Stepanoski v Aslan

The Opinion Evidence

1. There are significant differences of opinion between Mr Sanig and Dr O'Donnell, although they also reached considerable common ground. While neither of them was cross-examined, each of them participated in directions hearings designed to elucidate the issues between them. Mr and Mrs Stepanoski contend that the opinions of Dr O'Donnell, where they departed from those of Mr Sanig, should be afforded no weight, in so far as they are based on estimations without actual observations. They also complain that Dr O'Donnell, in expressing certain of his opinions, failed to refer to the express terms of the Lump Sum Contract, such that certain of his opinions fly in the face of those express terms. They characterise certain estimates provided by Dr O'Donnell as conjecture not grounded in any fact established by the evidence.
2. In particular, Mr and Mrs Stepanoski point out that Dr O'Donnell was not retained by Mr Aslan until April 2018, some two years after the dispute arose, and, accordingly, did not inspect the Fullers Road property in the state in which it was to be found after the cessation of work by Mr Aslan. Rather, his opinions were based on measuring design documents and interpreting the proportion of various items that were completed on the basis of photographs and reports.
3. Mr Aslan accepts that Dr O'Donnell based his opinions on estimates made from photographs and approved building plans and used, as a basis for his opinions, the original quotation for the Cost Plus Contract, rather than the Lump Sum Contract itself, and that he considered only theoretical costs to complete the Works under the Lump Sum Contract. However, Mr Aslan asserts that Dr O'Donnell was thereby able to provide a detailed calculation of costs, whereas Mr Sanig provided only a "high level" calculation. He points out that Dr O'Donnell's methodology was not challenged by cross-examination and points to the reliance placed by Mr and Mrs Stepanoski on some of the opinions expressed by Dr O'Donnell, to which I shall refer below. He contends that it is not open to Mr and Mrs Stepanoski to reject certain of Dr O'Donnell's opinions but, at the same time, to rely on other opinions based on the same methodology.
4. It is not ideal to endeavour to resolve differences in opinion evidence without detailed cross-examination. However, as I have said, in an endeavour to save time and costs, both parties agreed that neither of the quantity surveyors would be cross-examined and that no point would be taken by reason of failure to cross-examine. Further, Mr and Mrs Stepanoski made plain that they contended that there were deficiencies in Dr O'Donnell's report and that his methodologies would be "critiqued". They maintain their contention that their "critique" of the methodology employed by Dr O'Donnell should lead to the conclusion that his opinion evidence should be afforded little weight where it contradicts opinions of Mr Sanig, which, they emphasise, are based on the Lump Sum Contract and, more significantly, on Mr Sanig's physical attendance at the site and inspection of the incomplete works at the relevant time.
5. The approach adopted by the parties has resulted in the reports of the quantity surveyors being admitted into evidence, without objection, notwithstanding that they may contain evidence of opinions that are not based on specialised knowledge by reason of training, study or experience as required by s 79 of the Evidence Act 1995 (NSW) (the Evidence Act), and therefore do not satisfy s 79. While it is not necessary for all of the factual data on which an opinion is based to be given in evidence, the opinion evidence must include the whole of the reasoning and conclusions on which the opinion is based. [3] In the circumstances, I have not given any weight to opinions expressed in the various reports unless the prerequisites of s 79 are satisfied.

Relevant Provisions of the Lump Sum Contract

1. Clause 3 of the Lump Sum Contract relevantly provided that Mr Aslan would:

• diligently proceed and complete all work to be done under the Lump Sum Contract in a proper and workmanlike manner;
• supply all materials necessary for the completion of the work of the kind and quality stated in the plans and/or specifications; and
• comply with all relevant Australian Standards, laws and the requirements of relevant local council and all statutory authorities with respect to the work.

