[2019] HCA 18
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634(2014) 317 ALR 72
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640[2013] HCA 54
Browne v Dunn (1893) 6 R 67
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592[2004] HCA 60
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304[2003] HCA 22
Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 12
[1986] HCA 3
Gaynor v Attorney General for New South Wales (2020) 102 NSWLR 123
[2014] TASFC 10
Lee v Lee (2019) 266 CLR 129
[2019] HCA 28
Mills v Walsh [2022] NSWCA 255
Murphy v Overton (2004) 216 CLR 388
[2004] HCA 3
Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199
[2015] FCAFC 50
Pitcher Partners Consulting Pty Ltd v Nevilles Bus Service Pty Ltd (2019) 271 FCR 392
96 ALJR 271
University of Wollongong v Metwally (No 2) (1985) ALJR 481
Judgment (22 paragraphs)
[1]
Kronenberg v Bridge (2014) 26 Tas R 359; [2014] TASFC 10
Lee v Lee (2019) 266 CLR 129; [2019] HCA 28
Mills v Walsh [2022] NSWCA 255
Murphy v Overton (2004) 216 CLR 388; [2004] HCA 3
Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50
Pitcher Partners Consulting Pty Ltd v Nevilles Bus Service Pty Ltd (2019) 271 FCR 392; [2019] FCAFC 119
Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 96 ALJR 271
University of Wollongong v Metwally (No 2) (1985) ALJR 481; [1985] HCA 28
Watson v Foxman (1995) 49 NSWLR 315
Xu v Jinhong Design Constructions Pty Ltd [2011] NSWCA 277
Category: Principal judgment
Parties: Matthew Schrader (First Applicant)
Jacqueline Schrader (Second Applicant)
[2]
David Broach (Respondent)
Representation: Counsel:
C Stomo (Applicants)
M Fraser (Respondent)
[3]
Solicitors:
Kedron Legal (Applicants)
Williamson Lawyers (Respondent)
File Number(s): 2023/150227; 2023/274540
Publication restriction: Nil
Decision under appeal Court or tribunal: District Court of NSW
Jurisdiction: Civil
Citation: [2023] NSWDC 97
Date of Decision: 14 April 2023
Before: J Smith SC DCJ
File Number(s): 2021/00144195
[4]
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[5]
HEADNOTE
[This headnote is not to be read as part of the judgment]
In December 2019 the applicants, Mr and Mrs Schrader, engaged the respondent to carry out building works to renovate their residential property in Kareela (the "Works") under a Cost Plus (Residential) Building Works Contract (the "Contract") with an estimated cost of works of $300,000.
The Works began in January 2020. In August 2020 the respondent sent Mr Schrader a bill of quantities with an estimate of an additional $329,585.97 required to finish the Works. The Works ceased in September 2020 when the respondent sent a notice of suspension of works on account of unpaid invoices and the applicants subsequently served a notice of dispute under the Contract. Up until that time the applicants had paid $285,800 for the Works performed under the Contract.
The applicants claim the respondent made six "Contract Representations" which collectively led them to believe that the Contract was a fixed price contract for $300,000 except for the possibility of some additional costs associated with excavation and that this constituted misleading or deceptive conduct under the Australian Consumer Law. Relevantly the applicants allege that three of those representations, the Fixed Cost, the Estimate and the Excavation Representations, were made during conversations between the respondent and the applicants (or Mr Schrader) on 15 May 2019, 30 October 2019 and 13 December 2019.
The applicants also claim that the respondent acted unconscionably by leading them to believe that the Works would cost approximately $300,000 and by his conduct preventing the applicants from finding out that the Works would cost more than that. On 21 May 2021 the applicants brought proceedings in the District Court against the respondent. By orders dated 14 April 2023 the primary judge dismissed their claim.
As to misleading or deceptive conduct, the primary judge was not satisfied that five of the six Contract Representations were made, including for the reason that the primary judge was not satisfied that the conversations on 15 May, 23 October, 30 October and 13 December 2019 occurred as the applicants alleged. The Price Representation was admitted by the respondent however the primary judge was not satisfied that this conduct in its context, including the terms of the Contract, constituted misleading or deceptive conduct.
As to unconscionability, the primary judge was not satisfied the respondent's conduct was unconscionable.
The primary judge was also not satisfied that there was any loss even if the applicants had established misleading or deceptive conduct or unconscionability.
Whilst the applicants purported to bring an appeal as of right against the decision of the primary judge, they also filed an application for leave to appeal against the possibility that leave was required. The Court was required to determine whether the amount in issue was below $100,000 and if so, whether leave to appeal should be granted. The applicants sought, and were granted, leave to rely upon an amended notice of appeal.
The principal issues on the application are whether the primary judge erred in:
(i) his assessment of the applicants' evidence;
(ii) finding that none of the Contract Representations (other than the Price Representation) were made;
(iii) finding that the Price Representation did not contravene ss 18 and 29 of the Australian Consumer Law;
(iv) finding that the conduct of the respondent was not unconscionable within the meaning of s 21 of the Australian Consumer Law; and
(v) finding that in any event the applicants had not established any loss.
The Court (Stern JA, Gleeson and Leeming JJA agreeing) held, dismissing the summons seeking leave to appeal and dismissing the notice of appeal as incompetent:
On the issue of leave to appeal:
(1) Leave to appeal is required as there is no realistic prospect of the applicants being awarded damages in excess of $100,000 given the way the applicants put their claims for loss: [13].
(2) Leave to appeal on all grounds should be refused. The appeal does not raise any issue of principle or general public importance. Moreover, given the difficulties with the ways in which the damages claim was formulated, there is no injustice: [14]-[15].
As to issue (i):
(2) The primary judge did not err in finding that there were difficulties with the reliability of the applicants' evidence given the passage of time, the nature of the conversations and the susceptibility of their evidence to unconscious bias. There is no error in that assessment of the applicants' evidence. It was entirely proper for the primary judge to direct himself in the way he did in those circumstances: [73]-[74].
Watson v Foxman (1995) 49 NSWLR 315, Campbell v Campbell [2015] NSWSC 7834, considered.
As to issue (ii):
(3) To the extent that the primary judge found that the Contract Representations (other than the Price Representation) were not made, his Honour did not err. This follows from the conclusions as to the conversations on 15 May 2019, 30 October 2019 and 13 December 2019, and from the fact that neither the Budget Representation nor the Cost Plus Representation was particularised nor supported other than by alleged conversations which the primary judge correctly rejected. The Price Representation alone could not amount to the Contract Representations, given that the Contract Representations were pleaded as, collectively, the Budget Representation, the Estimate Representation, the Fixed Cost Representation, the Excavation Representation, the Cost Plus Representation and the Price Representation: [121]-[123].
As to issue (iii):
(4) The primary judge did not err in finding that the Price Representation did not constitute misleading or deceptive conduct or was not likely to mislead or deceive. The primary judge considered the conduct of the respondent as a whole, including all of the terms of the Contract, for the purpose of determining whether the numbers and words written on the Contract conveyed the meaning alleged by the applicants. The very clear terms of the Contract stand as an obstacle to the Price Representation conveying the meaning that the applicants alleged: [136]-[137], [141].
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60, Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25, considered.
As to issue (iv):
(6) The primary judge did not err in rejecting the applicants' unconscionability claim. There is nothing in the respondent's conduct that could properly be interpreted as seeking to hide the true costs of the Works from the applicants or preventing them from asking questions about costs: [188]-[189].
As to issue (v):
(5) The applicants' claim for damages to reflect the increased cost of the Works cannot succeed. The applicants have not shown that they have suffered any detriment on account of the fact that they have to spend further money to complete the Works. The value of the work that has and will be provided has not been shown to be less than the sums that the applicants have spent and will in the future have to spend. As the damages claim for unconscionability was the same as for the misrepresentation claim, the applicants' claim for damages suffers from all of the difficulties identified in relation to the misrepresentation claim. Further, there was no evidence from the applicants that they would have terminated the Works earlier than they did had they been aware of the likely cost of completion of the Works. That evidentiary lacuna prevents an insuperable obstacle to the way in which the claim for damages was advanced: [170]-[171], [174], [190]-[191].
Mills v Walsh [2022] NSWCA 255, applied.
[6]
JUDGMENT
GLEESON JA: I agree with Stern JA.
LEEMING JA: I agree with Stern JA.
STERN JA: The essential issue on this application is whether the primary judge was correct to dismiss claims of misleading or deceptive conduct and unconscionability that the applicants, Mr and Mrs Schrader, make against the respondent, David Broach. Whilst Mr and Mrs Schrader purported to bring an appeal as of right against the decision of the primary judge, they also filed an application for leave to appeal against the possibility that leave was required. As I have determined that the amount in issue is below $100,000, and thus that leave to appeal is required, I will refer to Mr and Mrs Schrader together as the "applicants" in this judgment.
On 23 December 2019 the applicants engaged the respondent to carry out building works to renovate their residential property in Kareela (the "Works") under a Cost Plus (Residential) Building Works Contract (the "Contract"). The Works began on 28 January 2020 and continued until 15 September 2020 when the respondent served a notice of suspension on the applicants on account of unpaid invoices in the sum of $76,999.49. Two days later the applicants served a notice of dispute under the Contract, the disputes notified included alleged misrepresentations and breaches of the Contract. Up until that time the applicants had paid $285,800 for works performed under the Contract.
On 21 May 2021 the applicants brought proceedings in the District Court against the respondent seeking damages for misleading or deceptive conduct contrary to Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, ss 18 and 29, unconscionability contrary to s 21 of the Australian Consumer Law and breach of contract. By orders dated 14 April 2023 the primary judge dismissed their claim.
The applicants contend that the primary judge should have upheld their claims for misleading or deceptive conduct and unconscionability (grounds 1, 3, 4, 5 and 7-11). They also contend that the primary judge erred in finding that their evidence was unreliable (ground 2). They contend that the primary judge erred in finding that they had not suffered any loss and contend that the primary judge should have found that they suffered loss in the sum of $273,587, which they say is the sum required for them to pay for the completion of the Works (ground 6). In this regard, they contend that their loss is the same under both the misleading or deceptive conduct and unconscionability claims. They say, in essence, that they would not have engaged the respondent under the Contract on 23 December 2019 were it not for the misleading or deceptive conduct and would have terminated the Contract in early 2020 were it not for the unconscionability. They say they have suffered loss because they now have to pay considerably more than they had anticipated for the Works to be completed.
[7]
Leave to amend the notice of appeal
The initial notice of appeal filed by the applicants erroneously stated that the appeal was brought under s 101 of the Supreme Court Act 1970 (NSW). As was pointed out by the respondent, the appeal in fact lay under s 127 of the District Court Act 1973 (NSW). On 11 August 2023 the applicants filed an amended notice of appeal. The respondent does not oppose the applicants being given leave to rely upon this amended notice of appeal. That leave should be granted.
[8]
Leave to appeal
On 25 August 2023, the applicants filed a summons seeking leave to appeal.
That summons was responsive to a motion filed by the respondent on 3 August 2023, seeking orders that the appeal be dismissed as incompetent with costs. The respondent contends, in support of that motion, that the applicants have not established that the amount in issue on the appeal is more than $100,000. On that account, the respondent contends, the applicants require leave to appeal under s 127(2)(c) of the District Court Act. This provides that leave to appeal is required for:
(c) an appeal from a final judgment or order, other than an appeal -
(i) that involves a matter at issue amounting to or of the value of $100,000 or more, or
(ii) that involves (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $100,000 or more
The application for leave to appeal and the motion were heard together with the appeal. Two questions arise from these applications:
1. Does this appeal involve a matter at issue amounting to or of the value of $100,000 or more, in which case leave to appeal is required; and
2. If so, should leave to appeal be granted.
As to the first of these questions, the issue is whether there is a realistic prospect of changing the wealth of the appealing party by $100,000 or more: Gillard v Hunter Wire Products Pty Ltd trading as Hunter Screen Products (No 2) [2001] NSWCA 450 at [12] (Priestley JA and Sperling J); Gaynor v Attorney General for New South Wales (2020) 102 NSWLR 123; [2020] NSWCA 48 at [15]-[19] (Bell P (as his Honour then was), Basten and Leeming JJA agreeing). For the reasons set out at [165]-[173] and [190]-[191] below, there is no realistic prospect of the applicants being awarded damages in excess of $100,000 given the way they put their claims. In these circumstances leave to appeal is required.
