Industrial Relations Commission of New South Wales in Court Session CITATION : Samir Batshon v Migliorino & Associates Pty Ltd & Ors [2001] NSWIRComm 271 APPLICANT: Samir Batshon FIRST RESPONDENT: Migliorino & Associates Pty Ltd (ACN 002 641 625) SECOND RESPONDENT: Rocco Migliorino PARTIES : THIRD RESPONDENT: Sitehope Pty Ltd (ACN 064 470 793) FOURTH RESPONDENT Salvatore (Sam) Moschella FIFTH ESPONDENT Glenda Moschella FILE NUMBER: IRC 6188 of 1998 CORAM: Schmidt J Unfair contract - building industry - whether contract was agreed on a costs plus margin basis or fixed price basis - use of Scott Schedule - costs incurred not established - application dismissed CATCHWORDS : Contracts Review Act 1980 LEGISLATION CITED : Industrial Relations Act 1996 Trade Practices Act 1974 (Cth) Autobake Pty Ltd v Budd & Anor (1986) 19 IR 18 CASES CITED : Davies & Anor v General Transport Development Pty Ltd & Ors [1967] AR (NSW) 371 Stevenson v Barham (1976-77) 136 CLR 190 HEARING DATES: 11/20/2000; 11/21/2000; 02/05/2001; 02/06/2001; 02/08/2001; 09/18/2001 DATE OF JUDGMENT: 10/30/2001 APPLICANT: Mr R Moore of counsel SOLICITOR: Stephen Hodges, Solicitor FIRST AND SECOND RESPONDENTS: Mr J Fernon of counsel LEGAL REPRESENTATIVES: SOLICITORS: Minter Ellison Lawyers THIRD, FOURTH, FIFTH RESPONDENTS: Mr A Moses of counsel SOLICITORS: Tress Cocks & Maddox Solicitors JUDGMENT: - 18 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J DATE: 30 October 2001 Matter Number IRC 6188 of 1999 SAMIR BATSHON v MIGLIORINO & ASSOCIATES PTY LTD & ORS Application under s106 of the Industrial Relations Act 1996 JUDGMENT 1 This claim was brought under s106 of the Industrial Relations Act 1996 ('the Act') by the applicant, Mr Batshon, a structural engineer and builder. The claim concerns a building contract between Mr Batshon and Sitehope Pty Ltd ('Sitehope'), for the construction of a childcare centre and caretaker's flat. The claim was also brought against the two directors of Sitehope, Mr Salvador Moschella and Mrs Glenda Moschella; the architectural firm which designed the building and acted as Sitehope's agent on the job, Migliorino & Associates Pty Ltd and the architect Mr Rocco Migliorino, who performed the architectural work and day to day work of supervision of the construction contract for Sitehope. The claim was also originally brought against one of the suppliers under the contract, Jensen Glass Pty Limited ('Jensen'), but that claim was settled prior to the hearing. 2 Evidence was called from Mr Batshon, Mr Migliorino, Mr Moschella and Mrs Moschella. A number of documents were also tendered. The circumstances 3 Mr Migliorino first met Mr Batshon when he performed engineering work on another building project which Mr Moschella was supervising. Mr Batshon was later engaged to perform some engineering work on this project. Mr Batshon had also started work as a builder and he was interested in tendering for the building work on the project. He discussed the prospect with Mr Migliorino and some time later, Mr Migliorino invited him to submit a tender. Mr Migliorino was Mrs Moschella's nephew. 4 There was a dispute as to the nature of the discussions between the applicant and Mr Migliorino before the applicant provided his tender. It was, however, common ground that the applicant was eventually the successful tenderer. His tender was for the sum of $532,000 plus excavation costs and 30 weeks' building time. It was also common ground that during a meeting between Mr Batshon, Mr Moschella and Mr Migliorino, at which the tender was discussed, Mr Batshon was asked if he could do better and a price of $520,000 emerged from the discussion, with a date for practical completion of 15 January 1996. It was also accepted that the work on the caretaker's flat might be completed after that date, it being completion of the childcare centre which was critical to Sitehope. 5 One aspect of the controversy between the parties in these proceedings was whether it was agreed in this discussion that the work would be done on a cost plus 10% builder's margin basis, as Mr Batshon claimed, or whether a fixed price of $520,000 was agreed, as Mr Moschella and Mr Migliorino understood on their evidence. Mr Batshon's evidence was that his tender price of $532,000 included a 10% builder's margin and his agreement to perform the work for the sum of $520,000 was on the basis that this was accepted as an estimate and that rather than the contract being for a fixed price, it was agreed that the work would be done on a cost plus 10% basis. 6 Despite this disagreement, it was undisputed that a written contract for a fixed sum of $520,000 was entered between the applicant and Sitehope shortly afterwards, which provided for a completion date of 15 January 1996. It was all the parties' understanding that the childcare centre was due to open in early 1996. 7 The building costs proved to be higher than the applicant had anticipated; he ran into financial difficulties and the project was delayed, in part as the result of agreed extensions to the completion date due to bad weather and in part as the result of problems the applicant was experiencing with the project. Eventually the contract was terminated by Sitehope. Another builder was appointed, who completed the project. The centre did not commence to trade until June 1996. It had taken enrolments for students in accordance with the earlier expected time of completion. When it in fact was able to begin to trade in June 1996, it had only 5 enrolments and was not fully booked until the following year. 8 On Mr Batshon's case, Sitehope paid him $462,680 for the work performed. (On Mr Moschella's evidence $467,834 was paid by Sitehope for the work performed.) Mr Batshon's claim was for a total expenditure on the project of $569,131.76, leaving $106,451.76 outstanding. In addition, Mr Batshon claimed a 10% margin of $56,913.18, making a total claim of $163,364.94. A further claim of $13,000 in relation to a Bank guarantee was also pursued. In the alternative, a quantum merit was sought. 9 This claim, it must be observed, was at odds with the evidence of the various witnesses as to Mr Batshon's advice in February and March 1996, as to what his cost overruns then were. 10 Even at the hearing there were significant difficulties in determining from the evidence led as to what, in fact, Mr Batshon had expended on this project. In the course of preparation of the case for hearing, directions had been made by consent of the parties for preparation of a Scott Schedule as to the costs of the project. Agreement on the Schedule was not reached. The case was, nevertheless, advanced by reference to this Schedule. 11 It was identified by Mr R Moore of counsel, appearing for Mr Batshon, that the expenses claimed in the Scott Schedule fell into three categories. Firstly, expenses in respect of which it was accepted by the parties that proof of the expenditure in relation to the project existed. These expenses amounted to $153,000. The second category was expenses in respect of which proof of the expenditure existed, but not that it had been incurred in respect of this project. These expenses amounted to $70,000. The third group was expenses in respect of which it was not agreed that either proof of the expenditure existed, nor that it had been incurred in respect of this project. These expenses amounted to $347,000. This latter figure came from the Green Book, which was a handwritten book kept by Mr Batshon, noting payments which he made. The earlier two figures came from invoices produced to the respondents. The Green Book was in evidence, but not any of the invoices. I will return to this matter below. 12 The applicant's claim centred around the allegation that, contrary to the written agreement, the parties had an oral agreement providing for the construction of the childcare centre on a cost plus basis, so as to ensure that the applicant was paid 10% in addition to the expenses incurred in erecting the building. Such an agreement was denied by the respondents, whose evidence was that the agreement was for a fixed price contract, in accordance with their later correspondence and the written contract which was executed by the parties. 13 Mr Batshon also claimed that a number of variations to the contract had been required by Sitehope during the construction, but had not been paid for in accordance with the contract, which provided for such variations to be paid on a cost plus 10% basis. He alleged that he had been promised payment when the building was complete. This aspect of the claim was not identified or quantified in the evidence led. There was evidence that claims for variations were made, that some were paid without dispute and some, after investigation by Mr Migliorino. In one case the payment was made with an adjustment, in order to reflect that Mr Batshon was not able to substantiate that the work in question had, in fact, been carried out. (This related to excavation work required to adjust site levels). What part of the claim for $106,451.76 related to such variations, was unclear. 14 The orders sought by the applicant were: 1. An order declaring void in whole or in part or varying in whole or in part either ab initio or from such other time the contract or arrangement including any collateral contract or arrangement ("the Contract") between the Applicant and the First Respondent and/or Second Respondent and/or Third Respondent and/or Fourth Respondent and/or Fifth Respondent whereby the Applicant performed work in an industry namely the building industry, as a licensed builder. 2. Further and in addition a declaration that the Contract between the Applicant and the First Respondent and/or Second Respondent and/or Third Respondent and/or Fourth Respondent and/or Fifth Respondent was an unfair contract in the requisite sense in that it was unfair or harsh or unconscionable or contrary to the public interest. 3. An order that the Contract (headed "Lump Sum Contract for Simple Building Works Edition 2" and dated 8 July 1995) be varied ab initio save as to monies already paid under the Contract to the Applicant by the Third Respondent and there be substituted in lieu thereof a cost plus contract for the performance of the building works as between the Applicant and the Third Respondent. In order to give effect to such variation: (a) all reference to a contract sum of $520,000 as provided in Clause 1.2.7 and stated in B7 of the Appendix is to be deleted from the Contract and in lieu thereof the following definition be inserted: "The Contract Sum under which it has been agreed that the Works as required under this Contract shall be performed by the Builder shall be the actual costs as incurred by the Builder from the beginning of the Works to completion plus a 10 per cent Builder's margin and shall include all costs incurred as a consequence of any variation or delay howsoever arising as provided elsewhere within the Contract"; (b) that in the event of termination of the Contract before the completion of the Works for any reason whatsoever the Applicant shall be entitled to be paid the costs incurred by him to date plus 10 per cent margin. 