Wingate v Lee

These proceedings concern the ownership of a property at Unanderra near Port Kembla (the Property). Without any disrespect intended, I shall refer to the parties by their given names.

The plaintiff (Lainie) and the defendant (Robert) were friends. The precise nature of their friendship is not relevant to the present dispute. In early 2015, they purchased the Property. They sought legal assistance and recorded the basis of that purchase in a “Deed of Agreement” made on 2 April 2015 (the Agreement). An unsigned copy of the Agreement is reproduced as a schedule to these reasons but, for the purposes of this summary, it is sufficient to set out its recitals, which broadly reflect what occurred:

There was no dispute that Robert arranged, undertook and paid for building works on the Property as contemplated by the Agreement (the Works). Unfortunately, the existence of the Agreement has not prevented the parties falling into dispute, with Lainie filing her summons on 10 November 2019. The matter then proceeded on pleadings.

By her statement of claim filed on 21 September 2020, Lainie seeks relief, including:

By his cross-claim filed on 5 May 2020, Robert seeks order including:

Robert does not assert any beneficial interest in the Property. He does not suggest that he has any entitlement to be reimbursed for his own time undertaking the Works. His only concerns in these proceedings are to recover the amount he says he is entitled to under the Agreement that he has spent on labour and materials for the Works and for his liability as a mortgagor in respect of the Property to be discharged, in particular over his own property at Barnes St.

The parties accepted that if Lainie cannot refinance her ownership of the Property, it will have to be sold. She did not dispute that upon either of those things happening, Robert’s obligations as mortgagor should be discharged. As the proceedings have evolved, there were only two matters genuinely in dispute requiring resolution by the Court.

The first question was whether, on their proper construction, the effect of recital (f) and cl 2(f) of the Agreement was to limit the amount Robert could recover (if he could prove the expenditure) to $30,000. The Court answers that question in the negative for the reasons set out below. In summary, recital (f) is a recital rather than an operative provision, and cl 2(f) is clear in its terms in applying to all expenses in relation to the Works.

The second question is the amount which Robert is entitled to recover under the Agreement. He claims “$163,695.26, or such other amount as the Court determines”. Proving his claim has been complicated, he says, because Lainie took and has now failed to produce a yellow folder in which he says he kept the relevant invoices and other records of expenditure.

Robert adduced expert evidence that the cost of the Works (labour and materials) was $162,424.48 (including a 15% allowance for preliminaries and excluding GST). Lainie had expert evidence supporting a figure of between $61,079.00 (including GST) and $73,193.00 (including GST), although based on different assumptions.

As a result of a conclave ordered by the Court, the three experts arrived at a cost of $65,049.00 (including GST), comprising $35,179.00 for labour and $29,870.00 for materials, on a different basis again, being the reasonable cost of a competent builder undertaking the Works. For the reasons set out below, the Court is satisfied that Robert has proven an entitlement under the Agreement to that amount, to which he is entitled out of the proceeds of sale of the Property if Lainie is unable to refinance.

Mr J L Polese of Counsel appeared for Lainie. Mr M Maconachie of Counsel appeared for Robert.

Since May 2021, Lainie has been a project administrator in a construction company. Before then, and at the times relevant to these proceedings, she was an accounts administrator for a large seafood wholesaler.

Robert has worked as a builder for over 30 years. He has never held a builder’s licence, but was qualified by experience, telling the Court that “I’ve worked with developers and builders alongside the builders, but I worked as a builder as I was qualified equally as the builders that I was working alongside with” (Tcpt, 5 August 2021, p 110(49)–111(1)).

Lainie and Robert first met in 2009. From 2010 to 2014, they lived in a property rented by Lainie. In 2014, they moved into Barnes St, being a property owned by Robert. They lived there until their relationship ended in about June 2017, when Lainie moved to her mother’s home.

There was no dispute that without Robert’s involvement, including providing Barnes St as security, Lainie would not have been able to buy a property of her own. They recorded their arrangements in relation to the Property in the Agreement. Clause 3 of the Agreement provided that their arrangement would come to an end during 2016, on a date not later than one year after the purchase of the Property had settled. Why this has not occurred was a matter of contention between the parties which it is not necessary for the Court to resolve.

