Champion Homes Sales Pty Limited v DCT Projects Pty Limited

The first defendant, DCT Projects (sometimes referred to as “the owner”), is the trustee of a unit trust known as “The Developers Club Trust No 1” (the Trust). The second to tenth defendants are the unit holders in the Trust and are, or at least were at the relevant time, directors of DCT Projects. The sixth defendant, Mr Brown, also acted as the trustee of the Trust for a time prior to the incorporation of DCT Projects on 23 September 2005.

The tenth defendant, Mr Nixon, is now bankrupt and the plaintiff, Champion Homes (sometimes referred to as “the builder”), no longer proceeds against him. There was no appearance for the seventh and eighth defendants, Mr Chang Seing Ching and Ms Annie Hsu. Mr Brown appeared for himself. The remaining defendants (including DCT Projects) were represented by the same solicitors and counsel.

At the time of the events giving rise to these proceedings, the Trust owned land at Padstow. The land is located on the southern side of Courtney Road. It consists of two blocks, both of which front on to Courtney Road. The larger block is roughly 18 metres wide and 150 metres deep and slopes approximately 17 metres downhill in a southerly direction. The second block is adjacent to the eastern side of the first and is approximately 17 metres wide and 53 metres deep. A large exposed sewer pipe runs diagonally across the site. It passes through the south-eastern corner of the smaller block and bisects the larger one.

On 17 February 2005, the unit holders in the Trust resolved to proceed with the construction of eight townhouses on the land in accordance with a development approval that had been granted by Bankstown Council on or about 8 October 2003. In accordance with those plans, six townhouses were to be located at the top end of the site – three on either side of a road that was to run down the middle. In accordance with the plans, the road was then to turn right and left and to run down the western side of the larger block leading to the remaining two townhouses (known as units 4 and 5), which were to be located at the bottom of the site, on the other side of the sewer pipe.

At some stage, the Trust had appointed Mr Max McLean as the project manager and Mr McLean was involved in obtaining the development approval and various reports relevant to the development. Mr McLean was appointed a director of DCT Projects on its incorporation.

The building work for the project was put out to tender and the successful tenderer was Champion Homes. Its final tender price was $1,660,000.00, subject to a number of conditions. That figure was subsequently amended in the contract to a figure of $1,665,000.00.

Shortly before 22 September 2005, Mr Brown, as trustee of the Trust, accepted Champion Homes tender and agreed at about that time to pay a non‑refundable tender fee of $40,000.00 at a later date. That fee was paid on 20 December 2005. Champion Homes maintains that the fee was a deposit pending negotiation of a binding contract. DCT Projects contends that the $40,000.00 was paid to cover the costs of further investigations by Champion Homes so that a firm price could be included in the contract. It will be necessary to say more about that issue shortly.

Following its incorporation, DCT Projects borrowed money from a number of financial institutions to finance the costs of the development.

The construction contract between Champion Homes and DCT Projects was entered into on 8 May 2006 following extensive negotiations in which DCT Projects and its unit holders were represented by Clarke McNamara, solicitors. Under the construction contract, the nine unit holders (who were parties to the contract) guaranteed DCT Projects obligations under the contract as to a one‑ninth share each.

Work started on the site on 16 August 2006.

There were delays in the progress of the work and Champion Homes made various claims for variations which led to disputes between the parties. As a result, Champion Homes suspended work on the site on 8 November 2007. The parties sought to resolve their disputes by a Modification Agreement dated 13 December 2007 by which it was agreed, among other things, that Gleeds, quantity surveyors engaged by DCT Projects, would value the variations in dispute and future variations. However, further disputes arose and Champion Homes suspended work on another three occasions, the last of which commenced on 18 June 2008. Following that suspension, both parties purported to terminate the contract for breach or repudiation by the other.

In these proceedings, Champion Homes claims the amount of $317,484.18 which it says is the amount owing under the construction contract less the amount it has been paid. It also makes a claim against the unit holders under their respective guarantees for their proportion of the amount claimed.

The defendants have filed a cross claim against Champion Homes and Mr Malesev, its Managing Director. In addition, Mr Brown has filed a second cross-claim against Champion Homes and Mr Malesev. As I have said, Mr Nixon is now bankrupt and there was no appearance by his trustee in bankruptcy. In addition, there was no appearance by Mr Ching or Ms Hsu, although Mr Ching was called to give evidence by the other defendants. It may therefore be inferred that the cross-claims by Mr Nixon, Mr Ching and Ms Hsu have been abandoned. Mr Brown, and the other unit holders who appeared, indicated during the course of the hearing that they no longer pursue their cross-claims. Consequently, the only remaining cross-claim is the one brought by DCT Projects.

DCT Projects makes a number of claims against Champion Homes.

First, it contends that prior to termination of the contract it overpaid Champion Homes the sum of $216,851.94 and it seeks to recover that amount. The amount said to have been overpaid consists of amounts paid by DCT Projects in respect of variations which DCT Projects contends were not properly claimable by Champion Homes.

Second, DCT Projects contends that it is entitled to claim liquidated damages at the contractual rate of $1,160 per day from the date for practical completion under the contract (which was 26 June 2007) to the date on which it purported to terminate the contract (2 July 2008) (that is, 372 days). The total amount claimed is $431,520.

Third, DCT Projects claims the amount that it paid another builder, Linx Projects Pty Ltd, to complete the work ($588,954.11) less the costs of variations inclusive of GST, making a total of $557,306.36.

Fourth, DCT Projects claims late completion damages in the sum of $376,293.74 in respect of the period 3 July 2008 to the time of the sale of the units on 1 August 2009. That amount is said to represent the interest and other charges that DCT Projects paid in respect of loans it took out in connection with the project.

Fifth, DCT Projects claims that Champion Homes engaged in misleading and deceptive conduct in contravention of what was then s 51 of the Trade Practices Act 1974 (Cth) (the TPA) (now the Competition and Consumer Act 2010 (Cth)) and that Mr Malesev was a person involved in the contravention within the meaning of s 75B(1) of the TPA. As pleaded, the misleading and deceptive conduct has two elements. One is that Champion Homes gave misleading advice concerning the amount that should be allowed for rock excavation and removal and site excavation and spoil and fill removal and misleading advice concerning the cost of constructing retaining walls. The other is that Champion Homes engaged in misleading or deceptive conduct by failing to disclose to DCT Projects that substantial excavation would be required and that it would be necessary to construct numerous and large engineered retaining walls which were far in excess of those that had been disclosed to DCT Projects. DCT Projects claims that if Champion Homes had not engaged in misleading and deceptive conduct, it would not have entered into the construction contract. It claims as its loss arising from the misleading and deceptive conduct the following:

Lastly, DCT Projects and the unit holders rely on an estoppel. Mr Gracie, who appeared for the represented defendants including DCT Projects, conceded that its case based on an estoppel could not succeed if its case in respect of misleading and deceptive conduct failed. No separate damages are claimed as arising from the estoppel case. Consequently, it is not necessary to consider it further.

Champion Homes lodged its first tender on 19 August 2005 for an amount of $1,638,141.00. That tender was subsequently varied and, on 9 September 2005, Champion Homes lodged a final tender for $1,660,000.00. The tender set out various conditions including a condition that DCT Projects clear the site of all trees, shrubs and grasses and rubbish within a 3 metre radius of the building areas “within 14 days of development approval”. Under the heading “Provisional Sum” it provided:

The tender was expressed to be valid for 14 days. It also provided:

The tender also stated:

It appears that some time prior to 22 September 2005 Mr McLean indicated to Mr Malesev, the Managing Director of Champion Homes, that DCT Projects accepted the tender on condition that it made the $40,000 non-refundable payment later.

Mr Malesev wrote to Mr Brown concerning that acceptance on 22 September 2005. In that letter he said:

Between August 2005 and February 2006, DCT Projects arranged to borrow funds to finance the cost of the building work. The principal loan was obtained from Suncorp Metway Limited and was secured by a first mortgage over the property. The loan was for an amount of $1,764,000.00. After paying out the existing mortgage and capitalised interest, the amount available to DCT Projects for construction work was $1,590,000.00. The second loan, secured by a second mortgage over the property, was obtained from Equititrust Limited. That loan was for an amount of $650,000.00. After making an allowance for capitalised interest and other expenses, the total funds available on completion of the loan were $488,362.75. The third loan was obtained from Performance Capital Mortgage Pty Limited in February 2006. It was for an amount of approximately $180,000.00, giving DCT Projects a total of approximately $2,200,000.00.