4. Such further Order or Orders as appear appropriate to the Commission in Court Session including an Order for compensation as against any or all of the Respondents. 5. Interest. 6. Costs. 15 The monetary orders claimed by the applicant were: Total Cost of Project as claimed by Batshon: $569,131.76 Amount received from Sitehope Pty Limited: $462,680.00 Difference $106,451.76 Plus Agreed margin of 10 per cent: $ 56,913.18 TOTAL CLAIMED ON PROJECT: $163,364.94 The above amount should have been paid upon determination of the Contract and interest is claimed at Supreme Court rates from 8 March 1996. Further in relation to the Bank Guarantee this Guarantee was cashed in by the Third Respondent on 13 August 1996. Batshon claims $13,000 plus interest at Supreme Court rates from 13 August 1996. BANK GUARANTEE $13,000.00 Batshon claims an amount of $176,364.94 before interest as particularised and costs. 16 Mr Batshon gave evidence as to the circumstances in which he alleged that the agreement he relied upon had come into existence. He also gave evidence as to further discussions with the respondents which, on his evidence, were in accordance with that agreement. Those discussions concerned how variations to the contract were to be dealt with. He also gave evidence as to how the respondents conducted themselves when the costs of the project proved to have been underestimated. 17 It is relevant to observe at this point that the respondents gave evidence which contradicted that of Mr Batshon in almost every relevant respect. As a consequence, the Court was faced with a case where the determination of the claim advanced by the applicant depended in large measure upon whether his version of events could be accepted or not. As Mr Moore of counsel conceded during submissions, the case advanced by Mr Batshon must fail utterly, if his evidence in relation to the critical conversations between the parties was not preferred over the evidence of Mr Migliorino and Mr Moschella. In that context it is relevant to comment on how the case was advanced by the respective parties. 18 As is usual with applications brought under s106 of the Act, the summons filed by the applicant was supported by an affidavit. Directions were given as to the filing of affidavit evidence, as well as the preparation of the Scott Schedule earlier mentioned. The applicant called no other witnesses to support his claims and himself swore no other affidavits in chief. In those circumstances, most curiously, his affidavit was not supported by reference to documents such as the written tender which he had submitted, the contract, any of the correspondence between the parties, or any invoices or other documents, such as the Green Book, which might have thrown some light on the costs which he had incurred in this building project. 19 Almost all of such documents, apart from the Green Book, as were put into evidence were brought forward through the affidavit evidence of the respondents. In almost every material way, these documents supported the evidence of the respondents as to the matters in issue in the case. There was nothing, not even correspondence from the applicant himself, which pointed to the existence of a contract on terms other than those reflected in the parties' written agreement. Indeed, in cross examination, Mr Batshon conceded that the first time that the oral agreement which he asserted was referred to in any document, was in the summons initiating these proceedings. 20 The applicant did not put on any affidavit evidence in reply to that of the respondents, in which they denied his version of events in a variety of material respects. Even the Green Book was only tendered in re-examination of the applicant, (over the objection of the respondents), the applicant having made reference to it in an answer given during cross examination, but not in his affidavit evidence. 21 Given the way in which the Green Book was brought forward in the proceedings, it necessarily provided but little assistance in the resolution of the issues lying between the parties. The applicant was not cross examined about the Green Book, it having been tendered during re-examination. Given the way in which the Green Book was introduced into the case, its tender was opposed. The tender was admitted, but the applicant was then not also permitted to re-open his case. 22 It followed that even if it were accepted that the mere face of this document proved that the expenses claimed in respect of the third category of expenses in the Scott Schedule identified by Mr Moore, were incurred by the applicant, it could not, without more, establish that they were incurred in respect of this project. 23 There was, for example, no evidence as to how the applicant kept his business records. The invoices on which the applicant relied in producing the Scott Schedule were not in evidence. The Green Book was a handwritten book identified by the applicant in his oral evidence in re-examination as the document in which he recorded his business expenses. There was, however, no evidence as to how the book was kept, whether it recorded payments made as well as invoices received, which expenses recorded in the book related to this project, and what entries reliance had been placed on in calculating the claim brought in these proceedings. 24 It followed that in order for the applicant to succeed in the claim here brought, he would have had to convince the Court to take the view that his version of events should be accepted and the evidence of all of the respondents rejected, even where the documentary material supported their version of events and not his. So understood, it can readily be appreciated that the task facing the applicant in these proceedings was a formidable one. 25 The claim was that the fixed price contract for $520,000 was but an estimate and that in addition to the sum of $462,680 already paid to Mr Batshon under the contract, further payments of $106,451.76 were owed to him in respect of sums he had expended on the project, but had not been paid for. As I have noted, Mr Batshon gave no evidence as to how the claimed outstanding sum had been calculated. Having regard to the evidence, it was not entirely clear whether this sum referred only to amounts already paid, or whether it also included sums owed to subcontractors, but not yet paid. The relationship of the claim to the three categories of expenditure identified by Mr Moore in relation to the Scott Schedule was also not apparent on the evidence. The Evidence 26 I now turn to the evidence in relation to the formation of the contract, the financial difficulties Mr Batshon encountered, and the circumstances in which the contract was terminated. It was submitted for all parties that much of this case depended upon the credibility of witnesses and whose evidence was to be preferred on various matters. These submissions were undoubtedly correct. I will thus deal in some detail with the evidence and the areas of conflict, particularly given the often contradictory nature of the evidence given by Mr Batshon, especially in cross examination and the consequential difficulty which I have had in accepting his evidence. 27 Mr Batshon's evidence was that he was invited to submit a tender for the project by Mr Migliorino and that they discussed the pricing of the project on a number of occasions, before the tender was submitted to Sitehope. Mr Batshon's evidence was that he had suggested figures of $650,000 and $595,000, which Mr Migliorino informed him were too high. Mr Migliorino denied having had such discussions, although he did not deny having had general discussions with Mr Batshon about the square metre rates being charged in the building industry at that time, of about $1,000 per square metre. The figure finally tendered by Mr Batshon was $532,000, with a 30 week building period proposed. 28 On the evidence, I have come to the view that Mr Migliorino's version of the discussions which preceded Mr Batshon putting in his tender must be preferred to that of Mr Batshon. I do not accept that Mr Migliorino had anything other than discussions of the most general kind with Mr Batshon as to the tender which Mr Batshon would submit. I have come to that conclusion for a variety of reasons, including the views I have reached on other areas of conflict in the evidence. 29 The questions of credit which here arise have to be resolved in a context where Mr Batshon, an experienced structural engineer, was, on his own evidence, starting out in his building business, but very anxious to acquire this project, both because it would have been his biggest building project to date and because he was hopeful of developing a working relationship with Mr Migliorino as a builder, which would lead to further building work in the future. On his evidence, at this time Mr Batshon was costing building projects on the basis of a 10% margin, but in light of this experience, was now operating on a 20% margin. 30 While Mr Migliorino was cross examined, in detail, about whether and how he had costed the project, his evidence that he had not prepared detailed costing was consistent with his evidence as to the general nature of his discussions with Mr Batshon. I also accept that his evidence was consistent with the different approach which might logically be expected to be taken by an architect, in respect of the costing of a building to be put out to tender, as opposed to the consideration which a builder would give to costing, when preparing a tender for a fixed price contract, as here sought by Sitehope. 31 It was common ground that the tender for $532,000 plus rock excavation costs, was discussed at a meeting attended by Mr Batshon, Mr Moschella and Mr Migliorino. Mr Batshon's tender was the cheapest which Sitehope had received. On his evidence it included a 10% margin. The witnesses differed as to the precise date on which this meeting took place, (either late June or early July) and exactly what was said, there was, however, some common ground as to what took place. The prospect of a reduction in the price was raised with Mr Batshon by Mr Moschella. A reduced price of $520,000 was agreed in the discussion, with no charge for rock excavation as was a completion date of 15 January 1996, and that the caretaker's flat might be completed after that date, it being the childcare centre which was of primary concern to Mr Moschella, given the proposed opening time the following January. 