Carbone v Fowler Homes Pty Ltd; Carbone v Fowler Homes Pty Ltd

1. [1]

   WARD P: I agree with Leeming JA.

2. [2]

   LEEMING JA: Messrs Giuseppe and Matthew Carbone, who are father and son, and to whom I shall refer for simplicity and without disrespect as Joe and Matthew, bring separate appeals from the dismissal (in the case of Joe) and the substantial dismissal (in the case of Matthew) of actions brought by them in the District Court of New South Wales against Fowler Homes Pty Ltd arising from the delayed completion of the construction of residential buildings on their neighbouring blocks of land. All save one of the grounds of appeal are from the judgment of 17 February 2023, delivered promptly after a five-day trial: Giuseppe and Matthew Carbone v Fowler Homes Pty Ltd [2023] NSWDC 29. The appeal is as of right pursuant to s 127(1) of the District Court Act 1973 (NSW) because those grounds of appeal involve matters in issue amounting to more than $100,000. In those circumstances, the appellants are also entitled to challenge within their appeals a subsequent order made in each proceeding in the course of assessing damages, despite its being worth only $20,000.

3. [3]

   The scope of the appeals is much narrower than the issues at trial. In particular, no appeal is brought from the dismissal of the two claims which were most prominent at trial, namely, claims of statutory unconscionability within the meaning of ss 20 and 21 of the Australian Consumer Law and (in the case of Joe) deceit at common law. Further, the appellants’ written submissions in reply, which unlike their submissions in chief were signed by Mr Herzfeld SC, who had not appeared at trial, advised that around half of the grounds of appeal were no longer pressed.

4. [4]

   Given the confined scope of the appeals, it is unnecessary fully to summarise the background or the reasons of the primary judge, the large majority of which concerned matters which are not challenged on appeal. However, it will be necessary, and in some detail, to refer to the pleadings and the course of the hearing, because at the forefront of the appeal is the appellants’ contention that the primary judge was wrong to fail to consider claims brought by each of them for damages for breach of contract (as opposed to damages for statutory unconscionability or deceit), a contention which embraces both the scope of the pleadings and the way the trial was run.

5. [5]

   For the reasons which follow, I have concluded that the primary judge was wrong to decline to consider the claim for damages for breach of contract. However, no error has been shown in his Honour’s rejection of the most spectacular aspect of Joe’s case, namely, that he had paid $60,000 in cash – in $100 and $50 banknotes in a Woolworths plastic bag – to Mr Frank Grippaudo, Fowler Homes’ Chief Executive, who neither counted the money nor gave him a receipt but merely took it away. Joe Carbone maintained at trial that Fowler Homes wrongly (and indeed deceitfully) refused to credit him for that payment, but the primary judge rejected that part of his case and I have concluded that no material error has been made out in that respect.

6. [6]

   I would also uphold the ground of appeal challenging the conclusion by the primary judge that no loss had been proven (to be fair, Fowler Homes did not seek to defend it), I would reject Fowler Homes’ reliance on the liquidated damages clause (which had not been raised before the primary judge but instead was raised by its notice of contention in this Court) and I would also uphold the appeal in relation to the treatment of the provisional amounts of $20,000 (which Fowler Homes did seek to defend, albeit not for the reasons given by the primary judge).

7. [7]

   Accordingly, the orders I propose reflect a modest success for Matthew, but a loss for Joe.

Factual background

1. [8]

   Joe and Matthew owned neighbouring vacant blocks of land at Oran Park in western Sydney. Each man entered into a contract with Fowler Homes for the construction of a duplex home on his block (which is to say, there would be four dwellings in all). Each contract was in materially identical terms, and based on the standard form “NSW Residential Building Contract for New Dwellings” issued by the Housing Industry Association.

2. [9]

   Each contract specified a “Building Period” of no more than 48 weeks after the building period commenced (item 6 of schedule 1). Fowler Homes did not dispute that although located in a definition, the contract imposed an obligation upon it to achieve practical completion within that period, although that was subject to the provisions governing suspensions. In particular, the contract provided for an automatic extension of time where the owner had failed to pay a progress claim, expense, variation or extra within five days of the due date (special condition 9). The pecuniary consequences of delay were asymmetric. For delay attributable to the owner’s act, default or omission, delay damages were stated to be the actual increase in costs to the builder plus the builder’s margin (cl 19.4). On the other hand, if the building works did not reach practical completion by the end of the 48-week period as extended, the appellants accepted that the owner was entitled to liquidated damages in the amount of $1 per day. That was brought about because cl 32.1 made provision for liquidated damages in the amount specified in item 11 in the Schedule, and that item in the Schedule was expressed to be “$.00 per working day”, and the HIA standard form provided “if nothing stated, then $1”. I shall pass over whether, on its true construction, the clause in fact made provision for nil liquidated damages for delay.

3. [10]

   Work commenced in around August 2018, and therefore, putting to one side extensions, should have been completed by July 2019. I shall very largely pass over the details of the disputes that arose during construction. Joe and Matthew made final payments on 29 January 2020. Proceedings were commenced in October 2020, but on the basis that Joe and Matthew maintained that the contract remained on foot; indeed, they sought orders for specific performance and declarations that Fowler Homes’ purported terminations were invalid. Ultimately, possession was given in April 2021. Assuming the claim for damages for lost rent was in play at trial, then Joe’s and Matthew’s entitlement to damages for breach was governed by the contract, and it was accepted that turned on their establishing that all amounts owed by them had been paid. As will be seen, Matthew established that after 29 January 2020, but Joe has not.

4. [11]

   The issues arising on the appeals may be summarised as follows:

   1. (1)

      Was a claim for damages for breach of contract (a) within the scope of the pleadings, or (b) within the scope of the issues litigated at trial (ground 2 of Joe’s appeal, ground 1 of Matthew’s appeal)?

   2. (2)

      If so, then did the plaintiffs/appellants establish any amount of damages sustained by reason of Fowler Homes’ breach (grounds 5 and 8 of Joe’s appeal, grounds 4 and 7 of Matthew’s appeal)?

   3. (3)

      If so, did the liquidated damages clause apply, thereby reducing claims to a nominal amount (ground 1 of Fowler Homes’ notice of contention)?

   4. (4)

      Did the primary judge err in rejecting Joe’s claim that he had paid in around July 2018, the amount of $60,000 in cash (ground 1 of Joe’s appeal)?

   5. (5)

      Was there error in the directions given by the primary judge to the referee concerning a provisional amount of $20,000 in respect of each contract, relating to s 94 contributions (ground 6 of Joe’s appeal, ground 5 of Matthew’s appeal, ground 2 of Fowler Homes’ notice of contention)? This involved a challenge to directions given by the primary judge to a referee, in proceedings following the main trial.

5. [12]

   The appellants’ written submissions in reply, supplied in advance of the hearing, abandoned grounds 3, 4, 7, 9 and 10 of Joe’s appeal, and grounds 2, 3, 6, 8, 9 and 10 of Matthew’s appeal.

Procedural background

1. [13]

   The appellants had originally commenced proceedings in October 2020 in the Supreme Court of New South Wales, seeking specific performance of the contracts following a dispute between them and Fowler Homes. Ultimately, it was not necessary for that aspect of the dispute to be litigated because, by agreement and without admissions, Fowler Homes undertook the additional works. It may also be noted that although Fowler Homes contended that amounts remained outstanding from both Joe and Matthew, it brought no cross-claim to recover those amounts.

2. [14]

   After it became clear that the only issue between the parties was one as to quantification, the proceeding was remitted to the District Court.

3. [15]

   It seems fairly clear that there were a large number of small matters of dispute in issue between the parties, and that the trial which occupied four days in November proceeded informally on the basis that what would be determined was the large items of whether causes of action in deceit or statutory unconscionability were made out, and whether Joe and Matthew were entitled to damages for lost rent. By “informally” I mean that there appears to have been no order pursuant to UCPR r 28.2 identifying particular aspects of the litigation to be tried separately and in advance of the remaining issues. Instead, the trial proceeded in the expectation, which turned out to be unduly optimistic, that once the principal issues were decided, the parties would be able to work out the extent to which overpayments or underpayments had been made. The principal issues were, as will be seen, expressed without undue precision during the hearing, as was reflected in the reasons published on 17 February 2023. Thus the primary judge said at [9]:

4. [16]

   The primary judge found against Joe and Matthew on all those issues, concluding at [102]:

5. [17]

   The reasons for judgment were delivered promptly on 17 February 2023, following a five day trial, in which Messrs Barham and Stitt had appeared for the plaintiffs and defendant respectively over 4 days of evidence in November 2022, followed by an exchange of written submissions throughout December and a day of oral addresses on 1 February 2023.

