Zhang and Mills v JSW Property Projects Pty Ltd and Ors

Zhang and Mills v JSW Property Projects Pty Ltd and Ors - [2021] NSWDC 655 - NSWDC 2021 case summary — Zoe

Background to the Proceedings

At the relevant time, that is to say, between September 2016 and April 2017, the First Plaintiff, Ms Crystal Zhang ("Zhang"), was the registered proprietor of the property known as 150 Sydney Street, North Willoughby. The Second Plaintiff, Mr David Mills, ("Mills") was her husband.
The First Defendant, JSW Property Projects Pty Ltd ("JSW"), was a company incorporated on 26 August 2016. Its sole director and shareholder was the Second Defendant, Mr Haiden Walsh ("Walsh"). The Third Defendant, Legge and Legge Architects Pty Ltd ("Legge and Legge") was a firm of architects.
The other person relevant to the proceedings was the late Mr Didier Bertini ("Bertini"), who died in September 2017. Neither Bertini nor his estate were joined in the proceedings.
Zhang is a pharmacist. During 2016, Zhang's friend and professional colleague, Ms Kong, had her pharmacy renovated. Apparently, Zhang was impressed with the renovation work undertaken at Ms Kong's pharmacy. Ms Kong told Zhang that the same builder who undertook the work on her pharmacy had also been engaged by her to renovate her apartment. Apparently, Ms Kong was also happy with this work. Reliant on Ms Kong's satisfaction with the building work with which she had been provided, Zhang asked for the contact details of the builder. The work had in fact been undertaken by another company associated with Walsh.
Ms Kong provided Zhang with Walsh's mobile telephone number. Zhang made contact with him. At that stage, Zhang intended to renovate her own pharmacy. She arranged to meet with Walsh, who attended on her at her pharmacy in mid 2016. At some stage, the conversation apparently switched from the possibility of Walsh being involved in the renovation of the pharmacy to his involvement in the possible renovation of Zhang's residential property. Zhang said to Walsh that she and her husband were looking for someone to do some renovation works at their home, and she enquired whether he could do that. Walsh replied that he probably could, and he enquired as to what Zhang had in mind. She replied that the front section of her house had three bedrooms which she rented out to students, and she wanted to make that area into a self-contained area with a kitchenette and with each bedroom having an ensuite.
In general terms, the front of the dwelling was an old single-story construction, whereas the rear of the house was an extension which had been built more recently than the front section and was of two storeys.
It was arranged that they would meet at the property to discuss the proposal further.
At some stage in mid 2016, Walsh visited the property and there met with Zhang and Mills. Together, they inspected the site.
By this stage the renovation proposal had seemingly changed. Mills told Walsh that they wished to undertake a renovation of the front section of the house so that it would contain four bedrooms instead of three, with all bedrooms to have ensuites. Mills said that they also wanted a galley kitchen in the front section of the house. These proposed renovations were explained as having the benefit of allowing Zhang and Mills to take in four tenants, rather than three. It would also allow the tenants to live in a self-contained manner in the front of the house, without interrupting Zhang and Mills' lifestyle.
Mills said that he wished to keep the renovation simple, and he did not want to spend more than $100,000.
Throughout mid 2016 there were a number of further meetings held to discuss the proposed renovation. At some stage after the first meeting, Mills and Zhang indicated to Walsh that they now wished to also renovate the back section of the house, in addition to the front section. One or other of Mills or Zhang told Walsh that they were thinking of a larger renovation, that they wished to get new finishes, and that they wished to change the whole interior design of the house, so the front and rear sections appeared to be more unified than they presently appeared. They said that they had some ideas as to how to achieve this, but they said that they needed help with the design.
In response to this, Walsh said that what was now being proposed was a bigger job than had been originally explained to him. As such, he said he would like to get his friend involved. The friend was Bertini. Walsh explained that Bertini had a company called Wow Developments Pty Ltd ("Wow Developments"), and that they had worked together on projects for many years. He said that Bertini had experience in boutique home renovations, which he thought was now being proposed by Zhang and Mills.
It was agreed that the parties present at the meeting would meet Bertini to further discuss the proposed renovation work.
On 16 September 2016, a further meeting on-site occurred between the Plaintiffs, Bertini, and Walsh. At this meeting, one of the Plaintiffs suggested to Walsh that they wished to spend about $500,000 on the renovation. Walsh agreed that he said that this seemed possible.
Later that day, Mills forwarded an email to Walsh attaching some joinery and CAD drawings which had been prepared by an architecture firm named Play Architects Pty Ltd.

[4]

The Maisy's Meeting

On 20 September 2016, there was a meeting at a coffee shop in Neutral Bay called Maisy's Café ("the Maisy's Meeting"). In attendance were Bertini, Mr Tony Legge ("Legge") (of Legge and Legge), Walsh, Mills, and Zhang.
Walsh says that at that meeting Bertini gave assurances that he could project manage to a high standard, as did Walsh in relation to JSW. Legge was introduced as an architect, and both Bertini and Legge gave the Plaintiffs assurances that they could help the Plaintiffs come up with a suitable design for the renovation work. Mills said that they wished to spend about $500,000 on the renovation, and that they wished to have the work completed by February 2017. Walsh responded, "Ok, that can be done".
According to Walsh, Mills said words to the effect of: "I don't want to go through Council. I want to avoid doing anything which will require Council approval. I want you to invoice my company and say on the invoices that the work is for an office renovation. I'll send you the details." This is a disputed conversation. I shall deal with questions of credit shortly.
At the Maisy's Meeting, Legge drew some rough sketches and floorplans on a notebook, and he led a discussion about the design of the proposed renovation. The Plaintiffs described various things which they wished to include in the design, and Legge sketched and made notes to reflect these instructions. Walsh says that this discussion was carried out at a fairly high level of generality. Detail was lacking. The instructions given by the Plaintiffs were general instructions about the rooms which they wished to renovate, with some ideas as to the required style. There was no discussion about finishes and materials to be used, nor as to the cost of particular items.
Walsh gave evidence that he believed that at the time of the Maisy's Meeting it was possible to have the work described by the Plaintiffs completed by February 2017. He also expressed the view that the cost of the works would be around $500,000. He noted, however, that the Plaintiffs had not, at that stage, selected any finishes, materials, appliances, or furniture to be used in the renovation. Self-evidently, the ultimate cost of the project depended on such matters. That said, Walsh agreed that, in principle, he believed that it was possible to make such selections, so that good quality products could be used and that the works could be undertaken, to a high standard, for around $500,000.
In their evidence, Mills and Zhang suggested that they sought and were promised a written contract by Walsh at the Maisy's Meeting. This is disputed by Walsh.
Walsh says that the next step in the process was for the Plaintiffs to meet with Legge, Bertini, and himself, so that Legge could prepare some drawings and undertake work on a design for the renovation. Walsh says that Mills said words to the effect of: "Please give me a quote for your work with an estimate, I want to get started as soon as possible after that."

[6]

The 18 November Plans

On 18 November 2016, Walsh sent Mills an email to which was attached plans for the renovation of the site which been prepared by Legge and Legge, and an invoice for the deposit of $100,000 ("the 18 November Plans"). The covering email contained the following message, "Hi Dave, I've put together a rough scope of works, however we do need to wait until we get the final drawings to finalise the cost."
The initial invoice, which was rendered by JSW, contained a skeletal outline of the works to be undertaken, and concluded with the following, "Final scope of works & price to be finalised once drawings are received from Tony Legge Architects. Budget of estimated works to be between $400,000 to $500,000."
Walsh explained that the 18 November Plans indicated that the Plaintiffs requested the following works be undertaken at the site (Walsh Affidavit dated 20 November 2020, at [33]; CB 839-840): 1. On the ground floor: 1. The three existing bedrooms, the existing bathroom and the existing study be extensively renovated and partly demolished to make way for four bedrooms, each with their own ensuite bathrooms; 2. The existing lounge, kitchen, dining area and toilet at the back of the house be completely demolished to make way for a large open plan kitchen and living space with a pantry and a laundry room to be inserted behind the new kitchen; 3. A skylight be constructed above where the existing kitchen was located, which would be the location of the new living area, however, Walsh says that at this time the position of the skylight was indicative only and that no specific design had been chosen; 4. The stairway be demolished and replaced with a staircase with a different layout and dimension, creating a void intended for a large pendant chandelier and freeing up space on the first floor; 5. Doors be inserted near the stairway and where the existing lounge was or the new kitchen would be; and 6. A new deck be built in the backyard area to replace the existing patio. 1. On the first floor: 1. The existing ensuite bathroom and walk-in wardrobe for the master bedroom be demolished to make way for two open plan walk-in wardrobes; 2. The existing second bedroom be demolished to make way for a large spacious ensuite bathroom for the master bedroom; 3. The existing sitting room area and second bathroom be demolished to make way for a larger living room and a small second bedroom; 4. An ensuite bathroom for the second bedroom be inserted in part of the space freed up by the demolition of the existing stairway; and 5. The stairway be demolished and relocated as mentioned above.
As I have indicated the 18 November Plans were not final plans. Various aspects of the design were yet to be finalised, and no work had been done on the elevations. In addition, the Plaintiffs still had not made any decisions as to fixtures, finishes, appliances, electrical, and other matters to be used on the project.
On 21 November, Mills' personal assistant by email notified Walsh that payment of the initial invoice in the sum of $100,000 had been made to JSW by Mills International.

[7]

Demolition Works Commence

About 23 November 2016 Wow Developments and JSW commenced demolition works on the site. The Plaintiffs moved into a granny flat at the back of the site while the work was taking place.
At the time that the works commenced, therefore, a contract was not in place. Walsh says that neither Plaintiff had requested a contract be prepared, and indeed that that topic was never raised until the parties fell in dispute about the costs of the project, and JSW left the site (this occurred in April 2017). Walsh went on to say that in any event it would not be normal practice for a written contract to be prepared at that stage, as a more final estimate of costs was necessary before this could be done. This in turn would require the design to be closer to finalised, and for some decisions to have been made in respect of fixtures, finishes, appliances, electricals, and furniture.
Over time, the project grew and changed substantially. This was a result of the Plaintiffs changing their instructions. Indeed, ultimately final decisions were never made either in relation to the design of the project, or the fixtures and fittings to be used. This remained the case until at least the time that JSW left the site in April 2017. Indeed, Walsh says that when construction works were still ongoing by JSW, and, as late as April 2017, Mills and Zhang were still providing instructions to JSW and others as to the finishes and fixtures to be used in the project, and were still requesting additions and alterations to be made to the overall plans and drawings.
While the works were being undertaken, JSW operated as a project manager on the site, however it did not have any employees who were directly performing works on the site. Walsh was its sole presence on site. JSW retained subcontractors to conduct the various works required on the project in accordance with the plans prepared by Legge and Legge, and according to the Plaintiffs' changing instructions.
JSW also retained a subcontractor, David Ciano ("Ciano"), to act as a site manager in relation to the project. Ciano was responsible for the day-to-day coordination of the various subcontractors, including tradesmen and labourers, on the site. JSW also retained Nastasi & Associates ("Nastasi") to provide structural engineering and design services for the project.
On 16 December 2016, JSW received structural drawings from Nastasi in relation to the works conducted on the site.
Walsh explained that when he attended the site, he supervised the work at a high level, and was mainly involved in project managing the renovations and coordinating the works of subcontractors. He says that he relied on Ciano to supervise the labourers, and says he relied upon qualified tradesmen to properly undertake works within their respective areas of expertise.
In the meantime, the Plaintiffs' instructions continued to change. Walsh says that he was unable to prepare a further estimate of costs of the property beyond the rough estimate set out in JSW's 18 November 2016 invoice. This was the situation that continued until February 2017. Mills, in turn, was very involved in the day-to-day conduct of the works, including involving himself in the detail of many aspects of the work. Walsh says that Mills regularly gave instructions directly to Ciano, and sometimes directly to tradesmen.