The question thus arises whether leave to appeal should be granted. In my judgment it should not. As is well established, it is ordinarily appropriate to grant leave only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond being merely arguable: Carolan v AMF Bowling Pty Ltd t/as Bennetts Green Bowl [1995] NSWCA 69 at 2 (Sheller JA, Kirby P and Cole JA agreeing); Jaycar Pty Limited v Lombardo [2011] NSWCA 284 at [46] (Campbell JA, Young and Meagher JJA agreeing). As is apparent from my analysis of the applicants' grounds of appeal set out below, this application does not raise any issue of principle or general public importance. Moreover, given the difficulties with the ways in which the damages claim was formulated, there is no injustice.
[9]
Factual background
In order to put the applicants' claims in context, it is necessary to rehearse some of the relevant factual background. In this regard, it is of some significance that the applicants challenge the primary judge's findings only in four respects, namely as regards his Honour's rejection of the applicants' accounts of conversations between the applicants (or Mr Schrader) and the respondent that occurred on 15 May 2019, 23 October 2019, 30 October 2019 and 13 December 2019. During the hearing, however, counsel for the applicants conceded that the conversation on 23 October 2019 had no relevance to any of the pleaded representations.
The applicants bought their property in Kareela in May 2000. In late 2015 they started exploring options to increase the amount of space in the home. They contacted a building designer, John Hatch of JMH Living Design, to discuss their situation: J[14]. Mr Hatch says that at his initial meeting with the applicants there was discussion about the difficulty of the site and the excavation of rock. He prepared a concept plan which involved adding living space, a bathroom and wine cellar under the existing house. This was to be achieved by excavating into the sandstone bedrock. In February 2016 he prepared some preliminary plans. At the time he estimated a price of $250,000 for the proposed Works.
Mr Schrader says his budget was $300,000 as he did not want to get a loan of more than that sum. He thought that would be overcapitalising the property and he wanted their debt levels to remain serviceable.
In February 2017 Mr Hatch contacted the respondent asking if he was interested in "quoting" on the job. He then sent the respondent some preliminary plans dated 15 September 2016. The respondent reviewed the plans, attended the site and met the applicants. He then provided Mr Hatch with two estimates for the Works based upon the preliminary plans drawn up by Mr Hatch.
1. On 19 May 2017 he provided an estimate of $351,105.59. This included a figure of $109,548.60 for excavation. The figure for excavation was based upon excavation of 70 m3 at a rate of $1,546.98.
2. On 20 June 2017 he provided an estimate of $298,507.29. This included a figure of $59,564.60 for excavation. The figure for excavation was based upon excavation of 54 m3 at a rate of $1,064.98 and underpinning brick walls of 8 m3 at a rate of $256.96.
[10]
Consideration
In considering the applicants' grounds of appeal it is convenient first to deal with the challenge to the primary judge's findings as to the reliability of the applicants' evidence, then to deal with the challenges to the factual findings before dealing with the alleged misrepresentations and the primary judge's observations as to damages. Finally, I will deal with the challenge to the primary judge's rejection of the unconscionability claim.
[11]
Ground 2 - the findings as to the reliability of applicants' evidence
In ground 2 of the amended notice of appeal the applicants contend:
"His Honour erred in finding that the evidence of the appellants were unreliable because they appeared confident of their recollection of certain words being spoken or held firm views about facts. His Honour misdirected himself in the comments by Sackar J in Campbell v Campbell [2015] NSWSC 784 at [76] where the comments were addressed to events of much longer in the past whereas the comments by the appellants were within months of the events or at most a year and no objective evidence contradicted their evidence."
The primary judge introduced his factual findings with the following analysis:
"Approach to fact-finding
103 The approach to fact-finding in civil cases was thoroughly examined recently by His Honour Andronos SC DCJ in Williams, William v Williams, William [2023] NSWDC 10 at [34]-[40]. The most relevant aspect of that examination involved the unreliability of human memory: see, for example, the passages quoted from Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 at [15]; and Campbell v Campbell [2015] NSWSC 784 at [73].
104 The plaintiffs' case relies, to a large extent, on their affidavit evidence as to what was said in conversations that took place several years ago. That fact alone raises difficulties, not in terms of honesty, but in respect of reliability. Further, even on the plaintiffs' own evidence, the conversations were capable of bearing different meanings depending on nuance and emphasis, the appreciation of which not only must have diminished over time, but were very susceptible of bias, not only at the time of the conversation, but also during the preparation of the affidavits as well as during the course of oral evidence. [See the comments by Tamberlin J in Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (trading as Uncle Ben's of Australia) [1995] FCA 451 per Sackar J in Campbell v Campbell at [76]."
105 The unreliability of human recollection is one of the reasons for which demeanour ordinarily carries little weight in the assessment of a witness' evidence. However, it is often instructive to watch how a witness gives evidence as it gives some indication, along with what evidence is given, of the character of that witness. This is often revealed very subtly as the evidence progresses and cannot be appreciated from reading the transcript.
106 Each of the plaintiffs presented as being very confident of their recollection of certain words being spoken. I have no doubt that they truly believed that what they were saying was right. Mr Schrader, in particular, held strong views about the facts and was very keen to give his version, regardless of what question he was asked. Mrs Schrader, too, held firm views, but initially was more nervous than her husband, and overall more anxious. They both presented as being very proud of their achievements, their home and family and keenly interested in every detail of those matters. Those characteristics bear some weight in my analysis of the evidence and determination of whether I am satisfied on the balance of probabilities of the facts that they rely on in their case.
107 Mr Broach was less confident in his answers, but I disagree with the plaintiffs' submission that he was evasive and untruthful. Overall, he impressed me as making every effort to give truthful answers."
[12]
Ground 8 - the conversation on 15 May 2019
In ground 8 of the amended notice of appeal the applicants contend:
"His Honour erred in finding that the conversation of 15 May 2019 did not take place as deposed by the appellants (to the effect that the building works could be carried out for the sum of $300,000.00). His Honour ought to have found that the conversation did take place as deposed by the appellants where items referred by His Honour and not inconsistent with the deposed conversation in that:
(a) His Honour found that a conversation of that nature did take place.
(b) The reasons for rejection of the evidence is unreasonable on the evidence adduced.
(c) the conversation itself refers to the main concern being that of excavation cost in the pleading refers to the "only real" item being that of excavation,
(d) the obtaining of quotes and considering other options is not inconsistent,
(e) the defendant concedes that a conversation took place and the costs would have been discussed."
The applicants' pleaded case was that on 15 May 2019 the respondent orally made the Fixed Cost Representation and the Spreadsheet Representation.
In his affidavit, Mr Schrader said that the conversation on 15 May 2019 with the respondent was to the following effect:
"Me: "Well, we are conscious of our budget of approximately $300,000, which you have quoted. Are you sure that we can do these works for that price?"
Defendant: "The works can be done for the price I have given. I have some concerns about the excavation costs however as we can see what is on the surface, but we don't know what we'll find underneath."
Me: "So the main thing that will change the price is the excavation costs?"
Defendant: "Yes. The excavation and whether you want to upgrade any materials or fixtures and fittings."
Me: "So the rest of the works is known quantities?"
Defendant: "Yes. They are pretty straight forward. The only area of concern is the excavation."
Jacqueline: "We really do not want to go over our budget. This is our maximum that we can afford."
Defendant: "You have no need to worry. I will provide a spread sheet that we will track every week to make sure we don't go over budget. The girls will keep track of everything.""
In her affidavit, Mrs Schrader gave a broadly similar account:
"Matthew: "The quote you have given for $300,000, are you sure you can do the works for that price?"
Defendant: "I have been given all the plans by John Hatch, and the job is fairly straightforward."
Me: "We really don't want to go too far over our budget as it is all we can afford really."
Defendant: "You don't need to worry. The girls in the office will prepare weekly spreadsheets so we can keep track of everything. The only real concern is the excavation costs which we won't know until we start digging, as we don't know what is underneath the surface. Otherwise, it is a pretty straightforward job.""
[13]
Ground 9 - the conversation of 23 October 2019
In ground 9 of the amended notice of appeal the applicants contend:
"His Honour erred in holding that the conversation of 23 October 2019 did not take place as deposed by the Appellants. His Honour ought to have found that it did take place as deposed by the appellants version where the Respondent agreed that a conversation of that nature did take place."
In his affidavit, Mr Schrader deposed that on or about 23 October 2019 he telephoned the respondent and had a conversation to the following effect:
"Me: "Hi David, how are you going with the payment schedule. I am just confirming that the payment schedule will cover everything in the quote like the render, eaves and gutters, pergola, garage door and all the other stuff?"
Defendant: "Don't worry, leave it with me. I will work it out and e-mail it to you. Remember, we can't do a fixed price because of the excavation."
Me: "Yes. We have discussed this before.""
In his affidavit, the respondent denied the conversation set out by Mr Schrader, rather he said that Mr Schrader said "Can I have a payment schedule please".
The respondent was also cross-examined on this conversation:
"Q. And on 23 October you had a telephone call sort of saying, "How are you going with the payment schedule."
A. Yep.
Q. And he also indicated that he was confirming that it will "cover everything in the quote".
A. For the purposes of finance for the bank.
Q. Well, what he said to you, that it was "just to cover everything in the quote".
A. For the purposes of the finance for the bank, I put together a payment schedule.
Q. And you once again told him that you "can't do a fixed-price contract because of the excavation costs."
A. Yes."
There was thus no dispute that a conversation occurred on 23 October 2019. As to the terms of the conversation, the primary judge found (J[119]):
"Mr Schrader's evidence is … that he asked that the defendant include a number of particular details in the schedule and confirm the reason that there would not be a cost-plus contract. I find it highly unlikely that that extra conversation occurred. First, for reasons I have already given, Mr Schrader's memory of such a conversation is very unlikely to be reliable. Secondly, he was asked by his mortgage broker some two weeks earlier for the payment schedule and, although it does not appear in the evidence, it is likely that he would already have asked the defendant for the payment schedule. In those circumstances it is very unlikely that he would say, again, what was required in it, particularly in light of his own evidence that he was not an expert in the building industry and expected the experts he engaged to give him advice as to what to do."
[14]
Ground 10 - the conversation of 30 October 2019
In ground 10 of the amended notice of appeal the applicants contend:
"His Honour erred in holding that the conversation of 30 October 2019 did not take place as deposed by the Appellants. His Honour ought to have found that it did take place as deposed by the appellants version where the Respondent agreed that a conversation of that nature did take place where the respondent does not contradict the conversation, there is nothing to contradict the conversation, it was not challenged and was not contrary to any objective evidence. His Honour misdirected himself in requiring the evidence to be corroborated before being accepted."
The applicants contend in the statement of claim that the respondent orally made the Estimate Representation on 30 October 2019.
In his affidavit, Mr Schrader deposed that after sending the respondent a few emails about the geotechnical report he telephoned him and had a conversation to the following effect:
"Me: "Hi David. I have re-sent to you the engineering plans and the geo-tech report. Have you received them?"
Defendant: "Yes. I have received them. Thank you."
