TRIMIS & ANOR v MINA [1999] NSWCA 140

New South Wales Court of Appeal CITATION : TRIMIS & ANOR v MINA [1999] NSWCA 140 revised - 02/06/99 FILE NUMBER(S) : CA 40164/98 HEARING DATE(S) : 17 March 1999 JUDGMENT DATE : 18 May 1999

PARTIES : Sofoclis TRIMIS & Anor v Nazih MINA JUDGMENT OF : Mason P at 1; Priestley JA at 78; Handley JA at 79

LOWER COURT JURISDICTION : District Court LOWER COURT FILE NUMBER(S) : DC 7949/94 LOWER COURT JUDICIAL OFFICER : George ADCJ

COUNSEL : T G R Parker (Appellant) M Galvin (Respondent) SOLICITORS : Coustas & Co (Appellant) Elias Gates & Associates (Respondent) CATCHWORDS : CONTRACT - Building work - repudiation - attempt to rely on alternative justification; CONTRACT - unwritten variations - when restitutionary claim open; CONTRACT - measure of damages - builder wrongfully excluded Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221 CASES CITED: Update Constructions Pty Ltd v Rozelle Child Care Centre Limited (1990) 20 NSWLR 251 Liebe v Molloy (1906) 4 CLR 347 DECISION : Allowed in part

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40164/98 DC 7949/94 MASON P PRIESTLEY JA HANDLEY JA

Tuesday 18 May 1999

SOFOCLIS TRIMIS & ANOR v NAZIH MINA

JUDGMENT

1 MASON P: The appellants Mr and Mrs Trimis ("the owners") owned land at Bankstown which they wished to develop. Plans for six cluster homes were approved by Bankstown City Council. Four houses were built by another builder. 2 The respondent Mr Mina ("the builder") is a structural engineer who was carrying on business as a builder. He quoted for the remaining work. 3 On 16 November 1993 the parties executed their contract. They used Building Agreement Edition 8 (amended) issued by the Housing Industry Association, deleting particular provisions. The contract price was $155,300. The deposit was 5%. Clause 7 when read with schedule 11 required "progress payments" to be made at eight stages of the building work, these payments being due within 10 days of the builder notifying the owners of each event nominated in the schedule having occurred. A final payment of $3,800 was due on practical completion. 4 Clause 4 (when read with schedule 10) required the builder to proceed diligently with the works and to complete them within 18 weeks from the date of the contract. Provision was made for extending the time for completion on various contingencies (cl 4(c)). 5 The deposit of $7825 was paid. Between November 1993 and February 1994 the first four stages of construction were undertaken and paid for as follows: 1. Footing poured $17,000 2. Slab work $30,000 3. Timber framing and roof tiling $32,000 4. External brickwork $15,000. 6 The fifth stage ($15,000) was for gyprock and joinery work, and the sixth ($12,000) was for painting and tiling, kitchens and other PCs. 7 On 16 March 1994 the builder submitted his claim for payment of the sixth (sic) progress claim seeking $15,000 "for gyprock, 90% of joinery and 30% of paint and some PC items". This claim was not paid. 8 By this stage of the work it was apparent that there had been some departure from the plans. In particular, in the upstairs area of unit 1 a bedroom was built smaller than shown on the plans, with the result that a walk-in wardrobe was narrower and a ledge (not shown on the plans) appeared next to the stop of the stairwell. Other departures or additional work were the subject of unresolved disputes for extra payments. 9 Relations between the parties quickly soured. The owners were unhappy with the work. And the builder was not paid the moneys he claimed for work done, some at least of which was not apparently the subject of dispute. 10 In the court below it was found that on about 23 March 1994 the owner Mr Trimis effectively excluded the builder from the site and took the keys to the building. He said that he did this in the mistaken understanding that 23 March 1994 was the date for practical completion and that that stage had not been achieved. He apparently acted on the advice of the solicitors who were then retained by him. This conduct was held to constitute a repudiation of the contract by the owners. Despite the absence of a finding that the repudiation had been accepted by the builder, George ADCJ held that the owners' repudiation in March 1994 meant that the builder's claims pursuant to contract succeeded. 11 On appeal, the owners challenge the finding of repudiation on 23 March 1994 on various grounds. They also challenge the legal consequence attributed to that finding. I shall return to these issues. 12 Towards the end of March the builder received a letter from Jordan Antonopoulos & Co, the then solicitors for the owners. The letter cannot be located. It is apparent that the letter complained on the owners' behalf of various defects (cf Blue AB 57). On 30 March 1994 the builder responded. Among other things he complained that Mr Trimis was refusing (with the concurrence of Mr Antonopoulos) to give him the site keys. The builder expressed concern for the safety of building material locked within the site and threatened legal action (Blue AB 55). He pressed his claim for the $15,000 progress payment for gyprock and joinery together with a number of extras detailed in the letter. The total sum claimed was $24,800. 