Trade Practices - Building contract - formation of contract - course of dealing - appointment of builder - final price not established - contract concluded - part performance - appointment of another builder - breach of contract - assessment of damages - loss of potential profit. Trade Practices Act 1974 8.52 Cases: G. Scammell _ and Nephew Ltd. v. QOuston (1941) A.C. 251 William Lacey (Housiow) Ltd. v. Davis (1957) 1 WLR 932 Sabemo Pty. Ltd. v. North Sydney Municipal Council (1977) 2 NSW L.R. 880 Jones & Lyttie Ltd. v. Mackie (1918) 2 W.W.R. 82 (Can.) COMCO CONSTRUCTIONS PTY. LTD. v. LEISURE HOLDINGS AUSTRALIA PTY. LTD. No. WA G24 of 1986 MUIRHEAD J. PERTH ' 30 MAY 1986 aro, eer Wits ts ee, ne cereee wes ee re S s were wey pee, IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA G24 of 1986 eed BETWEEN: COMCO CONSTRUCTIONS PTY. LTD. Applicant and LEISURE HOLDINGS AUSTRALIA PTY. LTD. Respondent MINUTE OF ORDER JUDGE MAKING ORDER: MUIRHEAD J. DATE OF ORDER: 30 May 1986 WHERE MADE: PERTH THE COURT ORDERS THAT: Judgment for the applicant in the sum of $54,675.07 plus costs to be taxed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules OT nr oO en ners ee re een eee ae . ey Oa Awe woe oe IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA G24 of 1986 BETWEEN: COMCO CONSTRUCTIONS Pry LTD Applicant and LEISURE HOLDINGS AUSTRALIA PTY LTD Respondent CORAM: MUIRHEAD J. 30 May 1986 REASONS FOR JUDGMENT The applicant (Comco) seeks damages from the respondent (Leisure) arising out of breach of contract allegedly entered into between the parties in August 1984. In the alternative Comco claims that certain representations of Leisure constituted false and misleading conduct in breach of s.52 of the Trade Practices Act 1974 whereby it suffered loss and damage. Comco, a building company commenced to carry on business in Western Australia in 1983. The events giving rise to the action occurred relatively early in its business life at a time when it was important that work be secured and successfully performed. Its managing director Mr. Ken Doubikin has long experience in the building industry, having started off his life Ww in that field as an apprentice carpenter. Mr. C. McLaughlin, a civil engineer was employed by Comco as project manager of the works in issue. At material times Leisure carried on business as a developer in Western Australia. Mr. Jon Warren is its managing director and Mr. Dean Scook, also a director, played the principal role in the negotiations and events leading up to the alleged contract. BFC Finance Ltd. (BFC), a Sydney based company, was Leisure's financier for the project in question. Mr. Ken Bohatko was its principal real estate administrator. The persons mentioned above and others gave evidence. As to the history of the matter there is not great dispute save on one or two critical matters. Thus the credibility of the witnesses on disputed factual matters is of importance. Be that as it may the history of the matter is of some importance as it serves to explain what at first glance was an unusual course of dealing between the parties. In 1983 Leisure was engaged upon a major home unit development comprising 40 units at Highgate known as the Peppertree project (Peppertree). BFC was the financier of that project and building difficulties were encountered. BFC appointed Comco to audit and act in the capacity of a watchdog. Because of a past bankruptcy a builder, Mr. Lister, engaged on Peppertree which as I have said was a substantial project, was not acceptable to the financier. After negotiation and discussion it was agreed in effect that Comco would take over as builder on Peppertree. Clearly Mr. Doubikin was regarded with confidence by Mr. Bohatko wna ve otlaw Tt eee a eee uUce. in wid ipdeta ocumtil lates itayves, by tye davactors of Ler uy the meantime Leisure had another development in the pipeline. the Peach Tree project. (Peachtree) BFC was the proposed financier. There is no need to deal in detail with the contractual arrangements concerning Feppertree but Comco aqreed to take it over on a very small margin. I accept Mr. Doubikin's evidence expressed in the following terms: "I agreed to that unrealistically low margin on the first contract in good faith. Leisure Holdings indicated to me that providing things went well between us, we could look forward to subsequent major contracts, and it was indicated that Mr Lister would probably still serve their purpose on minor contracts." It was, I find, most important for Leisure's operations that it should have a reliable builder available, acceptable to its financier, a builder with the capacity to get on with and finish comparatively large projects. Leisure was selling units before construction off plan and significant difficulties or delays served not only to increase its interest liabilities but were likely to cause embarrassment with pre-construction purchasers. Work on Peppertree commenced early in 1984. Mr. McLaughlin was project manager and the project in its early stages was ahead of schedule. Towards its termination date Comco expertenced difficulties, which on the limited evidence available fo me, I find was probably due, not to its default but to