6. [18]

   After dealing with preliminary matters, his Honour referred to the dispute as to the scope of the pleadings that had arisen in final addresses, and summarised them at [12]-[28]. In the course of doing so, his Honour accurately recorded that he had expressed a view as to the unavailability of a claim for damages for breach of contract, as a result of which Mr Barham sought and was granted a short adjournment to take instructions as to whether he should seek leave to amend, after which he advised that he did not wish to seek leave to amend: at [27]. I shall return to the pleadings below.

7. [19]

   The primary judge dealt with the “$60,000 cash payments” at [47]-[77], rejecting claimed payments explicitly on the basis both of his Honour’s adverse findings as to Joe’s credit, describing him as a “most unsatisfactory witness”, but also by reference to the inherent probabilities and objective facts.

8. [20]

   At [78]-[100], under the heading “The rent issue”, his Honour dealt with the claimed damages on foregone rent, consequent upon the claims for deceit and statutory unconscionability. His reasons noted at [82] that:

9. [21]

   In any event, his Honour considered that the plaintiffs had failed to establish their loss and stated that the Court should not be left to “pluck a figure out of the air”, as Gleeson CJ had put it in Troulis v Vamvoukakis [1998] NSWCA 237. Finally, at [101], his Honour rejected the claim for exemplary damages.

10. [22]

    Very properly, no orders were made on 17 February 2023. The parties were invited to bring in short minutes of order resolving the balance of the issues, but they were unable to agree. Thereafter the primary judge referred to a referee the question whether Fowler Homes was indebted to either plaintiff, and if so in what amount. There were delays in making the reference, and delays in the provision of material to the referee, and delays when his report was returned in a form which on its face did not comply with the orders of Court, leading to the Court writing to him on 18 October 2023. There ensued further disputes, with each side vigorously contending that the other was taking points which should never have been taken. Ultimately, the primary judge adopted the referee’s report, entered judgment in favour of Fowler Homes in Joe’s claim, and entered judgment in favour of Matthew in the amount of $21,759 in his claim against Fowler Homes. I shall return to the details of this when addressing the treatment of the $20,000 provisional amount.

Should the primary judge have determined a claim for damages for breach of contract?

1. [23]

   As noted above, the primary judge did not determine a claim for damages comprising lost rent for Fowler Homes’ delay in completing the dwellings, regarding it as outside the pleadings. On appeal, Joe and Matthew relied on the pleadings, and, separately, on the way the trial had been conducted. I shall address each in turn.

(a) Joe’s and Matthew’s pleaded cases

1. [24]

   The statements of claim commence with 22 (in the case of Joe) and 19 (in the case of Matthew) prayers for relief. The majority (13 or perhaps 14 in the case of Joe) are declarations. This was far too many.

2. [25]

   Some declarations may be appropriate in a specific performance suit (for example, as to the validity of a notice of termination), but it is difficult to think of circumstances when the majority of the declarations sought by Joe and Matthew could ever be appropriate. They commenced with a prayer for declarations that the parties had entered into the contracts, notwithstanding that they were alleged to be wholly in writing, and as to which there was never any dispute. There followed a series of uninformative declarations, including “Declaration that the defendant has breached the Building Contract”, “Declaration that the defendant has engaged in unconscionable conduct within the meaning of section 20 of the Australian Consumer Law”, “Declaration that the defendant has engaged in unconscionable conduct within the meaning of section 21 of the Australian Consumer Law”, ”Declaration that the defendant has committed the tort of deceit”, and so on.

3. [26]

   Then there were declarations involving sums of money. Prayer 12 of Joe’s pleading and prayer 11 of Matthew’s pleading sought an “[o]rder or declaration that the defendant holds the sum of $70,845 or such other amount as may be calculated as owing by the defendant to the plaintiff after any allowances which may be allowed to the defendant in respect of unsigned variations (“Credit Amount”) as money had and received by the defendant to the use of the plaintiff”. This paragraph shows real confusion of thought as to the juristic effect of an “order” or “declaration” concerning an amount of money owing by defendant to plaintiff. There followed a prayer for a “[d]eclaration that the defendant has been unjustly enriched by the retention of the Credit Amount”.

4. [27]

   Separately from the above, there were also declarations sought concerning the validity of the purported termination, and an estoppel in respect of one aspect of the parties’ rights, to which the criticisms below do not apply.

5. [28]

   Ironically, counsel for the plaintiffs was at pains at the commencement of the trial to submit that the District Court was unable to grant any of the declaratory relief sought. That too was wrong, like so much of the approach taken by the pleading. None of it arises in this appeal, save insofar as the appellants rely on the declarations that there had been a breach of contract in support of their contention that a claim for damages for breach of contract had been pleaded. Nevertheless, it seems worthwhile making the following basic points.

6. [29]

   Declarations should be clear on their face. A bare declaration that a party has committed a tort or contravened a law should not ordinarily be made, and if it is sought, the party propounding it ought to be able to explain what is special in the circumstances of the litigation to warrant that unusual course being taken. Some of the declarations sought were relevantly identical to those deprecated in very strong language in the joint judgment of Gummow, Hayne and Heydon JJ in Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53; [2003] HCA 75 at [89]-[90]. There, dealing with bare declarations that parties had contravened various sections of the Trade Practices Act, which were identical in form to those sought by the appellants concerning ss 20 and 21 of the Australian Consumer Law, their Honours said:

7. [30]

   In cases where it is appropriate for declaratory relief to issue, the declaration should “specifically and succinctly identify the gist of the relevant conduct and its relationship to contravention”, to use Allsop CJ’s language in Australian Securities and Investments Commission v Youi Pty Ltd [2020] FCA 1701 at [69].

8. [31]

   A declaration that merely serves to record the outcome of proceedings, or of a cause of action in proceedings, is unlikely ever to be appropriate. “The remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment”: Warramunda Village Inc v Pryde (2001) 105 FCR 437 at [8], approved in Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378; [2012] FCAFC 56 at [35] and Brougham v Edwards [2024] SASCA 59 at [105]. True it is that there is authority to the effect that there may be utility in declaring contraventions of a statute “in order to define and publicise the type of conduct that constitutes a contravention of the Act and to set out clearly the foundation on which the consequential orders by way of injunction and pecuniary penalty, including those based on accessorial liability, are grounded”: Cruse v Multiplex Ltd (2008) 172 FCR 279; [2008] FCAFC 179 at [53], approving Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd [2004] FCA 693; (2004) 207 ALR 329 at [21]. I respectfully agree. But no such utility was present in the present proceedings, which were private litigation to recover money.

9. [32]

   The declarations concerning particular money sums exhibit a different misconception. It was not asserted that any property was held on trust, or otherwise gave rise to rights or was subject to obligations. It follows that no useful purpose could be served by a declaration that an amount was money had and received, or a declaration that Fowler Homes had been unjustly enriched in a particular dollar amount. An “order” that money is owing is likewise problematic, begging the question as to its juristic nature. Instead, what should have been sought in the event of success on those causes of action was judgment in an amount against Fowler Homes, which could then, if necessary, be executed.

10. [33]

    Axiomatically, a declaratory judgment is not an executory judgment. As was observed by Jagot, Kerr and Anderson JJ in Clarence City Council v Commonwealth of Australia (2020) 280 FCR 265; [2020] FCAFC 134 at [90] (an appeal was dismissed, without doubting the correctness of the following), referring to the enforcement of contractual obligations:

11. [34]

    The difference between executory and declaratory judgments is fundamental. An executory judgment may be enforced. It will sustain a bankruptcy notice, or a writ of execution under the Real Property Act 1900 (NSW), or other forms of execution. Declaratory judgments are not executable. They cannot sustain a bankruptcy notice, as Sackville J explained in Cawood v Cawood, in the matter of Cawood [2000] FCA 1786. For that reason it makes no sense to speak of a stay of a declaratory judgment (although it is possible to stay the enforcement of rights declared by the judgment): see Talifero v Asbestos Injuries Compensation Fund Limited as Trustee for the Asbestos Injuries Compensation Fund (No 2) [2018] NSWCA 323 at [16]-[17], citing Arnhem Land Aboriginal Land Trust v Northern Territory of Australia (2007) 157 FCR 255; [2007] FCAFC 31 at [6]-[8].

12. [35]

    Likewise, the doctrine of merger of a cause of action into a judgment does not apply where a purely declaratory judgment has issued. In Zavarco Plc v Nasir [2021] EWCA Civ 1217 at [37] Sir David Richards explained:

13. [36]

    The distinction was confirmed in London Steam-Ship Owners’ Mutual Insurance Association Ltd v Kingdom of Spain (No 4) [2021] EWCA Civ 1589; [2022] 3 All ER 970 at [104]-[106].

