Repfix Industries Pty Ltd v FBD Group Pty Ltd

THE PAYMENT TERM FOR THE CONTRACTS

1. This is a question common to the three disputed contracts.

The pleaded term

1. The pleaded term for price for the T1 works was expressed as follows: "… the Costs of the T1 works would be: i) fees for the plaintiff's services reasonably consistent with the estimate of $145,000 given for the (relevant) works, excluding furniture, graphics, signing, fire systems, certain extra stainless items, CCTV and lighting, plus ii) an additional amount in respect of furniture, graphics, signing, fire systems, extra stainless items, CCTV and lighting; the defendant would pay the plaintiff the Costs of the T1 works plus GST." [1]
2. In relation to the T2 works, the pleaded term for price was: "…the Costs of the T2 works would be: i) an amount reasonably consistent with the estimate of $300,000 given for the works excluding furniture, graphics and plastering, plus ii) an additional amount in respect of the costs of furniture, graphics and plastering; the defendant would pay the plaintiff the costs of the T2 works plus GST." [2]
3. In relation to the Rhodes works, the pleaded term for price was: "... the Costs of the Rhodes works would be: i) an amount reasonably consistent with the estimate of $80,000 given for the works, plus ii) an additional amount in respect of the costs of certification; the defendant would pay the plaintiff the costs of the Rhodes works plus GST." [3]
4. In the case of each contract, the particulars indicated that the plaintiff's case was that each contract was partly expressed and partly implied, with its express terms concluded orally by Chris Anderson (for Repfix) and John Aras (for FBD) [4] .
5. FBD's pleaded position in relation to the term for price was that it was a fixed price for each contract: $145,000 (excluding GST) for T1 works; $165,000 (excluding GST) for the T2 works; and $60,000 (excluding GST) for the Rhodes works. FBD contended that, in each case, the term was express and agreed during a conversation between Mr Anderson and Mr Aras "in about July 2015" [5] . There was no averment that the plaintiff's pleaded term for price was incomplete or uncertain.

Mr Anderson's evidence

1. Mr Chris Anderson is the managing director of the plaintiff. He prepared three affidavits; the principal one being that of 5 October 2018.
2. Mr Anderson deposed to an effective working relationship with FBD from November 2013 through to the next 18 months in which Repfix had completed the fit out for various FBD premises. He deposed that in early 2015, he had learnt from a friend (Mustafa Ozturk, of M&C Stainless) that FBD was proposing a refurbishment at its outlet in the Rhodes supermarket. Some months after that, he recalled Repfix was speaking to FBD on other projects other than at Rhodes. He deposed to John Aras asking him whether Repfix felt it could take on 3 projects (with M&C Stainless supplying the stainless steel).
3. Mr Anderson set out, in tabular form, a schedule of all dates and conversations with Mr Aras. Some of the items in that schedule were conversations, but others were text messages and other documents. This evidence by narrative form was not helpful in elucidating the content of the evidence.
4. What did appear to emerge from the presentation of this evidence was that in late June 2015, Mr Anderson said he had communications with Mr Aras and had a meeting with the latter on 29 June 2015 at the T2 Domestic Terminal food court outside the existing Sahara Grill. There, he summarised, was a discussion about the fitout potentially applicable to a hard copy of the design and drawings; and the format the projects would run. That included (for T2) a temporary kiosk style outlet in front of the existing T2 Domestic outlet; secondly, a T1 International outlet; thirdly, a T2 Domestic outlet; fourthly, a T2 Domestic kiosk removal; and fifthly, a Rhodes fit out.

T1 works

1. On 29 June 2015, Mr Anderson deposed, he and Mr Aras drove to the T1 International outlet. He outlined the scope of construction works for T1. Mr Anderson set out another table of dates and conversations for T1. This relevantly included entries for 29 June 2015, in which Mr Anderson concluded that Repfix had been 'awarded' the fitout, and on 9 July 2015, there was an entry that Mr Aras, for FBD, had signed and nominated Repfix for an 'estimate of cost of $198,000 (including GST).
2. On 20 July 2015, Mr Anderson noted a text message providing an estimate of $145,000 (without graphics or furniture) for the T1 works. FBD relied upon this text message to support its 'fixed price' argument. Repfix, however, emphasised that Mr Anderson had a telephone conversation with Mr Aras after that text message - still apparently on 20 July 2015 - in which they had a discussion of costs. This part of Mr Anderson's affidavit (paragraph 6) supplied the following narrative summary of that telephone conversation: "We spoke about the text estimate and Aras told me that his budget for the shop was $200K as this was his bank limit. Aras gave an example of DFO only costing him $165K. I explained the differences between projects and that a close estimate of $200K would be a fair amount as indicated in the itemised amounts in the application for Airport Works ($198K). Aras replied "OK Chris. Please do what you can to keep costs down". I asked Aras to send me his company details."
3. In the application for approval of the works to the airport authority, the figure of $198,000 was inserted as the estimated value of the T1 works.
4. On 7 November 2015, Mr Anderson sent to Mr Aras an email. This referred to an original estimate of $145,000 which did not include furniture, fire systems, original stainless items, CCTV and lighting. This, he deposed, brought the total cost of the T1 works to $195,020 (excluding GST).

T2 works

1. In relation to the T2 works, Mr Anderson deposed in his principal affidavit that Repfix had been awarded the fitout on 29 June 2015. He deposed that on 9 September 2015, Mr Aras had nominated a cost estimate of $275,000. This was the figure which was inserted as being the anticipated value of the works in the documentation supplied to the airport authority for approval of the works.
2. Nearly two weeks later, however, on 22 September 2015, Mr Anderson and Mr Aras met again. Mr Anderson's narrative account of what was said on the subject of price for this project (paragraph 13) was as follows: "Aras and I spoke about the fit out again. I explained that if T1 estimate was $200K, T2 would surely be 1 and ½ times greater for the full fit out, estimate $300K. Aras replied "Do what you can to make it cheaper. I had a quote from a Chinese guy that was going to do it for $265K. He was going to bring in workers from China to fit it out". I replied "Of course it would be cheaper. I don't use important Chinese guys". Aras laughed and replied "See what you can do."
3. On 2 December 2015, Mr Anderson sent to Mr Aras a final costing for T2 works for the sum of $348,215 (excluding GST). After the deposit and earlier payment of $30,000, the invoice attached to the email recorded a balance owing of $262,036.50.
4. Thereafter, further events occurred, again reproduced in tabular and narrative form. They relevantly included entries as follows: on 22 December 2015, Repfix emailed a costing spreadsheet itemising costs reduced to $334,528 (including GST). There were entries suggesting negotiations in January 2016 for the reduction of price.

Rhodes works

1. In relation to the Rhodes contract, Mr Anderson deposed in his principal affidavit to Repfix being awarded the fitout in August 2015 and some verbal negotiation. His narrative account of what was said on the subject of price (paragraph 19) at a meeting with Mr Aras on 18 August 2015 was as follows: "Aras asked "How much do you think this will cost?" (Anderson) replied: "Ballpark $60k to $80k". Aras replied "I'd prefer $60K". (Anderson) replied: "Of course you would but it will depend on the cost of the finishes. I won't know until I have the quotes back".
2. When application was made for approval of the works in October 2015, the nominated value was $85,000.
3. On 16 December 2015, an email was sent to Mr Aras providing a costing for the project for the sum of $86,385.20 (including GST). After payment of $24,000, the balance owing was $62,385.20 (including GST).
4. But on 22 December 2015, a spreadsheet was sent to Mr Aras indicating that costs were reduced by $4,450 (including GST). In January 2016, Mr Anderson deposed to further conversations in which there was discussion about further discount to be given.

Cross-examination

1. Generally, under cross-examination, Mr Anderson was referred to a written quote in relation to different works (appearing at Exhibit A, Vol 2, p 418). This was a quote for a pop up kiosk. The quote set out, in some detail, materials and provided a lump sum for the price, albeit a sum which was subject to corrections. It was suggested that this form of the quote was 'standard' and manifested the way that Repfix did business. But the cross-examiner pointed out the contrast between that work and the works in relation to the 3 separate projects the subject of this proceeding. It was suggested that Mr Anderson did not adduce evidence of quotes for the subject 3 projects since it would have contradicted his case. Mr Anderson denied this.
2. In re-examination, Mr Anderson explained that written quotes could not have been prepared for the subject works since, at the relevant date(s), he did not have drawings or finishes schedules; or the information he required from sub-contractors and suppliers. The work for the 'pop up kiosk' was much more limited in scope than the subject 3 contracts.

