that he wanted the external appearance of the house to be square and contemporary-looking with parapets. Ted and I did not discuss my fees to design the house at this time. I said that I would prepare some preliminary layouts and catch up with him and Kelly at a later date. Ted said that there was no urgency for the project."

22 Mr Doepel's evidence was also (examination-in-chief, TS 609):

"Ted told me that he wanted to spend about $400,000 on the shell of the house up to lockup. He aid he would be responsible for the pool, landscaping, special fixtures and fittings, security system, floor finishes and airconditioning."

23 Mr Doepel also gave this evidence as to the style of the house Mr Hodgkinson said he wanted at this time (examination-in-chief, TS 611):

"Ted said that he wanted a comfortable house. Ted said that he did not want to live in a project house and he wanted something different from that. Ted told me that he liked open-plan living. The block had never to be built out views and Ted said that he wanted to capitalise on them."

24 It will be seen that there is matter in common between the two descriptions, but also points of difference.

25 As to the points in common for the two storey residence, although there is no mention in the quoted passage from Mr Doepel's evidence of a flat roof, he subsequently testified that such a roof was discussed (cross-examination, TS 803). The descriptions of the exterior walls are much the same. (The interior ones are a different matter, to which I will return.) There would be four bedrooms and an office. There would be a security system, and air conditioning ("central", on Mr Hodgkinson's evidence, "reverse cycle" on Mr Doepel's). There would be a swimming pool.

26 There were items in both lists not appearing in the other. Mr Hodgkinson's evidence referred to a TV room, a cabana, and a rammed earth division wall on the ground floor, while Mr Doepel's evidence as to the initial discussions did not refer to any of these. Mr Hodgkinson's evidence referred to internal walls of brick and plaster, while Mr Doepel's evidence made no reference to internal walls of that sort, rather referring to "feature walls", as I will again indicate. Mr Hodgkinson's evidence referred to timber flooring, inbuilt benches and cupboards, bench tops and splash backs in certain areas in granite, marble walls and floors in certain areas, and full height tiling in other areas, while Mr Doepel's evidence made no such references. Mr Hodgkinson's evidence was that the wooden flooring was important to him, at least in what would be his daughter's bedroom, because of her asthma. The family's Earls Court residence had wooden flooring in his daughter's bedroom. Mr Hodgkinson's evidence was also that the proposed residence was meant to reflect another aspect of the Earls Court residence, which had full height marble on some of the walls and marble on some of its flooring, and full height tiles on all walls in the second bathroom.

27 Mr Doepel's evidence referred to an ensuite and a walk in robe for the master bedroom on the ground floor, a powder room, meals room flowing into the family room, a formal sitting room, a cellar under the stairs, a rumpus room, an ensuite off one of the first floor bedrooms, a first floor bathroom, a first floor balcony, a large capacity hot water system, an outdoor shower with hot and cold water, and a garden shed, while Mr Hodgkinson's evidence referred to none of these. Mr Doepel's evidence referred to feature walls inside of either limestone or Donnybrook stone, while Mr Hodgkinson's evidence made no reference to internal walls of those sorts.

28 Mr Doepel's initial design sketches (Exhibits D491 - D494), some at least of which were shown to Mr Hodgkinson in about July 1998 (cross-examination of Mr Hodgkinson, TS 353) indicate some but not all of the detail which Mr Doepel's evidence sets out. Thus, the sketches show, on the ground floor, a double garage, an office, a meals room connected with a family room, a sitting room, and a master bedroom. The sketches show, on the first floor, three bedrooms, one with what appears to be with an ensuite, a bathroom, a rumpus room, and a balcony. There is no labelling or other detail to identify any other features of the sort Mr Doepel's evidence refers to.

The initial indications of the Hodgkinsons' budget, and what it covered

29 There was also agreement as to what Mr Hodgkinson had initially indicated was the sum the Hodgkinsons wanted to spend or had as a budget, at $400,000.

30 Mr Doepel's evidence was that the scope of what that sum covered was a "shell" (examination-in-chief, TS 609; cross-examination, TS 745 and TS 810), which he explained as a residence completed to the "lock-up" point, rather than a completed residence. A completed residence was one in which the client could live, and would feature such items as floor coverings, window treatments, full appliances, cabinetry and furniture. He described what was included in a "shell", in the sense in which he was using the word, in cross-examination as follows (TS 744 - TS 745):

"---Standard doors would be but not specially-made doors, no.

So doors were always in the figure?---Standard doors would have been in the figure, so a door and a doorframe, say, $150 each.

A door and a doorframe?---As opposed to, you know, I think $4000 each.

And the windows were in?---Windows were in, yes.

Yes, and kitchen appliances were in a standard cost estimate?---For the shell of the house, yes.

Right. Just pause there. So kitchen appliances are a part of the shell. What else is in the shell?---It's basically a locked up situation so you've got external walls, internal walls, roof on, but no painting, no special finishes, no floor coverings, no special cabinetry, no special - - -

Hang on. But you've got kitchen appliances?---You would have basic kitchen appliances.

Yes, and kitchen cabinets to put the kitchen appliances into. You're not going to put a whole pile of kitchen appliances in the middle of a concrete shell of a floor, are you?---Not normally, but that was not part of my scope of work.

It wasn't part of your scope of work?---No.

What, in 1998?---Yes."

31 He acknowledged he could not recall a specific occasion on which he had used the word "shell" in his dealings with the Hodgkinsons, and the word does not appear in any of the documents that passed between them. However, he also testified that he was sure he had used the word or a similar one with them (cross-examination, TS 745).

32 There was no evidence of an understanding in the residence building industry of "shell". However, there was evidence from representatives of two firms of builders of residences to standard designs which indicated what their firms included and did not include in their firms' standard designs. They were witnesses called by the plaintiff.

33 One witness was a Mr Dean Harding, an after sales service manger for J-Corp Ltd, which, trading as Oswald Homes, builds homes, and did at all times material to this case. In 1998 Oswald Homes built a "standard specification" home on Lot 11, Blenheim Lane, Mt Claremont for a price of $269,495. This was near the Hodgkinsons' proposed house. In his testimony Mr Harding appeared to agree to a description of the home as a project home with some variations. I will return to this home's cost and some of its features later in these reasons. For now, I note that tendered into evidence was a document dated 16 April 1998 (Exhibit P232) which set out as a "schedule of finishes" the specifications for this house, and a further document (Exhibit P233) which was a variation form for the house.

34 In cross-examination, Mr Harding testified that homes of the sort represented by that on Lot 11, Blenheim Lane did not include a number of items on the basis they would not be ones all buyers would want, but would consider "discretionary". For the house on Lot 11 Blenheim Lane, there would have been an allowance within the price for the home for some kitchen appliances, but not (as the specifications indicated) such items as a dishwasher, a hot plate and a microwave, although there would be a recess provided for the latter at least. There was no provision for an intercom system, a vacuum system, an alarm system, or air conditioning. There was no provision for floor covering except by way of an allowance of $40 per square metre, and except as a variation to the standard specifications.

35 The other witness to give evidence of this sort was a Mr Alwyn Even, the general manager for Webb & Brown-Neaves, a firm that primarily builds residences, and which did at all times material to this case. Mr Even accepted that his firm builds project homes. In 1999 his firm entered into a contract to build a residence on Lot 4, Prince Albert Court, Mt Claremont for a price of $250,728. Particulars for that residence were put into evidence (Exhibit P237), as were the variations to those particulars (Exhibit P238), and the plans for the residence (Exhibit P239). As with the house on Lot 11, Blenheim Lane Mt Claremont, I will return to the price and some of the features of Lot 4, Prince Albert Court later in these reasons. For now, I note that Mr Even indicated in examination-in-chief what a buyer from his firm of a residence at this price would in 1999 have normally received, and not received (TS 527 - TS 528):

"Can you, if you are able to, tell me what a home owner would have got for that price for this house in 1999?---Only in general specifics. Generally a house would consist of the tiling that's shown on the plan, kitchen cupboards, vanity cupboards, mirrors, appliances as in wall oven, hotplate, range hood, hot water system. It's probably easier to say what it doesn't include and it wouldn't be floor coverings, any

Just pausing there, when you say it wouldn't include floor coverings, I think you said there would be tiling in the bathroom?---It would include tiling as hatched on the plan.

Yes, but it wouldn't include carpet or - - -?---Carpets or timber floors or tiling to living areas in that price.

Thank you. Are there any other things it would not include?---Airconditioning, window treatments

Sorry. Just pausing there, that's curtains or blinds?---Curtains or blinds, or timber blinds or something like that.

Yes?---Landscaping, reticulation. It may or may not in those days have included painted walls. It's a general thing that that's included these days but in those days it may not have included, for that price, painted walls.

Yes, I see?---But the rest of the house is painted, depending on also whether it was too wet to paint when the owner took possession.

Yes, all right, and so what a person gets for that price is not a house that somebody could go into - I suppose they could go into and live in it straightaway but ordinarily one would expect that somebody would spend more money to get it to the stage that they wanted to live in it?---That's correct, yes."

36 It is apparent from considering the evidence in this respect of the two witnesses that there is much in common between them as to what buyers of similar priced homes in the same area would not receive for the price. This included floor coverings (except for the allowance in the case of 11 Blenheim Lane, and some tiling in the case of Lot 4 Prince Albert Court, Mt Claremont), window treatments and air conditioning. There is also at least one difference: included in the house on Lot 4 Prince Albert Court, but not included the house on Lot 11 Blenheim Lane, was a hot plate.

37 Mr Even also testified as to the specifications for a further standard specification home ("The Residence") built by Webb & Brown-Neaves at about this time, one for which they also had built a display home on Lot 8, Prince Albert Court, Mt Claremont. The Residence, he testified, was the most expensive home his firm built at that time, and had a cost in 1999 of $392,700. Its standard specifications, set out in a brochure on the design (Exhibit P250), included items not included in the standard specifications for the houses on Lot 4, Prince Albert Court and Lot 11, Blenheim Lane, Mt Claremont, including "marble top servery to the kitchen cupboards" and a "Quality security system with three motion sensors, door switch, keypad and two sirens". But like the other two homes, The Residence did not include such items as floor coverings (except for some tiling) and window treatments. The display home version of the Residence on Lot 8, Prince Albert Court, Mt Claremont included a range of items not included in the standard specifications as indicated in a document listing them (Exhibit P240). Those items were such as floor coverings (carpet and timber), window treatments and air conditioning.

38 However, it is clear from the evidence as to the standard specification homes and the display homes that there is no equivalent detailed documentation listing the inclusions and the exclusions, or non-inclusions, in the Hodgkinsons' home, encompassed by their budget of $400,000, either in 1998 or, as will be seen, later, when plans for the home were submitted for development approval and a building licence with the local authority in 1999.

39 As I will indicate below, an application for a building licence was made in December 1999 by the defendant. The value put on the building at that time was $300,000, and as will be seen there is a controversy on the evidence as to whether or not Mr Hodgkinson was the source of that figure.

40 Of relevance in this context, Mr Doepel was asked in cross-examination what he understood the building for the purposes of the application covered (TS 911 - TS 912):

"So there was an application for the building licence and that's page 55 and it is exhibit P26. Yes, that's it. So that's the application for the building licence that you filled out?---That's correct.

And you are the builder noted on there?---That's correct.

And you see there that there's an estimated value of the building work at $300,000?---That's correct.

The building work being referred to in that application, what's that?---It is the whole of the house excepting for the landscaping, pool, driveway and anything that might - like soft furnishings and furniture and things like that. It's actually whatever is fixed in the house.

So it's floor coverings?---Well, not normally carpets or timber or things like that, but basically a house that you could, you know, move into.

Yes?---Yes.

So it's not a shell?---No."

41 As to the exclusions referred to in Mr Hodgkinson's evidence, being the swimming pool, as well as "soft furnishings", landscaping, "special equipment" and furniture, he testified, as I have indicated, that he had excluded those items because he did not wish to pay Mr Doepel a fee for procuring them and because he wanted the opportunity to choose them for the best price he could find. His evidence was also, as I have indicated, that at the time he had a budget of $100,000 for the excluded items.

42 There was considerable attention directed at the trial to the lack of specificity in the quoted terms. Mr Hodgkinson admitted under cross-examination he was not sure exactly what he had meant by those terms (TS 336 - TS 339, and TS 340 - TS 347). He appeared, after some equivocation, to indicate he meant carpet and curtains (if that was the form of window treatment ultimately decided upon) to be within "soft furnishings". He said television and DVD equipment was "probably" within "special equipment", together with some but not all of the speakers to be installed in the house. He also gave as an example of "special equipment" a cellar in the garage. As will be indicated later, a cellar in the garage was added to the specifications for the property after the defendant had ceased to be associated with it. I will have occasion to return to this listing below.

43 Mr Hodgkinson said that air conditioning and a solar vacuum system were not within "special equipment", but rather within the "house" for the purposes of the $400,000 figure he used with Mr Doepel (cross-examination, TS 344).

44 He said his uncertainty had to do with the early stage of the process.

45 He also testified he had contemplated at this early stage that the Hodgkinsons would work with an interior designer on the "internal fit-out" (TS 341). The fee for this work was not included within the budget for the "house", although it was not referred to any of the specific exclusions (TS 347).

46 Mr Hodgkinson's evidence as to the grade or quality of house he had in mind that he had communicated to Mr Doepel in the March 1998 discussions with him was this (cross-examination, TS 347):

"Did you say to him that you wanted the house to stand out and not look like a project home?---No. I said I wanted it to look subtle down the end of the street and just to fit in nicely to the end of the street.

Did you tell him that you wanted the external appearance of the house to be square and contemporary-looking with parapets?---Yes."

47 I have already referred to Mr Doepel's evidence as to the grade or quality of the home Mr Hodgkinson had in mind.

48 In any event, I note the use of all of the quoted terms, except for "soft furnishings", in the letters dated 22 July 1999 from the defendant to the Hodgkinsons (Exhibits P14 and P15), to which I return below, in which the following appears:

"Further to the completion of the previous sketch plans in December 1998 we confirm that the house budget is in the range $390,000 to $400,000 not including pool, landscaping, special equipment and furniture."

49 Mr Doepel's evidence as to the items he understood to be excluded referred to the ones previously indicated, which differ from those for Mr Hodgkinson in their specified exclusion of air conditioning, a security system, all the appliances, the whitegoods, the light fittings, the door handles, floor finishes and window treatments. As I have indicated, Mr Doepel also gave evidence that he understood a shell "normally" to include allowances for doors, and kitchen appliances. It was not clear from his evidence whether or not such allowances were appropriate in this case, because of the Hodgkinsons' list of exclusions.

The evolution of the project between March 1998 and November 1998

50 Between March and November 1998 the defendant produced a number of sketch plans for the work. There is no contest that over that period the design of the house changed. Among others, the living areas of the house changed, from a ground floor of 271 square metres to one of 292 square metres, while the first floor changed from one of 133 square metres to one of 173.8 square metres (examination-in-chief of Mr Doepel, TS 643). This represented a change in total living area from 404 square metres to 465.8 square metres (cross-examination of Mr Doepel, TS 834, TS 831).

51 As I will indicate, there is likewise no contest that there was by 22 July 1999 a further increase in the area of the ground floor, to raise the total living area to 525.8 square metres.

52 There were also changes in the lay-out of the house, involving the designs of particular rooms, increases and reductions in the areas of particular rooms and spaces, the addition of new spaces, the relocation of rooms and a change in the shape of at least one part of the house, from a curved to a square look (examination-in-chief of Mr Doepel, TS 615 - TS 617, and TS 619; and sketch plans produced by him over this period, some of which have amendments annotated on them, SK1.1 - SK4, being Exhibits D493 - D494, D502 - D507.)

53 There were also changes to other areas lying outside the footprint of the house, including most notably an increase in the size of the swimming pool (examination-in-chief of Mr Doepel, TS 617 and sketch plan showing amendment, SK1.1 as amended, being Exhibit D496).

The letter from Mr Doepel to the Hodgkinsons dated 30 November 1998 and further changes

54 Under cover of a letter dated 30 November 1998 (Exhibit P13) Mr Doepel sent plans (identified in the evidence of Mr Doepel as SK5, which appear to be Exhibit D515: see examination-in-chief, TS 623 and TS 625) to the Hodgkinsons. These were identified in Mr Doepel's evidence as the first formal or full size plans.

55 The letter itself set out a "budget breakdown based on an overall expenditure of $500,000 as confirmed by you". The letter broke this down under the headings "Project Budget", for "house areas". These were a:

• ground floor plan for 292 square metres, and a first floor plan of 173.50 square metres, both areas shown at $750 per square metre, producing the amounts of $219,000 and "$130,100" (in fact the figure is $130,125: there was no explanation for this discrepancy at the trial), respectively;
• a garage area at 46.20 square metres and a balcony area of 21 square metres, both shown at $500 per square metre, producing the amounts of $23,100 and $10,500, respectively;
• paving of 251 square metres shown at $35 per square metre, producing the amount of $10,000 (in fact the figure is $8,785: there was no explanation for this discrepancy at the trial);
• a pool "say $35,000"; and
• landscaping shown at $13,000, for a total of $440,700.

56 This produced, Mr Doepel testified, a total, for the portion of the work to which he understood the Hodgkinsons' budget of $400,000 to relate, of $382,700 ($219,000 + $130,100 + $23,100 + $10,500) (cross-examination, TS 828 - 832).

57 To these amounts, and under the next heading, "Architectural Fees", for schematic design, design development, development approval application and working drawings and specifications, was added a further $20,800. And there were two further line items, one for "structural engineer say $3,500.00", and the other for "project management" of $35,000.00.

59 There was considerable attention directed to how the figure of $500,000 fitted with Mr Hodgkinson's account of his budget of $400,000. Mr Hodgkinson was cross-examined on it as follows (TS 361 - TS 364):

"All right. So he's told you, and you can see this, that he has worked out this exercise based upon $750 a square metre. Do you see that?---Yes, I see that.

And you didn't think to either disabuse him of that belief or tell him he was wrong?---No, because I weren't moving on it at all.

But if it was wrong you would have said so, wouldn't you?---No, no, not at all.

The fact that you weren't, as it were, moving on it, why is that a reason not to correct something which you now say was wrong?---I corrected it - well, later on

Sorry. When did you correct it?---No, it's the wrong word I used.

Yes?---I said when I sold the office building I told Kim to go ahead and then I asked, to make certain, can he still build this house for 400,000, which he gave to me in writing, and I asked for it in writing.

And you never corrected anything that was said in this letter, did you?---No, never.

All right. What it says is that this exercise produced as a figure of $500,000?---Yes.

Did you say to him, 'Look, Kim, you've got it wrong. The budget is not 500, it's 400'?---I've already told you I said nothing about the letter to him whatsoever.

All right. So your evidence is that's wrong as well but you didn't correct it?---Yes.

Is there anything else in the letter that's wrong and you didn't correct it?---I didn't correct anything at all in there.

So when he says $500,000, first page, page 24, $500,000 confirmed by you, you say that's wrong as well but you didn't correct him?---I didn't correct it. I didn't answer this letter and if you go through it correctly 500,000 includes a pool, includes landscaping, so there is 50,000 roughly.

Mr Hodgkinson, just listen to my question, not what you want to tell me. I'm directing your attention to the words that appear in the second sentence of the letter on page 24. Can you find that?---Yes, 'As confirmed by you'.

Right, and do you say that is wrong?---I can't remember at all confirming this letter to him whatsoever.

No, no, just take a moment and read the sentence carefully?---I said - - -

Read it carefully yourself then I will ask you the question again?---Yes.

What the sentence says is that this $500,000 is the figure that you have confirmed as your budget. Do you say that that is wrong?---I say it is wrong because I didn't confirm it and the letter I'm looking at is not even signed.

And because you say - sorry, is there some point there? Do you deny that you got this letter?---No, I don't deny - - -

You identified in your evidence it's a letter you received, didn't you?---Yes, but it's not signed either.

It's a file copy, isn't it? You would have the original. Correct?---I don't know if I have or not. I can't answer that.

What's the point that you're making here, Mr Hodgkinson?---I just notice the letter is not signed.

You accepted in your own evidence that this was a letter that you received?---Yes.

And you've accepted that you did not respond to it?---I'm only making a comment the letter was not signed.

So it's all wrong but you don't respond in any way?---No, I

Is that the long and the short of it?---Yes. That's what I think I did[.]"

60 The reference to Mr Hodgkinson telling Mr Doepel to "go ahead" at a later stage appears to be one to events in July 1999, to which I return below.

61 I understand this evidence to be that Mr Hodgkinson did not consider the overall budget figure to be "all wrong", but rather to include the previously discussed figure of $400,000, as he indicated. The difference between that figure and $500,000 is explained by the other items in the letter, particularly the swimming pool, landscaping and paving.

62 This is consistent with Mr Doepel's evidence, to which I referred. It is also consistent with Mr Hodgkinson's failure to respond to this letter. That failure is not in my view to be explained entirely by the lack of certainty the building project would go ahead. Thus, there was a sufficient prospect for it going ahead that the design continued to evolve after the letter but before the "go ahead", as I will indicate.

63 For the defendant, it was put to me that on the evidence this letter confirmed or at least was consistent with an allocation of responsibility with respect to the budget for the building project as between the Hodgkinsons and the defendant. The Hodgkinsons through Mr Hodgkinson supplied the figure for the ground and first floor of $750 per square metre. The defendant was not responsible in any way for the appropriateness of that figure.

64 Mr Doepel's evidence with respect to the figures of $750 per square metre and $500 per square metre used in the letter of 30 November 1998 was this (examination-in-chief, TS 612, TS 624):

"---The [March 1998] 400,000 building cost was based on a rate of $750 a square metre which Ted said he could achieve because of his contacts. The $750 per square metre rate was a trade rate. At the time the going rate for a residence of this type with standard finishes and fixtures was about $850 per square metre.

Just pause there. You need to look at volume 1 of the defendant's index to trial bundle, so again grey volumes, volume 1 at pages 9 to 65. Do you identify that as the Ralph Beattie Bosworth pocket compendium for Perth, January 1999? Is that right?---That's correct.

Yes. I tender that, your Honour.

SIMMONDS J: Yes. That will become exhibit D4 pocket compendium of Ralph Beattie Bosworth January 1999.

EXHIBIT D4 Defendant

Pocket compendium of Ralph Beattie Bosworth for January 1999

...The trade rate of $500 a square metre was adopted for the garage and balcony as these two areas are not finished to the same standard as the main house."

65 He later confirmed that the "trade rate" was one to do with the "major" cost component of the house, its limestone walls (cross-examination, TS 915). He elaborated on this in the following terms (TS 916):

"[I]n your mind what sum did you ascribe to the external limestone leaf, both to purchase and to lay?---I didn't specifically calculate a number but I knew that you could in fact get larger project houses in limestone, ie, like the one next door for Mr Fletcher, which was external walls out of limestone, and that was in the range I think of about 450 to less than 500 thousand, so that was - I didn't know anything about limestone. I knew that you could have a limestone-clad house in that range, which was in the sort of range that Mr Hodgkinson was talking about, and he being an expert in limestone I probably, in hindsight, unwittingly accepted his advice."

66 In his cross-examination, he elaborated on his testimony as to the rate of $850 per square metre, explaining that he had gone to the publication (Exhibit D4) at the same time the figure of $750 had been used in the early discussions of the project, in March 1998. That publication was one on building costs for projects of varying descriptions, from which he identified a figure of $850 per square metre as the otherwise appropriate rate. This figure was one he acknowledged he had identified as at a point in the range in that publication for "Building Costs Residential Houses Architect designed $/squ m gross 800 - 1100 medium standard finish". This was the middle range, between "Speculative 500-600 Low standard finish", and "Prestige executive 1100-1700 Various levels High standard finish". He explained that identification as follows (cross-examination, TS 749 and TS 821):

"This is what you're referring to there, Houses. Yes?---Yes.

Speculative: what's a speculative house?---That might be like a project house.

Do you know?---Not particularly.

But you use this standard even though you don't know what the terms mean?---Well, spec houses are houses that builders build and then sell, so they're built on spec with no particular client in mind.

So that's what it is?---Yes.

You do know?---Well, I'm just presuming. That's my understanding of it.

Okay. The next one, Architect Design, 800 to 1100?---That's correct.

Medium Standard Finish?---Yes.

Sorry, what did you say the number you would have used was, for this house? 850, wasn't it?---Yes.

So at the lower end of this?---That's right, because I didn't have a complete scope and other things were being done by others, so I used the lower end of the scale because fixtures and fittings and special equipment would be by somebody else, of which I had no control.

...

And it's not in here, is it, that in March 1998 he told you that he was proceeding on the basis - just a moment. I'm looking at 102, so is it your evidence or your recollection that in March 98 he gave you this rate of 750?---That's correct, yes.

So is it around then that you went and consulted the guide?---Look, I would have looked at the guide at some stage before I had written the letter in November of 98 where I had the 750. I didn't give Mr Hodgkinson a copy of page 18 because we had discussed the rate that he believed he could achieve in the house.

I'm just trying to understand why you, with the process you went through - not what you said to him or you say he said to you; why you put this house as explained to you in March 1998 into this middle band?---Because he'd never said to me that he wanted to have a luxurious over the top house. Even the house that was finally built doesn't fit into the prestige executive residence.

Right?---You go around, you know, The Coombe and Saunders Street and other places and you'll see prestige executive residences. This is not one.

He wanted a house that he would be proud of because other people's opinions mattered to him a lot?---That's right. He wanted something different. He didn't want a project house.

He wanted a quality house?---That's right.

And you put that in the middle band?---Yes. You can have a quality project house for 110,000."

67 He further testified that he had chosen a value towards the bottom of the range as follows (cross-examination, TS 750):

"But these rates here aren't rates for estimating shells, are they?---No. T [sic] why you've got between 800 and 1100.

That's right?---There's a $300 a square metre difference which is, you know, a third of the value.

So you have gone at the bottom range of this?---Yes.

For just the shell. Is that right?---Well, knowing that others were doing other things, yes."

68 Later in these reasons I will refer to evidence of a consultant architect called for the defendant, a Mr Standen, which would I find indicate that this location of the house in the cost per square metres bands was too low.

69 He also testified he had described the rate of $850 per square metre at the time the rate of $750 per square metre was discussed (cross-examination, TS 755).

70 Mr Doepel's evidence as to the derivation of the rate per square metre for the garage area and the balcony was as follows (cross-examination, TS 832- TS 833):

"$500 per square metre?---That's correct, for the garage.

Who came up with that?---I did, and that's because a garage isn't finished to the same standard as a house, meaning that you would normally have, say, painted brickwork instead of rendered and plastered. You would have surface mounted fluorescent fittings. You wouldn't have the same amount of finish.

It's just fanciful, Mr Doepel, that Mr Hodgkinson gives you a rate for the house and you come up with a rate for the garage?---No, it's not. By the same token, I've got the same rate for balcony. Now, if you don't have a roof and you don't have external walls, you would agree that it wouldn't cost the same as inside the house when you have those things. That's how the rate is derived at."

71 The prior experience he was referring to was (cross-examination, TS 917):

"Because he engaged an architect and a builder to build one house some years before?---He had built a limestone house, had used the same stonemasons and, I presume, had purchased the stone from the same source. Now, even if there was an architect and a builder, he would've been aware of those costs.

Why?---Because he employed them.

Well, how do you know that?---He said so.

He had a builder?---He said so a few days ago.

For the Mosman Park home?---That's correct.

So you just proceeded on the basis in going through your own thought process in relation to this, that, 'Well, I've got no idea about the limestone'?---Well, basically, yes."

72 Mr Hodgkinson's evidence was that he had not been the source of the $750 figure and had given no indication he considered he could obtain trade rates for the project (cross-examination, TS 361).

73 With respect to the figure of $750, I note the evidence I return to below, from this project, that Mr Hodgkinson considered he knew enough about the costs of construction with brick and plaster walls to be able to estimate, accurately on the evidence of the quantity surveyor who testified in this case, the cost of such walls he was considering having replaced with rammed earth ones. I also consider the evidence as to his prior property development experience, in commercial and residential developments. I find on all of this evidence that he had some understanding of costs of construction relevant to the construction of a residence. However, I am unable to conclude that this would have enabled him to provide a figure of $750 himself. Below, I consider the more likely explanation for that figure on the evidence before me.

