Home Management Maintenance Pty Limited v Matthew Peter Doyle and Naomi Roseanne Doyle [1992] ACTSC 44; (1992) 107 FLR 225 (13 May 1992)

SUPREME COURT OF THE ACT

HOME MANAGEMENT MAINTENANCE PTY. LIMITED v. MATTHEW PETER DOYLE and NAOMI
ROSEANNE DOYLE
S.C. No. 246 of 1989
Contracts - Building Contract - Money Counts - Equity
[1992] ACTSC 44; (1992) 107 FLR 225

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Contracts - building contract - construction and interpretation implied terms - variations.

Building contract - breach - repudiation.

Building contract - defences to action for breach - conditions and warranties.

Money counts - money owing for work done and materials provided.

Equity - unjust enrichment.

Goff and Jones, The Law of Restitution, 3rd ed., 1986, p.16

HEARING

CANBERRA
13:5:1992

Counsel for the plaintiff: Mr J. Constance

Solicitors for the plaintiff: Snedden Hall and Gallop

Counsel for the defendants: Mr T. Johnstone

Solicitors for the defendants: O'Connor Harris and Co.

ORDER

THE COURT ORDERS THAT:
1. Leave to the defendants to reopen their case is refused.

2. The plaintiff be at liberty to enter judgment for $14,000.

3. Each party pay its and their own costs.

DECISION

The first defendants (Mr and Mrs Doyle) owned their house at 14 MacGregor Street, Deakin. By agreement the plaintiff (Home Management) through sub-contractors carried out extensions to the house. Home Management claims that the price which Mr and Mrs Doyle agreed to pay for the extensions was the cost to Home Management of purchasing materials and engaging the sub-contractors. Mr and Mrs Doyle claim that the price agreed upon was a fixed price of $30,000. That is the essential question in the case, but a number of other issues have to be resolved before the question can be answered.

2. The statement of claim alleges that the agreement was entered into in or about December 1986 and that its terms included a term that the extension would be constructed to "lock-up stage" in accordance with the plans and directions of an architect engaged by Home Management. The statement of claim further alleges that the agreement was repudiated by Mr and Mrs Doyle when they refused to allow any further work to be carried out on the premises. The statement of claim specifies a liquidated amount as that paid to sub-contractors for materials and the labour costs, and in the alternative claims the same sum under a common money count for work done and materials provided.

3. In their defence Mr and Mrs Doyle deny the terms of the contract as alleged in the statement of claim. They say that it was an express term "or alternately (sic) it was a term thereof and the plaintiff thereby warranted" that the extension would be constructed "to completion in accordance with the plans and directions of the architect" and that the work and labour and materials used to construct the extension should be done and supplied for the sum of $30,000. They also rely upon a term of the contract that the work should be done in a proper and workmanlike manner and allege that the work was not so done. There is, accordingly, a counter-claim for the cost of rectification.

4. Home Management also claims that it was a term of the contract that Mr and Mrs Doyle "have the option to carry out themselves any part of the work". Mr and Mrs Doyle claim that the agreement was that the only part of the work to be carried out by Mr Doyle, himself an electrician, would be the electrical work. In the course of his trade Mr Doyle did sub-contracting work for Home Management for which he was entitled to be paid.

5. Home Management also claims that there was a term of the agreement that the work be carried out within a time that was reasonable having regard to Home Management's commitment to carry out other building work elsewhere. This term is denied by Mr and Mrs Doyle.

6. It is essential then to turn to the evidence in order to ascertain what the terms of the agreement were. It is as well to observe, before embarking on that exercise, that both parties allege that there was an agreement. In a sense there is no issue that there was "an agreement". But if it turns out that each side is talking about what is essentially a different agreement then it may be misleading for the Court to proceed on the assumption that there is no issue that there was an agreement. Where one party asserts Agreement A and the other asserts Agreement B, it may turn out that there was no real agreement at all or that the agreement was neither A nor B but C.

7. I record here that an arbitrator has already determined that the cost to Home Management for the work done and materials supplied by the sub-contractors, after making allowance for the cost to Mr and Mrs Doyle of the rectification of unsatisfactory work is $62,961.48.

8. This is not a case in which I consider that a detailed discussion of the evidence in narrative form is necessary. I state my conclusions based on the evidence relevant to each of those conclusions.