Mr Aras' evidence

1. Mr Aras is the director of FBD. He swore two affidavits.
2. In the first of his affidavits, Mr Aras indicated that Repfix had come to his attention first in October 2013 when it acted as a sub-contractor for a fit out of FBD's premises known as DFO Homebush. The contractor was M&C Stainless Steel. Mr Aras wanted that contractor to do the works the subject of this proceeding but learnt that Mr Ozturk was unavailable. Mr Ozturk recommended that Repfix be engaged. Mr Aras confirmed that in May 2015, he spoke, by telephone, with Mr Anderson and elicited the latter's interest in undertaking works for 4 fitouts, whilst emphasising the tight windows for the works. He deposed to many meetings and telephone discussions with Mr Anderson between May and July 2015, including site discussions.
3. On 13 July 2015, Mr Aras received, via email, a quote for the domestic kiosk at T2 for the sum of $38,250 excluding GST; but after discussion, the price was reduced further to $34,587. No claim was made in relation to this particular work. However, the circumstance that a written quote was produced was relied upon by FBD to argue that in relation to the relevant contracts, it reasonably expected that an agreement as to price would be reduced to writing.
4. Mr Aras deposed to a conversation with Mr Alexander on 17 July 2015 in which he pursued quotes for T1, T2 and Rhodes and emphasised urgency in the timing. This was followed up by further requests for quotes in a telephone conversation on 29 July 2015 and in August 2015. The thrust of his evidence was that there were windows of opportunity for Repfix, who FBD had already nominated as its shop-fitting contractor in documents to the Sydney Airport Corporation Ltd, to provide such (written) quotes.
5. Mr Aras deposed that by early August 2015, he was very concerned about the commencement date for the T1 refurbishment and he had a conversation with Mr Anderson during a meeting at the T1 Terminal. According to Mr Aras, the conversation was substantially as follows: Mr Aras said: "I still haven't received any quotes from you. The job here (T1) starts next week. How much are you going to charge for it? If we can't agree on a price, I will have to get someone else to do the job" Mr Anderson said: "Well, what's your budget?" Mr Aras said: "We did a similar sized job a while back for $110,000. That's what I'm looking to spend." Mr Anderson said: "I think that the job would be around $155,000." Mr Aras said: "The maximum I can pay you for this job is $145,000." Mr Anderson said: "I can work with that. I will provide you with a written quote under this amount." Mr Aras said: "Ok. For Domestic T2, this is a new fit out. It's very similar to the DFO fit out Mustafa (Ozturk) did and you sub-contracted on." Mr Anderson said: "Yes, it is similar in scope. It should probably cost about the same." Mr Aras said: "Mustafa did the DFO job for $165,000. That is the maximum amount I will pay you for the Domestic T2 job." Mr Anderson said: "That's the sort of figure I have been working on. I can do it for $165,000." Mr Aras said: "Good. That's agreed. Rhodes is a smaller job. I have received a verbal quote for $60,000. If you could do it for this amount, the job is yours. Otherwise I will give it to the other contractor." Mr Anderson said: "That is the amount I have been working on. I can do it for $60,000." Mr Aras said: "That's good. I am happy with those prices. Let's go ahead. Just send me the quote for my records".
6. Mr Aras could not recall whether the discussion of prices included mention of GST.
7. It was put to Mr Aras that his account of a conversation on 8 August 2015 did not happen. Mr Aras maintained that it did. It was suggested to Mr Aras that he permitted Repfix to work after 8 August 2015 without a written quote (for any of the contracts). Mr Aras conceded that FBD had permitted this, but said that he "had to".
8. Ultimately, FBD never received a written quote for the T1, T2 or Rhodes works.
9. Under cross-examination, Mr Aras accepted that there was relatively greater importance, for FBD, in completing the fit out for the T1 outlet and the T2 works than the Rhodes shop.
10. Mr Aras accepted that he may have been sent a text message from Mr Anderson on 20 July 2015, which referred to a $145,000 cost estimate; although he thought that it was directed to the T2 works and not the T1 works.
11. Mr Aras was referred to several documents which related to the processes whereby FBD obtained approval for the works. He was asked as to who was responsible for what; and, in particular, the extent to which he knew, or perhaps acquiesced, to Mr Anderson (or someone for Repfix) or his own interior designer (Otto Design Interiors Pty Ltd) completing detail in the application forms.
12. One such form (Exhibit E) disclosed an estimated value for the T1 works for $198,000. Another form (Exhibits G-H) revealed a change from an initial estimated value of the T2 works, from $250,000 to $200,000, from 9 September to 28 September 2015. Mr Aras indicated that he was unaware of this change.
13. In relation to the T2 works, Mr Aras was referred to his first affidavit (paragraph 82(b)) where he denied having any discussion with Mr Anderson (as the latter had alleged) on 22 September 2015. His attention was directed to the part of his affidavit where he deposed that he had still chased Mr Anderson for a written quote confirming the verbal agreement, but did not receive a written quote. It was suggested that there was no need for him to chase Mr Anderson for a written quote if it was true that he had earlier reached agreement with Mr Anderson for a fixed sum. Mr Aras disagreed with this proposition.
14. Similarly, Mr Aras was referred to his evidence in his first affidavit (paragraph 89(b)) where he responded to Mr Anderson's asserted costings of $348,215 (excluding GST) in relation to the T2 works by saying (among other things) that Repfix had not substantiated its breakdown for total costs. That meant that Mr Aras did not have the means of determining whether the alleged sum represented the reasonable actual costs. In cross-examination, it was suggested to Mr Aras that if FBD's contention that the contract was for a fixed, lump sum price, he would have had no occasion to verify the said breakdown. The fact that Mr Aras thought fit to assert the point about wanting the opportunity to verify the breakdown was inconsistent with that case.
15. Mr Aras was referred to some correspondence with Mr Anderson after the contracts had been entered and (at least some) works were performed. These were intended by the Repfix to illuminate what price had been agreed for the contracts.
16. Specifically, he was referred to exchanges that occurred on 20 and 21 December 2015. On 20 December 2015, Mr Aras sent an email to Mr Anderson. The email was important in setting out FBD's general position in relation to what had occurred in the second half of that year. Relevantly, with reference to the T2 works, the email evinced Mr Aras' belief that the work performed could have been done by other shopfitters for an amount ($220,000 including GST) much less than the amount which Mr Anderson had demanded ($348,000 excluding GST). In the last part of the email, Mr Aras indicated that FBD would not pay Repfix any more until the two entities had negotiated the works done and fixed the remaining defects. It was suggested to Mr Aras that his grievance was not that FBD had received an invoice inconsistent with a previously agreed fixed price, but the email showed that he was willing to negotiate a final price after Repfix had completed the works on what was an estimate. Mr Aras indicated that his attitude was that FBD was not willing to give an open cheque to Repfix and his company's purpose at this point was to move on.
17. The other parts of that email upon which Mr Aras was not specifically cross-examined upon, but which were of some significance, were Mr Aras' assertions that a verbal quote had been provided in relation to the T1 works ($145,000) and Rhodes ($60,000) and, in relation to the T2 works, the price was to be comparable with the DFO store ($165,000).
18. Mr Aras was then referred to the version in his affidavit of a conversation with Mr Anderson on 21 December 2015 (at sub-paragraph 90(c)) which evinced a refusal to negotiate on costs; and it was suggested that if this account of what was said was correct, it was at odds with the invitation to negotiate apparent in his email of the day before. Mr Aras commented that "his (Mr Anderson's) amount was unreasonable".

Mr Anderson's affidavit in reply

1. In his third affidavit, Mr Anderson denied Mr Aras' account of a conversation on 8 August 2015. He also disagreed with Mr Aras' account about the timing for the work at Rhodes and general emphasis upon the relative urgency in which works needed to be performed. He said he recalled Mr Aras indicating that he wanted the work on the T2 kiosk performed first, and suggesting a delayed start to the T1 works by 2 weeks.

Repfix's submissions

1. On the issue of price, Repfix submitted the work on the projects proceeded on estimates but the works would be performed, in effect, on a cost plus basis; so that the total cost would be paid following completion of the works, after deducting the deposit and any progress payments made by FBD. Reliance was placed, firstly, on certain surrounding circumstances. There was the text message sent by Mr Anderson on 20 July 2015. The work on the T2 kiosk (which was governed by written quote) was distinguishable as being naturally more apt for a fixed sum. Secondly, Repfix's estimates were the basis of information being supplied on FBD's behalf (by its designer, as FBD's agent) to the authorities for approval of the T1 and T2 works. The estimates which Mr Anderson provided to the designer were $198,000 (including GST) for the T1 works and $275,000 (including GST) for the T2 works. An estimate was also given for the Rhodes works in an application for a complying development certificate, which was for $85,000 (including GST). This evidence indicated that FBD was prepared to allow the works to proceed on the basis of estimates, without any written quote. The evidence also was contrary to Mr Aras' account of a conversation on 8 August 2015: at least for the T2 and Rhodes estimates, as they occurred after 8 August 2015. There would be no need for Mr Anderson to provide estimates for third parties if fixed sum prices had been previously agreed to.
2. Secondly, Repfix referred to post-contractual conduct. Repfix relied upon Mr Aras' email dated 20 December 2015, which spoke of a desire to negotiate Repfix's final costs. This showed that the parties' intention was that the work would be performed on the basis of estimates, but that at completion, Repfix's costs would be assessed for the value of the works. Further, the circumstance that an 'overpayment' was made, being partly the subject of FBD's cross-claim, was inconsistent with its 'fixed price' argument; particularly where there was no assertion that the payment was made by mistake.