There was ample evidence and no real dispute that between 2015 and 2016, Robert undertook the Works. Lainie does say, however, that some of the Works are defective and that she will have to spend money on both rectifying alleged defects and completing the renovations so that the Property is habitable and can be sold.

It is convenient at this point to reproduce recitals (d) to (f) and cl 2 of the Agreement:

In his final written submissions, Mr Polese contended that the Agreement should be construed as follows:

In his final written submissions, Mr Maconachie contended that the Agreement should be construed as follows:

I accept Mr Maconachie’s submissions and add these further reasons.

Recital (f) is in terms a recital rather than an operative clause. It sets out what Lainie and Robert proposed to do “[a]s at the date of the making of this agreement”. It contains no express language purporting to limit the cost of the work to $30,000.00. It is no more or less than a statement of their present intention as at the date of the Agreement.

Clause 2, by its subclauses, extends what Lainie is responsible to pay as “all expenses in respect of the upkeep and maintenance of” the Property. In my respectful view, “all expenses in relation to the building works on the [P]roperty” (emphases added) in cl 2(f) means exactly that. It is not limited to $30,000.00 and its scope is extended to include the balance of the items listed in cl 2(f).

There are three further points to be made in relation to construction.

First, there can be no doubt that “the building works” in cl 2(f) are the “works which will be carried out by Robert” referred to in recital (f), which phrase itself refers back to “renovations, repairs and extension to the [P]roperty” earlier in that recital.

Second, giving the expression “all expenses” at the start of cl 2(f) a very wide meaning is consistent with the clear context of the Agreement read as a whole: the Property was to be Lainie’s alone and Robert was getting nothing out of carrying out the Works. Read in its entirety, it is obvious from the Agreement that Robert was not to be left out of pocket in relation to any aspect of his participation in the Agreement.

Third, writing about often used terms such as “in relation to” in Perry Herzfeld and Thomas Prince, Interpretation (Thomson Reuters, 2nd ed, 2020) at [4.350], the learned authors provide this summary (citations omitted):

The context to which I have referred in [26] reinforces the conclusion that the degree of connection connoted by “in relation to” between “all expenses” and “the building works” was to be understood expansively. On any view, the cost of labour and materials for the Works are expenses well within the requisite degree of connection and they are not limited to $30,000.00.

In turning to consider the amount to which Robert may be entitled under the Agreement, it is necessary, first, to deal with what came to be referred to as “the yellow folder”. Robert’s case on the quantum of his reimbursement depended on his word alone. He had no contemporaneous documents or lay witnesses to corroborate his claim. His case depended on expert evidence which assumed the truth of Robert’s instructions as to what he had done and how long it had taken.

Mr Polese submitted that in the absence of primary records the Court should find Robert had failed to prove his entitlement to any amount under the Agreement. Mr Maconachie submitted that Robert’s records that would have substantiated his claim (and which were said to include a diary recording the time taken by tradespeople on various tasks which was then reflected in the amount they were paid in cash by reference to an hourly rate) were contained in a yellow folder that had been taken by Lainie and which she had failed to produce in answer to various interlocutory requests. He submitted that the issue of quantification should, therefore, be resolved against Lainie by accepting Robert’s evidence of a figure higher than Lainie’s experts, because it was her misconduct that had made it so difficult for Robert to prove his loss. That submission invited the Court to draw at least an analogy with the old case of Armory v Delamirie (1722) 1 Stra 505; 93 ER 664 (Armory). A modern example of its application is the decision of Hodgson J (as his Honour then was) in LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1989) 24 NSWLR 499.

Because I would have come to the same view as to quantum, irrespective of the applicability of the principle in Armory, it is not strictly necessary for me to decide the issue of the fate of the yellow folder. However, in case the matter goes further, I will briefly explain why I would find, if it were necessary, that there was a yellow folder of records that would have assisted Robert, which was taken by Lainie and has not been produced by her:

Robert called Dr John Cunniffe, an accredited building consultant. His qualifications were impressive as recorded in his affidavit:

Dr Cunniffe assumed what works had been done in accordance with instructions provided by Robert (noting in his expert report that “no plans, project diary, quotes, invoices or receipts have been produced”). He also inspected the Property. He applied his experience by reference to the Cordell Housing Building Construction Cost Guide for 2015 to cost the individual items, activities and times that he had assumed. His figure for “what those works would have cost [Robert] (in 2015 terms) in terms of materials and labour hire to complete” (to quote his task from his letter of instructions) was $162,424.48 (including 15% for preliminaries, but exclusive of GST).

