District Court New South Wales Medium Neutral Citation: Schrader v David Broach t/as David Broach Building Services [2023] NSWDC 97 Hearing dates: 30 January – 3 February, 6 – 7, 15, 17 February 2023 Date of orders: 14 April 2023 Decision date: 14 April 2023 Jurisdiction: Civil Before: J Smith SC DCJ Decision: (1) The Statement of Claim be dismissed with costs (2) The Cross-Claim be dismissed with costs Catchwords: BUILDING AND CONSTRUCTION — Australian Consumer Law – unconscionability – misleading and deceptive conduct – defective work – budget report – unpaid invoices – quantum merit CONTRACT – cost-plus contract – breach of contract – implied terms – good faith – consequence of breach – damages ­– whether termination by acceptance of repudiation Legislation Cited: Australian Consumer Law ss 4, 18, 21, 22, 29 Home Building Act 1989 (NSW) ss 18B, 18F Cases Cited: ACCC v 4WD Systems Pty Ltd [2003] FCA 850; 59 IPR 435 ACCC v Allphones Retail Pty Ltd (No. 2) [2009] FCA 17; 253 ALR 324 ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90; ATPR ¶42-447 Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570 Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2020] FCAFC 130; 278 FCR 450 BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPCHCA 1; 180 CLR 266 Campbell v Campbell [2015] NSWSC 784 Doepel & Associates Architects Pty Ltd v Hodgkinson [2008] WASCA 262 Foran v Wight [1989] HCA 51; 168 CLR 385 Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 Howard v Pickford Tool Co [1951] 1 KB 417 Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313; [2001] ANZ ConvR 513 Kimberley Developments Pty Ltd v Bale [2023] NSWCA 25 KKL Investments Pty Ltd v Daikyo (North Queensland) Pty Ltd [1995] QCA 25 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115 Kronenberg v Bridge [2014] TASFC 10; 26 Tas R 359 Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (trading as Uncle Ben's of Australia) [1995] FCA 451 Mann v Patterson Constructions Pty Ltd [2019] HCA 32; 267 CLR 560 Morris v Leaney [2022] NSWCA 257 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; 285 ALR 217 Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; 136 CLR 444 Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; 236 FCR 199 Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; 149 CLR 537 Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; 157 CLR 17 Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 Shevill v Builders Licensing Board [1982] HCA 47; 149 CLR 620 Société Générale v Geys [2013] 1 AC 523 Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 96 ALJR 271 Williams, William v Williams, William [2023] NSWDC 10 Woods v Woods [2000] NSWSC 851 Texts Cited: Mason K, Carter J, Tolhurst G, Mason and Carter's Restitution Law in Australia (4th Edition, 2021, LexisNexis) Seddon N, Bigwood R, Cheshire and Fifoot's Law of Contract (12th Ed, Aust Ed, 2023) Category: Principal judgment Parties: Matthew Schrader (First Plaintiff and Cross Defendant) Jacqueline Schrader (Second Plaintiff and Cross Defendant) David Broach (Defendant and Cross Claimant) Representation: Counsel: C Stomo (Plaintiffs and Cross Defendants) M Fraser (Defendant and Cross Claimant) Solicitors: Kedron Legal (Plaintiffs and Cross Defendants) Williamson Lawyers (Defendant and Cross Claimant) File Number(s): 2021/00144195 Publication restriction: None Judgment Introduction 1. The plaintiffs, Matthew and Jacqueline Schrader, are husband-and-wife who have lived at their home in Kareela since about 2000. In December 2019 they entered into a building agreement with the defendant, David Broach, for building works on their home that included the excavation of the lower ground floor, the construction of a rumpus room, wine cellar, storeroom, internal stairs and bathroom as well as the removal and rebuilding of an upstairs balcony and external stairs. 2. The building contract was in the form commonly known as a cost-plus contract and included in it an estimate of the costs of the building work which was stated to be $300,000. 3. The building work commenced on 29 January 2020. In August 2020 the plaintiffs asked the defendant for an update as to the likely further cost to complete the work. In response, the defendant sent the plaintiffs a detailed budget for further work estimating that a further $352,000 was required to complete the work. 4. At this time, the plaintiffs had failed to pay a number of invoices sent to them by the defendant for work undertaken by him. On 15 September 2020, by reason of that failure, the defendant sent the plaintiffs a notice of suspension of works under the contract. No further building work has been undertaken on site. 5. The parties engaged in discussions in an attempt to settle the disputes between them but these were unsuccessful. 6. In May 2021, the plaintiffs commenced these proceedings. They claim damages from the defendant on a number of bases. It will be necessary in due course to examine these bases with some care, however, for present purposes, they may be summarised as a claim that the defendant misrepresented the likely cost of the building works, acted in breach of his duty of good faith, and acted unconscionably. They further claim that some of the work undertaken by the defendant was defective. They claim, by way of damages, the amount which it will take to rectify the defective work and to complete the works required under the contract less an allowance of the value of the works already completed. 7. The defendant cross-claims for money owing for work done under the contract or, alternatively, a reasonable remuneration by way of restitution for work done for the benefit of the plaintiffs. 8. The plaintiffs' claim must be dismissed, principally because, even though the defendant did breach a number of terms of the contract, he neither misrepresented the cost of the building nor acted contrary to good faith or unconscionably and, in any event, the plaintiffs have not suffered any loss as a consequence of his action as pleaded. The cross-claim must be dismissed because the defendant failed to claim for amounts in the manner prescribed by the contract and was, in any event, paid for the work that was outside the scope of the work under the contract. 9. The plaintiffs' pleadings are not straightforward and lack a number of important particulars. For that reason, they take some time to understand. The task of analysing the pleadings is generally important and even more so when, without that analysis, there is a real risk that the case will be decided on the basis of issues that do not arise on the pleadings. 10. The critical role that pleadings play in civil proceedings was recently examined by President Ward in Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 at [67]-[73]. It is pertinent to set out here the following passage in her Honour's reasons: [67] The central role of pleadings was authoritatively expressed by the High Court in Banque Commerciale SA., in liquidation v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11 (Banque Commerciale). At 286-7 Mason CJ and Gaudron J said (omitting citations) that: The function of pleadings is to state with sufficient clarity the case that must be met. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. [68] Brennan J, as his Honour then was, at 288 expressed the principle in the following terms (omitting citations): When the pleadings bring the parties to the issue, the court's function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings (as to which, see the observations in London Passenger Transport Board v Moscrop. The rule is clearly laid down in the judgment of this Court in Dare v Pulham: Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings. [69] Procedural fairness requires that any relief granted is to be confined to that properly pleaded (see Banque Commerciale at 286-287; see also Gould & Birbeck & Bacon v Mount Oxide Mines (1916) 22 CLR 490; [1916] HCA 81 at 517 per Issacs and Rich JJ). Likewise in Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70 at 664 it was said that "the relief which may be granted to a party must be founded on the pleadings". [70] Ipp JA noted in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 (at [424]) that the rule that, in general, relief is confined to that available on the pleadings secures a party's right to a basic requirement of procedural fairness; and that, apart from cases where the parties choose to disregard the pleadings and to fight the case on additional issues chosen at the trial, the relief that may be granted to a party must be founded on the pleadings. 1. This was not a case in which the parties effectively conducted the proceedings outside the scope of the pleadings: see Kimberley Developments Pty Ltd v Bale [2023] NSWCA 25 at [38]-[39] (Leeming JA, Kirk JA and Griffiths AJA agreeing). For that reason, the claims of each of the parties fall to be decided on the basis of the pleadings, such as they are. 2. Upon my analysis of the pleadings, I consider that the best way to approach the issues raised in them is to deal with the issues in four parts: the first part dealing with those issues arising from the facts up to and including the entry into the contract; the second part dealing with the issues arising from the facts that occurred from that point up to February 2021, when the defendant had suspended work and then returned to take some of his equipment; the third part dealing with the claim for defective works and the fourth dealing with the cross-claim for unpaid invoices. There is some overlap between each of these parts; however, the purpose of this approach is to attempt to deal with the issues that arise between the parties on the pleadings within a logical framework and so to afford them procedural fairness. 3. I will first set out a brief chronology of events, focussing on the lead up to the contract, but dealing with the whole dispute. In doing so, I will highlight any relevant factual matters that are in dispute and then resolve those disputes later in the reasons. These facts will be supplemented where necessary when I come to deal with each of the issues. Chronology 1. In or about late 2015 the plaintiffs began exploring their options of increasing the amount of space in their home to accommodate their family. One of the options considered by them was to renovate the house. They made an enquiry with a design company, JMH Living Design, the principal building designer of which was Mr John Hatch. Mr Hatch went to the property to discuss the situation with the plaintiffs. 2. Mr Hatch then prepared some concept plans for renovation of the house including an additional living space, bathroom and wine cellar under the existing house. In or about February 2016 Mr Hatch provided the plaintiffs with preliminary plans to give them an idea of what the alterations and additions to the house would look like once complete. 3. The plaintiffs took their time to consider these plans and their other options. Finally, in May 2017 Mr Schrader called Mr Hatch to find out what the construction of the building shown his plans might cost. In his affidavit he said that he told Mr Hatch that he had a budget of approximately $300,000. After this telephone call Mr Hatch approached the defendant to ask for an estimate of what the construction of the building shown in his plans might cost. 4. The defendant sent Mr Hatch a preliminary estimate indicating an estimated cost of works of $351,106.59. Mr Hatch sent the defendant's preliminary estimate to the plaintiffs by email on or about 19 May 2017. 5. On or about 20 June 2017 Mr Hatch sent the plaintiffs a further email attaching a revised preliminary estimate from the defendant in the amount of $298,507.29. After considering these estimates the plaintiffs decided to proceed with the next stage of the project. 6. In July 2017 the plaintiffs engaged Mr Hatch to prepare and lodge a development consent application with the local council. The application was prepared in January 2018 and lodged shortly thereafter. Those plans were subsequently revised and, on 19 June 2018 the local council granted development approval in respect of those revised plans. 7. Mr Hatch was then engaged to obtain a construction certificate for the project. To this end, a structural engineering firm, Steve Whelan & associates pty limited, was engaged to prepare the structural drawings. These drawings were provided on or about 15 August 2018 and revised on 25 March 2019. On or about 27 February 2019 a geotechnical report was obtained in relation to the required excavation into the rock bed as required by condition 10 of the development approval. 8. The next step in the process was to engage a builder to undertake the required works. To this end, Mr Hatch sent relevant documentation to the defendant on or about 8 April 2019. The plaintiffs had a conversation with the defendant at their house on or about 15 May 2019. There is some dispute about what was said during the conversation. 9. The plaintiffs say that Mr Schrader told the defendant that they had a budget of $300,000 and asked him whether he was sure whether he could do the job for that amount. Mr Schrader says that there was then the following exchange: Defendant: The works can be done for the price I have given. I have some concerns with the excavation costs however as we can [scil: can't] see what is on the surface, but we don't know what will find underneath. Mr Schrader: So the main thing that will change the price is the excavation costs? Defendant: Yes. The excavation and whether you want to upgrade any materials or fixtures and fittings. Mr Schrader: So the rest of the works is known quantities? Defendant: Yes. They are pretty straightforward. The only area of concern is the excavation 1. In cross-examination, Mr Schrader added that the defendant said that the "girls in the office will keep track of it for you" and that they would send a spreadsheet every couple of weeks and that they would let the plaintiffs know "if we go over." 2. In her affidavit, Mrs Schrader says that she said to the defendant that they did not want to go too far over their budget as it was all they could really afford. She also said that the defendant replied that they need not worry that: "The girls in the office will prepare weekly spreadsheets so we can keep track of everything. The only real concern is the excavation costs which we won't know until we start digging, as we don't know what is underneath the surface. Otherwise it is a pretty straightforward job." 1. In his evidence the defendant doesn't give his own version of that meeting, but denies that he was given a budget at that time or that he said that the works could be done for the price that he had given. He also denies that Mrs Schrader said that the plaintiff did not want to go over their budget or that he said anything about supplying a spreadsheet every couple of weeks. 2. The plaintiffs say that after this conversation they began to seriously consider their options and explored their options again to see the best course of action for them including looking at other homes to see if they could move house, engaging other builders to provide quotation and beginning to arrange finance to see what they could borrow to carry out the works. 3. Mr Hatch subsequently gave the plaintiffs the names of two alternative builders and Mr Schrader approached each of them for a quotation. Both of these builders came to inspect the site and to discuss the matter with the plaintiffs. The first of them, Mr Wienholt, provided a building estimate on 24 August 2019 for a price of $467,696 (including GST). On or about 29 September 2019 the second of these builders, 360 construction projects provided a quotation in the amount of $511,686.08 (excluding GST). Neither was willing to do the work on a fixed costs basis; they would only do it under a cost-plus contract. 4. On 7 August 2019 the defendant sent an email to the plaintiffs advising them of the cost of the home warranty insurance for alterations and additions. The email advised that the project costs were noted as $250,000. Mr Schrader, who received the email, did not query that amount. It is notable, however, that Mr Schrader was sent the draft development application by email from Mr Hatch dated 21 December 2017. Mr Hatch explained at that time that that figure was an estimated cost and was for determination of council fees only. 5. On or about 20 September 2018 the plaintiffs received from JMH living design a partly completed application form in respect of the construction certificate and were asked to sign the front page. This document, too, had an estimated cost of work as $250,000. 6. On about 1 October 2019 the plaintiffs applied to Credit Union Australia Ltd ('CUA') (as it then was) for finance in relation to the project. CUA subsequently asked the plaintiffs to provide it with a confirmation of a building estimate from the builders and Mr Schrader asked the defendant for a quotation for the works for that purpose. 7. Much was made during the course of evidence about the difference between a quotation and an estimate in connection with construction work. Ultimately, the nomenclature used at any particular time by any particular person is not decisive of any issue in the proceedings. What is important is whether what was represented was misleading or deceptive and, if so, whether it was productive of any loss or damage to the plaintiffs. For that reason, my use of the word "quotation" or "estimate" at this stage of my reasons should not be taken to indicate any view that I have on that issue. 