13 The builder arranged for his solicitor, Elias Gates & Associates to write to the owners' solicitor on 28 March 1994. The letter is not in evidence, but it is obvious that it followed the theme of the builder's earlier letter. The solicitor's letter responded item by item to the owners' Notice to Builder asserting either that the work had been carried out consistently with the drawings or that the item was not a responsibility of the builder. The letter concluded in the following terms: We further note that our client has a great deal of materials, plans and equipment on the site to which your client has refused access and we hold your client responsible for any damage or losses incurred. Accordingly, would you kindly obtain your client's urgent instructions to resolve this matter for our client to receive the progress payment and subsequently to be allowed on the site to complete the works as contracted. 14 It is apparent that the owners had previously served a Notice to Builder raising 11 items of complaint about the building work. 15 After two further letters from the builder's solicitor (dated 12 and 14 April) urging a response, the owners' solicitor replied on 14 April 1994. The owners' solicitor responded to various points made in the earlier letter in which the builder's solicitor had justified his position. The detail of the response does not matter except that it contains no suggestion that the contract had gone off by this stage. Indeed, the letter is eloquent of the contract remaining on foot. It was denied that the owners had ever locked the builder out of the premises or denied him access. "The builder is welcome to attend and rectify all outstanding items and defective work. Our client would be most willing for your client to attend to continue the work." 16 Under cover of the letter of 14 April 1994 the owners served a further Notice to Builder. Invoking cl 14(c)(aa) of the Building Agreement, the owners notified the builder of 14 items of defective work which they required to be remedied within 14 days. 17 Clause 14(c) of the Agreement permitted such a notice in the event that the builder failed to proceed with the works with due diligence and in a competent and workmanlike manner. Clause 14(c)(aa) provided that, in the event of default continuing for more than 14 days after service of a notice, the owner could serve a Notice of Determination and thereafter engage another builder to complete the work with the right to include the cost of completion of the works by the other builder in the final claim between the parties. 18 It is not suggested that any Notice of Determination deriving force from cl 14(c) was served at any time thereafter. Indeed, the Notice to Builder served by the owners on 14 April 1994 was deficient in that it did not contain a provision that stipulated that the agreement may be determined if such default was not rectified within the space of 14 days (cf cl 14(c)(aa)). 19 On 27 April 1994 the owners lodged a complaint with the Building Services Corporation. That body had authority pursuant to what is now known as the Home Building Act 1989 ("the 1989 Act") to investigate complaints and issue rectification orders (s59) and to take disciplinary action against recalcitrant licensed builders (ss 63ff). The owners' complaint listed 27 items, made up of the 23 items listed in the notice of 14 April 1994 plus four further items. 20 The complaint was handled initially by Mr Thorburn at the Building Services Corporation. On 13 May 1994 he issued a Rectification Order requiring the builder to rectify four of the items in the complaint, being items of defective or incomplete work (Blue AB 94, 95). A note stated that the remaining items were "considered incomplete work and/or not justified items of complaint, considering the owner provided the design". 21 The owners arranged for the work to be inspected on 20 May by Mr Zervos, a building consultant. His report (Blue AB 96-102) addressed 30 items, finding fault (with the builder) in most items and recommending action for the majority of them. He expressed the opinion that a number of the faults/discrepancies were consistent with lack of adequate supervision. His advice was that the builder should be notified to make good all rectification work required; and that if he did not comply within the nominated period then the Building Services Corporation should be notified for it to advise on the appropriate action to be taken (AB 102). 22 A copy of the report was sent to the builder's solicitor and passed on to the builder on about 26 May 1994. The Court was not referred to any evidence of the circumstances in which the report was sent to the builder's solicitor or the demands which accompanied it. What is clear is that the defects noted by Mr Zervos were not made the subject of a fresh Notice pursuant to clause 14(c) of the Building Agreement. 23 Instead, the owners obviously took Mr Zervos' advice and went back to the Building Services Corporation. The matter was now being handled by Mr Willis, who inspected the site on 29 June 1994 and reviewed Mr Zervos' report. On 20 July 1994 the Corporation issued a further Rectification Order under Mr Willis' hand (Blue AB 74-5). This called for seven items of work to be attended to. 24 Mr Willis did not include every item of Mr Zervos' report in his Rectification Order. It is obvious that Mr Willis did not agree with Mr Zervos in every respect (see Blue AB 189-192). For a number of items he recorded in his inspector's report that Mr Zervos' complaint was "unjustified" or "unjust." for various reasons, including the fact that the builder had built in accordance with the plan or that the plan contained no relevant measurement. 