74 With respect to the matter of trade rates for the project, I note that Mr Hodgkinson acknowledged in cross-examination he had identified and dealt directly with P & P Italiano Limestone, who were responsible for the brickwork and stone work for the project, because of their work in providing walls for prior projects with which he had been associated, including one of his houses (TS 358). In relation to the Blenheim Lane project, he had paid on their invoices without discussing their rates with them, because of his satisfaction with their prior work on projects for him (TS 393). However, there appears to be no evidence that he was aware of the rates they had charged on any of their prior work, on the projects for him or on other projects in which he had been involved.

75 I note also that the defendant had not been involved in any of the dealings with P & P Italiano (cross-examination, TS 405), although from the invoice and quotation documents with respect to limestone and work on it (Exhibits D319 - D334) the work they did appears mostly to have occurred after the defendant's involvement ceased. I also note that a fax dated 21 December 1999 from P & P Italiano, attaching a quotation from the supplier of limestone for the project, Meteor Stone, refers to "prices as discussed with Kim Doepel". It appears from those documents that invoices from Meteor Stone were directed to Mr Hodgkinson who paid them. This pattern, of Mr Hodgkinson dealing with the suppliers of limestone work and materials, continued after the defendant had suspended work on it and a building designer firm had been retained for the project (cross-examination of a Mr Dancer of Hindley & Associates, to whom I return below, TS 501). It also appears, as I will indicate below, that the limestone contractors were the only contractors for the Blenheim Lane project who were both identified for its purposes, and dealt with exclusively or almost exclusively, by the Hodgkinsons.

76 I have already set out the evidence that Mr Doepel did not consider he was able to estimate the cost of limestone walls. However, I also note the following evidence (cross-examination of Mr Doepel, TS 805 - TS 806):

"Can I put it to you that when a client is talking to you about the sorts of matters that Mr Hodgkinson is talking to you about, a limestone house, a limestone two storey house with all bedrooms being double sized bedrooms, when you're talking about feature internal walls out of limestone, Donnybrook stone or rammed earth, swimming pools and landscaping, cellars and the like, that's a very expensive house, isn't it?---Not necessarily. I mean, for instance, the house next door had all of those things and that was, you know, not all that expensive.

Which house?---The Fletchers' house.

It had a swimming pool?---Yes.

And you know how much that house cost to build, do you?---Well, I think it was around 450 to 500 thousand, and that was limestone as well.

So you could have then built a limestone house with a pool for 450,000 at the time?---No, Mr Hodgkinson could have gone to Riverstone and had an identical house to the one next door for about that price; correct."

77 I conclude from this evidence that it is more likely the figure of $750 was arrived in the discussions between Mr Doepel and Mr Hodgkinson as a result of Mr Doepel's consideration of the publication (Exhibit D4) just referred to, and of what he knew of the cost of the house next door just referred to, which appears to have been a "project home", as well as of his assumption that a price of $750 could be attained after allowing for the removal of a builder's margin on the work, and for Mr Hodgkinson's contacts, at least in relation to limestone. I also conclude that it is more likely than not Mr Hodgkinson was aware that Mr Doepel had left the matter of limestone largely to him, but was not aware that Mr Doepel was relying on him obtaining a substantial trade discount in relation to the limestone. I do not find that Mr Hodgkinson indicated to Mr Doepel that he could obtain such a trade discount.

78 Mr Doepel also testified that Mr Hodgkinson had allowed, beyond "$50,000" for "landscaping and a swimming pool" (on the letter itself, $48,000), a further "$100,000 for the internal fit out" (examination-in-chief, TS 613). This last amount, Mr Doepel testified, was not included in the budget break down in the letter of 30 November 1998 (cross-examination, TS 836), and was beyond the amounts for the swimming pool and the landscaping (TS 837). Mr Doepel testified he did not understand this last amount as a budget, but as an amount "he may spend on the fit-out" (TS 836). I have previously referred to Mr Hodgkinson's evidence that he had a budget of $100,000 for all of the excluded items, including the swimming pool and landscaping.

79 The plans enclosed with the letter dated 30 November 1998, Mr Doepel said, were for the Hodgkinsons' approval prior to the plans being submitted to the local authority for its approval. In the event plans for the work were not submitted to the local authority until nine months later, on 4 August 1999.

80 Following the letter dated 30 November 1998 letter, a further set of sketch plans was produced (sketch plans SK5.1, Exhibit D516) which was sent to the Hodgkinsons in December 1998. These were apparently to reflect further changes requested by Mr Hodgkinson after he saw the plans included with the letter of 30 November 1998. The changes he requested were to certain windows in the house, the enlargement of a walk in robe, to the entry to the porch, the lengthening of the car stand on its northern side, the addition of a window, the adding of certain section lines and the adding of a street verge (examination-in-chief of Mr Doepel, TS 625).

The further evolution of the project from December 1998 to July 1999

81 Further changes in the design were made in the period leading up to the finalisation of a set of plans submitted to the City of Nedlands for development approval, after the Hodgkinsons had given their approval in July 1999.

82 In particular, changes were precipitated by the request from the neighbour at the northern boundary of Lot 9, Blenheim Lane seeking approval from the Hodgkinsons for the neighbour's home to be built with its garage at that boundary. The request was made in 1999, and its consequences were said by Mr Doepel to be as follows (examination-in-chief, TS 629 - TS 630):

"Ted's neighbour's plans had a garage against the northern boundary of Ted's property, ie, adjacent to Ted's proposed office. Ted said that he was concerned this would affect the workability of the office due to noise levels. He therefore wanted me to redesign the house. This led me to designing what I call the second concept.

The second concept had some significant changes. The garage was moved to the northern side of the property, became a three car garage and was built to the boundary with a parapet wall. The study was moved to the southern side, a television room was added, a second powder room was added and there were changes to many rooms including the storeroom, laundry, powder room, study, pantry, master bedroom, walk in robe and the position of the pool motor. I prepared a series of sketches dated 5 April 1999 which reflected the changes requested by Ted and Kelly."

83 This resulted in a further set of plans being sent to the Hodgkinsons, in April 1999, while they were away overseas. On their return in May 1999 they requested further changes, on Mr Doepel's testimony (examination-in-chief, TS 630). The changes asked for, and a further round of changes, were said by Mr Doepel to be as follows (examination-in-chief, TS 632 - TS 633):

"---The changes from the previous design were the shape of the laundry, a bathroom had been added to the east of the laundry, a large cupboard was added to the laundry, the garage door was changed to a double door and a single door, the study was moved, the television room increased in width from 3.5 metres to four metres, the shape of the kitchen benches changed, the layout of the walk in robe to the main bedroom and a waterfall was added to the pool on the northern end.

On 31 May 1999 I met with Ted and Kelly at their house and was instructed to make further changes to the plans. The changes were an angled wall between the ensuite and the television room, the cabana increased in length by 500 millimetres to the east, the television room was changed to incorporate double doors splayed to the staircase and the design of the kitchen.

...

---At approximately 1 pm on 5 July 1999 I met with Ted and Kelly at their residence at 2 Earls Court, Claremont."

84 The effect of the changes made up to this meeting was described by Mr Doepel as follows (examination-in-chief, TS 633):

"What was the effect of those changes?---Well, it changed the internal layout of the house, but it also brought the design at that stage to what we believed to be the final changes."

85 A further change Mr Doepel identified in his evidence was the addition of a rammed earth internal wall, along the family room to the master bedroom. This on his evidence came about as a result of discussions between Mr Hodgkinson and Mr Doepel in late 1998 and early 1999. Mr Doepel obtained a quotation from a supplier he identified, Ramtec, for $4,900, for the wall, which it appears became part of the house design (examination-in-chief of Mr Doepel, TS 653 - TS 654). I have previously referred to Mr Hodgkinson's evidence that an internal rammed earth division wall was a part of the specifications for the house from the early discussions.

86 What happened at the meeting of 5 July 1999 is not evident from the evidence. However, I note that not long before that meeting, on 2 July 1999, on Mr Hodgkinson's evidence he paid the defendant $10,000 for architectural services provided, the first such payment (examination-in-chief, TS 160). As I will indicate below, there is some uncertainty on the evidence as to this amount, but not that the first such amount was paid at about this time. This indicates to me that the parties considered they were approaching the conclusion of an important stage in the building project.

87 Indeed, it appears to be common ground between the parties that Mr Doepel and Mr Hodgkinson together reached the view in July that the design of the house had evolved to the point where development approval for the project from the relevant local authority could be sought.

88 Also in July 1999, on 16 July, the Gould Street property in Herdsman, to which I previously referred, was sold. There was no evidence before me of the net proceeds of the sale, that is to say, the proceeds after satisfaction of any amounts secured on the property. There is evidence the gross proceeds were in the order of $3 million (cross-examination of Mr Hodgkinson, TS 269 - TS 270). However, it is not in contest that it was after this sale that Mr Hodgkinson told Mr Doepel to "go ahead" (cross-examination, TS 362).

89 Mr Hodgkinson's evidence was also that prior to 22 July 1999 he and Mr Doepel had a meeting about the work. This meeting occurred shortly after the finalisation of the plans for that work. These plans were ones reflecting the changes since those of December 1998. Mr Hodgkinson's evidence was that, at that meeting, he requested and received a confirmation from Mr Doepel that the costs of the work, with the exclusions for the swimming pool and landscaping, special equipment and furniture, would be between $390,000 and $400,000. Mr Hodgkinson asked for Mr Doepel to confirm his answer in writing (examination-in-chief, TS 161).

90 Mr Doepel gave no evidence as to such a meeting. However, there is no contest that there was an exchange between the parties initiated by a letter dated 22 July 1999 from the defendant to the Hodgkinsons the terms of which contained a budget confirmation as well as a statement of the defendant's costs, a request for payment and advice as to "colour coordination with Kelly [Hodgkinson]". I consider on this evidence it is more likely than not there had been an exchange between the parties, arising out of the finalisation of the plans for the building project for the purposes of development approval, in which the matters in the letter had been addressed in some form. This exchange had occurred before the first of the letters of 22 July 1999 was sent.

91 The first letter dated 22 July 1999 from the defendant to Mr Hodgkinson (Exhibit P14), signed by Mr Doepel, began:

"Further to the completion of the previous sketch plans in December 1998 we confirm that the house budget is in the range $390,000 to $400,000 not including pool, landscaping, special equipment and furniture."

92 The balance of the letter comprised four paragraphs on the defendant's costs and other fees, and a paragraph on a "structural engineer", to which I return.

93 There was also one paragraph recommending a person, a Ms Elizabeth Brickhill, to advise in the area of "colour and design management". The paragraph went on:

"Elizabeth would be pleased to meet with you once the sketch plans are complete to advise you in this area, and she will discuss and agree her charges direct."

94 There was a concluding paragraph asking for "another $10,000 towards our costs, as we will be starting working drawings while you are away".

95 As to the defendant's costs and fees, the letter noted that "the costs to prepare the designs and council drawings to December" were "$7,362.00", of which the Hodgkinsons had paid $5,000, leaving a balance of $2,362. It is not clear why, if Mr Hodgkinson had paid $10,000, as I have indicated was his evidence, the figure of $5,000 was used.

96 The letter said there needed to be added a further $1,500, for the cost "to redo the plans (Todd's time only)", and a still further $11,780, for "working drawings". (The reference to "Todd" was to a Mr Todd Doepel, who at the time worked in the defendant's office, and to whom I will return.) An additional $20,000 was referred to, "to assist with the coordination of the building works in conjunction with yourself". And it was added that "we will need a structural engineer at about $3,000", although it was also said that "we will get some quotes". The total of all of these amounts not paid was $38,642.

97 On the letter (Exhibit P14) there were annotations which it was not contested were in Mr Hodgkinson's handwriting. These were a sum of "$40,642", and also "spoke to Kim agreed at $35 000 23/7/99". If the figure of $40,642 was intended to be the total of the amounts in the letter shown as not paid, it appears to be too great, by $2,000.

98 In any event, it is not contested it was agreed that the total should be revised to $35,000 and an "ammended [sic] letter" also dated 22 July 1999 was faxed to Mr Hodgkinson on 23 July 1999 (Exhibit P15). This letter repeated the paragraph as to the "house budget" which began the previous letter. It then indicated that "to design and prepare drawings and supervise using our Building Licence our fee will be $35,000.00". The letter said nothing further about the make-up of the defendant's costs and fees, and did not refer to any amounts as having already been paid. In particular, there was no repetition of the passage in the previous letter allocating $20,000 "to assist the coordination of the building works in conjunction with yourself". The later letter went on to repeat the remaining paragraphs from the previous letter, to do with a structural engineer, colour management and advice, and the request for $10,000 towards the defendant's costs.

99 It will be seen that the letter that is Exhibit P15 was meant to replace the previous letter, Exhibit P14, by embodying the new agreement as to the balance of the defendant's costs and fees. This implied a total for costs and fees, if the $5,000 already paid was included, of $40,000. It is not altogether clear if this included the cost of a structural engineer. However, as will become apparent when I consider the agreement between the defendant and the Hodgkinsons below, it seems it is not to be regarded as included.

100 Mr Hodgkinson's evidence was also that, in the 23 July 1999 telephone conversation, he had also told Mr Doepel of his keenness for the work to be completed before the introduction of the GST, on 1 July 2000. Mr Hodgkinson's evidence was that Mr Doepel replied in terms that the work would be completed by September 2000 if the defendant were engaged to prepare the plans and to be the builder supervising the work.

101 Under cross examination, however, Mr Hodgkinson appears to have become confused between his preference for 1 July 2000, and what he recalled Mr Doepel indicated, which at one point he said had been completion by 1 July 2000, but which he later said was wrong.

102 It will be noted that there is no reference to a completion date of any sort in either form of the 22 July 1999 letter (Exhibits P14 and P15). I will also note, when I reach the written portion of the agreement between the parties, a written portion I find was entered into after the settlement of the defendant's fees as I have indicated, that that portion also does not contain any reference to a completion date.

The agreement between the Hodgkinsons and the defendant of July 1999

103 Mr Hodgkinson's evidence was that a second agreement was entered into between the Hodgkinsons and the defendant at about the same time as the letters dated 22 July 1999. There is reason to believe, from the writing going to show this agreement (Exhibit P2), that it was entered into after the parties arrived at their agreement with respect to the $35,000 for fees. Further, in cross-examination Mr Hodgkinson testified it was concluded shortly after that agreement (cross-examination, TS 365). As I will indicate the writing (Exhibit P2) records among other things that figure of $35,000 for fees.

104 The writing (Exhibit P2) was on the form provided by the Royal Australian Institute of Architects, and was dated 26 March 1998 ("the RAIA form"). On Mr Hodgkinson's evidence this backdating was at Mr Doepel's request, to cover the earlier work done. The coverage of that work is also evident from the date of the agreement in all of the circumstances. This coverage would indicate to me that the new agreement replaced any previous one, and I so find.

105 The RAIA form's provisions were set out under five headings. They were "Responsibilities of the architect", "Responsibilities of the client", "The services", "The fees" and "Reimbursable expenses". Under the heading "The services", under the sub-heading "3.4 Contract administration", there was an entry, written alongside the item "other", "project management of building works".

106 Mr Doepel's evidence as to what was meant by this last reference was as follows (cross-examination, TS 775):

"You weren't just warehousing or allowing Mr Hodgkinson to use your licence; you were the builder?---I was the registered builder, yes.

Yes, the builder. You were responsible for the building of the property. Yes?---As the project manager, yes.

So where it says in your statement that Mr Hodgkinson was the builder, that's just untrue again, isn't it?---No, that's not true.

All right. Well, who was the builder then, you or him?---We were both responsible for building, organising various parts of the building. There was no building contract."

107 Under the heading "The fees" all of the sub-headings were crossed out except the one, "4.3 Lump sum fees", which showed a total of $35,000. This in my view indicates this document must have been executed after the revision in the fees and costs that resulted in the revised 22 July letter. It seems likely this amount included the amount already paid, to which the earlier form of the letter had referred, given the dating of the agreement, 26 March 1998. There is no evidence of any design work done before that date. There was no reference in the RAIA form to any work schedule or completion date for the work.

108 I now note other provisions in the RAIA form of possible significance to this case.

109 Under the heading "Responsibilities of the architect", the following provisions, among others, appear (italics in the original):

"The architect [the defendant] shall:

1.1 provide the services described in this agreement and shall exercise the skill and professionalism of a qualified, registered architect in doing so.

...

1.3 provide, where appropriate, indications of the cost of the works which are not a guarantee of the actual cost, a quotation or a tender

1.4 co-ordinate and integrate the work of all specialist consultants but shall not be responsible for the services provided by them

or

1.4 on behalf of the client, engage and be responsible for the services provided by specialist consultants and shall co-ordinate and integrate their work with the architectural work

(strike out one of these clauses to suit project arrangements)"

110 I note that there is no such striking out in the RAIA form.

111 Under the heading "Responsibilities of the client", the following provisions, among others, appear (italics in the original):

"The client [the Hodgkinsons] shall:

....

2.2 provide the architect with a realistic project budget and all relevant information required by the architect to complete the services described in this agreement

2.3 engage specialist consultants required by the project after consultation with the architect and shall pay all fees and expenses associated with their engagement

(strike out if consultants engaged by architect)

...

2.5 recognise that their original brief and other requirements may be altered when approval is given by them to the design as it develops through each stage of the design process."

112 There is no such striking out in the RAIA form.

113 Under the heading "The services", after the introductory words quoted, the following provisions appear, among others:

"Generally, the architect will provide the following services at each stage of the project. Additional services should be included if required by the project.

3.1 Sketch design

....

Design stage

• Obtain client's approval to proceed with final design

• Review final design against budget and prepare updated cost estimate

• Obtain client's approval of contract documents and to call tenders."

114 There was no evidence in this case that tenders were ever called for any part of the building project while the defendant was contracted to it.

Further evolution of the design between 22 July 1999 and 25 October 1999

115 On 2 August 1999, Mr Hodgkinson paid the defendant a further $10,000 towards its fees (examination-in-chief, TS 169).

116 On 4 August 1999, the defendant submitted plans to the local authority, the Nedlands City Council, for development approval. Those plans were apparently the ones finalised before the 22 July meeting and were Exhibit D537. On 9 September 1999 Mr Doepel faxed "amended drawings" to the City, "following our meeting in your office with Mr Ted Hodgkinson" (Exhibit P16; and the changed plans, Exhibits D538A, D538D, and D540).

117 Mr Doepel's evidence was that the changes from the "previous design" were (examination-in-chief, TS 642):

" ... [T]he roof was added to the pool equipment room, the balcony was increased in size, the window sills in the rumpus room were raised, a robe was added to one of the spare bedrooms, the second floor bathroom was increased in size and a bath added and a portico screen was added."

118 By a letter dated 20 October 1999 the City wrote to the defendant that development approval had been given (Exhibit P22).

119 Mr Doepel's evidence was that on or about 25 October 1999 the design for the house was changed again "following further discussion with the Hodgkinsons" (examination-in-chief, TS 642). Those changes were shown on plans prepared by the defendant (Exhibits D539 and D541), and were described in Mr Doepel's evidence as follows (examination-in-chief, TS 642):

" ... [T]he walk in robe design changed, the ensuite bathroom adjoining the master bedroom was made larger, the office was made larger, the porch was made larger, the kitchen was made larger, a stainless steel sink, barbecue, ice box and bench were added to the cabana, the return bench in the laundry was made longer and the ensuite bathroom to the second bedroom was completely redesigned."

120 On 25 October 1999 the defendant applied to the City for development approval for "the construction side fence, pool equipment room and retaining walls" for the work (Exhibit P25). It is to be noted that none of these changes is included in the list in Mr Doepel's evidence just quoted.

121 There was considerable attention directed in the cross-examination of Mr Doepel to the relationship between those changes and "the house budget" of $390,000 to $400,000 in the letter dated 22 July 1999 from the defendant to the Hodgkinsons. The exchanges with him were as follows (cross-examination, TS 849 - TS 855):

"Now, could you look in that book of pleadings again please, page 42? You will see there a paragraph 7.4. Do you see that?---Yes.

'Defendant prepared a new set of sketch plans, being a sixth set, which were dated 25 October 1999'?---Yes.

And that's what you referred to as the second expanded residence?---No.

Well, it is?---What they refer to is the second amendments to the July 1999 development approval plans, which were relodged back to the City of Nedlands for development approval on the walls. I've got them here. I can point to you the changes, if you like. It's the wall at the end of the property. Shall I point them out to you?

Just?---I would like to, actually. I would like to point out to you the differences because you don't seem to understand what the sets of drawings mean. There are lots of sets of drawings. They all comprise of work that we did at different stages.

Just tell me - and if you need to look at a plan to answer it but I don't need to look at a plan unless I tell you, all right? 7.4:

Defendant prepared a new set of sketch plans, being a sixth set, which were dated 25 October 1999, which revised sketch plans were drawn in accordance with the plaintiff's ongoing amended instructions and detailed a much larger house than the original residence and comprised a substantial and material departure from the scope of the brief pleaded in 6.

I can take you to 6 if you want to see that. Now, do you have any understanding what those plans are?---I do.

There's a set of plans of 25 October which detail a much larger house than the original residence?---That's correct, and you've already pointed out those differences in area.

These are the DA plans we're talking of?---And I've done the calculation on the differences from the March 1998 plans to the July 1999 plans. These are essentially the July 1999 plans, first amended on 9 September, second amended on 25 October. There they are, one, two, three.

Yes, and it's the same area?---Substantially different to the original design of the house. That statement is correct.

Sorry, that was entirely my fault. I switched off a bit then. The DA plans - we will talk about those - they're the August 99 plans?---They are the July 1990 (sic) plans submitted on 4 August 1999, I think.

They're the DA plans. We all know what they are?---And they were amended on the 9th of the 9th and amended once again on the 25th of the 10th, showing extra work each time they are amended.

Yes, it didn't detail a much larger house. The size of the house didn't change after the DA plans, did it?

McGOWAN, MR: That's not what paragraph 7.4 says, 'The original residence'?---No, that's correct.

DONALDSON, MR: The original, okay. I'm grateful to my friend.

So 25 October, they're no different in size or the house depicted in the 25 October 99 plans are no different in size to the DA plans?---Well, I can confirm that to you if I look at the drawing.

Is the answer 'Yes'?---Well, I can tell you that if - I've got three sets of plans there all done after July 1999.

But you looked at these transparencies. It's a simple question. It's the same-size house. It never got any bigger after the DA plans?---I think the areas are slightly different and I pointed that out in the schedule.

It was within half a metre, wasn't it?---Some dimensions are different.

All right. So that's the house we're talking about?---If we're talking about the second design, which are the plans that were submitted for the development approval, they are different from the original design done in 1998.

Thank you. In November 98 they're much bigger. I'm happy to call them 'bigger.' Happy with that?---Thank you.

But 25 October 99 plans deal with the same dimensioned house as the DA plans with this slight change of half a square metre or whatever it is. Do you accept that?---Yes.

What this says is - 7.4 - you 'prepared a new set of sketch plans on 25 October 99 drawn in accordance with their ongoing amended instructions; detailed a much larger house than the original residence.' Just pausing there - - -?---That's correct.

- - - that's either March 98 or November 98?---Yes.

It doesn't matter - 'and comprised a substantial and material departure from the scope of the brief pleaded in 6 hereof.' If you want to turn back a page you will see what 6 is. That's what you were told in March 98. Okay?---Yes.

I'm just trying to be fair to you, Mr Doepel, so that's what that's about?---Yes.

Which Mr Doepel, on behalf of the defendant, told the plaintiffs and the first plaintiff, as property developer, knew would increase the cost of the residence substantially.' Now, when did you tell Mr Hodgkinson that?---Well, as far as the house itself is concerned, I had confirmed on 22 July that that house plan was within the budget, and that was $394,350. I didn't actually confirm that precise figure but I did confirm that it was within that budget of 390 to 400. So what this refers to, if the house price budget is the same, it must refer to the other changes that were made on 25 October drawing on the instructions of Mr Hodgkinson which would cost, you know, a considerable amount of money.

Your plea is that a new set of plans were prepared and dated October 99?---Yes.

- - - for a house in exactly the same dimensions as the DA plans. Yes?---Basically.

That was bigger or a much larger house than the March 98 one?---Yes.

So that's what we're comparing. We're comparing October 99 to March 98. Yes?---Yes.

It comprised a substantial and material departure from the brief that you were given in March 98.' That's what you say. Yes?---Yes.

And you say that you told the plaintiffs that that would increase the cost of the residence substantially?---If we're referring to the October plans, yes. The changes on the 25 October plans would have increased the cost substantially.

Why?---Because there was a massive retaining wall at the rear of the property which is depicted on the 25 October plans which would have cost a considerable amount of money which was never in the brief. It was never part of the costs; it was never part of the works.

But wasn't fencing, on your evidence, always excluded from the budget?---The whole reason for 25 October plans was to show those changes and those plans had to be resubmitted back to the City of Nedlands for a development approval and that's those plans on the end. That's the only change in those plans from the plans of the 9th of the 9th.

That isn't - sorry?---And the plans of the 9th of the 9th were also submitted to the City of Nedlands. In fact, there were three sets of plans submitted to the City of Nedlands, one set on 4 August, one set on the 9th of the 9th and a further set on 25 October, each one depicting additional work to the scope on the plans in - you can't just build things without approval so those three sets of plans show additional work that had to be approved by the council before it could be built.

Didn't it work like this: there were the DA plans that were submitted?---Yes.

There were conditions imposed?---Yes.

- - - which required a tree of a particular height?---That was the 9th of the 9th plans.

That's right?---They had to be relodged back with the council?

Yes, so they had nothing to do with the Hodgkinsons. You say that they did but in fact they were as a result of conditions imposed on the development approval by the council?---That's correct.

So that's them, and the 25 October plans dealt with the retaining wall, didn't they?---That defined the new wall of the rear of the property which Mr Hodgkinson wanted raised to above the level of the swimming pool and that wall was put in by Landcorp so we had to get Landcorp's approval and also the City of Nedlands.

So the 25 October plans?---And that's the only difference in those plans, to my recollection, to the ones of the 9th of the 9th.

Just increase the height of the wall?---Substantial increase.

Yes, but you needed a separate development approval to increase the wall?---And also Landcorp approval.

Yes, because they owned the adjoining land?---It was a condition of the purchase that the existing boundary fences that Landcorp had put in could not be altered, changed without their approval. That's why we needed their approval, as well as the City of Nedlands.

So you needed approval from Landcorp as a condition of that; you needed a separate DA from the council for the fence?---That's right.

So it is your evidence that you said to Mr Hodgkinson that that change to the fence would increase the cost of the residence substantially?---Well, the wording in the pleadings isn't precisely correct the way it has been put.

Did you ever have a conversation with Mr Hodgkinson about an increase in the cost or an increase in the budget from 22 July through to October 1999?---In regard to the fence on the 25 October plans, yes, and he understood that if you add height to a fence, that's going to cost extra money, but with the actual house, as that hadn't changed, that was still within the budget.

So in relation to the residence it didn't change at all?---No.

SIMMONDS J: Can I clarify that answer, Mr Doepel? Are you saying that so far as the residence budget is concerned, the 390 to 400 envelope had not changed in your view between 22 July 99 through to and including 25 October 99?---For the actual house, yes.

For the actual house?---Yes."

122 I return below to the "transparencies" to which Mr Doepel refers in this evidence. I conclude from this body of evidence that there had been changes to the building project between the plans on which the 22 July 1999 letter rested and the plans of 25 October 1999, not all of the changes on which were the subject of the application for development approval on that date. However, the major effects on the project's cost of those changes derived from matters Mr Doepel saw as outside the "the house budget", such as the retaining wall. So far as the "the house budget" itself was concerned, he saw no reason to think that the effect of the changes over this period was sufficient to make it inapplicable.

The application for and grant of a building licence

123 By document dated 3 November 1999 the defendant applied to the City for a building licence to commence construction of the residence. In that application the value of the building work was shown as $300,000 (Exhibit P26). It was Mr Doepel's evidence that Mr Hodgkinson had instructed him to use that figure, to minimise the fees (examination-in-chief, TS 648); however, Mr Hodgkinson denied giving any such instruction (examination-in-chief, TS 262).

