Construction & Design Australia Pty Ltd v Robinson (No 2)

1. [1]

   Nerida Robinson and Mark Bowmer, who I will call the “Owners”, purchased a vacant block of land in Kiama in September 2017.

2. [2]

   The property is deeply sloping in parts and has spectacular views, including to the Pacific Ocean.

3. [3]

   The Owners approached a number of builders concerning the possible construction of a home on the property.

4. [4]

   Ultimately, in July 2018, the Owners approached the plaintiff, Construction & Design Australia Pty Ltd, who I will call the “Builder”.

5. [5]

   The two directors of the Builder are brothers, Daniel Turnbull and Gerard Turnbull.

6. [6]

   The Owners commissioned the Builder to prepare a design for a home to be constructed on the property. The Builder did so. The local council gave development consent in respect of the proposed dwelling on 31 January 2019.

7. [7]

   On 15 February 2019, the Builder and the Owners entered into an HIA NSW Residential Building Contract for Works on a Cost Plus Basis (the “Contract”). The Contract obliged the Builder to construct a “two storey dwelling with detached garage, pool, retaining walls and garden shed”.

8. [8]

   Work commenced in March 2019.

9. [9]

   Work progressed until September 2019, when the Builder suspended works.

10. [10]

    By then, the Owners had paid the Builder some $550,000. The lower floor structure works, and ancillary works, including excavation, were then complete.

11. [11]

    The Builder terminated the Contract on 6 February 2020.

12. [12]

    There is no dispute that the Builder was entitled to suspend the works and terminate the Contract.

13. [13]

    The Builder claims that the Owners are obliged to pay it a further amount in the order of $270,000, as well as damages for loss of profit, and seeks to recover those amounts in these proceedings.

14. [14]

    However, the Owners allege that the Builder, by its directors, represented to the Owners that the cost of building the completed dwelling on the property would be around or not substantially more than $550,000, or alternatively around or not substantially more than the Owners’ stipulated budget of $750,000.

15. [15]

    The Owners contend that these representations were as to future matters and made without reasonable grounds, and thus constituted misleading or deceptive conduct within the meaning of s 18 of the Australian Consumer Law (“ACL”). [1]

16. [16]

    The Owners contend that, but for the alleged representations, they would not have entered the Contract, would have sold the land and, with the proceeds of sale, bought a finished home elsewhere in Kiama. The Owners thus seek to make out both a “no transaction” case and an “alternative transaction” case.

17. [17]

    The Owners seek damages of $1,039,497.12, calculated in accordance with the attached schedule, which was handed up in opening submissions by Mr Crossland, who appeared with Ms Flaherty for the Owners. Defendants' Quantum of Claim (115907, pdf)

18. [18]

    There is no dispute that, if established, the Owners’ misleading or deceptive conduct case could be raised as an answer to the Builder’s case to recover the further amount claimed by the Builder. [2]

19. [19]

    The Owners do not otherwise resist the Builder’s claim, save for matters arising from two invoices and an issue arising from the Builder’s substitution of “Rediwall” for blockwork, to which I will return.

20. [20]

    During the hearing, and by agreement, counsel and I referred to the relevant actors by their given names, Nerida, Mark, Daniel and Gerard. Where convenient, I shall do the same. I intend no disrespect or overfamiliarity.

21. [21]

    There is a sharp divergence of recollection between Nerida and Mark on the one hand, and Daniel and Gerard on the other, as to a number of matters, including what was said at meetings on 24 July, 3 August, 30 August, and 16 November 2018. Each presented as being confident of the accuracy of their recollection to which they deposed. Each presented as being articulate and intelligent. None has made a contemporaneous note of what was said. Their recollections are irreconcilable.

22. [22]

    I am conscious of the restraint I should exercise in forming a view about the credibility of the witnesses based on their demeanour when giving evidence. Giving evidence is a stressful, alien experience for most people. I have in mind Atkin LJ’s aphorism that “an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of the evidence with known facts, is worth pounds of demeanour”. [3]

23. [23]

    I must weigh my impressions as to demeanour “carefully against the probabilities” and “examine whether the disputed evidence is consistent with the incontrovertible facts”. [4]

24. [24]

    To determine what probably occurred, it is thus necessary to look at objectively determined matters, particularly from the parties’ contemporaneous communications, and the logic of events.

25. [25]

    It is also necessary to bear in mind the observations of McLelland CJ in Eq in Watson v Foxman: [5]

26. [26]

    These words should not, however, be seen as a demand for unattainable perfection. [6]

The alleged representations

1. [27]

   The Owners allege that the Builder, Daniel, and Gerard, made three representations.

2. [28]

   First, the Owners allege that Daniel, and thus the Builder, represented that the cost of building the dwelling on the property, as designed by the Builder, would be about, and not significantly more than, $550,000. This is described as “the $550,000 Representation”. This representation is alleged to have been made orally by Daniel in a disputed conversation at a meeting on 30 August 2018.

3. [29]

   Second, the Owners allege that Gerard, and thus the Builder, represented that the total cost of items listed in a spreadsheet that Gerard sent the Owners on 24 January 2019 would be about, and not substantially more than, the total of $457,000 listed as the “4-month subtotal” in that document. The alleged representations in the spreadsheet are called “the Spreadsheet Representations”.

4. [30]

   Third, the Owners allege that Daniel and Gerard, and thus the Builder, represented that the Builder could build the dwelling on the property within the Owners’ budget of $750,000 or alternatively that the sum required to build the dwelling would be about, and not substantially more than, $750,000. These representations (the “$750,000 Representations”) are said to arise by “one or more” of the $550,000 Representation, the Spreadsheet Representations, and:

5. [31]

   Determination of whether these representations were made and, if they were, whether the Owners relied on them in deciding whether to enter the Contract, requires careful consideration of the considerable body of correspondence between the parties both before and after execution of the Contract.

Decision

1. [32]

   I am not persuaded that any of the representations was made, save for that at [30(a)] above.

2. [33]

   However, I am not persuaded that this representation played any role in Nerida’s and Mark’s decisions to enter the Contract.

3. [34]

   The Builder has established its case under the Contract, save for its claim for damages for loss of profit.

The course of events

1. [35]

   At the time Nerida and Mark met Daniel and Gerard, they were living in a duplex in Kiama that they had bought in 2015, having borrowed 100% of the purchase price.

2. [36]

   They had by then sold another property in Berry, the proceeds of which were some $1.6 million.

3. [37]

   Nerida and Mark had used around half of the net proceeds of the Berry property to purchase the subject property and had around $750,000 on deposit.

4. [38]

   Their ambition, particularly that of Mark, was to achieve construction of a house on the property without further borrowings.

5. [39]

   It is in those circumstances that there are numerous references in the evidence to Nerida’s and Mark’s “budget” for the build being $750,000.

6. [40]

   In a letter of 18 September 2019, sent after relations between the parties had broken down, Daniel acknowledged that “you came to us with a budget of $750k for the house construction and another $100k for the pool”. [10] However, as I set out below, it appears that Nerida’s and Mark’s expectations as to what could be included in the house for that price lie at the heart of the position they now find themselves in.

7. [41]

   The first communication between the Builder and the Owners was on 17 July 2018, following a website enquiry by Mark.

8. [42]

   Daniel wrote:

9. [43]

   Mark replied the same day:

10. [44]

    Daniel replied the following day, on 18 July 2018:

11. [45]

    Both sides placed emphasis on what Daniel said in this email.

12. [46]

    Mr Klooster, who appeared with Ms Waters for the Builder, drew attention to the “site conditions” of which Daniel wrote, namely the access to the site, the steepness of the site, the existence of the rock shelf, and the cost of running services from the kerb to the likely position of the house. As Mr Klooster pointed out, Daniel stated that the “biggest factors” in determining likely costs “per square metre” would be the site conditions, any “intricacies in design”, and the proposed inclusions.

13. [47]

    Daniel referred to the site as being “challenging”, and to the fact that “typically” the Builder’s contracts ranged from around $600,000 through to about $850,000. In cross-examination, Daniel agreed that he meant to convey that the Builder’s contracts typically ranged between $600,000 and $850,000 even on “challenging sites”.