32 Mr Batshon's evidence was that he told the others that his price of $532,000 included a 10% profit margin and that he could agree to the reduced price and earlier completion date, so long as he had the co-operation of the other two gentlemen in the building work. They both denied that this was said. Mr Batshon recollected that his quote for rock excavation was also discussed, which led to the following agreement: 'Migliorino: …Look why don't your (sic) reduce your rock excavation rate, it is too high. I suggest you reduce it to $30 per cubic metre to be competitive with the other tenderers. Batshon: Well if I do that, I am only doing it on the understanding that you will guarantee me a 10% margin on this project because that is what I have done in my original tender. Why don't we approach it this way? I will build the project for you to time and as long as I make 10% over the final costs of the project I will be happy. Can we enter into the arrangement on that basis? Migliorino: Yes. That seems reasonable to me. What do you think Sam? Moschella: Yes, I think I could live with that. Batshon: What we will do is we will make the date of practical completion for the downstairs area to be as you have suggested to me as 15 January 1996. However, we will allow extra time for minor work to be completed after that date for the caretaker's flat upstairs. Migliorino: Yes, January 15 1996 is an acceptable date for completion of the downstairs area and yes it does not matter whether the caretaker's flat requires some more work on it after that date. I think the deal is acceptable Sam. I suggest you accept it. Moschella: OK then, that will be what we will do. I recall that after this conversation the three of us shook hands and I immediately left to start to plan the job. At the conclusion of this meeting the contract was not signed between us.' 33 In their affidavits and in cross examination, Mr Migliorino and Mr Moschella denied that much of this discussion occurred. Each recounted their own recollection of the conversation, which was largely to similar effect, although there were perhaps understandably, some differences as to matters of detail. 34 In cross examination, Mr Batshon explained that the agreement reached was that he would be paid 10% of whatever the job finally cost. He was cross examined as to whether the $520,000 tender agreed included the 10% margin or not. His evidence was to this matter entirely inconsistent, to the point of being contradictory. At one point he asserted that it did, but later that it did not and that he would have to be paid $52,000 in addition o the agreed $520,000. Mr Batshon denied that he had made this evidence up after the event, even when it was put to him that his evidence put the alleged agreement on different terms to those put by Mr Moore of counsel on his behalf in opening the case. Having considered this evidence it must be concluded that it cannot fairly be read as being consistent with the case as advanced and opened. 35 All those present at this conversation agreed that rock excavation was discussed at the meeting, but both Mr Migliorino and Mr Moschella denied that the cost plus 10% margin agreement that Mr Batshon asserted, had been reached. On both Mr Migliorino and Mr Moschella's evidence, it was Mr Moschella who asked whether Mr Batshon could do better in price, which led to the discussion of $520,000. The difference between the parties as to this issue was crucial to the claim advanced. Its resolution depended not only upon a consideration of the various witnesses' recollection of the conversation, but the parties' subsequent conduct also threw light on what was, in reality, agreed. 36 In cross examination, Mr Batshon explained that the tender he had put in, was 'tight, very tight', both as to price and date of completion. He was ambitious, however, and believed that he could do the job for that price and told Mr Moschella and Mr Migliorino that if they all worked together, he could achieve it. 37 Mr Migliorino kept handwritten notes of the initial meeting. The notes do not refer to any agreement on a cost plus 10% margin basis being discussed, but rather refer to a fixed price of $520,000 being agreed. After the meeting he sent a copy of those notes to Mr Batshon, as had been agreed at the meeting. Mr Batshon then wrote to Sitehope on 2 July, confirming: '1. The total Contract lump sum estimated cost for this project is Five hundred (sic) and twenty thousand dollars. 2. No variation will be claimed by the builder or credited to the proprietors (sic) for the construction of the concrete boundary retaining wall in accordance with the engineers details. 3. If rock was encountered, there will be no additional claims for excavation in rock. 4. Consequently, no credit will be awarded for the elimination of strip footings. 5. Date of commencement is 10th of July, 1995. Prorietor (sic) has informed council of the (sic) this date. 6. Date of practical completion for the ground floor is the 15th January, 1995. 7. Minor works for the Caretaker's Flat may extend beyond this date. 8. The proprietors is (sic) to pay three thousand dollars to Ryde Council. This deposit will be reimbursed to the proprietor. Any damage by the builder will be deducted from the contract sum. 9. The builder confirms that the agreed contract sum will cover for all works indicated on the contract documents. 10. A special payment will be made to the builder upon completion of excavations, as set out in the attached trade break-up.' 38 Mr Migliorino and Mr Moschella both denied in cross examination that there had been any agreement to a cost plus contract during the meeting at which Mr Batshon's tender had been discussed. Mr Migliorino also explained that the agreement reached in relation to rock excavation did not simply mean that all of the costs were to be born by Mr Batshon. On his evidence, ordinarily an adjustment would have been made to the contract price, if rock was encountered on a site, for the cost of the strip footings which were envisaged in the design, but which would not be required. The agreement in relation to rock excavation thus meant that no such adjustment was made - to the benefit of Mr Batshon. 39 On Mr Migliorino's evidence other benefits also were offered to Mr Batshon in the meeting, in which the final price of $520,000 was agreed. This included an alteration to the method of construction proposed for retaining walls, which would also reduce Mr Batshon's costs. A special initial up front payment, to assist Mr Batshon's cash flow was also agreed. These matters were also reflected in Mr Batshon's letter, but the asserted cost plus 10% basis of the contract was not, on Mr Migliorino's evidence, because that had never been discussed or agreed. 40 In cross examination Mr Batshon explained that when he wrote to Mr Migliorino after receiving the notes of the meeting, he had simply overlooked making any reference in his letter to the cost plus 10% margin agreement. On his evidence, he had relied on the fact that he had shaken hands with Mr Moschella and Mr Migliorino and then did not even think about the basis of the arrangement any further. He explained that he had mentioned the rock excavation in his letter, because it had been discussed at the meeting, but had been left out of Mr Migliorino's note. It was put to him in cross examination that the reason why the cost plus nature of the agreement had not been mentioned in the same way, was because it had not been discussed. Mr Batshon firmly denied this. 41 The written contract which the parties entered shortly after Mr Batshon's letter, was consistent with its terms. It was a standard form contract entitled a 'Lump sum contract for simple building works Edition 2' of the Royal Australian Institute of Architects and the Master Builders Australia Incorporated. It was entered by the parties on 8 July. It provided, amongst other things, for a contract sum of $520,000; Mr Batshon to be given possession of the site on 4 July 1995; for a date of practical completion of 15 January 1996; a 10% cost escalation provision and a 10% margin for agreed variations. Those terms largely accorded with Mr Migliorino's notes and Mr Batshon's earlier letter. 42 Sitehope had taken a loan for $500,000 to fund the project. Mr Moschella's evidence was that he had access to other assets to fund the balance of the project. His evidence was that at that time he had expected that it would cost $520,000 and had not appreciated that costs might increase, albeit that the written contract later executed, made provision for variations to be paid on a cost plus 10% basis. In the result Sitehope spent over $700,000 to have this building completed and suffered losses when the opening of the child care centre was delayed. While it was submitted for Mr Batshon that it was open to conclude that Sitehope did not have the means to pay for the construction which it had engaged Mr Batshon to perform, in my view, there was no evidence which would leave such a conclusion properly available. 43 In reality, in cross examination Mr Batshon was completely unable to explain why his own letter and the subsequent contract which the parties entered, did not reflect the cost plus nature of the agreement which he asserted he had made with Sitehope at the meeting with Mr Moschella and Mr Migliorino. Even taking account of the difficulties which witnesses face recollecting details of events with the passing of time, the only impression properly available from Mr Batshon's evidence was that it was exaggerated and tailored to suit the case he sought to advance in these proceedings. 44 It was apparent that whatever Mr Batshon might have understood had earlier been agreed at the meeting, neither Mr Migliorino's notes of the meeting, Mr Batshon's letter, nor the contract which the parties later entered were consistent with a discussion of a contract on the asserted cost plus basis. Rather, they were each consistent with an agreed lump sum figure of $520,000. The parties then conducted themselves in accordance with the terms of that contract, until Mr Batshon began experiencing financial difficulties, which I deal with below. 45 The inescapable conclusion which must be reached on the evidence was that the basis of the agreement, which the parties discussed, was as it was recollected by Mr Moschella and Mr Migliorino. Their evidence must be accepted and that of Mr Batshon rejected. This conclusion flows not only from the evidence which the witnesses each gave and the documents to which I have referred. Having in mind Mr Batshon's own conduct, after the written agreement was entered, as well as that of Mr Moschella and Mr Migliorino after the meeting, I was simply unable to believe that in truth Mr Batshon went away from their initial meeting believing that a cost plus 10% contract had been agreed as the basis for this project, no matter what the project might have cost. Mr Batshon's later conduct confirmed that, in reality, he had no such understanding. 