M J Arthurs Pty Ltd v Isenbert

DISTRICT COURT OF QUEENSLAND

CITATION:	M J Arthurs Pty Ltd v Isenbert [2017] QDC 85
PARTIES:	M J ARTHURS PTY LTD (plaintiff) v MICHAEL DAVID ISENBERT (first defendant) and KERRIE ISENBERT (second defendant)
FILE NO/S:	BD3754/2013
DIVISION:
PROCEEDING:	Civil trial
ORIGINATING COURT:	District Court at Brisbane
DELIVERED ON:	12 April 2017
DELIVERED AT:	Brisbane
HEARING DATE:	28-30 November 2016
JUDGE:	McGill SC DCJ
ORDER:	Plaintiff’s claim dismissed.
CATCHWORDS:	CONTRACT – Offer and acceptance – need for communication of acceptance – whether made to authorised agent of offeror – when effectively made.  CONTRACT – Offer and acceptance – whether acceptance or counter-offer – whether counter-offer accepted – no contract. CONTRACT – Termination – whether repudiation – whether election to terminate for repudiation – whether effective election to affirm - need for communication of election.  PRINCIPAL AND AGENT – Authority of agent – whether third party agent – scope of authority of agent to receive communications on behalf of principal – no implied authority. BUILDING AND ENGINEERING CONTRACTS – Statutory regulation – obligation to provide copy – whether and when performed – right to withdraw – when arising – whether exercised. Domestic Building Contracts Act 2000 s 36, s 72, s 75. Ashdown v Kirk [1999] 2 Qd R 1 – cited. Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 – cited. Barker v GE Mortgage Solutions Pty Ltd [2013] QCA 137 – applied. Beckford Nominees Pty Ltd v Shell Co of Australia Ltd (1987) 73 ALR 373 – cited. Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 – cited. Brewer v Fichera (1991) 12 Qld Lawyer Reps 98 – cited. Brien v Dwyer (1978) 141 CLR 378 – cited. Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 – cited. Carter v Hyde (1923) 33 CLR 115 – considered. Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20 – applied. Commissioners of Customs and Excise v Pools Finance (1937) Ltd [1952] 1 All ER 775 – cited. Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 – cited. Costello v Loulakas [1938] St R Qd 267 – cited. Cozi Pty Ltd v Bedi [1994] VSC 161 – distinguished. Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 – cited. Davies v Smith (1938) 12 ALJ 260 – cited. Evans Deakin Industries Ltd v Queensland Electricity Generating Board (1984) 1 BCL 334 – applied. Fitzwood Pty Ltd v Unique Goal Pty Ltd (2001) 188 ALR 566 – cited. Foran v Wight (1989) 168 CLR 385 – cited. Ford v Lismore City Council (1989) 28 IR 68 – cited. Goodman Fielder Consumer Foods Ltd v Cospack International Pty Ltd [2004] NSWSC 704 – cited. Holland v Wiltshire (1954) 90 CLR 409 – considered. Howes v Miller [1970] VR 522 – cited. IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205 – cited. Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 – applied. Keogh v Dalgety and Co Ltd (1916) 22 CLR 402 – cited. Kirkpatrick v Kotis (2004) 62 NSWLR 567 – cited. Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 – cited. Legione v Hateley (1983) 152 CLR 406 – cited. M. J. Arthurs Pty Ltd v Heaysman [2015] QCA 113 – applied. M. J. Arthurs Pty Ltd v Heaysman [2014] QDC 160 – cited. Midland Bank plc v Serter [1995] 1 Fam Law R 1034 – cited. Mohr v Smith [1914] SALR 92 – cited. Morgans v Launchbury [1973] AC 127 – cited. Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2004] 1 Qd R 140 – cited. Permanent Trustee Co Ltd v O’Donnell [2009] NSWSC 902 – distinguished. Petersen v Moloney (1951) 84 CLR 91 – cited. Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1977] VR 454 – distinguished. QBE Insurance (Australia) Ltd v Cape York Airlines Pty Ltd [2011] QCA 60 – cited. Quadling v Robinson (1976) 137 CLR 192 – cited. R A Brierley Investments Ltd v Landmark Corporation Ltd (1966) 120 CLR 224 – cited. Scammel and Nephew Ltd v Ouston [1941] AC 251 – cited. Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 – cited. Shevill v Builders Licensing Board (1982) 149 CLR 620 – cited. Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd (2016) 91 ALJR 233 – cited. The Kanchenjunga [1990] 1 Lloyd’s Rep 391 – cited. Three Pty Ltd v Savoir Faire CTS 3841 [2008] 2 Qd R 568 – cited. Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 – cited. Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498 – cited. Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 – cited. Universal Guarantee Pty Ltd v Carlile [1957] VR 68 – distinguished.
COUNSEL:	GI Thomson for the plaintiff G Handran for the defendants
SOLICITORS:	Construct Law Group Pty Ltd for the plaintiff Morgan Conley for the defendants

1. The plaintiff was in 2012-13 in an arrangement with a group of companies which for present purposes can be identified as the Optima Group (“Optima”).  Optima was marketing house and land packages to people as an investment opportunity, using telemarketing to locate leads who were then visited by a salesman presenting what were said to be the advantages of obtaining an investment property in this way.  The properties being promoted were in a subdivision development north of Mackay. 

2. The defendants were two people to whom such a package was sold.  This involved procuring their signatures on two contracts, one to purchase a block of land in the development[1] and one for the construction of a house on the land; the latter, though dressed up to appear as a contract with Optima, in fact specified that the plaintiff was the builder.[2]  That contract was subsequently executed by Mr Arthurs on behalf of the plaintiff.  By this proceeding, the plaintiff claims damages for breach of that contract.  Pursuant to an order I made in the course of case managing this matter on the commercial list, the present trial is proceeding only on the issue of liability. 

   [1]Exhibit 1 Document 1.  Exhibit 1 is the Agreed Trial Bundle, and I shall refer to documents in it just as “Document x”. 

   [2]There are several versions of the contract in evidence: Document 2; Exhibits 25, 28 (incomplete), 40, 42, and 43.  They are not all the same, and unfortunately the original is not in evidence. 

Background

3. The arrangement with Optima predated the involvement of the plaintiff as the builder under such contracts, which occurred only from August 2013; prior to that Mr Arthurs, who controls the plaintiff, and who has been a licensed builder for some time, was nominated personally as the builder: p 22.  Until 19 November 2012, Mr Arthurs, and subsequently the plaintiff, were operating with a company, Portfolio Housing Pty Ltd, associated with a Mr Davison, which handled administrative arrangements while the plaintiff or Mr Arthurs concentrated on the actual building:[3] pp 21, 24, 27, 70.  In November 2012 there was a falling out between Mr Arthurs and Mr Davison, which led to litigation in the Supreme Court.[4]  Initially however the relationship between the plaintiff and Optima continued, though by mid-2013 that had also broken down. 

   [3]Arthurs pp 21, 24, 27, 70, 74.  Mr Davison was an “excluded individual” and hence could not hold a contractor’s license: see Queensland Building and Construction Commission Act 1991 s 31(1)(e), Part 3A.

   [4]M. J. Arthurs Pty Ltd v Portfolio Housing Pty Ltd [2014] QSC 151; [2015] QCA 86. Optima was advised that this relationship had ended on 19 November 2012: Document 21.

4. Following that break down, a number of people who had signed building contracts gave notices of termination under the Domestic Building Contracts Act 2000 (“the Act”), including the defendants. The plaintiff contests their right to do so, and that is one of the issues in the present proceeding. There has been previous litigation between the plaintiff and the parties to another contract procured by Optima, which I also tried.[5]  Neither party before me in this matter sought to challenge any conclusion I had arrived at in that decision, or anything said by the Court of Appeal on appeal from my decision, which was dismissed.[6]  There are another 23 proceedings pending in this court between the plaintiff (or Mr Arthurs) and other purchasers under other contracts procured by Optima; these have been stayed pending the hearing and determination of this matter, which (it can only be hoped) will resolve issues which are common to at least a number of those proceedings. 

   [5]M. J. Arthurs Pty Ltd v Heaysman [2014] QDC 160.

   [6][2015] QCA 113.

5. In November 2012 there were meetings between Mr Arthurs and representatives of Optima to confirm that the arrangement between them was to continue despite the departure of Mr Davison and his company: p 30.  The way the arrangement worked in practice was that from time to time Optima would identify a particular lot in the development and Mr Arthurs would nominate one of the plaintiff’s standard house designs which it would construct on that lot (p 31) for $X: p 72, 73.  Optima would then secure execution of a building contract for such a house for a higher price, $Y.[7]  Any contract would be sent to Mr Arthurs for signing, and he would return it to Optima after execution, keeping copies for his use: p 32.[8] 

   [7]See also Document 85. 

   [8]Sometimes after a little prompting from Optima: Exhibit 5. 

6. The plaintiff would build the house, once that could lawfully be done, with progress claims being submitted by the plaintiff to Optima, based on the price of $X: p 33.[9]  Optima prepared and submitted progress claims to the customers or their financier based on the contract price of $Y.[10]  When payment was received, the plaintiff was paid on its claim.  At the end of the day, Optima retained the difference between $X and $Y: p 73.  In the case of the contract involving the defendants, this difference amounted to $57,770.[11]  Perhaps unsurprisingly in the circumstances, it was part of the arrangement that the plaintiff was to have no contact with the owners under the building contract, with everything being handled by Optima on its behalf: p 33.  

   [9]Supported by photographs: Exhibit 6; Exhibit 7. 

   [10]On the plaintiff’s letterhead, with Mr Arthurs signature applied by a computer programme, to give the appearance of an invoice from the plaintiff, i.e. a forged invoice: Document 10; Whyman p 2-12. 

   [11]$X was $240,000: Arthurs p 86; $Y was $297,770: Exhibit 1, Document 2, p 110. 

The defendants

7. Also in November 2012, following contact from a telemarketer, there were meetings between the defendants and Mr Randall, a salesman employed (on commission) by Optima.[12]  The first of these involved a presentation about the supposed long term benefits of investing in the house and land packages being marketed by Optima: p 2-100.  A second meeting was then arranged, to which Mr Randall came armed with drafts of the necessary house and land contracts, and accompanied by Mr Ramsey from Optima who delivered a further such presentation: p 119, p 2-100.  The defendants were given a bundle of documents, a “welcome pack” which included an unexecuted copy of part of the contract.[13]  As a result the defendants were persuaded to enter into those contracts, and Mr Randall was left to get them executed. 

   [12]Randall p 104, 118 and 122, Mr Isenbert p 2-103; Mrs Isenbert p 3-67. 