On 8 December 2005, DCT Projects provided Champion Homes with contour plans of the site. Mr Pablo Cartagena, the drafting manager at Champion Homes, and Mr Luke Wakeham, an architectural draftsman who worked under the supervision of Mr Cartagena, used the plans provided by DCT Projects, including the contour survey, to prepare preliminary plans. They identified a number of issues in relation to those plans which were set out in typewritten notes and prepared by Mr Wakeham. The notes are dated 21 December 2005. The notes draw attention to a number of problems with the plans. Significantly, the notes state:

On or about 23 January 2006, DCT Projects retained Clark McNamara to act for it in relation to negotiations of the construction contract.

On or about 20 January 2006, Champion Homes provided Mr McLean with a draft building contract. Clark McNamara provided comments on that draft on 15 February 2006.

According to Mr McLean, in the period up to 9 September 2005 he had a number of conversations with Mr Petkovski, Champion Homes’ architectural draftsman, during which he said words to the effect that DCT Projects only had a fixed amount of money to spend, that it could not have a tender price where provisional allowance are not as close as they can possibly be to actual costs. He said that he had similar conversations with Mr Malesev and Mr Petkovski after 9 September 2005 until the date the contract was signed on 8 May 2006.

Mr McLean also says that he had a series of conversations with Mr Petkovski in which Mr Petkovski said that if DCT Projects wanted a more accurate cost then they would have to pay for it and that that payment would not be refundable. Mr McLean says that he asked Mr Petkovski how much Champion Homes wanted and says that in about mid‑September 2005 Mr Petkovski said that if DCT Projects wanted more accurate numbers it would have to give Champion Homes $40,000.00. Mr Petkovski denies those conversations. According to him by September 2005, Mr McLean was dealing with Mr Malesev and he (Mr Petkovski) had no discussions with Mr McLean.

There was a meeting on site on 27 February 2006. Present at the meeting were Mr Thorpe, Mr Petkovski, Mr Fordham and Mr Donovan from Champion Homes and Mr McLean. Mr Petkovski prepared a file note of the meeting. The note includes the following:

Following the meeting, on 1 March 2006 Mr Malesev wrote to Mr McLean attaching a revised draft of Schedule 2 setting out the progress payments to be made by DCT Projects. The letter relevantly said:

Mr McLean says that none of the representatives from Champion Homes raised with him the implications of the fact that the DA approved plans did not match the contour maps that were subsequently provided by DCT Projects. In particular, he says that he was not told that it would be necessary to change the position of the retention system for storm water and to change the levels of the driveway relative to the units, with the result that it would be necessary to construct retaining walls in conjunction with the driveway.

There were further negotiations between the parties concerning the terms of the construction contract in March and April 2006. The terms were finalised and the contract was signed on 8 May 2006. Before the contract was signed the unit holders met at Clark McNamara’s offices and Mr Clark took them through the contract in some detail.

The contract is in the form of the Housing Industry Association Building Contract for New Dwellings, November 2004 edition. It consists of standard and special terms together with two schedules – Schedule 1, which sets out the particulars of the contract and Schedule 2, which sets out progress payments to be made under the contract. The contract also incorporated a number of other documents into it, including the tender dated 9 September 2005, a builder’s program and a number of drawings.

Item 4 of Schedule 1 states:

Item 9 states:

Item 13 states that liquidated damages were $1,160 per day.

Schedule 2 sets out the total contract price and the progress payments to be made. The amount allowed for “rock excavation and removal, site excavation and spoil and fill removal” was $52,000.00 and was described as a provisional allowance. An amount of $95,000.00 was payable for “stormwater and hydraulics works complete”. That, also, was described as a provisional allowance. A payment of $66,000.00 was payable on completion. That amount included a “[p]rovisional allowance of $60,000.00 to be adjusted accordingly” for site cleaning and soft landscaping.

Item 12 of Schedule 1 provides:

Clause 5.1 provides that the owner must, at the builder’s request, deposit that part of the contract price that is not being supplied by a “lending body” into a security account in the joint names of the owner and the builder. Clause 5.2 provides:

Clause 9 of the contract deals with extensions of time. It relevantly provides:

Clause 11.1 provides:

Clause 12 deals with hidden site conditions. Clause 12.1 states that if either party believes that the sub-surface conditions may not support or may affect the building work, the builder may, and must at the owner’s request, retain consultants to report on the site conditions. Clause 12.2 requires the builder to give the owner notice detailing any extra work required and the costs of that work. Clause 12.5 provides:

Clause 15 deals with progress payments. Clause 15.1 states that the owner must pay the deposit stated in item 4(b) of Schedule 1. That item states that “the deposit is NIL”. Clauses 15.2 to 15.5 set out DCT Projects’ obligations to make progress payments and the information that was to be included in a progress claim. Clause 15.6 states:

Clause 17 deals with variations. Clause 17.1 provides:

Clause 21 deals with prime cost and provisional sum items. Relevantly, cl 21.5 states:

Clause 30 provides for the payment of liquidated damages at the rate set out in the schedule from the day after the end of the contract period to, relevantly, “the date this contract is ended”. The “contract period” was stated in the schedule to be 45 weeks.

Suspension is dealt with in cl 32. That clause relevantly provides:

Clause 33 deals with termination of the contract for breach. The clause provides for the service of a breach notice in the case of a “substantial breach”. If the defaulting party does not remedy the breach within 10 working days the party not in breach is entitled to end the contract. The clause provides that it is a substantial breach on the part of Champion Homes to suspend the carrying out of the work other than under cl 32 and that it is a substantial breach by DCT Projects to fail to pay any amount by the due date.

Clause 38.1 sets out the warranties given by Champion Homes in accordance with the Home Building Act 1989 (NSW), including the following:

In addition, clause 38.2 provides:

Clause 39 set out a dispute resolution procedure, which required the parties to meet within 10 days of one party serving a dispute notice under that clause in an attempt to resolve the dispute or to agree on a method of doing so.

The contract contains a number of special conditions.

Clause 44.1 provides that, in the event of any discrepancy between the documents forming part of the contract, the following order of precedence will apply:

Clause 47.4 provides:

Clause 48.1 provides:

Clause 53.2 provides:

Building work commenced on 16 August 2006 following delays in clearing the site and in obtaining a construction certificate. The construction certificate was delayed because it was necessary to make a number of changes to the plans to alter the levels of a number of the units in order to comply with condition 19 of the development approval, which specified the maximum gradient for driveways.

The builder’s program that was attached to the contract contemplated that work would commence on units 4 and 5, at the bottom of the site. However, there were difficulties in obtaining a neighbour’s consent to the removal of a tree to permit work to commence on the construction of the retaining wall. As a result, the program was abandoned almost immediately after work commenced and work started at the top of the site on the other six units. Despite a number of requests by DCT Projects over an extended period of time, Champion Homes never produced a new program.

On 13 September 2006, Champion Homes served variation no 1 claiming a total amount of $94,100.00 in respect of the changes to the levels.

As building work progressed, Champion Homes submitted a number of other variations, a number of which concerned the construction of retaining walls. It will be necessary to say something more about some of those variations. It is sufficient to observe by way of background that DCT Projects made payments in respect of a number of variations but not others and that it became increasingly concerned about the variations and their cost.

Under the original contract, the work was due to be completed by 26 June 2007. However, it was not complete by that stage.

On 23 August 2007, Mr Malesev wrote to Mr McLean in relation to extensions of time. The letter claimed 21 days on the basis that 7.5 mm or more of rain fell within a 24 hour period as measured by the Bureau of Meteorology Measuring Station at Bankstown Airport on that number of days. It referred to the previous agreement of 30 working days for the retaining wall behind units 4 and 5, which the letter said translated to 38 calendar days. It also claimed an additional extension of 68 calendar days because of shoring works behind units 4 and 5 which prevented work on those townhouses and caused delay for the entire project. The letter also claimed 35 calendar days in respect of the Christmas shutdown in 2006/2007. The letter continued:

Mr McLean replied to that letter on 27 August 2007, in that reply he said:

On 13 September 2007, Mr Malesev requested pursuant to cl 5.2 of the contract that DCT Projects provide Champion Homes with written evidence of DCT Projects’ ability to pay all money that may become payable under the contract.

Mr Brown responded to that letter on 17 September 2007. In that letter, he stated that the total amount owing under the contract was $1,845,840.00 which consisted of the original contract price of $1,665,000.00 together with $40,840.00 for variation no 11 and $150,000.00 for variation no 6, although this was later identified as an error and should have read $140,000. DCT Projects had paid a total amount of $1,226,176.00, leaving a balance of $619,664.00. Mr Brown said that amount was available from the facilities that DCT Projects had in place.