[8]

Further Works in December 2016

On 14 December 2016, Walsh says that he received a further draft of drawings relating to the works to be undertaken. These further drawings were dated 12 December 2016 and emanated from Legge and Legge ("the 12 December Plans").
Compared with the 18 November Plans, the 12 December Plans involved the following changes to the works to be undertaken (Walsh Affidavit dated 20 November 2020 at [65]; CB 845-846): 1. In relation to the ground floor: 1. The Plaintiffs had requested a changed layout for the four bedrooms and ensuite bathrooms which were to be constructed in the front area of the house; 2. The Plaintiffs had requested the inclusion of a kitchenette, laundry and office room, whereas around 18 November 2016 this section was only to contain four bedrooms and their ensuites; 3. The plans for the skylights had developed, with three small skylight windows planned to be built in the area above the living room; 4. In the back portion of the house, the Plaintiffs had requested that an additional bathroom be added near the staircase and adjacent to the void in the staircase area; 5. The Plaintiffs had requested the addition of a second door in the new living area; 6. Two existing round columns in the backyard patio were to be removed as part of the construction of the deck; 7. A bathroom which was previously planned to be constructed on the side of the house, which would be accessible from the new living room, was now removed from the plans; and 8. The Plaintiffs had requested some further demolition of the two walls leading from the kitchen and the living room to the patio, and the insertion of large sliding doors to the outdoor area in these locations. 1. In relation to the first floor, the Plaintiffs requested that: 1. The master bedroom suite be enlarged and rearranged to occupy what was previously intended to be the master bedroom and the living room; 2. A large master bathroom and walk in wardrobe to be accommodated where the then existing master bedroom and ensuite was located; 3. Some demolition work be undertaken in relation to the wall between the new master bedroom and the upstairs balcony, and large folding doors be installed in that area; 4. A second bedroom be built where the ensuite to the master bedroom was previously to be located; 5. A living space be built near the new staircase and the void in that area; 6. The landing at the top of the staircase be built out with more flooring; and 7. Some changes be made to the design of the bathroom, which was to be built behind the staircase area, including the planned location of the walls.
Several days later, Walsh received further draft drawings relating to the works to be undertaken on the property from Legge and Legge. The most major change reflected in the 16 December Plans was that the Plaintiffs had requested that a swimming pool be built in the backyard of the house. Included in this variation was a concrete patio area surrounding the pool.
On 20 December, Walsh received an email from Mills, in which Mills requested yet further changes to the plans. These were contained in an attached, marked-up copy of the plans that JSW had previously sent Mills, together with a number of Walsh's comments.
In this communication, Mills requested the following changes to the scope of works (Walsh Affidavit dated 20 November 2020 at [70]; CB 846-847): 1. A hidden storage room be inserted at the top of the staircase in the upstairs area, with a door which appears to be a wall; 2. A wall of the upstairs master bedroom be moved to allow for the living area upstairs to be larger; 3. A half wall with plantation shutters be installed between the master bedroom and its ensuite; 4. The doors to the master bedroom be changed to bifold doors; 5. A wall be included in the shower in the ensuite for the master bedroom in the upstairs area; 6. The concrete area around the pool be reduced in size to allow for more landscaping works and special features; 7. A cavity be included in a wall at the back of the house to accommodate the sliding doors when opened; 8. Double doors be included in the library or office in the downstairs area; 9. The windows in the front rooms be re-centred and rearranged, which would require doors to be cut and moved; 10. The pantry area be changed to accommodate a fridge and a wine cooler; and 11. The washing machines in the laundry be stacked.
Walsh says that by the time he received the 20 December 2016 email, it was apparent to him that the cost the project would exceed the $500,000 which in September 2016 the Plaintiffs had indicated that they wished to spend. This, he explained, was a consequence of the number of additions and alterations to the Plaintiffs' instructions since 18 November 2016, as reflected in the various plans prepared by Legge and Legge.
On 21 December 2016, Walsh says that JSW received a further $100,000 progress payment, which payment was again confirmed by email communication to Walsh from Mills' personal assistant. Walsh says that he requested this progress payment during a prior meeting with Mills on the site, however that he did not issue an invoice for this payment due to the difficulty of preparing an invoice at a time when the Plaintiffs' instructions were changing.
Walsh says he was unable to prepare a more final estimate of total costs of the project at this time because the Plaintiffs were still making many and regular requests for alterations or additions to the plans and the scope of the project. Walsh says, however, that he did discuss the cost consequence of these changes in broad terms with Mills. He says that, for example, he discussed Mills the following (Walsh Affidavit dated 20 November 2020 at [72]; CB 847-848): 1. The additional bathroom he had requested to be included in the would cost approximately an additional $20,000; 2. The installation of large sliding doors between the open plan living room and kitchen and the back of the house would increase the cost of the project; 3. The need to build out the flooring in the landing in the upstairs area would add to the cost of the project; and 4. The changes to the upstairs area, and in particular, the master bathroom and wardrobe, which was to have expensive fittings, would increase the cost of the project.
During December 2016 and January 2017, JSW continued to work at the site, and Mills and Walsh continued to have daily meetings. At these meetings, Mills continued to give further instructions as to the design of the project, and various other aspects of the work.

[9]

January and February 2017

On 11 January 2017, Walsh received an email from Legge and Legge which had attached a design presentation for the facade design. On 18 January, Walsh attended a meeting with Mills and Zhang, at which they advised that they had asked Legge and Legge to prepare a new design for the roofing, and the finishes on the second level of the property.
On 2 February 2017, Walsh received an email from Legge and Legge providing him with yet further draft plans relating to the work to be undertaken ("2 February Plans"). Compared to the 16 December Plans, the Plaintiffs had requested the following further changes to the scope of works to be done on the site (Walsh Affidavit dated 20 November 2020 at [79]; CB 849): 1. In place of the previously proposed office on the ground floor, the Plaintiffs had requested the inclusion of a cinema; 2. The Plaintiffs had requested that the skylights over the living room area be electrically operable windows; 3. The Plaintiffs had requested the inclusion of a second sink in the pantry; and 4. The Plaintiffs had requested a rearranging of the ensuite bathroom and walk in robe to the master bedroom in the upstairs area, to allow for more expensive tiling, fittings, and furniture including a raised bathtub.
In addition to what was shown on the 2 February Plans, the Plaintiffs had given JSW, Wow Developments, and Legge and Legge a number of further instructions. These involved the following (Walsh Affidavit dated 20 November 2020 at [80]; CB 849-850): 1. That the walls and ceilings throughout the house contain plastered recesses and mouldings as a design element, some of which are shown in the 2 February 2017 Plans; 2. That the rear deck be built up so that it was perfectly flush with the level of the kitchen and living room in the house; 3. That the concrete in the pool area be built so that it was perfectly flush with the deck as well; 4. That heated floors be installed through many parts of the house including the living area, the kitchen, the powder room on the ground floor, and the master bedroom's ensuite bathroom; 5. That the design allow for a surround sound system incorporating speakers in the walls and ceiling; 6. That a security system be installed with, among other things, 17 hidden cameras; 7. That special triple glazed and noise insulating windows by sourced from Italy by Wow Developments and installed throughout the house; 8. The facade of the house be renovated in a "Hamptons" style in accordance with designs prepared by Legge and Legge; and 9. That extensive landscaping works take place around the pool area.
Walsh says that even at the time that the 2 February Plans were being prepared, it was still not possible for him to prepare a precise estimate of the costs of the project. This was so, as first, though the 2 February Plans were relatively advanced, they still were not final, and as secondly, the Plaintiffs were still requesting that the plans be altered and supplemented. Further, Walsh explained, the Plaintiffs still had not chosen the various finishes and fixtures which would be incorporated in the project. Walsh explained that these choices would have a significant impact on the overall estimated cost of the project.
Walsh explained that even though he had not prepared a precise estimate of cost the project at that stage, it was obvious to him that the cost of the project would far exceed $500,000. He says that at site meetings, as the Plaintiffs gave further instructions changing the works, Bertini and he discussed the costs of the changes with Mills in rough terms. He says that the following were discussed (Walsh Affidavit dated 20 November 2020 at [82]; CB 850): 1. Bertini advised Mills that special windows from Italy would cost around $150,000; 2. He indicated to Mills that JSW's costs of building the deck and concrete area around the pool would add at least $50,000 to the cost of the project; 3. He indicated to Mills that the electrical works required to install the heated floors, security system and surround sound system would add at least $100,000 to the cost of the project; 4. He advised that apart from the cost of constructing the pool, the landscaping requested by the Plaintiffs in the pool area would add at least $100,000 to the cost of the project; and 5. He advised that the general level of quality the Plaintiffs were now requesting in terms of finishes, fixtures, and fittings would raise the cost of the project substantially.
In early February 2017, either Walsh or Bertini introduced the Plaintiffs to an interior designer who was engaged in relation to the project.
On 28 February 2017, Walsh sent Mills an email which had attached a scope of electrical works and a further copy of planned works, which were marked up to show the location of various items. This scope of electrical works incorporated a number of items which were not contemplated when Mills had said in September 2016 that the Plaintiffs wished to spend about $500,000 on the renovation. Walsh says that, on his estimate, these electrical works alone would have cost approximately $100,000. He says that the works included (Walsh Affidavit dated 20 November 2020 at [86]; CB 851-852): 1. Providing cable TV and internet connections throughout the house; 2. Supplying and installing LED lights with dimmers throughout the house, including to be used around cabinetry in the kitchen and living area; 3. Installing a security system involving 17 hidden cameras throughout the house; 4. Supplying a C-Bus controlled home automation system which would allow the Plaintiffs to control the various electrical components in their home with a smartphone app; 5. Supplying and installing a surround sound system to be incorporated into the living room ceiling as well as in the living area on the first floor; 6. Installing electrical equipment in the pool and the pump room; and 7. Installing heated flooring in a powder room to be included near the stairwell.