14. [37]

    The point of the litigation which has lasted more than three years and occupied at least six days of hearing was to resolve the controversy between Joe and Matthew and Fowler Homes, and to allow Joe and Matthew to recover any damages to which they were entitled. The suite of declarations which comprised the majorities of prayers for relief in each statement of claim were not to the point.

15. [38]

    Thirdly, although the plaintiffs disavowed all declaratory relief in the District Court, they did so not because all of the declarations sought were poorly framed or alternatively of no utility having regard to the compromise earlier reached, but on the basis that the District Court lacked power to make them. That was wrong. They were right not to ask the District Court to make the declarations sought, but not for the reasons which were given.

16. [39]

    The transfer from the Supreme Court to the District Court was made pursuant to s 149B of the Civil Procedure Act 2005 (NSW). Section 149E provides that “the transferee court has, and may exercise, all of the jurisdiction of the transferor court in relation to any proceedings to which a transfer order relates, including jurisdiction to determine any question arising in such proceedings”. Unlike s 44(1) of the Judiciary Act 1903 (Cth), which provides for the remitter by the High Court to another court “that has jurisdiction with respect to the subject-matter and the parties”, a transfer under 149A carries with it a conferral of jurisdiction if that is necessary, as was observed in Young v King [2016] NSWCA 282 at [15] (instead the position resembles remitters under s 44(2) or (2A) of the Judiciary Act, to which the conferral or investment of jurisdiction effected by s 44(3) applies).

17. [40]

    Although s 149E refers to jurisdiction rather than power, I think that in the present context the provision must be understood as not observing a strict distinction between the authority to decide a controversy, and the power to make an order. Any other view leads to absurdities. Take for example a proceeding which sought purely declaratory relief. Section 149A would confer jurisdiction if the proceeding were remitted to the District Court, but there would be no power to grant the only relief sought. Bearing in mind that “the distinction between jurisdiction and power is often blurred” and “‘jurisdiction’ and ‘power’ are not discrete concepts” (both quotations are found in the reasons of Gleeson CJ, Gaudron and Gummow JJ in Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559; [2001] HCA 1 at [64]), s 149E must be understood not only as authorising the transferee court to decide the controversy, but also to empower it to make such orders as are appropriate consequent upon that decision, to the extent that such power might be lacking. The sustained generality of “all of the jurisdiction of the transferor court in relation to any proceedings” makes that construction a natural one. A familiar example, mentioned during the hearing, is defamation actions in which a final injunction is sought, and I note that that is how the provision has been understood to operate by the District Court (“Where such a transfer occurs, the powers of the Supreme Court travel with the claim”): see Martin v Najem [2022] NSWDC 479 at [126]. It is unnecessary for present purposes to express any views about the powers of the District Court in relation to matters which have not been transferred to it.

18. [41]

    Separately, the statements of claim also sought injunctions under the Australian Consumer Law, orders for specific performance, an order for exemplary damages, interest, costs and “such further or other order as this Honourable Court may deem fit”, and, importantly, prayer 18 (16 in the case of Matthew): “further or in the alternative, an order that the defendant pay the plaintiff damages pursuant to section 236 of the ACL, and/or at law, in an amount to be assessed”.

19. [42]

    As will be seen, the order seeking damages was a key aspect of the submissions that the pleadings extended to a claim for damages for breach of contract. Reliance was also placed on the concluding prayer which sought “such further or other order” as might seem fit.

20. [43]

    Joe’s pleading took the following structure. Paragraphs 1-5 identified the parties and the contract. Paragraphs 6-13 identified certain “Credit Representations” that were said to engage s 18 of the Australian Consumer Law. Paragraphs 14-31 addressed variations and payments which were said to constitute the “Overpayment” which Fowler Homes had refused to repay, as a result of which the plaintiffs had suffered loss and damage and claimed restitution. Paragraphs 32-54 addressed the receipt for $59,543 (this relates to the cash payment of $60,000) and in substance maintained that its retention by Fowler Homes was both unconscionable conduct within the meaning of the Australian Consumer Law and amounted to deceit. Paragraph 55 stated that “the plaintiff claims exemplary damages in respect of his common law claims other than breach of contract”. Paragraphs 56-57 set out the basis for a claim for an order for specific performance, including an allegation that by failing or refusing to complete the building contract in accordance with its terms, Fowler Homes was in breach of the building contract. Matthew’s pleading was in substantially similar form, save that there was no allegation concerning the $60,000 payment nor a claim in deceit.

21. [44]

    It is clear that a claim for breach of contract had originally been intended to be claimed, at least as an element of a claim for specific performance. But that is to no avail. The pleaded claim of specific performance was disavowed at the commencement of the trial. Accordingly, I shall pass over (a) the difficulties confronting orders for specific performance of the obligations in a construction contract, which are often regarded as paradigm examples where such relief is not available: see Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [105]; Ippolito v Cesco [2020] NSWSC 561 at [66]-[77]; Misthold Pty Ltd v NSW Historic Sites and Railway Heritage Company Pty Ltd (No 2) [2022] NSWSC 561 at [372] and (b) the controversy concerning the status of the exceptions to the general principle stated by Romer LJ in Wolverhampton Corporation v Emmons [1901] 1 KB 515 at 524-525.

22. [45]

    Less unpromising is the fact that when making an allegation for exemplary damages – something which was never disavowed – the pleadings expressly exempted that remedy being ordered for breach of contract. That is a more powerful indication that a claim for damages for breach of contract was in play.

23. [46]

    It was on those bases that it was said in this Court (it never seems to have been put thus in the District Court) that a claim for the New South Wales equivalent of Lord Cairns Act damages pursuant to s 68 of the Supreme Court Act 1970 (NSW) was alive. Counsel’s submissions identified particular paragraphs in the pleading, which, if taken together, were said to demonstrate that a cause of action for damages for breach of contract was being propounded, including the particulars of damage under the allegation of deceit that Joe had been intending to rent out the property for $500 per week:

24. [47]

    Indeed, it was submitted that “the Supreme Court always retains a discretion to award damages in lieu of specific performance”. As I understood it, this aspect of the submissions was focussed on the prayer for specific performance which had led to the proceedings being commenced in the Supreme Court, about which there could be no misapprehension, and it was said that when without admission Fowler Homes undertook to complete the construction, there could likewise have been no misapprehension that the claim for Lord Cairns Act damages in lieu of specific performance was in play.

25. [48]

    A principal purpose of pleadings is fairly to put the defendant on notice of the nature of the case the defendant is to meet. This is where the appellants’ submissions encounter problems.

26. [49]

    It is true that Lord Cairns Act damages are available in lieu of or in addition to specific performance. It will be recalled that one of the mid-nineteenth century pre-Judicature reforms was to empower the Court of Chancery to order damages either in addition to or in substitution for an injunction or specific performance, to save the need for litigants to obtain such relief in a common law court, and that reform, known as Lord Cairns Act, is now found in s 68 of the Supreme Court Act. Section 149E of the Civil Procedure Act conferred power upon the District Court to make such damages if they had been sought in the Supreme Court proceedings brought by Joe and Matthew. They are different from damages at common law. They may be in a different amount, because they are assessed at a different time: see the lucid explanation in PNC Lifestyle Investments Pty Ltd v REW08 Projects Pty Ltd (No 2) [2017] NSWSC 993 at [32]-[41]. And, in sharp contrast with a plaintiff’s entitlement to damages in tort and contract, they are discretionary.

27. [50]

    It is conventional when a plaintiff advances a claim for Lord Cairns Act damages to plead it expressly – typically by words such as “damages, including damages pursuant to s 68 of the Supreme Court Act”. The reason for doing so is because otherwise it is a matter which may take the other side by surprise. “In a statement of claim, the plaintiff must plead specifically any matter that, if not pleaded specifically, may take the defendant by surprise”: UCPR r 14.14.

28. [51]

    I do not accept that this pleading, which makes no reference to Lord Cairns Act or its New South Wales counterpart, nor any reference to damages being ordered in lieu of or in addition to specific performance, and which makes express reference to the Australian Consumer Law which confers a separate power to order damages, fairly puts the defendants on notice of a claim for damages under s 68 of the Supreme Court Act by the words in prayer 18 “damages pursuant to section 236 of the ACL and/or at law”. For the same reason, the words “such further or other order as this Honourable Court may deem fit” take the matter no further. In contrast, the words “and/or at law” are to be understood as meaning “and/or at general law”, in contradistinction with the claim to damages pursuant to statute which immediately precedes them.

