BECHARA v PESKENS SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MASON P, STEIN JA and SHEPPARD AJA 24 June 1998 [1998] NSWCA 34 Mason P. Ex tempore The appellants are builders and the respondent is an architect. Each were experienced in their respective callings. The appeal arises out of a contractual dispute, which turns essentially upon the terms of an oral contract made between Mr Bechara, one of the appellants, and the respondent. It was common ground at trial that a contract existed and that it involved the retainer of the architect to prepare design plans and take other necessary steps in relation to a proposed development project, consisting of twenty townhouses at Artarmon that the appellants proposed to develop. The contract was formed on about 8 April 1989. Pursuant to it, the respondent prepared and lodged a development application, including plans, on 19 June 1989. Conditional approval was forthcoming from the Willoughby Council on 14 September 1989. Subsequently a building application was lodged and the development approval in its completed form was finally obtained on 5 October 1989. On 16 October, the respondent submitted his account, claiming $115,450, made up as to a fee calculated at 4.29% on final cost of $2,500,000, being a sum of $107,250; plus disbursements totalling $8200. The account was a first account and claimed the sum for professional services involving the taking of instructions, carrying out of a survey, submitting report, preparing sketches, plans, development application, building application, working drawings and details. In the period between April and October 1989 there were a number of meetings between the two principal parties. The architect respondent had found it necessary to prepare an environmental impact study and to address the Willoughby Council in support of the application. The development application had been lodged in the architect's name but on behalf of and on the instructions of the appellants. All these matters were common ground. There were three matters disputed at the trial. One is an issue of copyright which no longer concerns us. The second was a claim by the appellants that the respondent had promised that he would ensure approval from the council without delay and had breached that promise. The third issue was a dispute as to the terms of remuneration for the work which had been contracted to be done. The appellant Mr Bechara gave evidence that an express term of the retainer was that the architect would ensure approval without delay. He said that based on his experience there had been unreasonable delay because he contended that it would be possible to get approval from the council in a period of two months from the time of lodgment of a development application, whereas for various reasons the lapse of time was between June and October. 2 UNREPORTED JUDGMENTS On the question of price, the evidence of the appellant was that there was an express agreement between the parties that the fee would be $300 per unit, a total of $20,000 in all. The evidence of the architect was that the express agreement was that the architect would be entitled to scale fees, as recommended by the Royal Australian Institute of Architects for the design stage, subtracting the common one and a half per cent for contract administration, which represented a fee of four and a half per cent. It was the architect's evidence that the express agreement was that four and a half per cent would be applied to the estimated building cost and that the parties had discussed what this would be, with various figures being bandied about but ultimately agreement being reached that the figure would be $2,500,000. Accordingly, the architect's evidence was that the express agreement was that the fee would be four and a half per cent of $2,500,000, which came to an agreed figure of $110,000. (In fact, the mathematics brings it to $112,500.) The matter was fought over a number of days and, given that the dispute concerned an oral contract formed at a meeting at which only the two men were present, it turned principally upon the credibility of the two male witnesses. Judge Armitage dismissed the appellant's claim that there had been an express promise to ensure building approval without delay. As I read his Honour's judgment at pp 422 and 423 of the appeal book, that finding turned upon a preference for the architect's evidence as to the terms of the agreement. His Honour did not find it necessary to address the issue as to whether, had there been such a promise, it had been breached. His Honour found the respondent to be an honest witness not given to equivocation. He considered that the story he told accorded with common sense, in contrast to that of the appellant. It is relevant to observe that these were experienced people who had not had any prior dealings and had negotiated at arm's length. They were dealing with a site that had some difficulties in terms of capacity to get the approval for the development proposed and they were dealing with a council known to scrutinise applications properly. The evidence of the appellant was preferred and the claim that there was in effect an underwriting by the respondent of some obligation to get the approval in an extremely quick time was rejected. On the other matter that we are concerned with, namely the dispute as to the agreement as to price, his Honour expressed a clear preference for the evidence of the respondent. His Honour, as I read the judgment, gave three reasons for this. Before mentioning what those reasons are, I should say that senior counsel for the appellant indicated in his oral argument this morning that the appellant was dissatisfied with the statement of reasons found in the judgment. However, no such ground of appeal appears in the notice of appeal. In any event, his Honour did spell out his reasons on this critical issue of price and as I read the judgment they are threefold. Firstly, he found the respondent to be a credible witness. Secondly, he formed an adverse view of the credibility of the appellant, whom he described to be an unimpressive witness, willing to shift ground whenever it suited him to do so. His Honour gave some specific reasons elucidating this finding at the bottom of p 424 and the top of p 425 of the appeal book. I mention that because this was not a case where the finding turned upon what has been described in some of the cases as the subtle influence