14. [48]

    In oral submissions Mr Crossland emphasised Daniel’s statement that “we do our best to design to the budget of our clients”.

15. [49]

    What, however, must be remembered is that Daniel made the statements in this email before any design for the proposed house had been prepared. Thus, as Nerida and Mark must have understood, he was speaking at a high level of generality and without knowing what Nerida and Mark proposed for the design.

16. [50]

    Indeed, it was not until Mark sent Daniel a “rough brief” that “Nerida [had] been working on” on 20 July 2018 that Daniel knew what Nerida and Mark had in mind. The brief included an extensive list of “things we like and want included in the quote” and “things we don’t like”. The brief comprised 18 pages, including many pages of photographs, under the heading “Visual Inspirations”, setting out the “look” that Nerida wished to be achieved. The document shows that Nerida, and I infer Mark, had a very particular vision as to their requirements for the home to be erected on the site, and very particular requirements as to what they would generally wish to be included in their family home.

17. [51]

    The brief included, under the heading “budget”:

18. [52]

    Nerida and Mark met Daniel and Gerard at the site on 24 July 2018. There is disagreement as to what was said. Nothing said at this meeting is relied on as forming part of any of the representations on which the Owners rely. However, the meeting provides important context for what followed.

19. [53]

    First, there is disagreement between Nerida and Mark as to what was said.

20. [54]

    According to Nerida, the following conversation took place:

21. [55]

    Mark’s account of the conversation was that he and Daniel said:

22. [56]

    Mark said that the meeting concluded with this exchange:

23. [57]

    Mark agreed, in answer to questions from me during cross-examination, that he would not have asked Daniel and Gerard whether they could build what “we [wanted] for $750,000” because “Gerard and Daniel didn’t then know what [we] wanted”.

24. [58]

    Daniel gave a very different account of the conversation, as follows:

25. [59]

    Daniel said that he did not at this meeting give any indication as to whether the Builder could build what the Owners “wanted” for $750,000, and gave the following reasons:

26. [60]

    Gerard deposed that Daniel did most of the talking during this meeting but that Daniel did not state that “he could build what they wanted for $750,000 in my presence”. Gerard said that at that time:

27. [61]

    As I have said, Nerida and Mark disagree about what was said on this occasion. Mark agreed that he did not make an enquiry about the cost of building “what we want here”. Rather, on his account, he asked whether the Builder could build us “a house” for $750,000.

28. [62]

    It appears improbable that either Daniel or Gerard would have offered any opinion as to the likely cost of construction of a particular house (for example, “what we want”) at this stage because, as each has pointed out, they were not aware of information which would have been vital to the expression of any such estimate; particularly as to the design of the proposed house and as to the topography and geology of the site.

29. [63]

    Indeed, in cross-examination, Nerida gave this evidence:

30. [64]

    However, it is likely that there were discussions as to whether “a house” could be built for $750,000.

31. [65]

    Indeed, Gerard gave this evidence in cross-examination:

32. [66]

    On the other hand, Daniel gave this evidence:

33. [67]

    I think Mark’s and Gerard’s recollections are likely to be the more accurate here. It seems likely that it was agreed at the meeting that “a” house could be built on the site for $750,000. This would be consistent with Daniel’s statement in his 18 July 2018 email that the Builder’s contracts typically range between $600,000 and $850,000 including, as Daniel agreed in cross-examination, on challenging sites; notwithstanding the fact that this email was sent before any design had been prepared.

34. [68]

    Contrary to Nerida’s recollection, I think it unlikely that Daniel or Gerard said anything to the effect that any particular house could be built on the property for $750,000.

35. [69]

    In relation to this meeting, I find that, although Nerida raised the question of whether the build she wanted could be achieved for $750,000, Daniel did not give her the assurance to which she deposed.

36. [70]

    However, I find that, contrary to his evidence, Daniel did say that it was “doable” that “a” house (of some kind and with some design) could be constructed for $750,000. It seems obvious that “a” house, of some kind, could have been built on the site for $750,000.

37. [71]

    The following day, on 25 July 2018, Nerida sent Daniel an email:

38. [72]

    Nerida made no mention in this email of any statement by Daniel or Gerard about the cost of the build.

39. [73]

    Daniel replied the same day saying that he could commence work on a design of the proposed dwelling in a fortnight’s time and that he estimated construction would take between 7 to 10 months.

40. [74]

    On 30 July 2018, Ms Loren Turnbull, [11] from “CDA Admin”, gave the Owners a “fixed price quote for the design phase” of $11,000 including GST.

41. [75]

    On 31 July 2018, Nerida wrote:

42. [76]

    That led to a meeting between Nerida, Mark, Daniel, and Gerard at Daniel’s home. There is disagreement as to what was said although, once again, nothing said at this meeting is relied on by the Owners as forming part of the alleged positive representations.

43. [77]

    Each of Daniel and Gerard gave a detailed account of what occurred at this meeting.

44. [78]

    Daniel’s account of the meeting was as follows:

45. [79]

    Gerard gave this account of the meeting:

46. [80]

    And:

47. [81]

    In closing submissions Mr Crossland referred to what he called the “improbably long and detailed” recollection that each of Daniel and Gerard purported to have of meetings with Nerida and Mark. It may be that, as to matters of detail, Daniel and Gerard have deposed to some details of conversation that extend beyond their actual memory as to what was said. They each said they were recalling the substance of what was said. Gerard denied in cross-examination that he had spoken to Daniel about what should be said in their affidavits. He said that he did not know what was in Daniel’s affidavits. I see no reason not to accept that evidence. Mr Crossland did not ask Daniel any questions about this. Further, as I set out below, on 18 and 20 September 2019 Daniel wrote very detailed emails setting out his recollection of matters. [12] In cross-examination, Daniel did say that he had “used the documents to refresh his memory”. To a very large extent, the emails corroborate the evidence Daniel gave before me about these matters.

48. [82]

    Daniel and Gerard agree (with each other) that they told Nerida that $750,000 would not be sufficient to cover everything in Nerida’s “brief”. Daniel went further and said that the budget was “under fire”, if not “shot to pieces”.

49. [83]

    Both Daniel and Gerard agreed that Nerida said something to the effect of “if we have to go to the bank we will”.

50. [84]

    In cross-examination, Nerida agreed that, as Gerard had deposed, Daniel had said something to the effect that the plan was to design first and then look at the cost of the build based on that design.

51. [85]

    Nerida and Mark otherwise denied the account given by Daniel and Gerard of what was said at this meeting.

52. [86]

    I was initially troubled by Daniel’s evidence that he not only said that “you won’t be able to get all” the matters detailed in Nerida’s brief for $750,000, or that $750,000 “won’t cover” construction of a house in accordance with Nerida’s brief (which is what Gerard said was his recollection of what Daniel said), but that he also said “your $750,000 budget is definitely under fire, if not shot to pieces”. Daniel was adamant in cross-examination that he did say this.

53. [87]

    Nerida said in cross-examination that “I just wouldn’t have continued on with this process if anything like that had been said”. Mr Crossland placed great emphasis on that evidence. My initial impression was that if Daniel had spoken in the brusque terms to which he has deposed, it seemed likely that Nerida and Mark would have been taken aback, and given serious consideration to whether they should proceed with the Builder.

54. [88]

    However, as I set out below, [13] in his lengthy letter of 18 September 2019, Daniel said:

55. [89]

    As I explain below, Daniel’s 18 September 2019 letter was written in careful and calm language and contains what I see as being a reliable guide as to the truth of what passed between the parties. It persuades me that although Daniel may not have said that Nerida’s requirements for the build meant that her budget was “shot to pieces”, it is likely that he said that it was “under fire”.

56. [90]

    Following the 3 August 2018 meeting, Nerida sent Daniel and Gerard an email that Mr Crossland and Ms Flaherty described as the “Key Budget Email”.

57. [91]

    As this email was sent immediately after the 3 August 2018 meeting, its terms are likely to cast light on what was said.