FBD's submissions

1. FBD submitted that Repfix carried the onus of proving its pleaded case on the term for payment. For Repfix to submit that it was on a 'cost plus' basis was not only contrary to its pleaded case, but it amounted to an attempt to rewrite the bargain reached that there would be fixed prices for all three contracts. That attempt was made only after it became apparent that Repfix had lost control of the costs it was incurring. Repfix says that the verbal communications were too vague to admit of any binding consensus on any of the contracts (on price). At its highest, all that was discussed was estimates for costs (which Mr Aras hoped would not materialize) The typical indicia of a 'costs plus' basis for construction works (including, for example, provision for a profit margin, or provision for overheads or labour costs) was missing in evidence. Repfix's failure to retain orderly records on costs was also said to count against its argument.
2. If, however, its argument on price was accepted, Repfix did not prove the costs actually incurred by reference to primary documents (contained in Exhibit C). The Court should not be left in the position to guess where the party is in a position to furnish proof of its claim. That was all the more so where it was demonstrated that there were inconsistencies in the pleading of the case on quantum and the amounts tallied in the table constructed by Mr Anderson on the basis of documents produced (Exhibit C, pp 1-9); and there was reason to doubt the accuracy (if not the underlying integrity) for the analysis.

Credit

1. Mr Anderson was not impressive as a witness. His evidence when tested under cross-examination indicated to me that he was, to a significant degree, playing 'catch-up' in improvising a quantum claim for Repfix on the basis of its 'cost plus' argument on price. This was marked by the calculations contained in Exhibit C (p 9 of that exhibit) which were exposed, in cross-examination, as not being the product of any methodical or coherent analysis, but amounted to reconstruction. This had certain inherent drawbacks. An example of this was the apparent double-counting of GST in both the aggregating of the prices on the invoices, and its addition in the overall calculations. A further example occurred when Mr Anderson was asked to reconcile the amount ($3,215) allowed for parking on a spreadsheet concerned with T1 (Exhibit A, Vol 3, pp 277-278) with the amount for parking on the schedule prepared and inserted into the plaintiff's supplementary bundle (Exhibit C, pp 2-9) comprising $4,875.50 - a discrepancy over 50%. This followed an absence of detail in any of Mr Anderson's earlier affidavit evidence. I considered that the exercise of reconstruction - with a hearing imminent - was performed with an indifference to accuracy; and, as such, I found that Mr Anderson's explanations for how he derived those calculations as unpersuasive and implausible. This substantially diminished his overall credibility. On occasion, I also noted that his answers were not responsive to the actual questions raised, but amounted to explanations. I took from this that he was conscious of the import of how the evidence might affect the plaintiff's interests. This reduced the reliability of his evidence.
2. In fairness to him, he did make many concessions, although it might be said that he realistically had no alternative but to make them.
3. I am cautious in accepting his evidence which is not corroborated by other evidence or is consistent with the objective facts.
4. Mr Aras' recollections were not strong which was, in fairness, unsurprising in view of the passage of time since the events in this proceeding occurred. In terms of the content of his evidence, he struck me as an experienced business person who was prepared to delegate details to other professionals. His preoccupation with the subject works was to get them readied as soon as possible so that the outlets could effectively trade. In terms of his giving evidence, I formed the impression that he developed entrenched views on the correctness of FBD's position on the important issue of price from which he was not willing to countenance any contrary view; even in the face of evidence. This sometimes led him to give implausible answers. This was exemplified, for example, in the strong contrast between the content of his email to Mr Anderson dated 20 December 2015 and his account of a telephone conversation the next day. It was also exemplified by his answer as to why, if he was concerned about the choice of stone for the T1 works, he did not make similar complaint about the same stone that was deployed at Rhodes. At other times, particularly when he was asked about the alleged defects and their significance, he was not responsive to the questioning and was even somewhat evasive; which appeared to me to manifest a concern that the answers may not assist FBD's interests.
5. I am similarly cautious in accepting his evidence on material issues unless corroborated by other evidence or if it is consistent with the objective facts.
6. I am unable to ascribe any definitive general preference to the evidence of either Mr Anderson or Mr Aras where their evidence conflicted.

Principles

1. Contracts and contractual provisions may be inferred from the circumstances. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 McHugh JA (Hope and Mahoney JJA agreeing) said (at 11,117-11,118): "… [A] contract may be inferred from the acts and conduct of parties as well as or in the absence of their words…The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement… The conduct of the parties, however, must be capable of proving all the essential elements of an express contract… Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances… Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed."
2. The Courts can draw a circumstantial inference from the behaviour of the parties that a reasonable person in the position of an offeree at some point would have understood that the offeror had expressed willingness to contract on specified terms with the intention of those terms becoming binding on the offeree's acceptance. However, Courts are also to avoid the fallacy of inferring from conduct not inconsistent with a contract the conclusion that the conduct actually occurred because of the contract. Where contracts are inferred, the Court is assessing the perceptions of reasonable persons in the respective positions of the parties [6] .
3. To some extent, post-contractual conduct by a party may assist in that it might amount to an admission that a contract contained a particular term (as distinct from the separate question of the meaning of that term) [7] . Where contracts are said to be wholly or partly in writing, that is especially so [8] .
4. Where, as here, the disputed term of a contract is said to be the result of oral communications, I was referred by Counsel for FBD to the observations of Hammerschlag J in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94] regarding the difficulties in proof of the occurrence of the conversation, which are overlaid with the substantive requirements for proving a common intention of the parties to be bound by a consensus.
5. Questions as to the certainty of the term as to price are complicated in a case like the present where performance has substantially occurred. It is difficult, in such circumstances, to say that a contract was incomplete or uncertain even on so fundamental a provision such as the price for the supply of the materials and works. As I have indicated, FBD has never suggested that the payment term, as pleaded by the plaintiff, was uncertain or incomplete.
6. To address the problem of contractual uncertainty, and to strive to uphold contracts where they are performed, Courts may commonly resort to expedients such as implied terms. There is authority for the view that an implied term that may arise in commercial contracts is that there is an obligation that parties will act in good faith towards each other [9] . It is more unsettled whether an agreement to negotiate in good faith can be implied or not [10] . As indicated earlier on the matter concerning inferences that can be drawn from the circumstances, the Court may also find that the parties have agreed to negotiate a matter in good faith; even if, in practice, such agreements are usually express [11] .