[10]

March 2017

On 2 March 2017, Walsh received an email from Legge and Legge with a yet further draft of plans relating to works to be done on the site. He says that compared with the 2 February 2017 drawings, the Plaintiffs had requested the following further changes to the scope of works (Walsh Affidavit dated 20 November 2020 at [88]; CB 852): 1. The Plaintiffs had requested the inclusion of an outdoor kitchen on a deck on the side of the house; 2. The Plaintiffs had selected the locations of the windows to be sourced by Wow Developments; and 3. In particular, the Plaintiffs had requested a circular window be included, to be looking out from the master bathroom. This window was to have two layers of triple glazed glass, with a roller blind incorporated in between the layers. In addition, that on the inside of the bathroom, the window would be surrounded by a large pane of smoked glass, and Walsh was of the view that windows of that kind were not sold in Australia at that time.
After March 2017, further alterations were made to both the structural aspects of the renovation, together with matters going to fittings and finishes. The Plaintiffs requested that the first floor of the house, which at that stage only extended over the extension in the rear of the house, be built over the front of the house to incorporate a large living area or rumpus room.
From late February 2017, Walsh was copied in on substantial email correspondence passing between the interior designers and Mills, in which Mills provided instructions in relation to matters of interior design. On 27 February, Mills requested changes to the master bathroom, and in which Mills had approved the use of marble and smoked glass finishes for use in the kitchen and powder room on the ground floor.
On 7 March 2017, the interior designer provided Mills with computerised images of the first-floor bathroom, which featured marble walls, wooden floorboards, and a unique bath on a raised marble slab, with a circular window.
By email dated 8 March 2017, Mills gave instructions changing various aspects of the design of the kitchen, choosing electronics for the living room, including speakers built into the walls and ceiling, and changing some aspects of the design of the upstairs master bathroom.
On 15 March 2017, Mills was provided by the interior designer with amended drawings for the downstairs kitchen, which were reflective of his instructions that the area previously intended to be a pantry be changed to a fully-fledged second kitchen. These plans also accounted for the inclusion of various appliances integrated into the cabinets including three refrigerators, a wine fridge, two dishwashers, an oven, and a microwave.
On 27 March 2017, Mills approved the use of blast brass finishes and the inclusion of LED backlighting in the kitchen cabinetry.
By email dated 7 April 2017, the interior designers provided Mills with a computerised image of the master bathroom, which included a walk-in wardrobe.
On 13 April, Mills emailed Walsh requesting that the design of the walk-in wardrobe include various features including a safe, LED backlighting, and a special watch storage container.

[12]

Cost Plan Estimates

In early February 2017, Walsh prepared an Excel spreadsheet containing a total of the costs incurred by JSW on the project to date (the February Costs). It also contained an estimate of the total costs required to complete the project based on the Plaintiffs' instructions as at that time. He provided a copy of this document to Mills on site in early February 2017. This document estimated the costs of the project to completion at $1.529 million, and it advised that the incurred cost to date as being $561,182.04. Walsh said that this February cost plan was itself still a very approximate estimate, as the Plaintiffs had not finalised the design of the renovations, nor had they chosen fixtures and finishes.
Walsh says that after he provided the February Costs, he had a conversation with Mills to the following effect (Walsh Affidavit dated 20 November 2020 at [111]; CB 856): Mills: Haiden this costs plan is huge, is there any way for the estimate to come down? Walsh: Dave it's this high because you and Crystal have been requesting premium fit and finish. There's a lot of bathrooms in the design now, and so there's going to have to be lots of plumbing. The electricals are going to be very expensive as well. Mills: I'm going to have a hard time justifying this to Crystal, she is not going to accept this Walsh: You are getting a good price, especially on all the finishes because of [Bertini's] contacts in Italy. You will not be able to get a build of this quality done much cheaper than this. Mills: I get that but it is too much. Can you see what we can cut down on. Walsh: Ok I will go back and revise it with [Legge] and [Bertini] and bring it down. Mills: How have you incurred over $500,000 already? Walsh: You have been seeing the boys here working every day. This is a big job. Mills: Ok but I want to see invoices and make sure the figure is right. Walsh: Alright.
Walsh recounted that by that time, JSW had received $300,000 in progress payments, and had incurred costs of $561,182.04. He asked Mills to make a further progress payment to cover the balance of this amount. On 13 February, he prepared and sent to Mills an invoice seeking a further progress payment. This invoice was addressed to Mills International, and again referred to fictitious work being undertaken at that company's offices.
On 17 February 2017, JSW received from Mills International a payment of $100,000 in respect of its invoice of 13 February 2017. This payment brought the total sum of payments made to JSW to date to $400,000.
In late February or early March, Mills prepared a further version of the February Costs with an additional column entitled "Dave's Notes". In this column Mills requested various invoices, asked for details of various items, and made other queries relating to items on the February cost plan. This, he forwarded to Walsh.
Walsh in turn prepared a further version of the February Costs sheet, in which he responded to Mills' queries.
On 9 March 2017, JSW forwarded a further invoice for the fourth progress payment. Mills was reluctant to pay this invoice, and he indicated that he would not do so until he received a revised cost plan. In response, Mills was provided with a further version of the cost plan which reflected total anticipated cost of the project to completion of $1,529,774.70, and the cost to date of $719,625.28. At this stage, Walsh also gave Mills his physical file containing all of the invoices and quotes which he had received in relation to the project.
On 23 March, JSW received a payment of $100,000 from Mills International in respect of its invoice of 9 March. This brought the total amount received by JSW from Mills International to the sum of $500,000.
From late March 2017, the relationship between the parties, which had begun to deteriorate, continued to do so. Amongst other things, Mills asserted that he was being charged incorrectly by JSW. In the meantime, JSW was still working on the site, and it continued forwarding progress payment invoices to Mills International. These invoices were not being met by either Mills or Mills International.
Negotiations ensued between the parties in an attempt to resolve the dispute concerning the proper amount payable to JSW, however, because of the fact that Mills International had ceased to make payments, in mid April 2017 JSW directed the independent subcontractors to leave the site, and building works ceased. JSW also left the site.
The negotiations, with a view to resolving the growing dispute between the parties, continued without success.
On 18 August 2018, the Plaintiffs caused the still incomplete premises to be demolished. I shall return to this topic later in these reasons.
The analysis of the background to the dispute set out above is taken from the Walsh affidavit of 20 November 2020. I have attempted, in reciting this background, to indicate where that is a dispute as to facts. Where there is such a dispute as to the facts, I prefer the evidence of Walsh over Mills, for reasons to which I shall now turn.

[13]

Mills

I regret to say that I found Mills to be a most unconvincing witness. I gained the very distinct impression that he would happily surrender the truth for any opportunity to advance his case. He was a classic advocate witness. I feel unable to rely on his evidence.
His evidence was replete with failures to accept the obvious. One notable example of this is in relation to his steadfast refusal to accept that his constant changes to the plans for the property inevitably lead to increased costs. That was a proposition that verged on being an incontestable fact, yet Mills obfuscated in relation to it.
At one stage he attempted to pass off changes to the plans for the property, which had an obvious inflationary effect on the price, as being attributable to Legge and Legge, and not to his wife and himself. The following exchange occurred at page 57 of the transcript: Q. You didn't request an additional bathroom? A. No. No, that wasn't so. No. No. Q. Okay, well, let's have a look at page 232, which is the previous design? [sic] A. 230 - sorry? Page? Q. 232. A. 230 - 232, yes? Q. Can you see on the left‑hand side of the house, there is about halfway up the page, a doorway that enters into the house and then approaches the void? A. Yes, I can see that. Q. Now, would you go to page 931, please? A. Yes, I'm on that? Q. That's been turned into a bathroom, hasn't it? A. Yes. Q. Now, do you say that that's not something you requested? A. That's - that's correct. No, I - we did not request that. That was not us. So, it's‑‑ Q. Do you know who it is? Well, who requested it, if not you? A. The - it wasn't a ..(not transcribable)..it wasn't a - well, no one requested it, I don't think. That would be the right terminology. That was part of the design development from Legge. Q. Well, what terminology would you use? A. Legge had, as you've seen, put forward draft plans, options, in email, option one, option two, I believe. And based on our, obviously, our conversations, I would assume, and they were being discussed and obviously as feedback was given, Legge had taken it on himself and something to do with the - you know, provides a - some inspiration or such forth to us. And he'd move things around. HIS HONOUR: But, at the end of the day, Mr Mills, surely the ultimate decision makers are you and your wife? WITNESS: Yes. Yes, your Honour, absolutely. HIS HONOUR: So, anything that Mr Legge put up for discussion, ultimately, you and your wife decided whether you were going to take up their suggestion or not? WITNESS: Yes.
To my mind, an even more serious erosion of his credit occurred in relation to the issue of his request that Walsh prepare invoices to render to his company, Mills International, in relation to the works. This ruse, self-evidently, was intended to provide false evidence of the fact that the work was provided as renovation work at Mills International's premises, and thus, presumably, tax-deductible in Mills International's tax returns.
Mills steadfastly maintained that this course was undertaken solely as a result of the urgings of Walsh. I find this proposition to be simply unbelievable. It is glaringly improbable. Walsh did not know Mills International's financial position. He did not know whether it operated profitably or at a loss, and thus he did not know whether a tax deduction would be valuable to Mills International. Of the persons relevant to the proceedings, only Mills would know that.
The re-invoicing of the first two payments to JSW, so as to record an obligation to pay in Mills International, was initially organised through Mills' personal assistant. This led to the conversations between Walsh and Mills to which I have referred in para [66] herein. I accept that a conversation took place in those terms.
The irony of Mills' position in relation to this issue is that, even if against the overwhelming probabilities, Mills was correct in asserting that invoicing of Mills International was Walsh's idea, the fact that he would take up such a suggestion from Walsh, with the obvious intent to defraud the revenue would in any event also bear badly on his credit. This is so, to my mind, as even on Mills' view of the issue, his case strongly suggests that Mills is a person who was easily drawn to dishonesty.
Walsh did not purport to be commercially astute, and he did not present as commercially astute. The proposition that this proposed fraud on the revenue, engaged in for the benefit of Mills and his company, should have its genesis in a suggestion from Walsh, to my mind, only needs to be stated to be rejected.
In conclusion, I do not accept the evidence of Mills in any matter of contest other than when his evidence is corroborated, or against his interest.