1. I accept the evidence of Mr and Mrs Doyle
that Mr Frank Cooper, on behalf of Home
Management, had indicated to them in June 1986 at
a dinner party that he was willing and able to
arrange for Home Management to construct an
extension to their dwelling through
sub-contractors for a price of $30,000. The
extension all parties had in mind was that shown
in a sketch plan that Mr Doyle had produced over
dinner. This however was not intended by either
party to be a legally binding agreement. If for
instance at a later stage before work had
commenced Mr Cooper had declined to carry out his
proposal then Mr and Mrs Doyle could not have
sued for damages for loss of their bargain, and
conversely, if the Doyles had
told Mr Cooper they did not want to go ahead,
Home Management would have had no claim for loss
of bargain.
2. It was in the contemplation of both parties
that until plans were drawn up by an architect and
(possibly) approved by the appropriate ACT
authority there was no binding agreement.
3. When plans were drawn up by the architect
and approved by the ACT authority, each party
indicated to the other a mutual intention that the
construction by sub-contractors, to be arranged by
Home Management, of the extension shown on the
plan should proceed subject to any variations that
might arise by further agreement during the
progress of the work. A binding agreement came
into existence. On the question of price,
however, there was no agreement. Mr and
Mrs Doyle expected that the price would remain a
fixed price of $30,000 as it had been foreshadowed
by Mr Cooper. However, Mr Cooper, foreseeing
that the cost to Home Management could well exceed
the $30,000 that Home Management by that stage
owed to Mr Doyle, contemplated that Mr Doyle
would continue to carry out electrical
sub-contracting work for Home Management (as he
had been doing for a year or more). Thereby
Mr Doyle would become entitled to further
payments from Home Management, which could
conveniently be off-set by any further cost Home
Management was incurring in relation to the
extensions over and above the contemplated
$30,000. This, I think, was the significance of
the $30,000 to which reference was made by
Mr Cooper in various conversations. Whether or
not Mr Cooper intended to make this clear to Mr
and Mrs Doyle, they certainly did not appreciate
it. Mr Doyle was told that he could continue to
draw against what he was owed by Home Management,
and he did so on several occasions.
4. It was originally intended by Mr Cooper
that whilst the plans were being drawn up and
approval was being sought, the indebtedness of
Home Management to Mr Doyle, which in June 1986
was about $15,000, should be allowed to "run up"
to $30,000, and when it had reached that level,
construction on the extensions could commence
(subject to plans being approved by that time).
Mr and Mrs Doyle, however, had only a vague
understanding of that proposal. It did not become
a term of the agreement.
5. When construction commenced in June 1987
the indebtedness of Home Management to Mr Doyle
was about $30,000. During the course of
construction Mr Doyle continued to do further
work for Home Management and to become entitled to
further payments. However, from time to time he
drew against his entitlement so that, whilst the
indebtedness of Home Management to him never
dropped below $30,000, it never rose much above
$30,000. In the meantime Home Management was
incurring costs in carrying out the extension. By
November 1987 the net result was
that Home Management had incurred, or in the view
of Mr Cooper, was likely to incur, costs which
when off-set against what the company owed Mr
Doyle, exceeded $30,000.
6. The attitude of Mr Cooper is reflected in
several parts of the evidence, which I accept.
Mrs Doyle said that at the original discussion in
June 1986 Mr Cooper said that the account should
be allowed to accumulate until $30,000 was owing
to Mr Doyle. Mr David Hollyland, a shareholder
in Home Management, said that in October 1986 Mr
Cooper said that the company would do the
extensions and let the accounts accumulate to
$30,000. Ms Valia Palmer, Home Management's
interior design consultant, said that Mr Cooper
said in February 1987, "We can do the job for
$30,000 and piss it in" and later in May or June
that there was "enough in the kitty and the
extension can proceed". Ms Palmer also gave
evidence that in November 1987 the architect,
Mr Foskett said, "the job is likely to go over
$30,000" to which Mr Cooper replied, "Don't
worry, we will come in for $30,000". This is
supported also by the evidence of Mr Peter
O'Brien, a supervisor from Home Management, who
said that in early 1987 Mr Cooper told him that
they could do the job for $30,000 but "if it runs
over we'll still look after him, he's worked for
us and not drawn and that will pay for the
extension". Mrs Caroline Pfahl, the office
manager of Home Management, said that after July
1987 she mentioned at least twice to Mr Doyle
that the work carried out by Home Management had
exceeded $30,000. She knew that the sum of
$30,000 had been mentioned somewhere previously,
but she was not aware in what context. Her
approach is entirely consistent with being told by
Mr Cooper that the net liability of the Doyles
(that is to say, after allowing for the $30,000
which Home Management owed Mr Doyle at the
commencement of the work) should not be allowed to
exceed what Home Management owed Mr Doyle. This
is also consistent with Mr Cooper's evidence
about the need to safeguard the liquidity
situation.