Lainie called two experts. The first was Mr Tony Bean, a semi-retired quantity surveyor. While he is a member of the Australian Institute of Quantity Surveyors, by his own admission in his curriculum vitae Mr Bean explained that “he has gained his qualifications by experience and his knowledge has been gained by doing the job.” His view was that the “commercial value of the works completed to date” was $61,079.00 (including GST). He stated in cross-examination that he had not been prepared to allow for work he considered as having been inefficient or unproductive.

Lainie’s second expert was Mr Mark Colecliffe, an experienced licenced builder and building inspector. He valued the Works at $73,193.00 (including GST) if they had been undertaken as a continuous contract. This last point is important because it was Robert’s undisputed evidence that he had arranged for the Works to be done sporadically, on an ad hoc basis when he could find tradespeople who had openings between other jobs. The experts agreed this approach led to inefficiencies with the overall job taking longer if done that way, in contrast to being undertaken in a coordinated, continuous fashion. That, if I may respectfully say so, accords with common sense.

Finally, the Court directed the experts to meet in conclave. They produced a joint report. In that report, they addressed the question of the reasonable cost of a competent builder doing what Robert said had been done. This is to be contrasted with the ad hoc way in which the Works had been done, including resulting in what they all agreed were some imperfect outcomes. The approach in the joint report was explained by Dr Cunniffe during the concurrent evidence (Tcpt, 6 August 2021, p 206(20–25)): “I think we wrestled with the costings that I had allowed in my work, because I was going off instructions of what Mr Lee — the time it took to do certain things, and my colleagues sort of came back to me with, well, you know, a competent builder would have done that in a much shorter time. So, I ended up going with that approach.” The joint report arrived at a cost for the Works of $65,049.00 (including GST) comprising $35,179.00 for labour and $29,870.00 for materials.

As I have noted above, Mr Maconachie urged that I should apply the principle in Armory to adopt the figure most favourable to Robert. Armory was an action in trover where a chimney sweeper’s boy found a jewel and took it to a goldsmith. The goldsmith’s apprentice took the jewel out of its setting and would not return it. The nominate report records:

What needs to be borne firmly in mind is that, ultimately, the Court must be actually satisfied on the balance of probabilities of a fact, in this case that fact being the amount Robert actually expended on labour and materials for the Works. In the present case, if that fact is to be found, it must be inferred from the expert evidence.

For the reasons which follow, the Court is so satisfied and finds that Robert spent the amounts identified in the experts’ joint report. I am unable to reach the requisite state of satisfaction for any greater amount. This would have been the result irrespective of whether the principle in Armory applied (by reason of Lainie having taken and not produced the yellow folder as referred to in [30]), but, in what follows, I shall at least begin with Armory.

Armory offers a “rule” of evaluating evidence and not a rule of substantive law: James Edelman, McGregor on Damages (Sweet & Maxwell, 21st ed, 2021) at [10-008]. To use the language of the nominate report, it involves a presumption. Even in a case where an Armory presumption may be available, the Court’s task in considering evidence remains subject to issues such as plausibility, reliability and the need for the Court to be actually satisfied on the balance of probabilities. It does not require the automatic or unthinking acceptance by the Court of a figure that has been propounded by a claimant as being most favourable to that claimant. Mr Maconachie, with respect correctly, did not suggest otherwise.

The concept of actual persuasion was elucidated by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and managers appointed) (In liq) (No 2) (2011) 297 ALR 56; [2011] FCA 1123 at [48]:

There are four reasons why, even if one starts with Armory, I do not consider that it is applicable to the present case by analogy or otherwise so as to justify the Court in finding for the higher figure propounded on behalf of Robert.

First, the evidence in this case is not comparable with what occurred in Armory. In that case, the measure of damage was determined by evidence as to the value of the best quality jewel that would have fitted in the setting. This gave the Court the benefit of what might be called an objective standard. Here, there is no such element of objectivity because Dr Cunniffe’s report assumes Robert’s evidence, in particular his instructions of how long tradespeople worked on particular tasks. In my respectful view, if the Court is to have an objective standard to measure damages, it is provided by the experts’ joint evidence as to what a reasonably competent builder would have expended and taken in time to undertake the Works.