124 By letter dated 29 November 1999 the City notified the defendant of development approval for the development of the side fence, pool equipment room and retaining walls (Exhibit P31). By letter dated 2 December 1999 the City confirmed to Mr Hodgkinson that the building licence for the swimming pool was ready for collection (Exhibit P32). By document dated 8 December 1999 the defendant applied to the City for a building licence for a boundary fence between the property and the adjoining property (Exhibit P33). On 13 December 1999 the City issued a building licence for the construction of the residence (Exhibit P40). It was a condition of such a licence, it appears, that housing indemnity insurance be obtained for the work, and on the same day, 13 December 1999, Mr Hodgkinson received confirmation of such insurance from his insurance broker, with a certificate of insurance indicating the value of the building works at commencement of $300,000 (Exhibit P39). It appears construction began at about this time.

125 In February 2000 installation of the swimming pool commenced. Also that month, February 2000, Greenmount Constructions began to pour the ground floor concrete slab. On 22 February 2000 work stopped until a decision was made as to how to resolve an issue that had arisen concerning the height of the slab relative to the pool. In April 2000 the slab was removed and, on 28 April 2000 the defendant notified Mr Hodgkinson that the footings had been repoured. I will return to these events below.

126 The defence case focussed on the extensive commitments undertaken by Mr Hodgkinson prior to the defendant's suspension of its involvement in the work in late September 2000, which I reach shortly. These commitments were undertaken without discussion with or even notification to Mr Doepel, or at least there was no evidence of any such discussion or notification. It was Mr Hodgkinson's evidence, however, that, although Mr Doepel was not involved in or notified of the quotations or commitments, he had been made aware of what the Hodgkinsons were doing by coming to meetings at their Earls Court home where all of the items were discussed (cross-examination, TS 325). There is indeed evidence from Mr Doepel that he attended regular such meetings (cross-examination, TS 938). I return below to the principal such commitments.

127 There is no doubt Mr Hodgkinson was extensively involved in the Blenheim Lane project as it was carried out.

128 Altogether apart from those commitments on which the defence case focussed, throughout the time between 22 July 1999 and the suspension by the defendant of its work on the project, on 27 September 2000, the Hodgkinsons were involved in the administration of the work in a number of other ways.

129 In some cases, the defendant sent the Hodgkinsons quotations or nominations of contractors for aspects of the work, asking for acceptance, and subsequently for payment against invoices, which the Hodgkinsons would make. Examples were the structural engineer Saraceni Engineering Group Pty Ltd (examination-in-chief of Mr Hodgkinson, TS 179), and the supplier of rammed earth walls, Ramtec Pty Ltd (Exhibit P73, to which I return in more detail below).

130 In some cases Mr Hodgkinson nominated a contractor to the defendant, with which the defendant subsequently dealt on behalf of the Hodgkinsons. The main example appears to be Solarvac for the vacuum system for the residence (examination-in-chief of Mr Hodgkinson, TS 186, 189); and John Baldock & Associates, the surveyor (cross-examination of Mr Doepel, TS 914).

131 In some cases the defendant dealt with contractors they identified without further reference to the Hodgkinsons except for payment of invoices or problems with the work. The principal examples appear to be Sewell Earthmoving for site works (examination-in-chief of Mr Hodgkinson, TS 191, and cross-examination of Mr Doepel, TS 913, in both of which Sewell appears to be, incorrectly, referred to as "Seal"), and Greenmount Constructions for the concrete slab or pad for the ground floor (examination-in-chief of Mr Hodgkinson, TS 191, cross-examination of Mr Doepel, TS 913).

132 On some occasions the Hodgkinsons asked for Mr Doepel to obtain further quotations, as in the case of the swimming pool (examination-in-chief of Mr Hodgkinson, TS 173), and certain glass items (examination-in-chief of Mr Hodgkinson, TS 217). The swimming pool, as has been seen, was one of the items excluded from the budget for the work.

133 In some cases, the defendant referred the Hodgkinsons to some contractors with which the Hodgkinsons dealt directly, as in the case of the interior designer Ms Jennifer Telfer, who wrote to the Hodgkinsons to set out the scope of the service to be provided, the fee and her previous experience, by a letter dated 30 September 1999 (Exhibit P19). Her appointment was confirmed by a letter from her dated 7 October 1999 (Exhibit P20).

134 However, it appears to be that, apart from the commitments I reach next, it was only in relation to the limestone for the Blenheim Lane project that the Hodgkinsons dealt with contractors they identified without, in relation to the identification or the dealings, involving the defendant, apart from some meetings with representatives of them that it seems Mr Doepel also attended. The contractors were P & P Italiano for the brickwork and limestone work (cross-examination of Mr Hodgkinson, TS 405) and Meteor Stone for the limestone itself, as I will indicate below. In addition, Mr Doepel acknowledged in cross-examination that, in relation to quotations he recommended to Mr Hodgkinson be accepted, whether the former had "introduced [the person quoting] or otherwise", Mr Hodgkinson followed Mr Doepel's advice, "every time" (TS 921).

135 In the cases of the commitments on which the defence focussed, however, the Hodgkinsons dealt with contractors, from selection to and including payment, without any significant involvement of the defendant or even notification to it of the outcomes. In cross-examination, Mr Hodgkinson conceded that most of the items involved were intended to be within items within the budget, that is to say, were not within the exclusions he said had been made from it (cross-examination, TS 324).

136 One set of the expenditures concerned was for electrical whitegoods, ordered in the "early part of 2000", comprising one set of items for $16,276, and another set, of Gaggenau appliances, for $19,559, and a dishwasher for $2,161, for a total of "about $37,000" (in fact, $37,996) (cross-examination, TS 295 - 296; and Exhibit D245). These were said to be within the $400,000 budget.

137 There were, in addition and after the suspension of the work, other commitments entered into, or quotations received regarded as acceptable, which on the defendant's case showed the Hodgkinsons proceeding without reference to the budget, at least to the extent there was no evidence for them of any discussion with or notification of the defendant's successor, Hindley & Associates Pty Ltd, which I will reach shortly. These quotations received and accepted in whole or in part were:

• in September 2000, for "electrical and audio works", comprising such items as a security system, phone outlets, audio visual equipment and electrical wiring, totalling $58,882.50 accepted (cross-examination, TS 286 - TS 292; and Exhibits P135 and D360 - D367, and D369) (also said to be within the $400,000 budget);
• in July 2000, and in July and September 2001, for bathroom fittings, which resulted in orders for over $31,000 (cross-examination, TS 292 - TS 295; and Exhibits D268 - D273) (also said to be within the $400,000 budget);
• in January 2001, for cabinet work, at a total quoted price of some $85,000, which Mr Hodgkinson testified was for what was "needed" for the house, at an "acceptable" price, although the quotation may not ultimately have been accepted (cross-examination, TS 296 - TS 298; and Exhibit D246); and
• in June 2000, the acquisition at auction of three pairs of antique doors, for $6,194, which at about 3.1 metres in height were "much higher" than "standard doors", and the acquisition of which led to discussions with a door restorer and maker for the fabrication of pine doors to match the antique ones as well as to restore the latter, which led to a quotation in May 2001 at $45,000 which Mr Hodgkinson accepted, as well as a further quotation in August 2001, although in fact he never proceeded with the restorations and pine doors (cross-examination, TS 298 - TS 303; and Exhibits D256 - D260).

138 As to the variations in design, the plaintiff's case is that the variations in question were not significant ones, or were ones he had concluded at the time, on the basis in part of assurances from Mr Doepel, were not significant ones. On Mr Hodgkinson's evidence, the only changes were the extension of an upstairs balcony using what had been roof, changes to the internal layout of some rooms, and the replacement of internal walls that were brick and plaster with limestone, except for two sets of walls, which were replaced with rammed earth.

139 The plaintiff also placed heavy reliance on the evidence of a Mr Dancer, from the firm that succeeded the defendant, Hindley & Associates Pty Ltd, who produced transparencies to show the effects of two sets of changes. Three sets of plans reproduced on the transparencies were involved (Exhibit P236). One set of changes was the changes from the set of plans submitted to the Nedlands City Council for development approval on 4 August 1999 made by the set of plans which were apparently those prepared by Hindley & Associates and based on ones from the defendant, but with modifications submitted for the purposes of the building licence issued from the City in October 2000. The other set of changes was the changes from the 4 August 1999 set of plans made by the set of plans of the house as built which had been prepared by Hindley & Associates (examination-in-chief, TS 493 - TS 497; and Exhibit P236). Mr Dancer described all three sets of plans as "substantially the same" or not "significantly different" (examination-in-chief, TS 496 - TS 497).

140 However, he conceded that he had been concerned to deal with changes to the building as indicated by changes to its walls. He had not considered changes between the walls (cross-examination, TS 522 - TS 523). It was not clear what was meant by changes of the latter sort, except that it seems clear the plans (Exhibit P236) do not address the addition of columns as a result of a change from internal walls of brick and plaster to internal walls of (non-load bearing) limestone (see also Mr Dancer's cross-examination, TS 514). There was also evidence, from Mr Doepel, that development approval plans would not be expected to be at the same level of detail as building licence plans.

141 There is also evidence from Mr Doepel as to the results of his examination of the three sets of transparencies. His evidence was that the changes from the development approval plans to the as built plans were "substantial" (examination-in-chief, TS 711 - TS 721). I let this evidence in notwithstanding the objection that none of it was put to Mr Dancer, on the basis that it had emerged in cross-examination that Mr Dancer's evidence was limited in the way I have described, and the transparencies related to plans of Mr Doepel's on which it was fair he be able to give this evidence.

142 The evidence as to the changes to the upstairs balcony was that they were by way of extension of it using adjoining flat roof space (examination-in-chief of Mr Hodgkinson, TS 171, TS 236, TS 263). The evidence as to the cost of this was from Mr Dancer, who testified it added $4,680.50 plus GST (examination-in chief, TS 487).

143 There is evidence of a change to the internal layout of the rooms in early 2000 in the form of a decision to extend a laundry cupboard that changed the floor plan for the laundry, as indicated in a fax of that date (Exhibit P48). In June 2000 Mr Doepel faxed "further to your instructions" a sketch for redesign of bedrooms, a bathroom and a rumpus room, for review and comment (Exhibit P68). Mr Hodgkinson's evidence was this redesign did not change the size of the rooms, but did change the internal layouts. I have already referred to the evidence of Mr Dancer as to changes between the development approval plans of 4 August 1999 and the house as built, that the changes over that period were not significant.

144 Mr Doepel's evidence as to the internal layout changes was that (putting aside the changes I reach below) they were rather more numerous. However, I did not understand his evidence to be that there had been a significant change in the combined areas of the ground and first floors. Nor did I understand his evidence to be that the result was a house that bore no comparison with that for which the building licence had been obtained. The nature of the changes he referred to (again, with the exclusions I have referred to) is of room size differences, doors, deletion of some items, re-positioning of some items, addition of new spaces and new cabinetry. Changes of that nature would seem to me to indicate the contrary of any proposition that the house as a result bore no such comparison. His evidence was not that (again, putting aside the changes I reach below) they would have changed the house budget substantially, and indeed his evidence, which I reproduced above, as to the effect of the changes between the development approval and the plans he prepared for the purposes of securing a building licence in December 1998, would suggest the contrary to me.

145 Further, I note the evidence of the consultant architect, Mr Ednie-Brown, called by the defendant, in his report (Exhibit D486) as follows:

"Although there are obviously cost implications, the overall effect would not be particularly significant, with the exception to some extent of the cellar. The two buildings in area and size, drawn respectively by Doepel and later Hindley, are essentially the same."

146 As to the changes I set aside, the evidence as to the replacement of some internal walls with limestone and rammed earth was that in May 2000 Mr Hodgkinson discussed with Mr Doepel the possibility of replacing all of the proposed brick and plaster internal walls with limestone ones, except for the internal walls for the office and TV room, for which rammed earth walls were proposed (examination-in chief, TS 198). Mr Hodgkinson's evidence was that he had had limestone external walls on his Mosman Park residence. He had wanted to discuss the possibility of limestone internal walls because they did not require maintenance by way of re-painting and plastering as brick and plaster walls did. He had wanted to discuss the possibility of some additional rammed earth internal walls, for his office and the television room in the house. It will be recalled that the design of the house as at 22 July 1999 included some rammed earth walls.

147 Mr Hodgkinson's evidence was that he asked Mr Doepel whether there were any increased costs associated with such replacement. Mr Hodgkinson said he was told that the cost of the limestone would be approximately the same as the brick and plaster walls, but that the additional rammed earth walls would cost more (examination-in-chief, TS 198). Ultimately, Mr Hodgkinson had authorised the changes, after satisfying himself that the net additional costs, for the rammed earth walls (of $15,000 to $18,000), were within his budget range (examination-in chief, TS 201). He did not have any discussions with Mr Doepel about the effect of the change to these rammed earth internal walls on the budget (TS 201). His evidence was also that he came to know the cost of the replacements of the brick and plaster internal walls with limestone ones was in fact substantially more than he had expected, and there is evidence of a substantial increase in cost, as I will now explain.

148 The evidence as to the total cost of replacing the brick and plaster internal walls with limestone, and the addition of further rammed earth internal walls, was from a Mr Mark Ashton, a quantity surveyor, whose estimate, of $66,000 (including GST) (examination in chief, TS 1052), was not challenged. In cross-examination he indicated the difference between specifying rammed earth and specifying brick and plaster walls was that between $202 per square metre and $90 per square metre (TS 1063). Although he did not perform the calculation, it appears to be common ground that this produces a figure for the net cost of installing the additional rammed earth internal walls within the range Mr Hodgkinson had arrived at.

149 There was considerable cross-examination of Mr Hodgkinson on replacement of brick and plaster internal walls with limestone and the rammed earth walls, with a view to identifying what he knew, and did not know, of the costs associated with such replacement, both the new costs and the costs no longer to be incurred.

150 The new costs for the replacement with limestone walls on which there was evidence were in terms of additional structural design, of about $1,550, as shown in the quotation from the structural engineer for the work, a quotation Mr Hodgkinson accepted (Exhibit P70), additional steel, and labour. Mr Hodgkinson acknowledged he knew that additional structural engineering work was required, and that steel was required, although his evidence was he did not know that this would not have been required for brick and plaster walls (cross-examination, TS 399 - TS 405). The reason for both the additional work and for the steel, it emerged from the evidence, was that limestone is not load bearing, and requires steel reinforcements.

151 The labour for the internal walls was done by a firm, P & P Italiano, with which as I have indicated earlier it was Mr Hodgkinson's evidence he had had past satisfactory dealings. P & P Italiano had dealt with Mr Hodgkinson directly, in relation to the original (external) limestone walls, without going through Mr Doepel, and Mr Hodgkinson had gone to the firm again for the internal limestone walls. In both cases he had been content to contract with them without obtaining a rate for their labour, as he had trusted them (cross-examination, TS 393). The only evidence of the cost of the labour on the replacement limestone walls was an invoice for work done after June 2000 (Exhibit D321), which may or may not have included other items. Mr Hodgkinson could not explain how he could reconcile the invoice amount of $85,000 with the evidence of Mr Dancer of Hindley & Associates, the defendant's successor, as to the cost of such labour of $25,000 (cross-examination, TS 407), a figure with which Mr Dancer testified he had been provided by Mr Hodgkinson (cross-examination, TS 501). However, while Mr Dancer found $85,000 a "lot of money" (cross-examination, TS 501), his evidence was also as follows (TS 503):

"A lot more than you would have expected for the work that was involved?---Not necessarily, because it's quite intricate work. It's very labour intensive."

152 As a result of the replacement of the internal walls with limestone or rammed earth, the costs no longer to be incurred were those to do with the brick and plaster walls no longer needed. Mr Hodgkinson testified that he had not sought costings for these walls, from Mr Doepel, from P & P Italiano (which would otherwise have done these walls), or anyone else.

153 Mr Hodgkinson's evidence was that he had concluded that, for the walls to be replaced by the rammed earth, the costs saved were in the range I have described. He had reached this conclusion as a result of his visiting the site, and considering the walls of brick and plaster that would not need to be erected there, and making a "guess" (cross-examination, TS 392 - TS 393). The accuracy of his "guess" is supported by the evidence of the quantity surveyor to which I have referred. I consider this evidence establishes that Mr Hodgkinson considered himself, with some justification, able to estimate the cost of brick and plaster walls in building construction.

154 As to the limestone internal walls Mr Doepel's evidence was that, when Mr Hodgkinson raised the matter with him in late May 2000, Mr Doepel told him that there would be additional cost. This was for two reasons. Limestone was non-load bearing, and so columns would be needed. Also, an engineer would have "to redesign the house at additional cost" (examination-in-chief, TS 657). In his cross-examination, he testified he told Mr Hodgkinson that limestone walls would cost "[m]ore than brick and plaster" (TS 857). There is no evidence Mr Doepel specified an amount for the increased cost, or indicated that as a consequence the original budget, if otherwise still applicable, should now be seen as inapplicable. There is, however, evidence from Ms Telfer, the interior decorator, to which I will return, that he and Mr Hodgkinson were discussing the cost of limestone at a meeting she also attended on 16 August 2000. I find this evidence insufficiently specific to add anything in this context. I return to the evidence as to this meeting below.

155 I have considered Mr Doepel's evidence as to advising Mr Hodgkinson of increased costs from the limestone walls with his other evidence, that "he didn't know anything about limestone", on which Mr Hodgkinson was the "expert". However, on the evidence Mr Doepel knew enough about limestone to appreciate the need for the involvement of a structural engineer in the change. Indeed there is evidence that Mr Doepel and Mr Hodgkinson together met with the structural engineer for the Blenheim Lane project at which the change was discussed, although Mr Hodgkinson denied having any recollection of the meeting (cross-examination of Mr Hodgkinson, TS 400 - TS 401; and Exhibit P69). After this meeting Mr Hodgkinson was sent confirmation that the structural engineer would need to do work on the "slab supports" for the house (Exhibit P70). I also note again Mr Doepel's reference to the possibility of Mr Hodgkinson having a house with limestone walls done by a home builder, in a range near the budget of $400,000.

156 I have concluded on all of this evidence that Mr Doepel did not have the knowledge necessary to make the comparison about which he testified, and I find that he did not draw the matter of additional cost for limestone relative to brick and plaster walls to Mr Hodgkinson's attention.

157 As to the additional rammed earth walls, Mr Doepel's evidence was that Mr Hodgkinson had in late June or early July 2000 said he wanted more rammed earth walls, and Mr Doepel had obtained a quotation from a supplier of $29,840, which on 10 July 2000 he had faxed to Mr Hodgkinson (examination-in-chief, TS 654; and Exhibit P73). On that fax Mr Doepel indicated to Mr Hodgkinson that the "price is very expensive", and added "please consider" (emphasis in the original). On Mr Hodgkinson's evidence, he did consider the matter, by reference to the cost savings from deleting brick and plaster walls the rammed earth ones would replace, as I have indicated, and authorised the acceptance of the quotation (Mr Hodgkinson, examination-in-chief, TS 201).

158 On this evidence as to the additional limestone walls, and the additional rammed earth walls, I conclude that at most the matter of a potential overall impact on the budget of those changes had only been drawn to Mr Hodgkinson's attention in respect of the rammed earth. Mr Doepel's differential treatment of the two sets of changes as I have found it is consistent with his view of the role of Mr Hodgkinson in relation to limestone to which I have previously referred, as well as his evidence that he had previously been involved in five previous projects using rammed earth and he was "thoroughly familiar" with it (examination-in-chief, TS 653).

159 There was a further item to which Mr Doepel's evidence drew attention. It was the additional costs arising out of the acquisition, in late June 2000, by the Hodgkinsons, at auction, of antique doors for the house. These doors had a greater height than that allowed for in the designs. Mr Doepel's evidence was that he had told Mr Hodgkinson it would "cost more money to increase the height of the ceilings" on the ground floor (examination-in-chief, TS 655). There is also evidence from the interior designer retained for the Blenheim Lane project, Ms Jennifer Telfer, that she was the person who had informed Mr Doepel of the acquisition of the doors, and that she had said to the Hodgkinsons that "changes to the floor levels" might be required (examination-in-chief, TS 986).

160 Mr Doepel's evidence was also that it was when he learnt of the purchase of the antique doors he first felt the $400,000 budget would be exceeded. His evidence was this (cross-examination, TS 918 - TS 919):

"Now, did it at any point occur to you that that figure was going to be exceeded in relation to what you understood the shell to be?---I've just told you. The first time that I had that feeling was when the antique doors were purchased. When they were - - -

Did you say anything?---When they were purchased, at the time - and it was at an auction, so they had prior notice or warning of that - I wasn't asked to attend, I wasn't asked the impact of the size of them and I wasn't asked if they pay $10,000 for those, how much had I allowed in the budget for a front door.

But did you say anything to them about the consequence of the purchase on the budget?---I have just said that to you. After that was - after I became aware of that I mentioned that the height of the first floor would have been to increased and this has been demonstrated by Dobson's - Ramtec's quotes where the first quote was for 2.7 high walls and the second one was for 3.33150 high.

Did you say to them that the consequence of the doors or raising the height of the ceiling - I don't care what it is. Did you say to them at any stage that the consequence of that was that the estimate that you had provided in relation to what you say was the shell would be exceeded?---No, you're getting your words mixed up again, Mr Donaldson. I never, ever gave them an estimate, right?

The $400,000 quote - - -?---It was never an estimate I gave them. There's a big difference between an estimate and a square metre rate budget.

But the figure of $400,000 - - -?---Yes, I did.

You did say that to - - -?---When the door situation became - when I was aware of that, I explained that the floor would have to rise and there would be additional wall that would need to fill the space between where it would have been and where it was going to be. That space there had to be paid for and it has been demonstrated in Dobson's approach the difference between 2.7 and 3.15. Obviously

How has that been demonstrated?---The first quote was for walls 2.7 high. The second quote was for walls 3.150 high which is an increase in height between where they were originally designed and where they would have to be to incorporate the doors.

How does that demonstrate any difference in cost?---Because if you look at the quotes and if you break down the square metre rate - and we can do this. I have a calculator and a scale rule in my bag. I can measure the walls, I can divide it by the quote, I can work out the number of square metres and I can demonstrate to you that there are more square metres in a wall that is 3.15 metres high than a wall that's 2.7 metres high.

Right, and that process that you have just described there, pulling a slide rule out of your bag, did you ever do that and say to the Hodgkinsons, 'Well, the consequence of this is going to be these many dollars'?---In the second quote which incorporates the higher walls, I'd cautioned Mr Hodgkinson about the extra cost and that's in my handwriting on one of my faxes."

161 In fact, as Mr Doepel's later evidence indicated, he had been referring in this last respect to his annotation on the quotation in respect of the rammed earth to which I have previously referred, an annotation that related to the cost of the additional rammed earth walls, not the increase in ceiling heights (Exhibit P73).

162 Mr Hodgkinson's evidence as to the antique doors and their effects on the project was as follows (cross-examination, TS 298 - TS 300):

"Is the sequence of events here this: your wife Kelly saw an ad in the paper for an auction to be conducted by Alan Donnelly and Co at which certain antique doors would be auctioned off and she expressed some interest in those doors. Is that right?---Correct.

As a result you and she and Jennifer Telfer went to the auction. Is that right?---Right.

What we are looking at at [sic] page 1136 are the items that were knocked down to you at the auction. Is that right?---Yes.

So what you acquired at the auction were - tell me if I have got this right - three pairs of doors. Is that right?---Yes.

Three pairs of door, plus you also got a street lamp?---Yes.

The doors were approximately 3.1 metres high, weren't they?---Yes, I think so; yes, approximately.

They were, in other words, much higher than a standard door. Correct?---Yes.

Did you at that time - there's a time that you were involved in this auction which seems to be June 2000 - have a discussion with a man called Magnus McArthur?---Yes.

Magnus McArthur ran a business called Revival, didn't he?---Correct.

He was referred to you by Jennifer Telfer?---Yes.

What was it that you wanted from him?---I wanted him to - how can I say - - -

Restore?--- - - - restore these doors and make similar doors throughout the house to look like these doors made out of pine.

So you wanted him to do two things; first of all, restore the three pairs of doors that you had bought at auction?---Yes.

Second, you wanted him to create replicas or imitations of these antique doors as restored?---Yes; out of pine.

Out of pine. All right?---Yes.

And each of these other doors were to be 3.1 metres high or at least as high as these other doors?---No, not necessarily. To the heights of whatever the openings were in the house for the doors.

Kim Doepel wasn't at this auction, was he?---No.

And you didn't discuss the buying of the doors with him before you bought them?---I couldn't say.

But after you had bought them, he told you that the effect of these doors meant that the ceilings would have to be raised?---I disagree with that.

Do you say that you discussed anything with him about the implications and the consequences of buying these tall doors?---No.

So you just assumed that it would be business as usual?---Yes, to that degree.

All right, so you didn't think for one moment that if you buy overheight doors, that that would affect the way in which the construction of the house would proceed?---Well, the rammed earth walls were going to be made to 3.15 metres tall so the ceilings go on top of that so that's how I thought."

163 I find on this evidence, notwithstanding Mr Hodgkinson's denial, that it is more likely than not that he had been told of the possible need for an increase in ceiling heights as a result of the Hodgkinsons' door purchase. However, I also find that it is more likely than not he was not told of any significance of this for the budget amount of $400,000. In view of the rammed earth walls he was considering at the time, as he testified, it is not clear to me he should have appreciated any such significance.

164 There was evidence of one incident in the work which had caused delays. This was the height of the ground floor concrete slab laid in February 2000, to which reference was previously made. Mr Hodgkinson's evidence was that he noticed the slab's height was too high in comparison with the swimming pool. He arranged for a surveying firm, known to him from his work for the Perron Group, to check the height. On 22 February 2000 he received a fax from the defendant confirming the pad was 160 mm higher than the drawings called for (Exhibit P53). Ultimately, the pad was repoured by Greenmount Constructions, which Mr Hodgkinson understood bore the labour costs, while he also understood the materials costs were borne by the defendant's liability insurer. Mr Hodgkinson estimated the replacement of the slab delayed the work by about two and a half months.

165 By May 2000, Mr Hodgkinson had spent approximately $59,000 on the Blenheim Lane residence.

166 Mr Hodgkinson's evidence was that by mid-August 2000 he had become concerned about "the way in which Doepel was coordinating the building works". This concern had two aspects, he testified.

167 One was it appeared to him that there was no organised program for the works, and that as a consequence they would not be completed by September 2000 or even by December 2000, which was to allow for the extra two and a half months delay caused by the repouring of the concrete pad.

168 The other aspect was, he testified, concern expressed to him, initially by a Mr Rocco of P & P Italiano on or about 13 August 2000, about what was said to be the poor quality of the defendant's drawings.

169 On 13 August 2000, Mr Hodgkinson sent a fax to the defendant requesting a meeting on site on 16 August 2000 and asking for representatives from the rammed earth contractor, Ramtec and from P & P Italiano Limestone be present (Exhibit P79). Mr Hodgkinson's evidence was that there was a meeting on site in August 2000, at which Mr Hodgkinson complained to Mr Doepel about his performance (examination-in-chief, TS 204).

170 On 16 August 2000 Mr Doepel faxed to Mr Hodgkinson a 40 page finishes and fixtures schedule which Mr Hodgkinson asked him to bring to the meeting (Exhibit D48), which on the evidence was a document originally prepared by Ms Telfer (cross-examination of Mr Hodgkinson, TS 416). At Mr Hodgkinson's request for "all plans for the house", Mr Hodgkinson testified that Mr Doepel also sent him a disk in Autocad R14 format containing the ground floor and first floor plans.

171 Mr Hodgkinson testified that a meeting occurred at the Hodgkinsons' Earls Court house on 16 August 2000 involving Mr and Mrs Hodgkinson, Mr Doepel and Ms Telfer, the interior designer. At that meeting, Mr Hodgkinson testified, finishes and fixtures were discussed against the schedule of these previously faxed (Exhibit D48). Mr Hodgkinson testified that the matter of costs was not discussed at this meeting (examination-in-chief, TS 215). The schedule itself featured no cost information.

172 Following the meeting, on 17 August 2000, Mr Doepel faxed to Mr Hodgkinson notes of the meeting, consisting of the schedule, annotated in Mr Doepel's handwriting (Exhibit P98). Mr Hodgkinson's evidence was that Mr Doepel said nothing at the meeting about the effect of the selected finishes on the cost of the work. The notes of the meeting (Exhibit P98) do not address the matter.