8. On 8 October 2019 the defendant emailed Mr Schrader a quotation of $300,000 (including GST) for the works. Mr Schrader replied by email saying that their finance application was being processed and that they would know the budget soon. He also said that he would be happy to go through that with the defendant and figure out what can be achieved for that budget. 9. On 9 October 2019 Mr Schrader says that he telephoned the defendant and spoke to him about the quotation he had just received. While the evidence is consistent that there was a conversation around about this time, there is a conflict about who was involved and what was said. 10. In his first affidavit Mr Schrader said that the following conversation occurred: Mr Schrader: … I have received two other quotes from builders that John Hatch has worked with as well. Both these quotes came in well above what you came in at. How can you be so much cheaper than these guys? Defendant: I have all the tools and things I need to do the job. I don't rent stuff like the other guys and charge you for them like they do. I have everything from my years of building. I also shop around for supply of materials, and I get things from the western suburbs which is cheaper than local. It helps me keep my costs down. Mr Schrader: So based on what we have discussed, the main thing that could cost more is the excavation? Defendant: Yes mate. Mr Schrader: This is my main concern, that the excavation costs could blow out. Defendant: Okay. I will arrange for the excavator to come out and inspect the site. 1. In his affidavit, the defendant denies this version of the meeting. He says that he met both of the plaintiffs in the kitchen in their home to go over the costs. He says that he said: "This job is impossible to quote due to the excavation. Everything else I can normally quantify once I am out of the ground. I own most of my own equipment for work and we can save costs there." 1. He said that he would arrange for Steve Britton, the excavator, to come to site to have a look and that, for $300,000 they could try get the excavation done, the shell done, the doors and windows and balconies. His evidence was that Mr Schrader assured him that he would help and that he replied that "the more you put in, the more you save." 2. On 14 October 2019 the plaintiffs' mortgage broker emailed the plaintiffs saying that CUA had asked that "as the builder will not provide a fixed priced build contract" would they be able to provide a detailed "Progressive Draw/Payment Schedule" to outline when and what amounts would be required throughout the construction. 3. On 18 October 2019 the defendant attended the plaintiffs' house with an excavation contractor, Mr Britton. Again there is some dispute about the conversation that took place during this visit. 4. In his first affidavit Mr Schrader said that the following exchange took place: Mr Schrader: David, my main concern is the excavation costs blowing out as the costs are already near our budget limit. Defendant: It's all good. This is why I brought the excavator here so we can look at it in detail. Mr Schrader: After the inspection with the excavator, do you need to requote the works? Defendant: There is no need to requote. I am all over this. I will sharpen my pencil where I can for you, however the excavation costs will be what they are. Mr Schrader: Are you able to give me an estimate of the costs of excavation? Defendant: No. We cannot determine what the costs are at the moment we won't know until [we] start excavating. Mr Schrader: Okay. 1. In his first affidavit the defendant said that during this meeting Mr Britton did not give him a price for the job and when the defendant asked him for an estimate he said "I don't know. It's not an easy one to estimate." Later in his affidavit the defendant says that he denies that either he or Mr Schrader said anything about re-quoting. 2. In his affidavit Mr Britton said that, during this site visit he was unable to give the defendant a price but that he said "this is a really big job. The amount of unknowns is huge. Getting the material out is a major job." Both he and the defendant said that they discussed the question of access to the site during that visit. 3. On 23 October 2019 Mr Schrader telephoned the defendant to ask about the payment summary requested by CUA. This is another contentious conversation. Mr Schrader says ([60]) the following exchange occurred: Mr Schrader: Hi David how are you going with the payment schedule. I'm just confirming that the payment schedule covers everything in the quote like the render, eaves and gutters, pergola, garage door and other stuff? Defendant: Don't worry, leave it with me. I will work it out and email it to you. Remember we can't do a fixed price because of the excavation. Mr Schrader: Yes. We have discussed this before. 1. In his affidavit however, ([159]), the defendant denies that conversation and says that, rather, Mr Schrader said "can I have a payment schedule please?". 2. On 29 October 2019 the defendant emailed a payment schedule to Mr Schrader. 3. The following day Mr Schrader sent a few emails to the defendant sending him the geotechnical report and engineering plan. The two subsequently had a conversation in which Mr Schrader says that he asked the defendant whether he was sure whether he did not need to requote the works and that the defendant replied "no, it's all good". The defendant denies that Mr Schrader asked whether he needed to requote the work. 4. The plaintiffs' loan was formally approved on 31 October 2019 in the amount of $300,000. 5. On 13 December 2019 the defendant attended the plaintiffs' house so that the contracts could be executed. The parties had a conversation about the contract at that time, the details of which are in dispute. 6. In his first affidavit (at [68]), Mr Schrader says that the following exchange took place: Defendant: Hi Matthew and Jacqueline. Here is a copy of the contract for you to sign. As previously discussed, because of the excavation, it has to be a cost-plus contract. If we did not have the unknown excavation, we could do a fixed price contract. Mr Schrader: We have previously discussed that the excavation is the main reason why we can't do fixed price, but as you have said before, everything else is pretty much known. Defendant: Yes we have discussed all this before. Mr Schrader: Okay. We would have considered moving if it was going to be substantially more than $300,000. Mrs Schrader: We can't really afford to go over our budget. That is all we have. Mr Schrader: So you will be keeping track of excavation costs and let us know throughout the job? Defendant: Don't worry. You'll be out the back having a read on the balcony before you know it. The girls in the office will keep track of everything for you. Mr Schrader: Can we take some time to consider everything and get back to you to sign it. Defendant: No problem. 1. Mr Schrader further says that the defendant took the contract with him and did not leave them with a copy. 2. Mrs Schrader's version was as follows: Defendant: Hi Matthew and Jacqueline. I have the contract here for you to sign. We are using the standard cost-plus contract because as previously discussed we don't know the cost of the excavation, so we can't use a fixed price contract. Mr Schrader: Yes. We have been through that before. The excavation costs are unknown but everything else is pretty well known. Mrs Schrader: We don't want to go over our budget. It is all that we have. Mr Schrader: So you will be keeping track of everything? Defendant: Yes. The girls in the office will keep track of it all for you. 1. Mrs Schrader, too, says that the defendant took the contract away with him. 2. In his affidavit, at [45] and [142]-[143], the defendant says that at this meeting Mr Schrader again said that he would work on the site to reduce costs, said that he always told the plaintiff that the contract would be cost-plus and denied that Mr Schrader said that they would have considered moving if the cost is going to be substantially more than $300,000. 3. The contracts were not executed on that day and the defendant returned to the property on 23 December 2019. Mr Schrader signed the contract in the presence of the defendant on that day. Although Mrs Schrader did not sign the contract there is no issue between the parties that Mr Schrader had authority to sign the contract on behalf of both of them or indeed that he had the authority to engage in communications on behalf of both throughout the relevant time. 4. Although it will be necessary to examine the contract in greater detail later in these reasons it is pertinent at this point to note the following aspects of the contract. First, the principal obligation on the owner was to pay the build of the cost of the works plus the fee payable under the contract at the times and in the manner required by the contract: clause 2. The costs referred to in that clause are set out in Part A of Schedule 1 to the Contract and the fees payable in Part B of Schedule 1. Part A of Schedule 1 included the cost for the individual builder ($75 per hour) as well as stipulating that other agreed rates were set out in Schedule 2(a). Schedule 2(a) set out the rates that were payable in respect of various workers by reference to their role such as Foreman, Carpenter and labourer et cetera. 5. Secondly, it was expressly acknowledged in clause 3 by the owner that the total cost of the works was not known or ascertainable as at the date of the contract and it was acknowledged that the owner had read and understood the warning as to cost-plus contracts appearing at the front of the contract: clause 3 (iii). That warning included a reference to the estimated cost of works and fees inclusive of GST as $300,000 but also included a warning that "any figure nominated or stated below is only an estimate and is provided specifically subject to the terms of clause 30". 6. Thirdly, clause 1(b) in the conditions of contract required the builder to "regularly provide to the owner a written report on the cost of the works" which was to be known as the budget report. Part E of Schedule 1 required that report to be provided on the 30th day of each calendar month. The budget report was required to include a number of matters including a summary of work being performed and still to be performed, and a revised estimated total cost of works. 7. Fourthly, the contract also made provision for the period of 168 days as the period within which the builder was to carry out the construction but made no provision for any delay costs: see clause 10(c). 8. Fifthly, there was a provision for delays and extensions of time (clause 11), payment (clause 17), and suspension of work by the builder (clause 19). 9. On 24 December 2019 the defendant sent a tax invoice for the deposit in the sum of $30,000. Mr Schrader forwarded that to CUA and the amount was paid to the defendant. 10. The works commenced on site on 27 January 2020 and the demolition of the rear balcony commenced. 11. The plaintiffs took a keen interest in the progress of the building work. Each of them kept a separate diary detailing the work that they saw being done on the site. Mr Schrader took over 800 photographs of the site during the course of the works. He explained that he took notes so that he had a record of the work that he could show to other people and that he had kept similar records in respect of all of the other work that they had done to the house over the time that they had owned it. 12. Commencement of the work coincided with the commencement of the worldwide pandemic of Covid-19. I propose to deal later in these reasons with the works carried out and the conduct of each of the parties during the course of that work. For present purposes it is sufficient to note a few pertinent facts. 13. As a consequence of the government response to that pandemic both of the plaintiffs spent the vast majority of the time in the house. That is not to say that they were unoccupied at that time: Mr Schrader continued his employment but did so from home and Mrs Schrader was busy looking after their twin children including undertaking what was no doubt the very difficult task of their home schooling. 14. On 3 February 2020 the excavation works commenced. Most of that work was carried out by the contractor Mr Simmons, who had earlier looked at the site prior to the entry into the contract. 15. On 12 March the defendant wrote to Mr Schrader saying that there had been changes in the measurement to the downstairs bathroom, wine cellar and stairs and asked when he would be available for a site meeting to resolve the issue. There was a site meeting the following day between the defendant, Mr Schrader and Mr Hatch. 16. During that site meeting the defendant explained that there was an issue with the brick footing near the stairwell which would be difficult and costly to remove. He said that in order to achieve the designed dimensions of the stairwell it would have to be removed. He also explained that the excavation of the cellar floor was taking longer than expected and that they would stop excavating and amend the levels which would save some costs. 17. Mr Schrader said that he was not happy with that course but when Mr Hatch prepared some revised designs to meet the suggested amendments he accepted them. 18. On 12 April 2020 the defendant sent Mr Schrader a copy of the revised engineering plans. On 5 May 2020 the defendants had Mr Schrader and "updated spreadsheet" which he said reflected the cost impact of the excavation and drainage. In his first affidavit Mr Schrader said (at [88]) that he did not understand the content of the cost spreadsheets contained in that email and that they were not further discussed between him and the defendant. 19. On 6 May 2020 the defendant emailed Mr Schrader sending him variations to engineering and architectural plans for his approval. The defendant explained that they included an upturn to the concrete slab to assist with the capture of water for adequate drainage, the change from an external ground floor terrace from pavers to concrete slab and supporting the brick piers to rock foundation as well as changes to structural steel work supporting rear wall and rear balcony slab. He also included notes from a site meeting that had taken place earlier on that day between himself and the engineers Steve Whelan and Reza Pakfetrat. 20. Mr Schrader says in his first affidavit (at [93]) that the changes mentioned in the email were consistent with the changes previously discussed with the defendant and that he understood that they were going to discuss the items in greater detail in a face-to-face meeting. He does not explain why he understood that was to be the case. 21. The following day the defendant emailed Mr Schrader again saying that it would be good to catch up to go over the variations referred to the previous day in the meeting with the engineers in order to "supply a budget report". Mr Schrader replied that he would be available after 3 PM that day. The defendant's evidence is that there was a meeting in which it was discussed that the plaintiffs were lucky that there had been a lot of rain because that had revealed problems caused by water. Further, that had the construction occurred in a dry period, the problems would not have been evident and had the plans been built according to their original design there would have been water penetration problems. 22. The defendant says that he said to Mr Schrader "obviously the budget is blown." And that Mr Schrader replied "It's okay Dave, I've got more money. Let's keep going." Mr Schrader says that this meeting never occurred. 23. On 21 July 2020 Mr Schrader sent the defendant an email in response to an email from him chasing payment on the latest invoice. In his email Mr Schrader said that the four invoices were ready to process but he wanted to discuss them with the defendant to understand where they were with "actuals v payments". The email continued: "We would like to try and estimate what it will cost to finish the remainder of the work so we can make any critical decisions about it. I have attached a prioritisation/specification Excel spreadsheet we talked about earlier-it's reasonably complete except for light fittings." 1. The attached spreadsheet is not in the plaintiffs' evidence but it is in the defendant's evidence. 2. Mr Schrader does not include the defendant's response to his email in his affidavit. In that response, the defendant says that the actual payments to date were contained in the spreadsheet which was emailed that day and asks for payment on the invoices. He says it is available by phone anytime the following day. 3. On 12 August 2020 Mr Schrader sent a text message to the defendant asking him if he could meet up the following day and stating, "we're trying to do some budgeting so looking to get a handle on how much we will need to get the reno through to completion." 4. The defendant replied that he was unable to meet the following day because he would be finalising the budget and forwarding it as soon as possible. 5. On 16 August 2020 the defendant sent Mr Schrader a bill of quantities with an estimate to finish the works. In this email he said that there would be a reduction in the formwork cost for the veranda area as the work was well underway and that no allowance had been made for PC (prime cost) items. The estimate in the attachment to the email was $329,585.97. 