Sabouni v Revelop Building and Developments Pty Ltd

Supreme Court of NSW|2020-11-27|Before: Black J

Solicitors: O Sabouni (Plaintiff) (self-represented) HWL Ebsworth (Defendant) File Number(s): 2018/393550

Judgment

These proceedings involve claims in respect of the construction of a child care centre at Penrith in New South Wales. They were originally brought by the First Plaintiff, OSC Constructions Pty Ltd ("OSC"), against Revelop Building and Developments Pty Ltd ("RBD") in the Local Court of New South Wales in December 2018. OSC and the Second Plaintiff, Mr Sabouni, filed an Amended Statement of Claim in April 2019 by which Mr Sabouni contended that he rather than OSC was the proper plaintiff. RBD filed an Amended Defence and Cross-Claim in June 2019; the proceedings were transferred to the Supreme Court of New South Wales in March 2020; and ultimately Mr Sabouni and not OSC pursued the claim against RBD, and RBD pursued a cross-claim against Mr Sabouni and not OSC. The proceedings were heard on 26 November 2020; were adjourned without a substantive hearing on 27 November 2020, by reason of a party's illness on that day; and the hearing was completed on a second day on 20 January 2020.

Mr Sabouni's claim against RBD

Mr Sabouni pleads that he and RBD entered into a contract for construction works on a construction site at Penrith, under which he would perform specified Works in accordance with the Contract for a contract sum of $1,099,098. By its Defence, RBD initially denied entering a contract with Mr Sabouni to carry out the relevant works and contended that it had entered that contract with OSC. RBD ultimately accepted, in the course of the hearing, that the contract was with Mr Sabouni. Mr Sabouni pleads that, between 21 March 2017 and 20 April 2017 he carried out part of the relevant works (FASC [5]). Mr Sabouni pleads (FASC [6]) that he made a progress claim on 20 April 2017 for $100,086.53, and claims that RBD failed to pay the amount of the progress claim or provide a "progress certificate" evidencing its opinion of the monies due within seven days, and that the amount of the progress claim was deemed to be a debt due and payable under the Contract. By his Further Amended Statement of Claim, Mr Sabouni accepted that RBD had terminated the Contract on 1 May 2017 and pleaded that, "notwithstanding the termination", he was entitled to payment of that progress claim in full and the failure to make that payment represented a breach of contract, for which he claimed damages in the amount due of $100,086.53 (FASC [11]-[13]). By its Defence, RBD largely denied Mr Sabouni's claim.
In substance, Mr Sabouni's case is that his right to the amount of the second progress payment arises because RBD did not respond to his claim for that payment within the time specified in the Contract. In closing submissions, Mr Sabouni addressed the adverse impact of this matter on his family and indicated his belief that the money which was claimed was rightfully his, and his contention that the works were done and that RBD had not paid for them (T95). He also contended that he had shown through emails and documentation that RBD's conduct had a severe impact on the delay of the work, and that RBD had not provided him with all necessary documentation and had failed to fulfil its obligations with the structural engineer. He contended that no written direction was given regarding the extensions of time and they should be deemed accepted under the Contract and that the amounts claimed under the progress claims were also deemed to be debts due and payable under the terms of the Contract (T97).
In opening submissions, Mr Vincent submits that RBD denies any liability to Mr Sabouni in the amount claimed by him on the basis that the work which was the subject of the payment claim was either not performed as claimed or was otherwise defective, or on the basis that RBD was entitled to set-off against any amount determined to be owing to Mr Sabouni (which liability is denied) for the costs of completing the contractual works which exceeded the contract price by $831,202.21. Mr Vincent also submits that Mr Sabouni's evidence does not establish the extent to which the works had progressed at the time the second progress claim was issued; the costs he had incurred in respect of the works, or the proper value of the works as claimed under the second progress claim or at all.
In closing submissions, Mr Vincent notes, and I accept, that Mr Sabouni's claim to the amount claimed in the second payment claim, of $100,086.53 depends upon that claim being a valid claim under the Contract and on the contractual provisions which he contends entitle him to payment of that claim, when it was not contested by RBD within the time specified in the Contract. Mr Vincent responds that: "The Second Payment Claim is invalid and provides no entitlement on the part of Mr Sabouni to payment as it includes false claims for payment for work that was not even commenced by Mr Sabouni … This false claim could never constitute a valid claim for payments under the terms of the Contract and Mr Sabouni has no contractual entitlement for payment for work not performed. … Further the Second Payment Claim was not a valid claim under the Contract as it was issued prematurely on 20 April 2017, whereas claims were to be issued on the 30th day of each month for work done to the 15th day of that month: Clause 21.1 and Item 16 of the Contract." In closing submissions, Mr Vincent relied on Mr Sabouni's acceptance in cross-examination that, as I note above, he had not commenced work which the program he had prepared indicated had not been commenced as at 22 April 2017; and that several items claimed on the second progress claim were shown on that program as having not commenced on 15 April 2017, including piering slab 2; concrete slab 2; electrical rough-in slab 2; carpentry slab 1 walls and structural steel building 1. I have also referred above to, and not accepted, the contrary position put by Mr Sabouni in closing submissions. Mr Vincent submits that Mr Sabouni has no contractual entitlement to payment on that basis.
I am not satisfied that Mr Sabouni had accrued a right to payment of the second progress payment by the time of the termination of the Contract, where that progress claim did not comply with the timing requirements of the Contract for such progress claims, and, at least on Mr Sabouni's evidence in cross-examination and by reference to his program issued on 22 April 2017, had included work which was not properly within the scope of that claim.
I note, for completeness, that Mr Sabouni's claim was not pleaded or put, either when he was legally represented or when he subsequently represented himself, as a quantum meruit or restitutionary claim, nor did he lead evidence of the value of the works done that would have been necessary to support such a claim. The questions considered by the High Court in Mann v Paterson Constructions Pty Ltd (2019) 373 ALR 1; [2019] HCA 32, which involved a claim for quantum meruit following termination of a construction contract for repudiation, do not arise. A further question whether, on termination of a contract, a party can recover an amount under a quantum meruit claim that would not have been due by reason of non-compliance with the conditions for payment under that contract, noted by Ward CJ Eq in Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2020] NSWSC 1778 at [3221]ff] also does not arise. It is preferable that I do not express any view as to these complex questions where Mr Sabouni did not bring such a claim and the parties did not address the relevant principles or the applicable case law.