1. By cl 6, Mr Aslan promised to proceed diligently and complete the work within 40 calendar weeks from the date when the work was due to commence. Under cl 5, the work was to commence within seven working days from the date of the contract or, if the approval of the local council or statutory authority was still to be obtained for the work, the date of the written notification of that approval. Mr and Mrs Stepanoski assert that, by reason of cl 6 of the Lump Sum Contract, the Works were to be completed by 27 July 2014.
2. On 14 October 2014, a construction certificate for the Works under the Lump Sum Contract was issued. Accordingly, the Works were due to commence on 21 October 2014. However, as indicated in the Principal Reasons, the Lump Sum Contract did not in fact come into force until January 2015. Questions therefore arose as to the time by which the Works were to be completed.
3. By cl 9 of the Lump Sum Contract, Mr Aslan warranted that the work would be performed in a proper and workmanlike manner, and in accordance with the plans and specifications set out, and that all materials supplied by him would be good and suitable for the purpose for which they were used. Clause 11 of the Lump Sum Contract contained a list of prime cost items totalling $167,000. Clause 12 contained a schedule of progress payments. Clause 27 provided that, even if a dispute were to arise, the parties were required, unless acting in accordance with an express provision of the Lump Sum Contract, to continue to perform their obligations under the contract so that the Works were completed satisfactorily within the agreed time.

Termination of the Lump Sum Contract

1. On 10 June 2015, Mr Aslan sent to Mr and Mrs Stepanoski a notice ceasing building works, alleging refusal to pay Progress Claim No 3 and noting that work was to cease on 11 June 2015 (the First Notice). Shortly thereafter, the dispute that gave rise to the First Notice was resolved and building work resumed.
2. On 27 July 2015, an application was lodged with the Council for approval of modifications to the original development approval and construction certificate under s 96 of the Environmental Planning and Assessment Act 1979 (NSW). Section 96 relevantly provides that a consent authority (the Council in this case) may, on application being made by the applicant or any other person entitled to act on a consent, modify a development consent granted by it to correct a minor error, misdescription or miscalculation. The application for modification was lodged by Mr Aslan. On 30 September 2015, the Council wrote to Mr and Mrs Stepanoski, giving notice of determination of the application to modify their development consent. The modified consent was to operate from 30 September 2015.
3. However, in the meantime, on 14 September 2015, Mr Aslan issued Progress Claim No 4 for $214,000, together with a tax invoice, both of which were dated 9 September 2015. Progress Claim No 4 showed a contract price of $1,080,000, together with approved variations of $54,000, giving a total contract price of $1,134,000. The tax invoice described 10 items with a lump sum of $200,000 shown opposite them. Item 11 was for "Variation 3" for $14,000. On 2 October 2015, Macquarie Bank paid the sum of $200,000, being the amount of the claim, less the amount for Variation 3.
4. On 21 September 2015, Mr Aslan sent an email attaching a notice of ceasing building works dated 18 September 2015 (the Second Notice). The notice said that construction work had ceased as at 7am on 16 September 2015 "in accordance with the terms and conditions of your Lump Sum Building Contract". The reasons given in the notice were: "- Your written advice of your decision for withholding payment and refusal to pay our invoice relating to our Progress Claim Certificate No. 4 … - Your written advice of placing terms and conditions Not in accordance with the building Contract before any Progress Claims Invoices are paid by you … - Your verbal and written advice and in text messages of your intention for refusal to pay for any building works variation for the current Section 96 Amendments once costed … - Your unauthorised changing of the site gates lock on or about 16 September 2015 … - Your constant threats to remove from the site the existing plant and equipment… - The Constant unwarranted harassment and false accusations and insinuations and character defamation in written emails sent to third parties and to myself …"
5. The Second Notice stated that construction work would not recommence until Progress Claim No 4 had been paid and Mr and Mrs Stepanoski had given a written commitment to pay for all contract works variations and to continue to fund the project either through private funding or through bank funding. The notice also sought an undertaking to withdraw false accusations and to cease sending offensive and abusive text messages. The "false accusations" and "messages" were not further identified. The Second Notice ended by saying: "Your intentions not to pay any Variations to contract works and to withhold project funding on this project puts you in Breach of the Terms and Conditions of your Signed Lump Sum Contract." No work was done by Mr Aslan after the Second Notice was given.
6. At some time shortly after 31 October 2015, Mr Aslan submitted to Mr and Mrs Stepanoski Progress Claim No 5 dated 31 October 2015 claiming $48,545.72, the details of which were shown in a "Building Contract Variations Claim" attached. The attachment showed the following: Total Value: $190,640 Less Previously claimed: $ 25,000 This claim Total value: $190,640 Less Total Amount Received: $142,094.28 This Progress Claim: $48,545.72. Also attached to Progress Claim No 5 was a second "Building Contract Variations Claim" showing a revised contract price of $1,561,176 (excluding s 96 variations). It summarised the figures as follows: Lump Sum Building Contract Original Price $1,080,000.00 Total Value of Contract Variations to 31/10/2015 $481,176.00 Revised Contract Price As At 31/10/2015 $1,561,176.00. It also claimed $120,000 for: "Section 96 amendments, preliminary costing, provisional sum allowance for materials and labour as shown on the approved DA section 96 plans & specifications …[plus builder's margin of 10%]" The document contained a summary of the revised contract price as follows: Lump Sum Building Contract Original Price: $1,080,000.00 Total Value of Contract Variation to 31/10/2015: $481,176.00 Revised Contract Price (Excluding Section 96 Amendments): $1,561,176.00 Section 96 Amendments as at 31/10/2015: $150,000.00 Revised Contract Price as at 31/10/2015: $1,711,176.00. No part of Progress Claim No 5 has been paid by Mr and Mrs Stepanoski.

