Mirage Pools v Fowler [2001] NSWSC 803

New South Wales Supreme Court

CITATION : Mirage Pools v Fowler [2001] NSWSC 803 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 11668 of 2000 HEARING DATE(S) : 28/02/2001 JUDGMENT DATE : 13 September 2001

PARTIES : Mirage Pools Proprietary Limited (appellant) Warwick and Samantha Fowler (respondents) JUDGMENT OF : Hidden J at 1

LOWER COURT Local Court JURISDICTION : LOWER COURT 1605/99 FILE NUMBER(S) : LOWER COURT P Ashton LCM JUDICIAL OFFICER :

COUNSEL : D Allen (appellant) M Evans (respondents) SOLICITORS : Thurlow Fisher (appellants) Muggletons (respondents) CATCHWORDS : LOCAL COURT - appeal from decision in civil claim - contract subject to Home Building Act - estoppel - recovery of deposit - whether magistrate considered relevant issues LEGISLATION CITED : Home Building Act 1989 Justices Act Waltons Stores (Interstate) Limited v Maher (1987-88) 164 CLR 387 Commonwealth v Verwayen (1990) 170 CLR 394 CASES CITED : Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd (1990) 20 NSWLR 251 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 Shelton v Hansel [2000] NSWSC 357 Soper v Arnold (1889) 14 App. Cas. 429 DECISION : Appeal allowed - matter remitted to magistrate

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

HIDDEN J

Friday 14 September 2001

No 11668 of 2000 Mirage Pools Proprietary Limited v Warwick Fowler & Samantha Fowler Reasons for judgment