Findings

1. There is an obvious difficulty for Repfix, as pointed out by FBD, in relation to its pleaded case. The pleaded term for payment is in discrete terms: payment of an 'estimate'; with specific exclusions; followed by a subsequent payment on the items excluded from the original estimate. The difficulty is that there is no evidence, written or oral, to indicate FBD's agreement that the payment term included reference to these exclusions. Another difficulty, in relation to T2 works, was that the claim, as manifested in the invoice, did not delineate the exclusions.
2. Strict adherence to Repfix's pleaded case would indicate that its case in relation to payment would fail for these reasons alone. But at the outset of the hearing, Repfix's Counsel propounded the view that the term for payment was "in effect, a costs plus" basis. This was a substantial extension of Repfix's case on the payment term. However, in the absence of any express agreement to this, there was no pleading as to how that version of the payment term was agreed to: whether, for example, it was implied as custom, or trade usage, or of fact. No attempt was made in Repfix's submissions as to how those tests for implication were satisfied in respect to these contracts.
3. At any rate, at the conclusion of the evidence, the Court was presented by the parties, in effect, with a binary choice: either that there was a 'fixed price' arrangement, or that it was a 'costs plus' arrangement. In my view, there were difficulties with both arguments.
4. If I was to examine the facts as they emerged, there is much to be said for the view that the parties commonly intended that as at July 2015, Repfix would be entitled to a minimum 'floor' or 'baseline' price, but that this was subject to being altered by the parties agreeing, in good faith, to negotiate for a higher price in the light of the work performed.
5. This was not, to be sure, strictly the manner in which Repfix pleaded the payment term, at least expressly. Nevertheless, where it expressly pleaded that what was agreed to, in relation to each of the three works, was an 'estimate', it might be said that implicit in this is the suggestion that the final price could be altered from what was estimated. Further, FBD, by its conduct did not object when much of the cross-examination of Mr Aras was conducted on the premise that, contrary to Mr Aras' avowed belief that the parties had reached a fixed price arrangement, he had, by his conduct, indicated that he could be flexible and was open to negotiate. If, somewhat generously, I would be prepared to consider that, even in the absence of a pleading to clearly delineate its point, it was open to Repfix to run a case that estimates were subject to later alteration following negotiations conducted in good faith if those negotiations yielded an agreement.
6. I consider that what was written in Mr Aras' email of 20 December 2015 reflected this position: a mutual understanding that verbal quotes were given for each project by July 2015, but mutual recognition, also, that the amount might change following negotiations. There is, in this respect, force to Repfix's submission that if a fixed price had been reached in relation to the three contracts, then there was no need for Mr Aras to look behind the costs breakdown for the respective projects; which was a matter pointed out in Mr Aras' affidavit.
7. The circumstance, which was known to both parties, was that FBD had a fairly narrow window of opportunity to have fit-outs (or a refit) completed within tight time constraints. By this point, Mr Anderson may not have been able to have procured sufficient information, such as the prospective costs of subcontractors and suppliers, to provide a reliable estimate binding upon him or FBD. But it would be in his interest to secure for FBD's benefit the contracts, even if he was unclear what profit margin Repfix might obtain.
8. I do not accept FBD's contention that the position was the same as that which had been reached in relation to the T2 kiosk, where there was a written quote with standard terms and conditions. I accept that this was a smaller work. Whilst it is true that Mr Aras might have wished to receive a written quote for the subject works, this was for administrative purposes and was not an essential requirement for entry into any of the contracts. No complaint was made, for example, by Mr Aras that what was ultimately sought by Repfix was contrary to a written quote. There was no complaint that what Repfix was doing was contrary to the approach it had taken in relation to the kiosk. To the contrary, in his email of 20 December 2015, Mr Aras referred to verbal quotes, whilst indicating a willingness to negotiate.
9. Nor am I persuaded that a conversation occurred on 8 August 2015 in the terms recalled by Mr Aras. I have noted that Mr Aras' recollections were generally limited. There was no contemporaneous record to support the version he propounded and, as I have indicated, his willingness, to some degree, to later negotiate was inconsistent with any clear consensus as to a fixed price arrangement being previously agreed to. It was, in this regard, telling that during his cross-examination, when he was questioned about the sum of $220,000 referred to in his 20 December 2015 email, he emphatically stated that the amount of the claim ($348,000 plus GST) which had recently been asserted by Repfix "was unreasonable". But on FBD's case, that it was a fixed price arrangement, reasonableness should not have come into the equation.
10. Counsel for both parties referred me to the content of the applications for approval of the T1 (in July 2015) and T2 works (in September 2015) sent to the Sydney Airport Corporation and, specifically, what was inserted in relation to the estimated cost of building works. This aspect of the evidence was curious. The estimates in those documents were $198,000 for the T1 works and $275,000 for the T2 works (both estimates being inclusive of GST). As I understood him, Counsel for Repfix argued that these estimates (which were higher than the 'estimates' upon which Mr Anderson commenced the respective works) indicated that Mr Aras anticipated and accepted that FBD would have to pay more than the agreed estimates. For its part, FBD argued that there was no evidence that Mr Aras sighted the estimates supplied to the Sydney Airport Corporation and the circumstances in which those estimates were supplied were obscure. It was contended that Mr Aras relied upon Mr Anderson to provide an honest estimate in accordance to that which was agreed.
11. In my view, this is not a situation where agency principles, in which a principal may be imputed with the knowledge of its agent in its dealings with third parties, has any operation. The issue at hand is not the dealings between FBD and the Sydney Airport Corporation. I accept that it is not established that Mr Aras knew of the estimates supplied to the Sydney Airport Corporation. Even if he had, however, there was nothing to indicate any conduct by, or on behalf of, Mr Aras and FBD which could have manifested in Repfix the reasonable belief that FBD agreed to pay the estimates supplied to the Sydney Airport Corporation. Such communication as was manifested in the application for approval was from FBD to the Sydney Airport Corporation - not Repfix. Repfix never made such claim on the basis of the estimates supplied to the Sydney Airport Corporation. In my view, the evidence about the information supplied to the Sydney Airport Corporation is consistent with the view I have taken that Repfix and FBD had agreed that the former would commence the T1 and T2 works on the basis of estimates for payment, with any balance to the subject of further negotiations.
12. Accordingly, although it is true that FBD does not carry the onus of proving what the payment term was, I do not accept its argument that there was a fixed price arrangement.
13. If Repfix was, however, permitted to depart from its pleading of the payment term, it also has difficulties with the 'cost plus' arrangement it propounded in that event. It could not establish FBD's express or implied agreement to the constituent parts of such arrangement. I accept FBD's submission that there is nothing to indicate FBD's express acceptance of profit margin as the basis for charging overheads. It had to fall back on the vague argument that FBD's agreement to it was to be inferred from the circumstances.
14. Repfix's Counsel could to point to very little to suggest, objectively, that FBD manifested to a reasonable person in Repfix's position its assent to a 'costs plus' basis for pricing. Counsel referred me to correspondence indicating that, after works were performed by Repfix (the fact of which was not contested, even if the quality of the works was contested) Mr Anderson 'disclosed' to Mr Aras what Repfix's additional costs were. However, it could not be supposed that the FBD would sign an 'open cheque', to use Mr Aras' words, and there was nothing to suggest that Mr Aras agreed to what was 'disclosed'. If Mr Aras did not agree to the additional costs following any claim or assertion which Mr Anderson made upon him, there was no stipulated agreed machinery (such as determination by a third party) to settle a dispute the criteria for the final amount for price.
15. The problem for Repfix is that there was nothing to objectively indicate that the final amounts Repfix charged for, in respect to each of the projects, were the subject of negotiations, rather than by its unilateral stipulation; which Repfix's Counsel accepted - correctly in my view - was insufficient. Further, if, as I am prepared to accept for present purposes, there was an obligation of good faith to negotiate for an amount for price on each project higher than the estimate, there is nothing to indicate that FBD breached any obligation to negotiate for any final price in respect to each project.
16. Contrary to its Counsel's submission, the problem for Repfix is not resolved on the basis of a shift in the onus of proof. That is, it is not sufficient for Mr Anderson to assert an entitlement to costs and require Mr Aras to disprove such entitlement on the basis that some, or all, of the additional claim for costs was 'unreasonable'. That is effectively to say that Repfix could unilaterally stipulate what costs it (subjectively) regarded as reasonable. The problem was that there was nothing to indicate by what agreed criteria reasonableness of the additional costs claimed was to be assessed.
17. Repfix's difficulty cannot be resolved by implying as a term, or construing the contract to provide, that FBD's obligation payment was to pay 'reasonable' remuneration either. There was no criterion to indicate whether amounts charged beyond the floor price were objectively reasonable. In this respect, although, a short time before the hearing, in answer to a notice to produce, Mr Anderson compiled a bundle of invoices and other documents (not having done so when compiling three affidavits for use in the proceeding), there was no evidence that Mr Anderson's calculations as to was compiled (whose reliability was at any rate contentious, for reasons to be considered further below) was objectively reasonable; no matter what Mr Anderson may have thought.
18. Further, Repfix did not seek to mount a case that the amounts which exceeded the initial floor price were consequential to agreed variations on the price.
19. I therefore find that even if the Court was permitted to find that the parties had agreed to a floor price, subject to an agreement to negotiate a final price, the Court would have found that such negotiations did not culminate in an agreement to increase that floor price.
20. In summary, therefore, although the parties' agreement that FBD pay Repfix an 'estimate' may imply that the payment term in each contract was not final, Repfix has not persuaded the Court that a binding consensus was reached with FBD for the components of any 'costs plus' arrangement or any other basis for payment beyond the agreed estimate in relation to any of the three projects.
21. That means that the Court finds that the prices for each contract were as follows: T1: $145,000 (excluding GST) T2: $165,000 (excluding GST) Rhodes: $60,000 (excluding GST)

ENTITLEMENT TO CHARGE FOR COSTS

1. It follows from the above findings that it is not necessary to quantify the costs actually incurred by Repfix.
2. If, however, I am wrong in my view on the payment terms for the contracts, I will address this topic briefly. It is on the premise (contrary to what I have found) that Repfix was not limited only to the prices originally estimated in respect to the three contracts.

Repfix's submissions

1. Repfix submits that it is not disputed that Repfix incurred, paid or was liable for $525,192.65 for performing the three projects; a sum that was significantly greater than the amount ($427,000) FBD has paid.
2. As to discrete components of Mr Anderson's analysis, Repfix contends that it was not unreasonable for him to calculate his labour in comparable terms to that of his joinder. His claim for overheads and profit was uncontroversial. The allowance for profit, $33,978.41, was a reasonable amount.
3. Repfix's submissions are vigorously contested in these respects.