The Pleadings

1. In their amended Technology and Construction List Statement of 16 December 2017 (the Amended Statement), Mr and Mrs Stepanoski allege that, as at 16 September 2015, work had not commenced on a number of items (the unstarted work), work had commenced but was not yet completed on further items (the incomplete work) and that defective works existed with respect to other items (the defective work). The Amended Statement alleges that, by reason of those matters, Mr Aslan, in breach of cl 3 of the Lump Sum Contract, had failed to proceed diligently and complete all the work to be done in a proper and workmanlike manner and supply all materials for the completion of the work of the kind and quality stated in the plans and specifications. The Amended Statement also alleges that, in breach of cl 9, Mr Aslan did not perform the work in a proper and workmanlike manner in accordance with the plans and specifications.
2. The Amended Statement then makes the following allegations:

• On or about 16 September 2015, Mr Aslan advised Mr and Mrs Stepanoski that he would cease doing work under the Lump Sum Contract and did in fact cease doing work from 16 September 2015;
• By reason of Mr Aslan ceasing to do work from 16 September 2015, Mr Aslan breached cl 27 of the Lump Sum Contract;
• By reason of the matters referred to above, Mr Aslan evinced an intention no longer to be bound by the Lump Sum Contract; and
• On 1 May 2016, Mr and Mrs Stepanoski accepted Mr Aslan's repudiation and terminated the Lump Sum Contract.

1. Mr and Mrs Stepanoski claim in the Amended Statement that Mr Aslan failed to construct the Works as required under the Lump Sum Contract and that the true contractual value of the work carried out by Mr Aslan is far less than the amount that they have paid to him purportedly under the Lump Sum Contract. They claim that payments made by them to Mr Aslan were on account and interim only, and that they are entitled to recover the extent of any overpayment.
2. The second further amended Technology and Construction List Response filed on behalf of Mr Aslan on 4 June 2018 (the Amended Response) alleges the following:

• On 16 September 2015, Mr and Mrs Stepanoski locked Mr Aslan out of the building site by changing the locks;
• In the first half of September 2015, Mr and Mrs Stepanoski engaged in other conduct that provided a legitimate basis for Mr Aslan to suspend work, including the non-payment or threatened non-payment of Progress Claim No 4 issued on 9 September 2015;
• Mr Aslan suspended work on or about 16 September 2015;
• On or about 21 September 2015, Mr Aslan emailed a document to Mr and Mrs Stepanoski entitled "Notice of ceasing building work No 2", which informed Mr and Mrs Stepanoski that Mr Aslan had suspended construction work on 16 September 2015 and gave reasons why he had suspended work;
• Mr Aslan was entitled to suspend work;
• Although Mr and Mrs Stepanoski paid Mr Aslan the sum of $200,000 in respect of Progress Claim No 4 on 2 October 2015, part of Progress Claim 4 remained unpaid, as a result of which Mr Aslan was entitled to continue to suspend work;
• Shortly on or shortly after 31 October 2015, Mr Aslan sent to Mr and Mrs Stepanoski Progress Claim 5 claiming an amount of $48,545 and Mr and Mrs Stepanoski failed to pay that amount; and
• As a result, Mr Aslan was entitled to continue to suspend work.