Mr Malesev responded to that letter on 18 September 2007. He stated that the letter did not satisfy the requirements of cl 5 of the building contract. In addition, he asserted that the value of the building works to date was $2,145,852.00, that the amount that had been paid was $1,309,390.00, leaving a balance of $836,462.00.

Mr Brown responded to that email on 21 September 2007 saying that DCT Projects had requested a statement of the amount available from “our lending body” and saying that it would be provided as soon as DCT Projects received it.

On 25 September 2007, Mr Malesev sent Mr McLean a further letter in relation to extensions of time. In that letter, he pointed out that the initial program had to be abandoned because it was discovered that work could not commence with units 4 and 5 because of problems with the proposed retaining wall. The letter then goes on to explain the difficulties of making extensions of time claims because in some cases the effect of an event did not become immediately apparent. He gave as an example the delay caused by encountering a lot more rock than originally anticipated. The letter continued:

Mr McLean replied on 28 September 2007 saying that he could not give a substantive response until 3 October 2007.

On 28 September 2007, DCT Projects sent Mr Malesev a letter in which it asserted that the contract price did not include the price of any variations. The letter also claimed that DCT Projects was entitled to a reasonable time in which to establish a security account in accordance with cl 5.1. Mr Malesev replied to that letter on 3 October 2007 taking issue with it and requiring DCT Projects to establish a security account in the sum of $383,818.00 by 10 October 2007.

On the same day, Mr Malesev sent an email to Mr Brown and Mr McLean in relation to retaining walls. Mr Malesev said that Champion Homes would agree to certain pricing for the retaining walls if DCT Projects agreed to grant an extension of time in respect of the walls.

Mr Brown wrote to Mr Malesev on 4 October 2007 maintaining DCT Projects’ position that the price of variations was not included in the contract price and maintaining that it would establish a security account for the sum of $48,546.00. Again, Mr Malesev took issue with that position.

Mr McLean replied to Mr Malesev’s letter concerning extensions of time on 8 October 2007. The letter followed a without prejudice meeting between DCT Projects and Champion Homes at the offices of Clark McNamara. Mr McLean maintained that the builder had not lodged any extension of time claims under cl 9.2, that extensions of time should be calculated by reference to the critical path, but that since the contract program had been abandoned that was not possible. Mr McLean disputed a number of other assertions in Mr Malesev’s letter and refused to grant any extensions of time. Again, there was no suggestion in the letter that Champion Homes had misled DCT Projects concerning the need for retaining walls.

On 16 October 2007, Mr Malesev gave notice of disputes for the purposes of cl 39 of the contract and suggested that a meeting occur as soon as possible. The disputes related to Champion Homes’ claim for an extension of time, DCT Projects’ demand for the payment of “penalty damages”, the establishment of a security account and the nature and extent of variations in respect of the retaining walls.

By notice dated 8 November 2007, Champion Homes gave formal notice of the suspension of building works as and from that date. The grounds given were that DCT Projects had not paid for a number of identified variations and in addition had not complied with cl 5.2 of the contract. Relying on the same grounds, Champion Homes served a notice of breach dated 15 November 2007.

DCT Projects took issue with those notices.

Following correspondence and meetings between the parties, the parties entered into the Modification Agreement, which modified the terms of the building contract.

Clause 1 of the Modification Agreement set out a procedure to be followed in relation to future variations. In the case of future variations requested by DCT Projects, the builder was to provide Gleeds, the quantity surveyor appointed by DCT Projects, with the costs of the variation including details of the work to be carried out. Gleeds was to determine the reasonableness of those costs. If Champion Homes accepted Gleeds’ estimate, the work was to be carried out at the price of the estimate. If Champion Homes did not accept the estimate, DCT Projects was to have access to the site to carry out the variation at its cost. By cl 1.5, it was also agreed that DCT Projects would be entitled to construct the retaining wall behind unit 3. DCT Projects engaged Earthpro Pty Ltd to undertake that work. By cl 1.6, work carried out by DCT Projects would not deprive Champion Homes of an entitlement to claim an extension of time for practical completion referrable to the Christmas shutdown period.

Clause 2 dealt with past variation claims. Clauses 2.1 to 2.4 provided:

Clause 3 was in the following terms:

Clause 4.1 provided:

Clause 6.1 provided that the failure of DCT Projects to pay any money when required under the variation agreement was a substantial breach under cl 33 of the contract. The parties also agreed that cl 5 of the contract was deleted.

Under the terms of the Modification Agreement, Champion Homes was required to reopen the site for work on 14 December 2007. It did that and it appears that Earthpro did work on retaining walls on the site between January and March 2008. However, Champion Homes could not itself commence work because of the difficulty in re-engaging contractors shortly before Christmas. For that reason, Mr Malesev wrote to Mr Brown claiming a further extension of time in respect of the period 14 December 2007 to 22 December 2007 in addition to the industry shutdown period of five weeks referred to in cl 9.1(j) of the contract.

Despite that, it is apparent that Champion Homes was keen in January to resume work. For example, on 21 January 2008, Mr Malesev wrote to Mr Brown in these terms:

On 30 January 2008 Champion Homes re-commenced work on site. At that time, Mr Malesev wrote to Mr Brown saying that Champion Homes was limited in the work that it could do because of the work being done by Earthpro. Mr Malesev also asked for a response to his earlier request in relation to driveway lighting.

On 4 February 2008, Champion Homes served a second suspension notice. The suspension was based on a failure to pay for variations 14, 15, 16 and 23. Mr Brown responded to that notice of suspension on 7 February 2008 pointing out that DCT Projects had paid variations 14 and 15, that it was still waiting for a copy of variation 16 and information in relation to variation 23. On 14 February 2008 Champion Homes acknowledged that it had erroneously claimed that DCT Projects had not paid for variations 14 and 15 and agreed to withdraw the notice. In the letter withdrawing the suspension notice, Mr Malesev made the following observations about Champion Homes’ resumption of work:

There was lengthy correspondence between the parties concerning the amount due under the Modification Agreement for variations during which time little work was done by Champion Homes on the site, largely because of rain and because it maintained that it was restricted in what it could do because of the work being done by Earthpro.

On 6 March 2008, Champion Homes served a further breach notice claiming an amount of $78,021.68 under the Modification Agreement. It issued a third suspension notice on 12 March 2008. DCT Projects accepted that it owed $41,027.38 and on 14 March 2008 sent Champion Homes a cheque for that amount. The parties remained in dispute in relation to the balance. Champion Homes refused to recommence work. In the meantime, however, Mr Malesev wrote to Mr McLean on 26 March 2008 seeking instructions in relation to various matters including driveway lighting and he spoke to Mr Brown on 27 March 2008 and suggested a meeting to discuss those issues, which Mr Brown declined. Following that conversation, Mr Malesev wrote to Mr Brown on 2 April 2008. That letter said in conclusion:

Eventually, on 8 April 2008 DCT Projects paid Champion Homes $6,943.95 and the parties met on site the following day. Following that meeting, on 10 April 2008, Mr Malesev wrote to Mr Brown. In that letter Mr Malesev asserted that building work had not resumed up until that time “due to a combination of bad weather, the substantial retaining wall works undertaken by your contractors and the suspension of works for reasons that have been well documented”. Mr Malesev also said that Champion Homes was willing to accept the payment made by DCT Projects and formally resume building work and he set out his understanding of the then current position and what Champion Homes proposed to do. Champion Homes recommenced work on 16 April 2008.

However, a number of issues remained unresolved. Champion Homes commenced work on the fences but complained that it encountered a number of problems, including complaints from neighbours, which DCT Projects had not resolved. DCT Projects indicated that it wished to proceed with the driveway lights but wanted to pay Champion Homes’ contractor directly, avoiding the margin payable to Champion Homes.

Another issue related to variation 6, which was the construction of the large retaining wall adjacent to units 4 and 5. Clause 2.3 of the Modification Agreement provided that, in the event that that variation was not complete at the time Gleeds valued it, DCT Projects was to pay 75 percent of the value of the variation to the extent that that amount was not covered by the $264,000 payable under cl 3.1. Gleeds determined the value of variation no 6 at $189,075.29 on or about 19 February 2008. Following that determination, DCT Projects paid Champion Homes $41,027.38. According to Champion Homes, work on the retaining wall was completed on or before 26 May 2008. However, DCT Projects did not pay the balance of the variation. Moreover, on 26 May 2008, Champion Homes sent DCT Projects contract price adjustment no 4 in the sum of $28,813 in relation to backfilling work in connection with the retaining wall. That contract price adjustment was submitted to Gleeds for determination. However, on 4 June 2008, DCT Projects instructed Gleeds to stop work on it. As a result, on 5 June 2008, Champion Homes sent DCT Projects a notice that unless DCT Projects instructed Gleeds to commence or to continue carrying out the valuation, Champion Homes would consider that DCT Projects had repudiated the contract.