   [13]Randall p 120; Mr Isenbert p 2-100; Exhibit 28.  It included some sales propaganda, a disclosure document and credit guide from Optima Lending Solutions Pty Ltd, a copy of the odd numbered pages of the Schedules to the HIA contract, and the even numbered pages of the General Conditions of the HIA contract, including Annexure 2. 

8. The contracts had been prepared by Optima, and in the case of the house contract provided for the plaintiff to be the builder.[14]  The details about the defendants to be completed were highlighted[15] and stickers applied indicating where the defendants were to sign: p 112, p 2-6.  The defendants signed or initialled as directed.[16]  Mr Randall said that after the one copy of the building contract was executed by the defendants, he took it with him, though he told them that “the office” would sign it and they would receive a copy: p 111.[17]  The executed contract was sent to Optima, where a copy was taken for the file, and it was then forwarded to the plaintiff: p 2-7. 

   [14]Mr Randall said the sequence of the contract and other documents signed was as in Exhibit 25: p 108.  Ms Whyman, however, who prepared the contracts for sending to the salesmen, said that the HIA forms were at the back and the Optima documents at the front, as in Exhibit 40: p 2-14.  Most of the versions in evidence follow her layout, and I prefer her evidence on this point. 

   [15]Randall p 114; this was done when the draft contract was prepared in the Optima office: Whyman, p 2-6. 

   [16]Mr Isenbert p 2-97, 98; Mrs Isenbert p 3-68, 69; Randall p 108.  They had no prior experience of such a transaction: p 2-97. 

   [17]Mr Isenbert did not recall this: p 3-70.  Mrs Isenbert said Mr Ramsey said he would get the builder to sign, but said nothing about returning the signed contract to them: p 3-75.

9. Mr Arthurs said he received the contract, signed it where appropriate on behalf of the plaintiff, took copies for his purposes, and then posted the original back to Optima: p 40.  What happened to the original thereafter is a mystery – it was not produced and put in evidence at the trial.  The person at Optima who would ordinarily receive such a document, Ms Whyman, said that her practice was to put it in the file of another person who worked for Optima Lending Solutions Pty Ltd (“OLS”)(p 2-7), but that person, Ms McAllister, said that she only saw scanned copies of the contract which came to her as PDF documents: p 2-23.  That it was received by Optima is shown by the fact that a different Optima person emailed a copy to the plaintiff, not including the HIA General Conditions, together with some other documents, on 14 February 2013.[18] Mr Arthurs did not give a copy of the executed contract to the defendants, as required by the Act, s 36.

   [18]Exhibit 11. The reason for her doing this did not emerge. The other documents are identified at [99].

10. Neither of the Optima employees who were involved with the contracts said it was the practice to send a copy of the executed contract to the purchasers,[19] or indeed even to inform them that the contract had been executed by the builder (p 2-30, p 2-47), though Ms McAllister, a finance broker employed by OLS, said that, if she had been asked by a customer whether that was the situation, she would have said that it was, if that were true: p 2-49.  Both defendants denied that they were sent a copy of the executed contract, and I accept that they were not. 

    [19]Whyman p 2-8. 

11. In December Ms McAllister made contact with the defendants, and discussed what finance arrangements would suit them: p 2-21, 22.  What they worked out was that the defendants would obtain a line of credit from a credit union with which they were associated, to cover part of the cost and some renovations on their home, and the rest was to be borrowed from a financier located by OLS: Exhibit 32, which set out the basic structure of the arrangement: p 2-25.  She also sent them another copy of the Optima credit guide, on 11 December 2013: Exhibit 31. 

12. Mr Isenbert had some recollection of having been told, about the middle of February 2013, that the contract had been executed by the builder.[20]  His evidence was very vague about this, and he was not able to identify the person who told him; he nominated three people to whom they had spoken by phone: p 3-6.  Two of the persons named were not called as witnesses; one, Ms McAllister, was called, but she had no recollection of telling them this: p 2-47.  She did identify a “contact sheet” maintained as a record by OLS where some note could be made of various steps that had been taken including in particular contact with the defendants (Exhibit 34), on which her last entry is a note indicating that on 13 February 2013 she had contact with someone over the fact that a second financier had approved the finance necessary to enable the contracts to be completed: p 2-30, p 2-38.[21]  She thought she would have advised the defendants of this, as it meant that everything was in order for the contracts now to proceed; she sent them an email that day advising of the approvals: Exhibit 36.  That was the principle recollection that Mr Isenbert had. 

    [20]Mr Isenbert p 3-24, 25. 

    [21]See also Document 10, a letter to the defendants advising “formal” (but not binding) approval that day.  Two days later the lender’s solicitors wrote to the defendants: Document 53. 

13. The plaintiff was advised by Optima on 20 February 2013 that the defendants’ finance was now unconditional: Exhibit 12.  The defendants were concerned about the delay, and asked someone at Optima about this from time to time, being given plausible excuses.[22]  Subsequently Optima advised the plaintiff that the subdivision had become registered.[23] On 29 May 2013, someone from the developer sent Optima an authority to lodge an application for approval of the plumbing plan with the local authority and this was passed on to the plaintiff: Exhibit 13. The developer had to approve the design, landscaping and colour scheme of houses to be built on the estate and by email on 29 May on 2013 Optima gave the plaintiff advice on the requirements for such approval, which it said it would deal with: Exhibit 14. The plaintiff took steps to have construction plans drafted,[24] and retained Matrix Certification Services, a private certifier, to provide the necessary building approval.[25] 

    [22]Mr Isenbert p 3-5, 6.  It was caused by the developer’s delay in finishing the land subdivision.

    [23]Statement of claim, para 23(a); defence para 23.1.

    [24]They were ordered on 29 May: Exhibit 18.  They were sent to the plaintiff and the defendants on 25 July 2013: Document 91. 

    [25]In June 2013: Arthurs p 77.  See Document 133: on 18 June 2013.  A copy of the approved plans is in Exhibit 17.   

14. Mr Arthurs said that the plaintiff’s relationship with Optima began to deteriorate at the end of June, early July 2013: p 53.  As a result of this on 15 July 2015 he had his then solicitors send a letter to Optima terminating the arrangement for Optima to collect progress payments on contracts such as those with the defendants.[26] It was only that part of the arrangement that was terminated in this way: p 78. The plaintiff paid a fee to arrange BSA insurance for the construction of the house on the defendants’ land,[27] and also paid an amount to “QLeave” by way of a compulsory levy in respect of the construction of a house on that land: p 54.[28] 

    [26]Document 83, p 325.  In this way the plaintiff sought to take the benefit of the “kick backs” previously pocketed by Optima from the inflated contract prices.

    [27]The policy issued on 23 July 2013: Exhibit 17. 

    [28]But see Exhibit 20 – long service leave levy not paid.  Rix chased up on 16 July 2013: Exhibit 15. 

15. It appears that Optima moved quickly in response to this termination.  Mr Isenbert said that at some time, which he did not identify but which must have been mid July 2013,[29] he was told by Optima of a falling out with the plaintiff, referred to as “their builder”: p 3-8.  He was then told by Peter Ramsay of Optima that they had managed to find a new builder who would build a better house for them, and he arranged a meeting to sign a new contract: p 3-9.  Mr Isenbert also had some communication with the solicitors who had acted for him in the purchase of the land, and the defendant signed some documents with a view to putting an end to any contract which was in place with the plaintiff.[30] 

    [29]He thought that it was about 2 or 3 weeks before he signed Exhibit 26, on 30 July 2013. 

    [30]Mr Isenbert p 3-50; Mrs Isenbert p 3-80.   

16. The first contact Mr Arthurs had with the defendants directly was by an email which was sent to them on 25 July 2013 advising of the termination of the collection agency: Document 90.  Then on Saturday 27 July 2013 he telephoned the defendants in the morning.  According to him he spoke to Mr Isenbert, introduced himself and said he was the builder of the investment house: p 57.  He said Mr Isenbert disputed this, and claimed Optima was the builder.  He referred him to the first page of the HIA building contract at Item 3 of the Schedule, which Mr Isenbert looked at, and then admitted that the plaintiff’s name was on the contract.   Mr Arthurs said that Mr Isenbert appeared to become agitated, and he told him to calm down and advised him to get independent legal advice.  He said that he would be sending some material such as plans and insurance documents and a tax invoice for the deposit, and he said Mr Isenbert replied that he had already paid the full amount to Optima, and that the concrete slab was already down: p 57.  Mr Arthurs said that he told him that nothing had been done to build the house at that stage, invited them to look at the site, repeated that he would send the various plans and other documents, and told him that nothing would happen on the site until he paid the deposit.[31]  He also at some stage told Mr Isenbert that Optima was being terminated as the collection agent.  That he made a call to the defendants’ number on 27 July is confirmed by his telephone bill.[32] 

    [31]He said that that was his intention at the time (p 78) but in fact he did quite a lot with a view to starting work (p 68) and the deposit was never paid. 

    [32]Exhibit 16 p 6; for the defendants’ number, see p 3-62. 

17. Mr Isenbert recalled a phone call with Mr Arthurs, but was vague about the date; he thought it was around the time of the email on 27 July: p 3-7, p 3-36.  He did not give a very clear account of what was said in the phone call, but he said that Mr Arthurs said words to the effect that the defendants were in the middle of a scam, and the word “fraud” was used.[33]  He said Mr Arthurs was assertive and wanted them to switch allegiance from Optima to him.  He asked Mr Isenbert to look at the copy of the contract that was in his possession and he did so and saw that Mr Arthurs was on it, but said he was still under the belief that Optima were building the house: p 3-8. 

    [33]The use of the words “scam” and “fraud” were denied by Mr Arthurs: p 78.  See also Mrs Isenbert: p 3-72.  

18. After the call Mr Arthurs sent the defendants an email with an invoice for the deposit and another copy of the termination advice attached (Document 93), an email attaching copies of the BSA Insurance and the approved plans (Exhibit 17) and an email advising that he was ready to start construction when the invoice was paid: Document 95.  Mr Arthurs said that after this call he spoke to the site supervisor who was effectively in charge of the plaintiff’s business in Mackay (p 23), Mr Dobson, asked him to get a copy of the defendants’ contract and highlight certain points in it, and go around to the defendants to show it to them: p 59.[34]  Mr Arthurs said that he had never met the defendants in person (p 60) and did not speak to either of them on any occasion other than in that conversation on 27 July 2014: p 61.  After that conversation, he told the certifier to put his inspections on hold. 

    [34]To the same effect, Dobson p 2-71.  A call to Dobson’s mobile was made by Arthurs’ mobile after the call to the defendants: Exhibit 16, p 6. 