6. On 17 August 2020 the defendant had a meeting with both the plaintiffs in their kitchen. The parties have a vastly different recollection of what was said at that meeting. In his first affidavit the defendant said Mr Schrader said: "we can get the slab poured, and that is all we have the money to do" and that he replied "that's good. I'll keep the job moving." 7. In his first affidavit Mr Schrader said that the following conversation took place: "Mr Schrader: David, I have received the spreadsheet that you sent yesterday although I've only look through it briefly. Defendant: I put that spreadsheet together last week and it is up-to-date. Mrs Schrader: We need to understand how much it is going to cost to complete this job. We need certainty around the remaining costs. Mr Schrader: We are also not happy with the current billing and invoicing situation as it does not match up with the progress of the job. It is important now that we get an accurate cost to complete the works. There has been savings along the way with the situation under the stairs which were not happy about, and also the height in the wine cellar. Defendant: Look. I will finish off the balcony and put up a temporary handrail to make it safe for the kids. I will also remove the timber wedges in the sliding doors so that we could open them up for some ventilation. I know refinancing will be required and I will give you time to arrange this. Mr Schrader: What do you mean by that? I need to go through the latest spreadsheet and understand its contents as we had only received it last night. Defendant: Have a look through the spreadsheet, and I will finish off the balcony. We can talk further in the coming days." 1. On the following day the defendant ordered the steel reinforcement for the slab for the upstairs patio and that steel was delivered shortly afterwards. The defendant, or his employees, then built the formwork for that slab and installed the reinforcing steel. 2. On 21 August 2020 Mr Schrader emailed the defendant thanking him for sending through the spreadsheet "as discussed on Monday" saying that he had said he needed time to review it. In this email he indicated that he had reviewed it and had a couple of questions. In essence, he wanted to know whether the estimate of $362,544.54 in the spreadsheet sent to him was over and above the $300,000 estimate in the contract or was that $300,000 estimate to be subtracted from the new estimate. By email on 24 August 2020 the defendant confirmed that it was the first of these, namely that there would be an additional amount of $362,544.54 required in order to complete the work. 3. By this time the plaintiffs had been seeking legal advice and had organised to see a lawyer on 4 September 2020. 4. On 7 September 2020 the defendant prepared a notice of suspension of works under clause 24 of the contract. In his affidavit he said that he did not send that notice immediately because Mr Schrader had given him assurances that he would be paid. He sent the notice by email on 15 September 2020. 5. On 17 September 2020 the plaintiffs' solicitors wrote to the defendant giving notice of a number of issues said to have been in dispute in accordance with clause 24(b) of the contract. 6. By letter dated 20 October 2020 the defendant's solicitors responded to the notice of dispute. 7. In December 2020 the parties met in order to discuss resolution of the issues between them however were unable to come to any agreement. 8. These proceedings were commenced by way of statement of claim ('SOC') filed on 21 May 2021. The works were, and continue to be, in the same state that they were in (subject to some deterioration owing to weather) when the notices of suspension was given on 15 September 2020. Part 1: The claims based on the period leading up to the formation of the contract Identification of the claims 1. The plaintiffs make two claims based on what is described in the SOC as the "Contract Representations". Each claim is based upon the Australian Consumer Law ('ACL'). The plaintiffs claim that the "contract representations" were made in breach of sections 18 and 29 of the ACL. Before dealing with those claims, is necessary to deal with [55] of the SOC. 2. That paragraph reads: The plaintiff relying on the Contract Representations, entered into the Contract to their detriment as pleaded above and in breach of section 18, 21 and 29 of the ACL to which the plaintiff's claim loss and damage. 1. Leaving aside the references to sections 18 and 29 of the ACL and the infelicitous grammar, this paragraph makes no sense. The reference to section 21 of the ACL is to unconscionable conduct within the meaning of that section. However, the unconscionable conduct actually pleaded in the SOC (see paragraphs 45 to 48) refers to the carrying out of the building works and not to the contract representations. On that basis, the case based on unconscionable conduct relates to conduct that occurred after the entry into the contract and cannot logically be based upon the entry into the contract. The Contract Representations 1. It is necessary at this point to set out in some detail the precise conduct relied upon by the plaintiffs in their claims under the ACL. 2. The SOC pleads that the Contract Representations were made by the defendant orally and in writing, that is, that they were express. The term "Contract Representations" is pleaded, at SOC [13], to be a collective term for a number of other representations. In other words taken together, those other representations constituted the Contract Representations relied upon by the plaintiffs in their claims under the ACL. Each of the other representations is, in turn, given its own description which is set out below. 3. Those other representations are claimed, at SOC [13], to be: 1. The defendant understood the plaintiff's budget was $300,000: budget representation; 2. A quotation which appeared to be based on Cordell's Building Estimates in the sum of $298,507.29 and that the quotation provided was true and correct and a very close and accurate estimate of the total cost of the Building Works with the only real unknown being the actual cost of the excavation which should be close to the estimated amount of approximately $60,000: estimate representation; 3. The Building Works were known quantities (except for the excavation costs) and the defendant was capable of bringing in the cost of the Building Works within the plaintiff's budget of $300,000 subject only to excavation the costs which were the only real unknown cost contained in the Quotation: fixed cost representation; 4. Estimated the excavation costs at approximately $60,000 and that the costs of the excavation would not blow out, as the excavator came to site to properly determine the excavation costs: excavation representation; 5. That the defendant could not enter into fixed price contract because the defendant was not able to determine the excavation costs with certainty but that did the defendant was otherwise certain of the remaining balance of the estimated cost is been known costs in the sum of $300,000 which amount included excavation costs of approximately $60,000: costs plus representation; and 6. Prepared a contract with a represented price estimate of $300,000: price representation. 1. This appears to be a definition of the scope of the term Contract Representations. However, in spite of this, on one view, the SOC appears to include further representations made prior to the entry into contract: Spreadsheet Representation, Tools Representation, and Suppliers Representation: see SOC [14]. 2. The better view of SOC [14], however, is that its purpose is solely to give better particulars of the time and place of the representations identified in SOC [13] as being the constituent elements of the Contract Representations. That is because there is no allegation that any of the additional representations referred to in SOC [14] were in contravention of any provision of the ACL. Indeed, the other parts of the SOC suggest that the plaintiffs assert the correctness of those representations: see SOC [19] particulars, and SOC [50](b). The statutory provisions 1. Section 18 of the ACL provides that "a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." 2. Section 29(1)(a)(i) of the ACL relevantly provides that "a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services… make a false or misleading representation with respect to the price of goods or services." 3. Although the response to each of these claims in the amended defence was a blanket denial, there is no issue that, if, and to the extent that, they were made, the Contract Representations were both in "trade or commerce" and "in connection with the supply or possible supply of goods or services". The real issue between the parties is whether the open Contract Representations, as pleaded, were made and, if so whether they were misleading or deceptive or likely to mislead or deceive. 4. To the extent that the Contract Representations related to future matters, Section 4(1) of the ACL applies. That section provides: If: (a) a person makes a representation with respect to any future matter (including the doing of, or refusing to do, any act): and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. 1. Section 4(2) imposes an evidentiary onus on the representor to adduce some evidence that there were reasonable grounds for making the representation, although the mere fact of adducing that evidence does not establish that there were reasonable grounds and, further, the fact that there were reasonable grounds does not prevent the representations from being misleading or deceptive. However, once the evidentiary onus is met, it remains the plaintiffs' onus to prove that there were no reasonable grounds for the representation: North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; 285 ALR 217 at [28]-[30]. The relevant principles 1. The relevant principles concerning the relevant aspects of these provisions are relatively well-settled and were not in dispute between the parties. They were summarised by the Full Court of the Federal Court in Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2020] FCAFC 130; 278 FCR 450 at [22] ff. That summary included the following (omitting references to authorities): 1. While section 18 prohibits conduct that is misleading or deceptive or likely to mislead or deceive and section 29 prohibits the making of a false or misleading representation they are similar in nature. 2. The central question concerning the statutory prohibition of misleading or deceptive conduct (and closely related prohibitions) in the ACL is whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error (that is, to form an erroneous assumption or conclusion about some fact or matter). 3. The following principles relate to that central question: 1. conduct is likely to mislead or deceive if there is a real or not remote chance or possibility of it doing so; 2. it is not necessary to prove an intention to mislead or deceive; 3. it is unnecessary to prove that the conduct in question actually deceived or misled anyone. The question whether conduct is misleading or deceptive is objective and the court must determine the question for itself; 4. it is not sufficient if the conduct merely causes confusion. Resolution of the factual issues leading up to the contract Approach to fact-finding 1. The approach to fact-finding in civil cases was thoroughly examined recently by His Honour Andronos SC DCJ in Williams, William v Williams, William [2023] NSWDC 10 at [34]-[40]. The most relevant aspect of that examination involved the unreliability of human memory: see, for example, the passages quoted from Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 at [15]; and Campbell v Campbell [2015] NSWSC 784 at [73]. 2. The plaintiffs' case relies, to a large extent, on their affidavit evidence as to what was said in conversations that took place several years ago. That fact alone raises difficulties, not in terms of honesty, but in respect of reliability. Further, even on the plaintiffs' own evidence, the conversations were capable of bearing different meanings depending on nuance and emphasis, the appreciation of which not only must have diminished over time, but were very susceptible of bias, not only at the time of the conversation, but also during the preparation of the affidavits as well as during the course of oral evidence. [1] 3. The unreliability of human recollection is one of the reasons for which demeanour ordinarily carries little weight in the assessment of a witness' evidence. However, it is often instructive to watch how a witness gives evidence as it gives some indication, along with what evidence is given, of the character of that witness. This is often revealed very subtly as the evidence progresses and cannot be appreciated from reading the transcript. 4. Each of the plaintiffs presented as being very confident of their recollection of certain words being spoken. I have no doubt that they truly believed that what they were saying was right. Mr Schrader, in particular, held strong views about the facts and was very keen to give his version, regardless of what question he was asked. Mrs Schrader, too, held firm views, but initially was more nervous than her husband, and overall more anxious. They both presented as being very proud of their achievements, their home and family and keenly interested in every detail of those matters. Those characteristics bear some weight in my analysis of the evidence and determination of whether I am satisfied on the balance of probabilities of the facts that they rely on in their case. 5. Mr Broach was less confident in his answers, but I disagree with the plaintiffs' submission that he was evasive and untruthful. Overall, he impressed me as making every effort to give truthful answers. The contentious facts 1. The critical facts in issue are the conversations relied upon by the plaintiffs as inducing them to enter into the building contract and are referred to compendiously as the Contract Representations. [2] 15 May 2019 1. I am not satisfied that the conversation that took place between the plaintiffs and the defendant on 15 May 2019 was at all as pleaded or as deposed to by the plaintiffs other than in general terms. This conversation took place well over a year before the plaintiffs swore their first affidavits and the affidavits differ from both the pleaded case and the evidence given by Mr Schrader in cross-examination. There were no notes taken of the conversation or any other relatively contemporaneous record of what was said. In addition, Mr Schrader says in his affidavit that, after this conversation, they kept considering all of their options, including obtaining other quotes, applying for finance and looking for other properties to move into. That does not sit comfortably with the certainty of pricing from the defendant that they each present from the conversation in May 2019. In addition, there are other matters concerning a number of the particular topics broached in the conversation. 2. First, Mr Schrader's evidence that they told the defendant that they had a budget of $300,000 does not fit with the objective or uncontested evidence. When Mr Wienholt visited them 2 months later in August to discuss the possible costs of doing the building work, they did not tell him that they were working to a budget. Further, as late as October 2019 the plaintiffs were telling the defendant that they would only know their budget once their loan application had been approved. That makes sense because, until they knew how much they could spend, they would have little idea of how much they were willing to spend. 3. Secondly, I am satisfied that the parties discussed the cost of excavation as the main issue in determining the costs of the project. However, the pleaded case is that this was said to be the "only" matter which might lead the costs to be above $300,000. That pleading is not supported on any version of events. The difference between something being a main concern and the only concern or only real concern might simply be a matter of emphasis or nuance. The real risk here is that the plaintiffs' recollection has been affected by the importance of the excavation once the works actually took place and I am not satisfied that their recollection, other than as to a general discussion about the difficulty of assessing the costs of excavation is reliable. 4. In this respect, I note that, at one point in cross-examination, Mr Schrader said that the "only variable we ever discussed was excavation." This was one of a number of examples of the strengths of Mr Schrader's conviction that he was right and that his memory was accurate. However, it conflicts with his own affidavit evidence and undermines his general reliability. Another instance of a shift in his evidence concerned his wife's diary. At first he said that he didn't look at her diary at all; however, he later said, with equal confidence: "I haven't read the entire diary. I've gone through it. Generally speaking, we did check that the hours of the workers on site were accurate." 5. Thirdly, on the other hand, it is plausible that the defendant talked about the "girls" sending spreadsheets to the plaintiffs so that they could keep track of costs. That seems to have been a regular part of the office work undertaken in the defendant's office. Michelle Neudegg's evidence was that she had been employed to do that work since 2012. 