Me: "Great. I am still waiting on the bank to get back to me regarding the finance. I know I have asked you this before, but are you sure that you do not need to re-quote the works?"
Defendant: "No, it's all good.""
In his affidavit, the respondent denied that on 30 October 2019 Mr Schrader asked him whether he was sure he did not need to requote the work.
The primary judge was not satisfied that the conversation occurred in the terms deposed to by Mr Schrader for the following reasons (J[120]):
"He had already raised a similar issue with the defendant a little over two weeks earlier on 9 October 2019 and had just received from him a payment schedule that was consistent with an earlier estimate given by the defendant. Further, as I have said, nothing was raised in the site visit with the excavation contractor that could have assisted in any further determination of the price of the excavation works and so could have made necessary or relevant a re-quotation of the entire job. There is nothing in the objective evidence that would support the acceptance of Mr Schrader's version."
There is no error in this reasoning. In any event, as set out by the primary judge at J[121], Mr Schrader's account in his affidavit did not support the pleaded allegation that on 30 October 2019 the respondent orally made the Estimate Representation. In addition, the letter from the applicants' solicitor on 17 September 2020 made no mention of any representation having been made on 30 October 2019.
[15]
Ground 11 - the conversation of 13 December 2019
In ground 11 of the amended notice of appeal the applicants contend:
"His Honour erred in finding that the conversation of 13 December 2019 (to the effect that the building works could be carried out for the sum of $300,000.00 was unreliable as self-serving statement and ought to have found the conversation did occur as deposed where:
(a) there is common evidence that a conversation did take place and the parties had before them the costings which were prepared by the respondent and
(b) the respondent agreed that such conversation would have taken place but could not recollect the conversation and
(c) the second appellant provided corroborating evidence which was not challenged, and
(d) His Honour provided no plausible reasons for concluding it was self-serving statement or that there was no logical reason to raise the issues in the conversation."
The applicants contend in the statement of claim that on or about 13 December 2019 the respondent orally made the Fixed Cost Representation, the Excavation Representation and the Estimate Representation and also orally represented that a fixed price contract could not be entered because the actual cost of the excavation was not known.
In Mr Schrader's affidavit he said that on 13 December 2019, the respondent attended the property with the Contract which was pre-filled and they had the following discussion:
"Defendant: "Hi Matthew and Jacqueline. Here is a copy of the Contract for you to sign. As previously discussed, because of the excavation, it has to be a Costs Plus contract. If we did not have the unknown excavation we could do a fixed price contract."
Me: "We have previously discussed that the excavation is the main reason why we can't do a fixed price, but as you have said before, everything else is pretty much known."
Defendant: "Yes, we have discussed this before."
Me: "OK. We would have considered moving if it was going to be substantially more than $300,000."
Jacqueline: "We can't really afford to go over our budget. That is all we have."
Me: "So will you be keeping track of excavation costs and let us know throughout the job?"
Defendant: "Don't worry. You'll be out the back having a read on the balcony before you know it. The girls in the office will keep track of everything for you."
Me: "Can we take some time to consider everything and get back to you to sign it."
Defendant: "No problem.""
[16]
Grounds 1, 3, 4 and 5 - was there any misleading or deceptive conduct
In grounds 1, 3, 4 and 5 of the amended notice of appeal the applicants challenge the primary judge's findings:
1. That the Contract Representations were not made;
2. That the Price Representation was not a contravention of ss 18 or 29 of the Australian Consumer Law;
3. That the Price Representation was not a contravention of ss 18 or 29 of the Australian Consumer Law because the respondent had provided an estimate of $300,000 using "a recognised costing program, Cordells"; and
4. That the warning on the Contract overcame any representation of the cost of the Works so that the applicants did not rely on the respondent's representations.
[17]
Should the primary judge have found that the Contract Representations were made?
In ground 1 of the amended notice of appeal, the applicants contend that the primary judge ought to have found the Contract Representations or any of them were made where:
"(a) The respondent provided a quote on 8 October 2019 for the works contemplated by all the plans, specifications, engineering drawings and reports which formed the Contract and were in the possession of the defendant at the time the Estimate Representation was made.
(b) The plaintiff's budget was discussed between the architect and the respondent as early as 2017.
(c) The costs of the works were discussed between the appellants and the respondent.
(d) The estimate provided by the defendant of $300,000 was the estimate for the cost of the works and was the estimate for the works nominated on the contract.
(e) The respondent prepared an application for Homeowners Warranty with a declaration as to the correctness that the scheduled payments did not exceed the value of the works and materials supplied valued at $250,000.
(f) Failed to consider the conduct as a whole from the perspective of the recipient of the information."
The formulation of ground 1 of the amended notice of appeal ignores the fact that the respondent admitted that he made the Price Representation, namely that he "prepared a contract with a represented price estimate of $300,000" in the Contract and the primary judge found that this one representation was made out: J[127] & [129]. However, as the primary judge found, the Price Representation alone could not "amount to the Contract Representations as pleaded": J[129]. The primary judge was clearly correct as to this given that the Contract Representations were pleaded as, collectively, the Budget Representation, the Estimate Representation, the Fixed Cost Representation, the Excavation Representation, the Cost Plus Representation and the Price Representation.
It necessarily follows from my conclusions as set out above as to grounds 8, 10 and 11 of the amended notice of appeal, and from the fact that neither the Budget Representation nor the Cost Plus Representation was particularised nor supported other than by alleged conversations which the primary judge correctly rejected, that the applicants could not succeed on ground 1 as regards any of the Budget Representation, the Estimate Representation, the Fixed Cost Representation, the Excavation Representation or the Cost Plus Representation. As for the Price Representation, it was in any event admitted.
[18]
Should the primary judge have found that the Price Representation was a contravention of ss 18 or 29 of the Australian Consumer Law?
In grounds 3-5 of the amended notice of appeal the applicants challenge the primary judge's finding that the Price Representation was not a contravention of ss 18 or 29 of the Australian Consumer Law. In essence, the applicants contend that:
1. On the evidence before the primary judge he should have found that the Price Representation would have been understood by any reasonable person as either an estimate of the price for the Works or the likely costs of the Works based upon a reasonable and diligent process of estimation by the respondent, which they contend it was not;
2. The respondent bore the onus of establishing that the Price Representation was reasonable and failed to adduce evidence capable of satisfying that onus;
3. The primary judge erred in relying upon the fact that the respondent had used "a recognised costing program, Cordells" to provide the estimate and no reasonable foundation was provided by the respondent as to how the cost was calculated; and
4. The primary judge erred in placing reliance upon the warning on the Contract in finding that there was no misleading or deceptive conduct and the primary judge "misdirected himself in the interpretation of the term".
As is well known, s 18 of the Australian Consumer Law prohibits a person, in trade or commerce, engaging in conduct that is misleading or deceptive or is likely to mislead or deceive.
So far as relevant in this case, s 29 prohibits a person, in trade or commerce in connection with the supply or possible supply of goods or services making a false or misleading representation with respect to the price of the goods or services: s 29(1)(i).
Whilst s 18 contains the phrase "misleading or deceptive" whereas s 29 uses the language "false or misleading", there is no material difference between the two expressions: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; (2014) 317 ALR 72 at [40] (Allsop CJ) ("Coles").
Conduct is misleading or deceptive or likely to mislead or deceive if it has the tendency to lead into error, meaning that there is a sufficient causal link between the conduct and the likely error on the part of persons exposed to the conduct: Coles at [39], citing Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [39] (French CJ, Crennan, Bell and Keane JJ).
[19]
Ground 6 - did the primary judge err in finding that the applicants had not suffered any loss
In ground 6 of the amended notice of appeal, the applicants contend:
"His Honour erred in finding that the appellants had not suffered any loss upon a contravention of the ACL because they had not established that there had been a diminution in the value of their property, and it was erroneous to so find for the following reasons:
(a) Diminution in the value of the property by the conduct of the respondent was one and not the sole means for determining whether or not loss or damage had been suffered by the appellants.
(b) The conduct of the respondent caused the appellants to have a property that could only be made habitable through the expenditure of substantially more money than they had ever intended to spend or had budgeted.
(c) The appellants can only now render their property habitable by spending the additional sum $273,587 beyond what they had ever reasonably expected and thereby will have lost the benefit of that sum to use for living expenses and the maintenance of their current living standard.
(d) But for the false and misleading representation that the works could be carried out for a sum close to $300,000.00 the appellants would never have undertaken any works on the property or would have undertaken only modest maintenance and refurbishment alterations and would not otherwise have entered into a building contract with the respondent or any other builder.
(e) His Honour should have found that the appellants suffered loss and detriment in the sum of $273,587, being the costs to complete the works as agreed by the parties' experts."
The applicants' pleaded case as to loss was that the misleading representations led them to enter the Contract "thereby suffering loss and damage". In oral submissions in opening before the primary judge, counsel for the applicants submitted:
"We say that, if one looks at the authorities such as Wardley and Overton v Murphy, we - our detriment or prejudice is the position that we find ourselves in, where we have to complete the construction of the property for an extra $362,000. It won't be a situation of a counterfactual where most of the situations go."
Counsel clarified that other than rectification damages which were claimed for breach of contract, the only damages that the applicants were seeking were the cost to complete the Works.
[20]
Ground 7 - did the primary judge err in rejecting the applicants' unconscionability claim
In ground 7 of the amended notice of appeal the applicants contend:
"His Honour erred in finding that the respondent did not act unconscionably by not acting deliberately or dishonestly but only being sloppy or negligent. His Honour should have found that the actions and approach that the respondent had to the contract was unconscionable in the manner it was carried out within the meaning of s21 ACL where the conduct was such that would lead the appellants to a belief which was to their detriment. His Honour misdirected himself in the inquiry to be made which should be an objective assessment of the behaviour and not one tainted by the subjective intent of the respondent."
The applicants' claim that the conduct of the respondent was in all of the circumstances unconscionable within the meaning of s 21 of the Australian Consumer Law was broadly pleaded to encapsulate the following:
1. The respondent knew or ought to have known that the costs to complete the Works would exceed the cost that he "quoted";
2. The respondent failed to provide a budget report and simply issued invoices in accordance with the payment schedule and in so doing implied that the Contract was for the estimated fixed cost and thus prevented the applicants from querying any costs claimed;
3. In providing statements in accordance with the payment schedule the respondent implied to the applicants and led them to believe that the costs of the Works were within and in accordance with the estimated price when the respondent knew or ought to have known that price would be exceeded;
4. In all the circumstances, the combined effect of the Contract Representations, the respondent having conducted himself and requested payments in accordance with the payment schedule (defined in the statement of claim as post contract conduct), various alleged breaches of contract, and breaches of an alleged implied duty of good faith was unconscionable within the meaning of s 21;
5. The respondent charged in excess of a reasonable amount for the Works; and
6. The respondent knew or ought to have known that the costs he was charging were excessive.
In his oral closing submissions before the primary judge counsel for the applicants submitted that the unconscionability was "not complying with the terms of the contract … because it reinforced the $300,000 estimate that was given until it was too late". Counsel for the applicants also submitted that the damage caused by the claimed unconscionability was the same as that caused by the misrepresentations, being the cost to complete the Works. This is because the applicants' case is that the unconscionable conduct precluded them becoming aware that the costs of the Works were going to be greater than the estimated figure of $300,000, and that if they had realised this they could have stopped the Works at some time before 5 March 2020. The significance of this date is that the respondent's evidence was that on 5 March 2020 he told Mr Schrader that the budget had already blown. In closing submissions before the primary judge, counsel for the applicants accepted that there was no evidence that the applicants would have stopped the Works if they had known that costs were going to exceed $300,000, but he contended that they "lost the opportunity to make that decision".