19. Mr Dobson said that he highlighted the relevant parts of the contract that had been sent to him, and went to the defendant’s house on 27 July 2013 but was told by Mrs Isenbert that her husband was out fishing, and he said he would come back the next day: p 2-71.  He returned the next day at about 3.00 pm and spoke to Mr Isenbert, showed him the passages in the contract he had highlighted, suggested he get independent legal advice, and then left: p 2-72.  Mr Dobson said he went back to the defendant’s residence on 30 July, saw Mr Isenbert outside of the house, and asked him whether he had had time to seek independent advice about the contract, and Mr Isenbert told him that they were happy to stay with Optima as the builder: p 2-73.  He said that he just thanked him and left, and the same day told Mr Arthurs that the defendants were going to stay with Optima: p 2-74.[35]  At 1.00 pm that day, the plaintiff’s solicitors emailed the defendants advising of the termination of the Optima collection agency: Document 99. 

    [35]Visits from Mr Dobson on these days were denied by Mr Isenbert: p 3-56, 57 and Mrs Isenbert: p 3-74.  Exhibit 16 shows a number of calls that day between Mr Arthurs and Mr Dobson: pp 6-20. 

20. Mr Dobson said that he had, before 30 July, set out stakes on the property to mark out where the under slab plumbing was to go, had had some bricks and some timber delivered to the property, and had had the lot scraped: p 2-55, 57, 74.  He said that on 29 July he sent an email stopping reinforcing which he had ordered from being delivered to the site, and to 11 other sites in the subdivision: p 2-72; Exhibit 41.  The under slab plumbing was not put in: p 2-56.[36]

    [36]He had a list of things for him to do or arrange: Exhibit 37.  Nothing after item 12 was done: p 2-58.  See also p 2-56. 

21. At some time in July 2013, Mr Randall received advice from Optima of problems with the plaintiff, and was asked to make arrangements for new contracts to be signed with three of the customers, including the defendants: p 115.  Following this, he was sent a copy of a contract with Optima Homes (Qld) Pty Ltd to be executed by the defendants.  When he arrived at their home with the contract it was not necessary for him to provide any great explanation or justification for the new contract: p 117.  The defendants executed the building contract, which he witnessed, and which he subsequently returned to Optima: Exhibit 26.  That document is now dated 30 July 2013.  Mr Randall said that the dates in Exhibit 26 were not in his handwriting, and he could not recall whether or not they were there when the defendants signed: p 117.  Mr Isenbert however spoke as if he had put the dates on the contract, as the dates on which they had signed it.[37] 

    [37]Mr Isenbert p 3-35; Mrs Isenbert also said it was signed that day: p 3-71. 

22. Mr Arthurs said that on 28 July 2014 Mr Dobson reported to him that he had seen Mr Isenbert who told him that he was staying with Optima as the builder: p 61, 62.  After lunch however Mr Arthurs said that he was told this by Mr Dobson on 30 July: p 66.[38]  Mr Arthurs said that his building programme involved starting work with various subcontractors on the defendants’ lot on Monday 29 July, and when he was told what Mr Isenbert had said he immediately told Mr Dobson to get everything off the site (p 62), and he cancelled arrangements he had made to obtain prefabricated trusses, the joinery for the kitchen and the windows that he had already ordered for the house.[39] 

    [38]Dobson, to the same effect p 2-74. 

    [39]Arthurs p 66, p 88.  No emails doing this were disclosed by the plaintiff: p 79.  He denied he did not cancel the trusses and windows until after 20 September. 

23. Mr Dobson said that after he was told to get everything off the site, he cancelled the subcontractors who had been booked to work on the site, and arranged for a truck to go to the site to collect the material there (p 2-75) but when he went to the site on 31 July it had been bulldozed, the stakes that he had put into the ground had been pushed over, and the bricks and timber had been disturbed: p 2-75.  He nevertheless salvaged what he could from the site.  Mr Dobson said that part of his job as site supervisor was to take photographs of the sites as they reached the various progress payment stages, to be sent to Optima: p 2-54.  No photographs of the damage to the site which he claimed to have seen on 31 July were put in evidence.

24. Mr Arthurs said that he received the notice sent by the defendants’ solicitors under the Act, though he did not identify when he received it, except that it was after the discussion with Mr Dobson on 30 July 2013.[40]  On 18 August, Mr Arthurs composed and sent personally an email to the defendants rejecting the purported withdrawal from the contract by the defendant solicitor’s letter: Document 105.[41]  There was a reference, in a letter of 25 September 2013 from the plaintiff’s solicitors, to a notice to remedy substantial breach dated 26 August 2013, presumably given to the defendants or their solicitors: Document 117.  Somewhat curiously however there was no other evidence of such a document having been given in some way to the defendants, and I am not prepared to find that it was given. 

    [40]Arthurs p 66. The notice is Document 101, dated 1 August 2013.

    [41]The email identified a letter dated 5 August 2013, but Mr Arthurs conceded under cross-examination that this was a reference to the letter dated 1 August 2013: p 80.

25. Mrs Isenbert said that a person who introduced himself as Sean Dobson came to their house at 2.00 pm on 29 August 2013 and said that he wanted to show her something in a bundle of material he had, presumably the copy of the contract, but she told him that her husband would be home next Tuesday and to come then: p 3-72, 73.  She added that he told her that they should get their own lawyer because there was going to be “a big shit fight between them.”  Mrs Isenbert made a note of the conversation that day: Exhibit 46.  She said that Mr Dobson came to the home a second time about a week later and spoke with Mr Isenbert, but she was not involved in that: p 3-74.

26. Mr Isenbert said Mr Dobson came to their house on 5 September at 9.00 am: p 3-10, p 3-61.  His version of the conversation then was that Mr Dobson also mentioned they were in a scam and the word “fraud” was mentioned, and that they should disassociate themselves from Optima in favour of Mr Arthurs.  He said that on that occasion Mr Dobson gave him a copy of the contract, which he retained and which became Exhibit 42.  Mr Isenbert said that he made a note of the visit, Exhibit 44, and that two days later he faxed the document which was given to him to his solicitors, when he had access to a fax machine at work: p 3-12, Exhibit 43.  He did not have access to a fax machine at home. 

27. Mr Dobson denied that he went to the defendants’ house on 5 September 2013, and denied leaving Exhibit 42 with them: p 2-81.  He said that that day he went to Sarina with Mr Arthurs, which was confirmed by Mr Arthurs, who said that that day he and Mr Dobson were finalising four houses in Sarina, returning to the office in Mackay at about 3.00pm before he flew out of Mackay at about 5.00pm: p 66-7.

28. Around 20 September, Mr Arthurs prepared what he described as a list of the money outlaid on the lot the subject of the contract with the defendants, with a view to providing this to his lawyers: p 67.  He emailed this to Mr Dobson on 20 September 2013, to have Mr Dobson confirm these costs, though given Mr Dobson’s role in the project I would have thought that Mr Arthurs was in a better position to identify costs of this nature than was Mr Dobson: p 68.[42]  In fact, on the same day Mr Dobson went to Mr Isenbert, and gave him a copy of Exhibit 19: p 83.  He said that the purpose of giving it to Mr Isenbert was “just to give him the heads-up and just to let him know that this was here, and he’d go and get independent legal advice” (p2-85).  Mr Arthurs denied that he told or asked Mr Dobson to do this, as did Mr Dobson (p 2-85), who denied that he did this to intimidate the defendants: p 2-84.  Mr Isenbert said that on 20 September, Mr Dobson came to their house at 1.00 pm with the attachment to the email printed out, and said that they should switch their allegiance to Mr Arthurs otherwise these two documents would be submitted to a solicitor the following Monday: p 3-13.  Mr Isenbert made a note of that conversation: Exhibit 45; p 3-14.

    [42]When it was suggested that part of the document was grossly exaggerated, Mr Dobson’s response was that he did not know because he did not handle that side of it: p 2-84.  See also p 2-84, L 42. 

29. The building certifier company engaged by the plaintiff to provide certification services in relation to the houses in Mackay, including the subject of the contract with the defendants, was operated a Mr Rix: p 90.  Mr Rix identified Exhibits 20 and 21 as documents he prepared under the Building Act in relation to the construction of the building on the defendants’ lot: p 92, 93.  He also signed a notice to the defendants, Document 133: p 94.  Mr Rix said that he did the approval and sent notice to the owner before he heard about difficulties with Optima, which he heard of at the end of August or the beginning of September: p 95.  After this he found out about the approval by another certifier of a different building on the block, and he sent Mr Isenbert a couple of emails, Exhibits 22, 23, and had a telephone conversation with Mr Isenbert in the course of which Mr Isenbert told him that he had been told (by his solicitors) that he could ignore the contract with Mr Arthurs and tear it up: p 96.     

30. Mr Rix was not consistent about the sequence: at p 96 he said “I sent him a couple of emails and he finally rang me,” but at p 98 he said that the phone call was “after the first one… but before that second one.”[43]  Mr Rix said that he spoke to Mr Isenbert because Mr Arthurs had in conversations with him (which must have been in late September shortly before the emails were sent) indicated that he still wanted to perform the contract with the defendants: p 98.  Mr Rix said that in the conversation he told Mr Isenbert that he was in the middle of a scam, and that Optima was being fraudulent: p 98.  Mr Rix denied that he was interfering in the dispute between the plaintiff and defendants in the interest of Mr Arthurs (p 100), but it seems to me that there is no other construction which can sensibly be put on his intervention in this way.  The emails can only be described as a forceful attempt by Mr Rix to browbeat Mr Isenbert into continuing with the plaintiff. They certainly render quite unrealistic any notion that Mr Rix was acting as an “independent” building certifier. 

    [43]As Exhibit 23 says, that is, on 18 September 2013.  Mr Arthurs said he told Mr Rix that lot 533 was not going ahead on 19 September 2013. 

31. There is also the consideration that, at the time he was giving evidence, Mr Rix was 83.  Some of his evidence, even in his examination in chief, was unresponsive, confusing and inconsistent.[44]  I have already given one example of an inconsistency.  On p 96 he said at line 3 that he spoke to Mr Isenbert at “about that time” (that is, August/September: p 95).  But on the same page three questions later he said “I had no contact with Isenbert at that time.”  He then said that he had contact “at the beginning of September”, but the emails he sent were dated 17 and 18 September.  His suggestion that he somehow had a statutory duty to investigate this matter was obviously nonsense: p 100.[45]  I had the distinct impression that Mr Rix was showing not only loyalty to Mr Arthurs, but signs of senility consistent with his age.  He told me there was no age limit for building certifiers.  If that is so, he is a strong argument for the imposition of one, lower than 83.  Nevertheless, bearing in mind that Mr Isenbert essentially corroborated his evidence as to the emails and conversation (p 3-15), I do not consider his evidence was dishonest. 

    [44]See for example p 91 L 34, 35, where a completely unresponsive answer was given.