25 It is apparent that Mr Willis conducted his inspection in the presence of the builder and the owners, or at least Mr Trimis. In his inspector's report (Blue AB 191S) and in a written advice provided to the owner (Blue AB 76), he recorded matters in which the parties apparently reached agreement as regards minor aspects of the outstanding work. 26 This material means that I cannot accept the submission of the appellants that Mr Willis approached his task fettered in some way by the approach taken by his predecessor Mr Thorburn, or that Mr Willis otherwise restricted his examination to any particular categories of defective or incomplete work. Nor can I accept the submission that the builder's subsequent conduct in addressing only the seven items scheduled in Mr Willis' Rectification Order was clear evidence of some repudiatory approach to the Building Agreement or wilful non-performance of items identified by Mr Zervos and accepted by the builder as breaches of contract. 27 Correspondence in May and June indicates that the parties were still squabbling about access to the site. It is apparent that the builder was given at least limited access, although there were complaints from him about his capacity to respond to the Rectification Orders because of denial of access. (Each order was made subject to the owners allowing access to the subject premises.) But whether access was given freely or grudgingly, it appears to be the fact that all items notified in the Rectification Orders were attended to by the builder with the exception of one item of plumbing work notified in the second Order. That Order directed the work to be done by 12 August 1994 (subject of course to site access). On 15 August 1994 the builder wrote to Mr Trimis stating that he had attended to all items listed in Mr Willis' Order except the plumbing matter. The problem was that the plumber's son was sick. The builder made it plain that this work would be attended to as soon as he recovered health. 28 Although, as indicated, 12 August 1994 was the date fixed for completion of work in the second Rectification Order, the owners' solicitor wrote to the builder's solicitor on 9 August 1994 purporting to terminate the Building Agreement (Blue AB 111). The letter asserted that the builder had repudiated his obligation under the contract and that this repudiation was "apparent" from an ordinary Statement of Claim that the builder had issued against the owners in the Local Court at Bankstown on 15 July 1994. That Statement of Claim sought to recover $40,000, being the maximum sum permitted to be claimed in proceedings in the Local Court. (The moneys were claimed with respect to 14 items totalling $46,650). 29 The assertion in the letter dated 9 August 1994 from Jordan Antonopoulos & Co (the owners' then solicitor) that the Statement of Claim evinced an intention to repudiate the contract is, to say the least, a surprising one. Notwithstanding a claim that included one item for lost profit (item xiv) stemming from the builder being locked out of the site since 15 March 1994 (Red AB 4), the Statement of Claim does not purport to bring the contract to an end on the builder's part. On appeal, the owners did not challenge the finding of repudiation in August, but they sought to justify their conduct on an alternative basis. 30 In the court below it was found that the owners were not justified in terminating the contract on 9 August 1994 and that their purported termination that day was itself a repudiation. And, as with the earlier finding of repudiation in relation to the taking of the keys incident, it was found that "it therefore follows that in respect of claims made pursuant to contract, the plaintiff must succeed". 31 This conclusion and at least some of the findings of fact upon which it was based are challenged on appeal by the owners. 32 On 15 August 1994 the builder was on site with Mr Willis and Mr Trimis. Mr Trimis handed him a copy of his solicitor's letter of termination dated 9 August 1994. The builder noticed that Mr Trimis had a new builder on site. Four days later he drove past the site and noticed that there were plumbers and electricians present. He stopped and had a conversation with the new builder (Blue AB 12). It is clear from these events that the owners were now evincing an unconditional determination to put an end to the contract. In a letter to Mr Willis dated 15 August 1994, the builder acknowledged that he had no more access to the site (Blue AB 77). 33 The builder's proceedings in the Local Court were defended by the owners. In 1995 they were removed into the District Court and the owners were given leave to file a cross-claim. Subsequently the builder's Statement of Claim was amended by adding as par 8 a claim that the owners had wrongfully terminated the agreement on or about 9 August 1994. That assertion was coupled with a claim by the builder in quantum meruit "for work done and material supplied together with the delay, costs and loss of profits referred to" in the Statement of Claim as amended (Red AB 4). One such amendment was a claim for $19,800 being money stemming from the builder's lost opportunity to obtain work on another project by reason of delay caused by the dispute (item xv, particular (b) (Red AB 4). 