[21]
Conclusion
In light of my conclusions set out above, the summons seeking leave to appeal should be dismissed and the notice of appeal should be dismissed as incompetent.
Neither party in their submissions addressed the issue of costs. In these circumstances, there is no reason not to make the usual order that costs follow the event.
I propose the following orders:
1. Leave granted to rely upon an amended notice of appeal.
2. Summons seeking leave to appeal dismissed.
3. Amended notice of appeal dismissed as incompetent.
4. Applicants to pay respondent's costs of the proceedings in this Court.
[22]
Amendments
07 February 2024 - Additional file number included.
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: 07 February 2024
The respondent also brought a cross-claim which the primary judge dismissed. There is no appeal against that order.
For the reasons set out below the summons seeking leave to appeal should be dismissed and the notice of appeal should be dismissed as incompetent.
In these circumstances, leave to appeal on all grounds should be refused.
Both of these estimates were sent by Mr Hatch to the applicants in 2017, respectively on 19 May 2017 and 21 June 2017: J[17]-[18]. The emails forwarded the email from the respondent to Mr Hatch which described what the respondent had provided as an "estimate" and "updated estimate".
In December 2017 Mr Hatch prepared an application for development approval ("DA") for the Works. This required that he insert a price estimate to determine Council fees. He used a figure of $250,000. In an email to Mr Schrader he explained that this was an estimated cost "for determination of Council fees only". In oral evidence he said that in providing such estimates he would provide a realistic estimate for the Works "that's generally on the lower side, rather than the higher side".
After revision of the plans, the DA was approved on 19 June 2018: J[19]. Structural drawings were then provided and revised and a geotechnical report obtained: J[20].
In April 2019 Mr Hatch forwarded the plans and other documentation to Mr Schrader and raised with him whether he would want to contact other builders: J[21]. Mr Schrader got in touch with the respondent in May 2019.
There then followed a conversation between the applicants and the respondent on 15 May 2019. The applicants allege in the statement of claim that during that conversation the respondent orally made:
1. The Fixed Cost Representation, being a representation that the Works (defined as the Works under the Contract) were known quantities (except for the excavation costs) and the respondent was capable of bringing the cost of the Works within the applicants' budget of $300,000 subject only to excavation costs which were the only real unknown cost in the quotation (being the estimate of $298,507.29 provided to Mr Hatch on 20 June 2017); and
2. The Spreadsheet Representation, being a representation that a spreadsheet of all costs would be provided to ensure that there was no cost overrun.
Whilst the applicants do not, in the statement claim, identify when they contend that the respondent orally represented that he understood their budget was $300,000, in Mr Schrader's affidavit he says that on 15 May 2019 he told the respondent that their budget was "approximately $300,000" and that the respondent told him that "the works can be done for the price I have given". The respondent denies that the applicants told them their budget on this day.
The primary judge found that the pleaded representations were not made by the applicants on 15 May 2019 and rejected the applicants' accounts of the conversation they had with the respondent on that day. His Honour found that there was no evidence that the respondent ever told the applicants that he understood that their budget was $300,000: J[127]. The basis for these findings is set out in my consideration of grounds 1 and 8 below.
Mr Schrader's evidence as set out in his affidavit was that:
"[35] Following that conversation [on 15 May 2019], Jacqueline and I began to seriously consider our options as to what we wanted to do. We decided to explore all our options once again to see what the best course of action would be. We:
a. Began looking at other homes to see if we were able to move in the present market.
b. Engaged other buildings to provide us with a quotation as to the costs associated with completing the works.
c. Began to arrange finance to see what we could borrow to carry out the works."
Consistent with this, Mr Schrader asked Mr Hatch for the contact details for the other builders that he had previously suggested, Justin Looke and Chris Weinholt, and Mr Hatch sent him their details on 9 July 2019. Mr Schrader also set out in his affidavit that around that time they inspected other houses but none that met their requirements were within their price range. In fact, the one property that they were actually interested in sold in the high two millions which was "well in excess of what [they were] prepared to spend on a house".
As for the two other builders, the applicants obtained a building estimate from Mr Weinholt who had come to the house to inspect the site and discuss the matter with them: J[27]. His "Brief Estimate Summary" was in the amount of $467,696 (including GST) and included a line-item of "Demolition and Excavation" in the sum of $52,620 (exclusive of GST). Mr Weinholt gave evidence that he told the applicants that he would only be prepared to undertake the work on a cost plus contract. He also said that the applicants did not mention to him that they were working to a budget and his evidence as to that was not challenged. The second builder, 360 Construction Projects (of which Mr Looke was the project manager), provided a quotation and scope of work in the sum of $511,686.08 excluding GST. That tender costing had a line item of $113,180 for excavation, including cranage and hire of an excavator. Whilst the primary judge found that Mr Looke was also only willing to do the work on a cost plus contract: J[27], that is not apparent on the face of this quotation. In any event, this detail is of no material significance on the appeal.
On 7 August 2019 the respondent sent Mr Schrader an email advising of the cost of home owners warranty insurance for alterations and additions based on a "project cost of $250,000": J[28]. The respondent explained in his evidence that the figure he used for this was based upon the $250,000 figure in the DA application. Mr Schrader did not query this figure: J[28]. The figure of $250,000 had also been on the application form for a construction certificate in September 2018: J[29].
On about 1 October 2019 the applicants applied to Credit Union Australia Ltd ("CUA") for a loan to finance the building project: J[30]. CUA asked them to provide confirmation of a building estimate from the builders and Mr Schrader asked the respondent to send him a quotation: J[30]. The respondent's evidence is that Mr Schrader said:
"The bank will lend me $300,000. Can you send me a quote for that amount?"
On 8 October 2019 the respondent emailed Mr Schrader with a quotation for $300,000 including GST. This was a half page document which did not itemise particular line items, but stated:
"Supply labour and materials for alterations and additions to existing dwelling at … Kareela as per supplied documents and plans as list below."
In reply, Mr Schrader sent an email saying:
"We are in the finance approval process - we need to discuss what we can do for the budget once we know the final amount the bank is willing to lend."
The respondent replied on 9 October 2019:
"Just let me know when you are ready to discuss the budget."
Mr Schrader's response on the same day was:
"Thanks for the info, finance application is being processed so will know budget soon. Happy to go through with you and figure out what we can achieve for the budget."
There was a telephone conversation on 9 October 2019, the terms of which were disputed. The primary judge found that the essence of the conversation was as set out in Mr Schrader's affidavit, namely that Mr Schrader wanted to ask the respondent about his quotation and the respondent explained that the main thing that could cost more was the excavation, and Mr Schrader responded that his main concern was that the excavation costs could blow out: J[114].
The respondent says that he also told Mr Schrader:
"For $300,000, we can try and get the excavation done, the shell done, the doors and windows and balconies".
On 14 October 2019 the applicants' mortgage broker sent an email to them stating:
"CUA have requested that as the builder will not provide a fixed price build contract, can they provide a detailed Progressive Draw/payment Schedule to outline when and what amounts will be required throughout the construction? It just needs to show the breakdown of how the $300,000 will be paid and in what stages/sums."
By reason of this, on 16 October 2019 Mr Schrader sent an email to the respondent telling him that CUA wanted a payment schedule and asking:
"can we rough out something on Saturday?"
On 18 October 2019 the respondent attended the property with Mr Britton, an excavator. In the statement of claim the applicants allege that on this occasion the respondent made what they call the Excavation Representation, which is defined in the following terms:
"Estimated the excavation costs at approximately $60,000 and that the costs of the excavation would not blow out, as the excavator came to site to Properly determine the excavation costs".
The primary judge found that this representation was not made by the respondent on 18 October 2019 or at any time and rejected the applicants' accounts of the conversation they had with the respondent on 18 October 2019: J[115]-[118]. The basis for this is set out in my consideration of ground 1 below. There is no challenge to the primary judge's rejection of Mr Schrader's version of the conversation that took place on that day.
The respondent's account was that Mr Britton attended the site but did not give him a price for the job. The respondent said he asked him for an estimate but he said:
"I don't know. It is not an easy one to estimate."
Mr Britton's evidence is that he was not able to give the respondent a price but said:
"This is a really big job. The amount of loads is huge. Getting the material out is a major job".
The primary judge accepted Mr Britton's evidence and found that this meant that (at J[116]):
"even after having an expert excavator assessed the site, neither the defendant nor Mr Schrader had any further information about the likely scope of the excavation costs other than that, as Mr Britton explained, that it was a major job."
On 23 October 2019 Mr Schrader called the respondent and asked for a payment schedule as requested by CUA. Mr Schrader, in his evidence, suggested that there was a further conversation that day in which he requested confirmation that the payment schedule would cover everything in the quote and that the respondent said "[r]emember we can't do a fixed price because of the excavation". The primary judge found that it was unlikely that the further conversation described by Mr Schrader occurred: J[119]. This is challenged in grounds 1 and 9 of the amended notice of appeal. As set out above, counsel for the applicants conceded during his oral submissions that the dispute as to the terms of this conversation is of no significance to the outcome on appeal.
On 23 October 2019 the respondent sent Mr Schrader a payment schedule which he said he had put together "for the purposes of the finance for the bank". The payment schedule had a line item for excavation in the sum of $60,000 and came to a total of $300,000.
The respondent's evidence was that he "thought it might be possible to get the job to lock up stage for $300,000". In oral evidence he affirmed that this was the case. He said that he told the applicants that "We should get it to lockup stage … for the sum of about $300,000 subject to excavation costs".
Mr Schrader and the respondent had a conversation on 30 October 2019. The terms of that conversation are disputed. In the statement of claim the applicants allege that the respondent made the Estimate Representation on that day. The primary judge was not satisfied that the Estimate Representation was made on that occasion, or at all, nor was his Honour satisfied that the conversation occurred in the terms deposed by Mr Schrader: J[120]. This factual issue is considered in my analysis of grounds 1 and 10 below.
The applicants' loan was approved on 31 October 2019 in the amount of $300,000: J[47].
On 13 December 2019 the respondent attended the applicants' house and brought a copy of the Contract with him. The terms of their conversation on that day are disputed. The applicants allege in the statement of claim that on that occasion the respondent made the Fixed Cost, Excavation and Estimate Representations. They also allege that on that occasion the respondent orally represented that a fixed price contract could not be entered into because the actual costs of the excavation were not known. This appears to be part of the basis for what is pleaded as the Cost Plus Representation (albeit that the statement of claim does not identify when it is alleged this representation was made). The primary judge was not satisfied that any of these representations were made, and rejected the applicants' account of the conversation as "entirely self-serving and unreliable": J[122].
The Contract was not signed by Mr Schrader until 23 December 2019. It is a standard form Master Builders Association Cost Plus (Residential) Contract. On the first substantive page of the Contract, above the signatures of Mr Schrader and the respondent, the following text appears:
Further, on page iii of the Contract, again above the signatures of both Mr Schrader and the respondent it is stated:
"IT IS AGREED THAT:
…
(3) (i) The Owner acknowledges and understands that the total cost of the works, including the fee payable to the Builder and the GST payable on the works is not known or ascertainable as at the date of this contract.
(ii) The Owner acknowledges and understands that the work done and completed and the materials used directly affect the question of costs payable by the Owner.
(iii) The Owner has read and understood the warning as to Cost Plus Contracts, which appears at the front of this document."
At page (iv) was the statutory checklist which included at 5:
"Does the contract clearly state a contract price or contain a warning that the contract price is not known?"
Next to this there was a tick alongside the word "yes". On the following page Mr Schrader had signed acknowledging that he had completed the checklist and answered yes to all items on it.