Moreover, on 11 June 2008, Champion Homes sent DCT Projects contract price adjustment no 5 in the sum of $45,498. That amount related to hydraulic and stormwater drainage works, which Champion Homes maintained were substantially complete. There was a provisional sum item of $80,000 in the contract for that work. The total cost was $109,498, of which $64,000 had already been paid, leaving the balance of $45,498.

On 18 June 2008, Champion Homes purported to suspend the building works for non-payment of contract price adjustment no 5.

DCT Projects did not respond to that notice of suspension. Instead, on 2 July 2008, it gave notice purporting to terminate the contract on the basis that Champion Homes had repudiated it. In support of that proposition, the letter giving notice of termination said:

The letter went on to point out that DCT Projects’ own contractors were on site constructing the retaining walls behind units 3 and 6 and opposite unit 5 from 29 January 2008 until 2 April 2008. However, the letter asserted that various work could have been carried out by Champion Homes, but was not including the following:

The letter concluded:

On 7 July 2008, Champion Homes gave notice terminating the contract. In giving that notice, it relied on DCT Projects’ failure to pay the balance owing in respect of variation no 6 and contract price adjustment no 4, the failure to pay the amount claimed in respect of contract price adjustment no 5 and what was said to be the wrongful repudiation of the contract by serving the letter of termination.

On 4 August 2008, DCT Projects entered into a cost plus contract with Linx Projects Pty Ltd for the completion of the townhouse project. The estimated cost of completion under the contract was $599,187 plus GST. Attached to the contract was a list setting out the work to be done on each unit together with drawings for the whole site.

It is convenient to begin with this claim.

As I have said, the claim based on misleading and deceptive conduct has two limbs. One relies on positive representations. The other relies on a failure to disclose.

In characterising conduct as misleading or deceptive or as conduct which is likely to mislead or deceive, it is necessary to look at the conduct as a whole. As French CJ explained in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [25]:

In the case of silence, the question whether silence is misleading or deceptive is normally answered by asking whether the person alleged to have been misled or deceived had a reasonable expectation of disclosure. The relevant principles were summarised by Sackville AJA in these terms in Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209], which were cited with approval by Barrett JA (with whom Bathurst CJ and Beazley P agreed) in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [192] [citations omitted]:

As finally put, DCT Projects misleading and deceptive conduct case did not clearly distinguish between the case based on positive representations and the case based on silence, although it was consistent with the case as pleaded. As finally put, the case had the following elements:

In my opinion, DCT Projects has not made out this case.

DCT Projects seeks to characterise the payment of the $40,000 as a payment for services provided by Champion Homes. Implicit in DCT Projects’ submissions is a submission that Champion Homes provided advice to DCT Projects in relation to the project, that the payment was payment for that advice and that DCT Projects relied and was entitled to rely on the advice. I do not accept that characterisation of what happened. In my view, the $40,000 was a deposit. The requirement to make the payment was included in the first tender. There is no evidence to suggest that it was included at that time to cover the costs of further investigations and consultancy fees in order to permit Champion Homes to give advice or to permit it to fix costs that were described in the first tender as provisional sum items. The requirement to make the payment simply carried through to the final tender.

It is true that the contract stated that no deposit was payable. However, by then the deposit had been paid, and there was no suggestion that a further deposit was payable on the signing of the contract. It was for that reason that the contract itself did not provide for the payment of a deposit.

Champion Homes was not paid to give advice. It is possible that Mr Malesev or Mr Petkovski told Mr McLean that there was certain preliminary work that Champion Homes needed to do and that it would not start that work until the deposit was paid. I also accept that it is likely that Mr McLean told Mr Petkovski and Mr Malesev that DCT Projects wanted as firm a price as possible, and that Mr Petkovski or Mr Malesev told Mr McLean that the preliminary work to be undertaken by Champion Homes would assist in that process. But I do not accept that anyone from Champion Homes said anything to DCT Projects which suggested that Champion Homes was doing anything other than providing a quote for the work to be done in accordance with its tender and preparing to do that work.

DCT Projects places a great deal of weight on what occurred at the meeting on 27 February 2006 and the letter Mr Malesev wrote on 1 March 2006. However, it is clear from the letter that Champion Homes told DCT Projects that the development approval plans did not reflect the correct levels and elevations and that work would need to be done to alter the levels. The principal purpose of the site meeting was to assist Champion Homes to determine a more accurate costing of rock excavation etc to take account of that fact. Both the letter and cl 47.4 of the contract (which was a special condition inserted by the parties) made it clear that, despite the site visit, Champion Homes “is unable to fix the estimated cost of rock excavation and site excavation and removal of excess spoil from the site” (to quote from the contract). The provisional sum item of $52,000 must be understood in that context. In the light of cl 47.4, DCT Projects could not have understood Champion Homes to be representing that it was a reliable estimate or that its previous estimate of $65,000 was conservative. At most, the inclusion of a provisional sum item of $52,000 carried with it a representation that Champion Homes believed at the time that the estimate was an appropriate one. There is no evidence that Champion Homes did not have that belief.

I accept that, at the time the meeting occurred, Champion Homes was aware that it would be necessary to construct substantial retaining walls, and I think it is unlikely that Champion Homes passed that information on to DCT Projects. It is evident from Mr Malesev’s letter that there was some discussion of retaining walls. However, I think that the likelihood is that the discussion was limited to the existing retaining walls on the site and that there was no discussion of the new walls that had to be built. If that matter had been discussed, the likelihood is that Mr Malesev’s letter would have said something specifically about it; and the likelihood is that Mr McLean would have made enquiries concerning those walls.

However, I do not accept that, in the circumstances, DCT Projects had a reasonable expectation that Champion Homes would have said something about the retaining walls that had to be built and their cost. Champion Homes made it clear in its tender (and in the contract) that retaining walls were excluded from the work for which it was quoting. It is not surprising, then, that it would not have been focussed on the costs of those walls or, for example, the time that it would take to build them. They did not form part of the work that Champion Homes was offering to perform. It is apparent both from the tender and the contract that DCT Projects was to be responsible for the retaining walls.

DCT Projects submits that DCT Projects was entitled to infer from the fact that no retaining walls were shown on the plans and from the fact that Champion Homes excluded the cost of retaining walls from its tender that no retaining walls were necessary. I do not accept that submission. To DCT Projects’ knowledge, there were already some retaining walls on the property which would require work. The property ran down a hill. DCT Projects knew that the plans that were the subject of Development Approval were incorrect and that considerable work would need to be done to alter the levels. If retaining walls were unnecessary, it is difficult to see why Champion Homes excluded their cost from its tender. Although Mr McLean did not have technical qualifications and experience, he had been involved in previous developments and had been responsible for obtaining development consent and a number of reports in relation to the site that were necessary to obtain that consent. DCT Projects was advised by a firm of solicitors who was experienced in the field. It was obvious that Champion Homes’ tender excluded retaining walls. DCT Projects never asked about that exclusion or sought advice from Champion Homes on what retaining walls would be necessary. In those circumstances, I cannot see how DCT Projects could have had a reasonable expectation that Champion Homes would have given DCT Projects advice about the retaining walls that had to be built and their cost.

If DCT Projects had relied on Champion Homes’ conduct concerning the costs of rock excavation etc and the need for and the costs of the new retaining walls, it is to be expected that it would have said that it had been misled or deceived as soon as it became apparent that the costs for rock excavation etc were substantially more than the provisional sum item that had been allowed for them and that it would be liable for substantial costs for retaining walls. However, it did not do so. The first occasion that DCT Projects alleged that it had been misled or deceived was well after the contact had been terminated.

There is another difficulty with DCT Projects’ misleading and deceptive conduct claim. In its cross-claim, it pleads that, if Champion Homes had not engaged in misleading and deceptive conduct, it would not have entered into the building contract. It led evidence from most of the directors to that effect. The evidence given by the third plaintiff, Ms Avila, is typical. She says:

I accept that evidence. However, a feature of the claim based on s 52 of the TPA is that DCT Projects does not assert that, if the claim had been successful, it should be entitled to recover damages that would put it in the position it would have been in if the misleading and deceptive conduct had not occurred. Instead, as I have said, DCT Projects simply claims the costs of the retaining walls (including the amount paid to Earthpro for the wall built by it) and the increased costs of excavation. However, it did not incur those costs as a consequence of Champion Homes’ misleading and deceptive conduct. This is not a case where DCT Projects would have entered into the contract in any event and it could have proceeded with the contract without the additional costs if the misleading and deceptive conduct had not occurred.