34 In their cross-claim the owners pleaded that they had given notice of termination of the contract on or about 9 August 1994. They claimed damages consequent upon the builder's breaches of contract that led to that termination. 35 The trial took place before George ADCJ over seven days in 1997 and 1998. His Honour awarded judgment in favour of the builder on his claim. The owners' cross-claim was dismissed. The sum awarded to the builder was $50,720.83 inclusive of interest. Costs followed the event. 36 The key findings were as follows: (a) Taking account of extensions of time due to the builder, the date on which practical completion should have taken place was 1 August 1994; (b) The conduct of the owners, who on 23 March 1994 effectively excluded the builder from the site by taking the keys of the building: (i) constituted a repudiation of the contract; and (ii) triggered the operation of cl 6(d)(ii) of the Building Agreement which provided: If the Owner without the consent of the Builder shall prior to Practical Completion enter into occupation (actual or constructive) or take control of the Works or prevent or inhibit the Builder by any means whatsoever from executing the Works, such entry, taking control, prevention or inhibition shall, unless this Agreement has previously been determined, be deemed an acknowledgment by the Owner that the Works to such date executed by the Builder have been carried out and completed in a proper and workmanlike manner and in accordance with the Plans and Specifications and shall be deemed to be practically complete. (c) Because of cl 6(d)(ii), the works were deemed practically complete and to have been completed in a proper and workmanlike manner and in accordance with the plans and specifications. (d) Notwithstanding that the owners acted in good faith and in reliance upon the advice of their former solicitors, their conduct in (i) taking the keys on 23 March 1994; and (ii) terminating the contract on 9 August 1994 was a repudiation of the contract. (e) The consequence of either or both of these repudiations was that "in respect of claims made pursuant to contract the plaintiff must succeed". (f) As to the variations to the contract claimed by the builder, notwithstanding that they were not evidenced in writing signed by the owner and the builder as required by cl 9 of the Agreement, and notwithstanding s6 of the 1989 Act, it was held to be open to the builder to sue upon a quantum meruit (Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221). The builder was entitled to recover with respect to items (i), (ii), (iii), (v), (vi) as claimed in par 5 of the Amended Ordinary Statement of Claim. These had been costed at 1996 rates, but each costing was allowed with no provision for intervening interest, in order to adjust for 1993 and 1994 prices. (g) The builder's claims for unpaid contract work completed (including prime cost items) were allowed, with interest. (h) The builder's claims for loss of profit that he was prevented from making due to the owners' repudiation (item xiv) was allowed with interest. This head of damages is subject to appeal, and I shall return to it. 37 George ADCJ then addressed the owners' cross claim. He held that: (a) That part of the cross-claim seeking compensation for additional holding costs due to the delay in completion of the works by the builder failed because the contract was repudiated by the owners either on 23 March 1994 or 9 August 1994. (b) The cross-claim for damages in respect of defective work was held to be precluded by the owners' repudiation. Alternatively, the claim was precluded by cl 6(d)(ii) (supra) on the basis that the clause effectively deemed any work executed prior to 23 March 1994 to have been carried out in compliance with the contract. (c) Nevertheless the claims for damages for defective work appear to have been addressed on their merits (RB 29-30). In particular: (i) The owners were held to have abdicated any choice of dictating how such works were to be carried out by leaving the correction of errors in the drawings to the discretion of the builder…. It … seems to me that all the builder can do in such circumstances is not depart materially from the intent of the drawings and to do the best that he can to fit in the facilities that are required. In my judgment the builder has done this in respect of unit one. (ii) The allegation that unit two had been constructed smaller than as shown on the drawings was rejected on the basis that the builder was instructed to depart from the dimensions in the drawings, and to build unit two as a replica of unit three. This was done. Who repudiated the contract? 38 This was the principal issue joined in the appeal. 39 The owners submitted that the taking back of the keys on 23 March 1994 did not constitute a repudiation on their part. It was argued that the keys were taken for the purpose of interim security and not in such circumstances as to evince an intention by the owners to exclude the builder unconditionally. They submitted that the builder's rights were, by the express terms of cl 14 of the Agreement, confined to the right to suspend the Works and to issue a Notice calling for rectification of the owners' breach within 14 days. No such Notice was ever issued by the builder. 