of demeanour. His Honour's judgment was direct rather than subtle and explicit rather than implicit in the reasons for the credibility findings that he made. URJ BECHARA v PESKENS (Mason P) 3 The third basis of this part of the judgment was a conclusion that the surrounding circumstances clearly favoured the version of the respondent over that of the appellant. I share such conclusion. After all, these were experienced players in a complex area. They must be taken to have known the difficulties of getting approval and the type of work that would be involved. To me, it beggars belief that they would have agreed for the work to be done at the rate suggested by the appellant, given that they were not friends, they had had no prior dealings, and that there was no suggestion that the respondent was getting any profit out of the development project. At the commencement of his submissions this morning, senior counsel for the appellant acknowledged the principles referred to in cases such as Abalos v The Australian Postal Commission (1990) 171 CLR 167 and Devries v The Australian National Railways Commission (1993) 177 CLR 472. As summarised in Devries at 479, the task assumed by an appellant seeking to challenge fact finding by a trial judge based on the credibility of witnesses is a daunting one but it is not an impossible one. The principle is stated that if the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge has failed to use, or has palpably misused his or her advantage, or has acted on evidence which was inconsistent with facts incontrovertibly established by the evidence, or which was glaringly improbable. This test has to be understood against the background of equally well established principles that require trial judges to indicate to the extent that it is possible the reasoning process that lead them to their findings on credibility or otherwise. In my view, the appellant has entirely failed to indicate a credible basis for challenging the firm and sufficiently well enunciated reasons for the trial judge's conclusions. I should mention two matters that were raised in argument. It was suggested that it was very unusual for a retainer of this nature not to have been evidenced in writing. We were referred to expert evidence to that effect. I have no difficulty in accepting that submission. However, there was evidence given which his Honour was clearly entitled to accept, to the effect that at the critical meeting the appellant in effect demanded that the respondent trust him and evidence that trust by not seeking to record the terms of the retainer. Each witness was challenged on his respective accounts of that conversation, but I see no reason to reject the respondent's evidence to the effect that that was the way the parties embarked upon the retainer. The second specific issue concerns the method of costing the value of the building project for the purpose of applying the four and a half per cent factor to it. There was evidence that there were a number of ways in which this task is addressed. One way is to do it according to costing methods referred to as the Cordells basis. Another way is to look at the actual cost of the project after it is completed. Another way is for the parties to agree at the inception as to the estimated cost so that the percentage can be applied to that agreed estimate. No doubt there are other ways of doing it. The learned trial judge ruled at p 425 that certain evidence of expert witnesses was irrelevant. He was, as I understand it, referring to evidence which was advanced to show that it was more common, or indeed a practice within the industry, for the actual cost basis to have been adopted. His Honour considered it irrelevant because, in his own words, he was completely satisfied that 4 UNREPORTED JUDGMENTS Mr Bechara agreed to pay scale fees and accepted a figure of $110,000 calculated in the way that I have previously indicated. In my view, his Honour was completely entitled to form such a view. We have been referred to various versions of the respondent's evidence. It is sufficient to mention the account he gave at p 269 of the appeal book which supports the conclusion. His Honour was in my view clearly entitled to accept the respondent as a witness of credit, as he did. The amount of the judgment was calculated at $115,000 as set out on p 425. In fact, the mathematics of applying the version of the agreement which was found brought it out at a slightly higher figure but his Honour rounded it down to that figure because that corresponded with the claim made in the architect's cross-claim. In my view, the appeal should be dismissed. Stein JA. I agree with the judgment of the President without reservation. Indeed, the appellant's version of the contract was glaringly implausible, if not incredible. When one bears in mind the factual context, as his Honour the trial judge said, the appellant's version did not accord with common sense. I agree that the appeal should be dismissed. Sheppard AJA. I also agree that the appeal should be dismissed for the reasons given by the President. I agree also with the remarks made by Stein JA. Mason P. Mr Ashhurst, what is your application as to costs? ASHHURST — The respondent would seek the costs of the appeal. MASON P — The appeal is dismissed with costs. GLISSAN — Your Honour, there is one other matter that I don't know if it's appropriate to raise with your Honours. It's the matter of a bank guarantee that was lodged with the Registrar as security for a stay. As I understand it, the Registrar needs an order that those moneys be called up and released to the respondent. Is it appropriate to seek that order from your Honours, or to notify the Registrar? MASON P — I think we should try and avoid any further legal expenses. Is there any reason why that order should not be made? ASHHURST — No your Honour, not that I can think of. I would have thought that the order that was made by the Court presumably as part of the interlocutory proceedings. MASON P — We order that the Registrar call up from the Westpac Bank the guarantee lodged as a condition of the stay and release the moneys to the respondent to the extent necessary to satisfy the judgment, including interest. [1] Orders accordingly. Counsel for the appellant: J L Glissan QC/ W G Hodgekiss Counsel for the respondent: M A Ashhurst Solicitors for the appellant: Newman & Associates Solicitors for the respondent: Eleanor Murphy & Co