RBD's Cross-Claim against Mr Sabouni

By its Cross-Claim, RBD initially pleaded a contract with OSC, pleaded that OSC had breached that contract in a manner amounting to a repudiation of the contract which was accepted by RBD, and claimed loss and damage referable to the rectification of works carried out by OSC and the completion of works in the premises. In the alternative, RBD brought substantially the same claim against Mr Sabouni, and that claim is now pressed on the basis that Mr Sabouni rather than OSC was party to the Contract. In particular, RBD pleads that Mr Sabouni was obliged to commence the relevant works by the commencement date (being two weeks after the date of the Contract) and ensure the works reached practical completion by the date for practical completion (being 16 weeks after the commencement date) (Cross-Claim [17]). By his Defence to the Cross-Claim, Mr Sabouni substantially admits the terms of the Contract, but pleads that the date for which practical completion was due was subject to extensions of time and variations and the timeline of 16 weeks did not take into account inclement weather and delays caused by RBD, although he did not there plead any material facts said to give rise to such delays (Defence [17]).
RBD also pleads that Mr Sabouni breached the terms of the Contract in that he caused serious delay in respect of the works, continuously caused variations in respect of the works without RBD's consent, did not meet agreed deadlines in accordance with the Contract, did not carry out the works with due care and skill and carried out the works negligently. Mr Sabouni denies that he had breached the terms of the Contract (Defence [18]) and relies on delays in respect of inclement weather; claimed that RBD failed to provide him with correct and appropriate documentation or to pay the engineer and that caused delay to crucial works, and otherwise denied the claim. I am satisfied that RBD has established that Mr Sabouni had breached the Contract, at least in respect of the delay in respect of the works, but it has not established a failure to carry out the works with due care and skill or that the works were carried out negligently, absent expert evidence to support such a conclusion.
RBD also pleads that Mr Sabouni's conduct amounted to a repudiation of the contract; that RBD accepted that repudiation and terminated the Contract on 1 May 2017. Mr Sabouni denies his conduct amounted to a repudiation of the contract. Repudiation involves an expressed unwillingness or inability to render substantial performance of a contract: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 659; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 at [44]; Vanguard Financial Planners Pty Ltd & Anor v Ale & Ors [2018] NSWSC 314 at [228]. In Southern Cross Autoglass Pty Ltd v Protector Glass Industries Pty Ltd [2014] NSWSC 261 at [123], Kunc J summarised the relevant legal principles as follows: "A party will be taken to have repudiated a contract if it manifests the intention no longer to be bound by it or to fulfil it only in a manner substantially inconsistent with that party's obligations and not in any other way. That manifestation may occur before performance is due (known as anticipatory breach) and does not depend upon the existence of an actual intention to repudiate. Rather, the Court looks to how a reasonable person, in the position of the "innocent" party, would view the allegedly repudiatory conduct." I recognise that, as Lord Wright noted in Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60 at 71, repudiation of a contract is a "serious matter, not to be lightly found or inferred".
Mr Vincent also refers to the summary of the relevant principles in respect of repudiation, in the context of termination of a construction contract, in DCT Projects Pty Ltd v Champion Homes Sales Pty Ltd [2016] NSWCA 117 at [39]-[42], where Gleeson JA (with whom Macfarlan JA and Sackville AJA agreed) observed that: "For the conduct of a party to constitute a renunciation of its contractual obligations it must be shown that the party is either unwilling or unable to perform its contractual obligations, that is, it has evinced an intention to no longer be bound by the contract, or stated that it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and in no other way ... Repudiation is a serious matter and is not to be lightly found or inferred … Where inability to perform is declared the conduct amounts to a refusal to perform and the innocent party need not prove that the other party was actually unable to perform when the time for performance came ... A renunciation can be made either by words or conduct, provided it is clearly made ... The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it ... So far as factual inability to perform is concerned, what needs to be shown is that the party in question has become wholly and finally disabled from performing the essential terms of the contract altogether ... It is well accepted that factual inability must be proved "in fact and not in supposition" … [citations omitted]