40 In my view, the facts found by the trial judge support the conclusion that the owners breached the contract in taking the keys on 23 March 1994 and thereafter interfering in various ways with the builder's access to the site. But it is unnecessary to determine whether this was a repudiation, because it was not treated as such by the builder (at least in the sense of discharging the builder from his obligations under the contract). After 23 March the builder did work referable to the contract, albeit that at least some of it was done under threat of action by the Building Services Corporation. 41 But no similar doubt attends the events following 9 August 1994. The owners took steps, for which no justification existed under the contract, to exclude the builder summarily from the site. The letter of 9 August 1994 was clear in its terms, and the arrival of a new builder at the owners' invitation evinced the clearest intention to bring the contract to an end. If, and I repeat if, the owners were under a misapprehension about their legal rights, that did not deny their words and conduct that note of finality and certainty sufficient to evince an unconditional intent to abandon performance on their part. 42 I do not understand this proposition to be disputed by the owners. They seek, however, to justify their actions by reference to the principle established in Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359. That case "stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance" (Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 262 per Mason CJ). There are exceptions to the Shepherd principle (see Carter and Harland, Contract Law in Australia 3rd ed at [1969]). 43 The owners submit that as at 9 August 1994 they were entitled to terminate the contract because the builder had not fully rectified the defective work identified in the Notice issued on 14 April 1994 and detailed in the Zervos report. 44 This contention fails on a number of bases. The Notice of 14 April did not satisfy the requirements of cl 14(c)(aa) because it did not threaten termination if the builder's default was not rectified within 14 days. It did not purport to make time of the essence. It was overtaken by the events involving the Builders' Services Corporation in which the owners played their own part. The owners did not establish that any aspect of the Notice of 14 April or the Zervos report that was unperformed by the builder constituted a breach of contract. And they certainly did not show that the builder's conduct evinced an intention to abandon the contract on his part. In part at least, the owners impeded the builder in completing items of defective work because of the stand-off over access following 23 March 1994. 45 The owners repudiated the contract and that repudiation was accepted by the builder on about 15 August 1994. Measure of the builder's contractual damages 46 Alternatively, the owners submit that there was no evidence of the damages stemming from the owners' breach and repudiation, and that damages were assessed on an incorrect basis. 47 It is submitted by the owners that the whole measure of the builder's damages should have been assessed as on a repudiation. The task is to put the builder in the same position he would have been in had he completed the whole job. The consequence is said to be that the Court was obliged to take the total of the instalment payments actually received; then subtract the cost of the work to the point of termination; then add the balance of the purchase price; then subtract the cost of completing the work in accordance with the contract. The result would represent the profit the builder would have made had he completed the work. Instead of this approach, the builder's claim was effectively divided into parts. The work done was paid for at contractual rates, and damages for loss of profits were awarded with respect to that part of the work which the builder was prevented from doing by reason of the owners' repudiation. 48 In the owners' submission, this approach effectively treats each stage as an independent contract, with the progress payment relating to that milestone as the contract price. It is submitted that this is incorrect as a matter of legal analysis because the instalment payment may not necessarily reflect the value and cost of the work done for the stage of the project to which it relates. The consequence is, in the owners' submission, that even if the owners repudiated the contract, the builder has not proved his damage on the contractual aspects of his claim. The owners seek to have the relevant parts of the judgment set aside (these are identified as pars 1(e), (f), (g) and (h): see Red AB 33-4). 49 In my view, there was no error of principle in the way that the trial judge approached the issue of contractual damages. He was not bound to assess damages in the manner asserted by the appellants. The method chosen represented an available path to the goal of placing the builder in the position he would have been had it not been for the owners' accepted repudiation. 