173 Mr Doepel's evidence of the meeting was significantly different. He testified that he was "sure" he and Mr Hodgkinson began to discuss costs while Ms Telfer and Mrs Hodgkinson were in the room (cross-examination, TS 948). The two men continued to do discuss costs after the two women left the room with Mr Hodgkinson "tot[ing] up what was the probable cost of the expenditure of the house" as the two men went "right through the schedule" (cross-examination, TS 948). However, he acknowledged he could not recall details of any of these costs, and he did not think he had made any notes about any of them (cross-examination, TS 948).

174 However, I note that in his examination-in-chief, reading from his witness statement dated 3 August 2005 (Exhibit D649), he said this (TS 673):

"Ted said, 'Let's tote up the costs of the project to date.' Included in the calculations was (1) the pool which Ted said would cost approximately $35,000; (2) landscaping which Ted said would cost approximately $50,000; (3) house as amended which Ted said would cost approximately $725,000; (4) the doors which Ted said would cost approximately $30,000 to $35,000; (5) the cabana which Ted said would cost approximately $10,000 or $15,000, and (6) kitchen appliances which Ted said would cost approximately $30,000.

Ted asked me if I considered $890,000 to be the probable cost of the project. I said that $890,000 seemed reasonable."

175 Ms Telfer's evidence was that she heard the two men talking about the costs of limestone (to which I have previously referred) and the security system for the house as she left the room with Mrs Kelly, although her evidence is no more specific than that. Thereafter, she testified, she could hear the two men talking, but not what they were talking about (cross-examination, TS 1015 - TS 1017).

176 Following the meeting of 16 August 2000 work continued. However, Mr Hodgkinson testified that he was sufficiently "unhappy with Doepel's performance as the architect and builder" (TS 218) that, on 17 August 2000, he approached a firm of building designers, Hindley & Associates Pty Ltd, to review the defendant's documentation and to provide an indication of the firm's fee to assist in the completion of work and tendering for the work's completion. At the meeting were a director of the firm, a Mr Stephen Hindley, and a building designer with the firm, Mr Dancer. Following the meeting, on 22 August 2000 Mr Hodgkinson received a fee proposal from Hindley & Associates Pty Ltd (Exhibit P110). Both Mr Dancer and Mr Hindley testified that, on 28 August 2000, they met with Mr Hodgkinson on the site for an inspection.

177 Over the period until 27 September 2000, when the defendant suspended its work, a number of plans were forwarded by the defendant to the Hodgkinsons, or to contractors with confirmation of this to the Hodgkinsons. These included a preliminary ceiling plan and ground and first floor plans for a meeting with them on 30 August 2000; floor plans to International Cabinets (Exhibit P120); on 12 September 2000, preliminary working drawings showing ceiling plans, electrical layouts and dimensioned floor plans; on 15 September 2000, preliminary ground and first floor plans and elevations; on 22 September 2000, preliminary drawings concerning security, audio and electrical ground and first floor plans (Exhibit P130); and on 26 September 2000, electrical plans.

178 There is also an annotation on the left hand side of the first page of a fax from Mr Doepel to Mr Hodgkinson of 11 September 2000 (Exhibit D105) that reads:

"(3) As discussed with Ted, because there are so many changes to the building licence approved drawings they are all being completely redone."

179 During this period, on 5 September 2000 Mr Hodgkinson faxed Mr Doepel concerning difficulties the former was having with the interior designer, Ms Telfer (Exhibit P119) and asking him if he could take over the matters listed there as, in the Hodgkinsons' understanding, Ms Telfer's "responsibilities".

180 On 27 September 2000, the defendant notified the Hodgkinsons that they would be suspending the defendant's participation in the work. There is some dispute as to the exact sequence of events that day. Mr Hodgkinson testified he telephoned Mr Doepel concerning his role in the work. Mr Hodgkinson testified that he said he was unhappy with Mr Doepel's performance, and would be speaking with his lawyers (examination-in-chief, TS 230).

181 Mr Doepel's evidence was that in fact he was the one who telephoned Mr Hodgkinson on 27 September 2000 concerning problems with the project (examination-in-chief, TS 691). The same day the defendant sent the Hodgkinsons a fax (Exhibit P132) stating:

"Further to our telephone conversation this morning this is to confirm that we will be writing to you in detail confirming our position in relation to your project.

We are suspending all work on your project until that letter has been sent and until our position is clarified."

182 Mr Doepel's evidence was that the letter referred to was never sent as, on 4 October 2000, he received a letter from the Hodgkinsons' solicitors confirming that the Hodgkinsons were treating the suspension as a repudiation of the defendant's agreement with them, and were accepting that repudiation.

183 On 28 September 2000, Mr Hindley faxed a second fee proposal to the Hodgkinsons (Exhibit P134), and a short time later Mr Hodgkinson telephoned Mr Hindley to engage Hindley & Associates "to prepare construction documents and to assist with the construction of the residence" (examination-in-chief of Mr Hindley, TS 570).

184 On the same day, 28 September 2000, Mr Hodgkinson accepted the quotation represented by the second fee proposal from Hindley & Associates to complete the residence (examination-in-chief of Mr Hodgkinson, TS 231).

The period of construction from 27 September 2000 to the cessation of work in September / October 2001

185 On 11 October 2000 Hindley & Associates completed revised drawings for the Blenheim Lane project, incorporating some further changes, being a revised location for a staircase, the deletion of a store room, and some other changes, the evidence on the net effect of which was that construction costs in a minor amount were saved (examination-in-chief of Mr Dancer, TS 480). On the same day, 11 October 2000, the firm applied to the City of Nedlands for a building licence to complete the project, and a building licence issued on 19 October (examination-in-chief of Mr Hindley, TS 570).

186 In October 2000 Mr Hodgkinson asked Hindley & Associates to incorporate a wine cellar into the residence, and later that month they prepared a plan for such a cellar, for which they secured development approval (examination-in-chief of Mr Dancer, TS 480).

187 In November 2000 Mr Hodgkinson arranged a bill facility for $300,000 with Bankwest and on 17 November 2000 he drew down on the facility and transferred $300,000 to his overdraft account, the limit on which had almost been reached. He continued to use the overdraft to cover personal expenses and construction costs (examination-in-chief, TS 236).

188 Between 17 and 29 January 2001 Bonetti Concrete formed the upstairs slab and stairs for the residence (examination-in-chief of Mr Hodgkinson, TS 237).

189 On or about 23 January 2001 Hindley & Associates accepted a quotation from Perth Rigging for the erection of steelwork for the upper floor of the residence (examination-in-chief of Mr Dancer, TS 487).

190 In the same month, January 2001, Mr Hodgkinson authorised Hindley & Associates to extend the upstairs balcony area (examination-in-chief of Mr Dancer, TS 486).

191 Between 30 January and 9 February 2001 Bonetti Concrete poured the upper floor slab of the residence (examination-in-chief of Mr Hodgkinson, TS 237).

192 On 2 February 2001 Hindley & Associates applied to the City of Nedlands for development approval to construct the changed balcony (examination-in-chief of Mr Dancer, TS 486).

193 On 6 February 2001 Remson Steel provided Hindley & Associates with a quotation to fabricate steel for the upper floor of the residence (examination-in-chief of Mr Dancer, TS 487), and on 13 February 2001, Hindley & Associates accepted the quotation from Remson Steel (examination-in-chief of Mr Dancer, TS 487).

194 Also on 13 February 2001, Mr Hodgkinson received a report from Hindley & Associates on the defendant's documentation and building works (examination-in-chief of Mr Dancer, TS 487).

195 On 14 February 2001, Mr Hodgkinson received a report from Hindley & Associates as to the estimated cost of completion of the residence (examination-in-chief of Mr Hodgkinson, TS 237; and Exhibit P174), which put that cost at $828,000.

196 On 2 March 2001, the City of Nedlands informed Hindley & Associates of development approval for the change to the upstairs balcony area of the residence (examination-in-chief of Mr Dancer, TS 486).

197 On 10 April 2001 Mr Hodgkinson received an updated report from Hindley & Associates as to the estimated cost of completion of the residence which included some quotations Mr Hodgkinson had forwarded to them for the purpose (examination-in-chief of Mr Hodgkinson, TS 239; and Exhibit P180). That estimated cost of completion was $895,613.

198 In June 2001, in order to fund the construction on the Blenheim Lane project, Mr Hodgkinson sold the Earls Court property and began to rent a property in Kings Row, Mt Claremont (examination-in-chief of Mr Hodgkinson, TS 248 - TS 249).

199 In September 2001 Mr Hodgkinson instructed Hindley & Associates to stop work on the Blenheim Lane project, and in October 2001, after some word was done to protect the building from the weather and vandals, he had a steel security fence erected around the site (examination-in-chief of Mr Hodgkinson, TS 240 - TS 241).

200 On 22 February 2002 Mr and Mrs Hodgkinson separated, as I have previously indicated.

201 On 1 May 2002 Mr Hodgkinson began to rent 8 Abbey Gardens, Mt Claremont, replacing the Kings Row rental (examination-in-chief of Mr Hodgkinson, TS 250).

202 Some time in March or April 2003 Mr Hodgkinson decided to sell the Blenheim Lane residence in its then condition (examination-in-chief of Mr Hodgkinson, TS 242). In June 2003 he received an offer from Mr and Mrs M Lindley to purchase the residence. On 7 October 2003 the sale of the residence settled (examination-in-chief of Mr Hodgkinson, TS 243). The purchase price included payment for various chattels purchased for the project. It is not in contest that there was a small profit realised on the sale, after the cost of the land and construction was netted against the net sale proceeds.

203 Apart from Mr Hodgkinson and Mr Doepel, there were 13 witnesses called in this case, five by the plaintiff, and eight by the defendant.

• Mr Thomas Charles Dancer, who has an advanced certificate in architectural drafting from Central TAFE, and had been employed as a building designer by Hindley & Associates since 1999;
• Mr Stephen John Hindley, who was a director of Hindley & Associates Pty Ltd, which carried on business as a building designer, and who was himself a registered builder;
• Mr David Stewart Liggins, who is a licensed property valuer and real estate agent and practises as a valuer and property consultant; and
• two witnesses who were officers of home builders, Mr Dean Harding of J-Corp Ltd, trading as Oswald Homes, and Mr Alwyn Gerard Even, of Webb and Brown-Neaves;

• Mr Mark James Ashton, a qualified quantity surveyor;
• Mr Todd Lee Doepel, who appeared by video link from London, who has a diploma in building design and drafting from Central TAFE, and who had been employed by the defendant since 1996 when he was working on his diploma: his work with the defendant, until he left it in 2005 to take a leave of absence to work in the United Kingdom, involved him in (examination-in-chief, TS 867):

"The coordination of documentation, designing, site measuring, site inspection, development approval applications, building licence applications, construction documentation and minor site supervision;"

• Mr Anthony Colin Ednie-Brown, who is a consultant architect;
• Mr David Herbert Standen, who has a bachelor's degree in architecture, is a registered architect in Western Australia and New Zealand, has been a life fellow of the Royal Australian Institute of Architects since 1980, has taught architecture, and is currently a provider of consultancy services to architects and their clients;
• Mr Stephen George Dobson, who is a director of Ramtec Pty Ltd, which provides rammed earth walls and contracted to the Blenheim Lane project, and who has been involved in the business for some time;
• Mr Magnus Johnston McArthur, who is the principal of the business Revival, to which reference has previously been made, which is "involved in designing and making furniture and restoring antique furniture" (examination-in-chief, TS 961), and which was contracted to do work in the Blenheim Lane project;
• Mr Arthur Barugh, who with another runs a company called Electrical Spares and Service, and whose company provided electrical conduiting to the Blenheim Lane project; and
• Ms Jennifer Diane Telfer, who holds a diploma in fine arts from Leederville Technical College, is a qualified interior decorator and, as I have indicated, was contracted to do work for the Blenheim Lane project.

206 I was invited by counsel for the plaintiff to find that wherever there was a divergence between his evidence and that of Mr Doepel, I should prefer the evidence of the former. This is a matter of particular importance in relation to a meeting of 16 August 2000 at which both men were present.

207 However, I find I cannot make any such general determination. Both men gave their evidence in a forthright fashion, and, allowing for the complex and detailed character of many of the matters to which their evidence related, I consider they both gave their evidence clearly and generally with conviction. There was, however, from both of them equivocation and reversals of position on aspects of their evidence under careful probing of it.

208 Thus, in the case of Mr Hodgkinson, as I have indicated, there was some equivocation on the matters of what was excluded from the original $400,000 budget, and, as I have already indicated, a reversal on the matter of what date for completion of the work he says the defendant gave him.

209 Similarly, in the case of Mr Doepel, there was, as I have indicated, equivocation on what he understood was included within the "shell" which he said was the subject of that budget. There was also a reversal on the matter of whether or not the Hodgkinsons had commented on a document discussed at a meeting involving Mr Doepel and them (examination-in-chief, TS 671; and cross-examination, TS 949).

210 I do not consider I have sufficient reason generally to prefer one man's evidence over the other in the event of divergence in their evidence. Rather, I need to consider the other relevant evidence and the nature of the evidence each man gave to reach a determination with respect to the particular divergence in issue.

Was there no more than an indication of what the Hodgkinsons might be prepared to spend on the project?

211 I have already indicated both Mr Hodgkinson and Mr Doepel proceeded, from March 1998 at least until the letter of 22 July 1999, on the basis that there were at least two sets of budgets involved. One was for "the house areas" (the letter of 30 November 1998, Exhibit P13) or "the house" (the letters dated 22 July 1999, Exhibits P14 and P15), the other was for other items, although there was at best only limited agreement in their evidence as to what was covered by each. The first budget was understood to be no more than $400,000. The evidence as to the second budget is not as clear.

212 It was put to me for the defendant that these amounts would have been understood by the two men simply as indications of what the Hodgkinsons were prepared to spend at the relevant times. By this I understood the defendant to mean that the references to budgets in the 30 November 1998 and 22 July 1999 letters were no more than confirmations of such indications. They had no relevance as indications of the defendant's understanding of a concern by the Hodgkinsons for the feasibility, or of the cost, of construction within such amounts.

213 The defendant heavily relied upon the failure of Mr Hodgkinson to reply to the letter of 30 November 1998 in support of this submission. That failure indicated that Mr Hodgkinson was not concerned to ensure that Mr Doepel was clear as to the amount within which the project had to be undertaken.

214 However, I find this submission difficult to reconcile with the evidence as to the design work done by the defendant in the periods leading up to the letters. It seems to me that, whether or not the defendant had provided any equivalent indications as to its understanding of the Hodgkinsons' concern for the feasibility or cost of the project within the budget or budgets earlier, the confirmations of budget at those points would reasonably have been understood by the Hodgkinsons as confirmations of such indications then.

215 I have already indicated what I inferred from the failure of Mr Hodgkinson to reply to the letter of 30 November 1998. I do not consider that failure should be understood as the defendant appeared to submit. The form of the letter, breaking down project costs, and accompanied by design drawings, indicated, in my view, the defendant's understanding of a concern the project was to be accommodated within the budget indicated. As I have previously indicated, the budget was understood by Mr Hodgkinson to be consistent with the previous indications he had given to Mr Doepel as to the budget for the house. Further, the stage had not been reached where a commitment to the project was appropriate.

216 In this last respect, I note Mr Hodgkinson's evidence that he told Mr Doepel in March 1998 that he would need to sell the property at Gould Street, Herdsman, to fund the work (examination-in-chief, TS 159). The evidence of Mr Doepel was also that during this early period Mr Hodgkinson had informed him that Mr Hodgkinson "may sell [this property] to fund the building project", and that, "until he sold the Herdsman property he did not intend to commence construction" (examination-in-chief, TS 610). Further, development approval for the project was not sought until after the sale of the property on Gould Street in Herdsman, and after the letters of 22 July 1999 were sent by the defendant to the Hodgkinsons that confirmed the budget for the house. By that time further design work had been done on the house which had been provided to the Hodgkinsons.

217 I do not consider there is evidence that matters as to budget were understood by the defendant as ones of no importance to the Hodgkinsons. The evidence of the letters of 30 November 1998 and of 22 July 1999 in my view point strongly away from any such understanding. I also note Mr Doepel drawing the attention of Mr Hodgkinson to the matter of the cost of the additional rammed earth internal walls by way of his annotation to the fax I have previously referred to. Although the contrary is pleaded, there is no evidence that Mr Doepel was expressly told that the budget for the "house" or the "house areas" had changed since the 22 July letter. I return below to the evidence on which the defendant relies to show that the Hodgkinsons had conducted themselves in a way indicating that such a change had been made, or that no budget applied, or that they should have realised the 22 July budget no longer could be relied upon.

218 I have noted the evidence that Mr Hodgkinson had substantial financial assets including a large holding of shares in a listed public company Meditech Research Ltd. However, Mr Hodgkinson's evidence was that the holding's size was such it was not readily saleable. He continues to hold most of these shares. There was also evidence that Mr Hodgkinson had a substantial overdraft at the relevant time, to which he applied the proceeds of the bill facility to which I have referred. And there is no evidence that there was any discussion between Mr Hodgkinson and Mr Doepel of the former's financial position, except to the extent of the references to the relevance of the Herdsman property to the project.

219 I have also noted the evidence of Mr Standen that in my view establishes there is a difference in architectural practice between a client's budget and a construction cost estimate, whether emanating from the architect or from some one else. (See his report, Exhibit D484, par 6.1.) So much is also apparent from the Agreement of July 1999 between the Hodgkinsons and the defendant, to which I have referred, cl 2.2 (the client's responsibility to provide a "realistic project budget") and cl 3.2 (the architect's responsibility to "[r]eview final design against budget and prepare updated cost estimate").

220 This raises the question whether or not the defendant had ever passed beyond simply reflecting back to the Hodgkinsons the budgets they provided and their concern the project be one that could be accommodated within them, without seeking to address that concern, for that part of the budget corresponding to the defendant's brief, by providing the Hodgkinsons with any cost estimates.

Did the defendant make any cost estimates for the project?

221 The defendant put considerable emphasis on the evidence that the arrangement between the Hodgkinsons and the defendant was a distinctive one and not a normal relationship between an architect-builder and its client. In such a relationship as the one the parties had in this case, the defendant submitted, the defendant should not be understood to have made any cost estimates, or at least none of the sort the plaintiff said the Hodgkinsons relied upon.

222 The arrangement was said to be one by which the architect-builder and the client shared the work of directing the project, with it being intended the client provide access to reduced costs for at least some major aspects of the project, with allowance being made for the client to insist on changes to the design even after the building licence for the main construction had been obtained, and with it being envisaged the client would otherwise participate in the management of the project with the architect.

223 In those circumstances, as I understand the defendant's submission, the statements as to cost in the 30 November 1998 letter, and any indications as to cost in the 22 July 1999 letters, should be seen, and should have been seen by the Hodgkinsons, as the defendant's understanding of the Hodgkinsons' assumptions as to the cost of at least the "house" and the "house areas".

224 I understood the defendant to draw support for this submission from the lack of clarity in the matters to which the budgets in the case related.

225 For the purposes of the defendant's submission, there was reliance on the background of Mr Hodgkinson in commercial and residential property development. This background, of which both parties were aware, helped to account for the particular relationship between the parties.

226 While I consider that that background did point to Mr Hodgkinson having experience with the costing of construction projects, I do not consider that background in the face of the other evidence leads me to the conclusion as to any cost estimates in this case that the defendant's submission invited me to draw.

227 The evidence as to Mr Hodgkinson's background in property development did not, it seems to me, unambiguously point to his having an understanding of the estimation and management of the costs of construction of an architect designed residence.

228 His commercial property experience with the Perron Group over a considerable period of time was in the location, development and sale of allotments for residences, not their construction (examination-in-chief, TS 146). His own previous experience with the construction of new homes, for himself, involved, in one case, an architect designed home with a contract with a builder, and in the other a home acquired from a home builder. His experience in relation to the property in Herdsman on the evidence appears to have related to the location and management of an existing building. His experience with the construction of the medical centre was of a project in which an architect and a builder had been engaged.

229 However, his other relevant experience, in commercial property development on his own account and for companies with which he was associated, through which on the evidence he came to know Mr Doepel as an architect, might be seen to fall into a different category.

230 Mr Doepel's evidence in relation to those projects was as follows (examination-in-chief, TS 603 - TS 604):

"Ted Hodgkinson was, until this dispute, a long-standing commercial client of mine. I had done a number of commercial projects for Ted over a number of about 10 years, including several service stations and showroom buildings; for example, Mirrabooka service station, Ocean Reef service station, Kingsley service station, and several designs for showroom developments at the Mandurah Business Park.

In the case of the Mirrabooka service station and the Kingsley service station Ted sourced and developed the land. I provided a full architectural service. Ted bought the land for the Mirrabooka service station and leased the land for the Kingsley service station from the Grand Lodge of Western Australia. The Ocean Reef service station was an existing service station that I carried out work on at Ted's request. Ted asked me to carry out modifications to the existing building.

Together we would work up a project budget for the service station developments. We would work out the feasibility of the development together and once a budget was known Ted would negotiate the lease and rental. Ted was my client as the developer and commercial project manager for these developments. After Ted had sourced the land I investigated whether there were any restrictions over the land which may prevent Ted from developing the land for the purpose that he wanted.

I provided the architectural services, which included obtaining the development approval, preparation of working drawings and specifications, allowing a building licence to be assessed ready for the collection from the tendered builder, undertaking the contract administration, and administering building contracts between Ted and the selected builder."

231 In cross-examination, Mr Doepel somewhat qualified this evidence as follows, first with respect to the Mandurah business park project, for which he designed some buildings to elicit interest from potential tenants or owners (TS 782 - TS 785):

"So you obviously weren't having too many discussions with him about the cost of building these imaginary buildings, were you?---Yes.

...

You have given evidence about the service stations. How many service stations were there?---Three, from memory.

Mirrabooka, Ocean Reef and Kingsley?---That's correct.

And each of those - we'll deal with them in turn in fact. Mirrabooka was a project for Ampol. Is that so?---No.

Well, who paid your fee in that?---I believe Mr Hodgkinson.

Do you?---One of his companies.

Do you have a client-architect agreement for that project?---I'm not sure, and all my files have been destroyed because they were over - that was in 1998 and 1990, 89-90, and all those records we have

That was 1989 or 90?---I have, though, references or contacted the builder, Mr Fred (indistinct) instructions

No, don't tell me. I don't want to know what someone else who's not going to be called to give evidence says. All right, Ocean Reef: that's a Shell service station?---If we can just finish with the Mirrabooka one, as you're - - -

No, no. Please just answer my question?---Okay.

The Ocean Reef station: that's a Shell service station?---That's correct.

When was that built?---That was an existing building and I'm not sure when it was built.

And Shell was the tenant at the time?---Shell was the tenant.

And did you have a client-architect agreement in respect of that?---I can't recall.

Were you paid a fee in relation to that?---I was.

Do you recall who paid you the fee?---The Shell Co of Australia paid the fee.

Well, then they're the client, aren't they?---I received instructions on the project from Mr Hodgkinson.

What, in relation to an existing Shell service station where Shell paid you the fee?---That's correct.

What, he told you what Shell wanted, did he?---That's correct.

Rather than you hear it from the relevant officer of Shell?---Well, it would've been like this: Shell would've contacted me or he would've contacted

Do you know?---Yes, I do, and it's exactly the same situation with the Kingsley site. Where Mr Hodgkinson had a ground lease, he sought my advice about putting a - designing a service station and some showrooms on the land. I gave him some advice. He then successfully concluded a lease agreement with Shell. Shell ultimately engaged me to design the building and Shell paid me, but I received the instructions on the project from Mr Hodgkinson.

When you went to do the design and got paid, that was Shell. Yes?---Yes.

And the same with Kingsley?---I'm talking about Kingsley.

Well, how about Ocean Reef? Same again?---Yes.

Now we have got Freedom Furniture. That was for a company of which Mr Hodgkinson was a director?---The company that owned the land was Parkinson and Mann, and Mr Hodgkinson was either a shareholder or a director. Parkinson and Mann was located very close to Ikea in Scarborough Beach Road. Freedom contacted Parkinson and Mann and wanted to know if they could purchase the site and build a Freedom Furniture store on it. I received instructions from Mr Hodgkinson. I can remember presenting the design to the board, which included Buzz Parkinson, Tony Wood from Wood and Grieve and other directors.

Yes?---The design was accepted. They subsequently sold the site to another developer, who then built the Freedom store in accordance with our designs, as it is today.

Right. So other than Mr Hodgkinson being at a meeting where you made a presentation - - -?---No - - -

- - - he had nothing to do with you on that?---No, it was not Tony Wood; it was not Buzz Parkinson; it was not the chairman who instructed me on that project; it was Mr Hodgkinson.

Right, but that project, what, prior - did you have a client architect agreement with Parkinson and Mann?---I can't recall.

But you had one with the new owners who built it?---No, we didn't. We only did the development approval and the new owners organised their own building.

I see, so you did the DA plans?---And we were paid, in fact, $20,000.

By Parkinson and Mann?---That's correct.

All right. Is there anything else? That's it, is it? They're your prior dealings with Mr Hodgkinson?---Well, there's the three service stations, there's the Freedom Furniture, then there's the four or five projects down in Mandurah, which is a substantial body of work over a period of some 10 years, yes."

232 I draw from this that Mr Doepel and Mr Hodgkinson had had a business relationship in relation to the design of buildings, and that Mr Hodgkinson had shown an ability to understand the process. Further, I have already considered evidence of Mr Hodgkinson's ability to cost at least one aspect of construction relevant to the Blenheim Lane project, that of brick and plaster walls. However, I do not readily take from all of this material that Mr Hodgkinson had an ability in relation to the costing of building projects in general or residential projects in particular, or at least he had one upon which Mr Doepel had depended in the past. Whether Mr Doepel had done so in relation to this project is a different question.

233 As to the arrangement between the Hodgkinsons and the defendant, in the respects to which the defendant's submission drew attention, I have already referred to the evidence as to it being intended the client provide access to reduced costs for at least some major aspects of the project. I concluded that, while that was probably Mr Doepel's assumption, Mr Hodgkinson had not himself offered any such assurance.

234 The arrangement between the Hodgkinsons and the defendant as it developed to the Agreement between them of July 1999, backdated to 26 March 1998, involved the defendant doing both preliminary designs and plans for development approval purposes to implement the specifications for the project. Those specifications, as I have indicated, undoubtedly changed over that period in a range of respects as a result principally of the directions of the Hodgkinsons. Those respects included aspects of the project which on any view went to matters subsumed within the Hodgkinsons' $400,000 budget. Those matters were principally the increase in the combined areas of the ground and first floors of the residence, from 404 square metres (March 1998) to 465.8 square metres (November 1998) to 525.8 square metres (July 1999), as well as internal room layout changes and a change in the look of part of the house, from curved to square.

235 Those changes also went to matters which on any view went to matters subsumed in the exclusions from that budget allocated to the Hodgkinsons. The principal matter here was the increase in the size of the swimming pool.

236 There were also changes made after July 1999, including changes made after the building licence was issued for the house, as I have also previously indicated. Of those changes, the additional limestone and rammed earth walls, and the increase in the ceiling heights because of the purchase of the over-height antique doors, would appear to be matters which, on any view, were within the matters to which the $400,000 budget related. As I have previously indicated, there is also evidence that in September 2000 the defendant had told Mr Hodgkinson it was redrawing the plans "because there are so many changes to the building licence approved drawings" (cross-examination of Mr Hodgkinson, TS 428, and Exhibit D105).

237 There is also evidence of Mr Hodgkinson's other involvement in the Blenheim Lane project together with that of the defendant. I have already referred to the language of the first, although not the second, 22 July 1999 letter from the defendant to the Hodgkinsons which referred to an additional fee of $20,000, "to assist with the coordination of the building works in conjunction with yourself" as well as the entry in the Agreement of July 1999, under the heading "3.4 Contract administration", "project management of building works". I have also referred to the variety of respects in which both the Hodgkinsons and the defendant were involved in the contracting process for the project. These spanned a wide range of types of involvement, as I indicated. The Hodgkinsons identified and contracted with one major contractor in respect of the brickwork and limestone. The defendant identified and dealt with a number of other contractors, securing authorisation for payment from the Hodgkinsons. The defendant also identified a number of other contractors with which the Hodgkinsons dealt. And the Hodgkinsons also identified still other contractors, for which the defendant secured authorisation for payment from the Hodgkinsons.