inefficient supervision by Leisure's architect. Be that as it may, discussions took place early in 1984 concerning Peachtree. I find a mutual understanding emerged between Leisure, Comco and BFC that Comco would be builder on that project if broad agreement as to terms could be reached. Leisure's architect prepared a broad TY ee tres fey re oe tee Fie Tere ery roe eee = ere moar sy etee An 8. eee ee we design of this new project which involved the construction of approximately 50 units. Later a pictorial facsimile was prepared (Exhibit A.5). On 30 April Mr. McLaughiin and Mr. Dean Scook discussed this project, and by memorandum dated that day the former reported to Mr. Doubikin in the following terms: "Dean also said that Ralph & Beattie will prepare to Csicl Bill of Quantities for Peach Tree, which should ensure that documentation will be completed before we commence construction. Leisure Holdings also intend to submit our name as Builders in June to the Council and avoid a repetition of demolition rat baiting hold ups and delays in the issue of a Building License." Mr. Doubikin expressed his understanding of the position At that time as follows: "My understanding of the matter was that we were going to proceed down a path of doing exactly what we had done with Peppertree; pricing the job, calling subcontract quotations and hopefully reaching a price which was viable for the project." In May 1984 some union interest in the Peppertree project was evident and it was determined at a meeting arranged by Mr. Doubikin in May 1984 that a site allowance would apply not only to Peppertree but also to Peachtree from its anticipated commencement until termination (Exhibit 32). I mention this as it is consistent with the general intention of the parties that Comco would continue as builders. This general intention is further evidenced in Exhibit R.27, being Leisure's application for finance to BFC "to finance the purchase of land and construct 50 pre-sold gtrata titled units on Peachtree Lane". The application nominated "Comco Constructions Pty Ltd" as the 'builder'. This application woe eter ee meeps - y en i ae re . ns reat a yo wat > won bears date 11 May 1984 and LL contains the information that at that date "23 of the 50 units are sold off plan". Subsequent events which I merely precis satisfy me that from this stage onwards it was mutually contemplated that Comco would be likely to build Peachtree. With the consent of Leisure, Comco advertised in "The West Australian" of 16 June inviting subcontractors to register interest in the proposed development. Comco drafted the advertisement stating "We have been appointed builders and project managers" for the development (Exhibit A.2). This was done to minimise initial delays on the assumption that Comco would be the builder. Mr. McLaughlin prepared a form of notice to subcontract tenderers and Mr. Scook suppiied him with a coloured isometric photo of the project. A meeting was held early in July at which Mr. Bohatko was present when both Peppertree and Peachtree were discussed. At that meeting Mr. Doubikin was informed by Mr. Bohatko that the finance agreement was about to be executed and he sought a letter from Comco confirming its participation as builder. This letter was despatched on 10 duly (Exhibit A.33). Mr. Doubikin stated that at that meeting it was "reaffirmed that Comco Constructions were to be the builders of Peachtree". Mr. Bohatko's recollection was that there was no confirmation to that extent but he said "No I have no recollection of that. I do know and can add that we were all talking in terms positively, as I said, of the project proceeding but no official confirmation of that nature". The evidence tends to support Mr. Doubikin's recollection, which is disputed by Warren and Scook. It is not of primary importance as it is not claimed an agreement had been reached at this stage, but fre pert pe epee eee ee . worse 4. He ay ek ee wWhiteyer the tituation., I fisd thavs war seneral expectation that Somes would secform the pburidec's cole. Thereafter BFC provided Tomco with a cory of its offer to provide finance to Leisure. Finance apparently being in hand Leisure instructed its Quantity Surveyors to prepare a bili of quantities. Mr. McLaughlin was invited. prior to its preparation, to discuss the bill of quantities and shortly after he received the first plans he had seen. On 25 July the bill of quantities was supplied to Comco (Exhibit A.7) and Mr. McLaughlin set about pricing the bill. He contacted subcontractors concerning prices and with the help of a planning consultant prepared a preliminary construction programme. Mr. McLaughlin's understanding at that time was expressed by him as follows: "We were the only people pricing the actual works and we were to obtain the most competitive submission. We would then put on our agreed mark-up at the end and submit them to the client for approval. It was to be an open situation and I was quite happy to show them all the aspects of our price, virtually on a page by page basis if need be." This open approach to the project was maintained by Comco throughout. Leisure played its cards closer to the chest. It was then hoped that the building