In Schedule 1 to the Contract Part A sets out that the cost of works payable by the owner or at the direction of the builder include the cost of all works carried out by trade contractors engaged by the builder to carry out work at the work site or in relation to the works, costs of all necessary goods and materials, and cost of hiring equipment. It also provides that a budget report should be provided by the builder on the 30th day of each month. A note to this says that:
"this is to make the parties to the contract aware of the impact that:
(i) the work done;
(ii) choices made; and
(iii) things discovered or addressed during the construction works
Have on the amount to be paid by the Owner."
Labour rates are then set out. The Works were described as "alterations & additions to existing residence as per supplied plans".
The budget report is defined in the conditions as a written report on the cost of the works to include details of work done, costs known, summary of work performed, details of works on which instructions are required and a revised estimate total cost of works.
There is no dispute that these were not provided and that that was a breach of the Contract: J[161].
The conditions of Contract also included an acknowledgement that the amount payable by the owner under the Contract is not known at the date of the Contract and will not necessarily be ascertainable during the course of the Contract. They also include agreement that the parties will conduct regular meetings in order to review the work done and costs incurred, review the work done and costs thought to be payable for such work, and make decisions and choices regarding work under the Contract. Whilst this condition was alleged to have been breached the primary judge rejected this, finding that this was a joint responsibility noting that under the Contract either party could require a meeting: J[167]-[168].
The conditions of Contract also provided for variations in clause 14. This included:
"(a) The works as initially understood at the time of contracting may be varied by:
(i) the execution of additional work;
(ii) changes in the character or quality of any material or work;
(iii) changes in the levels, lines, positions or dimensions of any part of the works.
(iv) deletions or omissions from the works.
For the sake of clarity a variation is established by:
* written instructions from the Owner or the Owner's representative; and or
* the supply to the Builder of post contract details such as drawings; and or
* the discovery of an otherwise unknown or latent condition,
which alters the work done, the work to be done or requires adjustments to an existing situation or the work which was otherwise expected to be done."
Clause 30 of the conditions of Contract provided:
"If an estimation of the total amount that will become payable by the Owner under this Contract is or has been made either before or after the date of the Contract THEN such estimation will be or will have been made on the basis of the information, as to the detailed and complete nature and extent of the works, then available to the Builder. However the estimation will not be of any contractual significance whatever between the parties or deemed to be a representation innocent or otherwise as to the amount or approximate amount that will become payable by the Owner. …"
In the statement of claim the applicants allege that by preparing the Contract the respondent made a representation that the price estimate was $300,000, being the Price Representation.
The Works commenced on site on 28 January 2020.
The primary judge made a number of findings, none of which are challenged, as to what occurred thereafter. These include:
1. The applicants took a keen interest in the progress of the Works: J[61];
2. Most of the excavation work was carried out by Mr Simmons and it commenced on 3 February 2020: J[64];
3. On 12 March 2020 the respondent wrote to Mr Schrader about changes in the measurement to the downstairs bathroom, wine cellar and stairs, and asked for a site meeting to resolve the issue. The site meeting occurred the following day. The respondent told Mr Schrader of the need to remove a brick footing which would be costly and difficult. He also told him that that excavation was taking longer than expected and that they would amend the levels to save costs. Amended designs were prepared by Mr Hatch and Mr Schrader accepted them: J[65]-[67];
4. On 12 April 2020 the respondent sent Mr Schrader a copy of the revised engineering plans: J[68];
5. On 5 May 2020 the respondent sent Mr Schrader an "updated spreadsheet" the covering email to which said that it reflected "the cost impact of excavation and drainage": J[68];
6. On 6 May 2020 the respondent sent Mr Schrader variations to engineering and architectural plans for his approval: J[69];
7. On 7 May 2020 the respondent emailed Mr Schrader saying it would be good to catch up to go over the variations referred to in a meeting the previous day with engineers. The respondent said he met with Mr Schrader later that day and that he told Mr Schrader at this meeting "obviously the budget is blown". Mr Schrader denies this: J[72];
8. On 21 July 2020 Mr Schrader sent an email to the respondent saying that he wanted to discuss "actuals v payments": J[73]. The email continued:
"We would like to try and estimate what it will cost to finish the remainder of the work so we can make any critical decisions about it.
I have attached a prioritisation/specification XL spreadsheet we talked about earlier - it's reasonably complete except for light fittings."
1. The respondent replied saying that the actual payments to date were contained in a spreadsheet emailed that day: J[75];
2. On 12 August 2020 Mr Schrader sent a text message to the respondent asking if they could meet the following day and stating, "We are trying to do some budgeting so looking to get a handle on how much we will need to get the Reno through to completion". The respondent replied that he was unable to meet the following day and that he would be finalising the budget "to forward asap".
3. On 16 August 2020 the respondent sent Mr Schrader a bill of quantities with an estimate of $329,585.97 to finish the Works. On 21 August 2020 Mr Schrader asked if this was additional to the $300,000 estimate or included the $300,000. By email of 24 August 2020 the respondent confirmed that there was an additional amount of $362,554.54 required to complete the Works: J[78] & [82].
Mr Schrader by then had been seeking legal advice. He saw a lawyer on 4 September 2020. On 15 September 2020 the respondent sent the notice of suspension of works on account of unpaid invoices. On 17 September 2020 the solicitor instructed by the applicants sent the notice of dispute.
It is readily apparent from this analysis that the primary judge was very much alive to the risk that the applicants' recollection of the events from May 2019 to September 2020 may be unreliable and susceptible of bias. It is also apparent that the primary judge was influenced in his assessment of evidence by the manner in which each of the applicants, and the respondent, gave evidence.
The matters raised by the primary judge in the passage set out above reflect his Honour's findings at various points in the judgment. For example, when considering the applicants' account of the 15 May 2019 conversation with the respondent, the primary judge said (J[111]):
"The real risk here is that the plaintiffs' recollection has been affected by the importance of the excavation once the works actually took place and I am not satisfied that their recollection, other than as to a general discussion about the difficulty of assessing the costs of excavation is reliable."
Whilst the applicants contend that his Honour erred in finding that their case relied upon affidavit evidence as to what was said "several years ago" I would reject that contention. Each of the applicants prepared two affidavits, in each case dated 25 October 2021 and 21 March 2022. These described events that occurred between 2017 and 2020. Whilst, as the applicants contend, it is correct that some representations were articulated in correspondence prepared by the applicants' solicitor on 17 September 2020, that does not undermine the accuracy of the primary judge's finding. Moreover, by the time the applicants gave oral evidence in January-February 2023, the key representations that they alleged would have been made some three to four years earlier.
Contrary to the applicants' contention, the primary judge did not err in placing reliance upon the observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319, quoted with approval by Sackar J in Campbell v Campbell [2015] NSWSC 784 at [73]. Those observations bear repeating:
"… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience."
Those observations are apt in the circumstances of the present case notwithstanding that the passage of time between the events which gave rise to the claim and the written and oral evidence is significantly less than was the case before Sackar J in Campbell v Campbell. They reflect the need, when assessing the reliability of witness evidence, to be acutely aware that there are many reasons why honest evidence may not accurately reflect the events which are being recounted. It was entirely proper for the primary judge to direct himself in the way he did in the circumstances of the present case. The primary judge did not err in finding that there were difficulties with the reliability of the applicants' evidence given the passage of time, the nature of the conversations and the susceptibility of their evidence to unconscious bias.
Further, the applicants' contention that the primary judge found that the applicants' evidence was unreliable because they appeared confident and had firm views misrepresents the primary judge's findings. The primary judge identified the fallibility of memory over time. He also accurately characterised the conversations as being capable of bearing different meanings, and identified that the appreciation of the meaning of those conversations was susceptible to bias. In those circumstances, the primary judge considered that the confidence with which Mr Schrader attested to his recollection, and both of the applicants' strong views as to the facts, were consistent with them having become entrenched in a factual position in circumstances in which that factual position was not necessarily based upon actual recollection. There is no error in that assessment of the applicants' evidence. That evaluation was quintessentially one for the primary judge.
Again, the primary judge's assessment in this respect reflects specific findings he made as to the applicants' evidence. By way of example, when considering the conversation which the applicants said they had with the respondent on 15 May 2019, the primary judge said (J[112]):
"In this respect, I note that, at one point in cross-examination, Mr Schrader said that the "only variable we ever discussed was excavation." This was one of a number of examples of the strengths of Mr Schrader's conviction that he was right and that his memory was accurate. However, it conflicts with his own affidavit evidence and undermines his general reliability. Another instance of a shift in his evidence concerned his wife's diary. At first he said that he didn't look at her diary at all; however, he later said, with equal confidence: "I haven't read the entire diary. I've gone through it. Generally speaking, we did check that the hours of the workers on site were accurate."
It follows that ground 2 should be rejected.
In his oral evidence Mr Schrader said that the respondent said:
"the girls in the office will keep track of it for you and they'll send a spreadsheet every couple of weeks and we'll let you know if we go over".
By contrast with Mr Schrader's account in his affidavit, the account he gave in his oral evidence admits of the prospect that costs may go over budget.
In his affidavit, the respondent denied that the conversation took place as suggested by the applicants. He said:
"121 Before September 2019, the plaintiffs did not tell me they had a budget of $300,000. They never told me that if they could not get the work done for $300,000, they would not go ahead.
…
133 I deny that Matthew told me the budget was $300,000 in May 2019. I deny that I said the works can be done for the price I had given. I deny that Jacqueline said we really do not want to go over the budget. I said, "The way I work, we will supply a spreadsheet every couple of weeks so you can keep an eye on the costs."
…
137 I did not have numerous discussions with the plaintiffs before the Contract was signed. I recall a discussion in May 2019. I cannot recall any other discussions about the work to be done before I gave the plaintiffs the draft contract. I deny telling the plaintiffs that the costs would be in the vicinity of their "budget of $300,000". The plaintiffs never told me how much they had for the project, other than when they wanted to borrow $300,000 and needed a quote for that amount."
The primary judge's finding as to the conversation on 15 May 2019 was as follows (at J[109]):
"I am not satisfied that the conversation that took place between the plaintiffs and the defendant on 15 May 2019 was at all as pleaded or as deposed to by the plaintiffs other than in general terms. This conversation took place well over a year before the plaintiffs swore their first affidavits and the affidavits differ from both the pleaded case and the evidence given by Mr Schrader in cross-examination. There were no notes taken of the conversation or any other relatively contemporaneous record of what was said. In addition, Mr Schrader says in his affidavit that, after this conversation, they kept considering all of their options, including obtaining other quotes, applying for finance and looking for other properties to move into. That does not sit comfortably with the certainty of pricing from the defendant that they each present from the conversation in May 2019. … "
The primary judge identified the following matters which also supported his conclusion that the conversation did not happen as Mr Schrader said:
1. Mr Schrader's evidence that the applicants told the respondent they had a budget of $300,000 does not fit with the fact that they did not tell Mr Weinholt they were working to a budget when he visited them two months later and that in October 2019 the applicants were telling the respondent that they would only know their budget once their loan application had been approved;
2. There was a real risk here that the applicants' recollection has been affected by the importance of excavation once the Works actually took place; and
3. Mr Schrader's affidavit evidence that the "only variable we ever discussed was excavation" conflicts with his affidavit evidence as set out above and that undermined his general reliability.
The first of these reasons does not disclose error. The primary judge was correct to consider that it might be expected that the applicants would have disclosed their budget either to both, or neither, of the builders they approached. Moreover, the open-ended way in which the "budget" was discussed in the emails in October 2019 suggests that at that point in time the applicants had not fixed a budget of $300,000. Had the applicants' position been that their budget was $300,000 or such lower figure as they were loaned, it might have been expected that they would have said as much in the emails. Moreover, in the respondent's email of 9 October 2019 he said: "Just let me know when you are ready to discuss the budget". That suggests that to that point there had not been a discussion of budget.