58. [92]

    The email included:

59. [93]

    Nerida’s reference to being “very happy to answer any questions about our finances” suggests that there was some discussion at the 3 August 2018 meeting as to how Nerida and Mark would fund the construction. Gerard agreed that he had asked Nerida and Mark about “their ability to pay for the project”. Daniel said he had not done so, but in a context that did not, contrary to the tenor of Mr Crossland’s submissions, involve an implicit assertion that such an enquiry had not been made at all.

60. [94]

    Nerida’s reference to the possibility of selling “the duplex” to “cover any borrowings” to the extent of $120,000 suggests two things. First, that there had been a discussion at the meeting as to whether $750,000 would be sufficient to cover all of the matters specified in Nerida’s design brief: design, council fees, driveway, retaining walls, terrace, fences and a solar-heated pool. This is consistent with the evidence given by both Daniel and Gerard that they had stated at the meeting that $750,000 would not cover everything in Nerida’s brief.

61. [95]

    Second, Nerida’s 3 August 2018 email also suggests that she and Mark were contemplating that they may have to borrow funds to complete the build, albeit on the basis that any borrowing would be temporary and able to be cleared from the proceeds of the sale of the duplex.

62. [96]

    Mr Crossland submitted that it would be unlikely that Nerida would “have written an email restating that her budget was $750,000” if, as Daniel said, he had stated that the $750,000 budget is “definitely under fire, if not shot to pieces”.

63. [97]

    But Nerida did not in this email simply “restate” that her budget was $750,000. She was explaining how she and Mark could manage to finance a build costing more than $750,000, evidently in response to an enquiry made at the meeting or in anticipation that such an enquiry might be made. She was acknowledging that she and Mark might need to borrow the funds, and dispose of their “‘super’ plan” (being the Kiama duplex).

64. [98]

    I also do not see these matters as being inconsistent with Daniel and Gerard having said that $750,000 would not “cover all of” the matters in Nerida’s brief, or that “you won’t be able to get all [of the matters detailed in the brief] for $750,000”.

65. [99]

    Overall, Nerida’s email was acknowledging that $750,000 might not be sufficient to build the house she and Mark wanted on the site. I see that as being consistent with Gerard’s and Daniel’s evidence that they had said that the house Nerida and Mark wanted, as specified in Nerida’s brief, could not be built for their budgeted figure.

66. [100]

    Gerard replied on 8 August 2018 stating, “thank you for [all] of that information”, but otherwise making no comment about Nerida’s 3 August 2018 email.

67. [101]

    Gerard was asked about this in cross-examination:

68. [102]

    However, and contrary to Mr Crossland’s submission, I do not see how this evidence “puts paid” to Gerard’s account of what was said on 3 August 2018.

69. [103]

    It is true, as Mr Crossland emphasised in oral submissions, that Gerard did not state in his email that, in his opinion, building according to Nerida’s design brief could not be achieved for a figure of $100,000 in excess of the $750,000 budget. I will return to this when considering the Owners’ case concerning the “Silence Conduct”. However, I agree with the observation that Daniel made about this email that “I don’t believe there was a question in there”.

70. [104]

    On 30 August 2018, Nerida and Mark visited Daniel at his home. By then Daniel had a completed a design of a proposed home for the property.

71. [105]

    It was at this meeting that Daniel allegedly made the $550,000 Representation.

72. [106]

    Nerida deposed that, “Daniel showed us the design on a computer screen at his house. It was not what we were expecting but we liked it”.

73. [107]

    Nerida gave this account of what was said at the meeting:

74. [108]

    Mark said that, after looking at the proposed plans he said to Daniel, “so, you can build all this for $750,000”, and that Daniel replied, “I can build it for $550,000”.

75. [109]

    Daniel gave a very different account of the conversation, that included:

76. [110]

    As the passages in this account of the conversation that I have emphasised show, Daniel agreed that the figure of $550,000 was mentioned in the conversation. But he said the figure was mentioned in the context of a comparison with the cost of construction of a house “up the road”, which was a “basic house” on a “dead flat site”. In that context, Daniel’s recollection was that he mentioned $550,000 as being a figure the Owners could expect to be the cost of the “main living area once floor level is achieved”.

77. [111]

    Again, Daniel has given a lengthy account of what he recalls was said. Again, it may be that Daniel’s evidence, as to matters of detail, is beyond his actual memory of the conversation.

78. [112]

    But he was adamant that his reference to the figure of $550,000 was only in the context of saying that he expected that the Builder could achieve a similar cost for the main living area of the Owners’ proposed building as the Builder had achieved on that site “up the road” on the “dead flat” block.

79. [113]

    Contrary to Mr Crossland’s submissions, I do not see as inherently “not credible” Daniel’s evidence that he referred to the project “we’re doing up the road”, nor that he would “give a price for only part of a house”.

80. [114]

    There is no dispute that, as Daniel contends he said at the meeting:

    1. (1)

       the proposed plans showed a large “amount of sub-floor walls and retaining walls that we need to build to achieve floor levels”;

    2. (2)

       the plans showed that the water tank, pool equipment and gardening tools could be hidden in a dug out section of the lower level but at additional cost;

    3. (3)

       there was “a lot of building” involved in the proposed plans;

    4. (4)

       the Builder was in fact engaged in constructing a home “up the road” on a “dead flat site”, and that the contract for that project was “around $620,000”;

    5. (5)

       “engineering will play a major factor on this site” because the site was steep and “with a lot of rock”; and

    6. (6)

       “getting to floor level [would be] the element that has the biggest unknowns in terms of cost”.

81. [115]

    These factors point to the probability that Daniel did address these questions when considering Nerida’s question about “price”.

82. [116]

    Daniel gave this evidence about this conversation:

83. [117]

    I see that evidence as being consistent with Daniel having said, as he deposed in his affidavit, that “that part of your project”, being the main living area once the floor level was achieved, “is quite a simple construction”.

84. [118]

    In assessing the probability as to what Daniel’s “$550,000” reference was directed to, I have given consideration to the subsequent communications between the parties. As I set out below, until 16 September 2019, on not one occasion did Nerida or Mark refer, in any one of their numerous emails, to Daniel (or Gerard) having said anything about cost of construction of the proposed home being $550,000.

85. [119]

    The figure was only mentioned once, and over a year later, when, on 16 September 2019, Mark wrote to Daniel and Gerard stating:

86. [120]

    I deal with Mark’s 16 September 2019 email in some detail below. [14] For present purposes, the point is that statement was made when the relationship between the parties was beginning to deteriorate. There was also no assertion in Mark’s 16 September 2019 email that whatever was said about the “$550,000” figure was a matter on which Mark or Nerida relied.

87. [121]

    Further, and perhaps most importantly, in his lengthy and careful reply to Mark’s 16 September 2019 email, Daniel said that Mark had “taken this communication totally out of context” and gave an account of his reference to $550,000 that is consistent with his evidence before me. I return to this below. [15]

88. [122]

    It is, of course, for Nerida and Mark to persuade me that their account of what occurred at the 30 August 2018 meeting occurred. And because what was said at the meeting forms a vital part of Nerida’s and Mark’s misleading or deceptive conduct case, it is necessary that I have an actual persuasion of the mind that the conversation took place as they deposed. I am not so persuaded. Indeed, I think it unlikely the conversation occurred as Nerida has stated. If the conversation had occurred as Nerida and Mark now say they recall it, surely they would have mentioned on at least one of the many opportunities, to which I refer below, available to them between August 2018 and September 2019. My conclusion is that Daniel’s account of the conversation is more likely to be accurate.

89. [123]

    Shortly after the meeting, Daniel emailed to Nerida a copy of the “preliminary plans for your project”. These were slightly, but not substantially, different from those Daniel showed Nerida and Mark on his computer at the meeting.

90. [124]

    Later, on 30 August 2018, Nerida wrote to Daniel:

91. [125]

    Nerida made no reference in this email to the alleged $550,000 Representation.

92. [126]

    On 1 October 2018, Nerida wrote a lengthy email to Gerard making a number of comments about the proposed plans.

93. [127]

    Gerard replied on 5 October 2018. In relation to Nerida’s enquiry about a matter of detail, Gerard said:

94. [128]

    Gerard’s statement about keeping matters in mind “when it comes to quoting” appears to be inconsistent with Gerard or Daniel having earlier given any quotation for the cost of the build.