9 October 2019 1. I find that the essence of the conversation on 9 October 2019 was as set out in Mr Schrader's first affidavit. [3] The Schraders had just lodged an application for a loan and had received 2 quotes from other builders that were considerably higher than the figure given by the defendant. In other words, the project was advancing to the point where a decision would have to be made about whether to proceed and, if so, which builder to use. In that context, it makes sense that the plaintiffs would want to test the difference between the quotes and to see whether to accept the lowest. Similarly, it makes sense that he would express his main concern, namely the excavation, and that the defendant would try to assuage that concern by organising an excavator to have a look at the site. 18 October 2019 1. On 18 October 2019 the defendant brought Steve Britton, an excavation contractor, to site to ask him to comment on the proposed excavation. The evidence relating to the pertinent conversations that took place during that meeting are set out above. [4] I do not accept Mr Schrader's version of this conversation. 2. First, the defendant had explained to Mr Schrader little over a week before that he would bring the excavator along because of the unknown factor of the costs of excavation. In that context it does not make sense that Mr Schrader would need to, or in fact did, explain to the defendant again his main concern were the excavation costs blowing out. Secondly, Mr Britton said in his evidence that he was unable to give the defendant a price during his site visit because of the nature of the proposed excavation and the site. He was not tested on that evidence and I accept it. This means that, even after having an expert excavator assessed the site, neither the defendant nor Mr Schrader had any further information about the likely scope of the excavation costs other than that, as Mr Britton explained, that it was a major job. In that context it makes no sense that Mr Schrader would ask whether the defendant would need to requote his job. 3. In any event, Mr Schrader's evidence does not support the representation that was said to have been made by the defendant on 18 October 2019 and which is identified in the SOC as the "excavation representation". 4. Paragraph 13(d) of the SOC says that the excavation representation was made by the defendant when he: "estimated the excavation costs at approximately $60,000 and that the cost of the excavation would not blow out as the excavator came to site to properly determine the excavation costs." 23 October 2019 1. There is no issue that there was a conversation by telephone between Mr Schrader and the defendant on this day in which Mr Schrader asked for a payment schedule as requested of him by CUA. Mr Schrader's evidence is, as set out above, [5] that he asked that the defendant include a number of particular details in the schedule and confirm the reason that there would not be a cost-plus contract. I find it highly unlikely that that extra conversation occurred. First, for reasons I have already given, Mr Schrader's memory of such a conversation is very unlikely to be reliable. Secondly, he was asked by his mortgage broker some two weeks earlier for the payment schedule and, although it does not appear in the evidence, it is likely that he would already have asked the defendant for the payment schedule. In those circumstances it is very unlikely that he would say, again, what was required in it, particularly in light of his own evidence that he was not an expert in the building industry and expected the experts he engaged to give him advice as to what to do. 30 October 2019 1. As noted above, [6] Mr Schrader said that he asked the defendant on 30 October 2019 whether he needed to requote the work and that the defendant said that he did not. I am not satisfied that this conversation occurred in the terms deposed to by Mr Schrader. He had already raised a similar issue with the defendant a little over two weeks earlier on 9 October 2019 and had just received from him a payment schedule that was consistent with an earlier estimate given by the defendant. Further, as I have said, nothing was raised in the site visit with the excavation contractor that could have assisted in any further determination of the price of the excavation works and so could have made necessary or relevant a re-quotation of the entire job. There is nothing in the objective evidence that would support the acceptance of Mr Schrader's version. 2. In any event this paragraph in Mr Schrader's evidence does not support the pleading. At paragraph 14(f) of the SOC it is asserted that on 30 October 2019 the defendant orally made the "estimate representation" to Mr Schrader. The "estimate representation" is set out at [13](b) and includes a statement that the only real unknown in the costing was the actual cost of the excavation which "should be close to the estimated amount of approximately $60,000". 13 December 2019 1. The defendant came to the plaintiff's house on 13 December 2019 for the execution of the contract. The evidence relating to the conversations that were said to have taken place during that meeting is set out above. [7] I find that the plaintiffs' version of the conversation is entirely self-serving and unreliable. Mr Schrader at least, if not both the plaintiffs, had known for months that the only contract on offer was a cost-plus contract and, even on their own version of events, they knew that there were many unknowns within the costs estimates that had been provided to them by the defendant. While it may be that the main one of those unknowns was the cost of excavation, there was simply no logical reason for them to raise this again with the defendant at this stage. 2. While I have no reason to believe that the plaintiffs were deliberately untruthful in their evidence about this conversation, this is a good example of the way in which memory can be affected by both time and the subtle influence of bias. 3. In any event, the case pleaded at paragraph 14(g) of the SOC is not supported by the conversation referred to in the affidavits. In the SOC it is asserted that there were four representations made on 13 December 2019 including "the fixed cost representation", the "excavation representation" and the "estimate representation". In neither version of the events given by the plaintiffs of this conversation was the excavation representation ever made on 13 December 2019. Application of the principles to the facts 1. The Contract Representations are said to have been made up by six separate representations. For the reasons I have given, I am not satisfied that three of them were ever made: the estimate representation, the fixed cost representation and the excavation representation. The consequence of that is that the plaintiffs have not established that the Contract Representations, as pleaded, were made and the claims based upon them must fail. 2. However, there are other reasons for which the plaintiffs' claims based upon the ACL must fail. 3. First, only one of the constituent "representations" of the Contract Representations is made out. The first of those constituent representations (SOC [13](a)) is that the defendant understood the plaintiffs' budget was $300,000. That assertion is not particularised anywhere in the SOC and I have not accepted the evidence that the plaintiffs told the defendant in May 2019 that their budget was $300,000. Further, there is no evidence that the defendant ever told the plaintiffs that he understood that their budget was $300,000. 4. The second of those constituent representations, the costs plus representation (SOC [13](e)), is also not particularised anywhere in the SOC. To the extent that it is said to have formed part of any conversation between the defendant and the plaintiffs or either of the plaintiffs, for the reasons I have given, I do not accept it. 5. The third constituent representation is admitted by the defendant. The representation is said (SOC [13](f)) to be that the defendant prepared a contract with a represented price estimate of $300,000: price representation. However, it is not clear, beyond the insertion of $300,000 as an estimate in the cost-plus contract, what is exactly said to have been represented. Whatever be the case, and even if this single representation could amount to the Contract Representations as pleaded, which it does not, it did not contravene either section 18 or section 29 of the ACL. That is because of the clear warnings that were in that document to the effect that the estimate was not to be understood as being what the work would cost. I will return to those warnings shortly. 6. Secondly, the defendant adduced evidence that, when he made representations to the plaintiffs about the likely costs of the work (leaving aside for present purposes precisely what those representations were), there was a reasonable basis for those representations. That evidence was the breakdown of the second estimate given by him to the plaintiffs in 2017. That estimate was capable of providing a reasonable basis not only on its face as referring to the constituent elements of the proposed works at that time, but also because it was based on a recognised costing program, Cordells. Further, as he explained to Mr Schrader, he had his own equipment and did not, on the facts known at the time, need to hire anything that would add to the costs. For that reason, there is no presumption that there was no reasonable basis for the representations and the onus rests on the plaintiffs to prove otherwise. 7. Apart from the fact that the estimate given in 2019 was not going to be sufficient to complete the scope of works that ultimately emerged, the plaintiffs have not met their onus of proof. In particular, their reliance on the defendant's statement is misplaced. The fact that an estimate is not accurate does not mean that there was no reasonable basis for it. That is because the defendant was giving an estimate, not a precise figure. As he explained, it was not possible to do so on the basis of what he knew at the time. This was largely, although not exclusively, because the costs of the excavation were unknown. 8. Thirdly, the plaintiffs' ACL case is not segmented by reference to separate representations. What is really in issue is whether the defendant's conduct (in making all of the pleaded representations) was misleading or deceptive or likely to mislead or deceive. For that reason, all of the relevant circumstances must be examined in order to see the impugned conduct in its context. As mentioned in 128 above, part of the relevant circumstances are the terms of the contract. 9. The plaintiffs had the standard form contract (albeit without any details in it) as early as 11 May 2019. They were given the contract with details included in it (including an estimate) on 13 December 2019. They could have been under no illusion by then as to what was in the contract. They then had the contract for a further 10 days before Mr Schrader signed it. They had certainly read it by then. Mrs Schrader says that she did not read it in any detail, but, as I explain below, the terms of the document do not require any close analysis to understand the basic terms, especially relating to the costs involved. Finally, the plaintiffs had an opportunity, even after signing it, of reading it again, and rescinding the contract by notice given to the builder within 5 days: clause 4. 10. The very first page of the contract had a large heading in bold type: WARNING. The next statement, being the principal warning, is that the "amount to be paid by the Owner is not known as at the date of the contract" (emphasis in the original). There are several other warnings to the same effect. More specifically, although the amount of $300,000 is written in hand as the "Estimated Cost of Works and Fees)" there is the warning that this figure is an estimate only and is "provided specifically subject to the terms of Clause 30". 11. Clause 30 applies where, as here, an estimate is given and provides that the estimate is "made on the basis of the information, as to the detailed and complete nature and extent of the works, then available to the Builder" and goes on to say that it will not (original emphasis) be of any contractual significance or be a representation as to the amount or approximate amount (my emphasis) that will become payable by the owner. The principal terms of the agreement and execution clause appear on the third page of the contract. Paragraph (3)(iii) on that page states that the "Owner has read and understood the warning as to Cost-Plus Contracts, which appears at the front of the document." 12. The first numbered paragraph at the top of page 5 warns the owner not to "sign the contract unless you have read and understand the clauses as well as the notes and explanations contained in the contract and this document." The cooling off provision appears at paragraph numbered 4 below this. 13. The provisions in the contract mean that any representations made by the defendant up to that point were neither misleading or deceptive nor likely to mislead or deceive. They are in such plain, and emphatic, terms that they change the entire character of anything said up to the point at which the document was presented to the plaintiffs (assuming for present purposes that they first received it on 13 December 2019). 14. Fourthly, those provisions, together with the fact that the plaintiffs read the contract and that Mr Schrader, with the authority of Mrs Schrader, signed it and neither of them exercised their right to rescind the contract within the cooling off period has the effect that I cannot be satisfied that they relied on the defendant's representations in relation to the costs of the works in entering into the contract. Accordingly, even if the representations were made in contravention of ss 18 and or 29 of the ACL, the plaintiffs suffered no loss as a consequence of that contravention. 15. For those reasons, the plaintiffs' claims under s 18 and 29 of the ACL must fail. 16. In the circumstances, I do not need to deal with the plaintiffs' case on damages in any detail. It is not easy to understand the basis on which this part of the case was put. In opening, counsel for the plaintiffs explained that the quantum of damages was the amount which it would cost the plaintiffs to complete the building, that is, $362,000. The difficult with that is that it totally ignores the additional value likely to be added by the completion of the work. In other words, the plaintiffs are expecting a renovation worth over $600,000 and to pay $300,000 for it. 17. Mr Stomo also said in opening that the usual line of cases did not apply. That is, the authorities that deal with the situation where the innocent party would not have entered into a transaction if it had not been for the misleading and deceptive conduct. Having said that, though, in his closing written submissions he relied on Doepel & Associates Architects Pty Ltd v Hodgkinson [2008] WASCA 262, a case in which it was found that, but for the misleading and deceptive estimate of construction costs, the owners would have engaged another builder to construct the home for a lower cost. The loss awarded was the difference between the larger profit that would have been realised on the sale of the cheaper home and the smaller profit that was in fact realised on the sale of the home that was constructed. Unlike that case, here there is no relevant evidence of or agreement as to the value of the property on any hypothesis: cf. Morris v Leaney [2022] NSWCA 257. 