It is true that DCT Projects would not have incurred those costs if it had not entered into the contract at all. It was open in those circumstances for DCT Projects to claim the total costs it incurred under the contract less the value of what it received. However, it was not open to it to claim only part of those costs without bringing to account the value of what it received or proving that the difference between its total costs and the value of what it received was at least the amount of those costs. It did not seek to do that. As a result, it failed to prove that it suffered any loss as a result of the misleading and deceptive conduct on which it relies.

The remaining issues in the case largely turn on who was entitled to terminate the contract.

It seems clear that, if DCT Projects was not entitled to terminate the contract, then Champion Homes was because DCT Projects’ purported termination amounted to a wrongful repudiation of the contract entitling Champion Homes to terminate: Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 at 453 per Barwick CJ.

DCT Projects purported to terminate the contract on the basis that Champion Homes had repudiated the contract by not performing its obligations under the contract for a period of approximately six months. It is essential to DCT Projects’ claim that Champion Homes repudiated the contract. A mere breach of contract by Champion Homes would not have entitled DCT Projects to terminate the contract in the way that it did. In order to terminate the contract for breach, DCT Projects would have to have served a default notice in accordance with cl 33 of the contract and given Champion Homes 10 working days to remedy that breach. DCT Projects did not do that.

In order to establish that Champion Homes repudiated the contract “it must be shown that [it was] either unwilling or unable to perform its contractual obligations, that is, it … evinced an intention to no longer be bound by the contract or stated that it [intended] to fulfil the contract only in a manner substantially inconsistent with its obligations and in no other way”: Galafassi v Kelly [2014] NSWCA 190; (2014) 87 NSWLR 119 at [62] per Gleeson JA, citing Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 625-626; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 634, 647-648, 658; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 at [44]; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 423.

In my opinion, the evidence does not establish that Champion Homes evinced an intention not to be bound by the contract or an intention only to fulfil the contract in a manner substantially inconsistent with its obligations. It suspended work under the contract on four occasions because it believed, with some justification, that it had not been paid amounts due to it. When the work was suspended, it was open to DCT Projects to serve a notice under the contract giving Champion Homes ten days’ notice to resume work. It did not do so. Following the first suspension notice, it agreed to the Modification Agreement under which it paid a substantial sum of money. Following the second suspension, it pointed out that amounts that Champion Homes asserted had not been paid had been. Champion Homes accepted that it had made a mistake and withdrew its suspension notice and agreed to resume work. Following the third suspension notice, DCT Projects made further payments and following those payments Champion Homes again agreed to resume work. Champion Homes did do work during the periods when work was not suspended. In particular, it completed work on the retaining walls and on the drainage system. It also did some work on the fencing. It explained that it could not do further work because it was delayed by rain, by DCT Projects’ failure to provide instructions and by DCT Projects’ contractor. DCT Projects did not take issue with the assertion that some delay was caused by rain. It is apparent from the correspondence that Champion Homes was pressing DCT Projects for instructions on a number of items and that those instructions were not forthcoming or were delayed. DCT Projects asserts that there was work that Champion Homes could have done while Earthpro was completing the work that it was doing. However, it bears the onus of proving that that work could have been done and it has not sought to discharge that onus. It is possible that Champion Homes could have done more and that for that reason it was in breach of cl 38.2 of the contract. However, I do not think that that amounted to a repudiation of the contract.

It follows that DCT Projects’ termination of the contract was wrongful and that Champion Homes was entitled to terminate the contract.

Champion Homes is entitled to recover as damages an amount which, so far as money can do it, will put it in the position it would have been in if the contract had been performed: Robinson v Harman (1848) 1 Ex 850 at 855 per Parke B; Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80. Consequently, it is entitled to recover the amount that it would have earned under the contract, less any cost saved as a result of not having to complete the work under the contract together with any other amount payable by it on completion of the contract.

The total amount payable under the contract was $1,665,000.00. The total amount paid under the contract was $1,380,637.00. According to evidence given by Mr Malesev, which is not disputed, the total cost of the work to complete the contract was $141,034.48. Consequently, Champion Homes is entitled to recover $143,328.52 in respect of work under the contract (that is, $1,665,000.00 less $1,380,637.00 and less $141,034.48).

DCT Projects challenges this calculation on two bases, neither of which is easy to follow. First, DCT Projects submits that the final tender price was $1,660,000, which included a provisional sum item of $7,000 for rock excavation. Subsequently, in November 2006 Champion Homes served “Tender Amendment 1” which purported to increase the tender price by $45,000 to $1,705,000.00 to take account of the increase of the provisional sum item for rock excavation to $52,000.00. This is said to be an illegitimate attempt to vary the contract price. Second, it is said that DCT Projects should have received a credit of $40,000 for what Champion Homes claimed was a non-refundable deposit for that amount.

The short answer to these points is that the contract makes it clear that the contract price was $1,665,000 and that that was the price notwithstanding that DCT Projects had paid the sum of $40,000. The clear intention was that the total amount payable by DCT Projects was $1,665,000 in addition to the $40,000. There is no basis on which DCT Projects is entitled to deduct the $40,000 from the contract price.

Mr Malesev gives evidence that the total value of the variations and provisional sum items was $805,962.70 of which $631,807.04 has been paid, leaving a balance owing of $174,155.66.

DCT Projects does not dispute the calculation of the amount paid under the contract. It does, however, dispute the liability for variations and also claims to be entitled to liquidated damages under the contract for late completion.

DCT Projects submits that any amount payable in respect of variations and provisional sum items was “provisional” and was not subject to final determination until the contract was completed. Consequently, it claims that it is entitled to challenge all amounts claimed by Champion Homes or paid by it in respect of that work. Relying on expert evidence given by Mr Plaister, it contends that no amount is payable by it in respect of variations and that, in fact, Champion Homes owes it $216,851.94 respect of variations and provisional sum items.

Champion Homes, on the other hand, contends that it is not now open to DCT Projects to challenge the amounts paid and payable in respect of variations and provisional sum items. It relies on two grounds. First, it says that that was not the effect of the building contract. Second, it submits that in any event the issue was resolved by the Modification Agreement which dealt with disputed variations and provided a mechanism by which the value of those variations was to be determined.

In my opinion, the approach taken by Champion Homes in relation to variations is generally correct. It is necessary to draw a distinction between the amount payable under the contract for the contracted-for work and the amount payable under the contract for variations. Subject to adjustments for provisional sum items, the contract was a fixed price contract and provided for the payment of a lump sum (as adjusted) for the whole of the work to be performed under the contract. The contract also provided for progress payments in respect of work done under the contract. Those payments were “on account” of the price payable under the contract. The actual price for the work was not payable until completion of the contract and it was only on completion that the respective rights and liabilities in respect of the contracted-for work could finally be determined. As Fitzgerald P explained in Re Concrete Constructions Group Pty Ltd [1997] 1 Qd R 6 at 12:

On the other hand, work done in accordance with a variation is not work covered by the price agreed under the contract. Rather, cl 17 provides for variations to be priced separately. It assumes that the parties will agree on the price before the work is done. Once the price is agreed, it is not open to one party or another to take issue with the price as agreed. The agreed price is payable on the date of the next progress payment after the work is carried out unless the parties agree otherwise. Clause 17 contemplates the possibility that the work will be done before a price is agreed. The clause does not state how the price is determined in the absence of agreement, although cl 17.5 does state what the price is to include. In the absence of a mechanism for determining the price, there can be no doubt that it is an implied term of the contract that the price be a reasonable one: Foley v Classique Coaches Ltd [1934] 2 KB 1.

Similarly, under cl 21.6 of the contract, the contract price is adjusted to take account of the actual price of provisional sum items. The contract does not set out how the “actual price” is determined. There is no reason why it cannot be the subject of agreement between the parties. In the absence of agreement, it must be the reasonable price for the work.