works were to commence on 1 September 1984 for completion at the end of July the following year. Early in August 1984 Mr. Scook instructed Comco to proceed with demolition, rat baiting and investigation of water table levels, preliminary steps designed to shorten time. These steps were duly performed, invoiced and paid for in due course. On 14 August Comco's tender had been prepared and a meeting was arranged to discuss it. It was above Leisure's budgeted figure and a general discussion took place to find ways and means of scaling it down. Leisure's architect, Mr. Harler was present and not only price pruning but design changes to effect economies were, I find, discussed. I heard much evidence about Leisure's 'budget' figure for building costs and subsequent variations of price. I observe that however Leisure may have regarded its budget figure it was initially based on -estimates not supported by detailed Plans and specifications. It is clear to me that the system adopted posed real difficulties. The budget was reached - at an early stage, a stage not far divorced from sales 'off plan' and a Stage when a market building price had not been obtained. But having sold units 'off plan' Leisure's scope for design changes was somewhat limited. I find with confidence that "it was in' the contemplation of the parties that ways and means of reducing price could be found, by substitution of materials and by simplification of some aspects. Mr, Doubikin's evidence as to the meeting on 14 August was as follows: "Was there any response from Leisure Holdings people? ~--Yes. Mr Warren confirmed our understanding that the figure was in excess of what they were hoping to achieve. He indicated that it was fair. We made the concession in respect of our preliminary allowances which resulted in us pulling our general labour ay wore er eee se ~ tas fer "ye a a't an wr he. 8. allowance from three men down to two. We told him that any savings which resulted from subcontracts, cheaper subcontracts, would be afforded to his benefit, and Mr Harler was fairly convinced that he could effect considerable savings by a few design changes that he had in mind. Was there any mention of a figure expected to be reduced as a result of those design changes?---We felt that $200,000 was quite on the cards." On 16 August Mr. McLaughlin says he was advised by Mr. Scook that "Comco were to be the builders of the Peachtree Lane project. He stated he was told "that we were to use our every endeavour to try and reduce the price wherever possible by getting reduced prices and coming up with practical design alternatives to reduce the price and try and bring it close to their budget figure". He also told me that Mr. Scook was flying to Sydney that evening to confer with BFC and he was asked to prepare a 'cash flow' on the project so that the financial commitment could be more clearly defined. Mr McLaughlin hastily prepared the cash flow (Exhibit A.10) and delivered it to Mr. Scook. In the meantime he had conveyed the news of Comco's appointment as builder to Mr. Doubikin who told me that he immediately telephoned Mr. Scook. He stated: "---T told him that I was pleased that the agreement had finally been reached that Peachtree was to be built by Comco Constructions and that we would be doing everything in our power to make sure that it got moving as quickly as possible and contribute any energies at all that were required of us in the meantime. Do you recall Mr Scook's reaction?---Mr Scook was very pleased also that it was a fait accompli, and in fact it was at that time that he told me incidentally that we had beaten Mr Lister by $20,000." one Fy Sea 9. Unknown to Comco, Leisure had obtained prices from Mr. Lister, the original builder engaged on Peppertree. I pause at this stage to observe that Mr.Scook denied the meeting with Mr. McLaughlin on 16 August and he denied the telephone call with Mr. Doubikin the same day. This was a critical day in the long series of events, as it represents the day when Comco claims it established an agreement for the building of Peachtree and it is appropriate for me to make my findings on credibility. I found Mr. McLaughlin and Mr. Doubikin to be most impressive witnesses. Mr. McLaughlin is no longer employed by Comco, he now works for another firm. I am satisfied that he was not partisan; he did not hesitate to make concessions in cross-examination when the facts or truth so required. Mr. Doubikin I assess as being an entirely trustworthy and careful witness. He is a clear minded individual and I am confident that he would not lie to suit his own interests. The demeanour of Mr. Scook and Mr. Warren was generally good; they are both intelligent men. But they did not exhibit the same frankness, or the capacity to answer questions simply and to the point. Where the evidence of Mr. Scook or Mr. Warren conflicts with that of Mr. Doubikin or Mr. McLaughlin I accept the latters' testimony in preference. I find that on 16 August 1984 Mr. McLaughlin was advised that Comco was to be the builder and I find that the subsequent telephone conversation between Mr. Scook and Mr. Doubikin took place in terms of the latter's testimony. stew ies tie ~aee awe