18. Mr Stomo also relied on Kronenberg v Bridge [2014] TASFC 10; 26 Tas R 359. There, like here, a builder started construction work on a residential house but did not complete it after a dispute arose over the costs of the work. The contract signed by the parties was a standard form contract that included a contract sum of $340,000, but the builder had written "AS A COSTS PLUS CONTRACT" next to that figure. He also included an additional document that set out, amongst other things, hourly rates for different workers. The primary judge found that there was no concluded contract between the parties. However, on appeal, the Full Court found that the parties had entered into a costs plus contract and that the figure of $340,000 was not a price cap. 19. The Court found, however, that the estimate of $340,000 was misleading and deceptive and that the owners had relied on it in entering into the contract. Given that, like this case, there was no evidence about the value of the property before and after the work, damages were assessed on the basis of what the Court found the owners were likely to have done. In this respect, the Chief Justice held: "I am satisfied on the balance of probabilities that, but for the misleading conduct of the respondent, they would sooner or later have entered into a fixed price contract with another builder for the construction of the house, or perhaps a cheaper modified version of it. I am satisfied on the balance of probabilities that they would have been able to enter into a contract for the construction of the house for something in the vicinity of the rejected figure of $372,189 plus GST. They might or might not have been able to do better than that. There is a chance that they might never again have got so low a quote. The result of the respondent's misleading conduct is that the appellants lost the chance of entering into a more advantageous contract for the construction of a house on their land." 1. Here, the plaintiffs submit that "it may be implied from the evidence of the plaintiffs that they had a budget of $300,000 with a 30% contingency that if they were offered a fixed price contract of $390,000 that would have been accepted." Presumably, the plaintiffs are referring to a contract for the same scope of work as was included in the contract when it was first signed rather than enlarged by the later variations and inclusions. That reasoning may be logical as far as it goes; however, there is simply no evidence that they would ever be offered a fixed price contract in that sum. In other words, the plaintiffs' damages case is ultimately based on nothing but conjecture. Further, and in any event, the evidence suggests that, in light of the amount of excavation required, it was unlikely that they would be offered a fixed price contract at all. Part 2: Claims based on the defendant's conduct after the formation of the contract Identification of the claims 1. The plaintiffs' claims based on what occurred after the formation of the contract fall into two categories: breach of contract and unconscionable conduct. However, the pleading is made difficult to understand by three matters: first, these two claims are intertwined to a significant degree; secondly, there is a significant lack of particularity and, to a lesser extent, circularity in some of the critical paragraphs of the SOC; and thirdly, there are a number of matters pleaded the did not appear to go anywhere, in other words in respect of which there is no consequence set out in the SOC. For instance, in SOC [34]-[38] it is asserted that the defendant has repudiated the contract; however, no consequence of that repudiation, and in particular no acceptance of that repudiation or termination is pleaded at all. Breach of contract 1. The critical pleading in respect of the breach of contract claim is [33] which provides: [33] in the premises of: a. the Contract Breaches; b. the Contract Representations; c. the post contract conduct; and d. the implied terms pleaded herein; the defendant breached his duty to act in good faith in carrying out the contract and cause loss and damage to the plaintiffs. 1. Once again the plaintiffs took a collective approach to pleading, which leads not only to significant ambiguity but also to a number of difficulties in proof of the claim. 2. Mr Stomo, Counsel for the plaintiffs, clarified in oral submissions that SOC [33] is intended to mean that the combination of each of these sub paragraphs constituted a breach of the duty of good faith and it was that breach of duty of good faith that caused loss and damage to the plaintiffs. It is necessary, then, to examine each of the alleged constituent parts of the breach of duty of good faith. As will be seen, some of those constituent parts themselves contain allegations of a breach of good faith, making the whole pleading rather circular. In order to attempt to unravel the byzantine complexity created by this, it is best to commence with the allegation that there was an implied duty to act in good faith as well as other implied terms. The implied terms 1. The circumstances in which the duty of good faith is implied into contracts is not a settled matter in Australia: see Seddon N, Bigwood R, Cheshire and Fifoot's Law of Contract (12th Ed, Aust Ed, 2023) at [10.43]. The parties paid scant attention to either that issue, or to the further issue of the content of that duty when it is implied. In respect of the latter, Allsop CJ (Besanko and Middleton JJ agreeing) said, in Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; 236 FCR 199 at [288]: The usual content of the obligation of good faith that can be extracted from cases such as Renard Constructions, Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; 69 NSWLR 558, Alcatel Australia Ltd v Scarcella [1998] NSWSC 483; 44 NSWLR 349, and United Group Rail Services Limited is an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained. 1. As the Chief Justice went on to say, at [289], the duty does not require the interests of one party to be subordinated to the other or, put another way, it does not prevent the legitimate pursuit of self-interest. [8] 2. At SOC [17] the plaintiffs allege that there was an implied term of good faith imposed upon the parties "in performing their obligations under the contract". That much may be accepted. 3. However, the content of the duty of good faith is not identified in the pleading, or elsewhere, other than the compendious statement in SOC [19] that "in addition to the Contract Representations, the clauses in the contract and duty to act in good faith" required the defendant to do four things: 1. Be in communication to prevent the cost from exceeding the plaintiffs' budget; 2. Cost the work at a reasonable and competitive price; 3. Inform the plaintiffs of all costs incurred in manner consistent with the contract; 4. When charging for the building works carried out by the defendant, the charges would be fair and reasonable. 1. The particulars of that allegation refer to clauses 1 (e)-(f), clause 2A(d) of the Contract as well as to the spreadsheet representation. This is not easy to understand. First, the clauses in the contract referred to are the same clauses relied upon for the implication of the duty of good faith. Secondly clause 2A(d) obliges both the parties to act cooperatively and in a manner which progresses the works. However, there is nothing in that obligation that deals with the cost of that work. Thirdly, for reasons I have already given, I am not satisfied that the Spreadsheet Representation was not made. Even if, contrary to my earlier finding, that representation had been made, it is difficult to draw from that fact the conclusion, even in combination with the pleaded terms of the contract, that there was an obligation on the defendant to maintain what appears to be some objectively ascertainable level of costs in the performance of the works. 2. The principal difficulty with the plaintiffs' case is that they rely upon the implication of terms which go well beyond the scope of previously decided cases in respect of the duty of good faith, as summarised by Allsop CJ in Paciocco. Further, other than in respect of that duty, they have nowhere attempted to grapple with the principles concerning the implication of specific terms as explained by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPCHCA 1; 180 CLR 266 at 283. Finally, they have drawn my attention to no authority that supports the implication of the terms they rely upon. 3. For those reasons I reject the allegation that the terms pleaded at SOC [19] were implied into the contract. Post contract conduct 1. Returning to the claim based on breach of contract, it is necessary first to examine each of the constituent elements of the alleged breach. The first of these is pleaded as the "post contract conduct". That term is defined in SOC [20] to be conduct by the defendant "in accordance with a fixed price contract in the sum of $300,000 and requested payments in accordance with the payment schedule provided". The pleading makes little sense by itself; and so it is necessary to have regard to the particulars, which themselves, are not clear. 2. The first particular is that the defendant issued, and the plaintiffs paid, [9] all of the following progress claims during the course of construction. There then follows a table in which there are set out the details of 16 invoices. The second particular is that all payments made by the plaintiffs were made in accordance with a tax invoice provided as referred to in the first particular. [10] The third particular is that on 13 August 2020 a further invoice was issued for the outstanding progress claim, although this invoice has not been paid by the plaintiffs. 3. Finally, at SOC [21], it is pleaded that the post contract conduct was contrary to the terms of the contract but "consistent with the Contract Representations and the intention of the parties expressed during the Negotiation for a fixed price contract, subject only to some variation relating to the excavation costs." Again, it is not clear what this means. However, it is unnecessary to spend much time considering that question because there is no evidence to support the proposition that the parties expressed any intention to have a fixed price contract, regardless of any qualifications to it. Otherwise, to the extent that there is a breach of contract alleged in this paragraph, it is unnecessary because that breach is, at least to some extent, set out later in the pleading: see for example SOC [27]. 4. In summary, the pleading is to be understood as alleging that the issuing by the defendant of progress claims as particularised in SOC [20](a) constituted the "post contract conduct" which is relied upon as one of the four matters constituting a breach of the obligation to act in good faith. Contract breaches Budget report 1. Sub-clause 1(e) of the Contract required the defendant to "regularly provide" the plaintiffs a written report on the cost of the works. This report would be known as the budget report and was required to be submitted once per calendar month on the 30th day of that month. Subclause 1(f) regulated the content of those reports. It provided: (f) The budget report will include: (i) details of the work done, costs known and monies paid or payable as at the date identified in the budget report; (ii) summary of work being performed and still to be performed; (iii) details of work about which the Owner needs to provide instructions in order to allow the work to proceed; and (iv) a revised estimated total cost of works. … 1. The defendant does not deny that he failed to provide budget reports within the meaning of the contract. However, in his amended defence, he says that he did provide spreadsheets of costs every few weeks during the progress of the works, discuss the budget with the first plaintiff and, on 24 August 2020 provided a bill of quantities and an estimate of costs to finish the work to the plaintiff. 2. It is clear that the defendant did not comply with his obligations under subclause 1 (c) of the Contract. What he did instead was to send the plaintiffs invoices that reflected the payment schedule that he had prepared at the plaintiffs' request in October 2019 so that they could, in turn, provide it to CUA. In addition to that invoice, the defendant, or rather somebody working in his office, sent the plaintiffs a spreadsheet. It suffices to have regard to only one of the sets of documents that the defendant provided to the plaintiffs. 3. The first document is invoice 3560 dated 10 March 2020. The description in that invoice is simply "alterations and additions to existing residence progress payment-site establishment". The subtotal is listed as $16,363.64 which, when GST is added, equals a total of $18,000. 4. The second document is headed "for Kendall Place, Kareela-claim 1." The document is broken into two parts: the first being materials and the second labour. Under materials there are columns for date, invoice, supplier and total. Under "labour" there are columns for the name, the period (by reference to the week ending date) time (in hours) and amount (in dollars). There follows a total labour component to which is added 10% builder's margin and that is then added to the materials to reach a grand total. 5. There is no description here of any of the details of the work done, of the work to be done and no updated budget estimate. However, what is plain from the document is the amount of money said to be payable in respect of work done in a particular period. 6. The plaintiffs have established that the defendant breached clause 1(e) of the Contract. That said, one of the particulars to SOC [23] is anomalous. Particular (f) claims that the defendant "failed to cost the Building Works in a reasonable and competitive price." That cannot be a particular of a breach of clause 1(e) and I do not understand what it means in the context. For that reason, I will leave it to one side. Failure to arrange regular meetings 1. At SOC [24] the plaintiffs allege that the defendant failed to arrange regular meetings as per clause 2A(b) of the Contract. However, there is no obligation on the defendant in clause 2A(b) of the Contract to arrange regular meetings. The provision in that subclause is a joint responsibility of the builder and owner and notes that: "The Parties agree in order to maintain this situation that they will conduct regular meetings in order to:…" 1. It is important to note that both parties had the power to require a meeting to be held by written request: clause 2A(e). Failure to carry out the Building Works within the stipulated time 1. The plaintiffs contend, at SOC [25], that the defendant failed to carry out the building works within the stipulated time per clause 1(b)(iv) of the Contract. In his defence, the defendant rather unhelpfully simply denies this allegation. In any event, it is far from clear that this allegation is made out. 2. First, clause 1(b)(iv) of the Contract is in fact a reflection of the statutory warranty found in s 18B of the Home Building Act 1989. In other words, it is not, in its terms, an obligation to complete the works by any particular time. The contractual provisions for completion are found elsewhere in the Contract. Clause 10(b) requires the builder to proceed with due diligence and to bring the works to practical completion within the "construction period". The "construction period" is defined in clause 31(e) to be period referred to in schedule 2 item (c). That item provides: The period of 168 days after the date of commencement, subject to clauses 5, 10 & 11 1. The commencement date was 27 January 2020. 168 days from that date was 13 July 2020. There is no issue that the defendant did not bring the works to practical completion by this date. However, whether or not the plaintiffs have established that that constituted a breach of clause 10(b) depends upon whether they have proven that the operation of clauses 5, 10 and/or 11 (or, as will be seen, 19) did not extend the period set out in schedule 2 item (c). Of these, clauses 5 and 10 can be set to one side as they do not appear to arise on the evidence. However, clause 11 does. 2. Clause 11 of the Contract provides that if the progress of works is delayed by one of 12 enumerated causes (the last of which is a broad, catchall provision) then the builder is to receive a fair and reasonable extension of time to the "construction period" (see also clause 11(b)). That allowance for the extension of the "construction period" is not made expressly subject to notice of delay being given by the builder: see clause 11(c). The conclusion is fortified by clause 11(d) which provides that delay in notifying or a failure to notify the owner of a delay or matter causing delay will not of itself prohibit an extension of time being granted or allowed provided the cause of the delay is shown to cause delay to the works being carried out. 3. These provisions place an onus on the plaintiffs to establish that there was no delay that fell within clause 11(a) so that the period shown in schedule 2 item (c) remained effective for the purposes of clause 10(b). They did not attempt to meet that onus. 4. Further, clause 19 provides for the suspension of work by the builder in circumstances which include the failure to pay any amount within the time required by Schedule 1 Part C Item (b). That time is stipulated as being two days after the submission of a claim. Clause 19(f) provides that any period of suspension will "automatically and as of right extend the construction period and by consequence the date for Practical Completion." 5. The defendant issued a notice of suspension of work purportedly under clause 19 on 15 September 2020. That notice was issued on the basis of the failure by the plaintiffs to pay any money in respect of the final two invoices issued by the defendant. There is no issue that the plaintiffs did not pay those amounts. The plaintiffs did not address any arguments to the impact of the defendant's notice upon their claim that there was a breach of the requirement to bring the works to practical completion within 168 days of the commencement of the works. In particular, it was not argued that the notice of suspension was invalid by reason of any failure of the claim for payment to comply with the requirements of the contract. Failure to provide an estimate in accordance with clause 30 of the contract either before or during the term of contract 1. This allegation is misconceived. Clause 30 does not impose any obligation to provide an estimate and only provides that, "if an estimation… has been made…," that estimation will not be of any contractual significance. Failure to seek payment for works to be carried out in accordance with Schedule 1 Part A of the Contract when completed in accordance with clause 17(a) of the Contract 1. Once again this pleading is ambiguous. It appears to mean that the defendant was required to seek payment for the works in accordance with an obligation imposed by clause 17(a). However, that clause imposed an obligation on the owner to pay the builder certain amounts. The obligation on the builder arises under clause 17(c) to make a claim that identifies the following matters: the work for which the payment is required, the cost of works for work performed in the period, a brief description of any variations relative to the initial scope of work under the contract, the fees payable under Schedule 1 Part B and GST. The fees refer to the 10% of the cost of works (being the "plus" part of the cost-plus contract). However, the particulars make it relatively clear that the plaintiffs are not alleging a breach of that obligation. Rather, as will be seen, that provision is relied upon at SOC [28]. Before dealing with that, it is necessary to consider the particulars of the claim that seems to be based on a breach of clause 17(a). 