46 It was common ground that there were a number of variations to the building work, which were agreed and paid for, in accordance with the terms of the written contract - cost plus 10%. Some were not paid immediately, but only after discussion between Mr Batshon and Mr Migliorino. In some cases the total amount initially claimed by Mr Batshon was not accepted and a lower amount was paid. Having in mind the evidence as to the state of Mr Batshon's records, this approach seems unsurprising and in accordance with the relevant provision of the contract. A requirement for some evidence of the cost of a variation to be provided by the builder, given that variations were to be paid for on a cost plus 10% basis, is after all, hardly surprising. 47 By 24 October, Mr Batshon had submitted a number of variations which had been paid by Sitehope. One, in relation to excavation was paid after discussions between Mr Batshon and Mr Migliorino, in which an amount was agreed. It was common ground that by this stage, Mr Batshon had alerted Mr Migliorino to at least some of the financial problems he was encountering. On Mr Batshon's evidence, he informed Mr Migliorino at this time that the project was not advancing according to budget and that additional funds would be needed. This was, however, unsupported by any corroborating evidence, such as, for example, that payments to subcontractors were made at higher than estimated or expected costs. Mr Batshon's evidence was that Mr Migliorino made promises about additional payments from Sitehope which were never forthcoming, but which induced him to continue working on the project. 48 Mr Migliorino denied having made such promises. To the contrary, on his evidence, Mr Batshon suggested to him at this time that he would not make enough money out of the project and that the contract should be changed to a cost plus basis, but that Mr Migliorino rejected this suggestion. Mr Batshon denied Mr Migliorino's version of their conversation. Mr Moschella's evidence was that Mr Migliorino told him at this time of Mr Batshon's complaints that he was not going to make enough money from the job and that he became concerned that the project would be finished on time. It was common ground that it was agreed between them in November, that progress payments would be made fortnightly by Sitehope, rather than monthly, so that the enhanced cash flow could assist Mr Batshon overcome his difficulties. 49 Mr Batshon's problems continued. He accepted in cross examination that he was told in November by Mr Moschella that if he had been told by Mr Batshon of the higher costs he was by then claiming from the outset, he would have reconsidered the inclusion of the caretaker's flat in the project. This was a flat of some 70 square metres built on the first floor of a 430 to 450 square metre building. Mr Batshon agreed that Mr Moschella was then concerned about the suggestion of cost overruns which he was raising with him. 50 There was a certain amount of rain during the project and an extension of time by some 16.5 days was agreed, by the end of December. In January, there was a concern arising that the project was falling behind. By this stage Mr Batshon had raised with Mr Migliorino some difficulties he was having in paying subcontractors and arrangements were made for Mr Migliorino to pay some of the subcontractors direct out of progress payments due to be made to Mr Batshon. 51 Despite these problems, Mr Batshon took 2 weeks leave in January. This also caused concern as to the prospect of completion of the childcare centre in time for its projected opening. In cross examination Mr Batshon's evidence was that he took leave then because the building work was progressing well at that stage, the extensions for wet days had been agreed, but there were further claims to make for delays. The only problem at that stage, on his evidence, was a financial one. There was a qualified foreman on site while he was away and the building work was continuing. He also asserted that it had been agreed that Mr Migliorino was to be responsible for supervision of the job while he was on holidays in January, but that he too took holidays then, to Mr Batshon's disbelief. Mr Migliorino denied such an arrangement had been agreed. 52 On Mr Batshon's evidence, during January the site was further affected by about 2 weeks rain, causing the cancellation of a bobcat on 5 occasions. In further cross examination, however, Mr Batshon agreed that these further delays had not been discussed. On his evidence, all that was to be done at that time was the fit out of a kitchen and painting, as well as some landscaping work. He said that by January, Mr Migliorino knew that the job might be a week or two late. Mr Migliorino denied this. Mr Batshon agreed in cross examination that on his evidence, all the problems on the job were someone else's fault. His firm belief was that he had done a good job. 53 Despite the arrangements made for some subcontractors to be paid direct by Sitehope, Mr Batshon denied that by this time he was failing to pay subcontractors. His evidence was that he was paying them out of his Citibank mortgage account and was even leaving his family without food, so that he could keep working. It must be observed that this evidence was completely at odds with the undisputed fact that in January Mr Batshon took his family for a holiday on the Gold Coast and that he had made arrangements with Mr Migliorino at this time for some subcontractors to be paid direct out of a progress payment due to be made to him, because he could not pay them himself. Mr Batshon explained this arrangement to have arisen because they were subcontractors and suppliers who Mr Migliorino knew and who were specified in the contact and who had raised non-payment with Mr Migliorino. Mr Migliorino had then raised their position with Mr Batshon. Mr Batshon complained that Mr Migliorino was not then concerned about the payment of other suppliers and subcontractors, whom he didn't know. He also complained that Mr Migliorino had paid other suppliers direct, rather than paying Mr Batshon, such as Giffe Tiles and Jensen Glass. Mr Migliorino explained that these payments were made because those suppliers had been specified in the contract and were refusing to make delivery unless they were paid first. Mr Batshon could not pay them, so it was arranged for them to be paid direct. 54 It must be observed that it is difficult to see how complaint could be made about these matters or how it could be found that the respondents failed to co-operate with Mr Batshon in relation to them, as he complained. Mr Migliorino, as Sitehope's agent, was concerned to acquiesce to an arrangement which ensured that suppliers who would not deliver material to the site without payment received those payments direct, out of money which had been accepted was owed to Mr Batshon. Such an approach was understandable in the circumstances, as was Mr Batshon's agreement to that course. Without it, the project would plainly have come to a halt much sooner than it did. 55 Mr Batshon also suggested in his evidence that problems on the job arose because Mr Migliorino had spoken to suppliers and subcontractors about him and had caused problems, such as when the landscaping subcontractor left because he had heard there was no money. In addition to the suppliers and landscapers whose names he supplied to Mr Migliorino in writing in January 1996, and who Mr Migliorino then paid direct, his evidence was that he later began to have problems paying other subcontractors such as bricklayers, the brick supplier and the cement renderer, but that Mr Migliorino did not care about their position, because they had already done their work and thus did not seek to make any payments to them. 56 Again, Mr Batshon's evidence about those matters was contradictory and difficult to understand. There was no evidence, for example, that the cost of bricklaying had been estimated on a particular basis and that it had in fact cost more. Mr Batshon had provided a trade break-up, which was used in order to assess progress payments claimed by him. This document was required to be submitted with the tender documents, but was in fact provided afterwards. It was amended by Mr Batshon, after Mr Migliorino had pointed out to him some difficulties in the way it had been prepared. This was undoubtedly an important document in the context of a fixed price contract. In cross examination, Mr Migliorino explained that he made progress payments having regard to this trade break up document, rather than having regard to Mr Batshon's actual costs. Indeed, there was no evidence that either when progress payments were claimed, or at any time prior to the termination of the contract, Mr Batshon ever told the respondents what his actual costs were, or that his progress payments were not claimed on a basis which reflected actual costs. Having in mind the evidence as to the state of Mr Batshon's records and the state of the evidence in relation to his actual expenditure on this project, there was simply no basis in the evidence upon which it could here be concluded what the actual costs of the project in fact were or, indeed, whether they were higher or lower than those which flow from the trade break-up document. 57 The trade break up was, on Mr Migliorino's explanation, never intended to reflect actual costs. Indeed, the evidence in relation to the trade break up document and the fact that Mr Batshon never provided information to the respondents as to his actual costs, just tended to confirm that the basis of the parties' relationship was, in fact, intended to be on a fixed price basis. In accordance with the written contract, Mr Batshon's actual costs were not the business of the respondents - indeed he had no obligation to tell them what they were, other than in relation to variations, which were to be paid for on a cost plus 10% margin basis. It followed, as Mr Moore acknowledged in submissions, that under the contract which the parties executed, if his costs proved to be higher than Mr Batshon had estimated for his tender, that was at his risk, thereby reducing his profits. If costs were lower, that was to his benefit - thereby increasing his profits. It followed that it was in Mr Batshon's interests to keep the costs of the project lower than his estimates, but costs were not a matter into which the respondents were entitled to enquire, other than in relation to variations, and they did not. 58 This situation was consistent with Mr Migliorino's explanation in cross examination, that the costs of material on a building are not constant, quantity might be, but not the costs. Commonsense suggests that this must be so - the cost of many of the items utilised in a building project would depend on the price which the builder was able to negotiate with the supplier. The same would be true of work performed by subcontractors. 