ee cae eo we 7 A wes tnt wees ae _ 10. Subsequent events were, in my view, consistent only with that agreement having been reached. Regular discussions took place between Mr. Scook and Mr. McLaughiin not only as to the Peppertree and Peachtree projects but also to a further proposed development on nearby land called the Jasmin project (see Exhibit A.11l). On 23 August Comco having obtained rat baiting and demolition licences directed demolition of premises for the sum of $6700 (Exhibit A.12). Late in August Mr. McLaughlin went on leave and in his absence Mr. Doubikin worked on the cost figures reducing the price to 91,963,000 (in round figures) still above the 'budget' of $1,834,000 but substantially lower than the first price of $2,127,000. It was always in the contemplation of the parties that when the lowest achievable figure had been reached they would enter into a formal building contract, referred to in the evidence as "Edition 5B" as required ultimately by the financier. The parties were working mutually to that end. Early in September 1984 whilst the parties awaited the necessary building licence Comco took some further positive steps such as ordering tiles for the project. I find that Mr. Scook requested the builder "to firm up their pricing and to try and get fixed prices wherever possible to make sure that with a slightly delayed start it would not mean an escalation in pricing". Comco took such steps (see Exhibits A.18, A.19, A.20 and A.21). Up to this stage the relationships between the parties was good. I am satisfied that Comco's work on Peppertree, which had been ahead of schedule, had been to Leisure's benefit and it TI, Se red wea F a woarws ge ll. augured well for the future. The evidence of Mr. Bohatko shows clearly that he also had confidence in Comco and in view of the fact that Peachtree was to be almost totally financed this was an ' important factor. But as the weeks went by difficulties were encountered by Comco at Peppertree due principally, I find, to the inadequacies of supervision by Leisure's architect. The situation was described by Doubikin in the following terms: "What was the situation on the Peppertree project at that time, Mr Doubikin?---The job was causing us considerable concern. We just simply could not progress the job due to problems associated with the architect's inactivity or inability or - - - What - on certifying progress payments?---On every issue, We were not being paid moneys; we were not having our variations dealt with; we were not receiving instructions; we had trowels just standing around ~ trowel hands just standing around with trowels dripping, waiting to find out at what point they should stop and the job at that stage was in a terrible mess, It was an unfortunate set of circumstances because we had actually achieved a very good progress on the job. We were six, seven, eight weeks ahead of schedule at one stage and at that point in time we were getting back to where we had almost lost all that credit. We were getting nowhere with - it was an unusual contract; the client was actually the person who was handling instructions tous andwe seemed to have difficulty obtaining the architectural assistance that we definitely required. In fact, that was virtually the start, I guess, of an arbitration that subsequently took place with respect to Peppertree. So as a result of these difficulties you were experiencing on the Peppertree site - you mentioned the architect - what was the state of your relationship with Mr Warren and Mr Scook of Leisure Holdings at that point?---I would describe it as a state of balance. We were either going to be supported in our opinion as to how things were or we were going to be sunk as a result of their accepting Mr Harler's advice as to why things were as they were. I would say that at that stage our relationship was still intact, although under suspicion." were ee 12. I am satisfied that in the face of Comco's requests for variations on the Peppertree project Leisure's attitude to Comco underwent change. To this stage the parties had worked in apparent co-operation to prune the projected cost of Peachtree to a figure closer to Leisure's budget figure, a sum in itself fixed at a stage when it could be no more than a pretty rough estimate. It is probable that Leisure determined, despite its August agreement, to find other ways and means, including if necessary another builder to proceed with Peachtree. Without consulting Comco, Leisure determined on anew approach and put together a package which involved proposed developments at Bunbury and the Jasmin and Poplar Court projects in addition to Peachtree. They called for tenders on a "design and construct" basis from other builders. This came to the knowledge of Comco which by this time regarded itself as the Peachtree builder, which was actively pursuing preliminary matters and which had designated a project number in its accounting procedures to Peachtree. On 16 October Mr. McLaughlin wrote to Leisure requesting a meeting. He stated inter alia "We are extremely concerned at your non-approval of the recent variations submitted on the Peppertree Grove Units and the possible loss of the Peachtree Lane