9. In the circumstances, I conclude that whilst there was a contract between the two parties that Home Management would construct the extensions according to the plans, subject to agreed variations, there was no agreement as to price or method of payment and no agreement as to the precise limits on the range of work that might be carried out by Mr Doyle. Each party had a different understanding from the other.

10. There is a claim under the common money count of money owing for work done and materials provided. This alternative claim is wide enough to include a claim in quasi contract.

11. This leads to the issue of unjust enrichment.

12. The principle of unjust enrichment presupposes three things: first, that the defendants have been enriched by the receipt of a benefit, secondly, that they have been so enriched at the plaintiff's expense, and thirdly, that it would be unjust to allow them to retain the benefit. (See Goff and Jones, The Law of Restitution, 3rd ed., 1986, at p 16.) If these three things are found to exist, it is open to the Court to restore to the plaintiff the benefit which the defendants have unjustly gained at its expense.

13. In this case the Doyles have benefited from the receipt of building materials supplied by and building services provided by Home Management. In my view, the Doyles have benefited; first, by having received an immediate and realisable financial gain (being the increased value of their home brought about by the extensions) and, secondly, by having been saved an expense which they otherwise would necessarily have incurred (being the expense of paying another builder to carry out the extensions). The Doyles have gained a likely financial benefit and have been saved an expense.

14. The findings of the arbitrator are that Home Management incurred costs of $62,961.48 after taking into account the cost of rectification for unsatisfactory work. The question is whether it is just and equitable that Mr and Mrs Doyle should have to pay Home Management the full cost of what that company incurred in carrying out the extensions, or whether it is just and equitable that some lesser sum should be awarded to Home Management. In my view, the Doyles should not have to pay the full cost because of three factors: one, the conduct of Mr Cooper which led Mr and Mrs Doyle to believe that the costs to them would not exceed $30,000, two, the delay in completing the work and, three, the failure of Home Management to ensure that the sub-contractors keep costs down to a reasonable level.

15. The result is that Home Management gets the cost of extensions, $62,961, less what Home Management owed Mr Doyle, about $35,000. That leaves a difference of about $28,000 which should be borne equally by Home Management on the one hand and Mr and Mrs Doyle on the other hand. Ultimately, Mr and Mrs Doyle have to pay $14,000 to Home Management. The litigation was made necessary by the failure of Mr Cooper to keep the Doyles informed as to what was going on. Home Management was in a superior position throughout, using its continuing indebtedness to Mr Doyle for his electrical work as the means of keeping the Doyles to their side of what he considered ought be the bargain. In the circumstances, although Home Management has been successful in obtaining judgment, I do not think it appropriate that costs follow the event. Accordingly, each side is to pay its and their own costs.

16. At the end of counsel's arguments, I indicated to counsel my view of what should be the ultimate outcome of the case. I did so in order to avoid the delay necessitated by reserving my judgment but I expressed myself briefly in terms which were inadequate for a properly formulated judgment. Counsel for the defendant then sought an adjournment in order to reopen his case and call further evidence about the added value to the Doyles' house. He said that "far more was spent on this place than its added value", but he was not able to indicate what the added value was. There was nothing to indicate that the capital value of the house increased by less than the $35,000 for which I have credited to Home Management together with the $14,000 which the Doyles are to pay as a result of the judgment, a total of $49,000. The quantum of the increase in capital value in any event is only one factor and is not solely determinative. There is also the principle of finality in litigation. When at the close of evidence and addresses by counsel the Court indicates a tentative view or announces its decision with reasons to be given later if necessary, that does not mean that counsel for either party should be given leave to reopen the case to call further evidence to cover points, which, in the light of the Court's remarks, might have been more fully covered before the close of evidence. I refuse leave to the defendants to reopen their case.