2. The first particular is that the defendant did not provide the plaintiffs with any copies of invoices from any sub-contractor or supplier; however, there is no provision in the contract that required him to do so. 3. The second particular is that the defendant charged the items in excess of those required under the contract and then sets out a number of schedules that were sent by the defendant to the plaintiffs. However nowhere is it made clear what is meant by "in excess of those required under the contract". 4. The third particular refers to a text message sent by the first plaintiff on 12 August 2020. It is not clear how that is in fact a particular of the alleged breach. 5. The final particular is that, on 21 August 2020, the defendant advised the plaintiff that the cost to complete the building works would be an additional sum of $362,544.54. Again, this is not a particular of the alleged breach and seems to go nowhere. Failure to make a claim in accordance with clause 17(c) of the Contract 1. The obligation under clause 17(c) has been set out above. The plaintiffs allege that this obligation was breached in three respects: first that the defendant failed to identify the work for which payment was required; secondly, the defendant failed to identify the cost of the works performed for the relevant period; and thirdly, that the defendant failed to provide a description of any variations (if any) of the initial scope of works identified in the contract. Leaving aside the second of these (which is not in fact required by clause 17(c)), in spite of the denial in the amended defence, it is plain that the claims payments did not comply with this provision: see, for example, the document referred to at 162 above. The defendant failed to make claims for work carried out for a reasonable sum in breach of his obligation to act in good faith has pleaded above 1. As I have noted, the plaintiffs have not in fact pleaded the content of the obligation to act in good faith. However, it may be accepted that overcharging may be sufficient, in the circumstances of a particular contract, to amount to a breach of the duty of good faith, in particular because it might amount to improper or unfair dealing or indeed, go so far as to be bad faith. It is important to note, at this stage, that it was never put to the defendant in cross-examination that he acted in bad faith. Indeed, it was never squarely put to him that he overcharged for any work. It seems that the highest that the plaintiffs' case goes in this respect is that the defendant charged more for the work than other people considered was reasonable. That, however, does not establish that the charges were unreasonable. 2. Importantly, the contract makes provision for the amount that can be claimed by the defendant. The components of this include the cost incurred by the defendant (for example for charges from subcontractors or from material acquired for the works), the cost of labour, the cost of supervision by the defendant and administration and a percentage. There was no challenge to the defendant made on the basis that he did not comply with the contract in respect of the charges that he claimed from the plaintiffs. He charged for labour at the rates set out in the contract and, although the site diary was in evidence and the foreman was responsible for that diary, Mr Williams, while was cross-examined, he was never challenged as to the accuracy of that diary. The accuracy and validity of the costs incurred including the costs of the of the excavation were never challenged. 3. In those circumstances, not only have the plaintiffs failed to establish that the charges claimed by the defendant were unreasonable but also, to the extent that they may have shown that somebody else might have undertaken the work at a lower rate, they have not established that the charges were indicative of any failure to act in good faith. It would be inconsistent with the terms of the contract to require the defendant to undertake the work for a lower rate than that provided for in the contract. The defendant failed to act in good faith in his conduct towards the plaintiffs 1. This particular allegation is made at SOC [31]. The plaintiffs rely on the post contract conduct (as defined in SOC [20]), a failure to address complaints in a timely manner and in particular what is described as the dispute resolution process begun in September 2020, and finally an allegation that the defendant abandoned the contract and the building works. 2. As I have explained above, the "post contract conduct" as pleaded consisted of the sending by the defendant of progress payment claims and invoices to the plaintiffs. In her affidavit, Michelle Neudegg explained that she was responsible for preparing the spreadsheets and invoices sent to the plaintiffs and that the defendant instructed her when to issue the invoices, which she prepared based upon the records available at the time: [7]. She further said that the defendant explained to her that the spreadsheet needed to be sent with the invoices so that the first plaintiff could keep track of how much the job was costing. Ms Neudegg was not cross-examined on her affidavit and the defendant was not cross-examined to the effect that he might have said something different to Ms Neudegg. 3. On the basis of that evidence the only conclusion can be that the defendant was making an effort to send sufficient information to the plaintiffs to enable them to keep track of how much the job was costing. It was never suggested to the defendant, and indeed it would not have been open to the plaintiffs to suggest to him, given the uncontested evidence of Ms Neudegg, that he deliberately kept the true cost of the works concealed from the plaintiffs by sending them invoices and spreadsheets in the form that they received. 4. In those circumstances, however the content of the obligation to act in good faith is understood, the post contract conduct did not constitute, either alone, or in combination with anything else, a lack of good faith. 5. The balance of the particulars are, to my understanding, addressed to the circumstances that arose after the plaintiffs failed to pay the last two invoices sent to them by the defendant. This can be dealt with briefly. First, clause 24 of the contract provides that there must be written notice of any dispute concerning the agreement for the work. The parties must then confer at least once to attempt to resolve the dispute or to agree on methods of resolving the dispute and the consequence of not holding such a meeting is the inability to terminate under either clause 26 or 27. If one of the parties refuses to attend a meeting then the right to terminate under one of those clauses may be appropriate. 6. The following chronology of events comes from the plaintiffs' own evidence and undermines any suggestion of lack of good faith in this period by the defendant. First, invoices were sent in the middle of August 2020 but were not paid. There followed a period in which the plaintiffs were querying the future costs of the project and in which the plaintiffs met with their lawyers. On 15 September 2020 the defendant issued a notice of suspension of works and ceased work on the site. Shortly afterwards, on 17 September 2020 the plaintiffs issued a notice of dispute under clause 24 of the contract. The defendant responded through his solicitors to that notice by letter dated 20 October 2020. On 29 October 2020 there was a site meeting at which the parties attended together with structural engineers. There followed two engineers reports, consecutively on 17 and 18 November 2020 before the parties met on 2 December 2020 again pursuant to clause 24. The dispute was not resolved. 7. There is nothing in that chronology, or elsewhere in the evidence, to support the suggestion that there was any lack of good faith in the attempts between the parties to resolve the issues between them. Further, there is nothing to support the suggestion that the defendant abandoned the contract and the building works. Rather, as is made plain by the notice sent to the plaintiffs on 15 September 2020, together with the letter from the defendant solicitors dated 20 October 2020 and the following site meeting and meeting on 2 December 2020, the defendant continued to assert his rights under the Contract and to attempt to negotiate a way forward towards the completion of his obligations under it. 8. This claim is rejected. The defendant failed to abide by the terms of the Contract regarding Dispute Resolution pursuant to clause 24 nor acted in good faith to resolve the dispute by the following events 1. This claim is made in SOC [32]; however, it is essentially identical to that made in SOC [31] and fails for the same reasons explained in respect of that paragraph. Conclusion on the breach of contract claims 1. The plaintiffs have largely failed to establish the integers of the claim that the defendant breached his duty to act in good faith. As I noted at the outset of this topic, the allegation itself suffered from a lack of clarity and, amongst other difficulties, circularity. To the extent that the claims have been accepted, they do not establish a lack of good faith. I do not accept, in the absence of any authority, that a mere breach of an express term of a contract, without more, can also constitute a breach of duty of good faith. Even if this claim were properly pleaded and included an allegation that there need be, for instance, fidelity to the contract, I understand that concept to focus, not on compliance with individual obligations within the contract, but rather, on notions of fair dealing and reasonableness having regard to the provisions, aims and purposes of the contract as a whole. Good faith, as Allsop CJ explained in Paciocco, is a normative standard that arises from the need to promote the central conception and basal foundation of commerce: a requisite degree of trust. [11] 2. The claim for breach of contract is rejected. Unconscionable conduct 1. The plaintiffs claim, at SOC [46], that the supply of goods and services by the defendant was, in all the circumstances unconscionable within the meaning of section 21 of the ACL. 2. Before examining that claim it is necessary first to say something briefly about the plaintiffs' claim for damages in respect of it and then to briefly state the relevant principles. 3. The plaintiffs claim that, by reason of the defendant's unconscionable conduct they have suffered loss and damage: SOC [48]. The nature of that loss and damage is not described in the SOC. In their written submissions, the plaintiffs did not make any distinction between the basis on which they claim damages in respect of the unconscionable conduct and the basis upon which they claim damages for breach of contract or misleading and deceptive conduct. That is, their only submission in respect of the damages for each of these heads of damages is that they are "in fact the cost to complete given that they would not have entered into the contract and [were] required to expend a great amounts of money that [sic] they intend [sic]." That is also the basis upon which the plaintiffs opened their case. 4. The logical difficulty with that, it seems, is that the entry into the contract preceded the alleged unconscionable conduct and so could not have been caused, in any way, by it. 5. When the issue was raised during the course of oral submissions, Counsel for the plaintiffs confirmed that they were claiming the same damages as in respect of the misrepresentation case. He attempted to explain this by saying that, had the defendant complied with his obligation to provide a budget report by the end of February 2020 the plaintiffs would have known that the budget had been "blown" and could then have terminated the contract. The submission was that the loss was the costs incurred in now continuing with the project. There are numerous problems with that submission. Critically, however, that is not the way in which the case was run and it would be unfair now to decide the case on that basis. Relevant principles 1. Section 21 of the ACL relevantly provides as follows: Unconscionable conduct in connection with goods or services (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person; or (b) the acquisition or possible acquisition of goods or services from a person; (c) engage in conduct that is, in all the circumstances, unconscionable. … (3) For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and … (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law relating to unconscionable conduct; and … (c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. 1. Section 22 of the ACL enumerates a number of matters to which the court may have regard in determining whether conduct was unconscionable within the meaning of section 21. Whether any of them needs consideration depends on the facts of each case and the way in which the case is put by the plaintiffs. 2. Unconscionability is difficult, as well as undesirable, to define. [12] Like the concept of good faith, it is one that is concerned with values and norms. Thus, as Allsop CJ explained in Paciocco at [262], the task involved in determining what is unconscionable is "not the choice of synonyms; rather, it is to identify and apply the values and norms that Parliament must be taken to have considered relevant to the assessment of unconscionability: being the values and norms from the text and structure of the Act, and from the context of the provision." 3. The relevant task is to evaluate whether the conduct in question is "outside societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience": Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 96 ALJR 271 at [58] (Gordon J, dealing with the analogue to section 22 ACL in the Australian Securities and Investments Commission Act 2001 (Cth)). [13] Thus, a court should take the serious step of denouncing conduct as unconscionable only when it is satisfied that the conduct is "offensive to a conscience informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society": Stubbings at [58] (Gordon J, citing Kobelt [2019] HCA 18; 267 CLR 1 at 40 [93] (Gageler J)). 4. As submitted by the plaintiffs, central to the concept of unconscionability is the expectation that persons are dealt with honestly, fairly and without deception or unfair pressure or dealing: ACCC v Lux Distributors Pty Ltd [2013] FCAFC 90; ATPR ¶42-447 at [23], 43,463. 5. Given the normative or value-driven nature of this inquiry, the Courts have held that, normally, some moral fault or moral responsibility would be involved. This would not ordinarily be present if the critical actions are merely negligent: ACCC v Allphones Retail Pty Ltd (No. 2) [2009] FCA 17; 253 ALR 324 at [113] (Foster J). There would ordinarily need to be a deliberate (in the sense of intentional) act or at least a reckless act: ACCC v 4WD Systems Pty Ltd [2003] FCA 850; 59 IPR 435 at [185], 488 (Selway J). The pleaded case 1. The plaintiffs allege that the defendant engaged in unconscionable conduct by reason of the combination of the following circumstances: 1. The defendant knew or ought to have known that the cost to complete the Building Works would exceed the cost that was quoted to carry out the Building Works. 2. In breach of the contract, the defendant failed to provide a Budget Report and simply issued invoices in accordance with the Payment Schedule and in doing so implied that the Contract was for the estimated fixed cost and thus prevented the plaintiffs from querying any costs claimed; 3. In providing statements in accordance with the Payment Schedule, the defendant implied to the plaintiffs and led the plaintiffs to believe that the costs of the Building Works were within and in accordance with the estimated price when the defendant knew or ought to have known that the price would be exceeded; 4. In all the circumstances, the combined effect of the Contract Representation, Post Contract Conduct, Contract Breaches and breaches of the implied term of good faith was conduct carried out by the defendant that was unconscionable in the supply of goods and services within the meaning of section 21 of the ACL; and 5. The defendant charged the plaintiffs in excess of a reasonable amount for the work undertaken by the defendant. 