29. [52]

    Turning to the approach of identifying allegations from various parts of the pleading which when taken together might comprise a case for damages for breach of contract, this is not a valid way of assessing whether a pleading discloses a particular case. It may be thought that it adheres, literally, with what was said by Barwick CJ in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 473; [1981] HCA 7:

30. [53]

    But that is not how modern pleadings (which is to say, pleadings after 1972 in this State) work. The argument advanced in this Court could not have occurred before Judicature pleadings were introduced, when it was necessary at common law to identify the cause of action. True it is that we now have “narrative pleadings”, but the basic idea is that the pleading must be adequate to disclose the cause of action on which the plaintiff sues.

31. [54]

    I return to the rule that it is necessary to plead specifically any matter which if not pleaded will take the other party by surprise. In Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135; [2002] NSWCA 44 at [20], Hodgson JA said with the agreement of Mason P and Handley JA that “[t]he general requirement to avoid surprise means that material facts must be stated in such a way that a defendant can understand the materiality of the facts, that is, how they are material to a cause of action”. His Honour went on to say at [21]:

32. [55]

    Those statements have regularly been applied: see for example GC NSW Pty Ltd v Galati [2020] NSWCA 326 at [41]; Davis v Veigel [2011] NSWCA 170 at [95] and Hooker v Gilling [2007] NSWCA 99 at [51]. This is antithetical to an approach where one scours the pleading seeking to piece together from various places the elements of a cause of action.

33. [56]

    Here it is tolerably clear that Joe sued on a claim for restitution of amounts overpaid and statutory unconscionability and deceit, and Matt was in the same position but without a claim for deceit. The pleader has, conventionally, grouped the allegations of material fact on which the statutory unconscionability is based, and on which the action for deceit is based, and separated the causes of action by the words “Further or in the alternative” to make it plain a new cause of action is being addressed. Nothing like this is done so as to articulate a claim for damages for breach of contract. Conspicuous by their absence is any allegation of loss or damage caused by the alleged breach of the building contract, or a claim that damages measured by lost rent were sought by Joe and Matthew for being kept out of possession of their land.

34. [57]

    I respectfully agree with the primary judge that the pleaded case does not disclose a claim for damages for breach of contract as opposed to damages for deceit or statutory unconscionability.

35. [58]

    Alternatively, the appellants maintained that, notwithstanding their pleading, the case had been run on the basis that a claim for damages for breach of contract was in play. When Mr Barham opened the case for the plaintiffs, he repeatedly said, at the commencement of his short opening, that one of the issues before the primary judge was whether damages were too remote. Thus he said that “there is a real issue in the case concerning whether or not the claims for lost rent are damages which are within the reasonable contemplation of the parties”. Following a submission that the intention to rent the premises was in the actual contemplation of the parties, counsel then added “but really, to say that it wouldn’t be within the reasonable contemplation of the parties that somebody builds a house and might rent it out is an ambitious submission in my respectful submission”. (I interpolate that there were no written submissions in advance of trial, although there had been a mediation. It is not clear from the appeal books on what basis counsel was alerting the primary judge to the issues which would arise, but what was said proved to be accurate.)

36. [59]

    “Reasonable contemplation of the parties” is the language of the test for remoteness in Hadley v Baxendale (1854) 156 ER 145 for damages for breach of contract. It is not the test for remoteness for damages for deceit: see Palmer-Bruyn and Parker Pty Ltd v Parsons (2001) 208 CLR 388; [2001] HCA 69 at [13], [64]-[65] and [114]. In this Court, Spigelman CJ, with whom Mason P and Grove J agreed, in TCN Channel Nine Pty Ltd v Anning (2002) 54 NSWLR 333; [2002] NSWCA 82 at [100] and [102] treated Palmer-Bruyn as standing for the proposition that with intentional torts, “reasonable foreseeability is not an element of the test for recoverable damages”. More recently, it has been said in relation to intentional torts that “foreseeability of harm has no role to play in limiting the injured party’s damages”: State of New South Wales v Spedding [2023] NSWCA 180 at [291]. Likewise, the rules in Hadley v Baxendale do not circumscribe the damages available following a contravention of the Australian Consumer Law. Speaking of s 82, the joint judgment of McHugh, Hayne and Callinan JJ observed that “[i]t contains no stated limitation of the kinds of loss or damage that may be recovered and contains no express indication that some kinds of loss or damage are to be regarded as too remote to be recovered”: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at [34], which is consistent with the provision extending to a wide range of contravening conduct, including each of innocent, negligent and fraudulent misrepresentation.

37. [60]

    No question of reasonable contemplation of the parties could arise in relation to the claim for deceit brought by Joe, nor for the claims of overpayments brought by both Joe and Matthew. And it is very difficult to see how any such question could bear upon the claim for damages for statutory unconscionability. On the other hand, it is squarely relevant to a claim for damages for breach of contract. On their face, the repeated references to whether rent was in the reasonable contemplation of the parties could mean nothing other than a claim for breach of contract where the damages were the amount of rent said to have been foregone.

38. [61]

    Counsel for the plaintiffs referred to the claim for damages for lost rent, and an objection which had been taken to the so-called expert evidence of a real estate agent and then added “Joe also brings a claim in respect of exemplary damages, because of the way that this is being undertaken. Now, he can’t get exemplary damages under a contract claim. You either get your contract breach or you don’t, but in a claim for deceit he can get damages, and I’ve estimated $50,000…”. That once again is only consistent with there being a damages claim for breach of contract.

39. [62]

    Counsel for Fowler Homes did not state that any claim for damages for breach of contract was outside the scope of the issues he was prepared to meet. In his brief opening, he said:

40. [63]

    Counsel thereafter returned to the question of rent:

41. [64]

    That opening on behalf of Fowler Homes did not deny a claim of damages for breach of contract but instead flagged that the requirements of Hadley v Baxendale would not turn out to be satisfied.

42. [65]

    During the course of ruling on an objection in Matthew’s cross-examination, in the absence of the witness, there was a wide-ranging exchange one aspect of which had Fowler Home’s counsel reiterating his understanding of the case, and that aside from the disputed $60,000 payment in cash, there were other issues as follows:

43. [66]

    During Joe’s cross-examination, there was the following exchange directed to the same point:

44. [67]

    Similarly, Mr Grippaudo was cross-examined on the same point:

45. [68]

    At the conclusion of the evidence, a timetable was ordered for the exchange of written submissions, following which the parties would return for a day of oral addresses. Joe and Matthew provided their written submissions first, and contended:

46. [69]

    The submissions returned to loss of rent at [150]. After referring to the cross-examination where the principal of Fowler Homes conceded that the dwellings would not be left empty, the submissions stated “loss of rent was a loss which flowed naturally from a breach and, in any event, was obviously within the reasonable contemplation of the parties. It is a very long way from being too remote”.

47. [70]

    In Fowler Homes’ written submissions, referring to the claimed loss of rent, it was said that:

48. [71]

    Pausing there, it must be acknowledged that that is an unequivocal assertion by Fowler Homes that the claim for damages by way of loss of rent was confined to allegations of deceit and statutory unconscionability. However, the submissions went on to address contract. The submissions warrant extensive reproduction (to which I have added emphasis):

49. [72]

    These submissions proceeded, incorrectly, on the basis that the claim for damages for breach of contract depended upon the incorporation of a term concerning the provision of the completed dwellings for rent into the contract. They did not address, at least not in terms, the proposition that the loss of rent was put forward as a basis for calculating damages consequent upon Fowler Homes’ breach of the promise to complete the dwellings in 48 weeks. But significantly, far from contending that a claim for damages for breach of the contract was outside the scope of the trial, they sought to refute the claim on its merits.

50. [73]

    Joe and Matthew supplied written submissions in reply, in which they maintained a claim in damages for breach of contract:

51. [74]

    Unsurprisingly, when the parties returned to Court on 1 February 2023, this issue arose. When counsel for the appellants referred to Hadley v Baxendale, there followed this exchange:

52. [75]

    The exchanges continued along similar lines, with the primary judge expressing the firm view that the claim was not in the pleadings. When counsel for Fowler Homes addressed, he returned to the point that an ability to rent had never been a term in the contract, and pointed to the difficulties in the evidence facing the implication of such a term:

53. [76]

    It will be seen that even though counsel agreed with the primary judge, he nonetheless proceeded to address on the basis that a claim for damages for breach of contract, while it was “not … clearly pleaded in that way”, and was not the cause of action which led most directly to the claimed loss of rent, was nonetheless a cause of action which was to be addressed on its merits, on the basis that the loss was “not a natural loss that would flow from a contract”.