[15]

Zhang

The only area of any controversy between Zhang and Walsh was as to whether she requested written contracts from him on a regular basis. In her affidavit at 23(d) (CB 449) she asserts that she did. Walsh denies that assertion. Walsh says that no request from the Plaintiffs for a written contract was made until after the parties fell into dispute. Zhang was not cross-examined on this inconsistency, however there was no Browne v Dunn need to do so, as the matter was conducted on affidavit, and, as such, Zhang had been put on notice as to the dispute between her evidence and Walsh's (Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1).
I prefer the evidence of Walsh in this regard. Mills, to whom Zhang delegated authority to deal with the Defendants on her behalf, gives no evidence of such request being made orally or in writing until "shortly prior to 18 November 2016" (CB 176, Mills' Affidavit of 31/10/19 at [43]). This is denied by Walsh (Walsh Affidavit dated 20 November 2020 at [37]; CB 840).
It is overwhelmingly likely, in my view, that Walsh's evidence is correct in relation to this. As at 18 November 2016, the plans for the works were in such a fluid state that it is difficult to imagine how a contract could be prepared at that time.
I thus prefer Walsh's evidence to both that of Zhang's and Mills' in relation to this issue.
If, in fact, Zhang was regularly pressing for such a contract as she says, it is difficult to imagine that this request was not conveyed by Mills to Walsh, and reinforced in writing by email, as was the normal mode of written communication between the two.
At the end of the day, Mr DeBuse of counsel, who appeared for the Plaintiffs, placed great store on the evidence of Zhang. He put to me that I should view the case "through the prism of Crystal Zhang" (T 451.27). To my mind, this was an unusual submission insofar as it was contrary to the manner in which he had conducted the Plaintiffs' case, which was heavily reliant on the evidence of Mills, rather than Zhang.
The problem with any attempt to view the Plaintiffs' case "through the prism of Crystal Zhang", is that her own evidence was that, notwithstanding that the property was owned by her, she overwhelmingly left the dealings with the Defendants to Mills.
The reason for this approach to the centrality of the position of Zhang, however, was obvious, as Mr DeBuse frankly conceded that it was likely that I would have difficulties with Mills' credit. Indeed, I think it is fair to say that his attempts to bolster Mills' credit were at best tepid.

[18]

Was Walsh a Party to the Contract?

Walsh says that he was not a party to any contract with the Plaintiffs. He points to what he says are the many examples in the various iterations of the pleadings, and the affidavits of the Plaintiffs that are inconsistent with the proposition that he was a contracting party. In para [42] of his written outline of closing submissions, the Second Defendant described these as "admissions", in the following terms: If all this were not sufficient, the issue is also the subject of an astonishing number of prior admissions by the Plaintiffs: The Plaintiffs pleaded that what they proposed at Maisy's Café was that "JSW would carry out the building works". The Plaintiffs originally pleaded that on 21 November 2016, "JSW commenced residential building work", amending this only in their third pleading, which is suspect because it was done at a time where the Plaintiffs had made a decision to repurpose the claims intended for the First Defendant as claims to be made against the Second Defendant, rather than applying for the reinstatement of the First Defendant. The Plaintiffs' primary position, recorded at paragraph 21(a) of their pleading, is that the agreement was only with JSW. It is only their "alternate" position that the agreement was additionally with Mr Walsh. Their primary position is correct and they should not be permitted to resile from it. The Plaintiffs originally pleaded that in February 2017, "JSW provided a proposed cost plan", amending this only in their third pleading. The Plaintiffs originally pleaded that in April 2017, "JSW demanded further payment", amending this only in their third pleading. The Plaintiffs originally pleaded that in late April 2017, "JSW notified Mrs Zhang that they would no longer carry out the Building Works", amending this only in their third pleading. The Plaintiffs originally pleaded that "JSW, by its director, employees, servants or agents, failed or neglected to provide a written contract for the Building Works", only amending this in the third pleading. Mr Mills has a section of his affidavit, filed before the amendments in the third pleading and before the repurposing of the JSW case for Mr Walsh, containing the heading "Engagement of JSW". Likewise, Mr Mills' affidavit refers to "[t]he scope of works with JSW" and "[t]he works being performed by JSW". As recently as July 2021, the Plaintiffs entered into a Deed of Settlement and Release with the Third Defendant, which contained the following recital: "The [Plaintiffs] contracted with JSW Property Projects Pty Ltd (JSW) as the builder for the project". The Plaintiffs warranted that they had received, or had had an opportunity to receive, legal advice about, and understood the nature and effect of, the terms of the deed.
I do not believe that these matters are in truth admissions, at least not in a strict sense. I take this view as the question of whether Walsh was a contracting party is, at the end of the day, a matter of law. I do accept, however, that these matters are inconsistent with a belief by the Plaintiffs that the contract was other than with JSW. As I shall shortly discuss, however, the Plaintiffs' subjective views on that topic are not relevant.
I should also add that the contract upon which the Plaintiffs sue is not a conventional type of contract with clear offer and acceptance. In such cases there will usually be no issue as to the identity of the parties. Rather, the contract is a contract which evolved over time of the type identified by McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 110 (see also Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 per Heydon JA).

[19]

Identification of Parties to a Contract: Legal Principles

The task of identification of the parties to a contract falls to be determined in accordance with the objective theory of contract (see Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [54]-[58]; Harold R Finger & Co v Karellas Investments Pty Ltd [2015] NSWSC 354 at [79]-[86], and the authorities cited therein). Subsequent conduct is available to the court in determining the identity of the parties to a contract, in contradistinction to the situation where the court is construing contractual terms where it is not (see Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [59]).
The objective theory of contract demands a focus on what was objectively communicated between the parties. As I have earlier mentioned, the parties' uncommunicated subjective intentions are irrelevant. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157 at [1312]-[1321], the Court of Appeal of Western Australia endorsed the trial judge's analysis in the following terms: The first stage with an informal contract is to look for the "actual intention" of the parties. Consistently with the objective theory of contract, that is not a search for the subjective state of mind of each party, even if shared but not communicated. Rather it is a search for the "objective intention" of each party to be inferred from what is manifested by its communications and other conduct.
In Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833, Allsop J stated that subjective intentions may be relevant only "so far as they are manifest and shared". His Honour stated (at [369]): The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract.
Walsh criticises the Plaintiffs' approach to the issue of identification of the parties on the basis that their submissions are overwhelmingly reliant on what is alleged to have been their subjective belief that the person that they were dealing with was Walsh, as distinct from JSW. In my view, that criticism is well made.
In fact, such evidence of objective inter partes communications as there is, in my opinion, points exclusively to the conclusion that JSW was the sole contracting party. It was common ground that the email of 18 November 2016, and the Building Works Scope document (Quote 1110) that it had attached to it, formed part of the contract. The Plaintiffs plead as much at FASOC 21(i) and (iii).
The cover email is to be found at CB 912. It is sent from "JSW Projects", with the email address "info@jswprojects.com.au". It contains the "JSW Projects" logo twice in the email signature. To my mind, the fact that Walsh signs off the email in his own name does not alter the fact that this purported to be, and was in fact, a communication from JSW Projects.
The first attachment to the email is the drawings of Legge and Legge, to be found at CB 913‍-‍4. This is neutral on the question of parties: it refers neither to JSW nor to Mr Walsh.
The second attachment to the email is Quote 1110, which is to be found at CB 915‍-‍6. It has the following features: 1. It contains the JSW Projects logo at the top of both pages. 2. It contains JSW's email address in the letterhead on both pages. 3. It contains JSW's Australia Business Number in the letterhead on both pages. 4. It contains an express reference to "JSW Property Projects Pty Ltd" in the letterhead on both pages. 5. It contains JSW's banking details at the bottom of both pages. 6. It contains no reference at all to Mr Walsh.
Mills accepted in cross-examination that the reason why Mr Walsh was not referred to in this document is because this offer was being made by the JSW (T 37.1-11). Likewise, he accepted that the reason that he was being invoiced by JSW was because he and his wife had contracted with JSW (T 38.39-41). And he accepted, on several occasions, that JSW was the party with whom he had contracted (T 39.6-7; 140.7-8).
It seems to me that viewed in the light of evidence such as this, the proposition that Walsh was a party to the contract is a conclusion which a reasonable observer of the parties' communications would be unlikely to draw. As the Court of Appeal noted in Pethybridge: This is because the correct conclusion to draw from the objective evidence is that a reasonable observer of the communications that led to the entering of the contract, together with the background facts known to the parties, would conclude that the parties intended that the contract would be with whomever it was that was carrying on the business under the name of C & D Asphalt Service.
The background facts known to the parties in the present case would include the proposition that the contract was for the renovation of residential premises by a small building company. It was thus a commercial contract, and it would be consistent with authority for the reasonable observer of the communications to be a reasonable businessman (Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 107 at [47]).
To my mind, the conclusion is irresistible that what a reasonable observer/businessman would draw from the communications between the parties, considered against a background of the shared foundational facts, is that the homeowner was entering into a contract with the company nominated by the natural person, with whom they were dealing.
This, after all, is why companies are incorporated. The raison d'etre of companies is to create a prima facie position whereby a director and shareholder is not personally liable for the liabilities, acts, and omissions of the company, with which they are associated.
To my mind, the reasonable observer of the communications to which I have referred would understand that the parties did not intend that both the company and the individual shareholder/director would be parties. In my opinion, the reasonable observer would conclude that if the homeowner wished to have the director/shareholder made personally liable for the company's acts and omissions, then he or she would require that director/shareholder provide him or her with a personal guarantee of the company's obligations to them.
I find, therefore, that the contract the subject of the Plaintiffs' HBA claim was a contract with JSW alone, and as such Walsh can have no liability in respect of it.

[20]

Walsh's Secondary Arguments

Walsh, in his defence of the claims against him, advanced a multi-layered defence. As a consequence of my conclusion that Walsh was not a party to the contract upon which the Plaintiffs sue, many of the issues raised in these layers of defence fall away.
As I understand my obligations as a trial judge, I am not required to examine and determine every issue being raised in the proceedings. A minute explanation of each step of the reasoning process and detailed findings on every issue of fact is not required of me. I am thus not under any obligation to refer to every argument which was put.
In Read v Carmody (1998) NSWCA 182 at 41, Powell JA (with whom Meagher and Stein JJA agreed) held as follows: [T]he duty of a judicial officer to give reasons for the decision to which he ultimately comes is, as I understand it, not one which requires him to examine and determine every issue which has been raised in the proceedings, or to record in extreme detail the reasons which have led him to any particular conclusion, or the process of reasoning which has led him to his ultimate conclusion; it is enough if the judicial officer sufficiently exposes the facts which he has found which are relevant to his ultimate conclusion and the process of reasoning based on those findings which led him to his ultimate conclusion.
In a different context, but much to the same effect, in R v Sabet [2018] SASCFC 18 at [29], the Full Court of the Supreme Court of South Australia held as follows: It can be seen that the obligation imposed on the trial judge extended to a requirement that the judge identify the critical factual issues relevant to her verdict, identify the evidence relevant to the resolution of each issue and explain the process of reasoning by which the issue was resolved. However, a minute explanation of each step in the reasoning process and detailed findings on every issue of fact is not required. There is no obligation on a judge to refer to every argument which has been put. A trial judge is entitled to make a finding that a particular witness' evidence is rejected, without identifying, or indeed without there being any particular reason for rejecting the witness' version over and above acceptance of conflicting evidence.
And again, in Haros v Linfox Australia Pty Ltd [2012] FCAFC 42 at [31], the Full Court of the Federal Court of Australia held that: … a judge's duty to give reasons is not one which requires him or her to examine in detail every issue raised in the proceedings or to record in minute detail the reasons which led to any particular conclusion. It is enough if the judge outlines the facts found and the process of reasoning which led to the ultimate conclusion …
As a consequence of this understanding of the obligations which fall upon me, I will not deal with each of the fallback arguments that have been advanced, though I shall touch on certain of them in an attempt to ensure that my reasoning is clear.