1. The Amended Response also denied any breach of the Lump Sum Contract. It also alleged further that, even if there was a breach, the breach did not thereby evince an intention no longer to be bound by the Lump Sum Contract and that Mr Aslan did not evince an intention no longer to be bound. Finally, it also alleged that Mr and Mrs Stepanoski were in breach of the Lump Sum Contract at the relevant time.
2. The further amended Technology and Construction List Cross-claim Statement filed on behalf of Mr Aslan on 11 April 2019 (the Amended Cross-claim) repeated that Mr Aslan suspended work on 16 September 2015 and that he was entitled to suspend work because of the wrongful conduct of Mr and Mrs Stepanoski. The Amended Cross-claim alleged that Mr Aslan had continued to be entitled to suspend the work because of the wrongful conduct of Mr and Mrs Stepanoski. It then alleged that, although Mr and Mrs Stepanoski purportedly terminated the Lump Sum Contract on 1 May 2016, they were not entitled to do so and that, if the Lump Sum Contract had continued to completion, Mr Aslan would have derived a profit by reason of the margin to which he would have been entitled on the remainder of the contract work to be completed. He claims that Mr and Mrs Stepanoski are liable to him for the loss of that profit in the sum of $71,401. The opinion evidence of Dr O'Donnell as to that matter is relied upon by Mr and Mrs Stepanoski to support their claim for damages in respect of the failure to complete the Works.
3. The Amended Statement alleges that, by reason of the unstarted work, the incomplete work and the defective work, the giving of the Second Notice and by ceasing work from 16 September 2015, Mr Aslan evinced an intention no longer to be bound by the Lump Sum Contract. The Amended Statement then alleges that, on 1 May 2016, Mr and Mrs Stepanoski accepted Mr Aslan's repudiation and terminated the Lump Sum Contract. [4] The Amended Response denies that Mr Aslan evinced an intention no longer to be bound by the Lump Sum Contract and asserts that Mr and Mrs Stepanoski were in breach at the time. However, the Amended Response accepts that the letter from the solicitors for Mr and Mrs Stepanoski dated 1 May 2016 effected a termination of the Lump Sum Contract.

Value of Work Completed and Overpayment

1. It is common ground that Mr and Mrs Stepanoski have paid the sum of $1,067,094.28 and that e value of the work performed by Mr Aslan under the Lump Sum Contract is $564,426.48. Mr and Mrs Stepanoski assert, therefore, that there has been an overpayment of the sum of $452,667.80, calculated by deducting from the total amount paid, of $1,067,094.28, the aggregate of the value for completed works. The aggregate of the value for completed works is $614,426.48 being $564,426.48 for the work under the Lump Sum Contract together with the sum of $50,000 conceded by Mr and Mrs Stepanoski in respect of the additional variations approved by the Council.
2. However, Mr Aslan claims additional amounts for work over and above the contract work of $564,426.48 as follows:

• latent site conditions - $41,360;
• variations approved by the Council - $145,753;
• adjustments for excess prime cost amounts and provisional sum amounts - $18,147;
• delay costs - $141,139.59; and
• other variations - $40,000.

1. It is necessary to consider each of those items separately. Mr Aslan relies very heavily upon Dr O'Donnell's opinion evidence in relation to the items in question. However, the claims by Mr Aslan must be assessed against the provisions of the Lump Sum Contract.

Latent Site Conditions

1. This claim is based entirely on the opinions of Dr O'Donnell without reference to the terms of the Lump Sum Contract. Further, Dr O'Donnell did not inspect or observe the site prior to the work commencing by Mr Aslan. Rather, his opinion appears to be based on assumptions that are inconsistent with the express terms of the Lump Sum Contract. That is because Dr O'Donnell was retained on the basis that the contract between Mr Aslan and Mr and Mrs Stepanoski was the Cost Plus Contract referred to in the Principal Reasons.
2. Dr O'Donnell expressed the opinion that it is usual for rock excavation to be excluded from contract pricing because it is hard to estimate quantities. He said that, normally, a provisional sum or an "extra over" rate is included. He observed that the quotation provided by Mr Aslan to Mr and Mrs Stepanoski provided only $30,000 for excavation, and noted that the estimated actual costs based on the development application, excluding the pool, was $57,132. He said that excavation in soil would cost about half that amount and therefore was of the opinion that Mr Aslan had not allowed for rock excavation in the contract price and expected to be paid an extra "over cost" for rock excavation. Dr O'Donnell estimated a reasonable "extra over" cost for rock excavation as follows:

• Bulk excavation 264 cubic metres at $100 per cubic metre - $26,400;
• Detailed excavation 44 cubic metres at $150 per cubic metre - $6,600;
• Total - $33,000. That resulted in a total cost, including the margin and GST, of $43,560.