50 There was no evidence to suggest that the contract had been arranged in such way as to give the builder all of his profit at any particular stage. The agreed progress payments are capable of providing evidence of the common agreement of the parties as to the value to each party of each stage. I see no reason why work performed should not be paid for at agreed contractual rates with the lost profit on the unperformed work confined to that component. This does not involve segregating the contract. Nor does it depart from the requirement to approach the matter with the aim of putting the innocent party (in this case the builder) in the position he would have been had the contract been performed. The propriety of approaching contractual damages in this way is supported by McGregor on Damages 16th ed §1155. Variations 51 George ADCJ found for the builder on five of the variations which he claimed (items (i), (ii), (iii), (v) and (vi)). Because of the absence of writing, these claims were not allowed as variations of contract (see cl 9 and s6 of the 1989 Act). Rather the judgment was based upon restitutionary principles in accordance with Pavey & Matthews. 52 The owners submit it was not open to the builder to sue off or outside the contract in restitution with respect to the variations not evidenced in writing. Reliance was placed upon the remarks of Priestley JA in Update Constructions Pty Limited v Rozelle Child Care Centre Limited (1990) 20 NSWLR 251 at 271-5. Alternatively, it was submitted that there should have been no award for these components because the finding that Mr Trimis was aware of the work being carried out was not sufficient to sustain the restitutionary claim. What was lacking, it was contended, was a finding that the owners had agreed to pay extra for the work (cf Liebe v Molloy (1906) 4 CLR 347 at 354). 53 There was a conflict of evidence, with the builder saying that Mr Trimis had agreed orally to the variations, but Mr Trimis saying that he had done so on the basis that there would be no additional cost. The trial judge did not refer to or seek to resolve this conflict of evidence. 54 The starting point is a fundamental one in relation to restitutionary claims, especially claims for work done or goods supplied. No action can be brought for restitution while an inconsistent contractual promise subsists between the parties in relation to the subject matter of the claim. This is not a remnant of the now discarded implied contract theory of restitution. The proposition is not based on the inability to imply a contract, but on the fact that the benefit provided by the plaintiff to the defendant was rendered in the performance of a valid legal duty. Restitution respects the sanctity of the transaction, and the subsisting contractual regime chosen by the parties as the framework for settling disputes. This ensures that the law does not countenance two conflicting sets of legal obligations subsisting concurrently. As Deane J explained in the context of the quantum meruit claim in Pavey & Matthews (at 256), if there is a valid and enforceable agreement governing the claimant's right to payment, there is "neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration". See also Update Constructions at 275n; Ansett Transport Industries (Operations) Pty Ltd v Alenia Aeritalia & Selenia Spa (1991) 105 FLR 169; Brenner v First Artists Management Pty Ltd [1993] 2 VR 221. This principle is applicable to other restitutionary claims (see, eg Foran v Wight (1989) 168 CLR 385 at 413, 432; Baltic Shipping Co v Dillon (The Mikhail Lermontov) (1993) 176 CLR 344 at 355-6, 385). 55 Unlike the situation in Pavey & Matthews, the building contract in the present case was in writing and enforceable. The builder was entitled to sue under it for damages. And the owners were entitled to invoke its terms, notwithstanding the builder's termination for repudiation, in relation to rights "unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected" (McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477 per Dixon J). This basal principle was overlooked by the trial judge insofar as he held that the owners' repudiation meant that its cross claim for damages for additional holding costs due to delay in completion of the works by the builders necessarily failed (par 37(a) and (b) above). Termination for breach or repudiation does not divest the party in breach of rights accrued unconditionally before termination (see eg Elkhoury v Farrow Mortgage Services Pty Ltd (1993) 114 ALR 541). 56 Parties to a contract may so frame their agreement that it does not encompass the whole of their business relations. Thus, a contract for work may not preclude a claim for additional work, under an implied contract or on a restitutionary basis, where the additional work is done "outside the contract" and in circumstances where the law would recognise a contract to pay for it or impose a restitutionary obligation to similar effect. But merely because the work differs from that contracted for will not suffice, even if delivered to the plaintiff or performed upon the plaintiff's land (see Liebe v Molloy (1906) 4 CLR 347 at 353-5; Steele v Tardiani (1946) 72 CLR 386 at 402). Exactly what extra must be demonstrated before a restitutionary claim will lie is a matter of some controversy. Different positions are adopted depending on how essential one regards the need for the defendant's "benefit" to be established as an element in a restitutionary cause of action. 57 This Court addressed these issues in the present context in Update Constructions. There a builder claimed remuneration in respect of variations to a building contract. In relation to two categories of variations, the contract stipulated that notice should be given by the builder followed by instruction from the owner before additional expenses could be added to the contract price. Clause 6 addressed the mandatory requirements of public authorities and clause 8 addressed variations required by sub-surface conditions. The builder had not given notice before proceeding with work in each category. Nevertheless, the work was authorised by the owner's architectural agent. 