project" (Exhibit A.22). Two days later Mr Doubikin wrote to Mr Warren by letter which I regard as unequivocal and which quite plainly indicated that the Peachtree project had been awarded to Comco and that company would not accept departure from the basic agreement (Exhibit A.34). The meeting took place on 22 October and the minutes taken by Mr. McLaughlin and Mr. Warren's comments thereon ror om: 13. are in evidence (Exhibits A.23 and A.24). Comco was given to understand that the tenders were designed to ascertain competitive prices, the package had been designed to explore the possibility of overall savings on the four projects and that Comco was to he the 'preferred choice' for future projects. On this basis, and without I find departing from its stance on Peachtree, Comco submitted a tender on the package. There is no necessity to deal with subsequent events. By letter dated 8 November (Exhibit A.36) Mr. Doubikin was informed that in respect of the package, which included Peachtree, '"Jobec, builders have been appointed Prospective Builders". Leisure's conduct in this matter is difficult to understand, save on the basis that for reasons which I find were associated with Peppertree it had determined that it would not adhere to the bargain struck with Comco. During the hearing Leisure's witnesses, Mr. Warren and Mr. Scook adhered to the view that as no price had been finally agreed, and no written contract prepared, no contractual relationship had been established. And yet it engaged another builder to do the job on a basis that had, it seems to me, even less certainty as to price. As I commented earlier, Leisure's approach to the building development was unusual. It was not the situation of preparation of detailed plans and specifications followed by the calling of open tenders. It seems to me that having reached a pretty arbitrary budget figure and having sold 'off plan' weil before building started Leisure was determined to use every endeavour to prune building costs. Having sold units, the savings i. pan ae teoege wre wr cms . ao.9 Be Ste rn gs ote ere ge eae mapa 14, to be effected by design alterations were thus limited, and it is probable that Comco''s firm approach to variations on Peppertree led Leisure to engage another builder which it was hoped would be more amenable to its dictates. In reaching my findings I have kept well in mind the prior history of the matter and the relationship between the parties. I find that in the course of the negotiations Comco operated in a completely open manner with Leisure being prepared to reveal and discuss every aspect of its costing and the basis of its tendering. This was consistent with the relationship, encouraged by the financier, wherein the parties regarded. themselves as a team. The establishment of a firm client builder relationship had obvious advantages to Leisure as a developer, just as it had clear advantages to Comco which thereby had an assured future source of work. These were the considerations which weighed with the parties during the negotiating stage and it explains why, as I find, the final agreement that confirmed previous expectations Comco would be builder was reached' in an informal manner. I also stress that at the time when Leisure abrogated the agreement the question of cost reduction was being actively pursued by Comco and I can only assume, (as he did not give evidence) by Leisure's architect. The gap between the 'budget figure' and the final contract price was narrowing and at the time the contract was taken from it, Comco was energetically taking steps which can only be rationalised on the basis of its understanding that it was builder for the project. My eee wt wey + an pee pee oer ee "Fs : . iw in The steps taken by Comco arter 16 Aucdust were not steps av taken in the course of tender. Nor do I find there was a separate agreement to the effect that Comco would carry out steps on behalf of Leisure on the basis that if Leisure did not appoint it as builder a financial adjustment would be effected. The submission in September 1984 of Comco's invoice for demolition works and site clearance. which included the builder''s margin (Ex. A.16), is consistent only with the relationship of client and apointed builder. (See also Exhibits A.19, A.20 and A.21.) It is not a function of the court to interpret documents and dealings between parties as leading to a finding of consensus ad idem, when there was obviously no consensus. Lord Maugham expressed the situation in commercial contracts simply in G. Scammell and Nephew Ltd. v. Ouston (1941) A.C. 251 at 255: "In order to constitute a valid contract the parties — must so express themselves that their meaning. can be determined with a reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention; in other words the consensus ad idem would be a matter of mere conjecture. This general | rule, however, applies somewhat differently in. different cases. In commercial documents connected with dealings in a trade with which the parties are perfectly familiar the court is very willing, if satisfied that the parties thought that they made a binding contract, to imply terms and in particular terms as to the method of carrying