95. [129]

    The preliminary plans sent to the Owners on 30 August 2018 were revised in the following weeks.

96. [130]

    On or about 7 November 2018, the Builder lodged a development application with the Local Council.

97. [131]

    On 9 November 2018, Daniel wrote to Nerida and Mark:

98. [132]

    On or about 13 November 2018, the Builder engaged D&M Consulting Pty Ltd as structural engineers for the project.

99. [133]

    On 13 November 2018, Nerida wrote to Daniel approving a quotation for the engineering costs and continued:

100. [134]

     Nerida made no mention here of the alleged $550,000 Representation. Nerida’s comment that she and Mark would like “some idea of costings before we start” appears to be inconsistent with Daniel having already said that the cost would be $550,000.

101. [135]

     Daniel replied later that day:

102. [136]

     Nerida replied the following day, on 14 November 2018:

103. [137]

     Once again, Nerida made no mention of the alleged $550,000 Representation. Her statement concerning not being able to get a “ballpark” figure “for the total build cost until after engineering” appears to be inconsistent with Daniel already having said the build could be achieved for $550,000.

104. [138]

     Nerida gave this evidence:

105. [139]

     Nerida contended in cross-examination that what she meant by “ballpark” here was “where we were sitting between the [$550,000] and the [$750,000]”.

106. [140]

     However, Nerida made no such qualification in her email, a natural reading of which suggests that Daniel and Gerard had not then given any indication of the likely cost of the build. And Nerida’s reference to what Daniel had “admitted in an affidavit” was not correct. What Daniel said in his affidavit was, as I have set out, that he mentioned the figure $550,000 as the cost of the “main living area once floor level is achieved”. [16]

107. [141]

     On 16 November 2018, Daniel met Nerida at her home.

108. [142]

     Daniel gave this account of the meeting:

109. [143]

     Nerida denied that this conversation took place. Daniel’s account in the first emphasised passage about beginning a cost estimation is, however, consistent with the statement in Daniel’s 13 November 2018 email about using his estimating software to get a “ball park on cost” and Nerida’s response on 14 November 2018. [17] Daniel’s account in the second emphasised passage about Nerida going to the bank is consistent with Gerard’s and Daniel’s earlier evidence concerning what Nerida and Mark had said about that topic, and with Nerida’s 3 August 2018 email.

110. [144]

     Daniel’s account is also consistent with the email he sent Nerida and Mark on 20 September 2019. [18] As I set out below, this is a pointer to the probability that Daniel’s recollection is correct.

111. [145]

     In these circumstances, I think it likely that the conversation occurred as Daniel has deposed.

112. [146]

     On 14 January 2019, Nerida wrote to Daniel and Gerard:

113. [147]

     Although in this email Nerida enquired as to obtaining a “rough idea” of “total build costs”, she made no mention of the alleged $550,000 Representation. The fact that Nerida asked for a “rough idea” of the cost appears to be inconsistent with Gerard or Daniel having earlier given any assurance about likely cost.

114. [148]

     At about this time, the Builder engaged a geotechnical engineer. On 15 January 2019, Daniel sent the geotechnical engineer’s report to Nerida under cover of an email:

115. [149]

     On 18 January 2019, Nerida wrote to Daniel, with a copy to Gerard, under the heading “Approx payment schedule”:

116. [150]

     Gerard replied on 24 January 2019:

117. [151]

     The Spreadsheet was in the following form:

118. [152]

     The Owners contend that the Spreadsheet Representations arise from these documents; namely that the costs of each of the items specified in the Spreadsheet would be about, and not substantially more than, or alternatively less, or substantially less than, the costs indicated for those items; and that the total of those costs would be about, and not substantially more than, or alternatively less, or substantially less than, the total of $457,600 specified in the Spreadsheet.

119. [153]

     I return to the Spreadsheet below. [19]

120. [154]

     Nerida responded to Gerard’s 24 January 2019 email later that day:

121. [155]

     On 31 January 2019, Kiama Municipal Council issued a Development Consent for the proposed dwelling.

122. [156]

     On 1 February 2019, Gerard wrote to Nerida stating that “we’ll need a receipt showing payment of the long service levy” and asking Nerida to complete payment by going to a website address embedded in the email and “[copying] the details shown in the attached screenshot”.

123. [157]

     Nerida paid the levy fee on 1 February 2019.

124. [158]

     The attached screenshot was in the following form:

125. [159]

     As can be seen, that screenshot stated that the “Estimated Value of Work” was $750,000.

126. [160]

     This statement is said to be one of the elements giving rise to the $750,000 Representations.

127. [161]

     Gerard explained this entry as follows:

128. [162]

     There is no suggestion in the evidence that Nerida or Mark was aware of these matters.

129. [163]

     Although both Nerida and Mark asserted that they relied on this document when entering the Contract, I do not accept that this is so. By now, as I have set out, Daniel had told Nerida and Mark that he did not think the house could be built for $750,000. He had also offered on 13 November 2018 to use his estimating software to get a “ball park cost”, but had been told by Nerida not to do so at the 16 November 2018 meeting. Nerida paid the relevant levy within 20 odd minutes of receiving the email. It is in any event unlikely Nerida gave the document much thought as it required from her no more than the ministerial act of paying the relevant fee. And, within a few days, she and Mark willingly executed the Contract in the face of the “warning” appearing on its face and to which I turn shortly.

130. [164]

     Further, not once in all their subsequent communications, including those in September 2019 after relations between the parties had broken down, did Nerida or Mark assert they placed any store on the statement in the long service levy screenshot.

131. [165]

     On 14 February 2019, Daniel wrote to Nerida saying that he had spoken to the engineer and that “they are about 80% complete on the structural plans”.

132. [166]

     On 15 February 2019, the parties executed the Contract.

133. [167]

     The Contract stated, prominently at the outset, under the heading “Schedule 1 Particulars of Contract”:

134. [168]

     Clause 8 of Schedule 1 was headed “Sources of funds” and was in this form:

135. [169]

     Gerard agreed that the figure “750,000” appeared to be in his handwriting.

136. [170]

     This statement in the Contract is relied upon by the Owners as constituting part of the $750,000 Representations.

137. [171]

     Nerida deposed that she saw Gerard hand write the figure of “750,000” and that, as he was doing so, there was an exchange as follows:

138. [172]

     Gerard gave a different account of the conversation as follows:

139. [173]

     There was no cross-examination of Nerida, Mark or Gerard about these matters.

140. [174]

     I do not find it necessary to resolve this dispute.

141. [175]

     The statement in the Contract resulting from the insertion of the figure “$750,000” is that the “owners’ ability to pay for the building works will be funded by” a “total estimated funds” amount of $750,000. No doubt this reflected the fact, known to all the parties, that the Owners had $750,000 in cash available to fund the works. That must be how Nerida and Mark understood it. They did not suggest otherwise.

142. [176]

     As this statement appeared on the page following the “Warning” referred to above, I cannot see how it could constitute a representation by the Builder that the cost of the works would be or would not be substantially more than $750,000.

143. [177]

     In any event, I do not see how Nerida and Mark could have relied on the statement when deciding to enter the Contract. On Nerida’s own account of it, she only saw the statement when Gerard inserted the figure, at which time she and Mark were set on executing the Contract. That is why they were present. I cannot accept that the insertion of the figure played any role in their subsequent execution of the Contract.

144. [178]

     And, once again, in their numerous communications with the Builder, Nerida and Mark did not once assert any reliance on this statement as a representation. As I discuss below, on 16 September 2019, Mark asserted that the house was “contracted for $750,000”. [20] Mr Crossland accepted that this was a misconception on Mark’s part.

Events thereafter

1. [179]

   As I have said, [21] building work commenced in March 2019.

2. [180]

   Thus, on 14 March 2019, Nerida sent Gerard the executed “Notice of Commencement of Building Works”.

3. [181]

   Nerida wrote:

4. [182]

   Nerida’s email made clear that the full scope of the works was not yet agreed.