238 It is difficult to resist the conclusion from the nature of the arrangement I have described in the last two respects that there would be much greater difficulty for the defendant than for the plaintiff in monitoring the costs of the project as it evolved, whether in respect of the matters the subject of the budget of $400,000 or otherwise.

239 However, I also note my conclusions as to the derivation of the costings for the areas to which the defendant understood the $400,000 budget (as part of the figure of $500,000 given there) related in the 30 November 1998 letter. I also note the confirmation of the $400,000 figure at the commencement of the letters dated 22 July 1999, following the completion of the design work that produced the application for development approval, and preceding the conclusion of the Agreement of July 1999 that was backdated to the beginning of the relationship between the Hodgkinsons and the defendant and that confirmed the fees arrived at a result of the discussion of the first letter dated 22 July 1999.

240 I have concluded on all of the evidence that the defendant did indeed provide a cost estimate for "the house" as referred to in the 22 July 1999 letters. That cost estimate was initially provided orally at the meeting the letters dated 22 July 1999 were meant to address. I also find that that the defendant provided a cost estimate as to the "house areas" in the 30 November 1998 with respect to the same matters. The cost estimate, in the case of the 30 November 1998 letter, was more exact than the cost estimate in the meeting of July 1999 confirmed by the 22 July 1999 letters. However, I see no reason to conclude that the later estimate was other than that the "the house" could be constructed within the $400,000 budget. This cost estimate was I find in the nature of a statement as to the feasibility of construction within that budget.

What did "the house" cost estimate cover? Was the estimate not borne out?

241 At the same time, however, I note the uncertainty on the evidence as to what was included and what was excluded within the "house areas", or "the house", to which the cost estimate, or the $400,000 budget, related

242 I also note that, while Mr Doepel considered he had made clear to the Hodgkinsons that what he meant by the relevant "house areas" and "the house" was a "shell" or something to that effect, he also acknowledged that he had not spelt the matter out in any way (cross-examination, TS 745, TS 751, TS 758 - TS 760, and TS 766). I note also what appeared to me to be some equivocation in Mr Doepel's evidence as to what he understood by a "shell", for example, with respect to kitchen appliances (cross-examination, TS 737, TS 739). I further note the acknowledgement of Mr Doepel of the defendant's office in his evidence that he did work on more than the "shell" as he understood that term (cross-examination, TS 903).

243 Mr Hodgkinson's evidence was as I have indicated that "shell" or similar was not used with him. On his evidence he considered the cost estimate related to everything in the house that was not excluded. There was, however, the uncertainty in his evidence as to what was in fact excluded.

244 I find that the cost estimates made related to the house except for a swimming pool, landscaping, special equipment and furniture. This was language both parties accept, and, as the evidence of the letter of 30 November 1998 and of the letters of 22 July 1999 indicates, was used over the period of the relationship between them to the latter date. In any event it is the language of the 22 July 1999 letters which is the source of the cost estimate on which for present purposes the plaintiff relies, and which led to the Agreement of July 1999 and preceded the application for development approval. There was also, as I have indicated, a measure of agreement between the parties as to what this language covered.

245 The denotation of the house except for a swimming pool, landscaping, special equipment and furniture is also consistent with the understanding of the consultant architects called by the defendant. Neither considered that language apt to cover a "shell" as opposed to a residence (cross-examination of Mr Standen, TS 1036; cross-examination of Mr Ednie-Brown, TS 1074).

246 What the cost estimate related to would have emerged in greater detail as the defendant's drawings had evolved into the development approval plans of July 1999. At the least they related to what those plans indicated after subtracting the exclusions.

247 The defendant put to me that the drawings and plans showed no internal fit-out or finish details, and this indicated that what the language used in the 22 July 1999 letters referred to was only a "shell". I do not so find, particularly in the face of the evidence of Mr Doepel that he had it in mind that certain matters not shown on the drawings or plans, such as a hot water system, were included, and that allowances for kitchen cabinets and kitchen appliances should "normally" be made. It is also notable that on his evidence he had resorted to a particular finish level in a quantity surveyor's guide for the purposes of his consideration of the budget figure of $400,000.

248 The defendant also put to me that the understanding of the parties was that everything allocated to the interior decorator was outside the scope of the budget of $400,000. The evidence is, however, to the contrary. Mr Doepel acknowledged he had never so indicated to the Hodgkinsons (cross-examination, TS 751), and he also acknowledged that a number of the items in a schedule of finishes and fixtures produced by Ms Telfer, the interior decorator, shown as updated to 9 August 2000 (part of Exhibit P89), and in a later form discussed at the meeting of 16 August 2000 to which I have previously referred and to which I will return below, were matters "within [his] responsibility" (cross-examination, TS 943).

249 The defendant also appeared to put to me that the Hodgkinsons had shown, by their behaviour in contracting for or accepting quotations for a range of items, including ones which on Mr Hodgkinson's evidence he considered within the $400,000 budget, without reference to Mr Doepel before contracting or accepting, that either they in fact did not consider them within any such budget, or they were not relying upon any cost estimate it entailed. Indeed, while there is evidence the Hodgkinsons monitored the cash flow on the project, there is no evidence that they maintained a system of recording these against any budget, whether for the "house" or for other items.

250 There is no doubt that sums were entailed in these expenditures or possible expenditures that were significant in relation to the budget of $400,000. I put aside, for reasons I have already given, the expenditures or possible expenditures on the additional rammed earth internal walls, the limestone internal walls, and the over height doors. I have referred to the commitments or possible commitments on which the defendant's submissions focussed, of about $38,000 for kitchen appliances or whitegoods, about $59,000 for electrical and audio works, about $85,000 for cabinets, and about $31,000 for bathroom fittings. I was also referred by the defendant to the acceptance in August 2001 of a quotation for flooring for about $57,000 (Exhibit D246).

251 However, I note again the evidence from Mr Doepel that at least some kitchen appliances and some cabinets would "normally", to the extent of allowance for each, be within the "shell". This evidence is also consistent with the evidence of the officers of the home building firms, Messrs Even and Harding as to what was included in their firms' standard design homes, depending on the level of the finish provided for. Mr Doepel had not, on the evidence, indicated to the Hodgkinsons what the allowances were, unlike the specifications which Messrs Even and Hardy testified their firms provided. Further, as to the flooring, there appears to be no contest that Mr Hodgkinson had stipulated from the start for wood floors in at least some areas, as well as granite bench tops and marble tiles (see cross-examination of Mr Doepel, TS 805). I also note again the evidence of the regular meetings of the parties to review what had been undertaken.

252 Thus, I do not consider the size of the commitments or possible commitments, or the manner in which they were undertaken, evidence that the items to which they related were outside the $400,000 budget. Nor do I consider that the lack of any budget recording system for these or other items that the Hodgkinsons maintains indicates that they did not consider those items outside any budget. The uncontested evidence of the conduct of Mr Hodgkinson in relation to the additional rammed earth walls when his attention was drawn by Mr Doepel to the size of the quoted amount points away from any such conclusion.

253 However, I understood the defendant's submission also to be that, whether or not the items would otherwise have been included within the budget, the size of the expenditures relative to the allowances which Mr Doepel referred to indicated that the Hodgkinsons were in fact working to a level of finish different from the sort entailed by the $400,000 budget. Indeed, on the evidence of the variation of the design between 30 November 1998 and July 1999, and after that date, they were in fact working to a different house in other respects.

254 This in my view goes to two issues. One is whether or not "the house" cost estimate of July 1999 was not borne out. The other is whether or not the Hodgkinsons relied on the cost estimate. I deal with the defendant's submission in the latter respect under that heading below. It is convenient I deal with the defendant's submission in the former respect, the issue of whether or not "the house" cost estimate was borne out, at this point.

255 As I understand the defendant's submission, there is no evidence the house the subject of letters of 22 July 1999 could not have been constructed within the budget. The only matters that seem to bear on the issue are two, the cost of partial completion incurred by Mr Hodgkinson prior to the resale of the property with the partially completed residence, and the cost estimates in early 2001 arrived at by Mr Dancer.

256 The cost of partial construction of the house as resold other than the "plaintiff's additional items" was agreed by the parties at $630,804.58. However, as I understand the defendant's submission, this was for a house that materially differed from that the subject of any cost estimate by the defendant in the letters. The same observation could be made in respect of Mr Dancer's estimates of the cost of completing construction of the house, of February 2001 (at $828,000) and in April 2001 (at $895,613). I also understood from counsel for the plaintiff in his closing that the parties had agreed the cost of completing the home at Blenheim Lane, in the form as at the cessation of work on it the home would have taken had it been completed, at $1,149,000. That of course was the home in that (varied) form, including all of the items the subject of the commitments, and, it would seem, the possible commitments to which I have referred.

257 However, as to the variations in the design of the house, I note the evidence that the substantial ones occurred between the November 1998 and July 1999 letters, which I consider were reflected in the cost estimate in the later letters. On the evidence, particularly of Mr Dancer, the variations that occurred subsequently were not significant for this purpose, evidence which I consider was not materially qualified by that of Mr Doepel to which I also referred in this connection.

258 It is necessary to note separately the matters of the additional limestone and rammed earth walls, and the raised ceiling heights that resulted from the purchase of the antique doors. It is not altogether clear Mr Dancer took account of those items. However, I have already indicated my findings that the Hodgkinsons could reasonably have understood that those changes did not produce a different house for the purposes of the $400,000 budget. This is with the possible, partial, exception of the additional rammed earth walls, where Mr Hodgkinson's evidence is that he recognised it would produce an increase of $15,000 to $18,000, which was close to the amount which could be derived from the evidence of the quantity surveyor Mr Ashton. This amount in a budget of $400,000 does not, it seems lead to the conclusion that what resulted was a different house.

259 As to the commitments and possible commitments I have referred to, I note that most of these were entered into after the letters of 22 July 1999. It might therefore be argued that, to the extent they would otherwise be included within the house for the purposes of the budget of $400,000, they indicate a material change in the house. However, I also note the variations in finish levels for homes of standard design referred to in the evidence of Mr Harding and Mr Even, and in particular the latter's evidence as to the "The Residence" to which I referred early in these reasons, with its price of approximately $392,000. I also note the evidence of the consultant architect Mr Standen, who in cross-examination said this as to the specifications for the house which were put to him in cross-examination (TS 1038 - TS 1039):

"In relation to the specifications of this house as explained to you by Phillips Fox - and again could you return to your report at page 1545? You see there at paragraph 7:

'The following features were to be incorporated into the design.'

Do you see that?---Yes.

It says:

'Flat roof, external walls to be constructed in limestone with some Donnybrook stone, internal walls to be brick and plaster, a double garage, a swimming pool, rammed earth division wall, in built benches and cupboards, airconditioning, security system.'

If I could also tell you that the original specification was that there were to be three double bedrooms upstairs, one with an ensuite, with a rumpus room, with an additional bathroom upstairs, downstairs was to have a kitchen flowing through to a family area, a lounge room, a study, another bedroom for the parents with an ensuite in addition to those materials, that's a high-quality or high specification house, is it not, as described?---Certainly sounds like it, yes."

260 In view of all of this evidence, and the changes that had occurred in the house between November 1998 and July 1999, I do not consider that the commitments and possible commitments make the two sorts of cost evidence to which I have referred irrelevant to the issue of whether or not the cost estimate was borne out, or to put the matter another way, unreasonably low.

261 The plaintiff's case is pleaded, as I have indicated, in negligence and negligent misrepresentation, as well as breach of the express term of the contract, being the Agreement of July 1999, that the defendant would exercise the skill, care and professionalism of a qualified architect. There is indeed an express term in that Agreement to that effect (cl 1.1), which I have previously quoted.

262 I do not consider any distinction between these heads of liability for the purposes of the present issue should be drawn. In particular, it is not contested, nor in my view could it be, that if a cost estimate was made in the circumstances as I have found them to be (including the level of expertise in building cost estimation of Mr Hodgkinson that I have found), the defendant at the relevant time owed a duty of care to the Hodgkinsons, nor that it also owed a corresponding duty by virtue of the contractual term to which I have referred. And it follows from my analysis under the previous heading that the duty of care, whether in tort or in contract (by virtue of the backdating of the Agreement, and its coverage of cost estimates), extended to the making of the cost estimate I have identified. The question under this heading then becomes whether or not the defendant was in breach of the standard of care. That question reduces, it seems to me, to whether or not the estimate was made on reasonable grounds.

263 I have already referred to the evidence that the cost estimate was not borne out represented by the cost of partial completion of the house in the last quarter of 2001, and the cost estimates the Hodgkinsons received in early 2001. I have also referred to the evidence of matters occurring subsequently to the making of the 22 July 1999 that might indicate that circumstances had sufficiently changed to make the cost estimate no longer applicable to that house. For the reasons I gave under the previous heading, I do not consider that evidence in fact does so indicate.

264 The fact that those matters in fact had a substantial effect on the cost of construction of the house, in my view, goes to the matter of the reasonableness of the assumptions on which the house cost estimate of July 1999 rested.

265 For this purpose, I note the evidence of the consultant architect called by the defendant, Mr Standen (cross-examination, TS 1035 - TS 1036):

"A set of drawings is prepared by an architect and the architect is asked, 'Could the house that's drawn be constructed within a budget for 400,000?' and the architect says, 'Yes.' Then substantial changes are made, the changes that are referred to in item 12 of the Phillips Fox letter are made, to the plans and the same question is asked and the architect says, 'Yes' again, with all of those changes having been made. All right? Isn't it obvious that the architect's conduct has fallen below any acceptable standard to be expected of architects in that circumstance?---If that's the question, yes.

And it follows from your answer that it's patently obvious to any observer that they would significantly affect the cost of a house?---Yes, yes.

Or patently obvious to an architect obviously?---Yes.

When you were asked to express the opinions that you did in this letter or in this report, was it your understanding that Mr Doepel was asked to provide an estimate or a statement in respect of the price of the house to be constructed where that house was to be simply a shell?---I don't recall that very well. It's a few years ago since I was first asked anything about the place. I do recall some discussion about a shell but I don't recall the significance of it, just vaguely.

What do you recall?---Just remember the word 'shell' being used. I don't know who used it.

But the process that you have gone through in this report is to express an opinion in respect of Mr Doepel's conduct in advising the Hodgkinsons as to whether or not The Residence could be constructed within the estimate of 390 to 400 thousand, not a shell?---That was a budget, not an estimate.

I'm reading out to you your report, and you were asked whether there was a professional standard of conduct recognised that governed the work that Doepel did in advising the Hodgkinsons as to whether or not The Residence could be constructed on the land for the estimate of 390 to 400 thousand dollars. That's page 2 of your report at 1532?---Right.

You proceeded on the basis that the reference to The Residence there was not to a shell. Is that not so?---That would most likely be the case, yes.

Well, is it or isn't it?---It was the case, yes.

And if it was the case that an architect was, if asked to provide an estimate, only expressing an estimate in respect of a shell as opposed to a residence, that ought to be made crystal clear?---Yes, yes."

266 For the reasons I have given previously, I do not consider that the changes, except perhaps as to the additional rammed earth walls, would have indicated to the Hodgkinsons that the July 1999 cost estimate no longer obtained. Also for the reasons I have already given, I consider that the closest the defendant came to alerting the Hodgkinsons to this possibility was in relation to those walls. As I indicated the extent to which the cost estimate might be seen no longer to obtain as a consequence was only relatively slight.

267 In relation to the use of the quantity surveyors' publication (Exhibit D4), to which as I have indicated on Mr Doepel's evidence he had resorted in relation to the determinations he made as to the costs of construction within the budget of $400,000, Mr Standen's evidence, on the description of the house previously put to him which I quoted above, was this (cross-examination, TS 1039):

"And so an architect at the initial discussion with the client about budget when working out an appropriate square metre rate would look to one of the higher rates, would a competent architect not?---For this kind of house, yes."

268 I have previously noted the band and the point in it, for a "medium standard finish", to which the defendant resorted in this case on Mr Doepel's evidence. I consider that this exchange indicates the assumption as to the appropriateness of the point in the range chosen was not a reasonable one. I consider this is so even allowing for the likelihood of a saving of the builder's margin, to which Mr Doepel's evidence related, and which does not appear to be contested. Mr Doepel's evidence also related to a potentially larger saving on trade discounts, at least on the brickwork and the limestone, as to which, however, I have previously found Mr Hodgkinson made no assurance. It seems to me that in the absence of such an assurance an assumption of such a discount would be an unreasonable basis for such a cost estimate.

269 In relation to the matter of the role of the Hodgkinsons played in the building project to which I have previously referred, Mr Standen said this (TS 1039 - TS 1040):

"What's a normal practice?---Calling tenders from the builder and getting tenders from the builder and so on, without any input from the owner.

Right, but if the owner said, 'I want you, architect, to be the project manager and I will engage the trades directly, some of the trades directly,' that takes it out of the normal, does it?---I'm not sure what you're asking.

Well, it's pretty simple. You said there were some circumstances that were not normal?---Yes. In this case, as I understand it, the owner was going to arrange a number of separate contracts and the architect was also going to act as the builder, because he's a registered builder, and arrange separate contracts also between the contractors and the owner. It was nothing like a normal project.

What's so abnormal about that?---What?

What's abnormal about that?---No subcontractors.

There are subcontractors?---There weren't any subcontractors.

I see. They are direct contractors with the owner, are they?---Yes.

Why does that make a difference?---What I'm trying to say is that the whole arrangement was so unconventional that estimating in those circumstances is not as straightforward as normal practice.

Then should a competent architect have said, 'I can't provide an estimate on these circumstances'?---Yes, he could certainly be asked. He would have difficulty in answering the question because of the unconventional intentions.

Should that have been made crystal clear to the client?---I would think so, yes.

So if it was in what you describe as the unusual or abnormal circumstances which you understand pertain to this particular matter, because of those circumstances, it ought to have been made crystal clear to the client that any estimate provided by the architect was, what, wholly unreliable?---No, not wholly unreliable but subject to a lot of ifs and buts.

And that should have been made crystal clear?---In my opinion, yes.

And if it was not, that falls below the standard?---I would say so, yes."

270 I consider that this evidence indicates the inappropriateness of proceeding to make an estimate resting on assumptions not appropriate to the way in which the parties would be proceeding.

271 I also note the publication of the Royal Australian Institute of Architects, Practice Note AN13.03.002 "Architect's estimates" (July 1996) (Exhibit P273), which both Mr Doepel (cross-examination, TS 727) and Mr Standen (examination-in-chief, TS 1028) testified is applicable to a cost estimate made by an architect to a client.

272 That publication stresses that the "duty" of architects providing estimates (cl 3.1): "is neither as detailed nor as rigorous as the duty of quantity surveyors when they are providing detailed estimates".

273 I note that the only evidence on the matter of seeking advice from other sources was that of Mr Doepel in cross-examination, where he said that he had mentioned the matter of incurring the cost of engaging a quantity surveyor, but Mr Hodgkinson had indicated he believed it was not necessary (TS 817). This matter did not appear in any of Mr Doepel's witness statements for the trial, nor was the matter put to Mr Hodgkinson in cross-examination. I am not inclined to give it much weight. In any event, it seems to me it indicates that the parties were proceeding on the basis of no detailed estimate from such another source.

274 In such a case, the Practice Note goes on (emphasis added):

"[n]evertheless, if a cost limit is stated by the client, then it is part of the architect's overall responsibility to design with this state limit, provided this is feasible."

275 I have already indicated that, on the evidence here, the defendant made cost estimates by designing and then confirming the budget as they did in July 1999.

276 The Practice Note says (cl 3.1) that architects "commonly base their estimates on reasonable current cost rates per square metre of building area", and for this purpose (cl 3.4) "[r]ates are available from several sources including ... building 'cost guides' published by commercial firms". On the evidence of both Mr Doepel and Mr Standen I see the publication the former used (Exhibit D4) to be such a publication.

277 The Practice Note also says as to the scope of the estimate produced when a "schematic design" has been arrived at (cl 4.2) that the architect "should clarify in writing specifically what is included and should also advise what other possible costs may be need to be considered but which are excluded". Examples given of the latter include "professional fees including survey fees", and "furnishings, fixtures and equipment". When the design development has reached the stage that (cl 4.3) "all matters relating to the brief will have basically been resolved", the architect "could provide a further estimate of the building", in which case "[s]imilar comments to the previous opinion apply". I consider on my previous findings that this is the stage at which the 22 July 1999 estimate confirmation was provided.

278 Finally, I note that the Practice Note indicates (cl 4.5) the architect "must keep the client informed of the current financial status of a project at regular intervals, preferably agreed with the client, during the administration stage of the project".

279 I have already indicated the difficulties the defendant would have faced meeting this standard under the arrangements for this project. However, I take it from this provision, and the evidence of Mr Standen, that in light of those arrangements it would have been good practice for Mr Doepel to disclose the qualifications to his estimates that those arrangements indicated should be made.

280 I consider the evidence of Mr Standen and the Practice Note go to indicating what would represent good practice among architects in giving an estimate, rather than the application of the legal standard of negligence to Mr Doepel's conduct: Heydon, J D Cross on Evidence 7th ed Sydney, LexisNexis Butterworths 2004, at [29125] and cases cited there. I also consider that evidence can be used - albeit not as conclusive in the matter - in assessing, with the other evidence in this case, and particularly the difference between the cost of construction of the house as it was estimated to be, and as (partial) construction turned out to be, and the estimate, whether or not the defendant met the legal standard: Fleming, J G The Law of Torts 9th ed Sydney, LBC Information Services 1998, at 121.

281 I consider on all of the evidence that, in respect of the construction cost estimate I have found, the defendant did not meet the legal standard.

What loss or damage was caused by "the house" cost estimate?

282 The plaintiff pleads in relation to the negligent misrepresentation claim it makes that the Hodgkinsons were induced by the cost estimate I have found to commence construction on the project and to enter into the Agreement of July 1999. If there were such a cost estimate, as I have found, I find that reliance on it in those respects to have been made out. I also find, based principally on my findings in relation to the budget or budgets in this case, that the defendant knew or ought to have known that the Hodgkinsons would so rely.

283 The defendant, as I have previously indicated, put to me I should not arrive at any such finding, in view of the variations in the design of the house which the Hodgkinsons made and the commitments and possible commitments they entered into for the items I have previously considered.

284 However, I have also previously indicated why I do not consider that evidence shows the Hodgkinsons should be seen to have been proceeding with a different house in mind than that for which the house cost estimate had been made. That consideration in my view also disposes of the present point.

285 However, the defendant also referred me to the evidence of Mr Hodgkinson that in fact at the time of entry into the Agreement of July 1999 with the defendant the Hodgkinsons had revised their total budget upwards to a significant degree. That evidence was as follows (examination-in-chief, TS 168):

"---The agreement starting date was stated to be March 1998 to cover the early work done. Doepel said that he wanted the agreement backdated to March 98 when he had first started work on the project. When I received Doepel's estimate of costs to build the residence, I considered it prudent to make an allowance in my budget for the likely increase in costs to cover any changes I may wish to make.

Based on Doepel's estimate of costs of between 390 and 400 thousand, I believed the probable cost to complete the project including the items that I had excluded from the budget estimate of 400,000 and, allowing for some increases or extras, would be in the vicinity of 600,000."

286 Mr Hodgkinson was cross-examined on this evidence as follows (TS 318 -TS 319):

"So was the $600,000 now made up of 500,000 for Mr Doepel's part and 100,000 for your part or 400 and 200 or 300 and 300?---No. It was 400,000 for Mr Doepel's part, 100,000 for the other and if I change something, we had a little bit more in my thoughts there for it, like you do with any house if you can.

So the budget from July 1999 onwards was now 600,000. Correct?---No, no, no. It was 400 for the house, like I just said, and 100,000 for the landscaping.

Should I read to you the passage from your statement so we are all quite clear with it?---Yes. We had an extra 100,000 - - -

Did I ask you a question then?---Okay.

This is paragraph 122 of your statement. You read it out yesterday or the day before so you referred to the two faxes:

'Based on Doepel's estimate of costs of between 390 and 400 thousand, I believe the probable cost to complete the project including the items that I had excluded from the budget estimate of 400,000 and allowing for some increases or extras would be in the vicinity of 600,000?'

---Yes.

The question which is not very complicated is this: so your budget from July 1999 onwards was 600,000?---If there as any increases. That's what it was.

'Budget' representing the amount that you were prepared to spend?---Yes, if there was any increases in items; yes.

'Budget' being the amount you were prepared to spend. Is that right?---I said yes, if there was any increases.

There's no need for the suffix. You have said that you at that stage believed that the probable cost to complete the project was $600,000, so that's your budget, isn't it?---I don't say 'probable'; I said if there's 400

Shall I read it again?---Yes, yes.

'I believe the probable cost.' That's what your statement says?---Okay. That's what I said then, 'probable cost.'

You didn't discuss this with Mr Doepel, did you?---No.

Nothing to do with him, was it?---No, not

It's a matter for you to decide how much you want to spend on the house, isn't it?---To a degree.

Did you want to borrow money from Mr Doepel?---No.

What you had to do was work out how much you were going to spend on the house. Correct?---To a degree."

287 I consider this evidence establishes that there was a measure of allowance made by the Hodgkinsons in their total budget for "increases and extras", not that they were not relying on the house cost estimate. That cost estimate was the basis for the allowance in question.

288 However, as the defendant pointed out, and the plaintiff accepted, the plaintiff had been able to sell the partially completed house for an amount that recouped the costs of construction and the land as well as the costs of various chattels the Hodgkinsons had acquired for the house, and yielded a modest surplus. The defendant submitted this meant the Hodgkinsons had suffered no loss from the cost estimate.

289 The defendant relied for this purpose particularly on the authorities of McBratney & Anor v Boston, unreported; FCt SCt of WA; Library No 940567; 14 October 1994 and J & J C Abrams Ltd v Ancliffe [1978] 2 NZLR 420.

290 In McBratney the owners of a house had claimed to have suffered loss or damage as a consequence of the conduct of the architect they had retained to supervise the house's construction in representing that the house could be built for no more than $90,000 plus agreed extras. There was valuation evidence at the trial that the house was worth more than that sum. The Court concluded that the appeal against the trial judge's determination that the owners had not persuaded him they had suffered any loss or damage should fail.

291 I note, however, the following, from the judgment of Franklyn J in McBratney at 11:

"Nowhere in the evidence to which we were referred, nor elsewhere so far as I can ascertain, is it suggested by the appellants that they would settle for, or would have built, a house that had less than they had originally required. It may well have been the case that the house they wanted could not have been built within the price range they wanted. Whether they would then have built a house with a different design or smaller, or whether they would have abandoned their plan to build on the block and either sell or keep it, is a matter of conjecture. Counsel's assertion that, had the appellants known the cost of the house would exceed $90,000, they would have built a different house on the block at a cost they could afford is not supported by the evidence. Nor can it be assumed that, had the appellants not relied upon the respondent's representations, they would not in the end have built the same house, borrowing or by some other means acquiring the necessary additional funds so to do. What they would have done in the absence of such reliance was not explored. Without that evidence one cannot say, in my opinion, that they have, necessarily or even more probably than not, suffered damages as a result of the misrepresentation."

292 I also note the following from the joint judgment of Wallwork and Owen JJ, at 11:

"It was put by counsel for the appellants that had they not entered into the transaction they would have enjoyed the benefit of the construction of a residence at a cost of $89,679 plus the agreed extras. In other words they would have built a different house that was within their budget. There are numerous difficulties in this area. For a start, so far as we were able to ascertain there was no evidence on which such an assertion could be based. There was evidence, and findings, that the appellants had a budget beyond which they could not afford to go and that this fact had been made known to the respondent. There was also a finding that but for the representation the appellants would not have entered into the agreement. It seems to us that to go the one step further and say that they would have built a different house is a matter of speculation to which the evidence does not extend."

293 It seems to me that these judgments in McBratney allow for loss or damage in a case such as this one if there is a finding that, but for the unreasonably low cost estimate, the claimant would have made another contract. The loss or damage is the loss of the opportunity to make that contract: see Seddon, N C and Ellinghaus, M P Cheshire and Fifoot's Law of Contract 8th Aust ed Sydney LexisNexis Butterworths, 2002, at [23.8], and authorities cited there. As will shortly be seen the case before me was argued for the plaintiff on just such a basis.