[22]

The Misleading and Deceptive Conduct Claim

The Plaintiffs plead the following representations were made to them by Walsh and JSW, which they allege were misleading and deceptive pursuant the provisions of schedule 2 of the Competition and Consumer Act 2010, namely, section 18 of the Australian Consumer Law ("ACL"). These representations were: 1. That they were licensed to carry out residential construction works in New South Wales; 2. That they were qualified to do so 3. That they had the required skill, experience and capacity to carry out the proposed building works; 4. That any residential building work undertaken by them would be of high quality and standard; 5. That they were experienced in major residential building works; 6. That the proposed building work should be completed by February 2017; and 7. That the proposed building works could be completed within a budget of $500,000.
Elsewhere in the FASOC the Plaintiffs alleged that a representation was made that JSW was entitled to make demands for payments from them, however no submissions in relation to this representation were made.
As one might expect, the Plaintiffs allege that each of these representations were false, and, thus, misleading and deceptive. The Plaintiffs plead that they relied on the representations, and that their loss was constituted by the total payments made to JSW of $500,000. This was pleaded on the basis that but for the representations they would not have entered into the contract. They further allege that they obtained no value from the contract. This was so, they alleged, as such that the building works undertaken by JSW were valueless. The Plaintiffs thus alleged that the $500,000 paid by them represented the true measure of their loss.
Of the representations to which I have referred above, (1) and (2) were alleged to be implied representations. The balance were said to be express representations.
To describe the representations in subparagraphs (1) and (2) as being implied was curious. This was so, as to my understanding the jurisprudence in relation to chapter 2 of the ACL, and its predecessor, do not permit of implied representations. Rather, a representation, which is said to be arising out of what was not said, is to be determined within the rubric of the authorities which deal with the topic of a representation by silence. Those authorities make clear that in the case of representation by silence, that silence is but a factor, to be considered amongst all the circumstances of the case, in determining whether there has been misleading and deceptive conduct established. So viewed, a determination is required as to whether, in light of all those circumstances, the silence of the alleged representor was misleading and deceptive.
Walsh disputes each of the representations. He also puts in contest reliance and loss.
I shall now turn to Walsh's case on the representations.

[23]

The First Representation: that Walsh, JSW, and/or Bertini were licenced

As to the First Representation, namely, that he, JSW, or Bertini were licenced to carry out the works, Walsh says that his silence did not represent that either he, JSW, or Bertini were necessarily licenced under the HBA at the time of the conversation, said to give use to the representation. Rather, he submitted that his silence was a representation that if JSW and Bertini were given the work, the parties undertaking the work would be licenced, and thus legally able to undertake the works, by the start of the works. As such, he asserted that his representation was a form of representation as to the future, albeit a representation as to the future by silence.
To my mind, precision is required in identifying what can be discerned from silence, and this precision is especially necessary when the representation is arguably a representation as to a future matter.
It seems to me that on such close analysis, the representation made by his silence for which Walsh contends is the correct one. I believe that finding can be tested by the hypothetical that JSW was ordinarily licenced under the HBA, but that its licence had temporarily lapsed for some reason. Notwithstanding this lapse, steps were being taken to reinstate the licence, which steps would have been expected to have been completed within, say, 48 hours. In those circumstances, a representation constituted by silence, which silence occurred in the period of the cessation of the licence, would be a representation as to the future of the type suggested by Walsh.
I am of the view that Walsh's silence at the Maisy's Meeting (which is where it is alleged that each of the representations were made) was, at best, a representation that if he, JSW, and Bertini got the job, they would be legally able to undertake the works by the time they commenced those works. Thus, it was representation as to the future.
Walsh said that he has reasonable grounds for making this representation. He says that he and Bertini were able to become licenced by the time the project commenced, some two months later. He says that it was reasonable for him to represent that they would be able to get their regulatory affairs in order between the Maisy's Meeting and the commencement of the works. He says that to the extent to which his silence constituted a representation, he believed that licencing was something which Bertini was capable of attending to in due course. He says that, when working together, Bertini attended to such matters.
In support of this contention, he relies on his evidence in cross-examination to the following effect (at T 324.29-324.34): Q. So there was no possibility with you‑‑ A. They could have been both put on the contract, I think, but I'd say so. That I sort of left to Didier to do, but it probably would have come through as just JSW Projects and just be rewritten another builder - builder's license, with us as the project managers, or something like that. Didier handles more of that, but he knew how to do it.
I do not consider that this evidence can provide a reasonable basis for the representation that it would be lawful for JSW to undertake the work by the time the work started.
I do not believe that there is any evidence of there being a reasonable basis for Walsh's belief. For example, there is no evidence as to what steps would have to be undertaken to achieve the result that there would be HBA licencing in place by the time of the commencement of the works. There is similarly no evidence as to the timeframe in which such steps would be undertaken. There was no evidence that it was likely that either Bertini or JSW would achieve a licence under the HBA.
I thus find that the First Representation is established.

[27]

Sixth Representation: works could be carried out by February 2017

The Sixth Representation was said to have been made expressly by Walsh, who accepts that he said words to that effect.
Walsh submits, however, that is not been shown that that representation was misleading and deceptive. As I have earlier indicated, the Plaintiffs requested a very substantial number of changes throughout the course of the project. Certainly, the fact that the project was still on foot in March 2017 could not, in any way, lead to the conclusion that it was not possible to complete the initial scope of the works by February 2017.
In his affidavit of 20 November 2020 (at CB 837), Walsh explained: At the time of the Maisy's Cafe Meeting, I believed it was possible to have the renovation work desired by the plaintiffs performed by February 2017 and at an approximate cost to the plaintiffs of $500,000. The plaintiffs had not, at that stage, selected any materials, finishes, appliances or furniture to be used the renovation. I knew that the ultimate cost of the Project depended on the choices made by the plaintiffs in relation to materials, finishes, appliances, furniture and design. But, I believed that it in principle it was possible to make such selections so that good quality materials were used, the works could be done to a high standard, and the cost of the Project would be around $500,000.
This explanation was not challenged. In my view, it is reasonable to read this evidence on the basis that Walsh believed what was stated in his affidavit to be possible, based on his 15 years' experience in the building industry. The contrary was not put to him.
Walsh, to my mind, has made good a reasonable basis for his representation as to the future. The Plaintiffs have failed to prove that the proposed building works, as they existed at the time of the representation, could not be completed by February 2017. In order to rebut the basis for Walsh's belief, in my view, the Plaintiffs would have required expert evidence.
Notwithstanding that the Plaintiffs have engaged experts in the proceedings, none were asked to express a view as to whether the works described in the original drawings were capable of being completed by February 2017.
The Plaintiffs have failed to make out this representation.

[28]

Seventh Representation: works could be done for $500,000

Walsh accepts that at the Maisy's meeting he stated that it was "possible to perform the work required (per the proposed renovation) for about $500,000." Mills, on the other hand, accepted in cross-examination that what he was in fact being given by Walsh by that statement was a preliminary estimate of the cost of the project (T 50.50-51.2).
Walsh submits that the fact that the works ending up costing more than $500,000 says nothing about the original estimate, as the subsequent cost increase was a result of the Plaintiffs' many changes to the scope of work. He makes the perfectly valid point that the representation which he made at the Maisy's Meeting could only be taken to have related to the works being discussed at the time of the representation was made, and that it cannot possibly be taken to extend to any subsequent changes that were made to the works. As I have endeavoured to explain, such changes were extensive indeed.
As to the question of whether Walsh had reasonable grounds for believing that the proposed works, at the time of the representations, could be undertaken for an approximate budget of $500,000, he explained his reasoning in the following manner (Walsh Affidavit dated 20 November 2020 at [22]; CB 837): At the time of the Maisy's Cafe Meeting, I believed it was possible to have the renovation work desired by the plaintiffs performed by February 2017 and at an approximate cost to the plaintiffs of $500,000. The plaintiffs had not, at that stage, selected any materials, finishes, appliances or furniture to be used the renovation. I knew that the ultimate cost of the Project depended on the choices made by the plaintiffs in relation to materials, finishes, appliances, furniture and design. But, I believed that it in principle it was possible to make such selections so that good quality materials were used, the works could be done to a high standard, and the cost of the Project would be around $500,000.
Walsh went on to submit that this statement was based on his 15 years of experience in the construction industry. He also submitted that the Plaintiffs could not and did not attempt to establish that he lacked such reasonable grounds for his stated belief. Walsh also points to the fact that the Plaintiffs qualified an expert builder, Mr Nakhla, to advise in relation to quantity survey matters in the proceedings, and that Mr Nakhla did not falsify the proposition that it would have been possible to construct the works, as originally contemplated, for the budgeted estimate.
Further, when asked about the basis for his belief in cross-examination, Walsh gave further explanation of that basis. He explained (at T 222.23-25; 222.30-32): "I'm sure that we worked through some sort of costings, to be able to understand to build within that price range." "More likely me and Didier sat down and we'd be discussing with what was a general idea of what things should be achieved, to understand what they want."
Likewise, Walsh gave this answer in re-examination (at T 351.1-5): Q. Mr Walsh, why did you think the job could be done for $500,000? A. Cause at the time of the conversations and the meetings that we had and what - the works that was discussed, it seemed reasonable to achieve that budget.
Taking all of this evidence together, I am of the view that it is clear that Mr Walsh's estimate was the product of a number of discussions with the Plaintiffs and with Mr Bertini, and was arrived at as an appropriate approximate estimate for the works based on his and Mr Bertini's experience in the industry. Whether, if the scope of the works had never been expanded, the prediction of staying within a $500,000 budget would have been realised is not to the point. The question is whether there were reasonable grounds for the estimate. I believe that Walsh has established that there were such grounds, and the Plaintiffs have not established that that was not reasonable. The Seventh Representation is not made out.