    [45]In view of his emphatic endorsement of the plaintiff’s position in Exhibits 22 and 23, his attempts to get information as to what had passed between the defendants and Optima were obviously with a view to passing this on to the Plaintiff.   

32. On 25 September 2013 the plaintiff’s solicitors wrote to the defendants’ solicitors to say that, on account of the defendants’ failure to comply with what was said to be a notice to remedy substantial breach supposedly sent on 26 August 2013, the plaintiff had terminated the contract effective immediately: Document 117. It was at this time that the engagement of Mr Rix’s company was terminated: p 85; Document 116. The following day, a second notice of withdrawal under the Act was sent to the plaintiff: Document 122.

Credibility

33. There is a conflict in the evidence, particularly between the defendants and Mr Dobson, as to the extent, timing and what passed between them, which I need to resolve on the basis of the credibility of the witnesses.  The defendants struck me as straightforward, unsophisticated people, as might be expected given that they had been persuaded by Optima to enter into these transactions in the first place.  They frequently did not seem to have a very clear recollection of just what had happened on particular occasions, and their evidence seemed to be more that certain things had happened which stuck in their minds, rather than necessarily a comprehensive description of the event.  They seemed to me to make reasonable concessions in cross-examination, and in one matter there was some inconsistency between their evidence, which tends to confirm that their evidence was honest rather than a story which they had concocted together.[46] 

    [46]Mr Isenbert said that at the time he executed the building contract he thought the builder was Optima (p 3-17), whereas Mrs Isenbert said that on that occasion she noticed that the contract identified the plaintiff as the builder, and pointed this out (p 3-68) and Mr Ramsay said he had to take the contract to the builder to sign: p 3-75.  I accept this occurred but that its significance was missed by Mr Isenbert. 

34. Generally there was nothing in particular about Mr Dobson’s evidence or the way he gave evidence which affected his credibility, though there were some aspects of his evidence which struck me as implausible.  For example, his failure to take photographs of what he said was the damage done when he went to the site on 31 July seems odd to me.  As well, he said that he gave a copy of Exhibit 19 to the defendants without having been asked to do so by Mr Arthurs, but really did not give a plausible explanation for why he would have done such a thing without an instruction to do so from Mr Arthurs.  That he would give a copy of Exhibit 19 to Mr Isenbert, just to give him the “heads up” as he put it, without pointing out to Mr Isenbert the significance of his doing so, that is to say, what effect this was supposed to have on Mr Isenbert, also seems odd.  All he would admit to was that he recommended that Mr Isenbert obtained independent legal advice (p 2-85) but he did not say what it was that he was to get independent legal advice about. 

35. There does not seem to be any point in giving Mr Isenbert advance notice of a claim which is going to be brought against him unless it is with a view to persuading him to do something in response to that notice.  Yet there was not even a demand to pay up this money otherwise legal proceedings would be taken.  In short, Mr Dobson did not either give evidence of any plausible reason for providing this document spontaneously to Mr Isenbert, or of his having said when it was handed over anything which would provide a plausible reason for doing so.

36. There was also the consideration that, although Mr Dobson had a copy of the contract signed by Mr Arthurs (Exhibit 40) which he said he took with him when he went to see Mr Isenbert on 28 July, with a view to showing him certain things in it which he had highlighted, he denied that he provided Mr Isenbert with a copy of the contract, specifically the copy which became Exhibit 42.  Yet on 7 September 2013, Mr Isenbert faxed to his solicitors that document under cover of a note that “this is the contract that was given to me by the builder on Thursday”: Exhibit 43, which includes a transmission report dated 7 September 2013.  This is not just a copy of the contract signed by Mr Arthurs, which on the defendants evidence they did not have themselves until Mr Dobson gave it to them,[47] but a copy which is highlighted in very much the same way as Mr Dobson said he highlighted Exhibit 40.  There is one minor difference, which could easily be explained by a lack of care when transferring the highlighting on the original to the highlighting on the copy.  On Mr Dobson’s account Mr Isenbert paid no real attention to Exhibit 40 when they were together.  Mr Dobson’s version does not explain how Mr Isenbert could have obtained an only slightly inaccurate understanding of what parts of Exhibit 40 had been highlighted by Mr Dobson.  In short, Exhibit 43 could not exist unless it was a copy of the contract, highlighted by Mr Dobson as was Exhibit 42, and given to Mr Isenbert.  If that is so, it follows that Mr Dobson’s denial of having done so is false.

    [47]Isenbert p 3-31, consistent with the defendants’ whole case. 

37. There is also the consideration that it seems to me strange that Mr Isenbert would tell his solicitors that the contract was given to him by Mr Dobson on Thursday, i.e. on 5 September, if in fact it had been given to him at some time in late July.  It is clear that the solicitors in late July were conscious of the significance of whether or not the defendants had been provided with a copy of the contract, and this must have been something they would have been asking the defendants about.  In those circumstances, one would expect the defendants to be telling their solicitors promptly as soon as they got a copy of the contract, which is what they did by Exhibit 43 if it had been given to them on 5 September.  That supports their evidence that there was a visit on 5 September, and tends to falsify the denial of such a visit by Mr Dobson, whose evidence in this respect was corroborated by Mr Arthurs.  That suggests that both of those witnesses are not reliable. 

38. There is also the consideration that Mr Isenbert made a diary note dated 5 September to the effect that Mr Dobson came to their house, which gives a time as 9:00 am, and advised them that the contract with the plaintiff was still valid and not to sign a second contract as they would be liable for payment on both: Exhibit 44.  In September 2013 Mr Dobson was using a mobile phone on the plaintiff’s account.  The bill issued 16 September 2013 became Exhibit 24, and shows on p 19 calls made on 5 September on that mobile number between 7:34 am and 8:26 pm.  Each call records an “origin”, presumably the mobile phone tower through which the phone was operating at the time of the call.  At 8:01 and 8:04 am the origin is shown as Bucasia, which is located between Mackay and Shoal Point, close to and a little to the northeast of Eimeo, where the defendants live.[48]  At 8:27 am there was a call showing Mackay as the origin, and at 10:20 am there was a call with the origin Hay Point,[49] while at 11:28-11:49 am there were three calls with an origin Sarina or Sarina South. There were then a series of calls beginning at 12:56 pm with the origin Mackay, followed at 3:49 pm with one at South Mackay,[50] and from 3:56 pm five at Mackay East. There is nothing in that list of origins which would be inconsistent with Mr Dobson having been at Eimeo at around 9:00 am, but they are inconsistent with their being in Sarina by 10:00 am (p 67) and not being back at Mackay until about 3:00 pm (p 66).

    [48]Isenbert p 2-97.  The address is also on lots of documents in evidence. 

    [49]Between Mackay and Sarina.  But Mr Arthurs claimed they were in Sarina by 10.00am: p 89. 

    [50]Where the airport is, consistent with his having dropped off Mr Arthurs for his flight to Brisbane at 5.00pm: see Arthurs p 67. 

39. Mr Arthurs’ mobile phone records are in the same Exhibit, and on page six there were a number of calls made on 5 September, 8:35 am, 12:54 pm, 2:11 pm, and 2:33 pm, all showing an origin of Mackay.[51]  The next call was at 7:09 pm at Slacks Creek.  The origins listed for Mr Arthurs’ phone are not inconsistent with his having been to Hay Point and Sarina with Mr Dobson on 5 September, at the times indicated in Exhibit 24, but this exhibit appears to be inconsistent with Mr Dobson’s evidence about the extent of time that he spent in Hay Point and Sarina that day.

    [51]He conceded that he may not have been with Mr Dobson at 9.00am, contrast Dobson p 2-83, L 5. 

40. Mr Dobson denied the conversations recorded by the defendants in contemporaneous notes on 29 August 2013 and 5 September 2013, and that he said most of the things recorded on the contemporaneous note for the visit on 20 September 2013.  Mr Dobson had no contemporaneous notes to support his accounts of when he said he visited the defendants, and what he said passed on each occasion, and I think the existence of the contemporaneous notes bolsters the credibility of the defendants.  This is particularly the case where it would not have been obvious to them at the time that there would have been any particular significance to them in their fabricating notes of conversations with Mr Dobson which did not occur.  Overall therefore in relation to the interactions between the defendants and Mr Dobson, I prefer the evidence of the defendants.

41. This has some implication for the evidence of Mr Arthurs, since there are aspects of Mr Arthurs evidence which are inconsistent with the defendants’ version of their interactions with Mr Dobson.  For example, Mr Arthurs cannot have been told by Mr Dobson on 30 July that he had been told by the defendants that they were staying with Optima if, as I find, there was no contact between the defendants and Mr Dobson at that stage.  The notion that thereafter Mr Arthurs treated the contract as being at an end for this reason[52] is also difficult to reconcile with other contemporaneous documents.  For example, at 1.00 pm that day the plaintiff’s solicitors emailed a letter to the defendants asking them not to make payments to Optima but to pay “all future progress payments” into the plaintiff’s bank account, details of which were provided: Document 99.  There is nothing in that letter to suggest that at that time the solicitors were aware of any attitude by the plaintiff that the contract was at an end.  It may be that that was formed too late in the day for that letter to be intercepted.  There was however also a letter sent by the plaintiff’s solicitors to the defendants’ solicitors, in relation to this and other matters, on 5 August 2013: Document 104.  That letter contained nothing suggesting that the plaintiff regarded this contract as being at an end, and parts of it are clearly inconsistent with that, such as an assertion that no further payments should be made to Optima.

    [52]For example, at p 81. 

42. The email Mr Arthurs composed and sent personally, Document 105, said nothing about any supposed contact between the defendants and Mr Dobson, nor does it contain anything which is consistent with the notion that Mr Arthurs had decided that the plaintiff was not going to be proceeding with the building contract with the defendants; on the contrary in the second last paragraph he said “please note I am ready, willing and able to proceed with my obligations under the domestic building contract.”  That is on its face clearly inconsistent with the notion that, so far as he was concerned, since 30 July the contract was at an end, and indeed his evidence at p 81 that as at this date he was not intending to construct the dwelling.  His explanation, that he considered that the defendants were liable under the contract for breach of it, is not what he said in the letter. 

43. The letter of 25 September 2013 from the plaintiff’s solicitors advising that their client had terminated the contract effective immediately, Document 117, is inconsistent with the notion that the plaintiff terminated the contract on 30 July.  It is however consistent with Mr Arthurs having sent Exhibit 19 to Mr Dobson for him to deliver it to the defendants, to deter them from abandoning the contract.  Mr Dobson was not involved in costings, and so Mr Arthurs explanation for doing this, that he wanted Mr Dobson to check the costings (p 68), is implausible, particularly in circumstances where there was no evidence from either of them that Mr Dobson did in fact do so, and drew to Mr Arthur’s attention the fact that one part of the document was wrong.  It refers to what is supposed to be the cost of standing down subcontractors, but it gives the cost for 12 contracts, rather than just this one: p 83.  This error greatly inflated the total “claim”.  In any case, to be claiming the cost of standing down subcontractors is consistent with a claim for damages for delay, and inconsistent with an assertion that the contract was treated as terminated on 30 July.[53] 

    [53]This was also in the original statement of claim, but called “cost of quitting the site”: Arthurs p 87. 