59 As Mr Migliorino explained it, the trade break-up document gave an indication of cash flow on the project in a sequential way, so that progress payments could be determined as a percentage cost of the total contract figure. The figures represented the builder's estimate, at the outset, of what his particular costs would be and when they would arise, on a percentage, not actual basis. As I noted, the document initially supplied by Mr Batshon was adjusted by him after discussion with Mr Migliorino, having in mind deficiencies which Mr Migliorino drew to his attention in what was originally proposed. Having in mind Mr Batshon's experience and the fact that he had not even supplied the documents as required with the tender, it was difficult to conclude that anything disadvantaged Mr Batshon about Mr Migliorino's suggestions and his response, or that it suggested anything other than that the contract was to proceed on a fixed price basis. 60 Mr Migliorino explained that when he later made adjustments to progress payments claimed by Mr Batshon, having regard to the trade break up document, they reflected his interpretation of the percentage of the works which were completed to that point. For example, if 100% of the brickwork was claimed, but it was only 80% complete at that point, only 80% of the estimated cost would be paid. This reflected Mr Migliorino's task under the contract of ensuring that the work for which payment was being claimed had been performed. Again, this was also entirely consistent with a fixed price arrangement. 61 Despite Mr Batshon's evidence that he had difficulty in, for example, paying the bricklayer and brick supplier, there was no evidence that Mr Batshon had claimed a progress payment in respect of brickwork which had been rejected. The proper inference from the evidence as to these various matters was that the progress claims made had been paid in the vast majority of cases on the basis of how much of the work had been completed - consistent with a fixed price cost and not on the basis of actual cost. 62 In that context, the evidence of Mr Moschella and Mr Migliorino that a question which arose in their minds, when Mr Batshon informed them of his financial problems, was what Mr Batshon had spent the money on which he had received from Sitehope, was understandable. Here, on his evidence in these proceedings, it was apparently not on paying all that was owed to those such as the bricklayer and the brick supplier. Under the contract such matters were entirely a matter for Mr Batshon and not a matter about which the respondents were entitled to be informed, nor was evidence led in these proceedings about such matters. The respondents asked about these matters because on their evidence, Mr Batshon wanted to be paid more than the $520,000 agreed. 63 Mr Batshon's evident difficulties with bookkeeping matters suggests that in reality, Mr Batshon did not attend, either at all or sufficiently, to keeping an eye on his costs and whether or not they were in line with his estimates or expectations. Indeed, his evidence as to the advice which he gave to Mr Migliorino and Mr Moschella in the final days of this contract as to his costs blow outs, how the figure altered, and how he required the assistance of an accountant to try and work out his actual position, suggested that, in reality, he never took the necessary steps to ensure that his expenditure met his tender price. Whether such advice was then in fact obtained from an accountant was also unclear - no accounting evidence was called, nor any other expert evidence in relation to the costs of what was in fact built. 64 On this evidence, I am not satisfied that the proper explanation for Mr Batshon's conduct was that he understood that he would be paid on a cost plus basis. Rather, the evidence suggests a failure to keep proper records in relation to his building business. Indeed, given the evidence as to the state of his books, it is difficult to see how Mr Batshon could have demonstrated what his costs were, had there been a costs plus contract in place. In reality, if Mr Batshon was to be paid on a cost plus basis, keeping proper records of expenditure was even more crucial to him than under a fixed price context. 65 While there was disagreement between the witnesses as to the details of various conversations held around this time, it was common ground that upon Mr Batshon's return from holidays in late January, his financial problems were the subject of discussion between them. On Mr Moschella's evidence, for example, Mr Migliorino and Mr Batshon had a heated discussion as to what the money had been spent on. In cross examination however, Mr Batshon denied that Mr Moschella and Mr Migliorino had ever asked him where the money he had been paid had gone, asserting that 'We never discussed where the money went because they knew where the money went.' This evidence was completely untenable, inconsistent even with Mr Batshon's own evidence that he had to get the help of an accountant, because Mr Migliorino and Mr Moschella wanted to understand how a cost overrun had arisen and he was unable himself to provide such information. 66 On Mr Batshon's evidence he had told Mr Migliorino before he went on holidays that he had 'entered commitments greater than those which I thought in terms of completing this project' and that he expected money to be available from Mr Moschella on his return. Mr Migliorino denied this. On the evidence as to progress payments claimed to that time and the payments made, it is a comment which is difficult to understand. While not all of the progress claims made had been accepted in their entirety, or accepted immediately, Mr Batshon had been paid the vast bulk of what had been claimed, including in respect of variations to the contract, which included a 10% margin, as per the written contract. 67 If the answer to this dilemma was that Mr Batshon had not made claims for variations in respect of agreed changes to the contracted work up to this point, as his evidence implies, the evidence does not establish what sums, if any, were involved to this point. Had evidence been put on as to what was contained in the Green Book, this might have become clear. In the absence of such evidence, it is unhelpful to speculate about the matter. 68 What was agreed on the evidence was that the three men met on Mr Batshon's return from his holiday. It was then suggested for Sitehope that the $12,000 discount agreed when the tender was originally discussed would be restored, thereby increasing the contract price from $520,000 to $532,000. In cross examination, Mr Batshon said that Mr Migliorino had told him that Mr Moschella was also willing to pay him for the rock excavation work, which had also been excluded from the contract price. This did not however satisfy Mr Batshon's concerns, even though at that stage he was not precisely aware of what his costs were. In fact, he never put in a claim in respect of the rock excavation, because, as he explained in cross examination, the parties then went on to discuss other things. 69 Mr Batshon's affidavit evidence was that Mr Migliorino also told him that Mr Moschella was willing to pay him 50% of his losses and that he should put in another invoice as to those as quickly as possible. 70 Mr Migliorino's evidence was again different. His evidence was that there was a meeting involving both Mr Batshon and Mr Moschella, that Mr Batshon told them that he had underquoted the job, and that there would be a cost overrun. He promised to provide figures the next day. On the following day Mr Batshon told Mr Migliorino that he wanted the $12,000 discount restored, plus $30,000 for rock excavations. Mr Migliorino told Mr Batshon that Mr Moschella was unlikely to agree to such a payment. On the following day he told Mr Batshon that Mr Moschella might pay an extra $20,000 if the work were progressed and finished. 71 On 17 February, on Mr Migliorino's evidence, all three met again and Mr Batshon informed them that he was looking at a loss of $92,000, but he was still working on his figures. He also informed them that he had received legal advice that he could claim $75,000 variations. Mr Batshon agreed to provide more information about his losses. 72 A document was then provided by Mr Batshon. It was a single sheet which provided a list of various items, suggesting an overrun in the order of $92,000. It was, however, not Mr Batshon's final figure. 73 Later in the day, Mr Migliorino told Mr Batshon that Mr Moschella was prepared to pay 50% of the claimed loss of $92,000, if it was verified. Mr Batshon told him it would not be enough. 74 On 19 February, Mr Batshon told Mr Migliorino that he would need a minimum of $80,000 'to get him out of trouble'. Mr Migliorino told Mr Moschella of this development that evening, Mr Moschella's view was that he could not make that level of payments on the basis of the document Mr Batshon had thus far provided. 75 Mr Migliorino told Mr Batshon that Mr Moschella did not agree, but was prepared to discuss 'some sort of financial proposal that is more reasonable'. Mr Batshon informed him that he was in serious financial trouble and that some of his subcontractors were threatening him, because he had not paid them. 76 The respondents then obtained legal advice and a default notice was issued by Sitehope on 20 February 1995, in accordance with the contract, pointing out that the date of practical completion of the project, (7 February), had passed, requiring rectification and warning of termination of the contract otherwise. Mr Batshon denied that the time for completion of the job had been extended to 7 February. On his version, it was to be finished 'as soon as possible'. Again, this was difficult to accept, given the evidence of the other witnesses and the contemporary documents in evidence. It was never suggested in any of them that the date for practical completion which had been agreed was not 7 February. 