Findings

1. As foreshadowed in my findings on credit, I accept the submissions that Mr Anderson's analysis of the documents recently produced to the Court is unreliable. Amongst other things, I accept that there was double counting for GST and discrepancy between the allowance for parking between the most recent analysis and an earlier costs spreadsheet.
2. I will address first Mr Anderson's calculations spreadsheet (Exhibit C, pp 2-9). Thereafter I will address the underlying source documents.
3. Further, there was no contemporaneous corroboration of the components for 'overheads' and 'profits'. The plaintiff did not plead an entitlement to overheads or profits and it was not the subject of evidence from Mr Anderson.
4. On the 'labour' component, similarly, there was no pleaded entitlement to this component and it was not referred to in Mr Anderson's affidavit. The hourly rate selected was a different labourer (apparently Mr Lyons) in circumstances where, in his second affidavit, Mr Anderson indicated that he managed all of Repfix's work "from inception to completion". There was a composite bill from Mr Lyons, but it was nothing like a timesheet indicating the work performed. There is nothing to indicate that the estimated time was reliable.
5. Generally, Mr Anderson's analysis smacked of a sort of a belated reconstruction which had the effect, if not intention, of addressing the deficiencies in proof arising from Mr Anderson's earlier evidence.
6. The Court cannot proceed on the faith of the most recent analysis in the calculations sheet.
7. During the course of the hearing, Mr Anderson indicated that Repfix did have an internal accountant or financial controller (T 43). I would have expected that a person with such qualifications would have been in a position to collate records and assist the Court with evidence as to their content. No such person was called for Repfix and no explanation was supplied as to why that was the case.
8. I now turn to briefly comment on the source documentation (in Exhibit C) the subject of Mr Anderson's calculations spreadsheet.
9. A problem for Repfix here is that, although business records may be admissible as an exception to the hearsay rule, it is another thing for the Court to be persuaded as to the weight to be attributed to the evidence contained in the records; in the absence of explanation, at least where ambiguities could have been explained by witnesses [12] . A notable feature of the hearing (which was, I might add, conducted by Counsel with commendable efficiency) was that aside from the analysis that preceded the bundle, Mr Anderson was not taken to a single primary document within that bundle, or, for that matter, any other source document to support the claim for additional costs. In Repfix's closing outline of written submissions, no reference was made to any document contained within the supplementary bundle.
10. Repfix's Counsel submitted that where there was an ambiguity on the face of any invoice, it was open to FBD's Counsel to challenge Mr Anderson; after declining the opportunity to seek adjournment because of the late service of the documents. I disagree with that submission since it reverses the onus of proof. It was Repfix's case to prove. If documents are, on their face, connected to any of the three projects, the Court may draw appropriate inferences. If, however, doubt emerges on the face of documents, it is not for the other (non-tendering) party to prove a negative - that the documents do not relate to any of the three projects. The rule in Blatch v Archer indicates that evidence - including documentary evidence - is to be weighed in accordance with the relative capacity of parties to prove it. Plainly, here Mr Anderson was peculiarly situated to explain the ambiguities or questionable inferences from the documents. It was not for FBD's Counsel to tease the position out of him.
11. It was no answer, in my view, to say, as Counsel for Repfix suggested, that documents could be accepted for what Mr Anderson stated (in his unsworn calculations spreadsheet) they were because they were produced in answer to a notice to produce issued by FBD. FBD did not tender them and indeed, vociferously opposed their admission. As the tendering party, it was for Repfix to prove they had probative value.
12. There were, as Counsel for FBD submitted, many invoices not obviously referable to the subject works in respect to which it was said that Repfix had made payments. FBD's lawyers industriously produced a modified form of the calculations spreadsheet originally generated by Mr Anderson (Exhibit C, pp 2-9) which was submitted to the Court as an aide-memoire. The modified document featured columns indicating where it could be inferred that Repfix's payment of a particular invoice contained within the supplementary bundle was referable to one of the three subject projects and where it could not.
13. Counsel for FBD said, from the Bar table, that in some cases (illustrated by the treatment of an invoice from Chubb Fire & Security Pty Ltd, at Exhibit C, p 117), FBD did not contest the document's validity; even though there was no obvious express reference to a project (in this case, relevantly the T1 works) on the face of the invoice, since it could be inferred from other circumstances that the invoice had such connection. This was to demonstrate that FBD's analysis was conservative - that is to say, generous - to Repfix.
14. Repfix did not challenge FBD's modification of the calculations spreadsheet.
15. In its analysis for the invoices for the T1 works, which was not contradicted by Repfix, invoices in the aggregate sum of $44,717.08 could plausibly be identified as being payments by Repfix connected to the project. The balance of the aggregate sum which was claimed ($152,361.04), being $107,643.85, could not. In the absence of contradiction of that analysis, I adopt it.
16. In the corresponding analysis for the invoices for the T2 works, similarly not contradicted by Repfix, out of the sum $210,545.94, only the sum of $93,466.23 could plausibly be identified as being payments by Repfix connected with this project. On the same basis, I adopt that analysis.
17. In the corresponding analysis for the invoices for the Rhodes works, out of the sum claimed of $40,590, only the sum of $21,223.94 could plausibly be identified as being payments by Repfix connected with that particular work. On the same basis, I adopt that analysis.
18. This would still leave invoices which, Repfix claims, were monies owed by Repfix. The analysis undertaken by Repfix (Mr Anderson) indicated that amounts were owing to third parties in the respective sums of $10,389.50 (T1), $102,500.15 (T2) and $4,805.50 (Rhodes). As it appeared in the calculations summary (Exhibit C, p 9), this is the combination of 'notes' 2, 4 & 6 and it yielded a total of approximately $121,000.
19. A difficulty for Repfix that there is no evidence to indicate whether, or to what extent, any of these creditor claims have ever been pursued, or will likely be pursued against Repfix. This is not an insignificant omission in a context of invoices being raised with Repfix 4 or 5 years ago. This is the type of problem adverted to earlier where a tendering party simply relies upon source material to evidence the status of a transaction or relationship with third parties without explanation. Given the significant passage of time between the subject transaction with the third party and the time when the invoice was served, I am not persuaded that they represent legitimate creditor claims which Repfix is entitled to have paid by FBD.

RESTITUTION CLAIM

1. I noted that Repfix brought a claim in restitution. It was not identified in the schedule of issues which Repfix's Counsel presented to the Court on the first day of the hearing, and was not referred to in its Counsel's closing written submissions.
2. At the hearing, Repfix's Counsel conceded that unless the contract was unenforceable, restitutionary analysis was inapplicable. I consider that concession was properly made. Contracts materialised and were executed. They were not ineffective. Restitutionary principles are subordinate and are not intended to subvert contractual allocation of risk [13] . On the view that I favour, being a floor price with (at best) a promise to negotiate for a higher amount, the risk here, evident to Repfix, was that FBD, acting in good faith, may not agree to an increase in the floor price for each contract.
3. To reiterate, in any event, there was no objective evidence, such as market value, to value the quantum meruit claim.

FBD'S OVERPAYMENT CLAIM

1. By its pleading, FBD asserted a range of "further" payments, beyond the singular $20,000 'overpayment', which it says it paid to Repfix. It did not, in its Cross-Claim, fully articulate the circumstances in which it claimed an entitlement to be repaid those amounts.
2. There was no explanation for the overpayment by Mr Aras.
3. FBD says it paid more than the aggregate sum for the three contracts by $20,000. This was not referable to any agreement to increase the floor price for any of the three subject contracts. This 'overpayment' was, as Repfix's Counsel noted, inconsistent with Repfix believing that the prices for each of the three contracts was fixed.
4. Confronted with this difficulty, Counsel for FBD submitted that it would be open to the Court to infer that FBD made this payment in a fluid commercial context, where it was concerned about meeting its rental obligations and what it considered were material defects in the work; and needed to pay some money to Repfix to prevail upon it to complete or rectify further works; notwithstanding that it was not entitled to such payment.
5. If, as Counsel contended, that was the reason for the payment, then there is no proper basis for FBD to seek to repayment of that amount since FBD would have made a voluntary payment on the basis of what it perceived was its commercial interests. There is no restitutionary claim that it did so mistakenly and if there is no variation, there may be a promissory estoppel in that FBD led Repfix to believe it would not require repayment of the $20,000 so long as it performed those works. [14]
6. That being so, this part of FBD's cross-claim fails.