[30]

Mills' Lack of Reliance

On the failure of Mills to give explicit evidence of reliance, I am conscious of the authorities which suggest that in certain circumstances reliance can be inferred without direct evidence of it (Hanave Pty Limited v LFOT Pty Limited [1990] FCA 357). This is especially so where a contract is entered into based on a representation which is materially likely to have induced such an act (Gould v Vaggelas (1985) 157 CLR 215).
Notwithstanding these authorities, it seems to me that reliance, at least in relation to the First and Second Representations, which were not express representations, but rather are said to have arisen by silence, requires some degree of reliance to have been established on the evidence. In this case, I would not have inferred that, if Mills knew of JSW's lack of an HBA licence, he would have acted any differently to the way in which he did.
I have formed that view as Mills was not a person who appeared to care for legalities or proprieties. He did not wish to apply to the local council for development approval for the project, which approval seemed obviously necessary. His cavalier approach to his company's income tax obligations were also plain to see. Indeed, on balance I believe that if he became aware of JSW's lack of a HBA licence he may well have concluded that it was better for him to engage a small builder, even if unlicenced, as such a builder would be more likely to be compliant with his requirements for false invoicing.
His attitude towards legalities, and formalities can also be discerned from the fact of his seeming indifference to the need for a written contract to be put in place before the works were commenced, or indeed at all. He was similarly unconcerned about the fact that he was requiring the works to be commenced before the plans were complete. In short, he was quite happy to be putting in place an entirely anarchic building program.
I find that Mills was simply after a builder who would do the work as cheaply as possible, and as quickly as possible. I find that he did not rely on any failure of Walsh to note that neither he nor JSW held the requisite building licence.
I find that Mills has not established reliance in relation to the First Representation.

[31]

Zhang's Reliance on the First Representation

In respect of Zhang, in light of her uncontradicted evidence as to her attitude towards licencing, I find that she relied on Walsh's failure to disclose that JSW was not licenced. In my view, however, this reliance however does not result in her establishing a successful cause of action in relation to this representation, as in my view, on no view of the evidence, has she suffered any loss as a result of this reliance. I shall deal with the issue of loss later in these reasons, but it is appropriate to now deal with the position of Zhang separately as I believe different separate and additional considerations apply to her in relation to the issue of loss.
In my view, Zhang has suffered no loss reliant on her assumption that JSW was licenced. This is so as she paid no money as a result of such reliance. The moneys paid, and amount which the Plaintiffs seek to recover, was the $500,000 which was paid by Mills International. Mills himself would no doubt argue that he has suffered loss as a result of that payment, due to the fact that he became liable to JSW in the sum of $500,000, due to the creation of a debit in this sum in his Director's Loan Account with Mills International.
Zhang suffered no such loss. As earlier indicated, she paid out no moneys as a result of her reliance on an assumption that JSW was licenced,
Zhang said by way of reply that she suffered a loss. She submitted that, by means which were not explained, she became indebted to Mills in respect of the payment of $500,000 by Mills International.
I consider this contention to be erroneous. There was no evidence suggesting that the payment of $500,000 by Mills International would result in Zhang becoming indebted to Mills International or Mills. That being the case, and given that Zhang and Mills were married at the time of the payments being made in respect of her property, Equity would not impose any form of resulting trust in relation to the payments made by Mills, rather, Equity would assume that the payment constituted a gift by Mills to Zhang, by operation of the Presumption of Advancement.

[32]

Reliance on the Remaining Representations Admitted to have been Made

I believe that the issue of reliance in relation to the balance of the representations which were admitted to have been made can be dealt with together. There is no evidence of express reliance by either Zhang or Mills in relation to these representations. The Plaintiffs, in their extensive written and oral submissions, pointed to none.
I do not consider that, in the circumstances, reliance can be inferred. This is especially so in relation to the representations as to costing and the time for completion of the works. These are representations which Walsh accepts that he made.
While it may have been conceivable that Mills, the controlling mind of the couple, placed some reliance on the representations as to cost and timing at the time they were made, such reliance must have dissipated to nothing as Mills constantly changed his requirements, and thus changed the plans for the project. In my view, any causal link which may have been present time of making of representations would have been broken by these changes.
This can be put another way. The representations as to cost and timing could only be understood to apply to the plans, such as they were, at the time the representations were made. These plans, as I have indicated, very quickly became outdated, and became even further out of date as the changes escalated.
Further, the evidence strongly militates against a finding of inferred reliance by Mills on these representations. Far from relying on Walsh's representations on the topic of costs and timing, it seems to me, and I find, that Mills' approach to the works were distinctly one of self-reliance. He was on the site every day. He gave instructions to trade persons directly. He did so in Walsh's presence. The project was being managed in just the way he wanted it to be. He knew how much work had been performed, and he had a good appreciation also of where things were up to financially. As he accepted in cross-examination, he well understood that the $500,000 figure mentioned by Walsh was simply an estimate (T 77.38-40). He also accepted that he knew that if he increased the scope of the works, this would inevitably increase the costs (T 78.24-32). I believe that Mills personally involved himself in the project to ensure that all aspects of the project, including its costs, remained to his satisfaction.
I find that neither Zhang nor Mills relied on the representations which I have found were made.

[33]

Loss

As I have earlier indicated, the Plaintiffs plead that but for the representations they would not have entered into the contract with JSW, and that as a consequence they would not have paid to it the sum of $500,000. They then go on to plead that the self-same $500,000 represents the quantum of that loss. This is so, they plead, as the building works undertaken by JWS were valueless.
I consider this approach to loss to be wrong at law.
As the High Court has on numerous occasions made clear, where there are both burdens and benefits arising out of misrepresentations, damages will only arise for such wrongful inducement if the burdens of reliance on the misrepresentations outweighs the benefits; put another way, it is necessary for the plaintiff to prove the value of what he or it has acquired, less what was paid (see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 536 per Brennan J; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 514 - 5).
These authorities were both authorities concerning s 82(1) of the Trade Practices Act 1974, the section dealing with loss in the precursor to the ACL, as such they remain directly relevant to these proceedings.
Mr DeBuse for the Plaintiffs submitted that the approach to loss under the ACL to which I have referred was not of universal application, drawing my attention to what fell from Gleeson CJ in Henville v Walker (2001) 206 CLR 459 at [18]: S82 of the Act is the statutory source of the appellants' entitlement to damages. The only express guidance given as to the measure of those damages is to be found in the concept of causation in the word "by". The task is to select a measure of damages which conforms to the remedial purpose of the statute and to the justice and equity of the case. The purpose of the statute, so far as presently relevant, is to establish a standard of behaviour in business by proscribing misleading and deceptive conduct, whether or not the misleading or deception is deliberate, and by providing a remedy in damages. The principles of common law, relevant to assessing damages in contract or tort, are not directly in point. But they may provide useful guidance, for the reason that they have had to respond to problems of the same nature as the problems which arise in the application of the Act. They are not controlling, but they represent an accumulation of valuable insight and experience which may well be useful in applying the Act.
Mr DeBuse placed emphasis on the words which I have underlined.
As His Honour observed however, the common law approaches to loss remain valuable guides to assessment of loss under the Trade Practices Act and the ACL. Wardley v Western Australia and Marks v GIO reflect such an orthodox common law approach, and I see no basis for departing from that approach. I do not believe that the Plaintiffs' approach to loss "conforms to the remedial purposes of the statute and the justice and equity of the case." Rather, it seems to me that the conventional approach to which I have referred better reflects those compensatory aims.
As I have earlier indicated, the Plaintiffs, seemingly cognisant of the need to establish the value of what was obtained by them pursuant the building contract, glibly plead that the works were valueless.
The simplest answer to this contention is that the Plaintiffs, who have engaged both an engineering expert and a building expert in relation to matters of building works and costings, did not ask either to express a view as to whether the works undertaken by JSW were valueless. Consequently, neither did.
It is hardly surprising that no evidence was led as to the question of the value of the works at the date upon which JSW left the site, as it is close to inconceivable that the Plaintiffs' proposition that that the works were valueless could be correct. This, I believe, can be tested at least by reference to the fact that Mills was on site for virtually every day of the period during which JSW was working on site. He was constantly observing and interfering with instructions in the works. In the face of this daily contact, he requested JSW to do more, not less, building work, and he paid $500,000 in relation to it. That he could have come to the view that what he was seeing, and in part supervising, was valueless, to my mind is a proposition which only needs to be stated to be rejected.

[34]

The Applicable Legal Principles Where Loss Evidence Has Not Been Adduced

The starting point for consideration of the position which arises in cases of inadequate evidence being provided in relation to loss is the High Court decision in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83 where the court said that the obligation of court was to do the best it can to make a reliable estimate, where damages are difficult to assess. This proposition, however, is not an absolute one. In Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that "if the evidence called by the plaintiff fails to provide any rational foundation for a proper estimate of damages the court should simply decline to make one."
The approach of Pincus J was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiligou [1944] 1 VR 237 at 243. It was also endorsed by the Court of Appeal in Troulis v Vamvoukalis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof but there was an absence of raw material to which good sense may be applied, "justice does not indicate that… a figure should be plucked out of the air". (See also in Re. Waterfront Investment Group Pty Ltd (2015) 105 ACSR 280 at [44] per Black J.)
The issue was also considered by the Court of Appeal in McCrohon v Harith [2010] NSWCA 67. In that case McColl JA, with whom Campbell and Handley JJA agreed, quoted with approval the dicta of Devlin J in Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422 at 438 where his Honour stated "where precise evidence is obtainable, the court naturally expects to have it. Where it is not, court must do the best can."
In State of New South Wales v Moss (2000) NSWLR 536 after citing Devlin J's statement, to which I have just referred, with evident approval, Hayden JA added: As MacPherson J said in Nilon v Bezzina [1998] 2 Qld R 420 at 494, "the degree of precision with which damages are to be proved is proportionate to the proof reasonably available"
His Honour also referred to the decision of Bowen LJ in Ratcliffe v Evans [1892] 2 QB 524 at 532-3 where his Lordship stated "as much certainty and particularity must be insisted on … in … proof of damage, as is reasonable, having regard to the circumstances and the nature of the acts themselves by which damage is done."
In JLW (to which I have earlier referred), Brooking J stated that: "There is there is no rigid dividing line between cases in which guesswork is permissible in assessing damages and cases in which it is not. The borderline between guesswork and rational assessment is itself indistinct, as is the line between evidence that is "precise" and evidence that is not."
I am of the view that the Plaintiffs have not begun to approach the task of establishing the value of the property, at the date that JSW left it, with anything approaching the degree of precision commensurate with their capacity to do so. The task was a tolerably simple one, albeit requiring expert evidence. They eschewed that task, asserting that theirs was a "no transaction case", and as such not requiring proof of loss beyond the payment of $500,000. This, in my view, was a forensic decision which was based on a mistaken premise as to the appropriate measure of damages.
I am of the opinion that in the circumstances of this case, Plaintiffs have simply failed to establish their loss, and the court should not be left to "pluck a figure out of the air" to use the expression of Gleeson CJ in Troulis.
That said, as Brooking J observed in JLW, the dividing line between where guesswork on the part of the court is required and where it is not, is not a clear one. Accordingly, I accept that opinions may well vary as to the side of that line on which this case falls. In those circumstances, therefore, I shall express a conclusion concerning the state of the evidence in relation to the value of property as at the time JSW left the site.
The Plaintiffs in their closing written submissions floated the figure of $383,774 as representing the value of the works that JSW had undertaken prior to leaving the site. This figure was very much floated by way of a side wind. I do not believe that this figure could, on any view of it, be said to be provide any evidence of the value of the works at that time. On the contrary, that figure represents a figure put by the Plaintiffs as being a sum at which the parties might resolve their differences, without further disputation. The figure thus represented a settlement offer, which said nothing about the actual value of the work which JSW had undertaken to that time.
At paragraph 41 of their closing submissions, the Plaintiffs stated: If the Court is not satisfied that it should award the plaintiffs $500,000, then the plaintiffs say in round terms they should be awarded damages, doing the best the Court can in light of the absence of proper or adequate evidence of value from the defendant, the Court should award an amount of $150,000 plus the amount determined as HBA defects.
This submission surely was an example of an invitation to "pluck a number out of the air" of the type which Gleeson CJ deplored. I decline that invitation.