77 On 21 February, Mr Batshon wrote to Sitehope responding to a letter of 17 February. The letter refers to alleged wet weather days leading to the cancellation of the bobcat on 2, not 5 occasions, as Mr Batshon suggested in his oral evidence and other delays, not due to him. The letter said at pt 6; 'In response to your item No. 2 of your letter, the job costing were presented to you so as to consider payment of extra's (sic) that I have not claimed in writing at the time. You have being (sic) promising me payments for all extras since October as you were aware of the arrangements to pay. Your promises had led to a position where the completion of the project may be affected. I have carried out my part of the bargain without pressuring you and without delays. Your part of the bargain to work together to complete the project on time has being (sic) neglected. At the time of signing the contract you were aware that I only allowed 10% for my overheads, wages and profit. Yet, you have approved the submitted estimated costs as true. Your reasons for this is still unknown to me.' 78 This, of itself, did not provide any evidence of an agreement that the building work would be performed on a cost plus 10% basis, but rather to the contrary, suggested that it was understood that the price agreed in the contract only included 10% for overheads, wages and profits. This was indeed consistent with Mr Batshon's initial evidence in cross examination, that this was the basis upon which he worked at the time - overheads of 10 to 15 %, but that he now operated on a 20% basis. As Mr Moore submitted, this evidence was also consistent with the view that Mr Batshon's tender price of $532,000 included a 10% wage and the agreement to a fixed price of $520,000 involved an acceptance of a lower margin. 79 On 20, 21, 22 and 23 February, Mr Migliorino visited the site and found that it was closed. In cross examination, Mr Batshon agreed that he was away from the site, because he was working on his accounts. The time this apparently involved tended to confirm that the accounts were then in a serious state of neglect. This was also consistent with the evidence led as to those accounts in these proceedings. 80 On 24 February the three met again. In relation to this and a number of other conversations, they were not dealt with in affidavit evidence by Mr Batshon, but came forward in the evidence of Mr Migliorino and Mr Moschella. In cross examination Mr Batshon corroborated some, but not all, of their evidence. Mr Batshon sought payment of $93,000 and Mr Moschella offered $46,000, if the job was finished. Mr Migliorino asked for a breakdown of the costs, so that where the losses had occurred could be identified. Mr Batshon said that he would have to provide figures to prove his case. That the respondents were at this point concerned to have someone other than Mr Batshon verify his accounts seems entirely understandable. 81 Mr Migliorino found that the site again was closed on 24 and 26 February. On that day Mr Batshon told Mr Migliorino that he was facing losses of $170,000 to $180,000 on the job, which required another $247,000 to complete, he having already been paid some $465,000. 82 Mr Migliorino found that the site was closed on 27, 28 and 29 February and 1, 2, 5, 6 and 7 March. On 29 February, Mr Migliorino issued another notice extending the time for practical completion, having regard to 7 wet days in January, but rejecting the claim for extension days in February, because no work was then being performed, and there was a disagreement as to whether there had, in fact, been rain. On 7 March, Sitehope issued a notice to terminate the contract and engaged another builder. 83 On Mr Batshon's evidence in cross examination, he received the notice on 8 March when an electrician he had engaged was on site working. He had taken advice from a solicitor and a barrister in the meantime, whose advice was to seek a week's grace in relation to the contract period so that the problem could be discussed and mediation sought. He then tried to sort out his problems without the help of lawyers. On Mr Batshon's evidence, the completion of the job in another week or two was discussed with Mr Migliorino. Mr Batshon told him he needed money straight away to keep going, but Mr Migliorino and Mr Moschella wanted real figures from an accountant, which were provided a few days later. Such figures were not, however, tendered in the proceedings. 84 In cross examination, Mr Batshon also explained that the cost of the project, when he left the job was: 'When I saw my accountant it was about the 450,000 mark. That is what I paid out, 450,000 and it was a 170,000 loss. That was the figure from my accountant.' He also explained that he believed that he was entitled to '10 percent' and when questioned as to what figure he was seeking a such a percentage of, he was unable to answer precisely, but believed it was about $60,000. 85 On Mr Batshon's evidence, when he telephoned Mr Migliorino to inform him of this position, he was told that Mr Migliorino could not talk to him anymore, that he hung up and had not spoken to him again. Again, Mr Migliorino gave a different account of this final conversation. 86 In March 1996, Mr Batshon instructed his solicitors to write claiming outstanding payments of $60,189.91 for extras and an outstanding progress payment of $12,000. No reference was made to any 10% margin claim in that correspondence. 87 It was not until February 1998 that Mr Batshon again wrote to Mr Moschella, claiming an extension for practical completion of the project, advising that he was completing his final variation claim, which he could not remember having later submitted, but again making no reference to any entitlement to 10% margin. 88 In Local Court proceedings brought against Mr Batshon by Jensen Glass, Sitehope was made a third party and it brought a cross claim against Mr Batshon. The pleadings filed for Mr Batshon in response, refer to the written contract between the parties, but also make no reference to the oral agreement relied upon in these proceedings, as to a cost plus margin basis of payment. 89 In cross examination Mr Batshon agreed that the first time that mention was made of the alleged cost plus 10% agreement was when the summons was filed in these proceedings in November 1998. His only explanation for that was that 'The only reason I had not put it, was because I overlooked it'. 90 Having in mind all of this evidence, the inevitable conclusion to which I was led was that Mr Batshon's evidence was unreliable and could not be accepted on any point where it conflicted with that of the other witnesses, especially Mr Moschella and Mr Migliorino. I do not consider in any detail the evidence given by Mrs Moschella. In reality, it added but little to the picture and was not relied upon in the case advanced. The parties' cases 91 The case for the applicant, as opened by Mr Moore of counsel was that it was a simple one, arising out of the initial conversation between the parties about Mr Batshon's tender, which had led to an agreement that the project would proceed on a cost plus margin basis. The written contract did not reflect that arrangement and it was not adhered to, leading to a relevant unfairness in the contract. Problems with the funding of the project arose in November, when discussions as to the need for further funding began. By January it had become clear that the job could not be completed for the estimate of $520,000 and Mr Batshon continued working on the project, being assured that the funding he needed would be forthcoming. 92 The funding was not made available and by mid February matters had deteriorated to the point where the applicant sought legal assistance. The discussions continued without success, not much further work was performed on the project and the contract was terminated. At that time the applicant had been paid some $445,000, including about $20,000 for variations, but further work done and materials provided or committed, which had not been paid for and was outstanding, was worth some $150,000. There was an issue between the parties as to how much had been expended. 93 The upshot, it was submitted, on Mr Batshon's evidence was that on termination he was about $130,000 out of pocket and had received nothing at all for his work as a builder on the project. The variation sought was to alter the nature of the contract from that of a lump sum contract to that of a costs plus contract. In addition, recovery of a sum in relation to a bank guarantee which was exercised by Sitehope against Mr Batshon was sought to be recovered. 94 Mr Moore explained the three classes of expenses which comprised the sum claimed by Mr Batshon and how they had been identified by the parties in their failed endeavours to produce a Scott Schedule. This was later quantified as earlier outlined. Reference was made to various documents which evidenced the different classes of expenditure. Not all of them were ultimately tendered, as I have already observed. 95 In final submissions, it was put that questions of credit arose in relation to the witnesses' conflicting evidence in relation to a variety of matters and that there was an issue as to whether the contract had been validly terminated. If the applicant's primary case were rejected, the Court was invited to make an order of compensation thought 'just in the circumstances of the case'. It was also submitted that even if the Court was unable to quantify the appropriate money order, having regard to the state of the evidence, an appropriate course was, nevertheless, for the contract to be varied as sought. This would leave the applicant free to pursue his money claim under the varied contract in another court. 96 The case for the first and second respondents advanced by Mr J Fernon of counsel was that the case concerned a standard form lump sum building contract, alleged to be unfair because it did not reflect an agreement to a costs plus contract which the parties had agreed, together with a promise by the respondents that they would cooperate with the applicant. 97 The evidence demonstrated that no agreement to a cost plus contract had been reached and that the respondents had co-operated with the applicant. Despite discussions about payments greater than those agreed, the applicant had been unable to complete the building works in question. 98 Various issues of credit arose. Objectively, the evidence of the applicant as to matters in contention were not plausible and they were, in any event, denied by the respondents' witnesses, whose version of events was supported by the documentary material in evidence. It was submitted that the Court would give considerable weight to that material in determining the credit issues. Mr Migliorino's evidence would be preferred in cases of conflict. 99 In any event, the applicant had not proved that any loses had been incurred on the project. It followed that the claim should be dismissed with costs. It would be unconscionable for relief to be granted in this case, given that the applicant had failed to prove that costs which he had incurred had amounted to any more than $153,000, let alone the $520,000 agreed. 100 It was furthermore argued that the absurdity of the relief sought was illustrated by the failure to prove costs incurred. To grant the claim would be tantamount to giving the applicant a blank cheque, a result which on no view could do justice between the parties. 