Contrary to the applicants' contention in ground 8, the primary judge did not err in placing weight upon inconsistencies between the applicants' pleaded case and their affidavit evidence. In particular it was of some significance in the context of the claim that the applicants brought that their pleaded case was that the respondent said that he would perform the Works for $300,000 subject only to excavation but Mr Schrader's affidavit evidence was that the main thing that would change the price was the excavation. To that I would add that it is also of some significance that there was no mention in the letter drafted by the applicants' solicitor on 17 September 2020 of any representation having been made on 15 May 2019. Also, the oral evidence of Mr Schrader as to what the respondent said of the role of the spreadsheet is subtly, but significantly, different from both his affidavit evidence and the terms of the Spreadsheet Representation pleaded in the statement of claim.
Nor is there any error in the primary judge's observation that the applicants' actions in looking for a property to move to and obtaining further quotations for the Works did not sit comfortably with the certainty of pricing they assert in their accounts of the 15 May 2019 conversation. Whilst of itself that might not have weighed heavily against the reliability of the applicants' account, it was a factor which tended to suggest that the applicants were not at that point in time fixed as to their budget and had not achieved certainty from the respondent as to the pricing of the Works, subject only to excavation.
The applicants also place reliance in their submissions upon the fact that the respondent accepted in his oral evidence that there was discussion about the cost of the project during the conversation on 15 May 2019, including because he had already given the applicants an estimate. They also rely upon the fact that the respondent accepted that he told them during that conversation that his biggest concern was the unknown cost of the excavation and that he told them that the excavation was an unknown factor as "I can't see into the ground". None of that evidence undermines the primary judge's rejection of the applicants' account as set out above. Moreover, the applicants' submissions ignore that in the respondent's oral evidence, in response to the question "the only thing that was really unknown was the excavation costs" he responded "No, there's a lot more than that." Moreover, the respondent specifically denied that the applicants had told him on 15 May 2019 that they had a specific budget.
The applicants also seek to place reliance upon the respondent's affidavit evidence that in October 2019 he told the applicants that "[f]or $300,000, we can try and get the excavation done, the shell done, the doors and windows and balconies". However, that statement was made after the respondent had provided the estimate for the bank in the sum of $300,000. In any event, it does not support the applicants' account of the conversation on 15 May 2019.
Further, contrary to the applicants' submission and consistent with the primary judge's observation, the evidence discloses that the excavation was a matter of some importance once the Works actually took place. Mr Williams, who was second in charge on the building job at the applicants' property, kept a site diary for the job. That was admitted into evidence without objection. The supplementary report of Mr Capaldi included a table of excavation works which was admitted into evidence as a summary of the entries in Mr Williams' site diary. This shows that there were fairly consistent excavation works by Mr Britton and others from 4 February 2020 up to around May 2020. Moreover, whist Mr Britton's invoices came to a total of $82,288.80, it is apparent also that the respondent hired much of the excavation equipment and that tradespersons other than Mr Britton carried out excavation work. The respondent's affidavit evidence was that the excavation work took 26 days more than had been anticipated, they did not complete all of the excavation required by the plans, and the excavation revealed further problems, including foundations that did not bear on rock and intrusion of a concrete pier and beams into the building envelope, which required the assistance of the engineer. In oral evidence he said that the reason why he told Mr Schrader on 5 March 2020 that the budget "was blown" was because the excavation had taken much longer than anticipated and there had been additional "unknowns" encountered, being underpinning and water.
Moreover, as is apparent from the primary judge's more general comments as to the reliability of the applicants' evidence and from his analysis of Mr Schrader's account of this conversation in particular, the primary judge was influenced in his assessment by his observations of the applicants giving evidence. Thus, whilst this is an appeal by way of rehearing under s 75A(5) of the Supreme Court Act, and recognising that the supposed categories of fact finding are "so porous that no definitive test is possible": Xu v Jinhong Design Constructions Pty Ltd [2011] NSWCA 277 at [15] (Basten JA), the applicants must establish that the primary judge's findings were "glaringly improbable" or "contrary to compelling inferences": Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [29] (Gleeson CJ, Gummow and Kirby JJ); Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55] (Bell, Gageler, Nettle and Edelman JJ). As held in Lee v Lee at [55] (Bell, Gageler, Nettle and Edelman JJ):
"Appellate restraint with respect to interference with a trial judge's findings unless they are "glaringly improbable" or "contrary to compelling inferences" is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, "in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge"." (Footnotes omitted.)
As regards the conversation on 15 May 2019, the primary judge's findings were open to him on the evidence. Moreover, having regard to the matters he relied upon, they were clearly correct.
Ground 8 of the amended notice of appeal should be rejected.
The reasons provided by the primary judge provide a cogent basis for the primary judge's rejection of Mr Schrader's evidence. Moreover, the payment schedule Mr Schrader sent through does not include the various items Mr Schrader said he requested. Also, consistent with the primary judge's finding, Mr Schrader's oral evidence was:
"I did ask Mr Broach if he could provide a payment schedule and said we could rough one out. But Mr Broach sent it through without any input from myself."
The applicants do not, in the statement of claim, allege that any oral representation was made on 23 October 2019. It is thus of no material significance on appeal. In any event, it follows from my analysis that ground 9 of the amended notice of appeal should be rejected.
Ground 10 of the amended notice of appeal should be rejected.
Mrs Schrader said in her affidavit that the conversation was to the following effect:
"Defendant: "Hi Matthew and Jacqueline. I have the contract here for you to sign. We are using the standard costs plus contract because as previously discussed, we don't know the cost of the excavation, so we can't use a fixed price contract.
Matthew: "Yes. We have been through that before. The excavation costs are unknown but everything else is pretty well known."
Me: "We don't want to go over our budget. It is all that we have."
Matthew: "So you will be keeping track of everything?"
Defendant: "Yes. The girls in the office will keep track of it all for you.""
The respondent said in his affidavit that he always told the applicants that the Contract would be cost plus. He also denied that Mr Schrader told him that they would have considered moving if the cost was going to be substantially more than $300,000.
The primary judge rejected the applicants' version of the conversation, which he found "entirely self-serving and unreliable": J[122]. He found:
"122 …Mr Schrader at least, if not both the plaintiffs, had known for months that the only contract on offer was a cost-plus contract and, even on their own version of events, they knew that there were many unknowns within the costs estimates that had been provided to them by the defendant. While it may be that the main one of those unknowns was the cost of excavation, there was simply no logical reason for them to raise this again with the defendant at this stage.
123 While I have no reason to believe that the plaintiffs were deliberately untruthful in their evidence about this conversation, this is a good example of the way in which memory can be affected by both time and the subtle influence of bias."
The primary judge also found that the conversation as recounted in the evidence of the applicants did not in any event support the pleaded allegation as to the representations made orally on 13 December 2019: J[123]. In this regard the primary judge did not err in attaching significance to the terms of the applicants' pleaded case. Their pleaded case was not that the respondent's conduct over the period May to December 2019 conveyed the representations. Their pleaded case was that identified representations were made orally on particular occasions. If the evidence did not establish that the pleaded representations were made on those occasions, as the primary judge found, that meant that they had not proved that the alleged misleading or deceptive conduct occurred.
The applicants contend that the pleaded representations were conveyed in the conversation on 13 December 2019 when attention is given to the previous representations made by, and conduct of, the respondent. They contend that "the conduct should be viewed as each being added to the previous conduct from which it stems". In this regard they rely on the fact that each of the DA, construction certificate and home owners warranty insurance had estimated a cost of $250,000. There are difficulties with this contention. First, to the extent that the primary judge rejected the earlier alleged representations, they cannot be relied upon to support the pleaded representations on 13 December 2019. Second, the $250,000 figure used by Mr Hatch and/or the respondent in the various documents from 2018 to 2019 does not support the alleged representations having been made. To take the example of the Excavation Representation, the $250,000 figure goes nowhere towards supporting a representation that the excavation costs were estimated at $60,000 and would not blow out. Third, the applicants' submission wholly ignores the clear terms of the Contract which, as set out in some detail above, make it very clear that the $300,000 estimate in the Contract was not a representation of the likely cost of the Works and that the cost of the Works will be subject to the actual work done, having regard to the rates for labour set out in the Contract.
Whilst the applicants contend that the primary judge erred in finding that the applicants knew of many unknowns within the cost estimates given by the respondent, the evidence supports the primary judge's finding. Mrs Schrader agreed in her oral evidence that there were some details on the plans that had not been priced in the respondent's 2017 estimate, being landscaping, painting, natural stone finishes, fireplaces, gas heaters and an operable louvred roof. She also agreed that she knew that the plans would probably change once engineering plans had been obtained and that the costs might well increase depending upon what the Council wanted and the engineers required. She also said that she understood "to a degree" that the specifications became much more detailed and complex than in the earlier plans they had given to the respondent. Moreover, Mr Schrader said in his affidavit that based on what he had discussed with the respondent the "main thing" that could cost more is the excavation. That admits of the prospect that other things could also cost more.
Ground 11 of the amended notice of appeal should be rejected.
In these circumstances, ground 1 of the amended notice of appeal must be rejected. To the extent that the primary judge found that the Contract Representations were not made, his Honour did not err.
Conduct is likely to mislead or deceive if "there is a real and not remote chance or possibility that a person is likely to be misled or deceived": Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87 (Bowen CJ, Lockhart and Fitzgerald JJ); Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [112] (McHugh J) ("Butcher v Lachlan").
It is well established that whether conduct is misleading or deceptive is a question of fact to be determined having regard to all the contextual circumstances in which something was said or done: Butcher v Lachlan at [109] (McHugh J). The analysis is objective: Butcher v Lachlan at [111] (McHugh J);Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [102] (Gummow, Hayne, Heydon and Kiefel JJ) ("Campbell v Backoffice"). Further, where alleged misleading or deceptive conduct relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole: Butcher v Lachlan at [109] (McHugh J), cited with approval in Campbell v Backoffice at [102].
The Price Representation was defined in the statement of claim as:
"[the respondent] prepared a contract with a represented price estimate of $300,000 (Price Representation)"
As set out above, the applicants alleged in the statement of claim that the Contract Representations collectively "led the plaintiffs to believe that there was to be a fixed price contract except for the possibility of some additional costs associated with excavation". The applicants alleged that the Contract Representations were representations as to a future matter and that the respondent did not have reasonable grounds for making them.
Consistent with the case law set out above, the primary judge dealt first with the question of what was conveyed by the Price Representation. The primary judge found (J[129]):
"…it is not clear, beyond the insertion of $300,000 as an estimate in the cost-plus contract, what is exactly said to have been represented. Whatever be the case, and even if this single representation could amount to the Contract Representations as pleaded, which it does not, it did not contravene either section 18 or section 29 of the ACL. That is because of the clear warnings that were in that document to the effect that the estimate was not to be understood as being what the work would cost."
The primary judge held that in determining whether the respondent's conduct was misleading or deceptive, or likely to mislead or deceive, one relevant circumstance was the terms of the Contract: J[132]. As to these, the primary judge held:
"137 The provisions in the contract mean that any representations made by the defendant up to that point were neither misleading or deceptive nor likely to mislead or deceive. They are in such plain, and emphatic, terms that they change the entire character of anything said up to the point at which the document was presented to the plaintiffs …
138 Fourthly, those provisions, together with the fact that the plaintiffs read the contract and that Mr Schrader, with the authority of Mrs Schrader, signed it and neither of them exercised their right to rescind the contract within the cooling off period has the effect that I cannot be satisfied that they relied on the defendant's representation in relation to the costs of the works in entering into the contract..."
