Stepanoski v Aslan [2018] NSWSC 1160

Supreme Court New South Wales

Medium Neutral Citation: Stepanoski v Aslan [2018] NSWSC 1160 Hearing dates: 6, 7, 8, 9, November 2017; 21, 22, 23, 24, 25 May;3 July 2018 Date of orders: 30 July 2018 Decision date: 30 July 2018 Jurisdiction: Equity Before: Emmett AJA Decision: Parties bound by Lump Sum Contract Catchwords: CONTRACTS — Formation — Agreement — Battle of the forms – Construction Contracts – where parties signed a Cost Plus Contract – where parties later signed a Lump Sum Contract – where the Lump Sum Contract was back dated to the date of the Cost Plus Contract – whether parties bound by Cost Plus or Lump Sum Contract Category: Principal judgment Parties: Tony Stepanoski (First Plaintiff/First Cross Defendant) Sonja Stepanoski (Second Plaintiff/First Cross Defendant) Mohammad Jamal Aslan (also known as Jim Aslan) (Defendant/Cross Claimant) Representation: Counsel: F Corsaro SC with B Le Plastrier (Plaintiffs) D C Eardley (Defendant)

Solicitors: Keith Redenbach Legal (Plaintiffs) Stewart & Associates (Defendant) File Number(s): 2016/139580