5. [183]

   Earlier that day, Gerard had sent Nerida an email attaching a copy of the “Home Warranty Insurance Certificate for your records”. That certificate recorded that a contract of insurance had been issued for the purposes of ss 92 and 96 of the Home Building Act and stated that, for the purpose of that contract of insurance, the “Contract amount” was $750,000. This is said to be one of the elements of the $750,000 Representations. However, the “Contract amount” was plainly not $750,000. The Contract was a “cost plus” contract. The figure of “$750,000” was only mentioned in the context of the “source of funds”. In any event, by now, Nerida and Mark had entered the Contract. Mr Crossland suggested in argument, albeit without much enthusiasm, that but for this alleged representation, Nerida and Mark would have sought to terminate the Contract. However, Mr Crossland was unable to say upon what basis this could have been done. I do not see this aspect of the matter adding anything to the Owners’ case.

6. [184]

   On 2 April 2019, Nerida wrote to Gerard making enquiries about using solar energy. She said:

7. [185]

   The statement in this email appears to be inconsistent with Daniel having earlier said that the build could be achieved for $550,000.

8. [186]

   On 18 April 2019, Gerard wrote to Nerida:

9. [187]

   My attention has not been drawn to any response from Nerida or Mark asserting the existence of any of the representations now relied on.

10. [188]

    Indeed, on 26 April 2019, Nerida wrote to Gerard:

11. [189]

    The Contract specified that blockwork be used for the “contract/masonry” elements of the construction referred to in the 24 January 2019 Spreadsheet.

12. [190]

    Daniel gave evidence that on 26 April 2019 he had a discussion with Nerida and Mark about this. Daniel’s account of the conversation is:

13. [191]

    Gerard gave a similar account of the meeting as follows:

14. [192]

    Nerida’s evidence about this was as follows:

15. [193]

    In cross-examination, Nerida was asked about the passage in this evidence that I have emphasised. She said that she was “probably talking about a particular point in time”.

16. [194]

    Her evidence continued:

17. [195]

    Mark’s evidence about Rediwall was:

18. [196]

    In cross-examination, Mark was adamant that this conversation did not occur in April but, rather, in late June or early July 2019.

19. [197]

    On 10 May 2019, Daniel wrote to Nerida:

20. [198]

    “Bernard”, referred to in Daniel’s email, is Nerida’s brother Bernard Robinson, to whom Nerida referred in the passage at [192] above.

21. [199]

    Later on 10 May 2019, Nerida sent Bernard a copy of Daniel’s 10 May 2019 email under cover of the question “what do you think about the below?”

22. [200]

    Bernard replied to Nerida the following day, on 11 May 2019, stating, amongst other things:

23. [201]

    It is obvious from these communications that, contrary to Nerida’s evidence and Mark’s evidence, Daniel and Gerard did in April 2019 raise with Nerida and Mark the suggestion that the blockwork be substituted by Rediwall. Daniel said so in his email to Nerida of 10 May 2019. Nerida forwarded that very email to her brother, and sought his advice about the matter that had, as the email stated, been “mentioned at our last onsite meeting”. Nerida received Bernard’s advice that Rediwall was a “great option”. It is hard to see how, in these circumstances, Nerida could have maintained, so adamantly, her position that she had no conversation with Daniel about this matter.

24. [202]

    I find that the conversations about Rediwall took place substantially as deposed to by Daniel and Gerard, and that Nerida and Mark did agree to the change from blockwork to Rediwall.

25. [203]

    It is also hard to see why there was any controversy about this matter. The parties’ engineering experts, Mr Knightley for the Owners and Mr Dockrill for the Builder, agreed that the “core filled walls are structurally adequate and no rectification is required”. [22] There was thus no dispute that Rediwall was an adequate substitute for blockwork. There may be aesthetic considerations arising from the use of Rediwall, although I was told during the experts’ concurrent evidence that is it customary to conceal raw Rediwall with a coating or cladding.

26. [204]

    On 11 June 2019, Nerida wrote to Daniel:

27. [205]

    Again, although Nerida asked Daniel if he had “any idea” about “how we’re heading budget-wise”, she made no mention of the representations on which the Owners now rely.

28. [206]

    The following day, on 12 June 2019, Gerard wrote to Nerida:

29. [207]

    On 14 July 2019, Nerida wrote to Gerard:

30. [208]

    Again, Nerida made no reference here to the representations on which the Owners now rely. Nerida’s request to get a “rough idea” of when “we will have some idea of the remaining budget” appears to be inconsistent with Daniel or Gerard having earlier made the representations for which Nerida and Mark contend.

31. [209]

    On 1 August 2019, Nerida wrote to Daniel and Gerard concerning house cladding and said:

32. [210]

    This appears to show that, notwithstanding Nerida’s references to “the budget”, she and Mark were prepared to “invest” so as “to get the look we want”.

33. [211]

    Nerida’s email also contained detailed specifications as to “garden fencing” and “bath” and “outdoor lighting”, suggesting that the Owners’ specifications as to what was to be included in the construction were evolving.

34. [212]

    On 28 August 2019, Gerard wrote to Nerida:

35. [213]

    The attached spreadsheet was headed “Project Specification” and listed seven pages of detailed components on the construction, with headings “Finish”, “Size”, “Quantity”, “Supplier”, “Model” and “Notes”.

36. [214]

    Nerida and Gerard met at Gerard’s home on 29 August 2019.

37. [215]

    Nerida gave this account of what occurred:

38. [216]

    Gerard agreed that he provided “rough estimates for some of the remaining significant construction items on the back of an envelope totalling $515,000”. He said:

39. [217]

    Gerard added:

40. [218]

    Later that day, Mark wrote to Daniel and Gerard:

41. [219]

    Later, Nerida wrote to Gerard:

42. [220]

    Nerida’s email continued with some suggestions as to proposed inclusions in the building.

43. [221]

    If ever there was an occasion for Nerida and Mark to assert the existence of the representations on which they now rely, this was it.

44. [222]

    On their account, Gerard had informed them, for the first time, that the likely total cost of the build would be in the order of $1.1 million. If, as they contend, they understood that Daniel and/or Gerard had represented to them that the cost of the build would not be significantly more than $550,000 or $750,000, I find it impossible to understand why they did not say something to that effect at this point.

45. [223]

    Gerard wrote to Nerida the next day, 30 August 2019:

46. [224]

    On 3 September 2019, Nerida wrote to Gerard:

47. [225]

    Again, Nerida made no mention in this document of the representations on which she and Mark now rely.

48. [226]

    The parties met on 4 September 2019. Again, there is disagreement between Nerida, Daniel and Gerard as to what was said.

49. [227]

    However, even on Nerida’s account of it, she made no assertion that Daniel and Gerard had made the representations that are now contended for. Nerida’s account of the conversation is as follows:

50. [228]

    Daniel said that he and Mark also had this exchange:

51. [229]

    On 12 September 2019, Gerard wrote to Nerida:

52. [230]

    The Builder ceased work on the site on or about this date.

53. [231]

    As I have said, there is no dispute that the Builder was so entitled.

54. [232]

    Mark replied on 16 September 2019:

55. [233]

    Mark then referred to the Spreadsheet that Gerard had sent on 24 January 2019. He continued:

56. [234]

    Mark was specific about the complaints made in this passage. His points were that:

57. [235]

    Mark did state that “when you presented the plans to us” (which was obviously a reference to the 30 August 2018 meeting), “you said the house … could be built for around $550,000”. Mark did not assert that he and Nerida had relied on this alleged statement when entering the Contract. His email refers rather to an assurance the Builder allegedly gave that the house could be built “for our budget”, and the Builder’s alleged inability to “build to budget”.

58. [236]

    On 18 September 2019, Daniel and Gerard sent Nerida and Mark a detailed response to their communications, being a letter with seven closely typed pages. The terms of the letter suggest it was written by Daniel.

59. [237]

    Critically, Daniel said:

60. [238]

    The parties exchanged further emails on 20 September 2019 in which they, in effect, repeated their positions as stated in earlier emails, save that Daniel also said:

61. [239]

    Daniel is clearly referring in these passages to his meeting with Nerida on 16 November 2018. As I have set out above, [24] Daniel deposed that, at that meeting, Nerida said words to the effect that Daniel set out in this letter. The fact that as early as 20 September 2019 he made an assertion to this effect is a pointer to the probability that his recollection is correct.