General

1. FBD relied upon the report of Mr Peter Ellis dated 15 October 2019 [15] . Mr Ellis has a background in carpentry and joinery and has worked for over 40 years in the building industry. He has extensive experience in inspections, of different kinds, for builders and developers.
2. Repfix did not call an independent expert to counter FBD's expert, Mr Ellis, on the topics of disputed defects and the scope of appropriate rectification works. Mr Anderson's response to Mr Ellis' critique was contained in his affidavit dated 20 April 2020. Mr Anderson referred to his own qualifications including his completion of a Diploma in Mechanical Engineering and his own experience over the last 30 years; particularly working in shopping centres.
3. A number of items of work referred to by Mr Ellis were not pursued by FBD at trial, as indicated in its Schedule of Damages supplied to the Court at the outset of the hearing. FBD's position evolved further after the close of evidence when it chose not to press certain defects.
4. There was some not inconsiderable overlap between items of works for both T1 and T2 projects. This may occasion some duplication in evidentiary references.
5. I propose to address only the defects that are in issue in accordance with the parties' final submissions.

Agreed defects

1. Mr Anderson agreed item 2 was defective, in that there was non-matching filler used to end the joint of the timber menu board shelf.
2. Mr Anderson partially agreed that the item 10 was defective, with qualifications. He accepted that the metal cladding and signage was not in accordance with the nominated work drawings approved by the designer (there was meant to be a black metal used), but justified this with reference to oral agreement with Mr Aras arising as a result of time delays. Mr Anderson says that Mr Aras agreed to Mr Anderson folding up some mild steel sheet to address the problem that it would take at least 8 weeks to obtain the aged Zinc material for cladding of the exhaust hoods. He says Mr Aras indicated that this was too long to wait. Once the exhaust hood was cladded, he then obtained Mr Aras' consent to his coating it with a Dulux rusted look paint. Mr Aras accepted that he had provided his consent to Mr Anderson changing the type of cladding for the hood. Mr Ellis accepted that when observing the metal hood, there was no defective performance in relation to workmanship. The issue was only aesthetic.
3. In his affidavit of 16 August 2020, Mr Aras rejected any oral agreement to this effect. The tenor of his evidence (at paragraphs 12-14) is that he went along with the use of black mild steel under duress since the Zinc cladding was not available and he remained unhappy with the overall look as it was not in line with the designer's plans.
4. As to item 12, again, Mr Anderson partially agreed that the work was defective, but added qualifications. He accepted that the stone pattern and colouring was not the stone counter front specified, but justified this on the basis of oral agreement with Mr Aras. Mr Anderson says that this was the result of communications with Mr Aras in early September 2015, following which the latter required a different stone (a small slab) to be selected due to time delays in the order of 6 to 8 weeks. He says he emailed photographs of the slab he proposed as a substitute. On 3 September 2015, he says they had a telephone conversation and Mr Aras gave him the go ahead to use the slab for each of the three shops.
5. Mr Aras disputed Mr Anderson's version of any oral variation (paragraph 18 of his affidavit of 16 August 2020). However, under cross-examination, Mr Aras accepted that there was discussion with Mr Anderson about an alternative for the stone; but insisted that it was Mr Anderson who selected it. Mr Aras was referred to some photographs which Mr Anderson emailed to him on 3 September 2015 (Exhibit A, Vol 3, pp 541-543) and accepted that he thought one of those resembled the Teakwood Stone. In re-examination, he was shown an email. Mr Aras agreed that the selection of the alternative had not caused any operational issue for the trading operations of the premises.

Disputed defects

1. The main disputed item was item 4. Mr Ellis found that the joints at the end of the menu board were not mitred and that there was a misalignment of the timber joints. Mr Ellis said that the specifications required mitre joints in the frame, but not in the timber for the display boards. Further, not all corner joints were mitred as specified on the drawings. Insofar as the feature ceiling frame was concerned, the work did not comply with the approved drawings.
2. Mr Ellis accepted that, as between the two types of joints, being mitre joints and butt joints, the difference between them was only aesthetic. In re-examination, he reiterated his view that the work was defective since on the feature ceiling frame, the butt joints and finishes on the corner joints were not to a reasonable standard. That was indicated in one of the photos in his report (Exhibit A, Vol 1, p 245, photo 8).
3. Mr Anderson argued that in relation to the menu board shelf, the drawings did not show that they needed to be mitred. The changes affecting the feature ceiling frame were the result of inadequate design engineering signing off. One of the drawings had indicated a need for a structural engineer to provide final drawings. Mr Anderson said he contacted a structural engineer (Mr Natoli) and discussed with him the alternative of using solid timber sections that could be glued and screwed together to make an internal 90 degree 'L' angle, fixed to an in-ceiling beam. He said that Mr Natoli endorsed this course of action and obtained a certificate from him.
4. Mr Anderson did, however, agree that the finished joints were not filled and sanded to proper standards. Mr Ellis agreed with Mr Anderson on this point. Mr Ellis considered that the perimeter frame was not in accordance with the nominated drawings approved by the designer.
5. Mr Aras accepted that the defect had not been identified in his internal note listing defects for the T1 works (Exhibit A, Vol 2, p 284) (or, for that matter, the corresponding item for the T2 works, at Exhibit A, Vol 2, p 288). He accepted that it did not impact trading operations. Nevertheless, Mr Aras complained that he did not get what he paid for. But he accepted that in the four intervening years, he took no step to get the problem resolved.
6. Mr Aras also indicated that FBD's lease at T1 ends later in September 2020 and the lease for T2 ends in October 2020.

Rectification works

1. In relation to item 2, Mr Ellis did not actually make any recommendation beyond that which was identified for item 1.
2. In relation to item 4, again, with reference to the menu board shelf, that was to be addressed in item 1. The corners to the feature ceiling frame needed to be filled and sanded, the fixing screw points filled, and the perimeter of the ceiling frame repainted.
3. For item 10, Mr Ellis recommended that the existing signage be removed, and the metal be repainted to have a black finish.
4. For item 12, Mr Ellis recommended that the existing stone counter front be replaced in Teakwood Stone supplied by the Tile Market.

Agreed defects

1. In relation to item 2, Mr Anderson was not cross-examined on his evidence (at paragraph 66 of his affidavit of 20 April 2020) that nonmatching filler was used to the end joint of the timber menu board shelf.
2. Mr Anderson agreed that there was a defect concerning item 3, being damage to obsolete floor waste at the centre of the floor of the preparation area in the kitchen.
3. In relation to item 7, Mr Anderson agreed that cupboard finishes were not in accordance with the nominated work drawings approved by the designer. They were white when the specified colour was black. Mr Aras did not consider that the colour that was chosen (white, rather than black) was visible since it was applied only to the interior of the cupboards. Mr Ellis, when asked the same question, considered that the colour on the interior of the cupboards was visible to customers.
4. In relation to item 10, Mr Anderson accepted that the signage appeared to be plywood (not metal and not painted black) and that this was contrary to the nominated work drawings approved by the designer, but he cites verbal permission having been received from Mr Aras for this in early October 2015. Specifically, Mr Aras endorsed his cladding the exhaust hood with the same rust effect finish as had occurred with the T1 works. I have addressed this item earlier in the T1 works.
5. Similarly, in relation to item 11, Mr Anderson agreed that the signage to the metal cladding of the exhaust hood was a black sign and not back illuminated as required by the drawings approved by the designer. He says he added two spotlights so as to illuminate the sign to be consistent with the T1 hood signage.
6. In relation to item 12, Mr Anderson agreed that the stone pattern and colouring to the front counter was not in conformity with what was specified. Again, he reiterated what he said about this part of the work for the T1 works. Mr Aras' position was the same as it was in relation to the corresponding item for the T1 works.
7. As to item 13, Mr Anderson agreed that the welded joint had failed between the two sinks, allowing water into the cabinetry below. Mr Anderson partially agrees with the following items identified as defective.

Disputed defects

1. Mr Ellis found that (in relation to item 4) the joints at the end of the menu board were not mitred and the bottom edge of the end panel was not covered. Further, the corner joints were misaligned and not mitred, as specified in the workshop drawings, and screw fixings were not filled or painted. Further, not all corner joints were mitred as specified on the drawings. Insofar as the feature ceiling frame was concerned, the work did not comply with the approved drawings; in that the corners were misaligned and not mitred.
2. Mr Ellis observed (in relation to item 5) various defects to the plasterboard setting, including over the Sahara Grill signboard, a notable curve in the ceiling (left side of the shop), damage to the ceiling around the sprinkler fitting and damage to the ceiling, not repaired around fixing bolts supporting the suspended feature ceiling frame. Mr Anderson gave no evidence in relation to this item.