1 HIS HONOUR: This is an appeal from the decision of a magistrate in a civil claim in which the appellant, Mirage Pools Pty Ltd, was the plaintiff and the respondents, Warwick and Samantha Fowler, were the defendants. It is convenient to sketch the relevant facts before turning to the nature of the proceedings and the outcome. 2 The respondents engaged the appellant to build a swimming pool in the backyard of their home at Stanmore. The appellant prepared plans and on 5 February 1998 the parties entered into a written contract. In accordance with the contract, the respondents paid a deposit of $2,398.00. On 24 February plans were submitted to the local Council. 3 In the meantime, the respondents became concerned about the size of the proposed pool, concluding that the appellant's measurements were in error and that it would be necessary to relocate the existing sewer line, which would be a difficult and expensive undertaking. On 19 March 1998 Mr Fowler wrote to the appellant, enclosing a sketch for a smaller pool and asking that revised plans be prepared. That was done, and the structural engineer who prepared the new plans discussed them with Mr Fowler before submitting them to Council on 14 April. It seems that they did not meet the Council's requirements and they were re-submitted on 2 June. In the meantime, in mid-May, a representative of the appellant had told Mr Fowler that, subject to the weather, work on the pool would commence in three weeks time. 4 Early in June 1998 Mr Fowler contacted the appellant to enquire about the progress of the venture but, according to him, he received no satisfactory reply. On 26 June he wrote to the appellant "cancelling" the contract. On 2 July the respondents instructed a real estate agent to put the home at Stanmore on the market, as they had decided to buy a property in the Blue Mountains. On the following day the Council approved the revised plans. 5 The appellant sued the respondents in the Local Court for breach of the contract of 5 February 1998, claiming loss of profit which, after allowance for the deposit paid by the respondents, was said to amount to about $9,000. In the alternative, the appellant sought damages on a quantum meruit basis for the expense and labour involved in preparing both sets of plans and their submission to Council. Further in the alternative, the appellant pleaded that the respondents' request for the revised plans gave rise to a variation of the agreement of 5 February or to a new agreement. The combined effect of ss6(1)(b), 7(1) and 10(1) of the Home Building Act 1989 would render any such variation or new agreement unenforceable, as it was not in writing. However, the appellant claimed that, in the circumstances, the respondents were estopped from relying upon those provisions. 6 In their defence, the respondents asserted that the original contract had been frustrated by the appellant's error in estimating the dimensions of the pool and that that contract had been terminated by mutual agreement. As to the appellant's claim of a variation or a new agreement, they relied upon the provisions of the Home Building Act. In addition, they brought a cross-claim for refund of the deposit. 7 In his reasons for judgment the learned magistrate found that the written contract had not been frustrated but, rather, that the respondents had decided that they would be better served by a smaller pool. He found that it was only that original contract which was sought to be terminated by Mr Fowler's letter of 26 June 1998. It is not entirely clear whether his Worship found that that contract remained on foot, subject to variation, or had been terminated by mutual agreement. However, whether the revised arrangement be classified as a variation or a new contract, he found that it was unenforceable because it did not comply with the Home Building Act. 8 The respondents accepted that the appellant was entitled to certain out of pocket expenses. Otherwise, the appellant's claim failed. His Worship found that the respondents were entitled to the deposit which they had paid and, setting off those out-of-pocket expenses against the amount of the deposit, he gave the respondents judgment on the cross-claim for $1,057.50. In his reasons his Worship made no reference to the estoppel upon which the appellant relied. Nor did he refer to any basis in fact or law upon which the deposit was repayable to the respondents, apart from observing that the written contract was silent about that matter. It is in these two respects that it is contended that his Worship fell into error. 9 Argument was directed primarily to the question of estoppel. Counsel for the appellant relied upon the principles expounded by the members of the High Court in Waltons Stores (Interstate) Limited v Maher (1987-88) 164 CLR 387. He relied on estoppel both at common law and in equity, referring to the concise statement of the distinction between the two by Priestly JA in Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472. Reference was also made to Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd (1990) 20 NSWLR 251, in which the doctrine was applied. In that case Priestly JA (at 276-7) raised the question whether the distinction between common law and equitable estoppel is now to be maintained, a matter which the High Court revisited only months later in Commonwealth v Verwayen (1990) 170 CLR 394. That is not a question which needs to be examined for the purposes of this case. 10 Clearly, the facts of the case were capable of giving rise to an estoppel of either variety. The respondents' conduct in seeking the revised plans for the pool could be seen as a representation that they were parties to an enforceable contract with the appellant, and the appellant acted accordingly by having those plans prepared and submitted to the Council. By not dealing with the issue in his judgment, his Worship fell into error of law: cf Shelton v Hansel [2000] NSWSC 357, a decision of James J in an appeal in which it was accepted that a magistrate's failure to consider that issue (among others) amounted to error of law. 11 Let me turn, then, to the respondents' cross-claim for recovery of the deposit. Here again, his Worship appears not to have considered the question whether the respondents were entitled to that money, given the well recognised purpose of such a deposit as the provision of security for the performance of an agreement as well as part payment of the contract price: Soper v Arnold (1889) 14 App Cas 429, per Lord MacNaghten at 435. On one view of the evidence, the respondents wrongly terminated the original contract when it could not be said that there had been a total failure of consideration, so that they were not entitled to recovery of the deposit. When Mr Fowler wrote his letter of 26 June 1998 and, indeed, when the respondents put their home up for sale, the time limited by the contract in which to obtain Council approval of the plans had not yet expired, let alone the time allowed for construction of the pool. I should note that, before me, counsel for the respondents addressed no argument to this aspect of the matter. 12 Accordingly, I am satisfied that the learned magistrate fell into error in the two ways for which the appellant has contended. The question remains what should now be done. The appellant's position is that I should enter judgment for it in the amount claimed in the statement of claim and dismiss the cross-claim. Counsel for the respondents argued that, even if his Worship had found the estoppel claimed, that would have entitled the appellant to no more than the out-of-pocket expenses which the respondents conceded. By his silence on the argument about the deposit, it may be that he also acknowledged that the appellant was entitled to retain it. However, he made no express concession to that effect. 13 In effect, both parties submit that I should determine the proceedings finally rather than remit the matter to the magistrate, exercising the expansive powers conferred upon me by s109 of the Justices Act. However, that course would involve my arriving at a number of findings of fact and, although I have the material which was before the Local Court, I do not consider that to be an appropriate course. A resolution of the matter whereby the appellant retained the deposit and was paid its out-of-pocket expenses may have much to commend it. No doubt, the parties will consider the future of this case with an eye to the amount involved, on the one hand, and the likely costs, on the other. 14 The appeal is allowed and the matter is remitted to the learned magistrate to be dealt with according to law. If necessary, I shall hear the parties on the costs of the proceedings in this Court. **********