Judgment

Introduction 1. The plaintiffs, Mr Tony Stepanoski and Mrs Sonja Stepanoski, claim damages from the defendant, Mr Jamal Aslan, for alleged breaches of a building contract for the construction of two residences on land owned by Mr and Mrs Stepanoski in Fullers Road, Chatswood. The first question in the proceedings concerns the terms of the building contract that was made between them. The parties have requested that the Court reach a conclusion as to that question before embarking on the resolution of the other questions raised in the proceedings. 2. It is common ground that, on 14 October 2014, Mr and Mrs Stepanoski, as "Owner", and Mr Aslan, as "Builder", signed a form of contract described as "Head Contract Cost Plus (Residential)" (the Cost Plus Contract). It is also common ground that at some time after 14 October 2014, Mr and Mrs Stepanoski, as "Owners", and Mr Aslan, as "Contractor", signed another form of contract described as "Home Building Contract for Work over $5,000" in a form published by NSW Fair Trading, an instrumentality of the Government for New South Wales (the Lump Sum Contract). The Lump Sum Contract bears the date 14 October 2014. Mr and Mrs Stepanoski claim that it was signed on 17 October 2014. Mr Aslan, however, claims that it was signed on 11 January 2015 or 12 January 2015. 3. The first question concerns the extent to which the Lump Sum Contract was intended to replace the Cost Plus Contract. Considerable time has been occupied litigating that question. Initially, Mr Aslan contended that the Lump Sum Contract was not intended to replace the Cost Plus Contract to any extent and that it was, in effect, no more than a sham. He asserted that the Lump Sum Contract was brought into existence solely to enable Mr and Mrs Stepanoski to represent to Macquarie Bank Limited (Macquarie Bank) that they had a contract with a builder for a fixed sum, a requirement specified in a loan approval given to Mr and Mrs Stepanoski by Macquarie Bank. 4. In the course of oral addresses after all of the lay evidence had been completed, Mr Aslan's position changed. He now accepts that the Lump Sum Contract was intended to replace the Cost Plus Contract with effect from the time it was signed, which he maintains was on 12 January 2015, but that the work that had been done prior to signing the Lump Sum Contract was to be charged for in accordance with the Cost Plus Contract. He was therefore given leave to amend his Response and Cross-Claim to assert that: "… in January 2015, the parties signed [the Lump Sum Contract] which they dated 14 October 2014 for the sole purpose of providing the document to [Macquarie Bank] to assist [Mr & Mrs Stepanoski] obtain finance for the project, but: (i) the parties orally agreed that they would continue to be bound by finance and apply the [Costs Plus Contract]; and (ii) [Mr Aslan] had informed [Mr Stepanoski] a number of times, and [Mr Stepanoski] had agreed that the cost of the project would be greater than the amount stated in the [Lump Sum Contract]." 1. Thus, Mr Aslan asserts that an oral agreement was made that qualified the written arrangements between the parties. No particulars have been furnished as to when and where any such oral agreement was made. The most that counsel for Mr Aslan was able to point to as to the evidence of any such agreement were answers given by Mr Stepanoski in cross-examination and evidence-in-chief given by Mr Aslan. 2. Thus, it was "suggested" to Mr Stepanoski that the Lump Sum Contract was produced and signed by him and Mrs Stepanoski sometime after 11 January 2015 for "the purposes of obtaining funding" from Macquarie Bank and that was its only purpose. Mr Stepanoski responded "yeah". It was then "suggested" to him that he knew all the time that the actual agreement that he had with Mr Aslan was the Cost Plus Contract dated 14 October 2014. Mr Stepanoski responded "both incorrect". 3. As will become apparent, the Lump Sum Contract was indeed signed to ensure that Mr and Mrs Stepanoski could obtain funding from Macquarie Bank. That, however, says nothing about whether the quite inconsistent Cost Plus Contract was intended to remain binding in some way. 4. In evidence-in-chief, Mr Aslan said that in January 2015 he received a telephone call from Mr Mirko Stojanovic, who was the finance broker for Mr and Mrs Stepanoski. He said that Mr Stojanovic told him that the Bank was "not recognising" the Cost Plus Contract that Mr Aslan had signed with Mr and Mrs Stepanoski in October. Mr Aslan said that his response to Mr Stojanovic was as follows: "Oh, my God what are you talking about? We already signed the building contract . We have a contract in place and we have an agreement oral and written. I never would have signed a lump sum for that price." Mr Aslan said that Mr Stojanovic responded: "The Bank doesn't recognise the cost plus contract. We have to do a lump sum. Can you prepare one and get it signed ASAP or the Bank won't release any funds for the loan and [Mr Stepanoski] will lose his loan." 1. Mr Aslan was then asked, without objection, to explain what he had meant by referring to an "oral contract". His response was as follows: "Well, the agreement was that we have a cost plus contract in place in view of the fact that the ultimate or final price of the build was unknown and could not be ascertained back on 10 October. It was in view of so many changes and amendments. A section 96 had to be prepared at some stage based on advice of the certifier. Tony and Sonja were both on different wavelengths as to what they want, they don't want and from colour to finishes to granny flats to store rooms to balconies so obviously they were in somewhat of a hurried state to get a building contract signed so that they don't lose their construction loan." 1. Mr Aslan then asserted that the Lump Sum Contract was signed on 11 January 2015. He asserted that Mr Stojanovic told him that the Lump Sum Contract should be backdated otherwise Macquarie Bank "would not recognise that a contract had been signed prior to the expiry date for the loan". Mr Aslan asserted that he replied: "This is not right. It puts me and my family in an awkward situation. We have a contract in place. Why should I sign another one? I might as well just walk away, terminate the contract back then." Mr Aslan asserted that Mr Stojanovic said: "No no it won't be used against you. I'll make sure Tony doesn't do it." 1. There is no evidence that Mr Stepanoski or Mrs Stepanoski had any knowledge of any of those alleged conversations between Mr Aslan and Mr Stojanovic. It was not put to either of them in cross-examination that they had knowledge of any such statement by Mr Stojanovic. 2. Mr Aslan also gave evidence-in-chief that he telephoned Mr Stepanoski straight after Mr Stojanovic had called him and said: "Tony, Mirko just called me. He said, I'm not happy about it. I really don't want to do this" ….. "I said, this is not right." Mr Aslan accepted that he did not tell Mr Stepanoski that Mr Stojanovic had told him that the Lump Sum Contract would not be used against him. He said that Mr Stepanoski replied: "Don't worry, Jim, it's fine. It's just for the Bank. It's just to get a loan through, otherwise there is just no money to do the build." Mr Aslan said that he replied: "Well I'm stuck between a rock and a hard place. You owe me a lot of money, Tony, and I need money released ASAP so either get your money from somewhere else. I really want to think about this." Mr Aslan accepted that he did not have any other conversation with any other person in relation to the Lump Sum Contract. 1. In the light of that exchange, it is not possible to conclude that there was an agreement in the terms alleged by Mr Aslan in his Response. That is to say, assuming that the above evidence is accepted at face value, it is not possible to find any agreement that the Cost Plus Contract was to remain binding on the parties in any way. It may be that Mr Aslan was not happy about changing the arrangements. Nevertheless, the arrangements were changed in a critical respect by signing the Lump Sum Contract. I do not consider that an exchange such as that just outlined can lead to a conclusion that the parties did not intend to be bound by the Lump Sum Contract, with effect from the date that it bears, namely, 14 October 2014, irrespective of when it was signed. Nothing in that evidence is capable of supporting a conclusion that any lump sum contract that might be signed would not replace the Cost Plus Contract.