In closing submissions, Mr Vincent contended that repudiation was established by Mr Sabouni's inability to complete the works by the date for practical completion, where that date had passed by 1 May 2017; by Mr Sabouni's claiming for work in the second progress claim that he had not performed; and by the claims of 25 days by way of extensions of time on 28 February 2017 of which only six days were within the time for such claims specified in cl 22 of the Contract (which had not then been but was later executed), so far as the other extensions claimed related to events dating back to December 2016. Had it been necessary to determine the question whether a repudiation of the contract was established, I would have accepted that at least the first and second of those matters established repudiation.
RBD also pleads that it has suffered loss and damage which it quantifies as the cost of engaging alternate contractors to rectify defects in the works and complete the work, in an amount of $2,021,777.94. Mr Sabouni does not admit that RBD had suffered loss or damage.
The damages to which RBD is entitled, in respect of Mr Sabouni's breach of or repudiation of the Contract is the monetary sum which, so far as money can, represents "fair and adequate compensation for the loss or injury" which it sustained by reason of that breach or repudiation: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 116 per Deane J. The Court must do the best it can to make a reliable assessment of damages, where damages are difficult to assess, including where a party has failed to lead the best evidence of damages: Commonwealth of Australia v Amann Aviation Pty Ltd above at 83, per Mason CJ and Dawson J, 125 per Deane J, 153 per Gaudron J. In Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 at [135], Beazley JA observed that: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provides for breach of contract, an award of damages … . Such damages should not be nominal only, notwithstanding that the award may be difficult to assess. …" (Citations omitted)
On the other hand, the case law also recognises that damages must be proved with a degree of precision which reflects the proof that is reasonably available to the parties: State of New South Wales v Moss (2000) 54 NSWLR 536 at [72]; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 at [38]. In Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that "if the evidence called on behalf of [the plaintiff] fails to provide any rational foundation for a proper estimate of damages, the Court should simply decline to make one". That approach was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 243 and by the Court of Appeal in Troulis v Vamvoukakis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof, but there was an absence of raw material to which good sense may be applied, "[j]ustice does not dictate that … a figure should be plucked out of the air". That decision has been approved in subsequent cases, including McCrohan v Harith [2010] NSWCA 67 at [128], where McColl JA (with whom Campbell JA and Handley AJA agreed) held that an estimate of damages, in the nature of a "guess", should not be made where precise evidence of the damages suffered could have been adduced, but was not. I followed that decision in Re Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1578 at [20], on which I have drawn for the summary which appears above.
As I noted above, Mr El-Hazouri's evidence was that RBD engaged other contractors following the termination of the Contract (El-Hazouri 13.10.20 [93]). However, that evidence did not identify, in any admissible way, the particular works undertaken by those other contractors, or seek to establish that those works were within the scope of the work which Mr Sabouni had contracted to undertake under the Contract. Mr El-Hazouri's evidence (admitted with a limiting order under s 136 of the Evidence Act as a submission and not proof of the fact) (El Hazouri 13.10.20 [94]) was also that the total cost to have the other contractors finalise the works prior to September 2017 was $1,930,300.21, being $831,202.21 greater than the cost under the Contract. That evidence again assumed, but did not seek to establish, that the works undertaken by the other contractors were identical to those which Mr Sabouni had contracted to complete by the Contract. Mr El-Hazouri referred to a spreadsheet recording works undertaken in respect of the premises, which identified the other contractor who undertook that work and gave a broad description of the nature of the work and its cost, but again did not establish that the particular works coincided with the scope of the work for which Mr Sabouni was responsible under the Contract.
