A builder entered into a standard form contract with a homeowner to build a granny flat on their land, under a cost-plus contract of approx.. $200k.
Disputes arose which caused the homeowner to direct the builder to stop the works. Builder, who was owed money under the contract, contended that the homeowner had no basis for issuing such direction and therefore they were repudiating the contract by virtue of that direction. The builder therefore, accepted the homeowner’s repudiation and terminated the contract.
In the Tribunal, the builder sought damages for monies owed under the contract, damages for loss of expectation and damages for loss of anticipated profits under the balance of the contract price. Interest was also claimed.
The owner rejected the builder’s claim and filed a cross claim seeking repayment alleging that the builder had been overpaid and rectification costs. The owner claimed that the cost-plus contract, contained an implied term that the builder will do all that is reasonably necessary to ensure costs incurred were actually reasonable and fairly determined. An expert was instructed on their behalf who gave evidence that the costs incurred by the builder under the contract were not reasonable.
The Tribunal did not accept the owner’s expert’s evidence that the costs incurred were unreasonable because it held the cost plus contract entered into by the parties entitled the builder to be paid the actual costs incurred, not what the expert subjectively considers (with the benefit of hindsight) to be appropriate. The expert had also failed to provide a proper basis for how he had reached the quantum meruit assessment of the costs incurred. For these main reasons, the owner’s claim that the costs incurred were unreasonable failed.
Dealing with the question of measure of damages for the builder, the Tribunal assessed them using the principles of Robinson v Harman (1848) 1 Exch 850, noting that the damages claimed by the builder were effectively the margin or profit forgone on the value of the building works that it was deprived of the opportunity of completing.
The Tribunal ordered the builder the sum of $73,609.73 against which it offset $5,234, being the cost of minor rectification work. This entitled the builder a sum of $68,375.73. This amount was upheld on appeal and the owner’s appeal was dismissed with costs.