44. The evidence that Exhibit 19 was prepared for sending to the solicitors (p 67) is difficult to reconcile with the fact that it is completely different from the amounts claimed as damages for breach of contract in the initial statement of claim filed on 2 October 2013.[54]  There is some similarity in the total claimed, but that is because the statement of claim asserted that the plaintiff had lost profit on the contract of the order of $116,000.  Exhibit 19 looks like a deliberately exaggerated assessment of the plaintiff’s supposed loss, delivered with a view to persuading the defendants to have the plaintiff build the house on the land.  It was at about this time that Mr Rix emailed and spoke to the defendants.  Again, the content of his communications was clearly an attempt to pressure the defendants into staying with the plaintiff.  It is a remarkable coincidence if this occurred at about the same time as Mr Dobson dropped off Exhibit 19, if both were not part of a last attempt by Mr Arthurs to save this contract.  It is only when that attempt failed that the letter Document 117 was sent by the solicitors on 25 September, reflecting Mr Arthur’s final abandonment of the contract.

    [54]Despite Mr Arthurs assertion at p 81, that the statement of claim repeated the exaggerated figure in Exhibit 19.  But see p 87. 

45. It seems to me that the contemporaneous documents are quite inconsistent with the evidence Mr Arthurs gave to me, and that is a matter which reflects adversely on his credit.  The fact that he would put together and have given to the defendants the document in terms of Exhibit 19 is also something which reflects badly on his character, as it is plainly exaggerated, and indeed much the same can be said for the initial claim in the statement of claim.  The assertion that the plaintiff lost profit of over $116,000 on a contract where the plaintiff was only ever going to get $240,000 is obviously fanciful. 

46. There is also the inconsistency between his evidence that it was “exactly right” that when he sent the invoice for the deposit he did not intend to commence construction unless the deposit was paid (p 78) and his evidence that various subcontractors were programmed to start work on 29 July (p 62), as arranged earlier in 2013 by Mr Dobson: p 2-55, 56.  But he said it was only after he was told by Mr Dobson on 30 July that the defendants were staying with Optima that he called off the work: p 66.  That implies that, but for what he was told by Mr Dobson, work would have gone ahead on the site, which contradicts his evidence at p 78.  Conversely, the failure to start work on 29 July, and subsequently, and cancelling material, can be explained by the non-payment of the deposit, without any such conversation on 30 July. 

47. There is also the consideration that the effect of the arrangement between the plaintiff and Optima was essentially to bring into existence a series of contracts between the plaintiff and those who were sufficiently gullible to be taken in by Optima’s sales technique, under which the amount to be paid to the plaintiff to build the house that was to be built on their land, and hence presumably the value of that house, had been substantially, and perhaps fraudulently, inflated.  The customers were thereby cheated out of the difference, since they were never told the amount that was being paid as a kickback to Optima.[55]  Mr Arthurs conceded that there were in the order of 60 to 70 of these contracts involved (p 70), and if the kickback of over $57,000 paid in this case was typical, the customers overall were cheated out of about $4 million. Someone who would be willing to participate in this sort of industrial scale deception is unlikely to be above a little perjury.  

    [55]The contract notes at Document 2 p 112 acknowledged “payments to be made to Optima Homes (Australia) to act as agent for the builder and the building contract” [sic] but did not disclose the amount.

48. By the time of the trial, Mr Arthurs had a motive to invent the conversations on and before 30 July with the defendants, because the first notice of withdrawal under the Act was given on 1 August. The main argument presented by the plaintiff at the trial was that the contract was validly terminated by the plaintiff for the defendants’ breach before the first notice under the Act was given, preserving its right to damages. That argument was based entirely on the supposed conversations between Mr Dobson and the defendants on 27 – 30 July, and Mr Arthurs’ reaction to them, which are not supported by any contemporaneous document, and not mentioned in the original statement of claim filed 2 October 2013 or the original reply filed 22 November 2013.

49. Overall therefore I am not prepared to regard Mr Arthurs as a reliable, or indeed honest, witness, and in general I am not prepared to accept his evidence unless it is supported by contemporaneous documents, or other reliable evidence, or it is otherwise inherently likely.  The same applies to Mr Dobson.  I find that events unfolded as set out in the contemporaneous documents, and in the evidence of the defendants.

Plaintiff’s statement of claim

50. There is nothing that I need to resolve in relation to paragraphs 1 and 2.   Paragraph 3(a) alleged that a Mr Ross and a Ramsey were involved in some business.  There was evidence that there was a Mr Ross and a Mr Ramsay who had some association with Optima, and in that sense they were involved in the business of selling house and land packages to members of the public.  Subparagraph (b) then referred to the business “carried on by Mr Ross and Mr Ramsay”, but there was no evidence that either of them carried on any business, as distinct from the business (or businesses) carried on by the Optima group of companies.  This is a point taken in the defence, and I think that it is valid.  The same difficulty arises in relation to paragraph 3(c), and it follows that the rest of paragraph 3 was not made out.  There is however one allegation within paragraph 3 which requires some further attention, because it was central to one of the matters particularly in issue in the proceeding.  

Agency of Optima

51. Paragraph 3(b)(v) alleged that the business included acting on behalf of such investors, which they referred to as clients, to complete all necessary contracts and other documentation in respect of such house and land packages.  This allegation recurs.  For example, in paragraph 13(f) it is alleged that:

“The defendants authorised Mr Ross and/or Mr Ramsay and/or the Optima entities and/or the Optima personnel[56] to act on their behalf as their agent:

[56]A pleading in this form does not properly identify to the defendants the case the plaintiff is seeking to make, and strongly suggests that the plaintiff doesn’t know what its case really is.  The pleader might as well have added “and Uncle Tom Cobley and all.” 

(i)          to receive the building contract executed by the plaintiff, and to communicate to the defendants the receipt of the executed building contract;

(ii)        to communicate on behalf of the defendants with the plaintiff in relation to matters regarding the land contract, the building contract and construction work;

(iii)        to forward the executed land contract, the executed building contract and the associated documentation to the defendants’ financier;

(iv)       in respect of the matters pleaded in paragraph 3(b)(v) hereof.”[57]

52. These allegations are very much in issue, except that it is admitted that OLS acted as finance broker for the defendants: defence para 13(a).  The very vagueness of the allegation in the plaintiff’s pleading signals what was in fact the case, that there was no evidence of any express creation of any agency, either orally or in writing, by the defendants in favour of any company in the Optima Group, or for that matter any individual associated with Optima in any way, other than in relation to finance broking.  The plaintiff does not point to any document by which an agency is created, nor have I noticed any such document. 

53. By way of contrast, Document 2 contained an express acknowledgement that Optima Homes (Australia) Pty Ltd is not the builder and acts as agent on behalf of the builder for the purposes of the domestic building contract: p 112.  That was consistent with the system as explained, and particularly that the builder would have no direct contact with the customers of Optima.  It was an essential element of the Optima Scheme that Optima, in arranging for the building contract to be entered into, was acting as agent for the builder, and not as agent for the customers, because if Optima were acting as agent for the customers, the receipt by it of the substantial kickbacks from the building contracts would appear to be a criminal offence under s 442B or s 442E of the Criminal Code.[58]The relevant paragraph in the contract notes appears to have been deliberately formulated to ensure that the factual position was taken outside the operation of those sections.[59]  Given that the size of the kickback was not to be disclosed to customers, it was essential for the operation of the Optima system for Optima not to be an agent for the customers in relation to the building contracts. 

    [58]At the very least, since an agent is a fiduciary, there would have been a duty to disclose the extent of the benefit received: Dal Pont, op cit, p 207, 8; Keogh v Dalgety and Co Ltd (1916) 22 CLR 402 at 417; Fitzwood Pty Ltd v Unique Goal Pty Ltd (2001) 188 ALR 566 at [32].

    [59]See also the account of the arrangement given by Optima’s solicitors in Document 85, and on Mr Ross’ contemporaneous notes Exhibits 2 and 4. 

54. This would also explain why there was some effort made to keep the finance broking company, OLS, as a separate entity, even to the point of putting it in a different part of the Optima offices.[60]  As finance broker that company was acting as agent for the defendants once it was engaged by them to do so.  The system involved the company offering its services as finance broker to customers who had been signed up after the contract was signed, and it was then a matter for the customers to decide whether or not to take up the offer.  In the present case, that company was engaged as finance brokers, and it was therefore the agent of the defendants for that purpose.  I will come to that matter later.

    [60]Whyman p 2-4; p 2-13; McAllister p 2-23; p 2-36. 

55. This is of some importance, because agency is generally not something which can be unilaterally thrust upon a prospective agent.  The ordinary way in which an agency is created is by agreement between the principal and the agent, which requires at least the assent of the agent.[61]  In the present case, there was no evidence of any express conferring of authority by the defendants on any other company, or person, nor any evidence of any express assent by such company or person to the existence of an agency.  Nor was there evidence of anything that the defendants actually did by which they objectively manifested an intention that some Optima company or person should be their agent in relation to the building contract, nor was there any purported acting as agent by any other Optima company or person.  It is impossible in these circumstances for the existence of an agency relationship to be implied. 

    [61]Dal Pont, The Law of Agency (3^rd Edition 2014) p 83, citing Morgans v Launchbury [1973] AC 127 at 140; Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [175]-[177]; Boustead and Reynolds on Agency (20^th Edition 2014) p 63 acknowledge this as the traditional view, but quote some academic literature in support of the proposition that the true basis of agency is a unilateral manifestation of will, as found in a Power of Attorney: p 4, p 64.

56. As a general proposition, if a person acts as if another person is the first person’s agent for some purpose, and the other person acts as if he is the first person’s agent for that purpose, the existence of the agency will be implied.[62]  Again, there was no act of either defendant identified which involved their acting specifically as if Optima was an agent for the defendants, rather than as, with regard to the building contract, an agent for the plaintiff, or simply on its own behalf as a marketer of house and land packages to people like the defendants.  There was certainly no evidence that anybody on behalf of Optima purported to act as agent for the defendants in relation to the building contract.

    [62]Dal Pont, op cit, p 84-85, citing Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 at 150; Boustead and Reynolds, op cit, p 61.