Second, it is of great concern to the Court in assessing Robert’s case that, notwithstanding the lack of the material in the yellow folder, he could not call anyone and was unable to provide any other form of proof at all, whether it be bank statements, credit card records or the like to substantiate his claims. It may be accepted that he had his reasons for doing everything in cash, but in cases such as this, when proof is required, it is often the consequence that a Court cannot readily accept, in the absence of any other form of corroborative evidence at all, a statement that a particular amount of cash has been paid. For example, in some cases cash payments can be proven by submitting that the Court can infer them from bank statements which show the withdrawal of the cash from a bank account at the time of the alleged payment. Robert could not even do that because his evidence was he used cash he had received from other jobs. Nor could he call even one of the tradespeople whom he had employed.

In making the observations in the preceding paragraph, I have not overlooked Robert’s evidence that at least with some of the tradespeople his relationships have soured, but that is no excuse. Such people and their records could have been subpoenaed, if necessary. He also said he had lost contact with others. However it may be expressed, and unfortunately for his case, Robert’s complete inability to provide any form of corroborative evidence, even allowing for the loss of the material in the yellow folder, is a matter which makes it difficult for the Court to accept unreservedly his evidence as to what he says was done or, in particular, how long he says things took which was reflected in the costs that he paid the various tradespeople.

Third, five or so years have passed between the Works being undertaken and Robert preparing his evidence and instructing his expert. By Robert’s own admission, the Works were undertaken in an ad hoc fashion, a day or two here or there. This gives the Court further genuine concern, without wishing in any way to be critical of Robert, as to the reliability of his recollection. It is the experience of courts, particularly in a bitter dispute such as the present, that even an honest witness doing their best to tell the truth may well exaggerate or have an incomplete memory. The acrimony or even just the frustration or annoyance of a litigant that accompanies litigation of this kind to recover funds said to be owed is not conducive to a completely reliable recollection.

The Court’s doubts particularly turn on Robert being able to recollect some years later how long particular tradespeople worked in a sporadic fashion on particular tasks from time to time. I am not suggesting that Robert was in any way being deliberately dishonest. However, given the passage of time, and the ad hoc or intermittent way in which the Works were undertaken, I am unable to be satisfied to the requisite degree that the full amount he claims, as calculated by Dr Cunniffe, was paid.

Fourth, and perhaps it is only a minor point, Robert’s evidence was that he did not pay all the tradespeople and that no one was still chasing him for payment from that group to whom he may have owed money. He is only entitled to recover what the Court finds he has, in fact, expended. This entirely proper concession casts some further doubt on the overall reliability of the evidence on which Dr Cunniffe has based his calculations.

For these reasons, the Court is unable to be actually satisfied to the requisite degree that the amount expended by Robert is any more than the amount arrived at by the experts in their joint report.

Part of Lainie’s claim was for a sum of money that her experts had determined would be necessary to pay to remediate what were said to be defects in the Works and to complete the renovation of the Property to render it habitable and able to be sold. Mr Polese argued, in a way which, with respect, was not entirely clear, that the Court should set-off or make some adjustment in respect of those amounts against whatever it may be satisfied was owed to Robert.

I am unable to identify any principled basis on which that could be done. If there are defects to be remedied, and if there is work to be done to complete the Property, whether or not she chooses to do so is entirely a matter for Lainie. Because there is no dispute that the Property is beneficially entirely hers, whatever she chooses to spend in that regard will inure to her benefit upon sale.

I do not understand the legal or equitable basis on which it could be said that any costs for allegedly defective or additional works could be visited on Robert, given that the parties’ rights are entirely determined by the Agreement. Even in a Court-ordered sale by trustees, adjustments ordered by the Court must reflect the parties’ rights at law or in equity. The Court is not persuaded that there is any such basis in respect of either remedying alleged defects or completing the renovation of the Property.

The parties will be given an opportunity to agree upon short minutes to give effect to these reasons and as to costs. In particular, if Lainie cannot refinance, I have urged the parties to attempt to agree upon a regime for sale that will save them the costs of the appointment of trustees for sale. However, if they are unable to reach agreement on that point, then the Court will appoint independent trustees for sale of the Property, enter judgment for Robert in the amount to which the Court has found he is entitled under the Agreement, and give directions that he be paid that amount out of the proceeds of sale.