294 The defendant put to me that that branch of McBratney, and the authorities on loss of an opportunity to contract, should be seen as restricted to losses of business opportunities. However, I see no warrant to read either source as so restricted.

295 Nor does a basis for so reading apparent to me. It was indeed the case that on the evidence the Hodgkinsons were building for the long term as a family in the home at Blenheim Lane. However, there is no evidence that they were indifferent to the resale value of the home they were building, and indeed there is evidence to the contrary (re-examination of Mr Hodgkinson, TS 442). Circumstances in families can change - as they did, in the case of the Hodgkinsons' marriage.

296 Abrams (supra) does not in my view indicate that McBratney should not be read in any other way than I have. There a builder had given and repeated a cost estimate for the construction of two residential units even although the detailed specifications it received from the client's architect showed a higher level of specifications than the builder had contemplated when it initially gave the estimate. The builder finally told the client the much higher final cost after construction had begun and expenditures had been made. The client eventually had another builder complete the project, which the court found was reasonable to mitigate the client's loss. The value of the units was found to be significantly less than the cost of completion. The court determined the appropriate measure of damages was the difference between the value of the units when completed and the cost of completion. It does not appear that the possibility of the client making a different contract was put forward in the case.

297 Counsel for the plaintiff referred me to the following evidence of Mr Hodgkinson (examination-in-chief, TS 152):

"I had a budget of 400,000 to construct the house and 100,000 for items mentioned above to finish the house. I intended to sell my existing residence at 2 Earls Court, Mount Claremont when Blenheim Lane was finished and use the proceeds of sale to reduce my overdraft and repay any borrowings that I might have paid for the construction of Blenheim Lane.

If Doepel had indicated at this first meeting that the house that I described to him could not be built for 400,000, I would have approached other builders who I knew were building in the area, such as Webb and Brown-Neaves, Oswald Homes or Riverstone Homes, to build a house for me within my budget."

298 I was also referred to the evidence of Mr Doepel, to which I have previously referred in another connection, and which I repeat in this one, adding its larger context (cross-examination, TS 805 - TS 806):

"Can I put it to you that when a client is talking to you about the sorts of matters that Mr Hodgkinson is talking to you about, a limestone house, a limestone two storey house with all bedrooms being double sized bedrooms, when you're talking about feature internal walls out of limestone, Donnybrook stone or rammed earth, swimming pools and landscaping, cellars and the like, that's a very expensive house, isn't it?---Not necessarily. I mean, for instance, the house next door had all of those things and that was, you know, not all that expensive.

Which house?---The Fletchers' house.

It had a swimming pool?---Yes.

And you know how much that house cost to build, do you?---Well, I think it was around 450 to 500 thousand, and that was limestone as well.

So you could have then built a limestone house with a pool for 450,000 at the time?---No, Mr Hodgkinson could have gone to Riverstone and had an identical house to the one next door for about that price; correct."

299 The defendant put to me that there was no evidence that the purchase of a home as indicated is something the Hodgkinsons would in any circumstances have undertaken. I took this to mean that the Hodgkinsons had indicated from the outset their desire for an architect designed home as their permanent residence, and as the project had evolved their commitment to that outcome strengthened, as can be seen in their variations of the design and their commitments and other possible commitments to which I have referred.

300 In addition, the defendant referred me to the Hodgkinsons' course of action when they obtained the estimates of the cost of completion in early 2001, of $828,000 and then $895,613. That course had been to commit themselves to continuing, involving the expenditure of substantially more than the project home concept.

301 I return to that decision below, in relation to mitigation. For now, I note that the evidence I will examine is that Mr Hodgkinson considered the "best option was to continue with the construction to complete the house" (examination-in-chief, TS 239). He did not consider that stopping construction was a reasonable alternative at that time as he did not believe "the partly complete home would be a saleable item". He had already expended substantial funds on construction, and the building had reached the stage by 14 February 2001 that the first floor slab was in place. He had already bought almost $30,000 worth of whitegoods for the residence (examination-in-chief, TS 239). He had found himself having to sell the Earls Court residence during construction, instead of after it as on his evidence had been his intention, as I have indicated.

302 On all of that evidence, I do not consider that the Hodgkinsons' decision to continue in February 2001 indicates the implausibility of their approaching a home builder for a standard design home had there been no negligence.

303 This returns me to the evolution of the design and the commitments I have referred to. In fact, no commitments had been undertaken at the time of the 22 July 1999 letters. I note that a design to which they were prepared to commit themselves for the purposes of applying for development approval and entering into the Agreement with the defendant of July 1999 had been worked out. This would tend to indicate it would be less likely they would have abandoned that investment had there been no negligence.

304 However, it does not seem to me, in the light of the evidence I have accepted as to the importance to the Hodgkinsons of receiving the confirmation the 22 July 1999 letters provided, in the context of the previous dealings between the parties, and in particular the letter of 30 November 1998, that I should find that the loss of the opportunity to contract is not supported on the evidence, or is merely speculative. I have taken into account that, had there been no negligence, they would, in my view, have had designs they likely would have no use for, and for which they would have been expected to pay. However, the amount involved, on the evidence something between $5,000 and $10,000, would not seem to me to overcome the other evidence of the loss of the contract opportunity to which I have referred.

Was "the house" cost estimate misleading or deceptive conduct?

305 The statement of claim refers both to the general prohibitions on engaging in conduct that is misleading or deceptive, in Trade Practices Act 1974 (Cth), s 52 and Fair Trading Act 1987 (WA), s 10, as well to the prohibitions on falsely representing, in connexion with the supply of services, that services are of a particular standard, quality or grade, in Trade Practices Act, s 53(aa) and Fair Trading Act, s 12(1)(b).

306 The contravention of the latter pair of provisions is put in an implied false representation that the house cost estimate was based on a detailed itemisation of the cost of construction. This implication was from the fact that it is the practice in the construction industry to cost building works by breaking down each item of work and then estimating the construction of that item. However, no submissions were made to me in relation to these matters. I find there was evidence of some itemisation by Mr Doepel, as in relation to the allowances he would "normally" have made on certain accounts, such as for doors and kitchen appliances. However, there is no evidence the cost estimates I have found he made were made on any comprehensive itemisation. Rather, they appear to have been made in large part on the basis of his use of the quantity surveyors' publication I have referred to (Exhibit D4), which on the evidence did not involve him in any such itemisation. However, I do no have any evidence of the practice in the construction industry pleaded. Nor is it clear that practice among architects, as indicated by the Practice Note of the Royal Australian Institute of Architects to which I have referred (Exhibit P273), involves making cost estimates on any such basis.

307 I therefore find that the claim under Trade Practices Act, s 53(aa) and Fair Trading Act, s 12(1)(b) has not been made out.

308 I return to the claim of misleading or deceptive conduct. I find that "the house" cost estimate was a statement both of opinion and as to a future matter.

309 As a statement of opinion, from an architect in the circumstances of this case, it seems to me that there was implied in the cost estimate not only that the opinion was honestly held but also that it was reasonably based. So viewed, the making of "the house" cost estimate was misleading or deceptive conduct, on my findings as to negligence above.

310 As a statement of a future fact, the onus is placed on the defendant to adduce evidence that it had reasonable grounds for making the representation: Trade Practices Act, s 51A(2); or the onus is placed on the defendant to establish it had reasonable grounds for making the representation: Fair Trading Act, s 9(2). Whether the onus under the former Act is an evidentiary onus only (see Miller, R V Miller's Annotated Trade Practices Act 27th ed, Sydney Thomson Lawbook Co 2006, at [1.51A.37]) or, as it appears to me is clearly the case under the latter Act, a final one, it seems to me the defendant has not discharged the onus. The matters relied upon by the defendant are Mr Doepel's use of the quantity surveyors' publication (Exhibit D4), allied with the reduction by the builder's margin and trade discounts, particularly on the brickwork and the limestone. I have already indicated my findings with respect to those matters.

Did the Hodgkinsons act unreasonably or fail to mitigate their loss in relation to "the house" cost estimate?

311 The defendant submits that the Hodgkinsons acted unreasonably or failed to mitigate their loss in proceeding with the project at least from October 2000, when they knew or ought to have known that the cost estimate would not be borne out. If such a submission is made good, this would go to reduce the damages otherwise payable for the defendant's negligence, or on the defendant's breach of contract. It is also arguable it might reduce the damages otherwise payable for misleading or deceptive conduct under the Trade Practices Act and the Fair Trading Act: see Cheshire and Fifoot (supra), at [11.127] (discussing the authorities).

312 For the purpose of the submission, I put aside the matters of the design variations and commitments or possible commitments entered into by that time, for the reasons I have previously given. I do not consider that, by reason of those items at least, by that point they would have had knowledge or reason to know that the cost estimate would not be borne out.

313 However, there was evidence of a meeting involving the Hodgkinsons, Mr Doepel and Ms Telfer, the interior decorator, on 16 August 2000 at which costs were toted up. Considerable attention was directed to this meeting in the plaintiff's closing submissions. I begin there.

314 I have previously referred to this evidence. I particularly note the testimony of Mr Doepel as to the toting up of costs at the meeting, which on his examination-in-chief yielded a total of $890,000, including the cost of the "house as amended" of $725,000 with the other items referred to accounting for the difference. If I were to accept that evidence, it seems to me that the plaintiff would be shown to have had knowledge then that the cost estimate would not be borne out. Indeed the retention of the defendant from then until its suspension of work was accepted about one and a half months later as a repudiatory breach would call for an explanation as to why it should be found that the Hodgkinsons had relied on that cost estimate when it was given and confirmed.

315 However, I do not accept this evidence. As I previously indicated, I was invited by the plaintiff to make a determination that wherever there is a divergence between the evidence of Mr Hodgkinson and Mr Doepel I should prefer the evidence of the former. I have already indicated why I am unable to do that. The conclusion I reached earlier requires me to consider how the divergence in this instance should be resolved, by reference to the nature of the evidence each man gave, and the other evidence.

316 I consider on that examination I should conclude that, if cost was discussed, it was not in the terms of the totals of $725,000 and $890,000 referred to. I note the other evidence Mr Doepel gave as to the 16 August 2000 meeting that the discussion between the two men had been with respect to the schedule produced by the interior decorator, Ms Telfer, in the course of which costs had been toted up. If the discussion had been restricted to that schedule, it is difficult to see, on Mr Doepel's evidence as to her responsibilities by comparison with his own, how costs of the order described would have been reached. However, there is the evidence of Ms Telfer of what she heard before leaving the room as to the two men discussing the costs of limestone and the security system, neither of which appear in the schedule. At the same time, I note that there is no mention of those items in the elaboration in Mr Doepel's evidence-in-chief. There is also the evidence, to which I previously referred, that Mr Doepel had no recollection of the specific costs he listed there, and that he had kept no notes of those or any other costs from the meeting. There is the fact that none of the documents produced as a result of the meeting circulated to the Hodgkinsons and to Mr Doepel contained any cost information. And it is not clear to me how Mr Hodgkinson would have been able to assemble the information as to future costs necessary to arrive at the figures for the remaining construction work.

317 On all of this evidence, I find that there was no cost discussion at the meeting of 16 August 2000 of the sort referred to in Mr Doepel's evidence, being such as to indicate that Mr Hodgkinson knew or ought to have know that the house cost estimate would not be borne out.

318 The defendant's case directed my attention to the failure of the Hodgkinsons to call for an estimate of the cost of completion in October 2000, after they had dispensed with the services of the defendant. This failure is hard to explain, counsel submitted, if the Hodgkinsons were unhappy with the defendant's performance. It seems I was being asked to conclude that it was unreasonable in the circumstances for them not to have called for a general review of the defendant's work, or at least in a respect as significant as the cost of completion if a cost estimate had been provided as I have found.

319 Mr Hodgkinson's evidence was that at the time he and his wife dispensed with the defendant's services he had spent about $143,000 on construction costs and other expenses in relation to the project (examination-in-chief, TS 232). There is no other evidence that would call a figure of this order into question. There is also the evidence of Mr Hindley, whom the Hodgkinsons retained at this time to do the building design and supervision to complete the project in the defendant's stead, that the Hodgkinsons raised matters of a different sort with him at that time (examination-in-chief, TS 568).

320 Mr Hodgkinson's evidence was that in October 2000 his concern with the defendant's work had to do with "the poor documentation prepared by Doepel and lack of progress with the building works" (examination-in-chief, TS 232). This is confirmed by the evidence of Mr Hindley (examination-in-chief, TS 568) and by Mr Dancer (examination-in-chief, TS 478), who completed new drawings to replace those of the defendant on 11 October 2000. Those drawings included some further changes to the design the Hindley firm had recommended (examination-in-chief, TS 480)

321 Indeed, on Mr Hodgkinson's evidence the first time he began to be concerned about a cost overrun was in February 2001, when he asked Mr Dancer of Mr Hindley's firm for the first estimate to complete the construction (Exhibit P174). By that time on Mr Hodgkinson's evidence (examination-in-chief, TS 237) he had spent a total of almost $626,000 on the project, including the cost of the land and construction costs, which implies costs apart from the cost of the land of about $264,000. Again I do not consider there is other evidence that calls a figure of this order into question.

322 On this evidence I find that it has not been shown the Hodgkinsons knew or ought to have known that the house cost estimate would not be borne out before February 2001 when they asked for an estimate of the cost of completion from the Hindley firm.

323 This takes me to the decision of the Hodgkinson following the receipt of Mr Dancer's first estimate of the cost of completion (Exhibit P174) to proceed as they did. The evidence of Mr Hodgkinson in that respect was as follows (examination-in-chief, TS 238 - TS 239):

"When I received the Hindley cost estimate in February 2001 I was shocked to learn of the substantial cost overrun and I took some time to consider my option. I needed time to consider my option and to determine how I could overcome the problem that I was confronted with. I had to consider the option of proceeding with the house, arranging finance to complete the residence, discuss the matter with my bank and my accountant before I could decide upon a course of action.

After I received Hindley's estimated cost to complete it took about two weeks for me to discuss these issues with my bank manager and my accountant. After these discussions and a great deal of thought by me I decided that the best course of action open to me was to complete the residence. At this stage I was committed to Remson Steel for the steel for the upper floor and I had authorised Tom Dancer to accept Perth Rigging quote to erect the steel.

Although I was aware of Remson Steel and Perth Rigging costs I did not know the full extent of the cost of the change from brick plaster internal walls at that time. By the time I had also accepted quotes from Avlec for electrical work and Solarvac for the ducted vacuum system. By this time I had purchased almost 30,000 in whitegood for the residence. I did not consider redesign of the residence or demolition was a reasonable option at that time.

I considered the best option was to continue with the construction to complete the house. I did not consider stopping construction to be a reasonable alternative at that time because I did not believe a partly-completed house would be a saleable item. I knew it would be difficult to fund the residence but had decided to borrow funds and sell Earls Court to enable the completion of Blenheim Lane. I considered this to be the only real option available to me at the time.

I had no option other than to sell Earls Court at the time to raise enough money to continue with the construction."

324 Following this decision to complete the house to the standard intended for it, further costs were expended on the house in accordance with that decision until works ended in October 2001 (examination-in-chief, TS 240).

325 Before reaching the reasonableness of continuing to that point, with the expenditures that were made, the reasonableness of the basis for deciding so to do should be considered. The evidence as to this is that of Mr Hodgkinson, to which I have referred, as well as the evidence of Mr Ednie-Brown, the consultant architect called by the defendant (his reports are Exhibits D486 and D487), and of Mr Ashton, the quantity surveyor called by the defendant (the relevant report is Exhibit D488).

326 I have already set out the evidence of Mr Hodgkinson in his examination-in-chief. This was not shaken in cross-examination (TS 327 - TS 328).

327 The evidence of Mr Ednie-Brown was that there was by the time of the first February cost-estimate, when the first floor slab had been poured and was in place, no option to demolish the house. His evidence on that basis was that there was "an opportunity to instigate a disciplined cost controlled program", particularly in the respects his second report identified (Exhibit D487, par 12). However, as he seems to me to acknowledge in cross-examination, he had not sought to identify any specific savings, whether to attain the same sort of residence as had originally been planned, or a lesser one (cross-examination, TS 1078 -TS 1079).

328 The evidence of Mr Ashton was that the cost of completion of the house was substantially less than that in the estimates from Hindley & Associates of February and April 2001 (Exhibit D488, p 6). However, that cost estimate was for a home built to a "lesser specification", identified with a project home, and with a range of exclusions which are not costed (cross-examination, TS 1066 - TS 1068).

329 I do not consider on this evidence that it has been shown that the Hodgkinsons' decision following the receipt of the first estimate of the cost to complete to continue with a house of the same standard was an unreasonable one. Although the contrary was put to me by the defendant, I do not consider that the failure of Mr Hodgkinson to consult with suitable experts in house construction before making the decision was in the circumstances unreasonable. I particularly note in that respect the evidence of what the sale of the partially completed home in fact ultimately realised.

330 I also note that there is no evidence as to what a decision to complete the house to a lesser specification as Mr Ashton envisaged would have been expected to yield, or indeed would have produced (see particularly the cross-examination of Mr Ashton, TS 1068).

331 This leaves the matter of the reasonableness of continuing the work following the decision to complete the house, to the specification of the Blenheim Lane project, until October 2001, including the expenditures made in so doing. I can deal with the latter first. On the evidence relevant to that matter, which is that to which I have previously referred, I do not consider it has been shown that the expenditures were unreasonable, or indeed what other expenditures would have produced.

332 As to the discontinuation of the work when the Hodgkinsons did, the evidence of Mr Hodgkinson was as follows (examination-in-chief, TS 240 - TS 241):

"Roofing work was carried out by three contractors during August 2001 to October 2001. I authorised Surfa Seal to seal the limestone walls for protection. This work was done in September 2001. In August, September 2001 the funds that I could get my hands on to complete the residence had almost been exhausted. About August, September 2001 I decided to stop the construction of the works as soon as the building had reached the stage of being protected from the weather.

I was aware of another building constructed with limestone walls that had been substantially damaged due to weather. It was necessary then to get the building to the stage where it was protected from the weather and vandals."

333 Mr Hodgkinson testified that such protection, involving the installation of windows, some plastering and the addition of some fencing, was completed by October 2001 (TS 241).

334 It was put to Mr Hodgkinson in cross-examination that he had in fact caused construction to stop because of difficulties he was having with his then wife, to which he replied that it was the shortage of funds, not his personal position which produced that stoppage (cross-examination, TS 329). It would seem it was being put to Mr Hodgkinson that by that time it was apparent the house, which had been started as a family home, would never serve that purpose. I understood counsel of the defendant to put to me that I should not believe Mr Hodgkinson's response, in view of his financial position, in particular his holding of shares in the listed company Meditech to which I referred previously.

335 I do not agree. I have already referred to the evidence of Mr Hodgkinson that that holding was not saleable at the time. I also note that he had earlier sold the Earls Court residence and used the proceeds to pay down his overdraft. His evidence is that at the time of his decision to cease work his bank which apparently had security over the house had expressed its concern about his position (cross-examination, TS 329). The bank statement (Exhibit P221) shows that by this time, notwithstanding the payment in of the funds from the drawing down of the bill facility and the sale of the Earls Court property, to both of which I have referred, the account was in substantial and growing overdraft. As counsel for the defendant pointed out, the level of the overdraft was not as high as it had been on some occasions in the past, and the statements show that funds had flowed in from a variety of sources, not simply the bill facility and the sale of the Earls Court property. However, the overall picture is one of an overdraft that was continuing at substantial levels that were growing.

336 In the face of this evidence, I do not consider I should disbelieve Mr Hodgkinson's response.

337 In any event, I do not consider there is any evidence to show what loss was caused by the cessation of work on the house when it occurred. This would extend to any argument that the plaintiff unreasonably delayed (until March or April 2003, when he decided to sell the property) the resale of the partially complete house.

338 Thus, I conclude that the defendant's submission that the plaintiff's damages should be reduced for his unreasonable conduct or his failure to mitigate has not been made good.

What is the measure of the Hodgkinsons' loss or damage in respect of "the house" cost estimate?

339 I previously set out my reasons for finding that the plaintiff had made good the claim that, but for the unreasonably low cost estimate for the house, the Hodgkinsons would have sought to make another contract. That contract would have been made with a home builder to construct a home that would have been within their budget. Was such a contract available?

340 I find, on the evidence of Mr Harding of Oswald Homes, and of Mr Even, of Webb and Brown-Neave, particularly for the latter with respect to the latter firm's most expensive residence at that time, "the Residence", to which I have previously referred, as well as the evidence of Mr Doepel with respect to a home builder's product with limestone walls, to which I have also previously referred, that such a contract was available. For this purpose I particularly note the evidence of Mr Even that to include for the most expensive home his firm then had "extras" of the sort described to him an additional expenditure by the owners of about $80,000 to $100,000 might be expected (examination-in-chief, TS 543 read with TS 539). I admitted this evidence over the objection of counsel for the defendant on the basis that Mr Even was qualified by his experience with his firm to provide such evidence.

341 I accept that the home would likely not have met all of the specifications for the project the Hodgkinsons sought to undertake with the defendant, as evidence from the quantity surveyor called for the defendant, Mr Ashton (see Exhibit D488) would seem to me to suggest. I also accept that Mr Even's evidence as to the "extras" does not go or clearly go to all of the items with respect to which the Hodgkinsons entered into the commitments or possible commitments to which I have referred, although some of these appear to be within the basic specifications for "the Residence".

342 However, on all of this evidence I find that there were homes from home builders including ones in Mt Claremont which on this evidence would have substantially met the Hodgkinsons' objectives within their total budget of $500,000. On that evidence, I do not consider so finding would require speculation of the sort which was fatal to the claim in McBratney (supra).

343 On all of the evidence I conclude that the plaintiff has made out that the Hodgkinsons lost the opportunity to contract to have a home, of the sort they had been seeking to achieve, for a total budget of $500,000, provided on their land at Blenheim Lane, Mt Claremont.

344 I further find there is evidence, from the valuer called by the plaintiff, Mr Liggins, that, had such a contract with a home builder been entered into, the plaintiff, as at 31 October 2003, would have had a home with a market value of $1,260,000 (examination-in-chief, TS 582). I conclude that on the evidence of how this valuation was arrived at (examination-in-chief, TS 582 -TS 589), including the sales of a number of display homes in the area of the Blenheim Lane property, that I should find that this is the value of the contract the opportunity to conclude which the Hodgkinsons lost. I do not consider that, in the light of that conclusion, the further evidence elicited in the cross-examination of Mr Liggins of the assumptions on which he proceeded causes me to doubt that such a figure is an appropriate one in this context.

345 On that basis, the Hodgkinsons lost the opportunity to realise a profit of $398,000 at the time of the settlement of the sale of the partially completed home in October 2003. That amount is the difference between $1,260,000 and the sum of $500,000 (the cost of the other contract) and $392,000 (the cost of the Blenheim Lane land).

346 From any such amount, the parties agreed, the actual profit realised on the sale of the partially completed home should be deducted. The sale price of the Blenheim Lane property in October 2003 (Exhibit P272) was $1,075,000. The cost of partial construction of the house as resold other than the "plaintiff's additional items" was, as I have indicated, agreed by the parties at $630,804.58. This would yield a profit, allowing $362,000 for the land, of $82,195.42.

347 The net loss would then be the difference between $398,000 and $82,195.42, or $315,804.58.

348 The plaintiff claimed that there should be added to this amount interest incurred as the cost of the funds in excess of $500,000 borrowed for the construction project that resulted in the property sold with settlement in October 2003, the rental of a residence after the Earls Court property was sold until settlement, land tax for 2000, 2001, and 2002, insurance on the partially completed home from September 2001, the costs for the storage of furniture from the Earls Court home from the date 12 August 2002 and 17 June 2003, and the costs of consultants, being Mr Liggins and "Borrell Rafferty".

349 I put aside the last set of costs, the details of which, other than the total amounts pleaded, were not made apparent to me. I assume the cost for Mr Liggins was that of his reports for this case (Exhibits P271 and 272), while the cost for Borrell Rafferty was of an equivalent report. Both it seems to me represent a claim for the costs of this litigation, not a cost of mitigation, and should fall to be considered in the former context.

350 The claim for interest would seem to me to be properly put as a cost of mitigation. It is established that the costs of reasonable mitigation are recoverable: Cheshire and Fifoot, at [23.40]. On the evidence I considered in relation to mitigation, I find the steps taken following the first estimate of the costs of completion were reasonable mitigation. The costs of those steps should be recoverable. This would include, in my view, interest on the funds expended or arranged for the purposes of those steps. I have considered whether it is necessary for the plaintiff to show that no portion of those costs represented expenditure on items within the exclusions from the scope of the matters the subject of the house cost estimate. I have concluded that it is not necessary for such a showing to be made. The total expenditures represented that which Mr Hodgkinson considered to be necessary to complete the home as far as he could. I did not take the defendant to put to me that any of those expenditures were unreasonable for that purpose, and I note again that they were all recouped with a profit.

351 The claim for interest was made up of the sum of two classes of item (report of the accountant Mr R K Karia, admitted into evidence by consent as Exhibit P254). One class was interest costs incurred to pay a series of accounts for the work. The total of items in that class was $17,245.17. The other class was the interest costs on the bill facility on which Mr Hodgkinson drew down to which I previously referred. The total of items in the latter class was $47,979.16. There was no dispute as to the accuracy of these calculations.

352 However, the defendant put it to me that, while if a claim for interest was to be allowed, it should be confined to $17,245.17. The cost of the bill facility should not be allowed. It appears to have been put to me that was because the proceeds were not all expended on the Blenheim Lane project. While it is true the proceeds of the facility were, as I have previously indicated, paid into an overdraft account that was used to meet both personal expenses and construction costs, and that not all of the facility appears to have been used, I consider that the plaintiff has shown that, but for the need to make the expenditures the Hodgkinsons did to mitigate their loss, this facility would not have been necessary. I also consider, on the evidence of the overdraft account to which I have referred, that the arrangement of a bill facility, on which a draw down of the magnitude in this case to provide for future expenditures through that account was made, was reasonable for the purpose.

353 This takes me to the claim for rental of accommodation for the period after the sale of the Earls Court residence. That sale was completed on 25 June 2001, as I have indicated, and thereafter the plaintiff rented first one home and then another in Mt Claremont, for a total of rentals, letting fees and stamp duty paid in the amount of $41,920.98 (examination-in chief of Mr Hodgkinson, TS 249 - TS 251). There is no dispute as the accuracy of this amount.

354 The defendant puts against this claim that, to the extent the basis of this claim can be laid in any representation that Blenheim Lane project would be finished by the time claimed by the plaintiff, it has not been shown the Hodgkinsons relied on any such representation. I return to the claim there was such a representation below. For now, I note that the claim does not so depend, but is properly put as a cost of mitigation. The evidence is that, but for the need to meet the costs of construction, it would not have been necessary to sell the Earls Court property before the Hodgkinsons had moved into their new residence (see examination-in-chief of Mr Hodgkinson, TS 152, the passage which I have previously quoted).

355 The defendant also put against the claim that it was not shown by the plaintiff why there had been the delay in the resale of the Blenheim Lane property between October 2001 and October 2003. However, I note that the onus of proof as to failure to mitigate is on the defendant: Cheshire and Fifoot (supra), at [23.38]. I do not consider that the delay in respect of an item - a partially complete house - that on the evidence could be expected to be difficult to sell, and that is sold at a profit, emerges, on that state of the evidence, as other than reasonable conduct.

356 I find then that the claim for the rental is made out.

357 This takes me to the claim for furniture storage. On the evidence of Mr Hodgkinson (examination-in-chief, TS 251), the total amount involved is $477.87. There is no dispute as the accuracy of this amount.

358 I consider this claim is made out, for the same reasons as for the claim for the amount for rentals.

359 This takes me to the claim for insurance on the partially complete Blenheim Lane property for the period from September 2001. I note the evidence of Mr Hodgkinson (examination-in-chief, TS 251 - TS 252) that the cost involved was $9,784.10. There is no dispute as the accuracy of this amount.

360 The basis for this claim cannot in my view be put as a cost of reasonable mitigation. The Hodgkinsons would have been put to the cost of insurance had they secured their new residence. There is no evidence on the amount by which the insurance cost for the partially complete house would have exceeded that cost on a completed house on Blenheim Lane.