62. [240]

    As I have explained earlier, I see Daniel’s emails of 18 and 20 September 2019 as having significance in the case. Unlike the emails to which they respond, they appear not to have been written in anger. Their terms are calm and considered. Daniel was not challenged in cross-examination about their contents.

63. [241]

    As I have discussed above, they provide confirmation that, as Daniel and Gerard deposed in their affidavits:

64. [242]

    Ultimately, on 31 October 2019, Daniel prepared a “Trade Summary” estimating that the cost to complete the build was $727,469.72 including GST.

65. [243]

    On 8 January 2020, the Builder issued a Notice of Dispute under the Contract.

66. [244]

    On 17 January 2020, the Builder issued a Notice of Default under the Contract, asserting that the Owners’ failure to pay outstanding progress claims was a breach of the Contract.

67. [245]

    On 6 February 2020, the Builder issued a Notice of Termination under the Contract.

68. [246]

    As I have said, there is no dispute that that termination was effective.

The alleged representations - principles

1. [247]

   There was no dispute before me as to the relevant principles. Both sides referred to McHugh J’s observations in Butcher v Lachlan Elder Realty Pty Ltd that: [25]

2. [248]

   The alleged Silence Conduct was the Builder’s alleged failure to inform the Owners that the cost of building the proposed dwelling would be considerably in excess of $750,000.

3. [249]

   I have found that, on 3 August 2018, Daniel told Nerida and Mark that their $750,000 budget was “under fire” and that they would not be able to have a house built in accordance with Nerida’s brief for $750,000. [26]

4. [250]

   Further, as I have set out, on numerous occasions Nerida made enquiries of Gerard or Daniel about the likely cost of the build without asserting any understanding that it could be achieved for $750,000.

5. [251]

   In those circumstances, I am not persuaded that the Builder engaged in the alleged Silence Conduct.

6. [252]

   I have found that, on 30 August 2018, Daniel did not state that the cost of building the dwelling on the site would be $550,000. Rather he stated that $550,000 may be sufficient for the main living area of the house. [27]

7. [253]

   The Builder did not make the $550,000 Representation.

8. [254]

   I have set out the terms of the Spreadsheet and Gerard’s email of 24 January 2019 above. [28]

9. [255]

   The Owners allege that, by these documents, Gerard, and thus the Builder, represented that the total cost of items listed in the Spreadsheet would be about and would not substantially be more than the figure of $457,000 stated as being the “4-month subtotal”.

10. [256]

    In closing submissions, Mr Crossland and Ms Flaherty said that the representations alleged to have been made in the Spreadsheet are “not something that the Owners allege they relied on in entering the Contract and keeping it on foot” but that “they relied on the document in relation to cost”. How Nerida and Mark so relied on the alleged representations in “relation to cost” was not developed, and is not apparent to me from the evidence. If Nerida and Mark did not rely on the Spreadsheet when deciding to enter or keep on foot the Contract, I fail to see how it can be relevant.

11. [257]

    Assuming that it is relevant, Mr Klooster accepted that what was stated in the Spreadsheet was a representation as to a future matter.

12. [258]

    It follows, by reason of s 4 of the ACL, that the statements in the Spreadsheet are taken to be misleading if the relevant person, here Gerard, did not have reasonable grounds to make the representation.

13. [259]

    Section 4 of the ACL is in this form:

14. [260]

    Section 4 is an evidentiary provision only and does not reverse the legal or persuasive burden that, here, the Owners bear of establishing that reasonable grounds for making the representations did not exist. [29]

15. [261]

    The effect of s 4 has been summarised as follows:

16. [262]

    There will not be reasonable grounds for making a representation if, at the time of making it, the representor did not have facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation. [31]

17. [263]

    As I have set out above, the background to Gerard making the representations in the Spreadsheet is that:

18. [264]

    In those circumstances, Gerard sent Nerida the Spreadsheet under cover of his 24 January 2019 email describing the Spreadsheet as a “rough work schedule” which was “subject to change due to the engineering not having been completed yet”.

19. [265]

    The Spreadsheet itself was highly qualified. Five of the figures are described as being “approx” and five are described as being “rough”. Two significant figures, for excavation and windows, are described as being “just a guess”.

20. [266]

    On the other hand, as Mr Crossland emphasised in closing submissions, Gerard’s covering email, while describing the Spreadsheet as obtaining “rough estimates”, said that he had “gone pretty heavy on the rates”, expected “it to come in lower” and suggested that “we prepare” for a “worst case $450K in the next four months” but that “in reality I think it would be less than $400K”.

21. [267]

    Nonetheless, the representation constituted by the Spreadsheet was cautious and qualified.

22. [268]

    It was by no means a forecast as to the cost of completion of the build.

23. [269]

    Nerida said that once the work set out in the Spreadsheet had been done, the house would be “ready to be clad and the roof put on, because the walls [would be] there”.

24. [270]

    But Nerida agreed that she understood that, once the work referred to in the Spreadsheet was done, there would be no cladding, gyprock, roof sheets, joinery, kitchen, wet areas, stairs, windows (other than a quote for their cost), floor coverings, lining, driveway, shed, solar panels, floor heating, air conditioning or blinds.

25. [271]

    In fact, it appears that the Spreadsheet underestimated the cost over the four month period to which it referred. The Builder incurred $429,156.13 from the beginning of construction in mid-March 2019 through to the end of July 2019, being the first five months of construction and six months from the issue of the Spreadsheet.

26. [272]

    Gerard gave this evidence as to how he prepared the Spreadsheet:

27. [273]

    In my opinion, the steps that Gerard took were a reasonable response to Nerida’s request for a “rough idea” of what the build cost would be. Consistently with being asked to prepare such a “rough idea”, Gerard adopted a somewhat rough and ready approach using “best guess assumptions”, the Builder’s CAD drawings and “guesstimating for labour”.

28. [274]

    In these circumstances, the Builder has adduced “some evidence of reasonable grounds” for making the representations referred to in the Spreadsheet.

29. [275]

    In support of the proposition that the representations in the Spreadsheet were misleading, Mr Crossland handed up a schedule said to show that “the likely actual cost of the major works (and hence the total cost of the works in the [S]preadsheet) was vastly in excess of what appeared in the [S]preadsheet”. The schedule contrasted the predictions of the cost of the various items in the Spreadsheet with the “actual cost per invoices rendered” of those items in the case of completed works, including invoices in the period from July to September 2019 or the “projected cost” of those items, as set out in Daniel’s 31 October 2019 “Trade Summary” to which I referred at [242] above.

30. [276]

    But the Spreadsheet did not purport to predict the “likely actual cost of the major works”. It forecast a “4-month sub-total” of those costs. The analysis in Mr Crossland’s schedule is thus beside the point.

31. [277]

    I am not persuaded, in these circumstances, that the Owners have established that the Builder engaged in misleading or deceptive conduct by sending the Spreadsheet, nor that the Spreadsheet had any other relevant consequence in the proceedings.

32. [278]

    As I have set out above, the $750,000 Representations is alleged to have been made by reason of four matters.

33. [279]

    The first is the figure “750,000” that Gerard included in the long service levy screenshot as the “Estimated Value of Work”.

34. [280]

    I accept that Gerard’s statement amounted to a representation that the “Estimated Value of [the] Work” was $750,000.

35. [281]

    But, for the reasons I have set out above, [36] and for the further reason that Daniel had on 3 August 2028 made clear that the likely value of the work would exceed $750,000, I am not persuaded that Nerida or Mark relied on it when deciding to enter the Contract.

36. [282]

    The second is the statement in the Contract, under the heading “Source of funds”, that the “total estimated funds” was $750,000.

37. [283]

    For the reasons I have set out above, [37] I am not persuaded that this amounted to a representation that the Builder could build a dwelling on the property for $750,000, nor that Nerida or Mark relied on the statement when deciding to execute the Contract.

38. [284]

    The third is the statement made by Gerard in the 14 March 2018 home warranty insurance certificate that the “contract amount” was $750,000.

39. [285]

    For the reasons I have set out above, [38] I do not accept that this statement constituted a representation that the dwelling could be built for $750,000. In any event, it was made after Nerida and Mark had executed the Contract.