57. The plaintiff’s case placed some reliance on certain statements made by Mr Isenbert in the course of cross-examination.  He said at p 3-26 that the impression he was given was that “they [Optima] would handle everything for us,” that that was their profession and that he thought it was part of their profession to take care of any requirements in relation to the building contract documentation.  The difficulty with this evidence is that Mr Isenbert was at the relevant time under a fundamental misapprehension as to the nature of the contract that he had entered into: he thought that the effect of the documents he signed was that the defendants had made a contract with Optima for the house to be built.  Indeed, even when his attention had been drawn on 27 July to the reference to the plaintiff’s name as the builder in the contract, he still appeared to retain the view that the contract was with Optima, even if it provided that the house would actually be built by the plaintiff.  He acknowledged that, as a result of the discussion with Mr Arthurs on 27 July, he knew that Mr Arthurs must have been the builder (p 3-37), but he did not ever acknowledge that at any relevant time he believed that the building contract he had entered into was with the plaintiff rather than with Optima.  In addition, he accepted what he was told by Optima, sometime before 27 July 2013, that the first contract could be disregarded and that there was a new contract to be signed.  Hence by the time he spoke to Mr Arthurs, the point was academic as far as he was concerned because the original contract was no longer relevant: p 3-37. 

58. The evidence of Mr Isenbert is to the effect that as far as he was concerned he had contracted with Optima for it to have a house constructed on the defendants’ land.  That was not a correct view of the legal position, though it is an understandable mistake given the way the building contract was dressed up with Optima materials.  In this context, his understanding of the situation, and his expectation of what Optima would do, being predicated on an incorrect understanding of the legal position, cannot provide a basis for a conferral of authority on some Optima entity to act as the defendants’ agent for the purposes of a contract which he did not know existed.

59. Mrs Isenbert’s position was essentially similar, although she was made aware of the fact that the builder was the plaintiff, and that Mr Arthur was going to sign the contract.  Her understanding was that Optima was providing them with a package deal, under which they would organise everything: p 3-77.   She later clarified that the package as the house and land for them to rent out.  Optima were in effect providing her with a product in the form of a rental house: p 3-82.  She conceded that Mr Ramsay had said to them that he had to take the contract back to the builder to sign, but he did not say that it would be returned to them: p 3-75.  Her position was that her husband handled everything, though occasionally she would speak to someone from Optima, such as Sandy, when they telephoned: p 3-76.  Essentially she left everything to her husband and Optima: p 3-77.   In this situation, although Mrs Isenbert was expecting that Optima would organise the house for them, it does not follow that her intention at the time was that they would do so on behalf of them, rather than simply as part of their business of putting together the package that they were supplying to the defendants. 

60. Mrs Isenbert was never asked directly whether at the time of signing the contract she understood that the other party to the building contract that she and her husband were entering into was the plaintiff rather than Optima, but if she understood that Optima was supplying them with the house and land package, that would be consistent with her understanding.  Again, if that was her understanding of the position, her intention would not have been to create anything in the nature of an agency relationship between her and Optima since the positon of Optima as far as she was concerned was that of vendor or supplier. 

61. After the contract was signed, the only thing that Mr Isenbert did was to ring up Optima from time to time to find out what was happening and why building work had not yet started on their lot: p 3-6.  That is consistent with his understanding that his arrangement was with Optima.  The various excuses and explanations given, convincingly, to him came either from someone working for OLS, talking about how the finance application was progressing, or from someone from some other Optima entity in fact acting as agent for the plaintiff, though Mr Isenbert did not know that.  There was certainly nothing in any of those actions by which any such person purported to act as agent for the defendants, so far as the evidence goes. 

62. The contract after being signed by the defendant was sent by Optima to the plaintiff, but that was pursuant to the arrangement between Optima and the plaintiff, not something done as agent for the defendants.  The contract was then returned by the plaintiff to Optima, because it was part of the arrangement between the plaintiff and Optima that the plaintiff would do so, rather than with a view to giving it to someone acting on behalf of the defendants, but that ultimately does not matter; what matters is whether the defendants had in some way authorised Optima to receive the signed building contract on their behalf.  There was certainly no evidence of any actual intention on the part of the defendants that the signed building contract would be received and held by Optima specifically on their behalf, and no manifestation of that intention.[63]  They had been told by the Optima salesman that the signed contract would be sent to them, and the correct interpretation of the documentation entered into by them was that, for Optima to send them a copy of the executed contract would be the act of Optima as agent for the plaintiff.  Mr Isenbert had no recollection of having any particular intention at the relevant time as to what was to happen to the executed contract: p 3-22.  That does not amount to some sort of implied intention that the executed contract would be received and held on his behalf by Optima. 

    [63]Mr Isenbert denied such an authority: p 3-23.  He was not concerned about getting the contract back (p 3-20) and did not ask for it: p 3-27. 

63. It must be remembered that Optima had a considerable interest in the building contract being completed, because it was getting over $57,000 from that process, and that explains why Optima was liaising with the plaintiff about things like the progress of the subdivision, and assisting the plaintiff by, for example, giving advice on how to satisfy the requirements of the developer.  This may have facilitated the plaintiff’s work under the contract, and may even have satisfied in practice specific contractual obligations of the defendants, but that does not mean that Optima was doing things on behalf of the defendants, rather than in its own interest.  The defendants did not ask Optima to do things on their behalf, because, once they had signed the documents which Optima presented for signing with the contract, so far as they were aware there was nothing else for them to do apart from arranging finance to enable the contracts to be completed, part of which they did themselves, and for part of which they had the assistance of OLS. 

64. There is in the circumstances of this case no reason to characterise what actually happened as the defendants’ acting as if Optima was their agent in relation to the building contract, and Optima acting as the defendants’ agent in relation to the building contract.  The defendants did not demonstrate by their actions an intention that Optima would act as their agent, nor did Optima demonstrate by any of its actions an intention to accept that authority and act on it.  There is also the consideration that Optima was expressly the agent of the plaintiff in relation to the building contract.  It is possible for the same person to be the agent of two different parties to a transaction, but in circumstances where there is an express conferral of authority to act for one party, and there was good reason why the agent would be keen to avoid acting as agent for the other party, there would have to be evidence of acts which clearly indicated the existence of an agency relationship between the agent and the other party before a court would be justified in making such a finding.[64]  Far from there being such clear evidence in this case, there is in fact no evidence.  As well, a court will not readily infer such a relationship if it put the agent in a conflict of interest.[65] 

    [64]Commissioners of Customs and Excise v Pools Finance (1937) Ltd [1952] 1 All ER 775, where it was held that the documentary evidence was clear.

    [65]Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 at 234.

65. The plaintiff relied on Permanent Trustee Co Ltd v O’Donnell [2009] NSWSC 902, where it was held that a finance broker was also the agent of a lender (or a loan provider) as well as the agent of the borrower. In that case there was a contract in writing between the broker and the lender, and a further oral agreement between them as to how the broker would behave, and as to functions of the lender that the broker would perform, and Price J found that the broker was also the agent of the lender, distinguishing a number of cases like Barker v GE Mortgage Solutions Pty Ltd [2013] QCA 137. It is sufficient to say that the facts in that case were very different from those in the present case. There was no control exercised by the defendants over Optima, and no arrangement between them for Optima to perform functions for the defendants. This case really stands as a example of how difficult it is to show that the agent of X is also the agent of Y.

66. The position is much the same as if A contracts with B to build a house for B, and then subcontracts the carpentry work to C.  So far as B is concerned, it is A’s responsibility to organise everything, including the carpentry work, in order to supply the built house, but that does not mean that A becomes B’s agent for the purpose of the subcontract to C.  Not everyone performing a task which is for the benefit of another will be an agent.[66]  Of course, the actual legal positon here was that there was to be a contract directly between the defendants and the plaintiff, the equivalent of a contract in my example between B and C.  But if in that situation there were a contract directly between B and C, for C to do the carpentry work necessary on the house that A was building, that would not necessarily make A B’s agent for the purpose of the contract between B and C.  It could be arranged in that way, for example by providing that C would do the work as and when directed by B, and that A would give such directions on B’s behalf, but it would not have to be done that way, and the fact that A was responsible for delivering the entire house would not mean that A would have to be B’s agent for the purpose of the contract with C. 

    [66]Tonto Home Loans (supra) at [177].

67. There are two difficulties in the way of the plaintiff’s argument about agency.  The first is that the subjective expectation of both defendants was, clearly in the case of Mr Isenbert and quite possibly in the case of Mrs Isenbert, based on the misapprehension of the true relationship between the defendants and Optima in relation to the building contract.  This in my view is an insecure foundation for the existence of any implied legal relationship.  Apart from that, even if the defendants had at the time the necessary expectation or intention as a mental state, what matters is the manifestation of that intention by their words or deeds at the time.  Even on the Boustead theory mentioned above, that agency is based on a unilateral manifestation of will,[67] the unilateral will must be made manifest for the agency to be created, not merely exist in the recesses of the mind or minds of the putative principals.  There was simply no evidence of any manifestation of that will.  Mrs Isenbert may have had an expectation that Optima would get the builder to sign the contract documents on her behalf, but she had no recollection of any express discussion to that effect at the time: p 3-78. 

    [67]Boustead and Reynolds, op. sit. p 4.

68. Accordingly I am not prepared to find that any Optima entity was the agent of the defendants for the purposes of the building contract, that is for the purposes of any contract between the plaintiff and the defendants. Specifically, I find that Optima was not the agent of the defendants for the purposes of the receipt of the copy of the contract required to be provided to them by the builder under the Act. I also find that communication to Optima of the fact that the contract had been executed by the plaintiff was not communication of acceptance of the defendants’ offer by the plaintiff.[68]   That leaves the separate question of whether the receipt of the contract by OLS, which was the agent of the defendants, amounted to a relevant receipt.

    [68]I shall deal with the question of whether the building contract was ever made further below.

69. That depends on the scope of authority of OLS as agent for the defendants.  The fact that an agent is engaged for a particular purpose means that the agency operates only for that purpose.[69]  Agency is not a characteristic that the person has always in all circumstances and for all purposes.[70] It is always necessary to identify the scope of the agent’s authority.[71]

    [69]Midland Bank plc v Serter [1995] 1 Fam Law R 1034 at 1046-7, cited in IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205 at [37].

    [70]Kirkpatrick v Kotis (2004) 62 NSWLR 567 at [89], cited by Del Pont, op. sit. p 87.

    [71]IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205 at [2]

70. A finance broker acts as agent for the party seeking finance,[72] but only for the purpose of locating a financier; the finance broker does not have authority itself to enter into the financial transactions on behalf of the prospective borrowers.  The position is analogous to a real estate agent having authority to locate potential purchasers for a parcel of land, but not having authority to make a contract with those purchasers binding on the vendor.[73]  Hence a finance broker would have authority to communicate for the purpose of giving effect to that agency, and to receive communications for that purpose.  But that does not mean that any communication received by the finance broker is thereby to be effective as a communication to the defendants; that depends on whether the communication was received within the scope of the agency, that is, to give effect to the purpose of the agency in locating a financier. 