362 This takes me to the claim for government charges, in the form of land tax on the unimproved value of land under the Land Tax Assessment Act 1976 (WA) on the Blenheim Lane property. The evidence of Mr Hodgkinson (examination-in-chief, TS 251) is that for the years 2000, 2001 and 2002, the total amount involved is $6,443.20. There is no dispute as the accuracy of this amount.

363 The basis of this claim is that, had the construction on the Blenheim Lane property been completed in accordance with the representation that Blenheim Lane project would be finished by the time as claimed by the plaintiff, no such amount would have been payable. I return to that claim below. While I do not consider that claim is made out, there is evidence that Mr Hodgkinson had indicated to Mr Doepel that he was keen construction would be complete by September 2000, and Mr Doepel did not dissent from that possibility. I would conclude from that evidence that there was reason to conclude construction could be expected to conclude by or within a reasonable time of that date, extended as I will indicate by the delays brought about by the problems arising out of the ground floor slab.

364 This conclusion is relevant to the consideration of the present claim as a cost of mitigation. It is not shown that the discontinuation of construction at a point before the avoidance of liability to land tax was not a reasonable step in mitigation, and indeed the contrary is indicated, as I have already explained. On my conclusion on the evidence as to the time for completion to which I have referred, it is established in my view that completion would have occurred some time in the land tax assessment year 2000/2001, which would have avoided tax in that and subsequent years: s 24 of the Land Tax Assessment Act.

365 On that basis, it seems to me that a claim running from that year to 2002/2003, which I understand to be the plaintiff's claim, is made out.

Was there loss or damage by misleading or deceptive conduct by failure to inform the Hodgkinsons of certain matters?

366 It is pleaded that there was such conduct by the defendant in its failure to inform them that there was no detailed breakdown of the costs to construct the house on the Blenheim Lane property, or that it had not obtained an estimate of the cost of construction from a qualified quantity surveyor. Such failure, it is pleaded, gave rise to the reasonable expectation that the Hodgkinsons would not have agreed to commence construction had they been provided with an accurate cost estimate, and thereby they lost the opportunity to revise the design of the house so as to reduce the construction costs to a sum within their budget. It appears this pleading is relied upon as making out a contravention of s 52 of the Trade Practices Act and s 10 of the Fair Trading Act.

367 There was indeed no evidence the defendant did any more detailed a breakdown of costs than to the extent indicated in the 30 November 1998 letter, and his evidence as to the allowances that would "normally" be made in respect of certain items in a "shell" to which I have referred. Nor is there any evidence of any attempt by the defendant to obtain an estimate from a quantity surveyor, the evidence with respect to which I have previously considered.

368 However, there was no evidence to which my attention was drawn that indicates that disclosure of the lack of a detailed breakdown having been done would have led to the result pleaded, or any other result. I have previously indicated how I viewed the evidence as to the matter of the lack of an estimate from another source.

369 On this basis, I do not consider the pleading under this heading is made good.

Was there loss by a cost estimate representation as to the additional limestone and rammed earth walls?

370 The further amended statement of claim pleads that the in May or June 2000 the plaintiff on behalf of himself and Mrs Hodgkinson requested Mr Doepel to advise as to the costs of deleting existing internal brick and plaster walls and replacing them with limestone and rammed earth walls. It is pleaded that Mr Doepel represented that the cost of that variation would be approximately the same as if the existing internal brick and plaster walls were constructed. It is further pleaded that this representation was a failure by the defendant to exercise the skill and professionalism of a qualified registered architect.

371 I have previously referred to the evidence as to what passed between Mr Doepel and Mr Hodgkinson when the matter of the variation pleaded arose. On that evidence, I consider that a representation by conduct is made out as to the limestone walls, but not as to the rammed earth ones. In relation to the latter, as I indicated, Mr Hodgkinson made his own determination after he was alerted by Mr Doepel as to the expense of the rammed earth walls quoted.

372 However, it is not apparent to me what loss flowed from the representation I have found. The amount of increased cost at stake was on the evidence in the order of no more than $51,000, after allowing for the increase Mr Hodgkinson had calculated. There is no evidence that Mr Hodgkinson would at that point have determined on that basis to resort to the project home option, especially as construction had by then begun. There is also the evidence he had recouped his costs in the sale of the partially completed home in 2003.

373 On all of this evidence, I find that the plaintiff has not made out any loss from this claim.

Was there a representation as to completion time?

374 The plaintiff's claim is that in or about July 1999, at the time the house construction cost estimate was made, the defendant represented to the Hodgkinsons that the house could be completed by September 2000 if the defendant's services were retained. In reliance on that representation the Hodgkinsons retained those services. The defendant in making the representation was liable for having acted negligently, and in breach of the Agreement of July 1999, and was also liable on a contravention of the misleading or deceptive conduct provisions of the Trade Practices Act and the Fair Trading Act. The basis for liability lay in each case in the failure of the defendant to have carried out any adequate project planning or prepared a coordinated works programme and the failure to have reached a position that completion by December 2000 was indicated. That date allowed for the extra construction time the result of the problems with the ground floor slab to which I have referred.

375 The evidence as to the making of the representation relied upon was from Mr Hodgkinson and Mr Doepel.

376 Mr Hodgkinson testified that in the discussions with Mr Doepel of 23 July 1999, concerning the first letter from him dated 22 July 1999, Mr Hodgkinson told him he was "keen for the residence to be completed before the GST was introduced on 1st July 2000" (examination-in-chief, TS 161). It was in the "same discussion" that Mr Doepel had made the representation claimed.

377 In the cross-examination of Mr Hodgkinson, he initially testified that Mr Doepel had told him the house could be completed before the GST came in, before further testifying he was mistaken in that regard, and that the date Mr Doepel had given him was September 2000 (cross-examination, TS 367, TS 370).

378 Mr Doepel's evidence in this respect was as follows (cross-examination, TS 957):

"DONALDSON, MR: Now, Mr Doepel, it is the case that when this job commenced in - well, when the development approval plans were lodged in 1999, you had a discussion with Mr Hodgkinson about the approximate time that the building project would take?---I may have done. I can't recall it.

You recall there being a discussion that it was to occur either before or shortly after the introduction of the GST on 1 July 2000?---When are we talking? We're talking sometime in 1999?

Yes?---That may have been discussed. I can't recall it.

Yes. Mr Hodgkinson had it in mind and you knew that the building was to be finished, say, by September 2000, so he could buy material prior to the introduction of the GST?---He may have said that, yes."

379 I also note there is no reference to a completion date in any of the documentary evidence, and in particular none in the 22 July 1999 letters.

380 I consider this evidence establishes that Mr Hodgkinson had made known to Mr Doepel his keenness to have the work completed as soon as possible before or after the date of the introduction of the GST.

381 However, on the same evidence, I find that the plaintiff has not established that the Hodgkinsons had sought or obtained an assurance from Mr Doepel in this regard. His conduct may have led them to believe that he did not dissent from the view that construction could be completed by September 2000, but I consider the matter can be put no higher than that. Had an assurance been sought or obtained, I would have expected it to have been included in the second letter of 22 July 1999 or otherwise in documentation that passed between the parties.

382 On the view of the evidence I have just described, I do not consider that it has been made out that the Hodgkinsons relied on that conduct of Mr Doepel in deciding whether or not to enter in the Agreement of July 1999.

383 Thus, I do not consider the plaintiff's claim resting on the time for completion to have been made out.

384 The plaintiff's claim is for the defendant's breach of the Agreement of July 1999 in preparing drawings in or about August 1999 without using the using the skill and care required by the Agreement. Particular drawings are identified, including drawings obtained from the structural engineer for the project. The damages claimed are the cost of obtaining drawings from Hindley & Associates in October 2001, in the amount of $4,950.

385 The evidence relied upon by the plaintiff is that of Mr Dancer of Hindley & Associates, and the "revised fee proposal" for the "lump sum fee including GST" from the firm (Exhibit P134). Mr Dancer's evidence itemises, in at least some of the drawings with which he had been supplied for the purposes of his report (Exhibit P235), which included both a number of those particularised in the plaintiff's claim and others, deficiencies he identifies in them, including in at least one of the documents particularised by the plaintiff. His evidence is also that as a consequence of those matters new working drawing documentation was prepared (examination-in-chief, TS 491 -TS 492).

386 Mr Dancer was cross-examined at length on this evidence (TS 512 -TS 521). I do not consider his evidence, that the material he received, being drawings done by Mr Doepel and other drawings he had procured, in his view had the deficiencies he described, was shaken. I also find that it was as a consequence of the view referred to the new documentation was prepared, which resulted in a lump sum fee of $4,950.

387 I have noted the evidence of Mr Doepel in which he takes issue with there being deficiencies in the respects referred to by Mr Dancer (in which he reads from Exhibit D650, Mr Doepel's relevant responsive witness statement). If it were necessary to do so, I would conclude that there were sufficient deficiencies in the work done to merit the drawings being redone. It does not seem to me to be easy to explain the identification of the need to address such matters in the fee proposal from Hindley & Associates otherwise.

388 However, I do not consider it is necessary to reach such a conclusion. This is because I also note that at least two items in the revised fee proposal for the documentation (Exhibit P134) are not included among the deficiencies identified in Mr Dancer's evidence, being the "roof plan" and "stair details". I also note Mr Doepel's evidence that at or about the time, on 27 September 2000, he suspended work on the project, further changes to the design were still being made by the Hodgkinsons, whom he had informed, by fax dated 11 September 2000 to which I have previously referred (Exhibit D105) that new drawings to replace the previous ones were needed to accommodate changes made to that point (examination-in-chief, TS 687 - TS 688).

389 I consider on this evidence that at least part of the work for which the plaintiff's claim was made related to matter other than the deficiencies in the drawings the subject of Mr Dancer's evidence. There was no basis in the evidence on which I could apportion in this respect the fee which was relied upon as the measure of damages in the present context.

390 Therefore I do not consider the claim for defective drawings is made out.

391 The further amended statement of claim contains a claim for interest from 4 October 2000 to the date of judgment under Supreme Court Act 1935 (WA), s 32.

392 I consider in the exercise of my discretion under that provision this is a case in which it is appropriate to award pre-judgment interest under the provision. The appropriate rates should be the same as for interest on judgment debts, being those rates gazetted for the purposes of former s 14 of the Supreme Court Act and are now, effective 1 May 2005, the ones prescribed by regulation under s 8(1)(a) of the Civil Judgments Enforcement Act 2004 (WA).

393 There was no argument directed to me as to the date of 4 October 2000 as that from which interest should accrue. I note that was the date of the letter from the solicitors for the Hodgkinsons to the defendant terminating the Agreement with it for repudiatory breach (Exhibit P153). I consider that date to be a not inappropriate one for these purposes. It is the date as at which the contractual relationship between the defendant and the Hodgkinsons ceased. Were it not for the defendant's breach, with construction at the stage it had then reached, and expenditure on other accounts then as it was, as I have indicated, the Hodgkinsons might have been able to take other action in respect of the house. I have already indicated why in my view it has not been shown they acted unreasonably in acting as they did.

394 Accordingly, I would be inclined to award interest as claimed under this head. However, I would be prepared to receive submissions from counsel on the date from which interest should run.

395 In view of my conclusions in these reasons, I will hear from the parties as to the appropriate orders to make in this case.

CITATION : HODGKINSON -v- DOEPEL & ASSOCIATES ARCHITECTS PTY LTD [2006] WASC 237 (S)

HEARD : 15-19, 22-26, 29 & 30 AUGUST 2005, 7 MARCH 2007

DOEPEL & ASSOCIATES ARCHITECTS PTY LTD (ACN 069 628 440)

DOEPEL & ASSOCIATES ARCHITECTS PTY LTD (ACN 069 628 440)

Costs - Application for special costs - Legal Practice Act 2003 (WA), s 215 - Removal of time limits - Whether costs allowable under Legal Costs Determinations are inadequate - Turns on own facts

Rules of the Supreme Court, O 66 r 12(1), O 66 r 13(c)

Application for special costs order granted in respect of certain items

First Defendant by Counterclaim : Mr D J Garnsworthy

Second Defendant by Counterclaim : Mr D J Garnsworthy

1 This is an application, by the plaintiff, made pursuant to the liberty to apply provided for in my judgment following the trial of this action, for certain orders as to costs. The case for those orders is said to rest, at least in large part, as to most of the orders sought, on the issues of complexity of fact and law relied upon in the material filed in support of the application.

2 In the argument before me, and in the material in support of the application, those orders were referred to as special orders as to costs. I will consider below whether or not that is an adequate description.

3 I begin this judgment by briefly describing by way of background the action and my judgment in it, as well as the orders on that judgment. In that description I will highlight those matters that may be of significance to the plaintiff's case for the orders he seeks. I would emphasise, however, that, as is not uncommon in judgments on applications for special costs orders following judgment, this judgment is meant to be read with the judgment in the action.

4 I will then describe the present application and the material filed in support of it.

5 I will proceed from there to rehearse the principles applicable to the application. In particular, I will need to consider the nature of my jurisdiction. As will become apparent, that is a matter of some nicety that is of importance in this case. In addition, I will consider the approach to the exercise of my jurisdiction that has been followed in other cases.

6 I will then apply the principles I have described to the plaintiff's application.

7 The concluding section of this judgment is my orders.

8 The action was commenced by writ of summons on 13 February 2001. It was an action arising out of the provision to the plaintiff and his wife by the defendant, an architect and licensed builder, of architectural and building services. Those services were in relation to the construction of a new residence, which began in about December 1999. Construction of the residence was halted in or about September 2001, when the plaintiff had exhausted the funds he could secure for the purpose. Subsequently, in October 2003, settlement occurred on the resale of the house and land for an amount that recouped the costs of construction and the land on which the house sat, as well as the costs of certain chattels the plaintiff and his wife had bought for the house, while yielding a modest surplus.

9 The plaintiff acquired the rights of his wife, and commenced action claiming relief for damages for defects in the architectural and building services provided. The defects pleaded were in relation to advice as to the cost of the work and the time taken for its completion. Liability was referred to breach of contract, contraventions of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (WA), and negligence. The statement of claim and defence and counterclaim were both amended at least once before trial. By trial the plaintiff had abandoned one of its claims for damages and the defendant's counterclaim had been dismissed. At trial I gave leave to amend the re-amended statement of claim.

10 Prior to trial, by notice dated and filed 23 December 2004, the plaintiff called on the defendant to admit the facts over some six pages. By the end of the trial, I was told that the defendant did not require a number of those matters to be proved.

11 The trial commenced on 15 August 2005, and went for several periods, ending on 30 August 2005 and totalling 12 days. The trial involved the calling of 15 witnesses, including a number of experts on the practice of architecture and on home building. More than 484 documentary exhibits were tendered by the parties, including 219 by the plaintiff. My judgment was given on 27 October 2006, and ran to 114 pages. On 6 December 2006, there was a further hearing for me to take submissions on the date from which the entitlement of the plaintiff which I determined should run.

12 The issues at trial which my judgment identified were:

• Whether or not a cost estimate for the house project had been made on which liability might rest;
• What the cost estimate or estimates, if any, covered;
• Whether the cost estimate was borne out;
• Whether the cost estimate was negligently made;
• What loss or damage, if any, was caused by the cost estimate;
• Whether the making of the cost estimate was misleading or deceptive conduct;
• Whether the plaintiff and his wife acted unreasonably or failed to mitigate their loss in relation to the cost estimate;
• What was the measure of the loss or damage of the plaintiff and his wife in respect of the cost estimate;
• Whether there was a loss or damage by a failure to inform the plaintiff and his wife of certain matters;
• Whether there was loss by a cost estimate representation as to certain walls for the house;
• Whether there was a representation as to the completion time for the house;
• Whether there was liability for any defective drawings done for the house; and
• Whether the claim for pre-judgment interest should be allowed.

13 In my judgment, given on 27 October 2006, Hodgkinson v Doepel & Associates Architects Pty Ltd [2006] WASC 237, I found for the plaintiff on most, but not all, of these issues. The findings for the plaintiff were the following.

14 I found for the plaintiff in relation to the issues of whether there was a cost estimate for the house project which was not borne out, was negligent, and was a contravention of the Trade Practices Act and Fair Trading Act provisions relied upon. Loss or damage had been caused by the cost estimate which was to be measured by reference to the loss of an opportunity to make an alternative house construction contract, and the plaintiff and his wife had not acted unreasonably or failed to mitigate their loss in relation to the cost estimate such that the plaintiff's damages should be reduced on that account, while certain items, but not others, should be included in those damages, as costs of mitigation. In effect, of the 12 issues listed, the plaintiff was successful in whole or in part on all but three of them. As to one of those three, that of a cost estimate as to certain walls of the house, many of the matters raised there were relevant to other issues on which the plaintiff was successful: see Hodgkinson (supra), at [371], read with [146] to [158].

15 In view of the conclusions at which I had arrived, involving partial success for the plaintiff, my judgment invited the parties to make submissions to me about the appropriate orders to make arising out of my reasons. In particular, having determined the plaintiff should have pre-judgment interest on his damages, I allowed for further submissions on a date from which the claim should run other than that put forward by the plaintiff. At a further hearing on 7 December 2006 after hearing submissions from both counsel I determined that the date should be a later one than the plaintiff had contended for.

16 In the event, at the conclusion of the hearing on 7 December 2006, I determined that judgment should be given for the plaintiff in terms that:

• The defendant pay the plaintiff $429,870.96 and interest thereon;
• The defendant pay the plaintiff's costs of the action including any reserved costs to be taxed with a direction that the Taxing Officer make a reasonable allowance for Senior Counsel and for the cost of the transcript;
• The plaintiff have liberty to apply for any special costs orders or directions within 30 days of the order; and
• There be liberty to apply for both parties in any other respect.

17 Subsequently, the parties agreed on a sum for interest, in the amount of $90,013.56, which the plaintiff wished to incorporate into the terms of the judgment.

18 I was told at the hearing that the present application was not to finalise the judgment, which the parties understood to have been extracted, but was rather pursuant to the second last item just listed. I should add that it was not my impression that the judgment had been extracted. However, I do not go further into the matter for the purposes of this judgment.

19 These reasons are concerned with the special costs orders applied for.

The present application and its supporting material

20 On 22 December 2006 an affidavit of John David Finlay was filed at the Court under cover of a letter from Mr Finlay's firm. The letter said that "the affidavit was sworn in support of an application for special orders as to costs" pursuant to the "leave granted" by me.

21 I am informed by the solicitors for the plaintiff that on 19 January 2007 the central office of the Court informed them the only documents the central office had in respect of the application were the annexures to that affidavit, "JF1" to "JF6", and the cover letter.

22 On 24 January 2007 a fresh affidavit by Mr Finlay, sworn on 23 January 2007, with its annexures "JF1" to "JF6" (the "Finlay affidavit of 23 January 2007"), was filed. I am told this is the text of the affidavit with the same annexures that the solicitors believed they had filed on the earlier date. In any event this is the only supporting material on which there was reliance for the plaintiff at the hearing before me on the present application.

23 Annexure "JF6" to the Finlay affidavit of 23 January 2007 is a draft minute of costs orders. At the hearing this was replaced by a minute of orders (the "minute of orders") that made a number of minor corrections to the earlier document, and has the following proposed orders, embodying further corrections made at the hearing:

1. A direction that the taxing officer make reasonable allowance for the fees of senior counsel including fee on brief and refresher.
2. Orders that the limits of any relevant determination not apply to:

f. The costs of attending an informal conference with a direction to the taxing officer to make reasonable allowance for the costs of both senior counsel and instructing solicitor attending and preparing for that conference.

1. The plaintiff be awarded reserved costs;
2. A direction that the taxing officer make reasonable allowance for the cost of opening and closing submissions prepared by senior counsel in addition to any other allowance that may be available by reference to the relevant scale.
3. An order that the plaintiff recover his costs of this application to be agreed or taxed as an application in chambers.

24 At the hearing, Mr Garnsworthy noted that proposed orders 1, 2a and 2b, and 3, were unnecessary, in view of the orders on judgment. I agree.

25 In the Finlay affidavit, there is a reference to annexure "JF1" as a draft bill of costs prepared by Mr Garnsworthy showing the maximum remuneration available on the relevant scale (there are several such, as I will explain), and "the costs actually incurred and which will be claimed if the orders sought are granted" (par 6). After referring to the plaintiff's payment of the deponent's fees pursuant to "a costs agreement in writing", and of senior counsel's fee notes, the deponent says (par 12):

"[i]n further support of the application ... that the remuneration available on scale is inadequate and to a significant degree, having regard to issues of complexity of fact and law."

26 The deponent goes on to list 17 "factors" by which "that complexity is illustrated". The 17 factors are:

1. The length of the trial and the date of the delivery of the judgment;
2. The length of the judgment;

1. Analysis of the law relating to damages arising from a cost estimate not prepared with care and skill;

1. The failure of the plaintiff [sic the defendant] to respond to a notice to admit facts which is annexure "JD5", until "late in the proceedings";
2. The necessity to proof the plaintiff exhaustively concerning event, meetings and conversations between March 1999 and October 2001;
3. Analysis of the agreement in writing between the plaintiff and the defendant;
4. The number of witnesses called by each party;
5. The proofing of each witness for the plaintiff by the deponent;
6. The nature of the case, as one requiring the proper and careful briefing of expert witnesses;
7. The eight witness statements produced for the defendant in relation to which senior counsel prepared notices of objection;
8. The extent of the document management having regard to the number of documents tendered in evidence by the parties;

1. The greater attention to detail required in relation to the facts to an extent not usually encountered at trial;

1. The preparation of detailed opening and closing submissions by senior counsel, prepared during or immediately after the hearing in addition to mastery of the brief and conduct of the trial;
2. The statement of claim, which received the attention of both senior and junior counsel as to the damages claim, was generally a document needing greater than usual attention "having regard to the level of detail";
3. The answers to the request for particulars of the amended reply involved giving greater detail than contemplated by the scale allowance, with six pages of additional particulars given in relation to question 6;
4. The informal conference on 6 April 2005 which lasted for three hours and was attended by all parties, additional time being spent by senior counsel and the deponent in preparation for the conference; and
5. Counsel fees for a subsequent day of trial related to work done by both senior and junior counsel over an intervening weekend during the hearing of the action.

27 I turn now to consider the applicable principles which should guide the consideration of the case for special costs orders.

28 The matter of my jurisdiction to make the orders sought is not altogether straightforward. However, both counsel agreed it was under Legal Practice Act 2003 (WA), s 215, which reads:

"215. Effect of determination

(1) Subject to sections 221 and 241 of this Act and section 14 of the Legal Aid Commission Act 1976 -

(a) the taxation of bills of costs of legal practitioners, as between legal practitioner and client or party and party; and

(b) any other aspect of the remuneration of legal practitioners the subject of a determination,

is regulated by a legal costs determination in force under section 210.

(2) Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -

(a) order the payment of costs above those fixed by the determination;

(b) fix higher limits of costs than those fixed in the determination;

(c) remove limits on costs fixed in the determination;

(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or taxed.

(3) Nothing in subsection (1) is to be construed as limiting the power of a court, a judicial officer or a taxing officer of a court to determine in any particular case before that court or judicial officer the amount of costs allowed.

(4) If a legal costs determination is in force under section 210 in respect of any business referred to in section 210(2), any other subsidiary legislation fixing or purporting to regulate the remuneration of legal practitioners in respect of that kind of business is of no force or effect."

29 It has been held that, since the coming into force of the Act, on 1 January 2004, this provision has displaced the former source of the Court's jurisdiction, in O 66 r 12(1), which was a wider provision: SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S2), Roberts-Smith J (as he then was), at [97] - [98], followed in Green v Wilden Pty Ltd [2005] WASC 83, Hasluck J, at [180] and [181]; see also Tipperary Developments Pty Ltd v The State of Western Australia [2006] WASC 137, Murray ACJ, at [45]. However, I also note Townsend v Collova [2005] WASC 4(S), Le Miere J, at [48], in which his Honour applies O 66 r 12(1) in respect of a judgment pronounced on 14 January 2005, and does not refer to Act, s 215.

30 I further note that O 66 r 12(1) was itself repealed effective 1 March 2007.

31 However, I consider I do not need to determine whether or not that repeal determined the principles upon which I should proceed. I so consider in view of the conclusions in SDS Corporation (supra) to which I have referred, and the first of two further points I take from that decision which I reach next.

32 There are two points to be noted about the Act, s 215, that are or may be relevant to me. First, s 215 governs any application for special orders made in respect of a right to costs that arose after the date of the coming into force of the Act, whether or not the subject matter of the special order was work done or payments made before that date, and such a right arises when the judgment awards costs: SDS Corporation (supra), at [99], [100]. That arose in this case at the earliest when, on 7 December 2006, I indicated the terms of the judgment order for costs.

33 The second point for me to note about s 215 was also considered in SDS Corporation (supra). That point is whether "unusual" in s 215(2) qualifies "complexity" as well as "difficulty". In SDS Corporation Roberts-Smith J at [102] - [106] considered the issue, and concluded that "unusual" qualified "difficulty" only. This conclusion appears to be followed by Hasluck J in Green (supra), at [182]. I consider it is the correct view, for the reasons indicated in the former judgment. In any event, in the face of the support it has commanded in this Court thus far, I propose to follow it.

34 The authorities I have cited thus far appear to be the most recent on the making of special costs orders under s 215. I put aside Townsend (supra) for this purpose, as it did not involve any consideration of s 215. I will return to that case in another context, below.

35 The authorities decided under s 215 also have the advantage for me of drawing on the authorities on making such orders under prior law, to the extent those authorities continue to be relevant. What further relevant guidance do the more recent authorities, and the earlier authorities they refer to, offer?

36 A most useful short description of some of the lessons of the prior decisions is in Green (supra), Hasluck J, at [182]:

"There is no reason why the amount of work involved in the preparation of a case cannot of itself show that the costs allowable by a legal costs determination are inadequate: see Schmidt v Gilmour [1988] WAR 219. In complex litigation it may be necessary to supply detailed affidavit evidence to support an application for an order increasing the scale allowance: Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1994) 13 WAR 242 at 248."

37 The relevance of the adequacy determination lies in the requirements for a special costs order that rests on complexity. Those requirements are that, for the subject matter of each such order, as follows, from SDS Corporation (supra), Roberts-Smith J, at [106]:

"(a) the amount of costs allowable under a Determination is inadequate;

(b) because of:

38 I also note a number of lessons from Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122(S), Pullin J (as he then was). This judgment, on the jurisdiction to make indemnity costs orders (such an order is not sought here), also contains a valuable discussion of the jurisdiction under O 66 r 12(1), and in both respects was referred to with approval in Tipperary Developments (supra), Murray ACJ, at [38].

39 Of particular relevance to me from Flotilla Nominees (supra) are Pullin J's references to the claim for a special costs order to lift the hourly rate above that provided for in the scale, or to lift the hours provided in the scale, or a combination of the two (at [22], [23]):

"Secondly, a special costs order might be made in relation to the hourly rates provided for an item in the scale. An hourly rate might be thought to be too low for some reason. A special costs order will not be necessary if the amount to be claimed is no more than the maximum dollar amount specified for that item. So, for example, item 8(b) [of The Legal Practitioners (Supreme Court) (Contentious Business) Determination 1996], which relates to the giving of particulars of a pleading, provides for a maximum dollar amount based on the assumption that a junior practitioner will carry out the work and take up to five hours to complete such work. It is quite proper on taxation under that item to show that a senior practitioner did the work, but in that case the senior practitioner in the ordinary case would have to complete the work in less than five hours to stay within the dollar limit specified in the scale for that item. If a successful party considers that much more than five hours had to be spent on the task and believes that it can be demonstrated that this was reasonably necessary on a taxation, and also wishes to demonstrate that all of the work was performed by a senior practitioner and that the remuneration should be at the senior practitioner's rate, then a special costs order should be sought. The order that might be sought might be that the 'costs in relation to item 8(b) be taxed without regard to the limit in the scale and that the costs be taxed at the senior practitioner's rate' (or "at the rate of $x per hour"). The need for an order of this sort would be necessary if a costs agreement under s 59 of the Legal Practitioners Act [Act, s 221] has been entered into by the successful party, the hourly rates in the agreement are higher than in the scale, and the party wishes costs to be taxed at that rate. However, the details of the agreement, and in particular the hourly rate which the party applying for a special costs order wants to apply, should be disclosed when the application is made. In my opinion, it is not correct for a party to seek an order lifting limits in the scale without disclosing to the Judge the details of the agreement or the hourly rate which the applicant wants to use on taxation (and only later inform the taxing officer of the rate). I should also add that there should be no expectation that, as a matter of course, rates in the costs agreement which are above scale will be ordered to be the rates to apply in taxation as between party and party. There would have to be evidence justifying the higher rate. The whole point of the existing scale is that the rates are struck by reference to what is being charged within the profession. It is true that the hourly rates can only be an average or mean of the upper rates determined in the survey, and there will be some cases where the unusual complexity or importance of the case warrants the special expertise of the practitioner involved and warrants an increase in the hourly rate. In some cases not involving unusual complexity or importance, the higher rates paid will not be recoverable. A party is always entitled to the luxury of retaining the highest paid practitioners in the conduct of their case, but they cannot always expect to recover these costs from the other party. If the hourly rates in the scale are thought by parties or practitioners to be too low for work which is not of unusual complexity or importance, then submissions should be made to the Legal Costs Committee to increase the rates in the scale.