40. [286]

    I have found that the Silence Conduct has not been established. [39]

Conclusion as to the alleged representations

1. [287]

   Nerida and Mark have failed to establish any of the alleged representations save, perhaps, for that arising from the long service levy screenshot. But Nerida and Mark have failed to establish that any such representation played any role in their decision to enter the Contract.

2. [288]

   Accordingly, Nerida and Mark’s misleading or deceptive conduct case fails.

Damages

1. [289]

   It is therefore not necessary to consider what loss Nerida and Mark have suffered “because” of the conduct of which they complained. [40]

2. [290]

   However, as the parties devoted much time to this question, I will do so.

3. [291]

   The Owners’ allegations as to what they would have done but for the alleged representations is contained in this paragraph of their cross-claim:

4. [292]

   In their opening submissions, Mr Crossland and Ms Flaherty described the Owners’ case as a “no transaction” case. In closing, Mr Crossland said “it is primarily a no transaction case, but is supplemented by the pleading [set out in the preceding paragraph]”.

5. [293]

   Nerida’s initial evidence in support of that case was:

6. [294]

   As to the matters in (b) and (c) of the passage set out at [291], there is no evidence that the Builder, or any different builder, would have entered a fixed price contract with the Owners to build a home on the property. No such suggestion was made in submissions.

7. [295]

   As to the matter in (d) in the passage set out in [291], Nerida supplemented her evidence in a later affidavit as follows:

8. [296]

   Mark gave evidence to similar effect.

9. [297]

   Thus, he deposed:

10. [298]

    I allowed that evidence only as evidence of Nerida’s and Mark’s state of mind. In any event, such evidence could only be probative of Nerida’s and Mark’s intention.

11. [299]

    In substance, what the Owners sought to establish was an “alternative transaction” case, namely that, but for the alleged representations, they would not have entered the Contract but would have purchased a completed home elsewhere in Kiama and thereafter enjoyed a capital gain on that purchase.

12. [300]

    Nerida gave detailed evidence of the sort of “good quality, four bedroom house” she had in mind. But that evidence cannot be used to prove whether such a house was available, let alone at what price.

13. [301]

    In closing submissions, Mr Crossland and Ms Flaherty placed great emphasis on the fact that the evidence I have set out was not challenged in cross-examination. But this begs the question of what this unchallenged evidence was capable of proving. It was not capable of proving that, in fact, Nerida and Mark could have or would have purchased a suitable home in Kiama, let alone that they would thereafter have enjoyed a capital gain.

14. [302]

    The difficulty is that neither Nerida nor Mark have adduced evidence showing that they could have bought an existing house in the Kiama area that would suit them for around $1.6 million, nor as to what the value of any such property would now be.

15. [303]

    Thus, in closing submissions, Mr Klooster submitted:

16. [304]

    The design brief that Nerida sent Daniel on 20 July 2018 makes clear that she and Mark had very particular requirements for their family home. Yet they have not adduced any evidence as to whether they did locate, or could have located, a home in the Kiama area that would have met those detailed requirements, or such other requirements as might have satisfied them, for the funds that they had available.

17. [305]

    Both parties adduced expert evidence as to growth rates for the market for houses in Kiama although, in closing submissions, neither counsel addressed any submissions in relation to that evidence.

18. [306]

    Nerida and Mark have not made out an “alternative transaction” case. They are left with their “no transaction” case.

19. [307]

    There is no dispute that the purpose of an award for damages under s 236 of the ACL for a contravention of s 18 is to compensate the relevant party, here, the Owners, for the prejudice or disadvantage they have suffered as a result of the misleading or deceptive conduct. The purpose of an award of damages under s 236 is to put the Owners in the position in which they would have been had the misleading or deceptive conduct not occurred. This requires identification of the prejudice or disadvantage suffered by the person “because of” the impugned conduct, and of any countervailing benefits. [41]

20. [308]

    Here, the Owners contend that, but for the alleged representations, they would not have entered the Contract.

21. [309]

    The prejudice or disadvantage they have suffered by entering the Contract is that they have paid the Builder $550,000 and are liable to pay the Builder a further sum in the order of $245,000, taking into account my findings below concerning two disputed invoices and the Builder’s concession that an amount must be allowed in the Owners’ favour by reason of a part of the Rediwall that has bowed. The total disadvantage is thus in the order of $795,000. [42]

22. [310]

    What divides the parties is the proper measure of the countervailing benefit that has accrued to the Owners by reason of entering the Contract.

23. [311]

    The Builder contends that this benefit is the value of the works performed by the Builder. The unchallenged evidence of the Builder’s expert, Mr Tobias Seeto, is that this is just under $800,000, some $5,000 more than the figure at [309].

24. [312]

    The Owners contend the benefit is the extent to which the value of the property has increased by reason of the works. The parties’ valuation experts agree that the present market value of the land with its unfinished building work is $1,310,000 and the current value of the land without improvements is $1,150,000. Thus the value of the work carried out by the Builder is the difference between these two figures: $160,000. This takes into account the unfinished state of the works on the property and, evidently, the fact that those works have been subject to the elements since around September 2019: well over four years. The Owners contend that it is this figure, $160,000, that should be deducted from the figure at [309] to assess the damage they have suffered by reason of the Builder’s alleged misleading or deceptive conduct. The resultant damages figure is $635,000. [43]

25. [313]

    Untutored by authority, I would have concluded that the Owners’ contention should be accepted, as any increase in value of the property resulting from the works appears to me to be the “real value” to the Owners of that work. Otherwise, all they have now is an unfinished building. That is the test favoured by White JA in a similar context in Mills v Walsh. [44]

26. [314]

    However, the majority in Mills v Walsh came to a different conclusion.

27. [315]

    Thus, Brereton JA, with whom Bell CJ agreed, said: [45]

28. [316]

    The facts in Mills v Walsh were different from those in this case, in that the parties in the position of the Owners were induced to enter a building contract by the builder’s misrepresentation that he was insured, rather than a statement concerning the likely cost of the works. But that difference does not affect the generality of the statement made by Brereton JA.

29. [317]

    Accordingly, were it necessary to decide the question of what loss the Owners have suffered by reason of the Builder’s alleged misleading or deceptive conduct, the answer would be that there was no loss, calculated as follows:

The alleged building defects

1. [318]

   In their defence to the Builder’s claim, Nerida and Mark allege that “in breach of the Contract … the subfloor and ground floor walls were constructed using clad ‘Rediwall’” and that the Builder “is not entitled under the Contract to payment for [that alternative method]”.

2. [319]

   I have held that Nerida and Mark agreed to the change from blockwork to Rediwall. [47] That agreement was evidenced in Daniel’s email of 10 May 2019. [48]

3. [320]

   However, cl 16.1 of the Contract provided that “a variation must be in writing and signed by the builder and the owner”.

4. [321]

   Further, there was implied into the Contract a provision to the same effect by the combined effect of s 7E and Sch 2, Pt 1, cl 1(2) of the Home Building Act.

5. [322]

   The effect of these provisions was that the Builder could not have sued the Owners for the costs of the varied works. [49]

6. [323]

   But the Owners do not raise this point in answer to the Builder’s claim for the unpaid invoices. That is because, I assume, the Owners have already paid the Builder’s invoices relevant to the Rediwall construction.

7. [324]

   Rather, the Owners rely on the fact that the blockwork was substituted by Rediwall in their cross-claim and seek damages sufficient to replace the Rediwall construction with blockwork.

8. [325]

   It is in answer to that cross-claim that the Builder relies on what I have found to be the agreed variation to the Contract to substitute blockwork with Rediwall.

9. [326]

   That agreed variation was not in writing and signed by both the Owners and the Builder. But that does not mean that it has no effect. In particular, it does not mean that the Owners can “deny the effectiveness of the variation and claim damages for the Builder’s failure to construct the works in accordance with the original contract”. [50]

10. [327]

    As Handley AJA said in the same case: [51]

11. [328]

    His Honour was there referring to the effect of s 10 of the Home Building Act, but the same must apply to the relevant provision in the Contract and to the provision, to the same effect, implied into the Contract by the combined effect of s 7E of the Home Building Act and reg 59 of the Home Building Regulation 1997 (NSW). [52] Thus, in Wright v Foresight Constructions Pty Ltd, Basten JA held that the term implied into building contracts by s 7E and reg 59 should not be construed as to prevent any form of variation not in writing. [53]

12. [329]

    The Owners sought to draw in aid the observations of Fagan J in Paraiso v CBS Build Pty Ltd. [54] However, his Honour was considering a claim by a builder to enforce an oral variation rather than the circumstances here, where the Builder is seeking to resist a claim by the Owner in respect of work that is the subject of an oral variation.