Often, the parties did not agree on the price of a variation or provisional sum item and disputes arose concerning the price payable. Those disputes were dealt with by the Modification Agreement. Under that agreement, the parties agreed on a mechanism for valuing provisional sum adjustment 3 and variations 6, 13, 14, 15, 17, 19, 20, 21 and 22. They also agreed that DCT Projects would pay Champion Homes $264,000 on account of those variations and variations 1 and 12. By cl 3.3, they also agreed that DCT Projects would pay $64,000 on account of the provisional sum item for storm water and hydraulics works pending completion of that work, but they did not agree on a mechanism for the final determination of the amount payable in respect of that item. Lastly, they agreed by cl 4.1 that they remained in dispute in relation to variations 18 and 24. They did not specifically deal with the other variations or the provisional sum item for rock excavation. In particular, although the sum of $264,000 was payable on account of a number of variations including variations 1 and 12, they did not agree on a mechanism for determining the actual amount payable in respect of those two variations.

Several points emerge from all this.

First, the payments of $264,000 and $64,000 were expressed to be “provisional”, like the progress payments. They were provisional payments in respect of the variations and provisional sum items to which they related. As a result, the amount of those variations and provisional sum items was to be determined in accordance with the contract and Modification Agreement. To the extent that the value of the relevant variations and provisional sum items as determined in accordance with the contract and Modification Agreement exceeded the provisional amounts, DCT Projects was required to pay the difference. To the extent that the value was less, Champion Homes was required to refund the difference.

Second, the Modification Agreement did not deal with all variations. In my opinion, those that it did not deal with are generally governed by cl 17 of the contract. If the parties agreed the value of the variation, then they are bound by that agreement. Moreover, if Champion Homes sought payment in respect of a variation and that amount was paid by DCT Projects, then, in the absence of any evidence to the contrary, it can be inferred from the payment that DCT Projects agreed to the amount claimed. It is not now open to DCT Projects to challenge that amount and there is no basis on which it can recover what it now says to be an overpayment. That explains why the parties thought that it was unnecessary to address a number of variations in the Modification Agreement. Those variations had been paid and any dispute in relation to them was resolved by the payment. On the other hand, if there is no agreement in relation to a variation and no payment in respect of it, with the result that no agreement can be inferred, then Champion Homes is entitled to recover a reasonable amount in respect of the relevant work – assuming that the work was not included in the original contract. Clause 4.1 of the Modification Agreement specifically reserves DCT Projects’ position in relation to variations 18 and 24 for that reason.

Third, it seems to be agreed between the parties that variations 11, 15, 16, 23 and 25 all relate to the provisional sum item for rock excavation etc. However, there is no reason to treat them differently from ordinary variations. If the parties agreed on the amount that was payable or the amount claimed was actually paid, so that it can be inferred that agreement was reached on the amount of the adjustment, then it seems to me that the parties are bound by that agreement. It is not open to them to assert that the amount agreed was “provisional” and that the agreed amount can be challenged.

Fourth, where the value of a variation was not determined in accordance with the Modification Agreement before the contract was terminated, there is a question of how the value of that work is to be determined now. The parties have proceeded on the basis that the value of the work should be determined by the Court having regard to the expert evidence filed by them.

Following entry into the Modification Agreement, Gleeds proceeded to value the variations that it was required to value in accordance with that agreement. It also appears that Gleeds valued variations 1 and 12. Subsequently, Champion Homes made claims for the variations as valued by Gleeds and DCT Projects made payments that were additional to the provisional payments of $264,000 and $64,000. DCT Projects accepts that it has paid for all variations and adjustments to provisional sum items other than variations 6 (which it accepts has been paid in part), 18, 24, 25 and 26 and contract price adjustments 4 and 5.

A number of variations that DCT Projects now seeks to challenge were valued by Gleeds in accordance with the Modification Agreement. In my opinion, it is not open to DCT Projects to challenge those amounts. DCT Projects agreed to pay for the work covered by those variations in accordance with the Modification Agreement and it is bound by that agreement. In addition, in my opinion, by making payments that were additional to the provisional payments made under Modification Agreement, DCT Projects accepted that the provisional payments should be allocated to the variations and provisional sum item in respect of which Champion Homes made claims and that further amounts were due in respect of those items. It is bound by the agreement arising from that conduct. In any event, there is no basis on which it is entitled to recover the amounts that it has paid either as a result of the allocation of the provisional amounts it paid to particular claims made by Champion Homes or as a result of further payments by it.

It follows that the only amounts that DCT Projects may be entitled to challenge are those amounts that have been claimed by Champion Homes and have not been paid.

As I have said, DCT Projects maintains that it has not paid for variation 6 (relating to retaining walls) in full. However, that variation was valued by Gleeds in accordance with the Modification Agreement and it is apparent from evidence given by Mr Malesev that Champion Homes only claims the amount as determined by Gleeds ($189,075.29). For the reasons I have given, Champion Homes is entitled to that amount.

Variations 18 and 24 were the two variations that the parties specifically agreed in the Modification Agreement were still in dispute. Variation 18 relates to car parking spaces. Champion Homes claimed an amount of $8,351.97 in respect of that variation. The experts retained by the parties agreed in a joint report that the amount was not properly claimed as a variation as the car parking spaces were shown on the DA approved contract drawings. There is no reason not to accept the joint evidence of the experts on that point. It follows that Champion Homes’ claim should be reduced by that amount.

Variation 24 relates to a wall that was built to support the driveway where it rose above the sewer pipe. Champion Homes claims $16,085.08 in respect of that variation. The wall was necessary to support the driveway and was shown on the plans. However, Mr Zakos, the expert retained by Champion Homes, points out that the wall also operates as a retaining wall and on that basis he treated it as a variation. I do not accept Mr Zakos’s approach. The exclusion in the contract in respect of retaining walls is an exclusion in respect of retaining walls that had to be constructed in addition to the contracted-for work. It was not an exclusion in respect of work that was otherwise required by the contract. It is not disputed that the contract required Champion Homes to construct the driveway over the sewer pipe. The wall in question was part of that work. It therefore fell within the contracted-for works, whether or not it also operated as a retaining wall. Consequently, Champion Homes’ claim should be reduced by $16,085.08 in respect of variation 24.

Variation 25 relates to rock excavation. Champion Homes claims $5,280.00 in respect of this variation. According to evidence given by Mr Malesev, DCT Projects paid for the variation. However, there is no evidence of that payment and in my opinion the likelihood is that it was not paid. The experts agreed in their joint report that no allowance should be made for this variation. Champion Homes did not advance any reason for rejecting the conclusion of the experts. I accept their conclusion. It follows that Champion Homes claims that it is entitled to $5,280.00 in respect of this variation and claims that it has been paid, whereas the true position is that it has not been paid for the variation and it is not entitled to payment. On that basis, no adjustment needs to be made to Champion Homes’ claim to take account of this variation.

On 4 July 2008, Champion Homes served an invoice for $52,043.00 for “[w]ork done up to 2/7/2008 in relation to construction of turning bay”. In its second further amended statement of claim, it claims that amount as variation 26. The variation was not dealt with in accordance with cl 1 of the Modification Agreement. Champion Homes led no evidence in relation to the variation. I am not satisfied that it is entitled to the amount that it claims. Therefore, Champion Homes’ claim should be reduced by $52,043.00.

That leaves contract price adjustments 4 and 5. Contract price adjustment 4 is for an amount of $28,813.00. It was served on 26 May 2008 and relates to back filling works in relation to the retaining wall adjacent to units 4 and 5. It was not valued by Gleeds before the termination of the contract. Champion Homes claimed that that was because DCT Projects had instructed Gleeds not to do any further work on the claim. That instruction, in turn, was the subject of Champion Homes’ Notice to Perform Building Contract served on 5 June 2008. Mr Plaister’s assessment of this claim is $13,451.10. Mr Zakos’s assessment is $14,771.00. They differ only in relation to one item which was a claim of $7,635 (plus a 20 percent margin plus GST) for scaffolding. Mr Plaister’s view was that nothing should be allowed for this item because no details were provided as to where the scaffolding was used or why it was required in excess of 6 months. Mr Zakos was prepared to allow $1,000 (plus a 20 percent margin and GST) on the basis that some scaffolding would have been necessary. I prefer the approach of Mr Plaister. Mr Zakos’s assessment is based on an assumption, not on any actual information concerning the work. Champion Homes bears the onus of proof. It has not discharged that onus. On that basis, its claim should be reduced by $15,361.90.

Contract price adjustment 5 related to the provisional sum item for stormwater and hydraulic works. The total claimed for this work is $109,489.00. After allowing for the provisional payment of $64,000.00, the balance claimed is $45,489.00. The contract included a provisional sum item of $95,000 for that work. It is not disputed that Champion Homes completed the stormwater and hydraulic works. However, both experts agree that insufficient information was provided to assess this claim. On that basis, Mr Plaister expressed the view that Champion Homes should recover nothing. On the other hand, Mr Zakos was prepared to allow the claim in full. I am satisfied that Champion Homes did the work. It is not possible on the evidence to value that work. In the absence of evidence concerning value, I think that the most appropriate approach is to permit Champion Homes to recover the amount allowed in the contract – that is, the $95,000. On that basis, its claim should be reduced by $14,489 (that is, the amount claimed of $109,489 less the $95,000 allowed).