    [72]Barker v GE Mortgage Solutions Pty Ltd [2013] QCA 137 at [45], [46].

    [73]Petersen v Moloney (1951) 84 CLR 91 at 95, where the idea that a real estate agent was an agent in the strict sense was questioned, as that agent had no power to affect the principal’s legal rights: p 94.

71. The witness from OLS said that financiers did not necessarily need to be provided with a fully executed copy of the building contract before they would agree to provide finance, though they might want it before any money was actually advanced under any agreement to lend money which had come into existence.[74]  That is consistent with the absence of any evidence in the present case that a fully executed copy of the contract between the plaintiff and the defendants was ever in fact provided to any finance company, and in particular to the two financiers who ultimately approved the provision of finance for these contracts.[75] That indicates that it was relevant to the agency being exercised by OLS on behalf of the defendants for that company to receive a fully executed copy of the contract at some time, but it does not follow that OLS was the agent of the defendants to receive the communication of acceptance of the defendants’ offer for the purpose making a contract, or the defendants’ agent for the purpose of receiving the fully executed copy of the contract from the plaintiff in discharge of its obligation under the Act.

    [74]As happened with the ING Bank loan here: Document 54 cl 16(a)(i) required a copy only “before initial drawdown”.  That, and Document 53, show that a copy of the fully executed document had not previously been sent by OLS to the bank. 

    [75]Indeed, there was no evidence that any other financier was contacted, and the arrangements with the credit union were made by the defendants, not OLS: Exhibit 32. 

72. If OLS did not have authority to enter into a finance contract on behalf of the defendants, it did not have authority to enter into any other contract on their behalf, and was therefore not their agent to receive the communication of the plaintiff’s acceptance. The position with regard to s 36 is also clear: that duty can be performed by the provision of a copy to the agent of the owner, but only to an agent who has the authority of the owner to receive the copy of the contract from the builder for that purpose. The section would not be satisfied by providing a copy to just anyone who happened to be an agent of the owner for some purpose. There is no reason to treat the authority of a finance broker as extending so far. Hence providing a copy to OLS was not the performance of the plaintiff’s statutory obligation under s 36 of the Act, and the day on which it was provided was not the day on which the owner received a copy of the signed contract for the purposes of s 72(5) of the Act.[76] 

    [76]If the copy had in fact been passed on by OLS, receipt by the defendants may have been effective. 

73. No money was ever in fact advanced by either lender, at least in relation to the plaintiff’s contract, as no money was ever paid to the plaintiff, and there was no evidence that either lender had ever sought at any relevant time to be provided with a fully executed copy of the building contract. In those circumstances it was never part of the function of OLS to be in possession of a copy of the building contract for the purposes of its agency. The attempt of the plaintiff to rely on the agency of OLS to make the receipt by that company of the fully executed contract receipt by the defendants for the purposes of the Act therefore fails.

74. Besides, there was no clear evidence specifically that OLS ever received the fully executed contract when it was returned by the plaintiff to Optima.  Exhibit 13 was not sent by OLS, and Ms McAllister’s evidence suggested rather that a PDF copy of the contract would have been available to her if she needed it: p 2-23.[77]  She did not deal with the credit union, so she did not send it a copy, and the correspondence from the bank she dealt with indicates that it never received such a copy.  There was no evidence as to what ultimately happened to the original document.  On the evidence, I would not find that OLS ever had possession of the fully executed contract. 

    [77]Documents were submitted to lenders on line – p 2-28 – so what she needed was access to an electronic version when required.  There was no evidence that in this case either lender was sent a copy of the document signed by Mr Arthurs. 

75. It was submitted for the plaintiff that it was admitted in the defence para 10.7(a) that the contract came into the possession of OLS.  That is not the effect of that pleading.  Paragraph 10 of the statement of claim is a general allegation as to how the Optima system operated, so that any admission in response to any of it was directed to the general operation of the Optima system.  A party cannot purport to admit something which has not been alleged.  The relevant allegation is in paragraph 16(d)(ii) of the statement of claim, and the relevant (very narrow) admission, that OLS received the document, is in paragraph 16.4(b)ii of the defence. 

135. In these circumstances, if there were a contract between the parties and if it still subsisted after the notice on 1 August 2013, the failure of the defendants to take advantage of the extension given then to 2 August 2013 gave the plaintiff a right to terminate for non-payment of deposit, but it was a matter for the plaintiff’s election whether it terminated the contract or affirmed it in response to that right, and the plaintiff elected to affirm the contract.  That affirmation was not made expressly on the basis that the deposit be paid within any particular time, so although the defendants’ breach of contract was continuing, the right to terminate for it had been lost, and there was no right to terminate on this basis to be exercised by the plaintiff on 25 September 2013.

Second Notice of Withdrawal

136. The statement of claim then dealt with what was described as the second purported withdrawal by the defendants, the second withdrawal notice given on 26 September 2013.  This occurred after the defendants’ solicitors had accessed the electronic copy of the signed contract made available to them by Optima through the use of a dropbox facility.[116] This was the first occasion when the defendants, or their agent for that purpose, had been provided with a complete copy of the signed contract, so that it was a receipt day for the purposes of s 72. Accordingly, allowing for the intervention of a weekend, notice under that section could be given up to 26 September 2013, when the notice was in fact given. One of the ways in which that notice was given was by fax to the number 07 5677 0624, the fax number set out in Schedule 1 to the contract: Document 122, which was successfully transmitted: p 476. One of the things decided in the Heaysman cases (supra) was that notice given by fax to this number in this way was effective notice for the purpose of s 72.[117] The notice was given within 5 business days after the receipt date, and accordingly was potentially an effective exercise of the power in s 72(2) to withdraw from the contract. If there had been a contract between the parties, and it had not already come to an end, by this notice it was brought to an end.

     [116]Robson p 61; see also Exhibit 39.

     [117][2015] QCA 113 at [22].

137. The plaintiff relied in paragraph 47 on a number of matters as showing that this notice was not valid, but apart from the last of them these were the same as the matters relied on as showing that the notice on 1 August 2013 was not valid, and for the reasons given earlier those matters do not show any invalidity in this notice. The last matter relied on was that the contract had already been validly terminated by the plaintiff the previous day. That gives rise to an interesting question as to whether an owner can exercise a statutory right to withdraw from the contract after the time when the other party to the contract has terminated it, by accepting a repudiation of the contract by the owner. There is an important difference between the right to withdraw under the Act and the right to terminate for breach: in the former case, the termination is essentially ab initio, since the builder’s rights in such a situation are as specified by the Act, and are quite limited.[118]  They do not include any right to sue for a breach occurring, or to enforce any obligation arising, prior to withdrawal.  Since the whole purpose of a cooling off provision of this nature is in effect to give the building owner a short period of time for any change of mind about proceeding with the building contract, this would necessarily confer a right to terminate ab initio subject only to the statutory entitlement provided to the builder. 

     [118]See s 76 of the Act. Unlike in Heaysman, a claim under this section was advanced in this proceeding, but in the circumstances also fails: statement of claim paragraph 56A. 

138. On the other hand, termination for breach leaves intact all rights arising under the contract prior to termination, including claims for damages of any breach which has occurred prior to that time.[119] The exercise of the statutory right to withdraw would therefore intercept any such claim, and it follows that there would be some point in the existence of a statutory right to withdraw in this way even if the contract had previously been terminated for breach by the builder. Nevertheless, the wording of s 72, where it speaks of the exercise of a right to withdraw from a contract, does suggest that there must be at the time the right is exercised a contract in existence from which the owner may withdraw. I suspect the position is simply that the legislature did not have in mind the possibility that the contract, having been entered into, might be terminated by the builder for breach before the cooling off period had even expired, though obviously if the builder fails to comply with a requirement of s 36 of the Act, a situation could easily arise where the right would exist for some time.

     [119]Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd (2016) 91 ALJR 233 at [79].

139. Ultimately it seems to me that the position is simply that the actual wording of the section implies that it can only apply while there is a contract in existence, and if this leaves a gap in the consumer protection provided by the section, that is a matter for the legislature.[120] If therefore, despite all of the findings I have already made, the true situation was that the building contract had come to an end by the termination of it by the plaintiff on 25 September 2013, then that would have prevented the valid exercise of the right to withdraw under s 72, because there was no longer a contract from which to withdraw. On the findings I have made however, that situation did not in fact arise.

     [120]In fact the Act has been repealed and replaced with other legislation, on which I need not comment.

Repudiation by the defendants

140. The next part of the statement of claim alleged repudiation and termination of the contract on a different basis.  It was admitted that on 30 July 2013 the defendants engaged Optima Homes (Qld) Pty Ltd as builder to construct a house for them on lot 533: defence para 48, and see Exhibit 26.  Paragraph 48A alleged that that Optima company (or another one) had certain plans and drawings prepared for building on that lot, but there was no evidence of that and that was not proved.  In any case, the relevance of it did not emerge.  Paragraph 48B alleged that certain things were said during a telephone conversation between Mr Isenbert and Mr Rix, but there was no evidence from either of those individuals to that effect,[121] so that paragraph was not proved.  Paragraph 48C alleged certain things occurred during a conversation between Mr Dobson and Mr Isenbert on 30 July 2013 at the defendants’ residence.  For reasons I have already given, there was no such conversation on that day, and this allegation was not proved.  Paragraph 48D contained an allegation which logically should appear later in the pleading, and I will deal with it later. 

     [121]Nor does such evidence appear in Exhibit 23. 

141. Paragraph 49 alleged that on or before 30 July, the defendants personally or by their agents took control or possession of lot 533 from the plaintiff, or used the works on the lot, prior to paying the plaintiff the contract price and without obtaining the written consent of the plaintiff, and engaged another builder to construct the defendants’ house on the lot.  There was no evidence that the defendants took control or possession of the lot out of the hands of the plaintiff at that time.  There was evidence from Mr Dobson that on 31 July 2013 he went to the site and found it had been bulldozed and some things which he had put on the site had been pushed aside.  There was no evidence that was done by or on behalf of the defendants.[122]  There is however no other material to support Mr Dobson’s assertion, and for reasons I have given I do not regard Mr Dobson as a sufficiently reliable witness to be prepared to act on his evidence of this alone. 

     [122]Since Exhibit 26 was signed by the defendants on 30 July, and by Optima only on 31 July, it would surprise me if anything had happened so quickly, particularly since Optima would first have to complete the preliminaries, such as getting a building permit. 