[35]

The Defendant's Fallback Position on Value

Walsh's principle position was that the Plaintiffs have simply failed to prove any loss. As I have indicated, I agree with this contention. Notwithstanding this position, Walsh did not seek to establish that the value of the works which JSW undertook was of the order of $724,000. This founded an argument that Walsh had provided a benefit beyond JSW's remuneration of $500,000, the sum of such benefit being approximately $224,000. This sum, if it was asserted, was available by way of quantum meruit. This quantum meruit was pleaded by way of set off (as distinct from a cross claim).
Being only a defence of set off and not a cross claim, this issue can only arise in the event the Plaintiffs have suffered a loss. I have concluded that loss has not been established, and as such I do not consider that the issue as to whether the Second Defendant has quantified the value of the works at $724,000 needs to be determined. Nonetheless for more abundant caution I will briefly express my opinion on Walsh's analysis.
As I have indicated, the Second Defendant set about establishing the likely value of the works at the time JSW left the site. Mr Reynolds of counsel, who appeared for the Second Defendant, did so in a detailed manner in paragraphs 99 to 173 of his final written submissions. In the light of the fact that this analysis does not arise on my view of the Plaintiffs' loss, I will not describe the detail of the Second Defendant's analysis, but rather I will content myself with a discussion of the structure of the analysis. I should make clear, however, that I accept the detailed analysis and, in so doing, adopt as correct the analysis of the Second Defendant in paragraphs 99 to 173 of his submissions.
The Second Defendant commenced his analysis with what he described as "the First Costs Sheet". This document was prepared by Walsh on 22 March 2017. It is to be found at CB 1079 to 1083. In fact, earlier versions of it had been prepared and provided to Mills in February. This was the document which Mills reproduced in electronic form, and then added his comments to it under a column labelled "Dave's notes".
The document is one which describes the work done, and the work to be done to completion in some considerable detail. In the conclusion of the First Cost Sheet, Walsh expressed a view of the total cost of the project (when complete) at $1,529,744.70, and he quantified the work to date at $719,625.28.
Walsh relied on this document as providing at least some evidence of the value of the works done to date. He suggested that this approach to the quantification task was appropriate, and indeed endorsed by the Court of Appeal in Roude v Helwani [2020] NSWCCA 310. The Plaintiffs on the other hand say that Roude v Helwani has no application, as in that case the builder who also provided detailed costings to prove the value of work done, also gave expert evidence as to the reasonableness of his costings. In Roude v Helwani that course was taken without objection.
In the present case, the Plaintiffs put in issue Walsh's expertise to make any such assessment.
I did not find the parties' analyses of Roude v Helwani to be helpful. I took this view inter alia, as the manner in which the evidence was adduced in that case is quite different from the present case.
I approach the matter on the basis that the Costs Sheets upon which Walsh relies are business records of JSW which were admitted without objection, and are based on primary records, which provide some evidence of the relevant value. True it is that they were prepared when the relations between the parties were beginning to deteriorate, but it has not been asserted by the Plaintiffs that the Costs Sheets ceased to be business records on the basis that they were prepared in contemplation of litigation (s 69(3)(a) Evidence Act 1995 (NSW)).
Thus, in my view, the First Costs Sheet provides some evidence of the value of the works undertaken, and it is for me to attribute to the First Costs Sheet such weight as I consider to be appropriate in circumstances.
Walsh produced a further iteration of the Costs Sheet on 6 April 2017 (CB 1114-1175) (the Second Costs Sheet), this document provided an even more detailed analysis of the work done to date and work to be done. It ran to some 12 pages (compared with four pages for the earlier iteration). It contained, for example, a week by week breakdown of the hours worked by tradesmen and labourers, which was not part of the analysis of the First Costs Sheet.
Walsh's analysis of the value of the works undertaken by JSW then proceeded to deal with individual criticisms of the costings levelled by the Plaintiffs.
First, the Plaintiffs drew attention to what they contended to be overcharging in relation to tradesmen and labourers' hourly rates. Walsh, in his analysis, applied to the hours worked by labourers and tradesmen the rates agreed by the costing experts called by the parties (Messrs Madden and Nakhla) concluding, on assumptions favourable to Mills, that by that process the costing for labouring and trades marginally increased (by $627.20).
Next, the Second Defendant applied a rate for preliminaries as agreed by the costing experts of 15%. It should be noted in this regard that the Cost Sheets had preliminaries costs at about 7%. This resulted in an increase in the value of the works of $37,669.80.
Finally, Mills had long asserted that there had been he had been charged by Walsh with cost of items not attributable to his job. Walsh admitted in cross-examination that there were some instances of incorrect charging. He attempted to quantify the extent of wrongful charges on the basis of his estimate that wrongful invoicing constituted 25% of the difference between the costs in First Costs Sheet and the Second Costs Sheet.
This approach was taken as the difference between the totals for the First and Second Costs Sheets was $93,876.70. This figure, however, represented both an estimate of the extent of overcharging, and an attempt to resolve the developing dispute between the parties.
This approach would result in a deduction of $23,469. His second approach was to adopt Mills' "ballpark" estimate of wrongly attributable invoicing being at $100,000.
Walsh adopted the figure of $23,469.18 being 25% of the difference in total costs on the Costs Sheets on the basis of his evidence that incorrect invoicing represented "a small fraction of the total costs." I have already accepted Walsh as a witness of truth, and I thus accept this estimate.
I thus adopt the Second Defendant's analysis of the necessity to reduce the value of works by $23,469. This results in a final estimate of value of the works undertaken by JSW of $734,453.

[36]

A Test of Reasonableness

As a test of reasonableness of the proposition that the works would have had a value in excess of $700,000 at the time that JSW left the site, the Second Defendant pointed to the fact that when Mr Nakhla (the costing expert upon whom Plaintiffs relied) examined the premises prior to their destruction, he prepared a photo index of the works that had been undertaken which involved some 440 photographs. The Plaintiffs said that fact was at least some indication that those works were not insignificant.
Next, as a further test of reasonableness of his assessment of value, the Second Defendant proffered a comparison between the total estimated cost of each category of works involved in the job with the total claim to date.
This analysis produced the following:

Demolition works: 100% complete.
Rubbish removal: 100% complete.
Concrete cutting: 100% complete.
Steel works: 100% complete.
Gyprock works: 56% complete.
Skylight installation: 100% complete.
Electrical work: 56% complete.
Plumbing: 48% complete.
Mechanical / air condition: 24% complete.
Master bathroom: 22% complete.

Finally, in relation to the task of quantifying the value of the works, the Second Defendant placed reliance on the fact that the destruction of the house had made virtually impossible the task of him establishing the value of the works at the relevant time. The Second Defendant urged me to apply the usual inferences which apply where a person destroys evidence. This approach was discussed in Palavi v Queensland Newspapers Pty Ltd (2012) 84 NSWLR 523; [2012] NSWCA 182 at [18], in which Beazley JA (with whom Tobias AJA agreed) relevantly observed: In Allen v Tobias, the High Court (Dixon CJ, McTiernan and Williams JJ) was concerned with the proper approach to the determination of a contract claim where the underlying contractual document had been destroyed by the defendant prior to the commencement of proceedings. The High Court concluded, at 375, that in such a case, the court "should proceed upon the assumption that the document was … executed". Their Honours advanced two reasons for adopting this approach. The first was based upon the principle "omnia praesumuntur contra spoliatorem", explained by the Privy Council in Ophelia [1916] 2 AC 206 at 229-230: If anyone by a deliberate act destroys a document which, according to what its contents may have been, would have told strongly either for him or against him, the strongest possible presumption arises that if it had been produced it would have told against him; and even if the document is destroyed by his own act, but under circumstances in which the intention to destroy evidence may fairly be considered rebutted, still he has to suffer. He is in the position that he is without the corroboration which might have been expected in his case.
Mr Reynolds of Counsel submitted that the Latin principle referred to in Ophelia and Allen v Tobias - "omnia praesumuntur contra spoliatorem", or "everything is to be presumed against the spoliator" - is of ancient origin and has long been applied in cases in which one party destroys documentary or real evidence relevant to their case. On this basis, he submitted that an adverse inference should be drawn against the Plaintiffs, namely, that the physical state of the property when the works ended would not have assisted them in mounting an argument that the works undertaken by JSW were valueless.
In light of the destruction of the building works, I believe this is an appropriate manner in which to approach the matter of the value of the works at the date of the second defendant leaving the site. Accordingly, the presumption referred to in Allen v Tobias [1958] 98 CLR 367 forms part of my reasons for adopting the Second Defendant's methodology in attempting to undertake the retrospective task of ascertaining the value of the works from the disadvantaged position of not having had the opportunity to have an expert inspect the property for the purposes of expressing an opinion about the value of the works.
The Allen v Tobias principle also has application to the Plaintiffs' criticisms of the lack of primary documents, such as invoices, receipts, and the like, referable to the project, which were produced by Walsh.

[37]

Missing Primary Documents

To my mind, this submission rings very hollow in the Plaintiffs' mouths. The uncontradicted evidence of Walsh is that he did keep primary records. Indeed, he had a physical file which contained all the quotes, receipts, and invoices, and the like, provided to JSW by various labourers, tradespeople, subcontractors, and suppliers. The file also contained copies of plans and spreadsheets, and marked up copies of plans in which Walsh recorded the instructions which Mills gave him in their regular meetings on site. It was this physical file that was used by Walsh to keep track of the costs incurred in relation to the works on the site, to plan the works, and to prepare JSW's invoices.
At the Plaintiffs' request, Walsh gave the folder to Mills. Mills, in turn, appears have lost it. To my mind, this gives rise to similar considerations as the demolition of the house. Mills is the last person to have had the file, and he had it a time when a dispute between the parties was brewing. Despite this, he has neither retained the file, nor returned it to Mr Walsh. In my view, he cannot be heard to complain about the absence of records that were entrusted to him, and which he has apparently lost.
As a result of this, in attempting to assess the value of the works, Walsh has been forced to do the best that he could by searching his email account (CB 841 [44]. He explained, however, that because he has moved house and changed computers multiple times since 2017 (T 222.27; T 269.1-4; T 292.42-45), he no longer has a base record of the documents that were kept in the physical file. He has annexed to his affidavit the invoices that he was still able to find in his emails four years after the fact (CB 858-9 [123] and at CB 863-4 [141]).
The records which Walsh had were limited to those contained in the Exhibit to his Affidavit. He also points out that voluminous further records were provided to the Plaintiffs in response to their Notice to Produce issued shortly before the trial (T 12.35-41). He submitted that in the circumstances the fact that he does not have further records is not something for which he can be blamed. I accept Walsh's contentions.
Finally, Mr Reynolds referred to the Plaintiffs' complaints about inadequate details in the invoices which JSW rendered (T 317.15-18). He answered, correctly in my view, that the invoices were presented in the way at Mills' request; that is to say, being falsely referable to works carried out at Mills International's offices. It reasonably follows that that such invoices would not include itemised costs. Clearly invoices that falsely described the scope of works as "office fit out works" in Seven Hills could hardly have contained detail about the residential works done in Willoughby.