It follows from what has been said that Champion Homes’ claim in respect of variations should be reduced by $106,330.95.

Champion Homes claim must be reduced by the amount of liquidated damages to which DCT Projects is entitled. DCT Projects is entitled to liquidated damages in the sum of $431,520.00 except to the extent that Champion Homes was entitled to extensions of time. Champion Homes bears the onus of proving that entitlement.

Champion Homes does not plead the extensions of time to which it says it was entitled. Instead, in its defence to DCT Projects’ amended cross-claim claiming liquidated damages it simply denies that DCT Projects is entitled to liquidated damages.

In its written submissions, Champion Homes says that it is entitled to an extension of time on two bases. First, it relies on claimed extensions on 13 September 2006 (35 days), 24 October 2006 (10 days), 26 October 2006 (10 days); 14 November 2006 (28 days) and 13 February 2007 (60 days). It also appears to rely on the extensions of time that were summarised in Champion Homes’ letter dated 23 August 2007. As I have said, that letter claims 21 days on the basis that on that number of days 7.5 mm or more of rain fell. It refers to a previously agreed extension of 30 working days (which is said to translate to 38 calendar days). It also claimed 68 calendar days because of shoring work associated with the construction of units 4 and 5 and 35 calendar days in respect of the Christmas shutdown in 2006/2007.

Secondly, Champion Homes relies on the prevention principle. That principle was stated in these terms by the House of Lords in Trollope & Colls v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 at 607, quoting Lord Denning MR in the Court of Appeal:

However, the principle does not apply where the contract itself provides a mechanism by which time can be extended for the very reason which is said to cause delay. As Cole J explained in Turner Corporation Ltd (rec and mgr apptd) v Austotel Pty Ltd (1994) 13 BCL 378 at 384-5:

The exception stated by Cole J has not received universal approval: see Gaymark Investments Pty Ltd v Walter Construction Group Ltd (2000) 16 BCL 449. For discussion, see Hudson’s Building and Engineering Contracts, Sweet & Maxwell, 12th ed, 2010 at 6-031ff. However, in my opinion, the decision of Cole J is correct and should be followed.

Champion Homes submits that the exception referred to by Cole J does not apply in this case, relying on Gold City Developments Pty Ltd v Portpride Pty Ltd [2010] WASC 148. In that case, Mazza J refused to overturn the decision of an arbitrator who held that the prevention principle applied even though the building contract in that case concerned a provision (cl 11) dealing with extension of time. Clause 11(b) relevantly stated that “[n]otwithstanding provisions to the contrary contained in this Contract the Builder shall not responsible [sic] for any delays caused by any matter or thing over which the Builder shall have no control” including certain specified matters. Clause 11(c) relevantly provided that upon the happening of any of those events “the Builder shall notify the Owner thereof and shall be entitled to such extension or extensions of time for completion of the Works as shall in the circumstances be agreed and if there shall be any dispute the provisions of Clause 18 [relating to dispute resolution] shall apply”. Mazza J thought that cases which held that similar clauses excluded the operation of the prevention principle were distinguishable on a number of grounds:

Those features are not generally features of this case. Here, the clause provides a clear mechanism by which extensions of time are to be granted. The contract provides for liquidated damages. There are no words in cl 9 which are similar to the “overriding words” contained in cl 11(b) of the contract considered by Mazza J. And generally the delays on which Champion Homes relies are delays arising from variations to the contract. In those circumstances, in my opinion, the prevention principle has no application in this case. Clearly, however, the right to liquidated damages came to an end when the contract came to an end. Moreover, although Champion Homes has not expressly submitted that it should be entitled to an extension of time for delays arising from lawful suspensions of work, for the reasons explained below, I think that it is entitled to extensions for those periods.

DCT Projects submits that Champion Homes is not entitled to an extension of time for two broad reasons. First, it submits that, in the absence of a works program, it is not possible to determine what activities were on the critical path and consequently it is not possible to determine whether the delay in any activity actually caused delay. Second, it submits that none of the claims for extensions of time on which Champion Homes relies were made in accordance with the contract.

I do not accept DCT Projects’ first submission. It was not necessary to have a program of works in order to determine whether a particular event caused actual delay. That question can be answered without a program of works, although the issue of delay still requires an answer to the question whether as a factual matter an event caused a delay in the work. The real issue is whether Champion Homes made proper claims for extensions of time.

Clause 9 of the contract required Champion Homes to give written notice of a claim for an extension of time. Under cl 9.2, the notice had to detail the cause of the delay and the extension claimed. The claim had to be made within 10 working days after Champion Homes became aware of “both the cause and the extent of the delay”. If it gave a notice that satisfied those requirements, then, under cl 9.3, it was entitled to the claimed extension unless within 5 working days of receiving the notice DCT Projects gave written notice disputing the extension claimed and “detailing the reasons why the extension of time is disputed”. Although Champion Homes bears the onus of proving that it was entitled to an extension of time, DCT Projects bears the onus of proving that it gave a notice in accordance with cl 9.3.

In addition, in the absence of any evidence to the contrary, I think it should be inferred that any claim for an extension was made within the 10 day period. The 10 day period runs from the time that Champion Homes became aware, relevantly, of the extent of the delay. The extension was to Champion Homes’ benefit and the expectation is that it would claim an extension as soon as it was in a position to do so – that is, as soon as it became aware of the extent of the delay. In cases where the delay was caused by variations, that may not have been until work on the variation was complete.

The first extension of time of 35 days was claimed in variation no 1 dated 13 September 2006. As I have said, the variation related to changes in levels and set out the work that was required. The last paragraph of the variation stated:

In my opinion, the claim for an extension satisfied the requirements of cl 9. It was clear from the notice what the claimed cause of the delay was and the extension sought. There is no reason to think that it was made outside the 10 day period. DCT Projects did not dispute the claim for an extension within the 5 day period. Consequently, Champion Homes was entitled to the extension.

The second extension (of 10 days) was claimed in variation no 4 dated 24 October 2006. It raises the same issues as the extension claimed in variation no 1. Again, DCT Projects did not dispute the entitlement within 5 working days. In my opinion, Champion Homes was entitled to the extension.

The third extension (of 10 days) was claimed in an email dated 26 October 2006 from Mr Malesev to Mr McLean. It related to delays in obtaining engineering details in relation to the retaining wall adjacent to units 4 and 5. The email foreshadowed that further extensions would be claimed in relation to the actual construction of the retaining wall. In my opinion, the claims satisfied the requirements of cl 9. It was not disputed by DCT Projects within 5 working days. Consequently, Champion Homes is entitled to the extension.

The fourth extension (of 28 days) was claimed in a letter dated 14 November 2006 from Mr Malesev to Mr McLean. The letter is one of a series concerning variation 6 (relating to the retaining wall adjacent to units 4 and 5). When read in context, it is clear that the claim of 28 days was a claim for the time that it was expected to take to construct the wall and it is implicit in the claim that other work could not commence until the wall was built. In my opinion, the claim satisfied the requirements of cl 9. It was not disputed by DCT Projects within 5 working days. Consequently, Champion Homes is entitled to the extension.

The fifth extension (of 60 days) is said to have been claimed on 13 February 2007. However, the document is not identified in the submissions and there appears to be no claim for an extension of 60 days on that day in the tendered material. On the other hand, there is a claim of 60 days in an email dated 7 March 2007 from Mr Malesev to Mr McLean. That extension related to shoring works in relation to the retaining wall adjacent to units 4 and 5. The email indicated that Champion Homes intended to engage a specialist contractor to do that work. Mr McLean replied to that claim on 12 March 2007 saying that he would not agree to a 60 day extension, but gave no reasons. Mr Malesev responded on the same day asking whether DCT Projects’ position was that Champion Homes was not entitled to any extension and reiterating that Champion Homes maintained its claim. Mr McLean does not appear to have replied to that response. However, DCT Projects gave its consent to the shoring work proceeding. In my opinion, Champion Homes is entitled to the claimed extension. Its claim satisfied the requirements of cl 9. Although DCT Projects disputed the claim within time, it gave no reasons even after it was asked to do so. Consequently, it did not comply with cl 9.3.