142. There was no question of taking control, possession or use of the works out of the hands of the plaintiff within cl 26 of the contract, because “the works” meant “the works to be carried out, completed and handed over to the owner in accordance with this contract,” that is to say the house which under the contract the plaintiff was to build on the lot.[123]  Accepting that that could apply if only part of the house was on the lot if that part was taken possession of or used by the owner, there was at that time no part of the house actually on the lot, so what Mr Dobson described did not engage cl 26.  Entering into a contract with Optima Homes to build something different on the lot also did not engage cl 26, so paragraph 49(b) was not proved.  It follows that the plaintiff in paragraph 50 can rely only on the defendants’ having entered into a separate contract with another builder to build something different on the lot. 

     [123]Document 2, p 159, cl 38.1. 

143. The issue therefore becomes whether entering into a contract with a builder for that builder to build something different on land which is already the subject of another contract with another builder amounts to repudiation of that other contract.  The two contracts were inconsistent, in that it would not be possible for both homes to be built on the same parcel of land.  A contract may be repudiated by conduct, if the conduct is such as to lead a reasonable person to the conclusion that the person so acting does not intend to fulfil his part of the contract.[124]  I would think, for example, that if the vendor under a contract of sale of property also contracts to sell it to someone else, that amounts to repudiation of the first contract.[125]  On the whole, it does seem to me that entering into a contract to build something different on their land meant that the defendants were evincing an intention not to go on with the contract with the plaintiff.[126]  If there was a contract with the plaintiff at that time, therefore, the defendants were thereby repudiating it. 

     [124]Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 at 436; Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625-6; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 658.

     [125]Though there is some authority to the contrary: Mohr v Smith [1914] SALR 92.

     [126]That is consistent with the analysis in Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 351, where the owner let a separate contract to another to do a significant part of the work covered by a building contract.

144. Repudiation by one party however does not of itself terminate the contract, since the other party does not have to accept the repudiation, but may elect to reject it and insist on performance.[127]  It was submitted that in some circumstances a repudiation may have the effect that the other party has no choice but to terminate the contract, and in those circumstances communication of an election to rescind is not necessary to put an end to the contract.  I was referred to a number of decisions: Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1977] VR 454 at 459; Cozi Pty Ltd v Bedi;[128] Ford v Lismore City Council.[129]  What was said in Poort was that express or formal communication of the election to rescind was not necessary, relying on the statement of Dixon CJ in Holland v Wiltshire (1954) 90 CLR 409 at 416, that a vendor’s election to rescind for breach “was sufficiently manifested by his proceeding to advertise the property for sale, and by his selling it.”[130]  In Cozi Poort was followed and it was held that a vendor accepted a purchaser’s repudiation without communication by contracting to sell the land to a third party, although there was a precautionary finding that there was effective communication in a letter a few days later.  In Ford Allen J said at p 25 that all that was needed for termination for repudiation is “that the party not in default by his words or conduct manifests that he accepts the situation that the contract has been brought to an end by the conduct of the other party.”

     [127]For example, Foran v Wight (1989) 168 CLR 385 at 394, 5 per Mason CJ, 421 per Brennan J, 437 per Deane J, 441 per Dawson J, 458 per Gaudron J. See also Carr (supra) at 348.

     [128](Supreme Court of Victoria, Batt J, W9082/1993, 13/4/94, [1994] VSC 161, BC9406215.)

     [129](1989) 28 IR 68.

     [130]It appears that the other two members of the court decided the case on a different basis. 

145. More recently the High Court has considered the requirements for an innocent party to elect to affirm or to rescind in Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26. At 39 four members of the court, in a joint judgment, said: “The consequences of election may well be serious for the party electing; in particular, election involves the abandoning of a right that is available. A party can only be held to have elected ‘if he has so communicated his election to the other party in clear and unequivocal terms’.”[131]  This passage has been cited as authoritative by the Court of Appeal.[132]  So far as I am aware, it has never been reconsidered by the High Court.  I regard this as a clear and authoritative statement that an election to terminate a contract for repudiation must be communicated to the other party.  In so far as earlier decisions were to the contrary, they no longer represent the law.  I reject the plaintiff’s submission on this point. 

     [131]Citing The Kanchenjunga [1990] 1 Lloyd’s Rep 391 at 398 per Lord Goff of Chieveley.

     [132]QBE Insurance (Australia) Ltd v Cape York Airlines Pty Ltd [2011] QCA 60 at [23].

146. I accept that it would be correct to say that it was not open to the plaintiff in these circumstances to obtain specific performance of the contract, and therefore it is unlikely that a court would have granted an injunction against the defendants restraining them from having Optima Homes build on their land, even if the court had concluded that there was a valid building contract with the plaintiff at that time.   In such a situation there may be no practical remedy for the innocent party except to accept the repudiation and sue for damages.[133]  Nevertheless, the contract will remain in existence unless and until the innocent party terminates it.[134]  I am not persuaded that in these circumstances a repudiatory act by the defendants had the effect of bringing the contract to an end before the plaintiff even knew of it, let alone exercised any election in response to it. 

     [133]Ford (supra) at 19.

     [134]Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 463-5, dealing with wrongful termination of a contract of employment.

147. There was no evidence of when the plaintiff found out about the other contract, but Mr Rix said he found out in late August/early September that a different building approval had been granted in respect of the same parcel of land, so presumably the plaintiff found out at the latest at that time.[135]  As mentioned above there had been conduct prior to and after then, on 18 August and 5 September, by which the plaintiff affirmed the contract.  One other feature of the innocent party’s election confirmed in Immer (supra) was that the election will not be conclusive if made without knowledge of all relevant facts.  The effect of this is that the right to terminate for the defendants’ repudiation by the new contract was not lost until the plaintiff knew of the new contract.  The evidence does not show when that occurred, so it is not possible to conclude that anything which could amount to an election to affirm occurred between then and the purported termination on 25 September 2013.  

     [135]Mr Arthurs said he believed there was a new contract “by 20 September” p 83. 

148. Once the plaintiff found out about the contract with Optima Homes, it had a right to terminate the contract if it was still then in existence.  That right continued until it was exercised, or until the plaintiff elected to affirm the contract.  Even if this might have been characterised as an act of futility on the plaintiff’s part,[136] it is difficult to see why it could not keep the contract on foot until it exercised its election to terminate for repudiation.  Authoritative statements that on repudiation an innocent party has an election whether to terminate or affirm are in my opinion conclusive on this point. The contract continued, until one party terminated it.  On 25 September, however, the plaintiff did communicate an election to terminate by notice to the solicitors for the defendants: Document 117.  The plaintiff purported to terminate on a ground not shown to have been available, but that does not affect the validity of the termination.[137] 

     [136]At least in theory, the defendants could at that point have decided to stick with the plaintiff, and repudiate Exhibit 26 instead. 

     [137]Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 377-8.

149. It follows that the contract did not come to an end automatically as a result of the execution by the defendants of Exhibit 26, or for that matter Optima Homes’ acceptance of that offer the following day.  There had been no communication of an election by the plaintiff to terminate the contract communicated to the defendants between that time and 1 August 2013, on this or for that matter any other ground. 

150. Mr Arthurs gave evidence that on 30 July 2013, after he was told by Mr Dobson that Mr Isenbert had told him that day that he was going to stay with Optima, to get everything off the site, and claimed that thereafter his intention was not to proceed with the contract.  This cannot be relied on as an election to terminate because of the execution of the sale contract, for three reasons.  First, because there is no evidence that it followed the execution of the sale contract.  Second, because I do not accept that a conversation such as that occurred between Mr Isenbert and Mr Dobson on that day, and therefore Mr Dobson cannot have told Mr Arthurs about it, so Mr Arthurs cannot have formed such an intention on the basis of the conversation.  Third, an election to terminate is something that requires communication to be effective, and there was no suggestion that any such election on 30 July was communicated to the defendants prior to the termination on 1 August, or indeed later.

151. It was alleged in paragraph 48D that the plaintiff accepted the repudiation by removing materials and equipment from lot 533 in late July or early August 2013.  There was some evidence from Mr Dobson that material was removed from the site on and after 31 July, but for the reasons that I have stated I am not prepared to regard this evidence as sufficiently reliable to find that such a thing did occur.  That is sufficient to deal with this allegation, though the mere removal of materials would not in itself have communicated an election to accept any repudiation by the defendants, so it could not be effective for that purpose.[138]

     [138]It was also not inconsistent with a continuing willingness to carry out the contract when the deposit was paid, as stated by him earlier. 

152. That leaves the question of whether the fact that the defendants had repudiated the contract in this way, and were therefore not ready, willing and able to comply with it, meant that they were not entitled to withdraw under s 72. As discussed earlier, there is in my opinion no reason to read into the clear terms of s 72 a limitation of this nature. In my opinion the defendants were entitled to exercise their right to withdraw under s 72 notwithstanding their repudiation of the contract. The notice of withdrawal on 1 August 2013 was valid. If however the contract had been still on foot on 25 September, the plaintiff’s termination of it that day would have been effective unless the plaintiff had elected to affirm the contract after it knew of the contract with Optima Homes. In these circumstances, the contract would not have survived to be terminated the following day by the second notice of withdrawal under s 72.

153. The next part of the statement of claim, in paragraphs 51B to 51F, alleged that the correct interpretation of what happened when the defendants signed the contract and other documents in Document 2, and presumably subsequently, was that there was a contract between the defendants and Optima under which the defendants promised to confer a benefit on the plaintiff, by paying the plaintiff for the house to be built on the land, which gave rise to an enforceable duty to perform the promise under the Property Law Act 1974 s 55. This characterisation of the transaction, which the plaintiff did not seek to support in argument, is obviously entirely misconceived. Whatever Mr Isenbert might have thought at the time, there was actually no contract between the defendants and any Optima entity, and it follows that there could not have been a contract for the benefit of the plaintiff as a third party beneficiary.[139]

     [139]Ironically, at one point Optima’s solicitors asserted that it was a third party beneficiary of the contracts between the plaintiff and customers like the defendants: Document 100. 

154. Finally, it was admitted that on 27 August 2013 the plaintiff lodged a caveat claiming an interest in the defendants’ land.  The plaintiff alleged that the defendants withdrew the caveat on 23 August 2014, whereas in the defence the defendants alleged that it was removed by the Registrar pursuant to an order of the court.  I made such an order on 25 July 2014, which order was taken out on 11 August 2014.  I find that the caveat was removed pursuant to that order.

155. That addresses all of the matters necessary to be addressed in the plaintiff’s pleading in order to resolve the question of liability.  It is resolved against the plaintiff, and its claim is dismissed.  I shall invite submissions as to costs when these reasons are delivered, but assume that they will follow the event.