1. Mr Sanig, on the other hand, disagreed that any claim was available for excavation of rock on the site. He pointed out that the presence of rock was clearly visible on photographs taken before the work commenced and that Mr Aslan warranted that he had inspected the site and therefore must have seen the rock.
2. More importantly, there was no exclusion for rock made in any contract document or price. Specifically, there was no provisional sum for rock excavation in the Lump Sum Contract. Mr Aslan did not attempt to explain why the Lump Sum Contract did not expressly make rock excavation a provisional sum item.
3. Further, Mr Aslan adduced no evidence as to the volume of rock that was actually extracted or the labour and other costs actually incurred for that extraction. Thus, there is good reason for assuming that there would be documentary evidence of payments made for disposal costs in dumping the rock. However, there was no explanation as to why such evidence was not adduced by Mr Aslan.
4. In the absence of evidence that the presence of rock was a latent site condition and in the absence of evidence that the excavation of rock was not reasonably foreseeable by a competent or skilled contractor at the time that the Lump Sum Contract was entered into, there is no reason why the Lump Sum Contract should not be construed according to its terms. There was no contractual entitlement to be paid any variation in respect of rock excavation.
5. Thus, cl 13 of the Lump Sum Contract relevantly provided that the work to be done or materials used under the contract might be varied due to matters that could not, at the date of the contract, reasonably be expected to be foreseen by an experienced, competent and skilled contractor for the completion of the work. Clause 13 also provided that, before commencing work on a variation, the contractor (Mr Aslan) was required to provide to the owner (Mr and Mrs Stepanoski) a notice in writing containing a description of the work and the price, including GST. If not otherwise specified, the price was to be taken to include the contractor's margin for overheads, supervision and profit. The notice was then required to be signed and dated by both parties to constitute acceptance. However, the requirement for variations to be in writing was not to apply if there was likely to be a danger to any person or damage to property and the work could not be done promptly if the variation had to be put in writing before commencing work. There was no suggestion that that proviso had any application in the present circumstances.
6. There is no suggestion that Mr Aslan endeavoured to take any of the steps contemplated by cl 13. It must follow, therefore, that he is not entitled to an allowance in respect of the alleged latent site conditions.

Variations approved by the Council

1. Dr O'Donnell considered that it was better to measure the changes in total and completed an estimate based on the relevant plans. He arrived at an estimate of $161,649 for the total net extra cost of work that had been completed. Some of the changes were negative, such as reductions for wall framing and deletion of concrete floor finishes. Much of the negative values were for work not completed.
2. Mr Sanig did not dispute that the Works in question were a variation but says that much of the work was done before the application was made to the Council, which cast doubt on the validity of the contract drawings used as a basis for estimating costs. Mr Sanig disagreed with the methodology adopted by Dr O'Donnell on the ground that Dr O'Donnell gave estimates without reference to the actual costs, which could have been ascertained from invoices and the like. Mr Sanig conceded an amount of $50,000 for the variations that were approved by the Council.
3. There was no specific evidence as to the Works actually completed pursuant to the variations approved by the Council and what fell within the contemplation of the original scope of building works under the Lump Sum Contract. While it is appropriate, in the circumstances, to accept the concession made by Mr Sanig on behalf Mr and Mrs Stepanoski that a sum of $50,000 ought to be allowed for the value of work done by Mr Aslan, no basis has been established for the additional claim made by Mr Aslan.