[39]

The Demolition of the House / The Notice of Motion

I believe that on any view of it, the Plaintiffs performed a volte face when they decided that they no longer wished to renovate the existing premises at Sydney Street, Willoughby, which was by then partly renovated, but rather decided that they would demolish the dwelling and rebuild.
This demolition commenced on 18 August 2018. Photographs suggested that the new house constructed on the property was significantly larger and more elaborate than its predecessor.
As I have earlier indicated, the demolition of the house on the property occurred before the Defendants had their expert witnesses inspect the premises. This fact led to the Defendants, by Notice of Motion, seeking orders that the proceedings be dismissed pursuant to rule 13.4(1)(c) of the UCPR, or alternatively, that they be stayed pursuant to section 67 of the Civil Procedure Act 2005 (NSW).
The Motion was advanced on two bases: 1. That the maintenance of the proceedings following the destruction by the Plaintiffs of the premises constituted an abuse of process, Mr Reynolds referred to this as the "Broad Basis"; and 2. That in any event, the maintenance of the proceedings was an abuse of process as, following the demolition of the house, a fair trial was no longer possible.
In order to consider this issue, it is necessary to understand what preceded the demolition.
On 25 August 2017, Mills sent an email to Walsh demanding payment of $50,000 in respect of allegedly defective building works. The alleged defects were not particularised. The email threatened to take the matter to the to "Fair Trading". It threatened that in the absence of the payment of $50,000, the sum of $250,000 would be sought.
On 14 September 2017, Walsh received a letter from New South Wales Fair Trading, in which it was conveyed that Mills considered that some of the completed work was defective. There was again no particularisation of the of alleged defects.
On 20 September 2017, JSW, through its solicitors, sent a letter to Mills denying liability and noting that the JSW was still owed moneys for work done on the property. It offered to resolve the issues between the parties by accepting a payment of $50,000.
On 21 September 2017, Mills sent an email to JSW's solicitors declining to resolve the matter. He said, "We'll see your client in the Tribunal". This presumably was a reference to the New South Wales Civil and Administrative Appeals Tribunal.
On 15 November 2017, solicitors for the Plaintiffs sent a letter to the solicitors for JSW, informing the latter that the Plaintiffs had engaged a building expert to provide a report "for the purposes of our client's [sic] proposed litigation which advises that the work in its totality should be demolished and removed". It concluded, "We are instructed to commence action in the appropriate jurisdiction and are in the course of preparing our clients' evidence including expert evidence, which will be provided to you in due course".
By letter dated 17 November 2017, the Plaintiffs' solicitors reported that the Plaintiffs had instructed a new builder to demolish the building works carried out by JSW, and "to complete the project as originally envisaged."
The letter went on to advise that it was anticipated that those builders would commence their works no later than 1 December 2017. The letter concluded: "In the event that your client wishes to rely on expert evidence, it will be necessary for your client's expert to obtain access to the building works prior to that date, such access will be granted on 48 hours' notice in writing to this office."
It can be seen therefore, that the Defendants were offered a 14-day window within which to engage expert evidence. In reality, however, this 14-day opportunity was of very limited value to JSW, as it had not been provided with any particulars of the alleged defects in its work.
The demolition works in fact did not commence on 1 December 2017, but rather the property remained standing for a further nine months. The demolition in fact commenced on 18 August 2018. Walsh says that he first learned of this when the Plaintiffs' lay evidence was served upon him on 31 October 2019.
Leading up to and during the nine-month period between the Plaintiffs first informing to JSW that they would be demolishing the property, and when they in fact did so, numerous experts inspected the property on behalf of the Plaintiffs.
These proceedings were commenced on 17 January 2019. Identified in the Statement of Claim, for the first time, were the particulars of the alleged defects upon which the Plaintiffs relied. The Statement of Claim particularised 25 defects. This list did not purport to be final, as the pleading indicated that further particulars of the defects would be provided.
Over time thereafter, the Plaintiffs filed and served both lay evidence and expert evidence.
Due to the lack of earlier particularisation of the defects, the Defendants' experts were never able to meaningfully inspect the premises prior to demolition. This fact provided the fundamental basis for the Defendants' Notice of Motion.
The Defendant's Motion came on for hearing before me on 7 May 2020. At that stage, the Plaintiffs had not served their expert evidence, and thus it was impossible to determine if Walsh had suffered any prejudice as a result of the demolition.
The Motion was thus stood over in order to allow this to occur. The Motion came on again before Gibb DCJ on 31 July 2020. Her Honour concluded that it was still not possible to determine whether there was any prejudice suffered by Walsh. Her Honour concluded that this could not be determined until the trial judge determined whether to admit the allegedly prejudicial expert evidence, or either exclude it pursuant to section 135 of the Evidence Act 1995, or place a limit on its use under section 136 of the Act.

[45]

The Broad Basis for the Objection: the Destruction of Evidence

The Second Defendant continued to press for an order staying or dismissing these proceedings at large, on what it described as "the broad basis". This submission, as I understood it, was maintained even if I upheld the Second Defendant's objections to parts of Mr Dockrill's report under section 135 of the Evidence Act. The submission was based on the fact that the Plaintiffs, by their demolition of the premises, destroyed evidence which they knew to be significant to the determination of the proceedings.
The test that applies in such circumstances was set out by Johnson J in Clark v State of New South Wales (2006) 66 NSWLR 650 at [104] where his Honour stated: Ordinarily, a party is entitled to initiate and continue proceedings with the court determining those proceedings on their merits. Where, however, a party to proceedings intentionally destroys material which is significant to the determination of the proceedings, and such destruction occurs after the proceedings have been commenced, then a clear foundation would appear to exist for the court to call in aid its power to stay or dismiss the proceedings. The court will have in mind the interests of the individual parties to the civil proceedings, but also the protection of the administration of justice and the integrity of the courts and the system of justice generally. "… resolution of an application for a stay or dismissal of the proceedings will consider the question of whether a fair trial might take place in the absence of the destroyed material, even where the appropriate inference may be drawn adverse to the destroying party."
While Johnson J's decision in Clark involved a case where the destruction of evidence occurred after the commencement of the proceedings, it is clear that the principle has application in situations where the evidence is destroyed prior to the commencement of proceedings. (See Palavi v Queensland Newspapers Pty Limited [2011] NSWSC 274 at [21].)
As Johnson J made clear, however, the power to stay proceedings on this basis is one which should be "exercised sparingly".
What is also clear from the authorities is that the power to stay proceedings based on abuse of process is a discretionary one, and as Johnson J made clear in Clark, a relevant consideration to be taken into account is whether a fair trial can take place, in the absence of the destroyed material.
In the present case, I believe that it is necessary to identify with precision the abuse of process about which the Second Defendant complains. To my mind that prejudice is not the demolition of the house per se, rather, such abuse of process as may exist involves the commencement and maintenance of the proceedings, following that demolition. Indeed, this proposition itself requires further refinement in that any abuse which may be constituted by maintaining the proceedings following the destruction of the house, would be limited to so much of the proceedings as can no longer be answered by the Defendants due to the destruction of evidence.
In the present case, this would involve a consideration of the same defects upon which Mr Broune opined that, due to the destruction of the house, he was no longer able to express an expert opinion.
Accordingly, as I have made orders rejecting Mr Dockrill's evidence on these topics, I believe that any prejudice, which may otherwise have been thought to lead to an abuse of process, has been cured.
Accordingly, I would not dismiss or stay the proceedings generally for the "broad basis" as described by the second defendant.

[51]

The Quantity Surveying Evidence

The parties relied on evidence as to the costs of rectifying the various defects requiring rectification. The Plaintiffs relied on the expert opinion of Mr Nakhla, who is an experienced builder. His experience extends to the costing and estimating of building works. For the Second Defendant, reliance was placed on the expert evidence of Mr Madden, a quantity surveyor.
Without intending any disrespect to Mr Nakhla, the choice of a builder rather than a quantity surveyor to provide the court with expert opinion as to matters of costing was a curious one. As is well-known, quantity surveying is a specialist field of expertise, and while builders no doubt have general knowledge from experience about the costs of building works, they do not have the skills and training of quantity surveyors.
Indeed, Mr Nakhla readily accepted that Mr Madden was more qualified than he was (T 422.19-37). He also accepted that Mr Madden was more experienced than him in matters pertaining to quantity surveying (T 422.39-423.35). He also agreed that Mr Madden's approach to quantity quantifying the works, as set forth in his report was the normal approach used by quantity surveyors (T 441.20-23).
As the Second Defendant correctly submitted, the Plaintiffs did not challenge any part of Mr Madden's methodology, nor do they identify any instances of deficiencies or problems with his analysis. This should be contrasted with Mr Nakhla's report, which, in cross-examination, Mr Madden criticised in the following terms (at T 445.27-30): No, I don't believe what Mr Nakhla has put forward is a reasonable cost of what a builder would charge at all. I believe they're excessive and have no - and there's no - there's no workings or details of how he's - how he's - how he's arrived at those costings.
The Second Defendant also contended that I should place little weight on the evidence of Mr Nakhla, as he tended to provide figures for costings without exposing in detail the reasoning underpinning the calculations upon which he relied to reach his conclusions. The Second Defendant pointed to an example of this being that, without any explanation for the basis of the estimate, Mr Nakhla included an allowance for 240 hours for the repairing of the upstairs flooring. While Mr Reynolds did not take a Makita v Sproules type objection as to this evidence, he did, however, put that these deficiencies in Mr Nakhla's report rob it of the authoritative weight which can be attributable to Mr Madden's expression of opinion.
I believe that this is a well-founded criticism. Mr Madden, by contrast, thoroughly costed each step of his analysis, and set out clearly all of the assumptions upon which his expert opinion was based.
For these reasons, I prefer Mr Madden's evidence as to the cost of rectifying the agreed defects. This results in the following rectification of defects costs: Item Description Cost 1 Steel beam in living room $2,390.32 6 Skylight framing $3,184.75 7 Lateral bracing $8,590.00 TOTAL $14,165.07

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