54. [77]

    Counsel for Fowler Homes continued, elaborating on the subject:

55. [78]

    This exchange is also revealing. Counsel was proceeding on the basis that in order for a damages claim for lost rent to succeed, it was necessary for there to be a term in the contract that rent would apply, rather than lost rent being precisely the sort of damage to be expected from delayed construction of two duplexes comprising four dwellings. But putting that to one side, counsel’s elaborate submission is directed to how the plaintiffs had failed to establish any case for damages for breach of contract, leaving it to the judge to return to the way that the pleading only made out claims for damages in unconscionability and deceit.

56. [79]

    Counsel for Joe and Matthew returned to the issue, and maintained that a sufficient case had been pleaded, by reference to the paragraphs, doing so at some length, which was probably the reason for the primary judge then saying, very firmly:

57. [80]

    Thereafter, counsel for the plaintiffs flagged an application to amend “on the basis of what has been pleaded, on the basis of the way the case has been run and opened, if that’s your Honour’s view”. Counsel for Fowler Homes flagged his opposition. Thereafter, counsel for the plaintiffs sought and obtained a 10-minute adjournment to get instructions about the proposed amendment, stating that if his instructions were not to proceed, he would not waste the Court’s time. Following a short adjournment, counsel advised, “having considered the matter and heard what your Honour had to say, I’m not instructed to make that application”.

58. [81]

    Fowler Homes said that the case that was run did not extend to one which included a claim for damages for breach of contract. Further, Fowler Homes contended that considerable legal significance attached to the decision not to seek an amendment. It is convenient to deal with this latter point immediately.

59. [82]

    Fowler Homes said that Joe and Matthew should have made the application to amend, as a result of which there would have been a ruling, from which the disappointed party could appeal. It is true that the failure to make an application meant that there was no ruling, but I cannot agree that the forensic decision not to make the application stands in the way of, or indeed in any way affects, the answer to either aspect of this ground. In particular, I do not accept Fowler Homes’ submission that “by then not making the amendment application, that can also be understood as the plaintiffs accepting that that part of the claim was not part of the pleaded case”. As was pointed out by members of this Court at the hearing, and by Mr Herzfeld in reply, either the pleadings disclosed a cause of action for damages for breach of contract or they did not, and if they did not, then either the trial had been conducted in such a way that that case was in play or it was not.

60. [83]

    It is tolerably plain that counsel for Fowler Homes regarded as a live issue whether foregone rent was recoverable damages, or something which was outside the scope of what the company had promised. In addition to opening on the point, he cross-examined on that basis, and even after the exchange of written submissions and after his opponent had been confronted by the primary judge with the proposition that it was outside the pleadings, continued to address on why there could be no contractual obligation to pay damages for lost rent.

61. [84]

    Conversely, at no stage was it said on behalf of Fowler Homes words to the effect that “although my opponent keeps referring to Hadley v Baxendale, we are here to defend the claims advanced on the pleadings, which are claims for damages based on statutory unconscionability and, in the case of Joe, deceit, and there is no claim for damages for breach of contract”. To the contrary, Fowler Homes engaged with the issues of reasonable foreseeability, in opening, in cross-examination and in closing address.

62. [85]

    “Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted”: Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 287; [1990] HCA 11. Here, each counsel explicitly opened and cross-examined on the basis that whether foregone rent was within the parties’ expectations was in issue. That question was unequivocally referable to a claim for damages in that amount for the delayed performance by Fowler Homes.

63. [86]

    The position may be summarised thus. Joe and Matthew were plainly advancing a claim for lost rent; the affidavits sworn by the real estate agent had no other purpose. Joe and Matthew were also plainly advancing a claim for breach of contract; even if that was not clear from prayer 4 in the summons, it was explicit in the carve-out from the claim for exemplary damages. It is clear that one of the breaches alleged was that Fowler Homes took too long to complete. Most importantly, in both sides’ openings and in both sides’ cross-examination, both sides engaged explicitly with whether the lost rent satisfied the first limb of Hadley v Baxendale. Even in final address Fowler Homes did not unequivocally resist the claim. I would conclude that this trial was conducted in a way to extend to such a claim.

64. [87]

    Counsel for Joe and Matthew submitted to the primary judge that this claim was within the case as run, even if it was outside the pleadings. That submission was not addressed by the primary judge. It should have been addressed, and having regard to the conduct of the trial, it should have been upheld. I have concluded that this ground is made out.

Was the lost rent proven?

1. [88]

   These grounds of appeal may be addressed much more concisely. They have two components. The first concerns a challenge to the rejection by the primary judge of the entirety of affidavits sworn by Mr Nick Alexopoulos in each proceeding. He was an experienced real estate agent operating in the area who purported to give expert evidence of the likely rentals which the completed dwellings would achieve. His opinions were scarcely supported by reasoning, and mentioned no comparables. The entirety of his report was excluded on the basis that no reasoning was disclosed, in accordance with Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305.

2. [89]

   In this Court, it was not suggested that there was error in rejecting that evidence as expert opinion evidence. Instead, Joe and Matthew submitted that Mr Alexopoulos was more than an expert witness. It was said that substantial parts of his evidence should have been admitted as evidence of primary fact. For Mr Alexopoulos said that he had met the appellants in around 2013 when he had acted as the selling agent for Joe on a property. He said “Joe and I quickly became friendly and have stayed in touch since”. He gave evidence of a conversation in January 2019 where he gave an estimate of the likely rentals for two duplexes on each of the properties which were “going to be four bedders with two bathrooms and single garages” but with high level finishes. He also gave evidence of his conduct in actually marketing the properties for rent in April 2021, and annexed leases which had been entered into over the properties.

3. [90]

   In this Court, Joe and Matthew contended that so far as the real estate agent gave evidence of what in fact had happened, both before and after the dwellings had been completed, that was evidence that bore upon the likely rents: in the case of the evidence before, as admissible evidence bearing upon the rents to be achieved, and in the case of the leases, at least insofar as they were arms-length transactions, they were capable of bearing upon the rentals that would have been achieved had completion occurred in accordance with the contract. No such submission was made at trial.

4. [91]

   Further, in this Court – in contrast to the position below – it was conceded that the properties had some value for rent. Mr Bedrossian, who led Mr Stitt in this Court and had not appeared below, conceded candidly:

5. [92]

   It was refreshing and appropriate in this litigation about a relatively small amount of money for concessions to be made so as to permit attention to be given to the real issues dividing the parties. The fact that both sides accused the other of fraud did not relieve the parties nor their lawyers from the obligations in s 56(3) and (4) of the Civil Procedure Act 2005 (NSW). I would have reached all of the conclusions conceded by Mr Bedrossian.

6. [93]

   I see no error on the part of the primary judge in rejecting Mr Alexopoulos’ testimonial evidence concerning rents which he said he discussed with Joe before the contracts were performed, which were only tendered as expert evidence, and it is too late now for that evidence to be adduced. But the leases of the actual land were admissible as bearing upon the evidence of the rent the same dwellings built on the same land would have achieved had they been completed some months earlier.

7. [94]

   More generally, this is not a case where the plaintiffs should fail on the basis that they had not proven loss. The principles were summarised by Black J in Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 31 at [41]-[42]. In short, the Court must do the best it can to make a reliable assessment of damages, where damages are difficult to assess, including where a party has failed to lead the best evidence of damages: Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83, 125, 153; [1991] HCA 54. In Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 at [135], Beazley JA with whom Basten JA agreed said that:

8. [95]

   That said, where damages were susceptible of evidentiary proof, but there is an absence of raw material to which good sense may be applied, “[j]ustice does not dictate that … a figure should be plucked out of the air”: Troulis v Vamvoukakis [1998] NSWCA 237. Likewise, in McCrohon v Harith [2010] NSWCA 67 at [128], this Court said that an estimate of damages, in the nature of a “guess”, should not be made where precise evidence of the damages suffered could have been adduced but was not.

9. [96]

   Thus the law draws a distinction between cases of mere difficulty in proving damages, which must often be assessed on a counter-factual basis, and cases where damages are refused because the position is too speculative. In such cases it is important to have regard to the capacity of the plaintiff to adduce evidence, and how truly speculative the loss is. In the present case, the plaintiffs sought to adduce testimonial evidence of the man who let the very properties when it became possible to do so, not to mention the leases themselves, while the defendants adduced no evidence at all. And it is perfectly plain that there was some loss occasioned by the continued dispossession of the plaintiffs from their land, and far from being complicated, the quantification of lost rent turns on a small number of integers, principally, the number of weeks and the weekly rate. The rents on the leases actually entered into remove this case from being one where there is an absence of raw material on which to base a figure. Further, the leases in evidence demonstrate that the premises were let promptly after they became available. I consider that the case is the opposite of the sort of case where a plaintiff who is otherwise entitled to succeed for breach of contract should fail by not having established loss, and the primary judge erred in buttressing his decision by way of fallback on the failure to establish loss.