101 The case for the third, fourth and fifth respondents advanced by Mr A Moses of counsel, was that the applicant had failed to demonstrate any unfairness in the contract in question; that it had been negotiated at arms length; that no promises were made for payments on terms different to those contained in the written contract; that the applicant had repudiated the contract and that the applicant's conduct was such that he did not come to the Court with clean hands, so as to warrant any relief being granted in his favour. 102 As to credit issues, the applicant's evidence was so unsatisfactory in a number of respects, that it could not be preferred on any point in issue, over that of the other witnesses. The applicant was a witness of no credit on crucial issues. That conclusion was reinforced by the documentary evidence, none of which supported the case advanced for the applicant. The applicant could only succeed if the difficulties in his own case were ignored entirely and the suggestion that the respondents' witnesses were generally lacking in credit, were accepted. This was a result not available on the evidence and would require that no regard be paid at all to the obligation falling on the applicant, to make out an evidentiary basis for the case which he had brought. 103 Reliance was placed upon the approach of the High Court in Stevenson v Barham (1976-77) 136 CLR 190 per Barwick CJ at 192, as to s106 not being used to interfere in bargains freely made by persons not being exploited. Various authorities dealing with the Contracts Review Act 1980 and the Trade Practices Act 1974 (Cth), in which similar views were expressed, were also relied upon. 104 Contrary to the case advanced for the applicant, it was submitted that the evidence demonstrated no relevant lack of experience by the applicant, no lack of co-operation being afforded to him by the respondents, and no unfairness in the agreement reached. Even if the view were reached that the representations alleged had been made, they could not sit consistently with the written contract which the parties later entered. The variations sought to that contract were such as to make the contract a nonsense. 105 There was no evidence which would permit the Court to form any views favourable to the applicant, given the general, scanty and unreliable evidence which he advanced, contrasted with the documentary evidence led against him, all of which suggested that the claims advanced had no foundation. 106 The applicant had failed to establish what his costs of the project were. Even if the costs were more than the original estimates, a basis for relief would not thereby be established. Relief depended upon the Court reaching the conclusion that a costs plus contract had been agreed. On the evidence no such conclusion was available. On the case advanced, the relief sought was a contract which on its terms would encourage the applicant to increase the costs he incurred, thereby improving the return which he himself derived. On the evidence such orders would not do justice between the parties. 107 It was further submitted that there had been no attempt by the applicant to analyse what had been demonstrated by way of cost or to address the Court on how, in those circumstances, the relief sought could flow as a matter of justice between the parties. Indeed, the case as opened and how it developed in relation to these aspects were inconsistent, unsurprisingly given the way the Green Book was introduced into evidence, over the objection of the respondents. 108 While the case as opened suggested that certain costs had been incurred, it appeared that the claim also encompassed unquantified amounts alleged to be outstanding to unidentified subcontractors. In reality what was sought was financial salvation for the applicant's own commercial misjudgements, if indeed losses had been incurred. The financial evidence was simply hopeless, without either credible evidence in chief on that question, or any accounting evidence, despite the advice which the applicant had allegedly taken. 109 The applicant had proved no losses at all, only that his records were entirely in disarray. The Court was asked to conclude that large losses had been incurred, when no reliable way of measuring whether there had been any losses was presented. Relief based upon the assertions made would be simply speculative and unsafe. Such relief was discretionary and would not be exercised in circumstances where the applicant, being unable to advance a building claim in the District or Supreme Courts, where extensive practice directions applied to given how such cases were brought, had instead pursued an unsubstantiated case before this Court, in order to avoid the requirements of such directions, which he could not meet. 110 A dismissal of the claim and a costs order on an indemnity basis were sought, at least as to some of the respondents' costs was sought. 111 As to the idea that the contract could be found unfair, but no monetary orders made, it was submitted that this was a course not properly available. The applicant having made the claim and having failed to provide it, the only just result was for the claim to be dismissed. 112 In reply, it was argued by Mr Moore that the claim sought no blank cheque in favour of the applicant. All that was sought was the variation of a standard lump sum contract in one particular way, so as to remove the fixed sum of $520,000 and insert a cost plus 10% provision. That would permit all the work to be costed in the same way as variations were costed under the contract. 113 It was further submitted that there was no allegation that the applicant had worked in an unworkmanlike manner and no evidence that money paid to him had not been expended on the project or not expended properly. There was a question as to the form of the orders to be made, in order to be effective as between the parties, particularly if there was a concern about payments to third parties, which were outstanding. That could be accommodated by payments in favour of Mr Batshon not being required until there was a claim against him for such payments. It was submitted that such an approach would address any concern that Mr Batshon might otherwise make a windfall profit. I note, however, that no such alternative orders were formulated, for the Court's consideration. 114 As to the written contract, it was submitted that it was not unusual for claims to be advanced under s106, because the contract failed to reflect representations which had been made. The Court had a discretion in such circumstances, to vary the contract in question. That this claim involved a building contract, made no relevant difference. 115 As to whether the evidence as to costs was satisfactory, that was a matter for the Court. If Mr Batshon was accepted as a witness of truth, the case he advanced in relation to costs could also be accepted. 116 Here, what was claimed was not a guarantee of success from the respondents, but the determination of the moral obligations as between the parties. It would be inequitable to bind Mr Batshon to his contract, because it was in essence different to what the parties had agreed. If inequity was found, the Court had a discretion to remedy the deficiency. Consideration 117 In this judgment, I have gone to some trouble to set out the evidence led in the case, and the difficulties to which it gave rise. Given the evidence led by the applicant, this is a case where a question arises as to why this case was brought at all, let alone pursuant to s106 of the Act. 118 The application squarely raises for consideration the observations of Sheldon J in Davies & Anor v General Transport Development Pty Ltd & Ors [1967] AR (NSW) 371 at pp374-5: 'On the other hand, the fact that the Commission has been given such massive power makes it imperative that it should be exercised with proper restraint. In particular, when issues arise under (a) or (b), it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. In my opinion, the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes. Of course, under (d) or (e), action may be required even when there is no moral distinction between the parties because there the Commission is enforcing more directly an explicit public policy.' 119 In this case, the unavoidable conclusion on the evidence was that Mr Batshon's claim as to a cost plus 10% margin agreement having been reached, must be rejected. The parties had agreed on a fixed price contract in the sum of $520,000, plus agreed variations which carried a 10% margin, not a cost plus contract. 120 There were allegations made that the respondents' conduct was unfair and necessary co-operation was not afforded to Mr Batshon. There was, however, evidence of significant co-operation being afforded to him, including in relation to his costs overrun. When problems were encountered by Mr Batshon, Sitehope offered to restore the contract price to that originally tendered - $532,000 and to consider an additional payment for rock excavations. A further offer of payment of half Mr Batshon's costs overrun, when quantified as $92,000, subject to demonstration that the costs had been incurred, was also made. None of this evidence can be seen as demonstrating that Mr Batshon was a victim of the respondents' wrongdoing. Indeed, on the evidence, so far as Mrs Moschella was concerned, it is impossible to understand how she could have been thought to have any personal responsibility for what was here alleged to have occurred, given her limited involvement in the parties' dealings with each other. 121 While Mr Batshon's evidence as to the question of what margin he originally built into his original tender was less than clear, it might be assumed that, at the least, the tender of $532,000 included some $53,000 as a builder's margin. The parties' agreement plainly had the effect of reducing the applicant's builder's margin by $12,000 to $41,000. It follows that the applicant was content with that reduced amount of profit on this project, which he estimated would take some 6 months to complete, but for the later cost overrun. That Mr Batshon, an experienced structural engineer, was happy to accept such a reduced profit margin in circumstances where he was hoping to break into a new area in his building business and to develop a relationship with Mr Migliorino, was an entirely understandable approach for a business man to take, but cannot now provide a proper basis for relief under the section. 