Thirdly, the successful party might contend that the time allowed for performance of the work is inadequate. Say, for example, the time allowed for giving particulars of the pleading in item 8(b) is said to be five hours. If this is considered to be inadequate and there is no wish to seek an increase in relation to the hourly rate, then the appropriate order is to ask that the amount be lifted or taxed without regard to the limit. If that is the only order made, then, in my opinion, the taxing officer should tax on the assumption that above the maximum amount allowed by the scale, the hourly rate will be that fixed by the scale."

40 Before me, counsel for the plaintiff, Mr Garnsworthy, indicated none of the orders he sought were intended to uplift the relevant hourly rate. Rather, he was seeking to have the costs determination made without the taxing officer being constrained by the relevant scale limits on hours.

41 However, as I will indicate, I consider that some of the orders he seeks do indeed go to allowing for an uplift of the hourly rate.

42 Informed by Flotilla Nominees (supra), I am of the view that both the intention as Mr Garnsworthy described it, and the further consideration I have just described, should (where relevant) shape any special costs orders in this case.

43 I note that the reference to disclosure of the terms of any costs agreement in the quotation above needs to be read in the context of Pullin J's consideration of the evidentiary basis for the making of a special costs order. Where the applicant is seeking such an order in relation to the hourly rate the subject of the costs agreement, and is relying on the costs agreement in which such a rate is stipulated for, it would be necessary to provide that rate to the Court.

44 However, in my view, that does not amount to a general requirement for disclosure of the terms of a cost agreement, even in a case where an uplift of the hourly rate is sought. So to suggest would be contrary to SDS (supra), Roberts-Smith J, at [58] - [62]. Thus, the evidence for a higher hourly rate relied upon may be elsewhere, as in the nature of the issues raised by the action as it progressed coupled with the fact of payment of the higher rate.

45 I also note the reference from Flotilla Nominees (supra) to the relevance of the overriding significance of the reasonableness of the time said to be expended in relation to a particular item claimed in a bill of costs as follows (Pullin J, at [28], [29]):

"The test of reasonableness will apply even where there is a costs agreement. Unreasonable costs, or costs unreasonably incurred, will not be recovered under an indemnity costs order. Nor will they be recovered under a special costs order. Having referred to the proposed order in Tetijo's case [Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd, unreported; Fed Ct of Aust; 3 May 1991], counsel for the plaintiff then took me to the case of Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400, which was a case in which Malcolm CJ would have made a special costs order but for delay in making the application. In his reasons for decision, the Chief Justice said:

'The making of such an order would in no way limit the decision of the Taxing Master to determine whether any particular item of work, the subject of the defendant's bill of costs for taxation, was reasonably necessary for the purposes of the case, or whether any particular item of costs or disbursements was necessarily or reasonably incurred in connection with the litigation.'

From this the plaintiff submitted that in relation to the special costs order, not only was the test of reasonableness applied but, in addition, the costs were scrutinised to determine whether they were "necessarily" incurred in connection with the litigation. I do not interpret the Chief Justice's judgment as introducing some additional test in relation to the taxation of costs under an order pursuant to O 66 r 12(1). In my view, work which has been performed which was not 'necessarily incurred' in connection with the litigation would be costs not "reasonably incurred"."

46 I further note the following from Flotilla (supra), Pullin J at [43], with respect to the general approach to an application like the one before me:

"I am required to draw on my own experience, to act on impressions gained during the litigation, and to take into account the issues which have been involved. See Esther Investments Pty Ltd v Markalinga Pty Ltd (supra) at 404. I am very conscious of the need not to fall into the trap of making an estimate of the time which I consider would have been spent on the tasks, when I do not have all information before me to make the judgment."

47 See also SDS Corporation (supra), Roberts-Smith J, at [162]:

"The effect of a special costs order does not impede the discretion of the taxing officer. Where made, the order merely allows the officer to consider the charges made beyond the scale limit. It remains entirely for the exercise of the taxing officer's discretion to determine whether or not they should be allowed as being reasonable charges for work necessarily or reasonably done."

48 I return to the latter quotation at a number of points below.

49 Finally, in respect of s 215, I note that the draft bill of costs provides for recovery against the item in the scale established by Legal Costs Committee under the relevant legislation (the Legal Practitioners Act 1893 (WA), s 58W, or the Act, s 210, as the case may be) that appears to be the scale in force at the time the work claimed for was done. The scales that appear to be so used are the 1999, 2002, 2004, and 2006 Determinations. It is possible, for the reasons given in Tipperary Developments (supra), Murray ACJ, at [44] - [46], to make an order under Act, s 215(2), in litigation extending over the sort of time period of this litigation, to make just one of the Determinations applicable to all of the work claimed for. I consider this would be possible even if the matter were not otherwise a complex one. However, no such order is sought here.

50 I should also note that the application before me includes a request for a costs order in respect of the present hearing. My attention was drawn to O 66 r 13, which reads as follows:

"In any matter or case to which any relevant scale does not apply, the Court may -

(a) award a lump sum by way of costs;

(b) direct the Taxing Officer to tax or allow costs analogous to those allowable under the said scale;

(c) direct the Taxing Officer to tax and allow reasonable costs."

51 It was explained to me that the application in that respect is brought under O 66 r 13(c), to avoid the present application being dealt with as part of 2006 Determination, item 19(g) (attending on reserved judgment). I return to this below.

Application of these principles in this case: the matter of complexity

52 As Mr Garnsworthy put to me, this is a matter of pervasive significance to his submissions for each of the special costs orders he seeks. The complexity on which he relies is both of the factual and the legal kind.

53 At the hearing before me Mr Garnsworthy drew to my attention the number of factual issues raised at the trial, which I have previously enumerated. I agree that the case was factually complex, involving as it did accounting for an evolving house design over the time leading up to and the time of its construction until that construction was halted. As the trial Judge, my experience was that this posed considerable challenges in evidence marshalling, presentation and testing.

54 Mr Garnsworthy in his written submissions referred to the failure by the defendant until late in the trial to admit facts put to the defendant by the notice to admit of 12 December 2004. This put the plaintiff to the cost of preparing to prove the facts. However, before me in oral argument, he noted that this point was not pressed as a reason for a special costs order, in view of the award of costs to the plaintiff. This was except as a (partial) response to the defendant's argument, which I am about to reach, that the defendant's partial success was a reason not to make a special costs order of any of the sorts still pressed.

55 There is, of course, special provision, in O 66 r 3(2), for costs where a notice to admit is served under O 30 r 2 and a party "refuses or neglects to admit the facts within 7 days". In that case, "the costs of proving the facts shall be paid by him, unless the Court otherwise orders".

56 Here, the facts did not have to be proved, by reason of the concessions by the defendant at the trial. It might then be said that the requirement of the Rule is not engaged: the plaintiff has not succeeded at trial on that issue. That notwithstanding, it seems to me that the principle behind the rule would suggest that a special costs order for the plaintiff's costs of proving those issues would normally be appropriate in a case of a late admission, or at least one as late as those in this case, even if the defendant were otherwise successful. See Townsend (supra), at [20].

57 Here, of course, the plaintiff was successful, and will receive its costs in any event. Nor was there any apportionment by reference to the issues on which the plaintiff had not been wholly successful.

58 However, as counsel for the defendant put to me, this does not go to special costs. In this respect my attention was drawn to Townsend (supra), where Le Miere J said this (at [58]):

"There is a further and independent reason why I would not in any event make a special costs order. The defendants did not succeed on all the issues at trial. The plaintiffs succeeded on a substantial number of issues. In those circumstances, I would not in any event make a special costs order in favour of the defendants."

59 In that case, the original costs order Le Miere J, the trial Judge in Townsend, had indicated he would make had been for the plaintiff to pay the second and third defendants' costs, to be taxed. However, before those orders including that costs order had been drawn up, settled or extracted, the defendants called for another of the orders to be reconsidered, while the plaintiff sought to have the costs order scaled down to 75 per cent of the defendants' costs, to reflect the plaintiff's success at trial. Le Miere J indicated that he had jurisdiction to consider such applications: Townsend, at [5].

60 In the event, the costs order was changed to one requiring the plaintiff to pay three-quarters of the costs of the second and third defendants, to be taxed.

61 In this case there was argument directed to me at the hearing of the orders on judgment to making an order to apportion the costs of the action by relative success. I had rejected that argument, and indicated I would make the order I did. Counsel for the defendant did not indicate any intention to contest that order, assuming it was contestable: on the contesting of orders before they are drawn, settled and extracted, see Townsend (supra), Le Miere J, at [5].

62 I had so determined on the basis for the degree to which the plaintiff had been successful. In my view, that degree is greater than the corresponding success of the defendant in Townsend (supra). In particular, in this case, the plaintiff's success was on the principal issues relevant to the claims put forward in the statement of claim as amended. Those were in my view overwhelmingly the principal issues, in terms of the complexity of the evidentiary issues they posed, and the complexity of the legal issues they raised, and thus in terms of the trial time they consumed.

63 I do not consider that substantial costs were incurred by reason of the plaintiff's introduction of the issues on which it was not wholly successful. Indeed I did not understand the defendant to contend that it had been successful on a "substantial" number of issues. While one of those issues on which it had been successful, as to completion time, was one that did involve some significant trial time, and, I am prepared to conclude, out of court time and other costs, I do not consider that the costs involved would be "substantial" (Townsend (supra), at [16]) such that any special costs orders should be denied on that account. Further I note that in that case the costs involved were such that the successful defendants there were granted only 75 per cent of their costs without any special costs order.

64 Thus, I do not consider I have to go any further into the notice to admit.

65 Mr Garnsworthy also referred to the complexity of the argument as to the law in relation to damages. That required some attention in my judgment: see Hodgkinson (supra), at [339] - [365], applying the law as I considered it to be for a case where the plaintiff had recouped costs and indeed made a small profit (before certain other costs were taken into account). The principal discussion of that law is in the judgment at [288] - [296]. Although that did not require the discussion of more than two authorities, it required close analysis of them. I do not consider legal complexity entails a multiplicity of authorities.

66 Counsel for the defendant put to me there was nothing unusually complex in the action, either factually or legally. However, this seems to me to introduce a qualification on complexity which the authorities I previously discussed do not support and SDS Corporation (supra) rejects.

67 I consider there is complexity in this case such that a special order might be made in respect of subject matter for which there is evidence of the inadequacy of the Scale allowance which was due to that complexity.

Application of these principles in this case: getting up case for trial

68 Mr Garnsworthy confirmed this to be a claim by reference to the entry in the draft bill of costs, Items 35, 36 and 37, and the references there, to what the material I am about to reach confirmed were the relevant scale items. Those items were, under the 1999 Determination, Item number 13; under the 2002 Determination, Item number 13; and, under the 2004 Determination, Item number 16.

69 There is a reference at each Item in the draft bill of costs to a Sch 4 which describe the work done, "including but not limited" to the listed activities, and setting out tables (each called a "Part"), one for each of the 1999, 2002 and 2004 scales, the fee earners, hours, rates and totals, with totals in each of the tables corresponding to the amounts shown for Items 35, 36 and 37, respectively.

70 I note that the total of the amounts across Items 35, 36 and 37 is $77,258.40, which compares with the highest total under any of the three scales for "Getting up case for trial ... (includes work reasonably and necessarily undertaken prior to commencement of proceedings)", that under the 2004 Determination, of $34,100.

71 The amount for each of Items 35 and 36 appears, from the draft bill of costs and schedule 5, to be the product of the hourly rate of the deponent as a senior practitioner and the number of hours worked, where that hourly rate is less than the amount allowed a senior practitioner by the relevant scale, and the number of hours worked is less than the maximum number provided for by the scale item.

72 Item 37 is, however, the product of the number of hours worked by senior counsel, by the deponent, by another senior practitioner and by a clerk, where the hourly rates for each of these is below the relevant maximum provided for in the scale under the 2004 Determination, but the total of the hours worked by all of them (and in the case of one of the senior practitioners, the deponent, the total worked by him) exceeds the maximum allowed by scale. The resultant product is shown in the Finlay affidavit of 23 January 2007, annexure "JDF1", Sch 4, Pt C, as $55,786.30.

73 I have set out a table to summarise the matters I have just described, below:

Rate, Senior counsel (2004) Scale, SC, Maximum $506)

74 I should note that some of my figures above do not tally with those shown in the Finlay affidavit of 23 January 2007, annexure "JDF1", Sch 4. The discrepancies are the following.

75 I note the figure for 2004 shown above for the senior counsel is slightly higher than the corresponding figure, in the Finlay affidavit of 23 January 2007, annexure "JDF1", Sch 4, Pt C, of $10,927.20. Mr Garnsworthy explained this simply as a mathematical error.

76 I also note the figure for 2004 shown above for the first senior practitioner, of $42,374.25, which is the product of $330 per hour and 127.25 hours, is different from the corresponding figure shown in the Finlay affidavit of 23 January 2007, annexure "JDF1", Sch 4, Pt C, which is $41,992.50. Mr Garnsworthy appeared to explain this as a mathematical error.

77 I also note that the total shown in the Finlay affidavit of 23 January 2007, annexure "JDF1", Sch 4, Pt C, of $77,258.40, is different both from the total shown above, and also from the total of the component figures shown in the Schedule, which should be $77,234.40. Mr Garnsworthy again appeared to explain this as a mathematical error.

78 However, it will be seen that, whatever is the correct figure, it represents a claim that is substantially higher than that allowed for under the most recent Determination, that of 2004. The difference is accounted for by the much larger number of hours (250.85 hours) than the maximum allowed for getting up, under all of the relevant Determinations (100 hours, as I have indicated), as well as the inclusion of a claim for Senior Counsel's work, where the relevant Determination (2004 - indeed all Determinations) refers to the work of a senior practitioner. The effect of the larger number of hours is offset somewhat by the lesser hourly rates, than those allowed for a senior practitioner under the relevant Determination, for all of the others who participated in the getting up.

79 I consider there is sufficient evidence of the inadequacy of the relevant scale item, considered as the 2004 Determination, item 13.

80 I also consider there is sufficient evidence, in the Finlay affidavit of 23 January 2007, with my appreciation of the trial, that this was due to the complexity of the case as I have described it. My appreciation of the case is, of course, that deriving from my experience as the trial Judge: see on the relevance of that experience SDS Corporation (supra), Roberts-Smith J, at [148].

81 However, counsel for the defendant, Mr Forbes, put to me that there was insufficient evidence of the costs of getting up because the work described under that head in Sch 4 is not tracked into any of the accounts. I took this to be a reference to all of the fee earners concerned.

82 However, I do not consider that such identification is required. In my view, it is sufficient that a person who may be expected to know the allocation of work between those who have rendered accounts has provided evidence of the sort contained in the Finlay affidavit of 23 January 2007 that they have done that work, at the rates indicated. Mr Finlay was the solicitor for the plaintiff at least from shortly after the writ was issued, but not before that issuance. In that respect, both parties agreed, the Finlay affidavit of 23 January 2007, par 10, needed to be corrected, and was so treated before me.

83 I note that my determination of the work done and its cost is of the kind described as "essentially preliminary and provisional in nature for the purpose of the exercise of the discretion" in Esther Investments (supra), Malcolm CJ at 404.

84 I consider that a special costs order is appropriate for getting up the case for trial, to the effect that the limits of any relevant determination as to hours or hourly rate not apply. See Flotilla Nominees (supra), per Pullin J, as to this form of order where work above the maximum involving work done by a fee earner at above the hourly rate provided for is involved.

85 I note, however, the point from SDS Corporation (supra), Roberts-Smith J, at [162] on the power of the taxation officer.

Application of these principles in this case: statement of claim

86 I took this to be a claim by reference to the entry in the draft bill of costs, Item 2, for work done in 2001 on the statement of claim, and the relevant scale item, that under the 1999 Determination, Item number 6a; and draft bill of costs, Item 7, for work done in December 2003 and April 2004 on the amended and re-amended statements of claim, and the relevant scale item, that under the 2002 Determination, Item number 6a.

87 I need to deal with the two draft bill of costs items both separately and together.

88 In relation to draft bill of costs, Item 2, the relevant item in the 1999 Determination allows for a maximum of 10 hours at the senior practitioner hourly rate of $270 or a total of $2,700.

89 The draft bill of costs, Item 2, shows $3,229.60.

90 From the document "Summary 1" part of annexure "JF1" to the Finlay affidavit of 23 January 2007, it is indicated the basis for the claim is work of 11.74 hours at what appears to be the hourly rate for the deponent, the fee earner, of $275.09.

91 Both the claim's work hours and hourly rate are then above the 1999 Determination.

92 Mr Garnsworthy drew my attention to the description in "Summary 1" of the "[w]ork performed in relation to the statement of claim including" the listed items.

93 It seems to me that Summary 1 describes work done and paid for which shows the inadequacy of the scale item.

94 I also consider there is sufficient evidence, in the Finlay affidavit of 23 January 2007, with my appreciation of the trial, that this was due to the complexity of the case as I have described it.

95 It is the case that the difference is not very great between the scale allowance and the claim, and that this would incline me against making the order if it rested on that difference alone: SDS Corporation (supra) Roberts-Smith J, at [151].

96 However, the difference claimed is greater than that indicated simply by that comparison, as there is another Item in the draft bill of costs of which I am asked to take account.

97 In relation to draft bill of costs, Item 7, the relevant item in the 2002 Determination allows for a maximum of 10 hours at the senior practitioner hourly rate of $313, or a total of $3,130.

98 The draft bill of costs, Item 7, shows $5,777.20, made up of counsel fees of $3,665.20 and solicitor's fees of $2,112.00.

99 From the document "Summary 2" part of annexure "JF1" to the Finlay affidavit of 23 January 2007, it is indicated the basis for the claim is 7.7 hours of the deponent's work at what appears to be the hourly rate of $274.29; and 11.9 hours of counsel's work, at what appears to be the hourly rate of $308.00.

100 Here, the claim's work hours are above, but its hourly rates are below, the 2002 Determination.

101 I consider that Summary 2 shows the inadequacy of the relevant scale item. I consider there is sufficient evidence, in the Finlay affidavit of 23 January 2007, with my appreciation of the trial, that this was due to the complexity of the case as I have described it.

102 Finally, when draft bill of costs Items 2 and 7 are aggregated, the total is significantly greater both than the largest allowance under the relevant scales (under the 2002 Determination) or the aggregate of the allowances under the relevant scales (under both the 1999 and the 2002 Determinations).

103 Counsel for the defendant, Mr Forbes, put to me that no special costs order was appropriate on the material before me, as the statement of claim was once and for all work that should be taken to include all amendments. The work done here on the evidence before me was due to amendments. Further, none of the amendments was shown to be due to activity of the defendant, but rather at best changes of circumstance and at worst corrections of errors in the original drafting. Finally, complexity in the facts and law would not necessarily find reflection in the statement of claim.

105 It seems to me that a case's factual complexity, including complexity relevant to a complex legal issue might emerge or intensify over the time following the preparation of the statement of claim, necessitating amendments. It is not a matter of allocating fault to the party responsible for costs. The nature of the other party's case may be such that there is the need for the relevant drafting, of the original document or any amendments, which entails the costs in question.

106 Accordingly, I consider a special costs order is appropriate for the statement of claim, to the effect that the limits of any relevant determination as to hours not apply. See Flotilla Nominees (supra), per Pullin J, as to this form of order where work above the maximum involving work done by a fee earner at or below the hourly rate provided for is involved.

107 Again, I note the point from SDS Corporation (supra), Roberts-Smith J, at [162] on the power of the taxation officer.

Application of these principles in this case: giving particulars of the amended reply

108 I took this to be a claim by reference to the entry in the draft bill of costs, Item 9, for work done in September 2004, and the reference there to the relevant scale item, that under the 2004 Determination, Item number 6b.

109 The scale item allows for a maximum of five hours at the junior practitioner hourly rate of $231, or a total of $1,045.

110 The draft bill of costs shows a claim for $1,896.40.

111 From the document "Summary 3" part of annexure "JF1" to the Finlay affidavit of 23 January 2007, it is indicated the basis for the claim is work of 6.9 hours at what appears to be the hourly rate for the deponent, the fee earner, of $274.84.

112 Thus, there is a claim for a higher number of hours at a higher hourly rate than the maximum allowed under the scale.

113 Mr Garnsworthy drew my attention to the description in "Summary 3" of the "[w]ork performed in relation to the Plaintiff's Answers to Defendant's Request dated July 04 for Further and Better Particulars of Plaintiff's Amended Reply including" the matters listed there.

114 I consider that Summary 3 shows the inadequacy of the relevant scale item. Again, I consider there is sufficient evidence, in the Finlay affidavit of 23 January 2007, with my appreciation of the trial, that this was due to the complexity of the case as I have described it. The particulars went to matters of some significant complexity, and were accordingly themselves substantial and complex.

115 Counsel for the defendant, Mr Forbes, put to me that there was no evidence or no sufficient evidence that the work for the particulars required the services of a practitioner other than the junior practitioner provided for in the relevant scale item. I took this also to be a submission that there was no evidence or no sufficient evidence that the hours of work required were above the maximum allowed at that rate.

116 I consider this is met by the position I am in, with the Finlay affidavit of 23 January 2007, and my experience as the trial Judge, to assess whether a sufficient basis for the exercise of my discretion to make a special costs order is made out.

117 I consider that a special costs order is appropriate for giving particulars of the amended reply, to the effect that the limits of any relevant determination as to hours or hourly rate not apply. See Flotilla Nominees (supra), per Pullin J, as to this form of order where work above the maximum involving work done by a fee earner at above the hourly rate provided for is involved.

118 I note, however, the point from SDS Corporation (supra), Roberts-Smith J, at [162] on the power of the taxation officer.

Application of these principles in this case: costs of attending an informal conference

119 I took this to be a claim by reference to the entry in the draft bill of costs, Item 33, for work done in April 2005, and the reference there to the relevant Scale item, that under the 2004 Determination, Item number 23.

120 The scale item allows for attendance by a senior practitioner at the scale's maximum hourly rate of $341. It sets no maximum time. The draft bill of costs shows for the scale item the amount of $1,641.20, which equates to 4.8 hours.

121 The draft bill of costs claim is $6,041.20, referring both to attendance at a conference of three hours, and preparation (including attendance and preparation of senior counsel). The Finlay affidavit of 23 January 2007 indicates that both the deponent and senior counsel worked on preparing for the conference.

122 There is no further detail in the Finlay affidavit of 23 January 2007. In particular, there is no indication of the hourly rates for senior counsel and the deponent for the work done, nor of details as to what was considered likely to occur or did occur at this conference.

123 Mr Garnsworthy put to me in relation to this claim that I should see the complexity I have described earlier as accounting for the expenditures on the item in question.

124 However, it seems to me that there is more evidence than that to which I have referred with which I should be provided before I can make a special costs order under this heading. My experience as the trial Judge is of no assistance to me in considering what might have been seen as likely to occur or that did occur such that expenditure at that level, on two fee earners, might be seen to be appropriate because of the complexity, factual and legal, in this case.

Application of these principles in this case: reasonable allowance for opening and closing submissions

126 I was unable to find any discrete Item or Items in the draft bill of costs referring to this claim.

127 However, Mr Garnsworthy drew to my attention Item 39, for the first day of trial (at $44,384.80, for Senior Counsel, compared with the relevant scale item, in the 2004 Determination, Item 19b, of $17,644.00); and Item 59, for the second last day of trial (at $9,428.40, compared with the relevant scale item, in the 2004 Determination, Item 19d, of $4,411.00).

128 I note that the work done would thus be covered by the account of senior counsel a copy of which is annexure "JDF4" to the Finlay affidavit of 23 January 2007, which shows work done, principally identified as "getting up" or "attend court", over the period beginning 1 August. That account shows the hourly rate as less than $400 per hour, where the relevant scale shows the maximum rate for senior counsel at $473.

129 Thus, the claim is for more than the maximum number of hours allowed for in the relevant scale item, but below the maximum hourly rate.

130 I also note the reference to the opening and closing submissions prepared by senior counsel in the Finlay affidavit of 23 January 2007.

131 I further note that my experience at trial was indeed that the written opening and closing submissions, provided prior to or shortly after oral argument, were of significant assistance to me. They were in considerable detail, in particular in relation to the matters of factual complexity and legal complexity to which I earlier referred.

132 It seems to me that the work on such submissions is appropriately to be referred to the scale items I have referred to, and might in a suitable case warrant a special costs order.

133 It is true, as counsel for the defendant, Mr Forbes, put to me, such work might also simply be a part of good preparation for the opening and closing phases of the trial. Thus, it might be said, at least the opening submissions might form part of the amount for getting up the case for trial. Indeed the account of senior counsel refers to "getting up" as I have indicated.

134 However, that submission seems to me to go to avoiding any double counting of work, which would be for the taxation officer, not for me. How the account labels the work done is less important than the true nature of the work done, as that is ultimately determined by the taxation officer.

135 It is also true, as Mr Forbes also put to me, that there is no indication in the accounts for senior counsel forming part of the Finlay affidavit of 23 January 2007 that work on the opening and closing submissions is identified as part of the work charged for. However, I consider there is sufficient evidence, for my purposes at least, in the Finlay affidavit of 23 January 2007, that senior counsel did the work, and can be expected to have been paid for it.

136 I consider that the Finlay affidavit of 23 January 2007 shows the inadequacy of the relevant scale item in the respect the subject of the special costs order sought.

137 I also consider there is sufficient evidence, in the Finlay affidavit of 23 January 2007, with my appreciation of the trial, that this was due to the complexity of the case as I have described it.

138 Accordingly I consider a special costs order is appropriate for the cost of opening and closing submissions prepared by senior counsel such that the limits of any relevant determination as to hours not apply. See Flotilla Nominees (supra), per Pullin J, as to this form of order where work above the maximum involving work done by a fee earner at or below the hourly rate provided for is involved. I note that this special costs order only goes to the particular work identified.

139 Again, I note the point from SDS Corporation (supra), Roberts-Smith J, at [162] on the power of the taxation officer.

Application of these principles: the costs argument before me

140 Mr Garnsworthy, in his written submissions (par 5), put to me, as I have previously indicated, that the costs of the present application were "beyond the scope of taking a reserved decision", under which, on the practice of taxation as he described it, the matter might otherwise be referred to the scale item for taking a reserved decision, under the 2006 Determination, Item 19(g). That item allows only for the attendance of a clerk or paralegal at the maximum hourly rate provided for such persons, of $176.

141 Counsel for the defendant, Mr Forbes, did not disagree such a special costs order might be appropriate, on that basis. However, he put to me that it was only appropriate if the plaintiff was successful in obtaining all of the special costs orders it sought. In the event it obtained less than all, its costs should be scaled back proportionately.

142 I agree with the submission, but would add that account must also be taken of the substance of the issues on which the plaintiff succeeded and failed. If the issue or issues of the latter sort were relatively minor in character by comparison with those on which the plaintiff succeeded, it seems to me a scaling back would not be appropriate.

143 Here the plaintiff has succeeded on all of the major issues for which it contended, with the exception of those involved in the claim in respect of the informal conference. Those issues were, in my view, the least substantial of the major ones I have referred to.

144 I consider then that simply scaling back by reference to the number of orders for which the plaintiff contended on which the plaintiff succeeded (five out of six) or to the number of such orders raising major issues (four out of five) would be inappropriate.

145 Doing the best I can, I would order the plaintiff recover 90 per cent of his costs of this application to be taxed with the other costs if not agreed.

146 I will hear from the parties as to the orders I should make following from these reasons.