10. [97]

    This ground is made out. I will turn below to the quantification of loss.

The liquidated damages clause

1. [98]

   By notice of contention, Fowler Homes sought to rely upon the liquidated damages clause of $1 per day, if Joe and Matthew were regarded as having run a case for damages for breach of contract and have proven substantial damages. For the reasons indicated above, I have concluded that Joe and Matthew have established both of those premisses.

2. [99]

   No point was taken that the effect of upholding the notice of contention would not, strictly, be to affirm the decision on grounds other than those relied on below, without seeking “a discharge of variation of any part of the orders of the court below”, within the meaning of UCPR r 51.40. Acceptance of this point would have the effect of substituting for Fowler Homes’ complete success on this issue a judgment in the order of $600 or $400 ($1 per day from either July 2019 or January 2020 until April 2021). But the basic principle is that the rules of court are the servants of justice, not its masters (see for example Hodder Rook & Associates Pty Ltd v Genworth Financial Mortgage Insurance Pty Ltd [2011] NSWCA 279 at [38]). The notice of contention was a perfectly appropriate way of flagging what was an alternative defence to the substantial entirety of Joe’s and Matthew’s claim.

3. [100]

   The liquidated damages clause had not been pleaded. Joe and Matthew said that it could not be relied upon in the appeal, because if it had been relied upon, it would have been contended that it was unenforceable pursuant to the Contracts Review Act 1980 (NSW), and that would have required the Court to make factual inquiries which were not made. I think that point is sound. Prima facie, a clause which disentitles a party from claiming substantial damages from its builder for the builder’s breach is capable of being “unjust” within the meaning of the Contracts Review Act, there is no reason to doubt that Joe and Matthew would have responded in some way to a claim that any damages to which they were entitled for delay were limited to $1 per day, and if they relied on the Contracts Review Act there is a range of factual considerations in s 9(2) regard to which would have been mandatory. They included the extent to which this aspect of the contract was negotiated, whether or not it was practicable to do so, whether the clause was reasonably necessary for the protection of the legitimate interests of Fowler Homes, and whether the effect of the clause was explained to Matthew and Joe. All of this would have affected the testimonial evidence of Joe, Matthew and the cross-examination of Mr Grippaudo; cf Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33.

4. [101]

   Secondly and in any event, Joe and Matthew said that the liquidated damages clause, properly construed, did not prevent a claim for such damages for delay as an owner might prove. They relied on the reasoning in Baese Pty Ltd v RA Bracken Building Pty Ltd (1990) 6 BCL 137 at 140, where Giles J referred to his view that “clear words” would be required “before it was held that a liquidated damages clause was the entirety of a proprietor’s rights”. The clause in that case specified damages of “nil”. In Baese the result was reached merely as a matter of construction, but they also relied on Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021 at [29]-[32], a decision which involved the invalidating effect of s 18G of the Home Building Act 1989 (NSW), and in particular the following portion of Ball J’s reasoning:

5. [102]

   That decision post-dates the particular contracts into which Joe and Matthew entered, and the HIA form on which they were based (the evidence did not establish whether, in light of the decision, the standard contract has been varied). An earlier decision to the same effect is the decision of the Western Australian Court of Appeal in J-Corp Pty Ltd v Mladenis [2009] WASCA 157. Clause 11.9 in the contract in that case provided that if the builder did not complete the works on time, “it shall be liable to pay the Proprietor liquidated damages at the rate of NIL DOLLARS ($0.00) per day”. That clause was construed as not standing in the way of the owner’s entitlement to prove unliquidated damages in the event that the builder breached its obligation to complete within the time specified. The leading judgment was given by Newnes JA, with whom Buss and Miller JJA agreed. His Honour’s essential reasoning was that there was no clear intention to exclude an entitlement to claim and prove unliquidated damages, and the two were distinct:

6. [103]

   His Honour also had regard (at [53]-[54]) to the disparity between the remedies for breach given to each side:

7. [104]

   In opposition to these submissions, Fowler Homes said that there was an important difference between $1 per day, and $0 per day, which entitled this Court to depart from J-Corp, drawing attention to the statement that the position might be different where the builder is liable for liquidated damages “in a positive amount”. I am unpersuaded, even assuming, favourably to Fowler Homes, and in accordance with the appellants’ submission, that the clause made provision for $1 per day rather than $0 per day. To accept that submission would amount to a triumph of form over substance, in an area where the law’s concern is directed to the circumstances in which basic rights are regarded as having been taken away by the parties’ contract, which is to say, an area which turns on questions of substance rather than form. The qualification in Newnes JA’s reasoning does not apply to a liquidated damages clause in a nominal, albeit non-zero, amount.

8. [105]

   Fowler Homes also criticised the reasons given by Ball J, contending “it is a different point to say a warranty is to be excluded as opposed to breach of warranty is to result in an agreed outcome, an agreed damages amount”, and that the “reasoning identifying that a stated amount of $1 being so small is effectively an exclusion of the benefit of the warranties is not right”. I cannot agree. The point of a liquidated damages clause in a trifling amount, whether it be $0 or $1 per day, is that this is utterly negligible compared to the contract price, and for that reason the law treats the parties’ bargain carefully, requiring clear language before the entirety of a party’s basic right is treated as having been abrogated.

9. [106]

   I respectfully agree with the reasons of Ball J. I am also unpersuaded that J-Corp is distinguishable, and I am far from persuaded that there are compelling reasons not to follow it. I see no reason for the clause in a HIA contract, which already contains a provision giving an automatic extension in favour of a builder for every day’s delay in making progress payments, and other provisions for delay outside its control, to leave an owner with a nominal return in circumstances where the builder fails to adhere to its promised timing and the owner can establish loss caused by the builder’s delay.

10. [107]

    Accordingly, I conclude that Joe and Matthew are correct for both reasons: Fowler Homes should not be permitted to rely on the clause for the first time in this Court, and in any event it does not prevent Joe and Matthew from establishing proven loss consequent upon Fowler Homes’ delay. Contrary to Fowler Homes’ notice of contention, I would not uphold the substance of the judgment of the primary judge based on the liquidated damages clause of $1 per day.

Was there error in rejecting Joe’s claim that he paid $60,000 in cash?

1. [108]

   Joe at all times maintained that he had paid part of the consideration, in the amount of $60,000, in cash. In his affidavit, he described a conversation at the beginning of July 2018, in which he and Mr Grippaudo agreed that $60,000 would be paid in cash, following which, a few days later, Mr Grippaudo visited him at home where Joe had the cash ready to hand in $10,000 bundles, comprising four bundles of $100 notes and two bundles of $50 notes, which he placed in a plastic bag from Woolworths. He said that Mr Grippaudo did not want to count it, and that on around 27 November 2018, he received a receipt, in the amount of $59,963.95.

2. [109]

   Joe said that he had told Mr Grippaudo that he would need a receipt “because I need to show the bank that I paid the deposit”. Joe Carbone said that he had considerable amounts of cash from time to time because he was a member of various casinos, where he was considered a “high roller”. Annexed to his affidavit were photographs of the displays of poker machines, showing substantial amounts in credit. All were undated save for one, which showed a payout from Crown Casino Melbourne of $14,300 in March 2017.

3. [110]

   Mr Grippaudo denied receiving any cash payments from Joe Carbone. He said that some clients did pay amounts in cash, although never as much as $60,000, and he invariably banked those amounts.

4. [111]

   Such strength as there is in Joe’s allegation derives from an email dated 27 November 2018 by Ms Michelle Franic, whose email signature described her as a “team assistant” with Fowler Homes, to Matthew annexing, among other things, a receipt of the same date, referring to the land owned by Joe and stating that $59,963.95 described as “part payment received for frame” had been received. The email advised that Ms Franic had completed the progress payment request form required by RAMS, and they were attached. It also stated that:

5. [112]

   By letter dated 10 August 2018, RAMS (the non-bank lender which had promised to fund Joe’s and Matthew’s construction costs) had advised Joe that he could authorise his builder to commence construction. RAMS had approved a building contract in the fixed price of $651,541, and was providing $559,000 for construction. The balance to be provided by Joe, of $92,541, comprised a deposit of $32,577.05 and a partial payment for the frame of $59,963.95.