13. [330]

    The Owners also pointed to the observations of Harrison AsJ in Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange. [55] Her Honour there observed that the express term in the contract considered by the Court of Appeal in Wright v Foresight Constructions Pty Ltd was not expressed in mandatory terms. However, that is beside the point because, as I have pointed out, Basten JA also considered what the effect would be of a term implied into a building contract by the combined effect of s 7E of the Home Building Act and reg 59 of the Home Building Regulation. [56]

14. [331]

    Accordingly, the Owners’ claim concerning the Rediwall fails.

15. [332]

    In any event, as the experts all agree that Rediwall is structurally adequate, and there is no evidence that the use of Rediwall has any different function or reduced any amenity to the property, I would have held that replacement of the Rediwall by blockwork would be a remedy “out of all proportion to the achievement of the contracted objective” in a Bellgrove v Eldridge sense. [57]

16. [333]

    The measure of damages for defective building work is the reasonable costs of rectification, so as to give the plaintiff “the equivalent of a building … which is substantially in accordance with the contract”. [58] The work must be “necessary to produce conformity” with the contract and also “must be a reasonable course to adopt”. [59] These are questions of fact to be examined in each case.

17. [334]

    Such work will only be considered unreasonable in “fairly exceptional circumstances”, such as where the innocent party is “merely using a technical breach to secure an uncovenanted profit”, [60] or where the cost of the “proposed rectification is out of all proportion to the benefit to be obtained”. [61]

18. [335]

    Replacement of all the Rediwall with blockwork here would be out of all proportion to the benefit that the Owners would thereby obtain.

19. [336]

    It is common ground that there is one part of the Rediwall that has bowed and must be rectified. The cost is agreed at $26,206.95. The Builder accepts that this amount must be deducted from its claim against the Owners.

The Builder’s claims under the Contract

1. [337]

   The Owners raised a dispute about two invoices.

2. [338]

   The only dispute pressed by the Owners relating to these invoices is the labour charges.

3. [339]

   In Invoice 14296 there is a labour charge of $24,408.48. That figure is particularised in 10 line items stating that between three and eight “CDA men” performed a specified number of hours of work on specified dates between 23 August 2019 and 5 September 2019, and that, at some time during that period, Gerard performed 16 hours of work and Daniel performed 10 hours work. The particulars do not state what building works were performed by the individuals during these hours, although the invoice does give particulars of the materials supplied during the period (for example formwork, scaffolding, concrete and Rediwall). The Owners do not question the latter particulars.

4. [340]

   Invoice 14297 makes a labour charge of $22,902.88 and provides similar particulars to those in Invoice 14296.

5. [341]

   The Owners do not dispute that building work was carried out during the periods specified but, when exercising the dispute resolution provisions under the Contract, stated that they required “further evidence from [the Builder] to substantiate this claimed labour charge”.

6. [342]

   In cross-examination, Gerard was not able to identify what particular work was done by what particular person during the periods specified in the invoices. This is hardly surprising, it being over four years later.

7. [343]

   The Owners pointed to cl 15.5 of the Contract which provides that a progress claim must be “accompanied by such invoices, receipts or other documents as may reasonably be expected to support the claim and evidence the cost of the building works being claimed”.

8. [344]

   In my opinion, the detailed specification of the labour utilised during the periods referred to in the invoices is as much as could be reasonably expected by the Owners, notwithstanding the fact that the invoices do not specify, in relation to each hour spent, what work was done. The invoices as a whole make sufficiently clear what work was performed.

9. [345]

   The Builder also relies on Mr Seeto’s unchallenged evidence that the charges were “fair and reasonable”.

10. [346]

    The Owners submitted that Mr Seeto’s evidence “plainly cannot be relied on” for two reasons. The first was that Mr Seeto has done “no more” than assert that the costs were reasonable. But Mr Seeto’s evidence was admitted without objection, and he was not challenged during the concurrent evidence in relation to these matters. Further, the Owners contended there is “logical evidence that the quantum meruit figure [advocated by Mr Seeto] is not safe” because Mr Seeto’s opinion as to the cost to complete the works in accordance with the plans, assuming that the existing structure was not demolished, was in the order of $1.45 million, whereas his opinion as to the cost to complete the works, assuming the existing works needed to be demolished, were in the order of $1.18 million. I see no tension between those opinions: the latter appears to assume that the existing works have a value which would mean that the cost to complete the work without any demolition would reduce the overall cost.

11. [347]

    For these reasons, my conclusion is that the Builder is entitled to recover the labour charges referred to in these two invoices.

12. [348]

    Apart from the two invoices to which I have referred, the Owners do not dispute the Builder’s progress claims.

13. [349]

    The Owners did not dispute the Builder’s entitlement to interest on its unpaid progress claims.

14. [350]

    There is no dispute that the Builder lawfully terminated the Contract on 6 February 2020.

15. [351]

    The Contract was a “cost plus” contract. The Builder’s margin was 12.5%.

16. [352]

    The Builder is entitled to damages reflecting its loss of the opportunity to make the profit reflected by that Builder’s margin.

17. [353]

    Mr Klooster pointed to the following uncontroversial legal principles:

18. [354]

    The parties’ experts agree that the cost to complete the building as at July 2021 was $1,100,712.20.

19. [355]

    Using Rawlinsons Construction Cost Guide, [67] the equivalent figure for cost to complete as at February 2020 is $1,027,618.03.

20. [356]

    In opening submissions, the Builder contended that its loss of profit was 12.5% of this figure.

21. [357]

    However, as Mr Crossland and Ms Flaherty pointed out, such calculation would reveal the gross amount of the Builder’s margin, but not take into account the overheads that the Builder would incur in order to achieve that gross sum.

22. [358]

    The only evidence of the Builder’s overheads to which Mr Klooster pointed was an assertion made by Daniel and Gerard in a letter sent on 4 November 2019 to the Owners’ solicitors (containing an offer to complete the proposed works) in which it is stated:

23. [359]

    Leaving aside the question of whether that letter is subject to without prejudice privilege, I allowed it only as evidence of the fact that a document in that form exists. It was not received as evidence of the truth of its contents. In any event it could not provide a basis upon which I could conclude that, as a matter of fact, the Builder’s overheads were 5% of its costs.

24. [360]

    It follows, in my opinion, that the Builder has not established loss of profit. This is not a case where “precise evidence is not available”. The Builder must be able to produce evidence of what its overheads are. Simply pointing to an assertion in correspondence is not sufficient.

25. [361]

    The Builder has not established its claim for loss of profit.

Gerard’s email of 8 August 2018

1. [362]

   At the conclusion of Gerard’s email of 8 August 2018, [68] he said:

2. [363]

   Nerida responded later that day:

3. [364]

   I drew this matter to the parties’ attention and said that I would invite submissions, at the conclusion of the hearing, as to what, if any, steps I should take in relation to it.

4. [365]

   Since then, Gerard has sworn a further affidavit in the following form:

5. [366]

   In those circumstances, I received the following further submission from Mr Klooster:

6. [367]

   Mr Crossland and Ms Flaherty agreed.

7. [368]

   I accept that Gerard has taken the steps he has described. But this has only occurred because I drew attention to the significance of the invitation in his 8 August 2018 email.

8. [369]

   I propose to refer this aspect of the judgment to the Australian Taxation Office. It will be a matter for the Commissioner of Taxation to determine what, if any, further steps should be taken.

Conclusion

1. [370]

   The parties should confer and agree on the orders necessary to give effect to these reasons. If there is any dispute about what orders should be made, the parties should agree a timetable for short submissions. I will deal with any dispute on the papers, unless either side seeks an oral hearing.