In the letter dated 23 August 2007, there is a claim for an extension of time of 21 days for adverse weather. In my opinion, that claim does not satisfy the requirements of cl 9. It must have been obvious to Champion Homes at the time of the adverse weather that work would be delayed by reason of the fact that more than 7.5 mm of rain had fallen. The claim does not identify the days when it is alleged that there were delays. It my opinion, it needed to do so in order to comply with the requirements of cl 9.2. Without that information, DCT Projects had no means of assessing whether to dispute the claim on the grounds, for example, that the requisite amount of rain had not fallen on that day or that notwithstanding the rain work actually continued on the site on that day. In addition, the likelihood is that the days on which rain fell were more than 10 working days before 23 August 2007. Consequently, the likelihood is that Champion Homes was aware both of the cause of the delay and the length of the delay more than 10 working days before it made its claim. It follows that it did not comply with the time stipulation in cl 9.2.

The letter dated 23 August 2007 claims 35 calendar days for the Christmas shutdown in 2006/2007. No claim was made in respect of that period prior to that date. Again, it seems to me that the claim is out of time. Clause 9 does not automatically assume that there will be a delay over Christmas. Rather, it proceeds on the basis that a claim must be specifically made, presumably on the basis that it is possible that the builder or some of its subcontractors may choose to work over that period. It must have been obvious well before 23 August 2007 whether the builder had been delayed by Christmas 2006. In those circumstances, Champion Homes has not satisfied the requirements of cl 9 and is not entitled to the claimed extension.

It is difficult to reconcile the other extensions claimed in the letter dated 23 August 2007 with earlier claims. However, they appear to be a repetition of previous claims. In my opinion, no additional time should be allowed in respect of those claims.

Unsatisfactorily, Champion Homes’ submissions do not identify any other claims for an extension of time. It is not for the court to go looking for claims for extensions that are neither pleaded nor referred to in submissions.

However, there are two additional categories of extensions that should be considered. The first arises out of the Christmas period in 2007/2008. The second arises from the suspensions. It is obvious that Champion Homes claims to have been delayed by those events and although those events are not specifically referred to, reliance on them is consistent with Champion Homes’ general denial that it is liable for liquidated damages.

I have already referred to the correspondence sent by Mr Malesev immediately after the Modification Agreement was signed seeking an extension of time for 8 days before the commencement of the Christmas period and 35 days for the Christmas period itself. In my opinion, that claim satisfied the requirements of cl 9 of the contract. There is no evidence to suggest that Mr Malesev was aware before the Modification Agreement was signed that it would not be possible to re-commence work immediately. Consequently, I am satisfied that the claim for an extension was within time. DCT Projects did not dispute the claim within 5 working days. It follows that Champion Homes is entitled to an extension of 43 days in respect of the 2007/2008 Christmas period.

As to suspensions, cl 9.1 has two limbs. It states that the builder is entitled to a reasonable extension if building work is suspended under cl 32 or if the delay arises from a cause beyond the sole control of the builder including various nominated causes. In my opinion, the balance of the clause relating to notice etc only applies to the second limb of cl 9.1. In other words, the procedure for giving notice etc does not apply where the delay arises from a suspension. The suspension of work will obviously cause a delay and the length of the delay will be the length of the suspension. It makes no sense to require the builder in those circumstances to serve a notice detailing the cause of the delay or the extension of time claimed. Nor in the case of a suspension does it make any sense for the owner to have to give notice disputing the claimed extension. Either the suspension is valid or it is not. If it is, then the builder must be entitled to an extension. If it is not, then it is not. It is for that reason that cl 9.1 draws a distinction between delays arising from suspension and other types of delay.

It follows that Champion Homes is entitled to extensions for the periods for which it validly suspended work.

In my opinion, the first and third suspensions were valid.

The first suspension commenced on 8 November 2007 and lasted until 13 December 2007. It was based on the failure to pay for variations 13, 14 and 15 and a failure to provide written evidence to Champion Homes’ satisfaction that DCT Projects could pay all moneys payable under the contract and the failure to establish a security account. DCT Projects subsequently accepted that the amounts claimed in respect of variations 13, 14 and 15 were payable and paid them. It also failed to establish a security account. It follows that Champion Homes was entitled to an extension of time of 36 days in respect of the first suspension.

The third suspension commenced on 13 March 2008 and lasted until 15 April 2008. It was based on a failure to pay amounts due in respect of variations valued by Gleeds. DCT Projects paid part of the amount claimed and eventually made a further payment on 8 April 2008. By making the payment, it accepted that the amount paid was payable in accordance with the Modification Agreement. It follows that Champion Homes was entitled to an extension of time of 34 days in respect of the third suspension.

The second suspension commenced on 5 February 2008 and lasted until 15 February 2008. It was based on a failure to pay amounts in respect of variations 14, 15, 16 and 23. It subsequently transpired that Champion Homes had already been paid for variations 14 and 15 and DCT Projects had sought further information in relation to the other two variations. In my opinion, the suspension notice was not valid.

The fourth suspension commenced on 19 June 2008 and lasted until 2 July 2008, when DCT Projects purported to terminate the contract. It was based on the failure to pay contract price adjustment 5. The onus is on Champion Homes to prove that it was entitled to serve a suspension notice. For the reasons I have given when discussing the amount claimed for contract price adjustment 5, I am not satisfied that it has discharged that onus. Consequently, it is not entitled to an extension of time in respect of that notice.

It follows that in all, Champion Homes was entitled to an extension of time of 256 days. The total delay was 372 days. After allowing for extensions of time totalling 256 days, DCT Projects is entitled to liquidated damages for a delay of 116 days. On that basis, the liquidated damages are $134,560.00.

Champion Homes’ loss is the amount that it claims ($317,484.18), less the amount by which its claims for variations should be reduced ($106,330.95) and less the amount of liquidated damages payable by it ($134,560). On that basis, Champion Homes is entitled to judgment in the amount of $76,593.23. It is entitled to judgment for one ninth of that amount ($8,510.36) against the second to ninth defendants. In addition, it is entitled to interest at the rate prescribed by Practice Note SC Gen 16. That interest should run from the date of termination of the contract (2 July 2008) to the date of judgment. On that basis, the interest to which Champion Homes is entitled is $42,524.72.

On the conclusions I have reached, DCT Projects’ claim must fail. However, in the event that I am wrong in my conclusion that DCT Projects wrongfully terminated the contract, I should say something about its claim.

DCT Projects claims to be entitled to damages falling under four heads. First, it claims an amount representing the costs of completing the contracted-for work. Second, it claims liquidated damages. Third, it claims the amount it says it overpaid for variations. Lastly, it claims consequential loss it said it suffered as a result of the delay in completing the contracted-for works. Those consequential losses are the additional interest expenses it incurred up until the time the units were sold.

In principle, DCT Projects should be entitled to recover any costs additional to those it would have had to pay Champion Homes to complete the contracted-for work. The difficulty, however, is that DCT Projects has not proved what those costs were. It has proved that it engaged another builder (Linx Projects) and that that builder did work for which DCT Projects paid. However, what it has not proved is that the work that Linx Projects did was the work necessary to complete the contracted-for works. DCT Projects tendered the contract it entered into with Linx Projects and invited the court to infer that the work described in that contact was the work necessary to complete the contracted-for work. However, in the absence of any evidence, it is not possible from the contract alone to reach that conclusion. Consequently, I am not satisfied that DCT Projects incurred any additional costs in completing the contracted-for work.

DCT Projects is obviously entitled to liquidated damages for the delay. I have already assessed those damages at $134,560.00.

For the reasons I have given, I do not accept that DCT Projects is entitled to recover amounts that it has paid in respect of variations. Moreover, it remains liable to pay amounts due to Champion Homes before termination. In calculating the damages recoverable by Champion Homes, I have already determined the amount to which Champion Homes was entitled before termination in respect of variations that had not been paid. That amount was the amount claimed by Champion Homes ($174,155.66) less the amount that I held was not recoverable ($106,330.95), making a total of $67,824.71. The calculation is no different in this context. Consequently, DCT Projects would still be liable to pay Champion Homes $67,824.71 in respect of variations.

If Champion Homes wrongfully repudiated the contract, that wrongful repudiation obviously caused DCT Projects delay in completing the project and selling the units for which it has not been compensated. In my opinion, it is reasonable to calculate the loss DCT Projects suffered as a consequence of that delay as the amount it incurred in interest and charges between the time of termination and the time the units were sold. It is not disputed that that amount is $376,293.74.

The orders of the court are:

I will hear the parties in relation to costs if they cannot agree on costs.