6. [113]

   The point of Ms Franic’s email was that when RAMS was satisfied that the entirety of Joe Carbone’s contribution had been paid, it would release its funding, including (it may be inferred, immediately) the remaining $70,344.25 for the frame. That is what happened. At some stage shortly thereafter, the receipt and other documents completed by Fowler Homes were supplied to RAMS and Fowler Homes received $70,344.25 on around 5 December 2018.

7. [114]

   Joe said that this 27 November receipt for $59,963.95 was the (belated) receipt for the $60,000 in bank notes he had given to Mr Grippaudo some four months earlier.

8. [115]

   Notwithstanding the receipt issued by it on 27 November, Fowler Homes denied ever receiving $60,000, or for that matter $59,963.95, from Joe Carbone or anyone else. Mr Grippaudo said that he was prevailed upon by Joe Carbone to issue the receipt on the basis that there was an urgent need for funds and that someone on behalf of Fowler Homes was told, wrongly, that payment was delayed in the banking system. Despite counsel’s attempts to paint this in a charitable light, there is no way of avoiding the conclusion that someone (it may not have been Mr Grippaudo, to be clear) had, if Fowler Homes’ case were to be accepted, used a false document with the intent of causing RAMS to pay money to Fowler Homes.

9. [116]

   The primary judge rejected Joe’s account. In part that was based upon an assessment of his demeanour as a witness, and Mr Herzfeld very properly made no attempt to cavil with that.

10. [117]

    In part, his Honour relied upon the unlikeliness that Joe would not require an immediate receipt from Mr Grippaudo. There is no answer to the force of that proposition. It is unusual and excites suspicion to pay a relatively large amount of money in banknotes. But to do so with no witness, with no photograph, with no receipt, and indeed on Joe’s case without Mr Grippaudo even counting the money, is so conducive to controversy as to be implausible. Why would Joe be so unconcerned as not to take any of the steps available to him to corroborate the payment?

11. [118]

    The primary judge also regarded the attempt to demonstrate that Joe had substantial winnings from casinos as “derisory”. Despite Mr Herzfeld’s submissions to the contrary, no basis had been made out to interfere with the factual findings. No records from any casino were tendered to establish payouts. None of Joe’s financial records were tendered. True it is that Joe said that he did not deposit his poker machine winnings into a bank (why precisely that might be so is unclear; he maintained that he was not a professional gambler, so if in truth in some years he improbably profited from gambling, those profits would not contribute to his taxable income). Ultimately, the primary judge found that “[i]n short, I consider the explanation that the cash gambling winnings were available to fund the cash advances to be untrue”. That is unavoidably a conclusion adverse to the credit of Joe, and one squarely based upon an assessment of his evidence while cross-examined on that point. No basis has been made to interfere with it.

12. [119]

    Mr Herzfeld then maintained that the source of the funds was not so much to the point, and that Joe (a concreter) gave evidence that he did some jobs for cash. True it is that the ultimate issue is whether $60,000 was deposited by way of part payment of Fowler Homes, but the circumstance that it was paid in cash, and the basis upon which Joe Carbone maintained that he had relatively large amounts of cash in his premises when Mr Grippaudo called upon him, bore directly upon the plausibility or otherwise of that account.

13. [120]

    There was also in evidence an account of a discussion between the two men in 2017, a year earlier, concerning the possibility of a loan of $100,000 or less in connection with Mr Grippaudo’s divorce. Mr Herzfeld submitted that the primary judge had confused two incidents involving, coincidentally, the same amount of money being paid in cash. I did not understand Fowler Homes to seek to defend that aspect of his Honour’s reasons, and in relation to that issue, I think Mr Herzfeld is correct. But that does not entitle this Court to set aside a finding which was supported on a number of other independent bases. The primary judge relied upon a great many other independent considerations in his assessment of Joe’s credit.

14. [121]

    Mr Herzfeld also emphasised that at trial, where this claim was advanced as an essential aspect of Joe’s claim in deceit, the strictures in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and s 140 of the Evidence Act 1995 (NSW) applied, and were explicitly and appropriately invoked by the primary judge. In contrast, on appeal where the only question was whether the payment was made, this Court ought more readily be satisfied that the evidence attained that standard. I am far from sure whether that reasoning is correct, but it is sufficient to proceed on the basis most favourable to Joe. Even putting to one side the adverse assessment made by the primary judge based on Joe’s appearance in the witness box, his claim is not made out. The point of making a payment in cash is that the ordinary contemporaneous documents which establish the payment are absent, something which is self-evident to payer and payee, and heightens the importance of securing a witness or a photograph or a receipt. It is inherently improbable that no receipt was sought. It is inherently improbable that Joe would make such a payment without taking steps to corroborate what he had done. It is inherently improbable that Mr Grippaudo would leave without counting the money, or that Joe would let him do so. Even the details are problematic: Joe said that there were six bundles, each of $10,000, four bundles of $100 notes and two bundles of $50 notes. But that would make the $50 bundles twice as large as the $100 bundles, which seems improbable and impracticable.

15. [122]

    As the primary judge said, the tribunal of fact must feel an actual persuasion of a fact’s occurrence or existence before it can be found, and it cannot be found as a result of a mere mechanical comparison of probabilities independent of any belief in its reality: Briginshaw v Briginshaw (1938) 60 CLR 336 at 361. As was recently observed by this Court, proving that undocumented payments of large sums of cash were made is fraught: Slaveski v Nanevski Developments Pty Ltd [2023] NSWCA 145 at [36]-[37]. I am unpersuaded that there is any error in the rejection of Joe’s claim that he paid $60,000 in banknotes towards the price of his dwellings.

The provisional amounts

1. [123]

   These final grounds in each appeal concern amounts of $20,000 which were originally included as a “Provisional Allowance” in each contract. The “New Homes Tender” was incorporated into the contracts, and that document identified a “Provisional Allowance” of $20,000 for a range of matters including s 94 contributions. It was common ground in this Court that the s 94 contributions, which were in fact of $30,000, were paid by Joe and Matthew directly, and not by Fowler Homes. Joe and Matthew said that they should have had the benefit of the $20,000 provisional amounts when the referee was preparing his report. Joe and Matthew said that they should have been included, and were not included because of an incorrect direction from the primary judge.

2. [124]

   The referee’s report stated:

3. [125]

   Paragraph 44 of the principal judgment is as follows:

4. [126]

   On that basis the referee excluded the $20,000 provision from the calculations which led to an amount to which Matthew was entitled.

5. [127]

   The respondents did not seek to defend this aspect of the reasons of the primary judge. They made two points in response. The first was that the inclusion of an amount by way of “provisional sum” created no contractual entitlement, and “[a]bsent an invoice from the Respondent seeking payment of that $20,000 amount, there was no obligation against which any credit could be (or would need to be) applied. There was no evidence of any such invoice”. Secondly, by way of notice of contention, they submitted that the contract had been varied by Building Variation 7 (in the case of Matthew) and Building Variation 11 (in the case of Joe). The effect was to delete item 34 from the scope of the contract. Consequently, it was submitted that “[t]he conclusion reached by the learned Trial Judge at PJ [44] was correct, albeit also for a reason different to that identified by his Honour.”

6. [128]

   Joe and Matthew rejected both alternative bases propounded by Fowler Homes. First, they said that they had to pay progress claims, but the absence of a progress claim did not disentitle their claim to a credit when the final position was determined. Secondly, they accepted that the variations were made, but observed that when they were made, credits of $20,000 were applied by Fowler Homes to the benefit of Joe and Matthew. They then observed that “because of the primary judge’s direction to the referee based on his Honour’s incorrect conclusion, those credits were excluded by the referee”.

7. [129]

   I think the appellants are correct on this issue. There were payments between owner and builder in response to invoices, but that did not affect the operation of cl 20.6 of each contract, which provided that if the actual price for a provisional cost item was less than the allowance, then “the difference is deducted from the contract price”. Each of Joe and Matthew had paid a s 94 contribution to Council (in fact, of $30,000), rather than Fowler Homes doing so. The appellants said, and Fowler Homes did not deny, that no other works were put forward as the price of the components which contributed to item 34.

8. [130]

   Had the contracts not been varied, it follows that cl 20.6 would have entitled each of Joe and Matthew to a credit of $20,000. The variations removed item 34 from the scope of the contracts, but when that occurred, a credit was given by Fowler Homes to the owners of $20,000. That achieved the same effect as cl 20.6 would have had.

9. [131]

   The task for the referee was to determine, in light of the progress payments which had been made, the works which had been done, and the variations to each contract, what amounts ultimately were owed by Fowler Homes to each of Joe and Matthew. For the reasons above, that should have included amounts of $20,000 in each case. However, the referee, in compliance with the directions from the District Court, did not do so.

10. [132]

    This ground is made out.