The primary judge thus rejected the applicants' contention that the Price Representation conveyed the meaning that was alleged by the applicants. The applicants' contentions on appeal, as set out at [124(1)] above, ignore the context within which the Price Representation was made. In particular, they ignore the very clear terms of the Contract which stand as an obstacle to the Price Representation conveying the meaning that $300,000 was the likely cost of, or a reliable estimate of, the cost of the Works. Similarly, the terms of the Contract stand in the way of the Price Representation in any way conveying that the Contract was a fixed price contract except for the possibility of additional costs associated with excavation.
I have set out the relevant terms of the Contract at [51]-[61] above. Viewed in combination, these leave no room for doubting that the amount to be paid under the Contract was not known at the time it was entered into, would be calculated by reference to the amount of work done at the stated rates, that this could be subject to adjustment for any of a number of reasons, and that any estimated price given in the Contract was not to be taken as a representation as to the amount or approximate amount that would be payable under the Contract. In these circumstances, as the primary judge found, the applicants' contention that the making of the Price Representation constituted misleading or deceptive conduct fell at the first hurdle.
Contrary to the applicants' contentions, the primary judge did not find that the warning in the Contract "overcame" a representation by the respondent of the cost of the Works. Rather, consistent with the approach mandated by the authorities set out above, the primary judge considered the conduct of the respondent as a whole, including all of the terms of the Contract, for the purpose of determining whether the numbers and words written on the Contract conveyed the meaning alleged by the applicants.
The applicants submit that their contention as to the meaning conveyed by the Price Representation is supported by the analysis and conclusions reached in Kronenberg v Bridge (2014) 26 Tas R 359; [2014] TASFC 10. In that case there was a dispute between the parties as to whether the contract they entered into was a fixed price contract (as the appellants contended) or a cost plus contract (as the respondent contended). The primary judge had rejected both contentions and found that the parties had failed to reach a binding contract and that the respondent was entitled to remuneration on a quantum meruit: at [2]. The contract in that case was the standard form fixed price contract which had handwritten words: "as a cost plus contract" added next to the contract price at the respondent's insistence: at [22]. The Court held that these words were intended to have contractual effect and that the contract should not be interpreted as a fixed price contract: at [26].
The trial judge in Kronenberg v Bridge had found that the respondent had given a figure of $340,000 as an estimate of the cost of the works, that this led them to believe that the works could be completed by the respondent for that figure, and that they then decided to enter into an arrangement with him: at [49]. The Court found that the respondent provided an estimate of $340,000 plus GST, that that was so low as to be misleading, and that the evidence adduced by the respondent was insufficient to discharge the evidential burden which he bore as regards this representation as to a future matter: at [53]. The Court also found that in that case the appellants relied upon the respondent's estimate in entering the contract: at [54].
The applicants' submission that Kronenberg v Bridge supports their contentions as regards the Price Representation in this case should be rejected. The contract in Kronenberg v Bridge was a standard form fixed price contract which had been amended and added to. Thus, the contract terms were not the same as those in the present case. Moreover, the finding in that case was that the $340,000 figure was given as an estimate - but in the present case the applicants contend that the Price Representation conveyed that there was to be a fixed price contract except for the possibility of some additional costs associated with excavation. Thus, the meaning which was said to be conveyed in the present case was quite different to that in Kronenberg v Bridge. To the extent that reliance was placed upon the finding in Kronenberg v Bridge that the respondent did not satisfy the evidentiary burden he bore, that of course depends upon the very different evidence adduced in the two cases. By way of example, in Kronenberg v Bridge there was no evidence that the figures used by the respondent to calculate his estimate came from any recognised costs guide.
In these circumstances, the applicants' contention that the primary judge erred in dismissing their claims of misleading or deceptive conduct cannot succeed. Given that I have rejected the applicants' challenge to the primary judge's finding that the Price Representation did not constitute misleading or deceptive conduct or was not likely to mislead or deceive, it is unnecessary to consider the applicants' separate contention in ground 4 that the primary judge erred in finding that the applicants had not proved that the respondent did not have reasonable grounds for making the representation. The applicants' contentions were all, in any event, premised upon their erroneous contention that by making the Price Representation the respondent made an estimate as to the price or likely cost for the Works.
It follows that grounds 3, 4 and 5 of the amended notice of appeal should be rejected.
In the written closing submissions filed on behalf of the applicants before the primary judge it was contended:
"In the present case it may be implied from the evidence of the plaintiffs that they had a budget of $300,000 with a 30% contingency that if they were offered a fixed price contract the $390,000 that would have been accepted. If that is accepted by the court in the damages would be $285,000 (amount paid) plus $311,050 (amount to complete) less a hypothetical contract of $390,000. This would equate to damages of $206,050".
The evidence before the primary judge was that:
1. The applicants had paid the respondent $285,000 under the Contract;
2. The value of the work which the respondent had performed under the Contract was between $294,888 and $334,810 (being the range between the assessments of the two experts). This included between $29,096.90 and $69,019 for additional and variations works (again reflecting the range between the two experts).
Thus, on any view, the value of the Works completed by the respondent exceeded what the applicants had paid for them.
The primary judge did not deal with the applicants' case on damages in "detail" but observed that the contention that their loss was the cost to complete the Works (J[140]):
"…totally ignores the additional value likely to be added by the completion of the work. In other words, the plaintiffs are expecting a renovation worth over $600,000 and to pay $300,000 for it".
The primary judge also found:
1. Unlike the position in Doepel & Associates Architects Pty Ltd v Hodgkinson [2008] WASCA 262, a case relied upon by the applicants in their closing submissions, in this case there was no relevant evidence or agreement as to the value of the property on any hypothesis: J[141];
2. There was no evidence that the applicants would ever be offered a fixed price contract for the Works in the sum of $390,000, which the applicants had contended was a contract that "would have been accepted". Further, the primary judge found that the evidence suggested that, having regard to the excavation required, it was unlikely that they would be offered a fixed price contract at all: J[144]; and
3. the applicants' damages case was "ultimately based on nothing but conjecture": J[144].
There is no challenge on appeal to the primary judge's findings that there was no evidence as to the value of the applicants' property "on any hypothesis", that there was no evidence that they would have been offered a fixed price contract for the Works in the sum of $390,000 and that it was unlikely that they would be offered a fixed price contract at all. The applicants' challenge was to the primary judge's approach to the issue of loss and damage as a matter of principle. Their contention was that the assessment of loss or damage suffered "because of the conduct of another person" under s 236 of the Australian Consumer Law is not limited by categories but requires an assessment of the true detriment suffered. They contended that the primary judge did not do this. Their submission was that the primary judge should have found that their damages were the cost to complete the Works "given that they would not have entered into the contract".
In oral submissions, counsel for the applicants submitted that looking at possible resale of the property could not apply in the present case, and that it is not necessary for it to apply. I infer that the gravamen of this submission is that the extent to which the Works may have increased, or may in the future increase, the value of the property is of no relevance to the assessment of loss and damage.
Counsel for the applicants confirmed in his oral submissions that:
"It's a no contract case and the only damages that these people have suffered is the incurring of the extra liability really to complete because they have no choice but to complete. They've got a half finished house. They can't just leave it in the estate [sic] of being half finished. The question of sort of saying an increased value means very little to them because they still have to incur that particular cost."
He later added:
"there was going to be no other contract."
The relevant counterfactual for the purpose of assessing loss and damage is therefore the situation where no Works were performed at the property.
As to the proper approach to assessment of loss, he submitted:
"As long as it's contravention by a breach of the particular section. Then you've got to assess in a reasonable manner what is the particular damages suffered."
Counsel for the applicants submitted that the applicants' contention that their loss is the cost to complete the Contract is supported by analogy with the decision of the High Court in Murphy v Overton (2004) 216 CLR 388; [2004] HCA 3, and by analogy with the approach taken in a lost opportunity case such as Kronenberg v Bridge. He acknowledged that he could not identify any other authority supporting the applicants' contentions as to loss
Section 236(1) of the Australian Consumer Law provides that:
If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
It is uncontroversial in a no transaction case that the burden of proof of damage rests on the applicants: see eg Mills v Walsh [2022] NSWCA 255 at [130], [138]-[139] (Brereton JA, Bell CJ agreeing).
In Mills v Walsh, Brereton JA (Bell CJ agreeing) summarised the proper approach to the assessment of damages under s 236(1):
"109 The inquiry required by ACL s 236 is as to "the amount of the loss or damage" which the claimant has suffered "because of" the contravening conduct. The assessment of damages for that purpose is informed, though it is not controlled, by common law principles relating to the assessment of damages, particularly for misrepresentation. As was said of the predecessor section - s 82(1) of the Trade Practices Act 1974 - in Wardley:
"In this respect, it would not be right to conclude that the measure of damages recoverable under the sub-section necessarily coincides with the measure of damages applicable in an action for deceit or in an action for negligent misrepresentation. The measure of damages recoverable under s 82(1) can only be ascertained after a thorough analysis of those provisions in Pts IV and V of the Act for contravention of which the statutory cause of action may be maintained."
110 The purpose of an award of damages under ACL s 236 for a contravention of the prohibition on misleading and deceptive conduct in s 18, as at common law for misrepresentation, is to compensate the plaintiff for the prejudice or disadvantage it has suffered in consequence of having altered its position under the inducement of the misrepresentation made by the defendant. The aim is to put the plaintiff in the position in which it would have been had the misrepresentation not been made, so far as monetary compensation can do so. Typically, this involves making good the loss or expenditure incurred by the plaintiff in consequence of the inducement upon which it relied, offset by any corresponding advantage in money or money's worth obtained by the plaintiff from the transaction."
As to a "no transaction" case, his Honour explained at [111] that:
"Usually, the inquiry proceeds on the basis that had the misrepresentation not been made, the plaintiff would not have entered into the transaction. That is a so-called "no transaction" case. In such a case, at least prima facie, the applicable measure of damages is the difference between the price paid by the plaintiff, and the value it received in return. Unless the value it has received is less than the price it has paid, the plaintiff has suffered no loss."
As is clear, however, in every case the court must determine what prejudice or detriment the representee has incurred: see eg Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 11; [1986] HCA 3 (Mason, Wilson and Dawson JJ). As Brereton JA held in Mills v Walsh, this "necessarily involves bringing to account value received against moneys expended": at [121].
In the context of a construction contract, this requires a comparison between the price payable under the building contract and the value of the building work to the proprietor: Mills v Walsh at [124] (Brereton JA), citing Handley JA (Sheller and Stein JJA agreeing) in ADC v White [2001] NSWCA 9 at [67]. Brereton JA in Mills v Walsh explained that the value of the works will typically equate with the cost of the works unless the works are defective. This is because the value received by the plaintiff is the value of the labour and material supplied: at [140].
Thus, in Mills v Walsh, this Court found that the proprietors had received the value of the building works even in circumstances in which it was accepted that they had acted reasonably in subsequently demolishing the property and rebuilding because they decided they no longer wished to proceed with such an ambitious project and wished to undertake an alternative, less expensive course: at [145] & [154]. White JA, dissenting in Mills v Walsh, found that on the primary judge's findings, the proprietors in that case did not suffer loss until they decided not to proceed with the works and instead to demolish and rebuild: at [11]. His Honour found that from the point at which that decision was implemented, the amount paid for the initial works carried out by the defendant "could be seen to have been wholly wasted": [11].
Having regard to this authority, the difficulties which the applicants face in establishing that any representations made by the respondent caused them loss are immediately apparent. They do not contend that they would have entered into another, less costly, contract for the Works. Indeed, on the evidence before the Court such a contention would readily be rejected. The other estimates which the applicants obtained for the Works were in the sums of $467,696 and $511,686 respectively, and at least one of these was for a cost plus contract.
Nor do the applicants contend that the Works performed by the respondent are of no value to them, or that their value should be assessed as having a value less than that agreed upon by the experts. The applicants' claim is in fact premised upon those Works having value and relies upon the fact that the evidence shows that they will now have to pay additional sums to add to that value by completing the Works.