out the contract which it would be impossible to supply in other kinds of contract: see Hillas & Co. v. Arcos, Id. 147 L. T. 503, 511, 512, 514. My Lords, it is beyond dispute that if an alleged contract is partly oral and partly in writing it is necessary to take the whole of the negotiations into consideration for the purpose of seeing whether the parties are truly agreed on all material points, for if wpe me wT raremar oor haat ve oh ne ee nee oe a: San Sw 4 se T Panama) Tye ye, a 16. they are not there Js no nindaing contract. Nor is it right to construe a letter or other document forming a part of the negotiations in such a case without regard to the oral statements which also form a part of them." (See generally Halsbury's Laws of England (4th Edition) Vol.9) I am not dealing here solely with a claim for reimbursement of expenditure made in contemplation of contract, for example toa quasi contractual arrangement which has at its source the principles relating to quantum meruit. (See William Lacey (Hounslow) Ltd. v. Davis (1957) 1 WLR 932; Sabemo Pty. Ltd. v. North Sydney Municipal Council (1977) 2 NSW L.R. 880.) In the latter case Sheppard J. carried out a careful examination of the authorities relevant to the development of a party's right to remuneration or compensation for work done arising quasi ex contractu, not by reason of a concluded contract. (See particularly at 900-901.) Those were cases where by unilateral decision the proposed work was not proceeded with. Here the work did proceed, another builder being appointed, not only after Comco had been appointed but after it had taken steps in the performance of the agreement and the building works. As I commented at the outset the negotiations and the agreement itself were unusual in form, but the oral agreement cannot be analysed, isolated as it" were, from what had gone before. The fact that the respondent breached the agreement, part performed by the applicant before the agreement was incorporated in the written form contemplated by all concerned does not deprive the applicant of its right to damages. This is not a case where the project was abandoned, in which case the measure of damages to the applicant may well have been limited to the work done prior to breach. The work, already in my view Soyo 1 toe 4 1?. part performed by the applicant, proceeded and at a time when the applicant was ready willing and able to continue to finality as in my view was mutually contemplated. As I have mentioned Leisure's change of heart was in my view probably associated with Comco's insistence that it should be paid its entitlement upon Peppertree - an issue which was determined eventually by arbitration. I find that on16 August 1984 Comco was appointed builder of Peachtree, that with the approval of Leisure it took positive steps as builder to ensure the project could start without delay and without escalation of costs. A final agreement as to price had not been reached but there was agreement in principle that the price would be defined in the Edition 5B agreement after not only Comco but Leisure and its architect had further explored costs savings and design changes. I find the contract pleaded in paragraph 20 of the Statement of Claim and the matters pleaded in paras 23 and 24 of the Statement of Claim are established. The contract and its breach are proved. Comco is entitled to damages consequent upon such breach, which include reimbursement of expenses incurred as contract works or in anticipation of and to the benefit of such works. In assessing damages I take into account the evidence of the witness Greaves which I accept. I allow the following: vee 4, - ayes ae? mayen 2 Se ite 18. Newspaper advertisomoent $ 99.60 John Roth and Associates 5 248.00 - Construction Programme Applicant's costs associated with $ 370.00 construction programme Second Foreman at Peppertree to $ 5,000.00 ensure continuity - allowed at Water table excavation and investigation Executive Plant Hire $ 108.00 Comco $ 73.00 Demolition expenses $ 3,996.25 Work and design changes - Comco $ 1,450.00 Workers Compensation - interest allowance not allowed Retention - bricklaying team $ 1,433.22 Rat baiting $ 200.00 Site amenities $ 704.00 $13,682.07 Less progress payments recovered $_9,007.00 $ 4,675.07 . In addition the applicant claims $76,200 by way of loss of profits. The evidence before me shows and it was common ground- Comco was prepared to accept 5% of the appropriate figure for calculating the builder's margin (Exhibit R.25). The evidence of Mr. Ralph the quantity surveyor is that normally neither a builder's margin nor an allowance for project administration is included in a bill of quantities - a builder will generally make allowance for his profit margin and overhead expenses in submitting his costs to the individual bill items. But it was his NT eet ere me re 2 omy i a 19, firm, on instruction from Leisure, which prepared the bill of quantities where individual provision was made for both project administration and the builder's margin. Mr. Doubikin has assessed loss of profit by accepting the project cost figure at $1.8 million, 5% of which is $90,000. From this he has deducted his company's