Orders

1. [133]

   The appellants’ primary case was that damages for lost rent should accrue from July 2019, on the basis that thereafter Fowler Homes was in breach. It was said that the fact that after the parties fell into dispute there were disputes about payment was the wrong counterfactual, and instead the Court should ask what position Joe and Matthew should have been in had everything been performed properly and completed by July 2019. I do not accept this.

2. [134]

   First, it is clear that Joe was in breach of his obligations to pay progress payments. It is sufficient to point to the email of 27 November 2018 attaching the receipt which was to be used to cause RAMS to make the next payment. The email commences:

3. [135]

   It goes on to say: (emphasis in original)

4. [136]

   The contract draws a distinction between the automatic extension of time given to Fowler Homes whenever a progress payment was not made within five days of the due date (special condition 9) and the power of the builder to suspend work under cl 25. The latter required notice (cl 25.2) while the former was automatic.

5. [137]

   Further, the referee observed that from his review “Joe consistently paid the defendant’s claims late”.

6. [138]

   I am unpersuaded that Joe paid all of the amounts required to be paid by him on time. It is not quite clear to me whether the primary case advanced on behalf of Joe was independent of his achieving success on the payment of $60,000 in cash; my impression was that case was advanced, but only relatively lightly. Once Joe’s claim that he paid $60,000 in cash is rejected, it is tolerably clear that he was in breach of his obligations to make payments, and the automatic extension of time effected by special condition 9 applied. (I am likewise unpersuaded that Fowler Homes waived its entitlement to an automatic extension under special condition 9, a point I mention only for completeness because I did not understand this to be made by way of fallback.)

7. [139]

   Accordingly, I am unpersuaded that Joe was entitled to possession at any time earlier than he obtained it. At all times prior to April 2021 (and indeed to date) Joe continued to owe Fowler Homes money due under the contract, which the latter chose not to recover from him by cross-claim. This is unaffected by Joe’s success on the provisional allowance of $20,000, because it has not been established that that small success left him in a position of having overpaid Fowler Homes even without the purported cash payment of $60,000. Accordingly, Joe has no claim for damages for rent foregone because special condition 9 produces the result that Fowler Homes was not in breach of its promise to build the duplex by July 2019, but instead obtained the benefit of a deemed extension.

8. [140]

   I turn to Matthew. The referee found that Matthew had in fact overpaid Fowler Homes, by $21,579, and there is no challenge to the adoption of his report. Matthew’s last progress payment was in the amount of $61,303.40 on 29 January 2020. Accordingly, no later than 29 January 2020, he had paid Fowler Homes in full.

9. [141]

   The referee found that the second last payment made by Matthew was in the amount of $183,910.20, and was made on 11 July 2019. However, on 9 May 2019, Fowler Homes sent an email to Matthew attaching an invoice for that claim (as well as a similar invoice for Joe’s contract). The email said “Please forward to Rams as soon as possible as payment is now well overdue (29/03/2019)” (original emphasis). The attached invoice was dated 22 March 2019, and requested payment within 7 days. The March date on the invoice reflected the contractual date, but it is sufficient to note that Matthew did not pay within 7 days of 9 May 2019, and did not pay for another two months. On any view of the matter, Matthew was two months late in paying that invoice, and during that period, special condition 9 applied.

10. [142]

    The referee’s report addresses Matthew’s payments at pp 16-24. It states that based on his review of the information (which included the RAMS statements and the accounting material provided by Fowler Homes) “Matthew consistently paid the defendant’s claims late”. The documents supporting this conclusion appeared not to be in the appeal books. The referee calculated interest owed by Matthew to Fowler Homes, but the calculations (which were in Schedule C to the report) were also not included in the appeal books.

11. [143]

    Thus it is clear that Fowler Homes had the benefit of at least a two month automatic suspension pursuant to special condition 9 in relation to the second last payment made by Matthew. That means that the primary case advanced on his behalf, that he was entitled to possession from July 2019, cannot be upheld. The appellants did not advance an intermediate case, or invite this Court to determine some time between July 2019 and February 2020 when Fowler Homes was in breach but Matthew had paid in full. For that reason, Fowler Homes has not been heard on any such case.

12. [144]

    Further, the referee stated that Matthew was consistently late, and had subtracted amounts of interest from the amount determined to be owing to Matthew by Fowler Homes. Those calculations are not available to me to review.

13. [145]

    I think it is likely, based on the limited material available to me, that the operation of special condition 9 denied Matthew of any entitlement to rent prior to February 2020. The only reason I cannot be certain is that material which was tendered at trial has not been made available to this Court. But it is certain that, having regard to the way his appeal has been prepared and presented, Matthew is not entitled to damages for lost rent from July 2019, and thus he should be held to be entitled to the only other claim presented on his behalf, namely, rent from the period when he made his final progress payment until when he obtained possession, in April 2021.

14. [146]

    The question then is to quantify the damages to which he is entitled, for the period from February 2020 to April 2021. Fowler Homes said, although without any great conviction, that in this eventuality, there should be a remitter. However, this Court will not order a new trial on any issue unless it is inappropriate for it to exercise its own powers, which extend to making findings of fact under s 75A of the Supreme Court Act. The amount at stake is relatively small; indeed it may fairly be said to be miniscule compared to the resources which have been devoted to this litigation by the parties.

15. [147]

    I referred above to the leases which Fowler Homes in this Court (taking a less unconstructive approach than had been taken at trial) conceded were capable of providing some evidence of the rent which Matthew would have derived for the period from February 2020 until April 2021. One of the duplexes was leased on 4 May 2021 for six months at $600 per week. The leases of the duplexes built on Joe’s land next door were at $580 per week, and commenced on 7 May and 21 May 2021. There was evidence that Matthew’s other dwelling was leased to a friend of Joe’s and that Joe paid rent at $580 a week to Matthew.

16. [148]

    The appellants’ written submissions proffered a rent of $550 per week, for a period of approximately 63 weeks from February 2020 until mid-April 2021, which equated to $34,650. The respondents in their written submissions did not cavil with those calculations, but instead said the calculations were a “moot point” because the claim had not been pleaded, the liquidated damages clause would have excluded such a claim, and the appellants had not established a delay which constituted a breach of contract.

17. [149]

    It is notorious that rents in Sydney have been increasing sharply in recent years, and so the rents in leases entered into in May 2021 will be higher than the market rent for the period from February 2020 until May 2021 to which Matthew is entitled. The calculations in the written submissions are also based on a higher weekly rental than was particularised, for it will be recalled that the pleading included, albeit in the claim of damages for deceit, that Joe had “been denied rents, estimated at $500 net per week”. Doing the best I can on the state of the evidence, I would assess Matthew’s damages at $500 per week over a period of 63 weeks. The product is $31,500.

18. [150]

    Accordingly, I turn to orders. Although some grounds of Joe’s appeal have been made out, no basis has been established to vary the judgment entered against him. His appeal should be dismissed.

19. [151]

    The judgment in Matthew’s favour, in the amount of $21,759, should be varied by replacing it with a judgment in the amount of $73,259 (reflecting his success on the provisional amount of $20,000 and lost rent of $31,500). The effect of this Court’s orders varying the judgment of the District Court is that post-judgment interest will run from 10 November 2023, which is when the judgment in that amount should have been entered. (There appears to be a slip in the orders, which invokes s 100, rather than s 101, for post-judgment interest, to which the orders I propose will attend.) However, if nothing more were done, Fowler Homes would lose its entitlement to discharge the entire judgment debt within 28 days without being subject to post-judgment interest. Accordingly, the orders I propose will permit that to occur. So far as I can see, it is unnecessary to vary any other substantive orders made by the District Court.

20. [152]

    Understandably, the parties sought to be heard further as to costs. The orders I propose will permit that to occur. In relation to the (much smaller) costs of the appeals, bearing in mind (a) the abandonment of around half of the grounds by the appellants’ submissions in reply, (b) the failure of Joe’s appeal, (c) the reality that in substance there was one set of costs on each side despite there being two appeals, and (d) the modest success achieved by Matthew, there may be much to be said in the absence of any offers or Calderbank correspondence for the appropriate order as to costs of the appeals being that there be no order as to costs with the intent that the parties bear their own costs. I shall say nothing of the costs of the trial, save to say that it is difficult to see that there is a basis for altering the orders as to costs in the proceeding brought by Joe, and that it is difficult to avoid the conclusion that both sides permitted costs to be incurred disproportionately to what was at stake. Nonetheless, the orders I propose will permit all parties to be heard as to all aspects of the exercise of the costs discretion, in this Court and at trial.

21. [153]

    I propose these orders:

22. [154]

    MITCHELMORE JA: I agree with Leeming JA.