Provisional Sum and Prime Cost Items

1. Dr O'Donnell estimated the cost of works done that fell within the provisional sum and prime cost items and compared his estimates with those in the Lump Sum Contract. Significantly, Mr Aslan did not tender any documentary evidence in support of the claim in respect of provisional sum and prime cost items. If there were costs for provisional sum and prime cost items that exceeded the figure provided in the Lump Sum Contract, it would have been a simple matter to produce the invoice or statement evidencing the amount actually paid. No attempt was made to do so.
2. Clause 10 of the Lump Sum Contract relevantly provided that Mr Aslan was required to offer Mr and Mrs Stepanoski the opportunity to be present at the site during the performance of any work included in the provisional sum schedule in order to verify the actual costs of the work. Under cl 10, Mr Aslan was required to provide a copy of any relevant invoice, receipt or other document evidencing the actual cost of the work included in the provisional sum schedule at the time that payment is requested.
3. Clause 11 contained a similar provision in relation to prime cost items. Thus, if the actual cost of the work was greater than the provisional sum allowed, the excess together with margin was to be added to the contract price. However, Mr Aslan was required to provide a copy of any relevant invoice, receipt or other document evidencing the actual costs of the work included in the provisional sums scheduled at the time payment is requested.
4. No documentary material was produced by Mr Aslan. There was no evidence of any attempt to comply with cll 10 or 11. I do not consider that this claim is made out.

Delay Costs

1. Mr Aslan claims delay costs for a period of 38.2 weeks at the rate of $3,694.75 per week. They were calculated by Mr O'Donnell on the basis of extensions of time due to inclement weather and conditions as well as refusal of access from 16 September 2015 to 1 May 2016 and the suspension of works. Entitlement to the latter depends upon whether the Lump Sum Contract was breached by Mr and Mrs Stepanoski or was repudiated by Mr Aslan. That question is addressed below.
2. The figures relied upon are founded upon estimates by Dr O'Donnell. Had costs actually been incurred, one would expect the expenses to be readily verifiable through receipts, contemporaneous notes, journal entries and the like. No such material was in evidence. In any event, there is no entitlement under the Lump Sum Contract to a payment for any delay. I am not persuaded that Mr Aslan is entitled to any allowance for delay.

Other variations

1. The claim for an additional $40,000 appears to be based on Progress Claim No 5, in which a claim for that sum was made. However, there has been no attempt to demonstrate the variations for which the claim is made. Dr O'Donnell refers to the fact that "other variations" were claimed. I am not persuaded that there is any evidence of any variation other than those for which approval was given by the Council, as referred to above. This head of claim must be rejected.

Conclusion as to Overpayment

1. It follows from what I said above that all of the claims made by Mr Aslan in the Amended Cross-claim that are referrable to the Lump Sum Contract must be rejected, except for a sum of $50,000 for variations for which Council approval was given. Thus, it follows that the value of the work completed by Mr Aslan was $614,426.48. He has been paid the sum of $1,067,094.28. Mr and Mrs Stepanoski have therefore paid more than they were obliged to pay. It has not been suggested on behalf of Mr Aslan that, if the Court concludes that there has been an overpayment, Mr and Mrs Stepanoski would not be entitled to recover that amount, subject to Mr Aslan's claim for loss of profit. That claim depends on whether there was a breach of contract by Mr and Mrs Stepanoski or whether he repudiated the Lump Sum Contract leading to its termination by Mr and Mrs Stepanoski. Mr and Mrs Stepanoski are prima facie entitled to a refund of $452,667.80. However, they also claim damages by reason of the alleged repudiation of the Lump Sum Contract by Mr Aslan.