Rectification works

1. Subject to arguing about the costs, if his evidence about oral variations was rejected, Mr Anderson did not seriously contest the scope of the rectification works suggested by Mr Ellis. To the extent that there was any disagreement in his evidence, it is referred to below.
2. For item 2, Mr Anderson's evidence as to the rectification works (at paragraph 66 of his affidavit of 20 April 2020) was not contested. It comprised sanding, filling, applying veneer screw holes and joints.
3. For item 3, Mr Ellis recommended removal of a temporary hatch and seal floor with a matching product to adjoining floor finishes.
4. For item 4, in relation to the menu board shelf, Mr Ellis' recommendation was picked up in the rectification for item 1. Mr Ellis also recommended temporary removal of the ceiling feature frame, re-screwing the corners, trim and filling the corner joints, filling and sanding the fixing screw points, repainting the perimeter of the ceiling frame and rehanging the frame. The feature ceiling frame should be left down until the plasterboard ceiling was rectified.
5. For item 5, the feature ceiling frame should be removed (if that was not already undertaken in relation to item 4). There should be a temporary removal of all light fittings, sprinkler fittings. The full elevated higher-level section of plasterboard ceiling in the front of the shop should be restraightened and resurfaced. All joints and damaged finishes should be reset in accordance with the A/NZ Standard 2589 relating to Gypsum Linings. The full higher-level section of the ceiling should be repainted. The feature ceiling frame light fittings and sprinkler fittings should be refitted.
6. For item 7, Mr Ellis recommended that the corner cupboard at the left hand of the rotisserie be replaced and other exposed laminated finishes be relined. Mr Anderson disagreed that there was a need for replacement.
7. For item 10, a black mild steel sheeting should be provided to cover the existing plywood. A clear matte sealant should be provided for. Mr Anderson agreed with this method, if the Court found that rectification was required.
8. For item 11, the existing signage should be replaced with the illuminated backlit signage specified.
9. For item 12, the existing stone counter front should be replaced in Teakwood Stone supplied by the Tile Market. Mr Anderson agreed that this was reasonable.
10. For item 13, the damaged double blow stainless steel sink should be replaced.

Defects

1. In anticipation of Repfix's submissions, FBD submitted generally that it was not the law that Repfix was entitled to breach its contractual obligations so long as it had no functional impact upon FBD's business operations.
2. More specifically, following the evidence, FBD did alter its position somewhat. Taking the item numbers in its Schedule of Damages as a reference point, its position on defects was as follows.
3. For the T1 works, FBD submitted there were defects for items 2, 4, 10 & 12.
4. For the T2 works, FBD submitted there were defects for items 2, 3, 4, 5, 7, 10, 11, 12 and 13.
5. It has been noted that to some extent, Mr Anderson explained his divergence from the plans and specifications by reference to deviations which he says were authorised by or on behalf of FBD. It was suggested to Mr Anderson that he did not generally seek requests for deviations from the Finishes Schedule in writing. He was referred to a specific example that had been set out in his affidavit of 20 April 2020, being item 1 (for the T1 works), for the use of timber floorboard. Mr Anderson had attributed his deviation of this to a conversation with Ms Razon, however, agreement to that deviation was not reflected in his affidavit. There was no pleading of oral deviations to the ODI specifications. Further, there was nothing to indicate Ms Razon's authority to approve changes to the contract.
6. Repfix made no written submission, in terms, as to whether there were any defective works. It focussed its submission on the question of rectification. In closing argument, however, Counsel took issue with there being defects for items 10 & 12. This was on the basis that to the extent that the plans or specifications were departed from, this was done following an agreed variation sanctioned by Mr Aras.

Scope of rectification works

1. For the T1 works, FBD submitted that item 2 should be rectified in accordance with Mr Anderson's evidence. All other defects identified should be rectified in the manner suggested by Mr Ellis.
2. For the T2 works, FBD similarly submitted that item 2 should be rectified in the manner suggested by Mr Anderson. All other defects should be rectified in the manner suggested by Mr Ellis.
3. Repfix submitted that even if defects existed, rectification is unreasonable. FBD did not, and does not, intend to rectify them. FBD has only raised them in an attempt to limit what it wishes to pay Repfix as a result of the dispute about the latter's claim for payment. This is borne out by the circumstances that FBD has been able to trade, unhindered, for the last four years; that many of the defects are 'aesthetic' in nature; that Mr Aras himself sanctioned departure from the contractual requirements in certain respects (such as the hood exhaust and stone counter front); that Mr Aras did not undertake the rectification works in the ensuing years; and that it is now too late for the rectification works to occur, given the imminent expiry of the leases at the T1 and T2 premises.
4. In reply, FBD's Counsel submitted that a desire in Mr Aras for an aesthetic look was not to be derided. He operated a 'slick' chain of stores which, to be marketable, should be 'good looking'. Counsel referred me to a passage from Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 (at [16]), where the High Court quoted approvingly from what Oliver J said in Radford v De Froberville [1978] 1 All ER 33 at 42: "Now, it may be that, viewed objectively, it is not to the plaintiff's financial advantage to be supplied with the article or service which he has stipulated. It may be that another person might say that what the plaintiff has stipulated for will not serve his commercial interests so well as some other scheme or course of action. And that may be quite right. But that, surely, must be for the plaintiff to judge. Pacta sunt servanda. If he contracts for the supply of that which he thinks serves his interests - be they commercial, aesthetic or merely eccentric - then if that which is contracted for is not supplied by the other contracting party I do not see why, in principle, he should not be compensated by being provided with the cost of supplying it through someone else or in a different way, subject to the proviso, of course, that he is seeking compensation for a genuine loss and not merely using a technical breach to secure an uncovenanted profit."
5. As I understood him, FBD's Counsel submitted that where the High Court in Tabcorp was referring to 'exceptional' circumstances in which rectification works were not found to be reasonable, this was a narrow band of circumstance.

Principles

1. I accept FBD's submission that the starting point is that the owner was entitled to have something built in accordance with the plans and specifications. Where that has not been done, the usual measure of damages is the amount required to rectify the defects complained of. If that cannot be proven, however, it is open to the owner to claim damages based on diminution of the property on which the works were performed.
2. But that is only a starting point. The measure of damages recoverable by the owner for rectification works is the amount required to give the owner the equivalent of a building on land which is substantially in accordance with the contract. In practical terms, this is measured by the difference between the contract price and the cost of making the work substantially conform to the contract (Bellgrove v Elridge (1954) 90 CLR 613).
3. Nevertheless, the entitlement to receive rectification damages depends upon findings that (a) rectification works are a reasonable course to adopt, and (b) are necessary to produce conformity to the contract (Bellgrove at 618-9). In this regard, the High Court has said that it would only be in fairly exceptional circumstances that the standard of unreasonableness would be met (Tabcorp at [17]), such as where the owner used a technical breach to secure an uncovenanted profit, or where the cost of rectification is out of all proportion to the benefit to be obtained from the rectified work (Wheeler & Anor v Ecroplot [2010] NSWCA 61 at [81]). I understand the High Court to be using those circumstances as illustrative of the proposition of when a Court might find that works were unreasonable, rather than an exhaustive statement of when such finding of unreasonableness might be made.
4. Reasonableness and proportionality require factual assessments. Caution should be exercised in relation to the assessment of 'reasonableness' lest a party 'radically undercut' the bargain the innocent party had contracted for (Tabcorp at [19]). But in deciding whether rectification would be reasonable or not, the Court will have regard to the purpose of the building work - that is, the objective that the owner sought to achieve, as understood by the parties (Westpoint Management Ltd v Chocolate Factory Apartments Ltd; Chocolate Factory Apartments v Westpoint Finance & Ors [2007] NSWCA 253 at [48]).
5. Where a technical breach is being used to secure an uncovenanted profit, then the innocent party's intention may be relevant. In Westpoint, Giles JA said (at [60] -[61]): "... The plaintiff's intention to carry out the rectification work, it seems to me, is not of significance in itself... The significance will lie in why the plaintiff intends or does not intend to carry out the rectification work, the light it sheds on whether the rectification is necessary and reasonable… "… An intention not to carry out the rectification work will not of itself make carrying out the work unreasonable, but it may be evidentiary of unreasonableness; if the reason for the intention is that the property is perfectly functional and aesthetically pleasing despite the non-complying work, for example, it may well be found that rectification is out of all proportion to achievement of the contractual objective or to the benefit to be thereby obtained."
6. This passage was referred to approvingly in Cordon Investments Pty Ltd v Lesdor Properties [2012] NSWCA 184 at [229]) which, as Repfix's Counsel indicated, post-dated the High Court's reasons in Tabcorp.