122 The effect of the applicant's claim in these proceedings is that the basis of the whole arrangement between the parties should be altered by the Court, to one whereby, rather than the risk of the project being born by Mr Batshon, it should be born by the respondents. On the evidence, this claim was advanced because Mr Batshon was unable to control what he spent on the project. Mr Batshon's accounts and his understanding of what he had spent on the project were so disorganised, that no real attempt was made to lead cogent evidence about the actual costs and expenditure, by way of comparison to his estimates in his case in chief. It was plainly impossible for Mr Batshon to prove the case which he brought, that costs greater than what he had been paid had been expended on the project, given the state of his records. On any view, the evidence led as to those matters could not provide a proper basis for any discretion to be exercised in favour of Mr Batshon, even were it possible to conclude that the contract and arrangements in question were relevantly unfair. 123 In a case such as this, the recording of various amounts in a book kept by the applicant, as to the expenses incurred in his business, without anything else put to support the conclusion that the sums there set out had in fact been incurred, let alone paid, or that they related to the building project in question, could not provide a sufficient basis upon which a view could be formed in favour of the applicant. No evidence was led even from the applicant himself as to what the various items recorded in the Green Book related to, let alone evidence such as the relevant banking records or tax payments. That difficulty had an immediate and obvious consequence for the claim advanced. That is, that the claim that some $347,000 was expended on this project by the applicant, the third category of expenses identified by reference to the Scott Schedule could not be established. 124 Nor was the material on which reliance was placed as proving the second category of expenses identified by Mr Moore put into evidence, that is the invoices which established that these sums had been incurred, even if the invoices did not identify that they related to this project. Nor was there evidence led as to payment of these invoices. Mr Batshon did not give any evidence about this category of the expenses and he was not cross examined as to them. It, again, follows that no evidentiary basis was established for the conclusion that a further sum of some $70,000 was expended on this project. 125 The result was that the only expenses which could be accepted were incurred by Mr Batshon on this project, were those falling into the first category identified, in the sum of $153,000. The respondents accepted that proof of that expenditure existed in relation to this project. This situation provided a serious and obvious difficulty for the applicant in the case advanced, given that he had already received payment from Sitehope of some $467,384.00 under the contract. 126 The resulting position was that even if it could be concluded that the contract was unfair, no order for money relief could flow. The Court could not speculate about such matters. While it was submitted in closing, by Mr Moore, that if the Court were not satisfied that such expenses had been incurred the contract could be varied and the applicant left to pursue monetary relief in another court, it is obvious that such an approach would be entirely inappropriate. The claim, having been advanced by the applicant in relation to alleged costs which were not made out on the evidence, must be dismissed. It would simply not be open as a matter of justice between the parties, the applicant having failed to prove his costs, for the respondents to be placed in a position where they had to face the prospect of the identical claim being advanced against them in another court. 127 As earlier noted, I found Mr Batshon's evidence on a number of important matters, to be contradictory and unreliable. I was simply unable to prefer his evidence on matters of conflict, including in relation to the crucial question of whether the alleged representations as to a cost plus contract were made. Mr Batshon's evidence conflicted in crucial respects, not only with that of all of the other witnesses, but also with the documentary material which touched on the matters in issue, including even the documents which he had himself produced, or which were produced by his lawyers, presumably in accordance with his own instructions. 128 It follows that there was simply no basis established upon which it could here be concluded that Mr Batshon was the victim of any wrongdoing by the respondents. He was not only a licensed builder, but also a structural engineer. It was impossible, on the evidence, to form any conclusion favourable to Mr Batshon, which would lead to the view that there was any inequality in the parties' bargaining position or that the respondents' had unfairly used to their advantage, a position of superiority which they enjoyed over Mr Batshon. 129 Section 106 of the Act is not designed to shield persons from the consequences of their own mistakes, or to require other contracting parties to act as guarantors for those who, in retrospect, have made a bad bargain. (See the discussion by the Commission in Court Session in Autobake Pty Ltd v Budd & Anor (1986) 19 IR 18 at pp29-30). A person like Mr Batshon, who goes into business for himself in an occupation such as that of a builder and who, either as the result of his inexperience, error, incompetence, negligence, or bad luck, suffers losses in that business, cannot expect this Court to require those with whom he has dealt, such as architects and landowners, to make good his losses, when no wrongdoing has been proven on their part. Such circumstances do not provide a proper basis for a finding of unfairness in the contract here in question, nor any order in favour of the applicant, so as to achieve justice between the parties. 130 It is, of course, not only the conduct of the respondents in a case such as this which arises for consideration, but also that of the applicant. On Mr Batshon's evidence this was the first job of this size which he had undertaken as a builder. On his evidence, he was anxious to secure the contract and content to reduce what he might otherwise have made on the job, because he was keen to establish a good relationship with Mr Migliorino, who had promised him further work, if this job went well. 131 There was no reason to doubt that had such an offer been made by Mr Migliorino, it would have been given effect, if the work had been satisfactory. It was, after all, Mr Migliorino who had recommended the applicant's tender to Sitehope, because he had been happy with the work Mr Batshon had done as a structural engineer. On the evidence the difficulties which arose between the parties here was as the result of Mr Batshon's financial difficulties and not because of any difficulty or antagonism between Mr Batshon and Mr Migliorino. The evidence suggested that Mr Batshon's claims were attended to promptly by Mr Migliorino, that until the final breakdown of the relationship their communications were generally courteous and that when difficulties arose, Mr Migliorino endeavoured to assist Mr Batshon, as far as he was able to do so, consistent with his obligations to Sitehope. For example, Mr Migliorino arranged for progress payments to be made fortnightly, paid subcontractors direct when there were problems in Mr Batshon doing so, extended the time for completion when wet weather claims were advanced and even acted as a 'go between' in the discussions between Mr Batshon and Sitehope in negotiations for an ex gratia payment, in the light of the cost overrun. That discussion led to the offer to reinstate the original tender price and to make the other payments earlier referred to. 132 While there was evidence that there were delays in the work as the result of rain, there was no evidence from which it can be concluded that the extensions granted in respect of such rain did not properly reflect the claim made, having regard to the weather. The progress payments claimed by Mr Batshon from time to time foreshadowed that further time would be claimed having regard to weather and difficulties caused by the respondents being slow to make selections as to various items. Such claims were, however, not put forward. To the contrary, by the time the default notice was issued, Mr Batshon's financial difficulties appear to have caused the work to largely come to a halt, with little prospect of resumption, given his stated financial difficulties. 133 At that time, Mr Batshon was seemingly unable to progress the work, without an injection of funds from Sitehope. Such assistance was not rejected out of hand, but rather, unsurprisingly, given the ever increasing size of the claims being advanced day by day, it wanted some assurance that the work would be completed if money were advanced, and some evidence of costs which Mr Batshon had incurred on the project, and what costs were involved relation to what was left outstanding to be done. On the evidence, despite seeking the assistance of accountants and lawyers, Mr Batshon was never able to provide such information, not even in these proceedings. 134 While it was submitted for the applicant that it would be concluded that Sitehope had not validly terminated the contract, that is a conclusion which, in my view, is not properly open on all of the evidence. 135 The answer to Mr Batshon's difficulties appear to lie with his inadequate record keeping, still not rectified in any intelligible fashion, even during these proceedings. Even if it could have been concluded that a cost plus contract had been agreed, in order for the view to be reached that this contract was unfair, it required the Court to have some real understanding of what costing the tender was based on, what the money advanced to Mr Batshon was spent on, what remained owing to subcontractors and suppliers and what was included in his estimates of what the completion of the contract would involve. 136 While it might be said that something relevant could be gleaned from the fact that Sitehope had to pay another builder over $200,000 in order to finish the work which still remained and that over $460,000 had been paid to Mr Batshon, this did not throw any light on what costs Mr Batshon had incurred on the project to the point he had left it and what he had done with the money paid to him in respect of that work already done. After all, Mr Migliorino had dealt with all progress claims made to that point which had been paid, except for one claim then rejected in the order of $19,000. Even this claim was not proven on the case here advanced. 137 On the evidence and the case here advanced the only proper conclusion available is that the claim must be dismissed with costs. Orders 1. For all these reasons, I order that the application be dismissed. 2. The parties have liberty to approach within 28 days in relation to the appropriate order for costs, if they are unable to agree on that matter. ------------------------ 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. 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