Repudiation or Termination

1. Where a party to a contract acts on a genuine but erroneous view of its obligations under the contract, the party will not, for that reason alone, have repudiated the contract if the party shown that it is still willing to perform the contract according to its tenor. [5] However, persistence in an untenable construction will ordinarily be regarded as repudiatory conduct. [6]
2. In his written submissions, Mr Aslan asserts that he suspended works as a result of the default by Mr and Mrs Stepanoski. He asserts that the Second Notice "proved fatal", in that work was never recommenced and he was not paid his entitlement. Thus, he asserts that he did not perform any further work because he had not been paid in accordance with cll 12 and 14 of the Lump Sum Contract and that Mr and Mrs Stepanoski were not entitled to terminate the Lump Sum Contract pursuant to cl 25, or for any other reason, because they were in default, in having failed to pay Progress Claim No 4 in full and having failed to pay Progress Claim No 5 at all. He says that an inference should be drawn, from the fact that he returned to work after the First Notice, that he was prepared to return to work if payment of Progress Claim No 4 and Progress Claim No 5 had been made. He asserts that the termination of the Lump Sum Contract by Mr and Mrs Stepanoski was "high handed and unlawful" and there was no proper basis for the termination and locking him and his subcontractors out of the site.
3. Mr Aslan adduced no evidence as to the alleged locking out or to demonstrate that he was willing and was able to perform the Lump Sum Contract according to its proper terms. There was no evidence that he would have performed the Lump Sum Contract if he had been advised that that contract was applicable rather than the alleged Cost Plus Contract. Thus, there is not a basis for concluding that Mr Aslan was merely pressing a misconceived interpretation of the Lump Sum Contract and would have been prepared to perform the Lump Sum Contract according to its proper meaning and effect.
4. As at the time of the suspension of work, Mr and Mrs Stepanoski had already paid significantly more than the value of the work completed. It is common ground that, as at that time, they had paid the sum of $1,067,094.28 in circumstances where the Contract Price payable under the Lump Sum Contract was $1,080,000. It is also common ground that the value of work completed when work was suspended was $564,426.48. That is to say, they had paid 98.8% of the Contract Price, whereas only 52.26% of the work under the Lump Sum Contract had been completed, omitting the variations approved by the Council.
5. As indicated in the Principal Reasons, [7] cl 12 of the Lump Sum Contract set out a schedule of progress payments and descriptions of the work to be completed for each of the seven progress payments. As a matter of simple arithmetic, it is clear that Mr Aslan had been paid well in excess of the amounts to which he was entitled under the Lump Sum Contract in respect of the Contract Price. In the circumstances, it is clear that Mr Aslan claimed payments to which he was not entitled. He suspended work on the basis that Mr and Mrs Stepanoski had not made payments to which he was not entitled.
6. I conclude that Mr Aslan's conduct, in giving the Second Notice, stopping work, and failing to resume work, evinced an intention not to perform the Lump Sum Contract unless he was paid sums to which he had no contractual entitlement. It follows that Mr and Mrs Stepanoski were entitled to treat his conduct as repudiation, accept the repudiation and terminate the Lump Sum Contract. As a consequence, Mr Aslan is not entitled to damages for breach of the Lump Sum Contract. It also follows that Mr and Mrs Stepanoski are entitled to be compensated for the loss they have suffered as a result of the repudiation of the Lump Sum Contract by Mr Aslan.

Damages for Repudiation

1. Mr and Mrs Stepanoski claim to be entitled to damages over and above recovery of the overpayment made to Mr Aslan. First, they claim loss of rental that they would have derived had Mr Aslan performed his obligations under the Lump Sum Contract. Secondly, they claim damages for the additional cost of completing the work under the Lump Sum Contract. I shall deal with each of those separately.

Loss of Rent

1. The completed works were to constitute a duplex. Mr and Mrs Stepanoski intended to live in one and to derive rent from the other of the residences comprising the duplex. They say that Mr Aslan was aware of that intention and that it was within the contemplation of both parties that, if the work was not completed in accordance with the Lump Sum Contract, they would suffer detriment by way of lost rental income.
2. Mr Aslan was asked whether he was told prior to the Lump Sum Contract being entered into that it was the intention of Mr and Mrs Stepanoski to let out one of the residences of the duplex. After some prevarication, Mr Aslan acknowledged that he may have been told by Mr Stepanoski that he intended to let out one of the residences. When asked whether he entered into the contract on the understanding that Mr and Mrs Stepanoski wanted to move into one of the residences and rent out the other, he responded as follows: "Maybe, yes, until maybe his kids grow older. I don't know. His kids are too young. They can't live by themselves so maybe his intention. Yes, he may have wanted to rent it. That's my answer to you, sir." Subsequently, the following exchange took place in the course of cross-examination: "Q. The longer it took to finish, the longer it would take for them to realise their ability to rent out one of the houses, correct? A. That wasn't my concern at the time, sir, I'm sorry? Q. But you knew that before you entered into the contract? A What I knew, it makes no relevance to this case."
3. In the circumstances, I am satisfied that it was in the contemplation of both parties that, if there was a delay in the completion of the building, Mr and Mrs Stepanoski might suffer damage consisting of the loss of rental income from one of the residences in the duplex.
4. Mr and Mrs Stepanoski claim loss of rent for 111 weeks, at the rate of $1,275 per week, for 23 weeks from 21 July 2015 to 31 December 2015, and, at the rate of $1,350 per week, for 88 weeks from 1 January 2016 to 9 September 2017. The quantum of rent is based on unchallenged evidence by Mr Adam McMonigal.
5. Mr Aslan's response does not challenge the quantum of the rent claimed and no challenge has been made to the specific claim for 111 weeks. However, Mr Aslan complains that the calculation does not include an allowance for failure to mitigate loss or an allowance for what would have been received "net of loan repayments and payments to income tax".
6. It is unclear what mitigation ought to have been undertaken by Mr and Mrs Stepanoski. In that regard, Mr Aslan has the onus of showing that they failed to take reasonable steps to mitigate their loss. It is difficult to see what steps could have been taken. There is no specific contention.
7. Before the completed building could have been capable of generating rental income, it would have been necessary to complete the building. That would have required additional expense. Because the work was suspended and was never resumed, Mr and Mrs Stepanoski either avoided the payment of interest on the additional borrowings that would have been necessary to complete the work or had the use of the funds that were not expended. Ultimately, the property was sold with the building in its partly completed state. An allowance should be made for the saving or benefit derived by reason of the absence of the relevant expenditure.
8. To the extent that Mr and Mrs Stepanoski obtained judgment in respect of a loss of rental income, that part of the judgment, if recovered from Mr Aslan, would be assessable income. Accordingly, there is no justification for an allowance for income tax.