1. The plaintiffs additionally plead, SOC [47], that the defendant knew or ought to have known by virtue of his experience that the costs he was charging were excessive. Consideration 1. It is important to note that the plaintiffs' case was never based upon any intention by the defendant to deceive the plaintiffs, any dishonesty on his part or any other deliberate conduct. They did not, for example, allege that he deliberately charged excessive amounts or that he deliberately hid any aspect of his conduct or the costs of the works being, or to be, undertaken from the plaintiffs. There is no allegation that he took any advantage of any particular aspect of their knowledge or experience or that he pressured them, fairly or unfairly at any stage of his relationship with them. Rather, stated at a high level of generality, the plaintiffs' case is that they were led to believe by the defendant that they would pay approximately $300,000 for building work and they were prevented from finding out that it would cost more than that by the defendant's failure to provide them with a budget report in accordance with the terms of the contract. 2. Even if the case, stated at that level, were accepted, I am not satisfied that the defendant's conduct could be described as unconscionable within the meaning of section 21 ACL. Put simply, the case against the defendant does not rise to a level that warrants the condemnation of the defendant as having acted in a manner offensive to conscience. He may have been negligent, or sloppy, but he was neither deliberate, nor dishonest in his dealings with the plaintiffs and nor was he even reckless as to the interests of the plaintiffs. I refer to those particular matters not because they comprise essential elements of the claim, like the elements of a tort, but rather, because their absence, in all of the circumstances, carries significant weight in my evaluation of what is expected of conduct in the supply of goods and services. 3. In any event, the claim fails at the more granular level as pleaded. 4. First, although the defendant knew that the estimate in the Contract was only that, an estimate, and that, given the unknown factors involved in the works, especially the excavation, that figure would likely be exceeded, it was never suggested to him in cross-examination that he knew it would be exceeded. Nor was it ever put to him in cross-examination that he ought to have known that fact. 5. Secondly, the way in which the defendant issued invoices did not imply that the contract was for an estimated fixed cost. That is for two reasons. First, the invoices were prepared as they were because of a requirement imposed by the bank. Invoices were prepared in order for the plaintiffs to forward them to the bank for approval and draw down on the loan obtained by the plaintiffs for the building work. Secondly, the invoices were accompanied by spreadsheets which, although containing insufficient details to comply with the terms of the contract, showed that the amount of the invoice was in fact calculated by reference to the contract; that is, by reference to the costs incurred by the defendant, the hourly rate set out in the contract for each of his employees and a 10% margin for the defendant. In that way, the spreadsheets made plain that the plaintiffs were being charged in accordance with a cost-plus contract. 6. Thirdly, and in any event, the issue of invoices by the defendant in no way prevented the plaintiffs from querying any costs claimed. They were living, and working on the premises throughout the time that the defendant and his employees were working there. They took daily diary notes and hundreds of photographs. If they had, in fact, any questions about the amounts they were being charged, or the basis of those charges, they had ample opportunity to raise those issues with either the defendant or, at least in the first place, his foreman, Mr Williams. That they did not do so, was not because of the invoicing but rather, in my view, because they had no issues. 7. Fourthly the provision of invoices by the defendant in the form they took did not lead the plaintiffs to believe that the costs of the works were within and in accordance with the estimated price simply because there was no reference in those invoices to any estimated price. There was, for example, no reconciliation of the amounts paid against that price. 8. Fifthly, for the reasons I have given in respect of the representation case, and the breach of contract case, the plaintiffs have not established that the pleaded Contract Representation was made or that there was any breach of the implied term of good faith. Thus, the matters that have been established, namely the provision of invoices and the failure to comply with the budget report requirements of the contract, are insufficient on the plaintiffs' own case to establish unconscionable conduct. That is because, once again, the plaintiffs rely upon a combination of events. 9. Finally, the plaintiffs have not established that the defendant charged the plaintiffs in excess of a reasonable amount for the work undertaken by him. In any event, even if the amounts charged were excessive, that does not establish unconscionability. First, as I have noted there is no allegation that they were deliberately excessive or dishonestly excessive. Secondly, the work actually carried out was recorded by Mr Williams in the site diary and he was never challenged on that as being accurate. Thirdly, the work conducted was charged at the rates set out in the contract. In those circumstances, the charging of an amount above some objectively ascertained reasonable rate does not, of itself, amount to unconscionable conduct. 10. For those reasons the claim based on section 21 ACL must fail. 11. As I have endeavoured to explain, the way in which the damages case in this respect proceeded was the same as in respect of the case based upon the alleged misleading and deceptive conduct. For the reasons that I have given in respect of that case, there was no loss arising from the defendant's conduct. Further, as I have also noted above, those damages could not, in any event, have arisen from the unconscionable conduct because they are based upon the hypothesis that the plaintiffs would not have entered into the contract with the defendant, an hypothesis that necessarily preceded the alleged unconscionable conduct. In those circumstances, it is unnecessary to make any findings about the quantum of the loss alleged to have been suffered by the plaintiff. Part 3 – Defective work 1. The claim for defective work is framed by reference to the warranties pleaded in SOC [6]. However, no claim for damages is based upon any breach of those warranties other than the warranty that the works would be carried out with due care skill and in accordance with the architectural plans, the structural plans and specifications in the Contract. Ultimately, the claim was refined so that it focused upon three alleged defects: the stairwell, the drainage and waterproofing to the rumpus room, and the wine cellar. 2. The defendant says three things in response to these claims: firstly, there are no defects at all; secondly, to the extent that there is any work that needs adjustment, it is unfinished work because the contract has not been terminated; and thirdly, in any event, the work was undertaken in accordance with directions given by other professionals engaged by the plaintiff. 3. The plaintiffs say in response, that the contract was terminated by reason of the service of the SOC. It is necessary to determine that issue first before returning to the remaining issues. 4. The repudiation pleaded by the plaintiffs is based upon a number of allegations that I have rejected. These include, firstly, SOC [34], the post contract conduct and contract breaches being in a manner which hid from the plaintiff the true cost of the building works and prevented them from querying the costs at an earlier time than when they first disputed the contract costs. Secondly, the breach of duty of good faith. Thirdly, carrying out the building works at an excessive cost and contrary to the contract (although there is no particular of this allegation). 5. Breach of a contract by repudiation occurs when a party evinces an intention no longer to be bound by it or to fulfil it only in a manner substantially inconsistent with his or her obligations: Shevill v Builders Licensing Board [1982] HCA 47; 149 CLR 620 at 625-6; Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; 157 CLR 17 at 33, 40; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115 at 135 [44]. On the basis of the findings that I have made no such intention was evinced by the defendant and, accordingly there was no repudiation of the contract. 6. Although the plaintiffs do not rely upon the defendant's discontinuance of the work at the site to establish a repudiation, it will be recalled that he ceased work after serving a notice of suspension once he was not paid on the invoices that he sent to the plaintiffs for work he had done. Even though those invoices did not comply with the requirements for claims for payment under the contract, the defendant was nevertheless continuing to act in a manner that showed that he wanted to continue the contract rather than no longer be bound by it. It is notable, too, that both the plaintiffs and the defendant continue to engage with each other under the terms of the contract until at least December 2020 when they attempted to resolve their issues at a meeting. 7. Further, there is, as I have mentioned already, provision in the contract for termination by either party; however, the requirements of that provision were not followed in any way by either party. For instance, the plaintiffs did not serve any notice terminating the contract in accordance with clause 26 and clause 29. 8. For those reasons, I conclude that the contract has not been terminated. Nevertheless, I will consider briefly whether that conclusion would be different if I am wrong about the repudiation. 9. The first question is whether the repudiation entitled the plaintiffs to terminate. This was not the subject of any submission by either party so it is unnecessary to answer. However, I note that it is at least arguable that the plaintiffs did not show that they were ready and willing to perform the contract and so it was not open to them to elect to terminate the contract and claim damages. [14] They had refused and continue to refuse to pay the defendant. 10. The second question is whether the repudiation was accepted. As I have noted, one of the deficiencies of the SOC is that a repudiation of the contract by the defendant is pleaded but there is no consequence of that repudiation pleaded anywhere and there is no evidence, other than the intention of the first plaintiff to terminate the contract by service of the SOC, of any acceptance of that repudiation. As Asquith LJ put it in Howard v Pickford Tool Co [1951] 1 KB 417 at 421, "an unaccepted repudiation is a thing writ in water and of no value to anybody." 11. The general rule is that the repudiation of the contract does not necessarily bring the contract to an end. The innocent party has a right to choose either to accept the repudiation, thus bringing the primary obligations in the contract to an end but leaving them with a right to enforce the secondary obligation to pay damages for loss of the bargain; or to treat the contract as subsisting and claim any sums falling due under it as and when they fall due together with any damages for the repudiating party's failure to perform as and when performance should have occurred: see Société Générale v Geys [2013] 1 AC 523 at [113] (Lord Sumption). 12. An election to terminate a contract upon repudiation must be communicated. This may be by conduct or words, provided such words or conduct "make the election manifest to the relevant party": Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313; [2001] ANZ ConvR 513 at [155]. The commencement of an action claiming relief on the basis of termination for breach normally amounts to an election to terminate the contract. [15] 13. In Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; 149 CLR 537 Brennan J explained, at 570, that a summons does not itself affect the rights of the parties, but its issue and service may involve an election which affects those rights. His Honour referred to the decision in Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; 136 CLR 444 at 460 where the plurality discussed the impact of a claim made for specific performance. 14. Whether the commencement of proceedings does amount to acceptance of repudiation depends on whether it makes the election to terminate manifest. In KKL Investments Pty Ltd v Daikyo (North Queensland) Pty Ltd [1995] QCA 25, the acceptance of repudiation itself was contained in the summons and a declaration was sought that the deed was rescinded by that election. Similarly, a notice of motion filed in proceedings seeking a declaration that repudiation had been accepted was held to be one basis for concluding that there had been acceptance: Woods v Woods [2000] NSWSC 851 at [14]. The pleading here is quite different. Although repudiation is alleged, there is no allegation of termination. Further, although loss and damage is claimed in a number of places, the basis of that claim is never specified. There is also reference to "incomplete work", something that suggests that work remains to be done under the contract as it stands: SOC [56](d). 15. Although the issue is not without its difficulties, and there are arguments each way, these factors mean that, although the general tenor of the pleading is that the relationship between the parties is over, I am not satisfied that the pleading manifests the intention to accept the repudiation. The consequence of that is that the contract remains on foot and so, too, does the obligation of the defendant to make good any defects or faults which are attributable to his work in accordance with any notice given by the plaintiffs in the defects liability period: Cl. 22. For that reason, even if there are defects in the work completed to date, there is no liability for damages in respect of them. 16. If I am wrong about that, the only defect is that relating to the stairs. Rumpus room 1. The first claimed defect relates to the rumpus room. The drawings for the proposed works as they stood at the time of the contract were attached the contract. They show a plan for the development of the existing dwelling by the addition of concrete deck at the south-eastern, or rear, and then first floor of the dwelling and the construction of a number of rooms and patio area below that level. The rumpus room was to be at the lower level. On the same drawing there is shown the wine cellar to the left of the rumpus room and immediately above the wine cellar a landing stairs leading up to the right upper level. The stairs above the landing are the stairs which are said to be defective. 2. In March 2020, after the works had commenced, the structural engineer engaged by the plaintiffs, Reza Pakfetrat, met the defendant on the site at his request. They discussed the drainage to the rumpus area and the engineer considered that by putting in a tagline all the way around the hob they could collect the seepage which was seen at the time and direct it away from the rumpus room. He also said that because of the amount of water that was coming through they discussed the possibility of running trenches beneath the slab so they could put additional agg lines in to take the water outside the rumpus area to a drainage pit that was going to be installed under the terrace. 3. Agg lines, or agricultural lines, are slotted PVC pipes placed into a trench that is backfilled with rocks or sand. Their purpose is to drain away any water that is in the ground. Surface water or groundwater that seeps into the trench falls through the rocks and is carried away by the slotted PVC pipe. 4. Subsequently, the defendant suggested that a Dincel wall would be a better alternative to the proposed timber framed wall at the rear of the rumpus room (north-east end). A Dincel wall is a hollow plastic wall that is made structurally sound by having concrete poured into it. 5. The issue in respect of the rumpus room is whether there was sufficient drainage installed prior to the laying of the slab in that area. The plaintiffs rely upon the expert opinion of Mr David Hall who explained, in the joint report made with the defendant's expert Mr Anthony Capaldi, that the installed drainage behind the Dincel wall has no benefit and does not meet the requirements for drainage as there are no additional excavations in that area for an outlet and there is no provision for connecting the agg lines to a drainage pipe. 6. Mr Capaldi said that there was no drainage or waterproofing defect. First, the rock excavation was not in contact with the Dincel wall and the builder had allowed for an air void between the rock face on the back side face of the Dincel wall. Further, the defendant had installed a 100 mm socked coil drainage line behind the Dincel walls in the concrete up-stand curb. The concrete curbs were lined with vapour barrier and geo-fabric. The 100 mm socked coiled drainage lines were found to be 220 mm lower than the height of the concrete up-stand curb. The ends of the drainage lines were approximately 400 mm lower than the internal slab level. There were four agg lines in total. Two around the perimeter of the slab and two running through the middle of the slab. The perimeter agg lines were seen to be connected but the remaining two were not. In Mr Capaldi's opinion that fact was not a defect but simply incomplete work. In other words, this was work that was yet to be completed rather than work that had been done but incorrectly. 