In order to overcome the difficulties which the applicants faced in proving loss in these circumstances, they contend that the Court should uphold their claim by analogy with the approach which the High Court took in Murphy v Overton. In that case, the plaintiffs agreed to take a lease in a retirement village in reliance upon misleading or deceptive conduct, in breach of Pt V of the Trade Practices Act 1974 (Cth), relating to the likely outgoings under the lease. The lease provided that outgoings could include effectively all expenditure incurred in the operations of the village, however the estimate of outgoings given to the plaintiffs prior to them entering the lease failed to disclose that it did not adequately provide for all the expenditure them being incurred in the operations of the village and instead implied that all expenditure that could properly be taken into account had been taken into account: at [23]. The primary judge found that if the truth had been revealed the plaintiffs would not have entered the lease: at [23]. Some years after the lease was entered into, the defendant commenced claiming not just for additional outgoings moving forwards, but for shortfalls in past outgoings claimed.
The High Court held that in assessing loss under the Trade Practices Act it is necessary to identify the detriment which is said to be the loss or damage which has occurred: at [46]. Further, adopting for the purpose of illustration and explanation concepts from the law of taxation, such loss or damage should not be assumed to be either on capital account, or revenue account: at [49]. Rather, loss or damage on both capital and revenue account may be sustained, and loss on capital account may be sustained at a time different from any loss on revenue account: at [50]. In the circumstances of the particular case, the High Court found that the plaintiffs suffered loss "because the continuing financial obligations they undertook when they took the lease proved to be larger than they had been led to believe": at [54] & [66]. That loss was sustained even though the plaintiffs could not show that the sum they paid for the lease exceeded the market value. The Court remitted the matter to the trial judge to assess damages, noting that at the end of the day the plaintiffs may fail to prove any loss or damage: at [74].
The applicants' contentions relying, by way of analogy, upon Murphy v Overton as supporting their claim for loss should be rejected. The critical feature of the analysis of the High Court in Murphy v Overton was that the High Court rejected any strict dichotomy between loss on capital and revenue account (using those illustrative and explanatory concepts), recognising that loss on capital and revenue account may require separate analysis. The loss in Murphy v Overton, being the undertaking of additional financial obligations under a lease in circumstances in which the primary judge had found that the plaintiffs would not have entered the lease if they had been aware of the true position, can be understood as a loss on revenue account. The High Court found that the plaintiffs had suffered such loss even though the value of the lease that they entered into was not diminished by reason of the misleading or deceptive conduct and they had thus not suffered loss on capital account. The value of that loss on revenue account thus had to be assessed.
In the present case, by contrast to the situation in Murphy v Overton, the applicants entered into a contract for the respondent to provide services, namely to perform the Works. Those services have a value, and there was agreed expert evidence as to the value of the services that had been provided. The applicants claim that they have suffered loss as they now have to expend further money to have the Works completed. However, if they spend that further money, they will also receive value being the value of those Works. Even without looking at the applicants' position on capital account (again using that illustrative and explanatory concept), and focussing solely on revenue account, they have not shown that they have suffered any detriment on account of the fact that they have to spend further money to complete the Works. The value of the work that has and will be provided has not been shown to be less than the sums that the applicants have spent and will in the future have to spend.
In this regard, it is significant that, as set out above, it was no part of the applicants' case that the Works performed by the respondent were of no value to them. Nor was it their case that they suffered particular loss or damage by reason of the cost of the Works being greater than they say they anticipated. As the primary judge aptly observed, their damages claim was premised upon them getting the benefit of a renovation worth over $600,000 but only paying $300,000 for it: J[140].
The applicants also placed some reliance upon Pitcher Partners Consulting Pty Ltd v Nevilles Bus Service Pty Ltd (2019) 271 FCR 392; [2019] FCAFC 119. In that case the plaintiffs had tendered for, and been granted, a bus service contract on the basis of an error made by their accounting consultants, which led to them undertaking more onerous financial commitments by way of leasing arrangements than they would have undertaken if their accounting consultants had not made the error. The error was then covered up by the accounting consultants. This was found to be misleading or deceptive conduct. The primary judge had found that if the plaintiffs had known the true position prior to entering the contract or undertaking the leases they would have increased their bid price or renegotiated the contract to reflect the true state of affairs, and that that increased price would have been accepted: at [41], [58] & [129]. The Full Court of Federal Court found that in those circumstances the defendant had to compensate the plaintiff for the larger financial liability that the plaintiff had committed to by reason of the defendant's misleading or deceptive conduct: at [130]. Again, those factual circumstances are far removed than those of the present case. In particular, in the present case the applicants did not contend that they could have entered into a contract for the Works for a lesser sum than that which they are likely to have to pay to complete the Works. Nor, in the present case, is there some financial obligation separate from the Contract for the Works which the applicants contend they would otherwise have avoided.
In these circumstances, consistent with the analysis of Brereton JA in Mills v Walsh, their claim for damages to reflect the increased cost of the Works cannot succeed.
It follows that ground 6 of the amended notice of appeal should be rejected.
As to the various components of the applicants' case as to unconscionability:
1. as set out above, the primary judge found that none of the Contract Representations, other than the Price Representation, were made out, and that the Price Representation was not misleading or deceptive;
2. the primary judge rejected the applicants' case as to the content of any implied obligation of good faith in the Contract: J[155];
3. the primary judge rejected the premise that either of the parties to the Contract expressed any intention to have a fixed price contract, regardless of any qualification: J[158];
4. the primary judge found that the respondent did breach his obligation under the Contract to provide budget reports: J[166] but rejected the contentions that there was any obligation on the respondent under the Contract to arrange regular meetings: J[167] or to provide an estimate before or during the term of the Contract: J[176];
5. the primary judge found that the respondent was in breach of clause 17(c) of the Contract which required that a claim for payment identify the work for which payment is required, the cost of the Works, any variations to the initial scope, and any fees: J[177] & [182];
6. the primary judge rejected the contention that the charges claimed by the respondent were unreasonable or indicative of a failure to act in good faith: J[185];
7. the primary judge found that on the basis of the unchallenged evidence of Michelle Neudegg, who was responsible for preparing the spreadsheets and invoices sent to the applicants (at J[188]):
"the only conclusion can be that the defendant was making an effort to send sufficient information to the plaintiffs to enable them to keep track of how much the job was costing … and indeed it would not have been open to the plaintiffs to suggest … that he deliberately kept the true cost of the works concealed from the plaintiffs by sending them invoices and spreadsheets in the form that they received"; and
1. the primary judge found that the post contract conduct did not, either alone or in combination with anything else, constitute a lack of good faith: J[189].
Save as regards the primary judge's findings as to the alleged misrepresentations, which I have already rejected, none of the findings set out above were challenged on appeal.
The primary judge then directed himself by reference to the leading authorities on unconscionability, being ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90; Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50; ASIC v Kobelt (2019) 267 CLR 1; [2019] HCA 18; Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 96 ALJR 271 ("Stubbings"). As the primary judge observed, consistent with that authority the relevant task in a claim of unconscionability under s 21 of the Australian Consumer Law, is to evaluate whether the conduct in question is "outside societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience": Stubbings at [58] (Gordon J).
There is no suggestion on appeal that the primary judge misdirected himself in any way.
The primary judge noted that the applicants' case was not that the respondent had deliberately deceived the applicants or deliberately charged excessive amounts. His Honour concluded that even if he had accepted the applicants' case that the respondent led them to believe that the Works would cost approximately $300,000 and by his conduct prevented the applicants from finding out that the Works would cost more, that conduct could not be described as unconscionable within the meaning of s 21 of the Australian Consumer Law: J[210]-[211].
His Honour also rejected the claim "at a more granular level": J[212]-[219]. The primary judge gave comprehensive reasons for this, including that the invoices provided by the respondent did not imply that the Contract was for an estimated fixed cost, the spreadsheets the respondent provided made plain that the applicants were being charged in accordance with a cost plus contract and the invoices issued by the respondent in no way prevented the applicants from querying any costs claimed.
As is readily apparent, many of the integers of the pleaded unconscionability claim fall away in light of the primary judge's findings, many of which are not challenged on appeal.
In seeking to challenge the primary judge's conclusion as to the unconscionability claim, the applicants in their written submissions contend that the conduct of the respondent in keeping the applicants "in the dark" and "[hiding] from them the true position of the costs" was "not sloppy but definitely deliberate, if not necessarily dishonest". By contrast, in his oral closing submissions before the primary judge counsel for the applicants submitted:
"it's not deliberate. I didn't say it was necessarily deliberate."
Further, as confirmed by counsel for the applicants during his oral submissions on appeal, it was neither pleaded nor put to the respondent in cross-examination that he had acted deliberately. In these circumstances, it is not a contention that can properly be put on appeal: University of Wollongong v Metwally (No 2) (1985) ALJR 481 at 483; [1985] HCA 28; Browne v Dunn (1893) 6 R 67 at 70 (Herschell LJ), 76 (Halsbury LJ). In any event, in oral submissions before this Court counsel for the applicants clarified that, whilst he contended that the respondent had deliberately acted in breach of contract:
"I'm not so sure that it was deliberately to keep them in the dark but it had that effect".
Moreover, in the course of the oral submissions of counsel for the applicants before this Court, it transpired that the only evidence of "deliberateness" relied upon was the respondent's evidence that the way he operates is to send invoices and spreadsheets which, as the primary judge found, did not comply with the terms of the Contract.
In my judgment, for the reasons advanced by the primary judge the applicants' unconscionability claim must fail. As the primary judge found, whilst the respondent did breach the Contract in some respects, he provided invoices and spreadsheets to the applicants and those documents reflected the work done under the Contract. Further, the evidence that I have summarised above shows that in implementing the Contract the respondent took steps to discuss matters arising with the applicants. There is nothing in the respondent's conduct that could properly be interpreted as seeking to hide the true costs of the Works from the applicants or preventing them from asking questions about the costs. The simple fact that it was the respondent's practice to provide invoices and spreadsheets rather than budget reports and that this did not comply with the terms of a standard form cost plus contract falls well short of conduct that could be characterised as unconscionable.
Further, the unchallenged finding of the primary judge was that the respondent was making an effort to provide sufficient information to the applicants to enable them to keep track of how much the job was costing: J[188]. That unchallenged finding weighs heavily against a finding of unconscionability within the meaning of s 21 of the Australian Consumer Law given the way that contentions were put on this application.
In any event, during oral submissions counsel for the applicants confirmed that the damages claim for unconscionability was the same as for the misrepresentation claim. Thus, the applicants' claim for damages for the alleged contravention of s 21 of the Australian Consumer Law suffers from all the difficulties I have already identified in respect of the claim for damages for breach of ss 18 and 29.
There is a further problem with the claim for damages for the alleged breach of s 21. There was no evidence from the applicants that they would have terminated the Works earlier than they did had they been aware of the likely cost of completion of the Works. That evidentiary lacuna presents an insuperable obstacle to the way in which the claim for damages was advanced. Moreover, even on Mr Schrader's evidence it is clear that from at least 21 July 2020 he was uncertain as to how much it would cost to complete the Works. On that day he said that they wanted to "understand where we sit with actuals v payments" and "would like to try to estimate what it will cost to finish the remainder of the work so we can make critical decisions about it" Then in August 2020 he sent a text message to Mr Broach saying that they were "trying to do some budgeting so looking to get a handle on how much we will need to got the Reno through to completion". Notwithstanding this, the notice of dispute was not sent until 17 September 2020, after the respondent sent a notice of suspension on account of the applicants' failure to pay invoices.
It follows that ground 7 of the amended notice of appeal should be rejected.