General observations

1. In relation to technical questions as to whether the works conformed to the specifications and design finishes, I would prefer the view of Mr Ellis over Mr Anderson; the latter being plainly self-interested in the outcome of the dispute. But it is important to recognise the limitations of Mr Ellis' brief: it was, as he said, to check the issues identified by the designer with reference to the documentation he was supplied. His inspection in September 2019 occurred many years after the subject works were performed.
2. I also accept, given his objectivity, that where there is serious dispute about the scope of rectification works, I generally would prefer the evidence of Mr Ellis over Mr Anderson (absent a concession by FBD such as was made in relation to item 2). As was pointed out, as an expert witness, Mr Ellis was required to, and did, express adherence to a Code of Conduct which, amongst other things, acknowledged a primary duty to assist the Court. Mr Anderson did not adhere to such requirement. This omission has some significance in a context where I have generally questioned his credibility and reliability.
3. I agree with the submission that Mr Aras' intention to rectify is relevant, in the sense that an explanation as to why rectification works had not been carried out, or indication that they remain unlikely to be undertaken, illuminates the question whether the rectification is necessary and reasonable.
4. Plainly, Mr Ellis was not in a position to contest Mr Anderson's evidence about deviations. Further, in my view, just because a deviation or variation may not have been reduced to writing does not mean that the Court can ignore it, if it is found to exist. That would be a triumph of form over substance.
5. The circumstance that the leases might be coming to an end imminently does of itself not necessarily mean that FBD should lose the benefit of receiving its money's worth to put the outlets in the position that they would have been presented had the relevant breach of contract not occurred. General principle dictates that where an enforceable promise is breached, the secondary promise is to put the innocent party in the monetary position as if it was performed (Westpoint Management at [42]-[43]). The fact that rectification may not be possible is no automatic bar to recovery of damages in accordance with that measure. This is indicated by the cases concerning the subsequent sale of property upon which defective works were constructed, where it has been found that there is no automatic displacement of the owner's entitlement to damages: Director of War Service Homes v Harris (1968) Qd R 275 per Gibbs J at 278-279; De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28; Scott Carver Pty Ltd v SAS Trustee Corporation [2005] NSWCA 462. Nevertheless the impossibility of performing the rectification works is relevant to the question of the reasonableness of carrying it out: Westpoint Management at [61]-[62].

The T1 Works

1. As to item 2, I find that there was poor joinery workmanship displayed when non-matching filler was used to the end joint of the timber menu board shelf.
2. As to item 4, I find that the defect was not simply that the joints were not mitred from the frame but, as Mr Ellis had suggested, the butt joints and finishes on the corner joints were not to a reasonable standard.
3. As to item 10, on the contest between the evidence of Mr Anderson and Mr Aras as to whether there was a deviation, I did not discern much substantial difference. In my view, even if it was not recorded in writing, Mr Aras did provide a verbal assent for Mr Anderson to use folded up mild steel sheet and coating it with a Dulux rusted looking paint. In the circumstances, I am not prepared to find that the work on this item was defective.
4. As to item 12, I also accept Mr Anderson's evidence, again in preference to Mr Aras, that circumstances had unexpectedly changed which required the selection of a different stone for the counter and that Mr Aras had, as it were, gone along with Mr Anderson's suggestion. I do not regard that as a defect.

The T2 Works

1. I repeat the findings that I have made for items 2, 4, 10 & 12 made in relation to the T1 works with the corresponding items for the T2 works.
2. As to item 3, I accept that the item was defective in that there was damage to obsolete floor waste.
3. As to item 5, I accept Mr Ellis evidence about damage and misalignment to the plasterboard ceiling in the particulars he has referred to.
4. As to item 7, I find that there was a defect in the cupboard finishes, in terms of the colour. However, whether or not the colour was visible to customers, in my view, this defect was only cosmetic and was not, in itself, something that Mr Aras had any particular concern about or any real intention (by itself) to rectify.
5. As to item 11, I find that there was a defect in that the signage to the metal cladding was a black sign and not back illuminated. Although this might be regarded as a cosmetic matter, in my view, it was a significant cosmetic matter and FBD was entitled to have Repfix's promise performed in accordance with the plans.
6. As to item 13, I accept that there was a defect in that the sinks were loose, poorly fitted and with water leaks.

Rectification

1. I find that Mr Aras has never had any intention to carry out the renovation works. The works were performed over the period from late 2015 to early 2016, and in the four years (plus) that have intervened, none of the rectification has been undertaken. I note also that this situation has not altered even in circumstances where FBD must have known for a long period that its leases over the T1 and T2 works are to imminently expire.
2. Whilst I do not overlook the significance, to a limited degree, of the aesthetic appearance to the premises to Mr Aras and FBD generally, any concern about that was incidental to the primary concern as to whether the works could functionally result in the operation of the premises. But the objective of the building work was to produce (expeditiously, so as to enable the resumption of trading) a functional fit out that would enable FBD to conduct business at the premises. No evidence was adduced to indicate that the operations of FBD's businesses at T1 and T2 were impaired in a way that could be causally attributable to the quality of the joinery and carpentry. At least in certain respects, Mr Aras admitted that the only reason for arguing for defects was because of the dispute about payment terms (T 93.25, 95.11). In other respects, as I have found, there were deviations which he endorsed. Further, although some of the defects appeared to go beyond the cosmetic and were more of a structural kind, as noted, FBD has not considered them to be of such concern as to have them rectified in the meantime. There was no evidence that the defects adversely affected the use or occupation of the T1 and T2 premises.
3. The non-conformity of the works with the specifications was raised only after the dispute emerged about the payment terms. Mr Ellis' brief was essentially directed to determining defectiveness from the perspective of non-compliance with specifications: he was not asked to consider the functional significance of the defects. FBD's complaint about defects was supplemented by a complaint about delay damages which was raised by FBD, prosecuted in this cross-claim and only abandoned by it on the first day of the hearing. Mr Aras' intention, to be imputed to FBD, all along, has been that the defects should be used as a shield against Repfix's payment claim. Mr Aras has had no genuine desire to rectify the works and he has no intention to do so now with the leases on T1 and T2 shortly to come to an end.
4. I infer from the circumstances I have referred to that rectification now is not reasonable. This is one of the exceptional cases where rectification is out of all proportion to achievement of the contractual objective or to the benefit to be thereby obtained.
5. FBD did not claim damages on the alternative bases that there was a diminution in value of property, or any loss of amenity. Its case stands or falls on recovery under the rectification measure of damages.
6. FBD has not proven that case in respect to either the T1 or T2 works. It is entitled to nominal damages for the sum of $100 (in respect to each contract), for Repfix's several breaches of contract.

SUMMARY

1. In summary, I have found that: 1. there was no 'fixed' price arrangement for the three contracts; 2. FBD did not agree to any 'cost plus' arrangement for Repfix to be paid for any of the three contracts; 3. Repfix has not established an entitlement in the respective contracts to be paid more than the 'estimated' prices; 4. no claim lies in restitution on a quantum meruit; 5. FBD is not entitled to receive the sum of $20,000 as 'overpayment'; 6. FBD has not established an entitlement to rectification costs; and 7. FBD is entitled to nominal damages for the defective works performed by Repfix in breach of the contracts for the T1 and T2 works.

ORDERS

1. The plaintiff/cross-defendant is to bring in short minutes of order disposing of the proceeding and, in particular, the appropriate orders for costs, within 14 days. This should follow discussions with the defendant/cross-claimant. Given the delay in the adjudication of this dispute, the costs incurred by each party and the ultimate result that they have each obtained, it should go without saying that it would be desirable for further disputes about costs to be minimised.
2. The orders to dispose of the proceedings will be made on the papers, absent any indication to the contrary. Accordingly if the parties are in dispute about costs, they have liberty to supply my Associate with short submissions (not exceeding 3 pages, excluding attachments) in support of their respective positions.

Endnotes

1. Sub-paragraphs 6(d)-(e) of the Statement of Claim filed 28 August 2017 (the 'SOC').
2. Sub-paragraphs 11(d)-(e) of the SOC.
3. Sub-paragraphs 16(d)-(e) of the SOC.
4. Particulars to paragraphs 5, 10 & 15 of the SOC
5. Sub-paragraphs 6(b), 11(b) and 16(b) of the Defence filed 3 November 2017.
6. J D Heydon, Heydon on Contract (Thomson Reuters, 2019) [2.110].
7. Heydon on Contract, [3.40] & [9.1630]; also J W Carter, E Peden & G J Tolhurst, Contract Law in Australia (5th ed, Butterworths, 2007) [4-12].
8. Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 per Campbell JA (Basten JA and Sackar J agreeing) at [139]; and County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 per Spigelman CJ at [17]-[24] (and McColl JA at [161]-[163]).
9. Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 and Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd; TWT Property Group Pty Limited v Cenric Group Pty Limited [2019] NSWCA 87 at [155]-[156].
10. United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618 at [61].
11. See for example, Caves Beachside Cuisine Pty Ltd v Boydah Pty Ltd [2015] NSWSC 1273 per Kunc J at [121]-[124] for some of the difficulties of implying an agreement to negotiate in good faith in the context of a lease.
12. See for example, Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 at [338] - [339], [360] - [373].
13. Mann v Paterson Constructions Pty Ltd (2019) 93 ALJR 1164; [2019] HCA 32 at [14]-[18].
14. Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 at 448.
15. Part of this report featured evidence from Mr Seeto, a quantity surveyor. This will be considered, if at all, by a referee to be appointed following the referral on the issue of quantification of rectification costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 September 2020