58 The Court held that the work claimed for was work "within the contract" with the consequence that the contractual regime stipulated in clauses 6 and 8 governed the matter. Since, however, the architectural agent had acquiesced in the builder's proposals for variations without the requirement of written notice which led the builder to continue to its detriment with the work without complying with its formal contractual obligations, the proprietor was estopped from relying upon the requirement for written notice. The notice requirement thus being sidestepped, clauses 6 and 8 were worked out according to their terms. 59 In this context, Priestley JA (with whom Samuels JA concurred) considered the circumstances in which the builder could sue off or outside the contract. He held that a claim on an indebitatus assumpsit for quantum meruit was not available when a valid and enforceable contract, on foot between the parties, governed the situation between them. I have already indicated why this is the application of a fundamental principle of the law of restitution. 60 Priestley JA (at 271-2) discussed the early High Court decision of Liebe v Molloy, a case which (like the present) involved a claim for extras for which there was no order in writing in the context of a lump sum written contract that stipulated that such claims should be disallowed. The High Court held that if the proper inferences for the facts were (i) that the employer had actual knowledge of the extra works as they were being done, (ii) knew that they were outside the contract and (iii) knew that the builder expected to be paid for them as extras then a contract to pay them could properly be implied. If however the fact was that the owner did not know the particular works were extras or did not know or believe that the builder expected to be paid for them, then it would be proper to conclude that no contract to pay for them should be implied. In the light of those considerations, Griffith CJ (who gave the judgment of the Court) said (at 354): When a man does work for another without any express contract relating to the matter, an implied contract arises to pay for it at its fair value. Such an implication arises from an express request to do work made under such circumstances as to exclude the idea that the work was covered by a written contract. So it would arise from the owner standing by and seeing the work done by the other party, knowing that the other party, in this case the contractor, was doing the work in the belief that he would be paid for it as extra work… 61 Priestley JA continued (at 272): One point which seems to me to be basic to the decision in Liebe is that if the work claimed for had been work required by the contract to be done, then the builder could not recover for it, because he had not complied with the contractual requirements. If however the work was work which the builder was not required to do by the contract ("outside the contract" in the words of the High Court) then, if certain further facts were found, the builder could recover. It may be that the basis of such recovery would these days be referred to ideas of restitution rather than implied contract. 62 His Honour pointed out that if the work in Update Constructions was "outside the contract" in the restricted sense in which the term was used in Liebe, then it would be irrelevant that the contractual requirements of notice and instructions did not occur. He then applied these principles to the particular contract and the claims in issue (see at 273-4). 63 The third member of the Court (Kirby P) considered that Pavey v Matthews meant that the builder's entitlement to have its claim considered on a restitutionary basis was "not liable to be defeated by the terms of the written contract or the statute" (at 262). I confess to some difficulty in understanding the meaning or scope of this remark in a context (like the present) where the statute does not render the contract unenforceable in its entirety. In the light of the principles stated earlier in this judgment I find myself content to follow the guidance of the majority in Update Construction to the extent that it may be at variance with the views of Kirby P. 64 These principles mean that the appellants should succeed in this aspect of the appeal. The variations were not authorised in writing. There is no finding that the owners agreed to pay extra for the variations, that the variations were costlier to the builder than contractual performance, or that the owners received benefit additional in value to that contracted for. The principles stemming from Liebe as explained by Priestley JA were not satisfied, especially the requirement that the owner know that the builder expected to be paid extra for his alternative (but not necessarily extra) work. It follows that no express or implied contract to pay for the variations was established. And the bases of a restitutionary claim lying dehors the subsisting contract (with its requirement for written variations) were not established in the evidence or findings of the court. The dismissal of the owners' Cross Claim 65 As indicated above (par 37) the owners' cross claim for damages for holding costs due to delay in completion of the contract and for defective work executed prior to 21 March 1994 (Red AB 11) failed because the owners repudiated the contract. And the claim in respect of defective work was dismissed on two additional grounds: (1) cl 6(d)(ii) was held to deem any work executed prior to 23 March 1994 to have been carried out in compliance with the contract; and (2) the work was performed in accordance with the (defective) plans and/or specific instructions by the owners to depart from the plans. 