Escalation Costs

1. Mr and Mrs Stepanoski claim the sum of $988,176 as the cost of completing the Works under the Lump Sum Contract following the suspension of works by Mr Aslan. Mr and Mrs Stepanoski base that claim on an estimate given by Dr O'Donnell that the cost to complete the Works over and above the agreed lump sum was $988,176. That calculation was made by Dr O'Donnell in order to determine Mr Aslan's claim for lost profit margin by reason of wrongful termination by Mr and Mrs Stepanoski of a Cost Plus Contract.
2. Apart from Dr O'Donnell's estimate, there was no evidence as to the cost of completing the building work in accordance with the Lump Sum Contract. The alternative measure of damage, after Mr and Mrs Stepanoski had been reimbursed for the overpayment, would be a comparison between the cost to complete the building in accordance with the Lump Sum Contract and the balance of the Contract Price to be paid by Mr and Mrs Stepanoski under the Lump Sum Contract. However, no attempt appears to have been taken to deduce those amounts.
3. Mr and Mrs Stepanoski did not in fact complete the work contemplated by the Lump Sum Contract but sold the property with the building in its incomplete state. It can be assumed that the sale price was below the price that would have been realised had the work been completed. An appropriate measure of the loss might, therefore, have been the difference between the sale price, on the one hand, and the price that might have been realised had the Works being completed, on the other.
4. Of course, Mr and Mrs Stepanoski would have been liable to pay to Mr Aslan the balance of the Contract Price of $1,080,000, plus the cost of variations approved by the Council, as consideration for the completion of the Works. After the refund referred to above, they will have paid the sum of $614,426.48. [8] To have the work completed, they would be liable for the difference between that figure and the Contract Price plus the cost of Council approved variations. An allowance would be required in respect of that amount.
5. However, no attempt was made to establish loss on the basis just outlined. There was no evidence as to the likely sale price of the property with the work completed. In the absence of any further evidence, I would conclude that Mr and Mrs Stepanoski have not established the quantum of the loss, if any, occasioned by the failure of Mr Aslan to complete the Works in accordance with the Lump Sum Contract.

Conclusion

1. The parties have requested that I reserve the question of costs after publishing reasons for the conclusions that I have reached as to the quantum of damages to which Mr and Mrs Stepanoski are entitled. I propose to afford the parties the opportunity of considering the conclusions that I have now reached and will then entertain further submissions as to the appropriate orders, including orders as to costs.

Endnotes

1. See [2018] NSWSC 1160.
2. See [2018] NSWSC 1916.
3. See ASIC v Rich (2005) 190 FLR 242; [2005] NSWSC 149.
4. As referred to above at [26].
5. See DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431-2; [1978] HCA 12.
6. See Summers v Commonwealth (1918) 25 CLR 144 at 152; [1918] HCA 33.
7. See [31].
8. See [53] above. 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: 28 October 2019