7. The installation of the agg lines was in accordance with the discussions between the defendant and the structural engineer. The opinion of Mr Hall that they were a defect was based partly on an engineer's report that was not in evidence [16] and partly on inferences from what he could not see. However, in my view, Mr Hall's evidence suffers from a number of matters. First, he did not adequately take into account the matters actually seen during the site visit by him and Mr Capaldi as explained by Mr Capaldi in his opinion. This included the evidence of the agg lines prior to the pouring of the concrete slab and the fact that, although the slab has been in place since the middle of 2020, there has been no evidence or complaint of any seepage occurring in or around the rumpus room slab. 8. Mr Hall explained that this did not matter for two reasons. First, because you could only expect to see evidence of such seepage after a number of days of rain and secondly, because the fact that the lower area of the construction including the rumpus room was not enclosed would allow for greater evaporation of any moisture. Neither of these explanations has any real cogency. There was significant seepage identified in this area of the site by May 2020 in spite of there being no enclosed walls and since that time there has, as a matter of record, been a large amount of rainfall throughout the Sydney basin. It is likely in those circumstances, that if there were inadequate drainage in place during that period there would have been some indication by the existence of seepage. This was a point made by Mr Capaldi and I accept it. 9. For those reasons I conclude that the drainage in the rumpus room area is not a defect. 10. Mr Hall also gave an opinion that the waterproofing underneath the slab of the rumpus room was inadequate because there was no waterproofing membrane. In support of the conclusion that one was required he pointed to the drawings of the structural engineer of the rumpus and wine cellar details, in particular drawing number S2B. The relevant section is section 3 which is in the middle of that drawing. Mr Hall noted that there is a vertical dotted line in the cavity between the brick pier and the concrete curb. Mr Hall said that that could indicate the requirement for a waterproof membrane. That is not correct. Mr Pakfetrat himself said in his affidavit, at [24] that that area did not need a waterproofing membrane and one was not specified. For that reason this does not constitute a defect. Wine Cellar 1. The issue in respect of the cellar is again one of drainage. Mr Hall says that what was required before the laying of the slab was for perimeter drainage to be completed, that is, the digging out of a trench behind the curb of the slab closest to the sandstone behind (at the north-east end). He says that this cannot be done once the slab is laid because there would be only a very narrow space between the slab edge and excavated rock face and it would be difficult to excavate in that area. 2. Mr Capaldi says on the other hand that, while no drainage has been installed, typical building practice is to construct the concrete slab and curb first. He explained that this would provide a barrier to allow for drainage and granular fill. In his opinion, then, the drainage at this area of the works is incomplete. Mr Capaldi measured the distance from the rock to the top of the slab as being 170 mm. He said that allowing for 50 mm of gravel below the slab there was 120 mm, that is, sufficient room for an agg line to be installed below the top of the slab (these lines are 100 mm in diameter). 3. Mr Hall clarified his evidence to say that he agreed that the agg line was not to be put in before the formwork for the concrete was put in place and the concrete was poured but, rather, that the drainage outlets had not been installed. Mr Capaldi responded, saying that all that there was to do was to knock out one brick from the cellar wall that adjoins the lower rumpus room and that is where the agg line would have come out and dropped straight down within the void. He noted that the builders actually left a little bit of room between the stairs and the rock. 4. Mr Capaldi's evidence is supported by the evidence of Mr Pakfetrat who said in his affidavit, at [44], that, while there was one area where the drainage was not done properly on the southern side of the stairs going up to the wine cellar, a section of the brickwork needed to be removed to allow for drainage. There was no issue that this could not be done, or that it would not solve the issue of drainage in the cellar room. For that reason I accept Mr Capaldi's opinion that this was incomplete work. Stairs 1. The final issue is the stairs leading from the landing outside the cellar up to the inside of the next level. Before describing the issue, I will explain how it arose. 2. The drawings that form part of the contract showed, at the stairs in question, that an existing pier was to be removed and replaced with the wall and subfloor access door. In March 2020 there was a site meeting between the defendant, the first plaintiff and Mr Hatch at which, amongst other things, the brick pier near the stairwell was discussed. In particular, the option of retaining the brick pier and redesigning the stairs was discussed. As a result of these discussions Mr Hatch revised the drawings and sent them to the plaintiffs for comment. The relevant drawing now showed an angled wall from close to the bottom of the stairs leading up to the house across the landing. [17] 3. In order to deal with drainage issues, a Dincel wall was constructed at right angles at the area that was to be behind the raked wall in the amended plan. However, the way in which that Dincel wall was constructed was not in accordance with the amended plan. [18] The real issue is that, if the raked wall is constructed with the Dincel wall in place, the distance between the wall and the other side of the staircase will be less than the minimum width allowable for staircases, namely 900 mm. This much is agreed. What is not agreed is the method by which the issue can be resolved. 4. Mr Hall on the one hand says that the Dincel wall must be demolished and reconstructed so as to comply with the plan and the standards. Mr Capaldi, on the other hand, says that the Dincel wall could be cut back 150 mm using a hand concrete saw which would allow for the timber frame of the raked wall to be a sufficient distance from the opposite wall on the staircase. 5. The defendant argues that, if there is a defect, he is not responsible for any damages flowing from it because he reasonably relied upon the instructions of Mr Hatch, who was in turn engaged by the plaintiffs: section 18F Home Building Act 1989. The problem with that is that even Mr Hatch says that the building was not in accordance with his amended plans. 6. In his evidence, Mr Hatch agreed that the stairwell junction was not entirely as he had designed it but says that that would be something that could be fixed relatively easily by lowering the Dincel wall and redoing some of the stairs as winders. Annexure K to his affidavit is a graphic demonstration of his proposal. Mr Williams, too, in cross-examination said that this wall could be rectified. However, he did not expand on that evidence and there was no re-examination of him at all. 7. The difficulty with Mr Capaldi's suggested approach to this issue is that his evidence was uncertain as to whether the required opening on the staircase could be achieved. Neither Mr Williams nor Mr Hatch address that issue at all. For that reason, I accept Mr Hall's evidence that this constituted a defect and that his solution was the only one reasonably available. 8. There is a minor dispute between Mr Capaldi and Mr Whyte, an expert quantity surveyor qualified by the plaintiffs, as to the likely cost of rectifying this defect. Mr Whyte says that it is likely to cost $17,471 and Mr Capaldi $14,923. The difference between them being on the allowance for the amount of excavation required. As this case amply shows, it is preferable to make a more generous allowance for excavation because that always entails significant unknown elements. On that basis on the hypothesis that the contract was terminated then I would allow the amount of $17,471 in damages for the rectification of the defect in the staircase. Part 4. Cross-Claim: Unpaid invoices or quantum meruit 1. In his cross-claim, the defendant claims $97,549.14 said to be "due to him under the contract" plus 15% interest under the Contract or, in the alternative, the reasonable value of the work performed by him on a quantum meruit basis. The "work" the subject of this claim is not particularised anywhere. The defence to the cross-claim does not cast any light on the real issues in dispute. Assistance in understanding the issues must, therefore, be sought elsewhere. 2. At the start of the hearing, counsel for the defendant handed up a document entitled "Case Outline". The cross-claim is dealt with at part 5 of that document. In it, at [5.2], counsel explains that every few weeks, while the work was in progress, the owners were provided with invoices for their credit union together with spreadsheets itemising actual costs including labour rates as agreed under the contract. She says that none of those claims and costs were disputed until after the suspension of work. This appears to be a submission that the claim is based on the unpaid invoices issues by the defendant prior to the suspension of work in September 2020. 3. The unpaid invoices are as follows: #3789 13.8.20 $14,200.00 #3790 13.8.20 $11,055.09 #3791 13.8.20 $22,661.80 #3813 4.09.20 $29,082.60 Total $76,999.49 1. It is not clear how the amount claimed in the cross-claim ($97,549.14) is calculated. The closest the defendant comes to an explanation of that figure is at [5.5] of the case outline: "In Mr Capaldi's opinion the value of the work completed by the builder is $384,820.93. The owners have paid $285,000, leaving a balance of $99,820. The builder claims $97,549.14." 1. The alternative claim based on quantum meruit is explained, to some extent, at [5.4] of the "Case outline". There, counsel states that not all of the variations were in writing signed by the owner and the builder and, for that reason, the builder cannot claim the cost of those variations other than on a quantum meruit basis, so long as the claim does not exceed the amount calculated in accordance with the contract. This explanation of the alternative claim is repeated in the defendant's final written submissions: [29.2]-[29.6]. The submissions add, at [29.7], that in the alternative, Mr Capaldi has valued the variations in his first report. That valuation is $49,966.30. 2. In oral submissions, counsel for the defendant said that the quantum meruit claim was only for the work that could not be claimed under the contract, that is, the variations that were not signed by the owner in accordance with the contract. 3. The plaintiffs' submissions are not helpful. In his written submissions, Mr Stomo says, at [103], that "no valid money claim has been made by the defendant" but does not explain what he means. He then deals with the failure to have the variations signed by the owner and submits that what "variations have been carried out have been carried out by the defendant for his own benefit. Engineers were called on site, recommendations were made and without consultation with the plaintiffs, the defendant simply carried out work at the expense of the plaintiffs." The plaintiffs then submit that "it follows that no proper basis for a claim has been made or could be made." 4. The major premise of the plaintiffs' submission was not open on the evidence. Mr Schrader himself said that he was told about and approved a number of these variations. The only issue is that he did not sign the amended plans. In those circumstances, it cannot be accepted that the work undertaken by the defendant was for his own benefit. However, the rejection of the plaintiffs' argument does not mean that the defendant's claim succeeds. 5. There are critical difficulties with both the claim under the contract and the quantum meruit claim. In respect of the former, the problem is that identified, albeit rather obscurely, by the plaintiffs. The obligation of the plaintiffs to pay the builder was governed by clause 17 of the contract. Specifically, clause 17(b) required the plaintiffs to pay the defendant in accordance with the timetable in Schedule 1, Part C of the contract. Sub-paragraph (b) of Schedule 1, Part C required the plaintiffs to pay "each claim submitted by the" the defendant within 2 days of the defendant submitting the claim. Clause 17(c) required a claim to identify the work for which payment is required, the cost of works performed in the period, a brief description of any variations relative to the initial scope of work under the contract, fees payable under Schedule 1, Part B and the GST. None of the invoices issued by the defendant to the plaintiff (even when read with the spreadsheets that accompanied them) complied with those requirements. For that reason, the unpaid invoices were not "claims" within the meaning of Schedule 1, Part C(b) and no obligation arose for the plaintiffs to pay them. 6. The defendant did not claim that there was any waiver, variation or estoppel that prevented the plaintiffs from relying on the formal requirements of the contract: cf Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570. Further, although this reasoning was not expressly raised by the plaintiffs, I consider that it is sufficiently encompassed in the defence to the cross-claim so that there is no denial of procedural fairness for me to adopt it. 7. If I am wrong about that, and the invoices sent in August and September 2020 were claims within the meaning of the contract, then the plaintiffs are obliged to pay those invoices in full together with interest at the rate of 15% pursuant to Clause 17(f) and Schedule 2, item (d) of the contract. There was no argument as to when that interest starts accruing, but the ordinary meaning of the clauses suggests that it would be from the day after the day on which payment on each claim was due. 8. Regardless of whether the contract has been terminated, the contract provided for the means by which the defendant was to be remunerated for work done under it. It follows that, if the defendant's quantum meruit claim does extent to that work, it is not available. [19] 9. There is a further critical difficulty with the quantum meruit claim in respect of the variations. That is that the defendant has not proved that he was not paid for them. First, no effort was made in the proceedings to identify with any precision the work that was actually the subject of the only invoices that were unpaid. Secondly, the variations identified in Mr Capaldi's first report refer to work that appears to have been done before August 2020 when the first set of unpaid invoices were sent to the plaintiffs. On that basis, the defendant has received payment for these variations. Those payments were in accordance with the rates set out in the contract. Those were the rates relied on by the defendant as being a reasonable basis on which to assess the value of the work done by him. For that additional reason the quantum meruit claim must fail. 10. The cross-claim will be dismissed. Orders 1. The Statement of Claim be dismissed with costs. 2. The Cross-Claim be dismissed with costs. ********** Endnotes 1. See the comments by Tamberlin J in Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (trading as Uncle Ben's of Australia) [1995] FCA 451 per Sackar J in Campbell v Campbell at [76]. 2. SOC [13]. 3. See 32 above. 4. See 37 and following above. 5. See 41. 6. See 44. 7. See 47 and following. 8. Seddon N, Bigwood R, Cheshire and Fifoot's Law of Contract (12th Ed, Aust Ed, 2023) 10.45 and the cases cited there. 9. Although it is not clear why conduct by the plaintiffs is said to be included within the concept of "post contract conduct" by the defendant. 10. Again, it is not clear why the conduct of the plaintiffs forms part of this claim. 11. Paciocco at [293]. 12. Seddon N and Bigwood R, Cheshire and Fifoot's Law of Contract (12th Ed, Aust Ed, 2023) at [15.16] referring to RM Corporation Pty limited v ACCC [2016] FCAFC 98 at [164]. 13. Referring to ASIC v Kobelt (2019) 267 CLR 1 at 40 [92]; see also 59 [153], 78 [234], Australian Competition and Consumer Commission v Lux Distributors Pty Ltd (2013) ATPR ¶42-447 at 43, 463 [23]; Paciocco (2015) 236 FCR 199 at 275 [298], 276 [304]. 14. Foran v Wight [1989] HCA 51; 168 CLR 385 at 402 (Mason CJ), 451 (Dawson J). 15. See Seddon N, Bigwood R, Cheshire and Fifoot's Law of Contract (12th Ed, Aust Ed, 2023) at [21.23]. 16. The report by JK Geotechnics dated 17 November 2020. 17. The differences are best seen in Exhibit 20, the supplementary report of Mr Capaldi at p 10 where Mr Capaldi has put the two plans one on top of the other with a red arrow showing the amendment. 18. This Dincel wall can be seen from various angles in the report of Mr Capaldi dated 24 December 2021 at pp 78 to 81 (photos 68 to 74). 19. Mason K, Carter J, Tolhurst G, Mason and Carter's Restitution Law in Australia (4th Edition, 2021, LexisNexis) at [913]; Mann v Patterson Constructions Pty Ltd [2019] HCA 32; 267 CLR 560 at [14]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 April 2023