66 The owners challenge these findings. 67 I have already indicated (par 55) why the owners' repudiation of contract did not divest the owners of rights accrued unconditionally before termination. The owners' breach on and after 23 March 1994 and the owners' repudiation on and after 9 August 1994 was not an answer to their cross claim insofar as it claimed damages for the builder's failure, by 21 March 1994, to complete the works by that date and in accordance with the plans and specifications (Red AB 11). 68 The trial judge held that cl 6(d)(ii) (which is set out in par 36(b) above) precluded the owners from advancing their cross claim that the contract works were defective. 69 The owners are correct to point out that this interpretation gives the clause an extremely draconian effect. For example, it would deem the builder's due performance of every item of "executed" work upon mere proof of what could be the slightest breach by an owner in preventing or inhibiting the builder by any means whatever from executing the works. 70 The owners submit that the clause should be read down so that it triggers no more than an admission of due performance (cf Lustre Hosiery Limited v York (1935) 54 CLR 134), or alternatively an evidentiary presumption of due performance. Alternatively, it was suggested that the clause was void as a penalty. 71 There is much to be said for these propositions. However, I find it unnecessary to resolve the question of the construction or validity of the clause, because of the trial judge's alternative findings in which he addressed the claims of defective workmanship on their merits, and found in favour of the builder (Red AB 29-30). Those findings were open on the evidence and I can see no basis for overturning them. 72 The owners submit that the builder cannot shelter behind the inadequacy of the plans. It is said that he should have declined to enter into the contract in the first place or given a notification under cl 3 of the Agreement. Clause 3 permits a builder who has discovered any discrepancy or error in the plans and specifications to notify the owner accordingly, and requires the owner within 7 days of such notification to give to the builder in writing all such instructions and directions as may be necessary to enable the builder to proceed with the works. I do not think that this clause can be used to create an exclusive code which precludes the builder from relying upon the type of defects identified here in answer to an active claim of breach by the owner. Nor does cl 3 answer the findings by the trial judge that the owners directed the builder to construct unit two as the mirror reverse of unit three. 73 This leaves the owners' cross claim for additional holding costs due to the delay in completion of the works by the builder. The essential allegation was that the works were due to be completed within 18 weeks from 15 November 1993, being 21 March 1994 (Amended Notice of cross claim par 6(b)). The builder's pleaded defence was to invoke the terms of the written contract. The contract provided (in cl 4) for the builder's entitlement to a fair and reasonable extension should performance of the works be delayed by any of a number of stated reasons. These included the period known as "Industry Shutdown" during the five week period commencing on about 22 December each year, as well as other specified grounds. Except for the Industry Shutdown extension, the builder had to notify its claim. 74 It is clear that issue was joined at trial as to extensions. The primary judge held that the builder was entitled to 5 weeks for Industry Shutdown, taking the date for practical completion to 3 May 1994. His Honour also appears to have found the builder entitled to have made four additional claims for extension totalling 39 days bringing the date for practical completion through to about 1 August 1994. Those findings were not challenged in the notice of appeal. Although there was some debate about them in the course of the hearing, this was in the different context of the submissions about repudiation. 75 Accordingly, no ground exists for disturbing the trial judge's dismissal of the cross claim, albeit that not all of his reasons can be sustained. 76 Because costs issues might arise depending upon the outcome of the appeal, we were asked to allow written submissions on that issue after delivery of judgment. 77 For these reasons I would uphold the appeal, but only in relation to the five variations allowed by the trial judge. I would direct the parties to bring in Short Minutes within 14 days. If agreement cannot be reached within that time about the orders (including orders as to costs), then the appellants are to file and serve written submissions within a further 7 days, to be followed by the respondent's submissions within a further 7 days. 78 PRIESTLEY JA: I agree with Mason P. 79 HANDLEY JA: I agree with Mason P. **************