There is, as Mr Vincent largely conceded in closing submissions, no evidence that several items of the costs claimed were within the scope of the Contract between Mr Sabouni and RBD. By way of illustration, those items included the costs of initial cleaning of the premises and cleaning of balcony glass (El-Hazouri 13.10.20 [99]-[100]); costs of installation of "spit fires", which were not further described (El-Hazouri 13.10.20 [103]-[104]); costs of installation of a mirror at the premises (El-Hazouri [109]-[110]), of fencing and gates (El-Hazouri [116]-[117]), of a stainless steel bench (El-Hazouri [118]-[119] and of unidentified glass at the premises (El-Hazouri [122]-[123]); costs of the installation of a fire-brake and blankets (El-Hazouri [124]-[125]) and of a braille sign (El-Hazouri [128]) and of line-marking works and hardware (El-Hazouri [133]-[134]); costs of acoustic services and testing (El-Hazouri [141]-[142]), provision of tactile and adhesive flooring (El-Hazouri [143]-[144]); costs of window tinting (El-Hazouri [155]-[156]) and costs of provision of an occupational certification (El-Hazouri [163]-[164]). Plainly, the cost of obtaining those items was not caused by any breach of contract by Mr Sabouni if he had not contracted to supply them, and that was not established by RBD. Some other items, for example costs referable to plant supply, landscaping, laying grass and removal of trees at the premises (El-Hazouri 13.10.20 [101]-[102], [107]-[108], [135]-[136], [149]-[152]), costs of building work generally (El-Hazouri [105]-[106], [120]-[121]) and of plumbing works (El-Hazouri [112]-[113], [139]-140]) overlapped with general categories of work within the scope of the contract. However, RBD made no real attempt to establish whether the scope and nature of the works actually undertaken were identical to those which Mr Sabouni had contracted to undertake or, if they were not, how they differed from those which Mr Sabouni had undertaken to complete. The evidence does not establish the extent to which the work undertaken travelled outside the scope of the work which Mr Sabouni had contracted to undertake, and was not caused by any breach of contract on his part.
RBD led no evidence from any contractor subsequently engaged to complete the work as to the work which it undertook or that that work was in fact directed to rectifying any defects on the premises as a result of works undertaken by OSC or Mr Sabouni. Mr Vincent's submissions also did little to establish the basis on which the damages claimed were referable to the loss suffered by reason of termination of the contract. Mr Vincent submitted that, following termination of the Contract, RBD had to engage further contractors to complete the works and rectify defects on the premises as a result of the works undertaken by OSC (or Mr Sabouni). Mr Vincent also submitted that RBD was under time constraints to complete the works as the sub-lessee was to take possession of the premises in September 2017, and I accept that it is likely that RBD wished to complete the works sooner rather than later, although that sub-lessee was an associated entity. Mr Vincent submits that the total cost to RBD to have the contractors finalise the works prior to September 2017 was $1,930,300.21, which was $831,202.21 more than the Contract Price. It is, however, not apparent how that escalation in price originated, or how it is linked to any breach of or repudiation of the Contract by Mr Sabouni, in respect of the delay in works at an earlier point. Mr Vincent also refers to RBD's estimate, unsupported by expert evidence, that the works were only approximately 5% complete at the time RBD terminated the contract.
Mr Vincent submits that there is uncontroverted evidence as to the costs incurred by RBD to complete the contractual works which costs greatly exceed any amount that could conceivably be payable to Mr Sabouni. While I accept that there is evidence as to the costs incurred by RBD to complete the premises, it seems to me that RBD has not established that the work which was done to complete those premises corresponded to that which Mr Sabouni had contracted to complete, or that the whole of the costs incurred in completing the premises, or any particular cost or costs referable to doing so, resulted from Mr Sabouni's repudiation of or breach of the Contract. There is no rational basis in the evidence led by RBD to hold Mr Sabouni liable for the whole of those costs or to identify any lesser amount that may be recoverable by RBD as a result of the breach. RBD therefore fails in its claim for damages in the Cross-Claim.

Costs

My preliminary view is that, where each party has failed in establishing its claim for damages against the other, there should be no order as to costs, but I will allow the parties an opportunity to make written submissions as to that question. I direct the parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 14 days or, if there is no agreement between them, their respective draft orders and submissions, not exceeding 8 pages in one and a half spacing, as to the differences between them.

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