allowance for project administration and the evidence of Mr. Ralph supports the approach that such administration should be incorporated in the margin, not chargeable as a separate item on the job. In the bill the applicant allowed $13,800 for project administration. This allowance may well have been reduced in due course but the procedure gives the respondent a maximum allowance. Thus Mr. Doubikin arrived at his claim for loss of profit at approximately $76,200.00. Having found the respondent committed a fundamental breach of the agreement there can be no doubt as to the applicant's right to recover by way of damages the profit reasonably anticipated and proved. The loss was of a type reasonably in the contemplation of the parties and it was damage arising in the ordinary course of things from the breach. See Hadley v. Baxendale (1854) 9 Ex. 341; Victoria Laundry (Windsor) Ltd. v. Newman Industries [19491 2 K.B. 528; Canada Foundry Co. v. Edmonton Portland Cement Co. (1918) 3 W.W.R. 866 (P.C.): Hudson's Building. and Engineering Contracts (10th Edn) 596. I am satisfied as to the competence of the applicant to carry out the work and I find that save for the breach it would have done so. It was a job of the nature Comco sought. Mr. Soygtee aye — se er ae he 20. Doubikin was an experienced builder who knew the capacities and limitations of his company which had of course recent experience upon the Peppertree project. Exhibit A.40 sets out the contracts secured by the applicant since the breach took place and Comco appears to be pretty regularly engaged on a variety of building projects, some modest, some substantial. I am satisfied that the applicant had an efficient up to date administration and it would be erroneous to find on the evidence that the loss of profit on Peachtree was replaced by profit on another job which would not otherwise have been secured. The evidence of the independent witness Greaves was relevant on this aspect when he was dealing with administration and fixed overheads: "It is there as a set number of people who expand with the volume of work that they have on. As far as I am concerned, in particular, all my administration staff or my tendering staff and my purchasing staff are a fixed cost, so0 the more profit I maximise the more or the less percentagewlse is that overall cost against ny profits, bearing in mind as I said that this is going on all the time, and I suppose in a sense it is like putting fuel into a diesel bus. It is there all the time. While it is traveling along, the more customers or the more fares you get on to the bus, the cheaper that fuel costs. It is a very similar situation as far as building is concerned." I accept Mr. Doubikin's evidence that had Peachtree gone ahead with his company as builder he would still have "bid" for the subsequent contracts he obtained. I also accept that whatever the builder may determine as his margin, profit will vary according to the fortunes of the particular project. The applicant's counsel submits that in assessing entitlement to damages for loss of profits - loss of the bargain - I should bear in mind that the contingencies relating to profit on this type of ran oe eer = es ke en ee pete coe yc Ley oqeer spre wing Oe iat An ban —_— ar eee ' 21. project may be favourable as well as adverse. But I must bear in mind the nature of the project in question and the clients with whom the applicant planned to be associated. I can feel no confidence that had the agreement not been breached the road to completion would have been altogether a smooth one. When the parties were in negotiation there was optimism that Peachtree would commence in August 1984 and would be finalised 10 months later, i.e. about June 1985. Mr. Scook informed me that the job has only just been completed. This is of no evidentiary value, as a different builder was engaged and there may have been variations of which I am not aware. But my assessment on the probabilities is that Peachtree may have proved a difficult contract and in assessing damages under this head I consider realism requires the award of a sum substantially less than the amount claimed. Some allowance must also be made for the time, labour and expense saved by reason of the fact that the builder was by circumstance relieved of his obligation to carry out the contract. (See Jones & Lyttle Ltd. v. Mackie (1918) 2 W.W.R. 82 (Can.) (referred to in Hudson at p.602)). I award $50,000 damages for loss of profit, a total award of $54,675.07. As I have found for the applicant in respect of its cause of action based on breach of contract there is no necessity to consider the claim as alternatively pleaded under the ete eee "F ie see ioe — ee . Kt opty eres enya p ae 22. Yrade Practices Act. Whilst the measure of damages under that act may in some circumstances be assessed upon a different basis it would in this case, if misleading conduct had been established, make no difference to the outcome. There will be judgment for the applicant in the sum of $54,675.07 plus costs to be taxed. I certify that this and the twenty-one preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Muirhead. Hsoecth | Associate Dated: 30 May 1986 ys Sate aie ra