J Westerlund Construction Ltd v Burgess [2003] WSSC 53 (14 October 2003)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN

J. WESTERLUND CONSTRUCTION LTD
a duly incorporated company having its registered office at Vaitele-Uta
Plaintiff

AND

DAVIES BURGESS
of Vaitoloa, Sound Technician
Defendant

Hearing: 7 and 8 October 2003

Appearances: Mrs R Drake for Plaintiff
Mr P Fepulea'i for Defendant

Judgment Date: 14 October 2001

RESERVED JUDGEMENT OF
JUSTICE C J DOHERTY

Introduction

[1] On or about 28 March 2002 the plaintiff construction company commenced building a residential house for the defendant at Vaitoloa ("the house''). The house was a two-storey house of sizeable proportions. It has been described as a luxurious house, in at least the top 10% bracket for this country. The principal of the plaintiff (Mr Westerlund) was on site daily as were his builder-employees and from time to time, subcontractors. To commence the house there had to be a partial demolition of the defendant's home at the time; thus the defendant lived on site for the duration of the building programme. The house was completed on or about 22 August 2002. It was completed to the satisfaction of the defendant; he has never complained about its quality (until these proceedings). He had significant input into its ultimate form and state. At the commencement of work the defendant had paid $30,000.00 and thereafter periodic payments of $30,000.00. These were generally paid in the last week of each month until August 2002. On 9 August 2002 he paid $20,000.00. By then there had been a total of $170,000.00 paid. At the end of that month, as the house had been completed, Mr Westerlund, on behalf of the plaintiff, provided a final account. That account was considerably in excess of what the defendant says he was expecting and as a result, this dispute has arisen. The defendant paid a final cheque of $30,000.00 and refused to pay anything over the total figure of $200,000.00. The plaintiff claims that there remains outstanding $63,567.65. The plaintiff has issued these proceedings pleading quantum meruit for this amount as its cause of action.

The Issue

[2] The issue in this case is what the contractual arrangement between the parties was. On the one hand the plaintiff says it was to build a two-storey house of a similar size to that owned by Mr Westerlund and inspected by the defendant, for a sum of between $250,000.00 and $300,000.00. On the other hand, the defendant says the contract price was $180,000.00 less any sum contributed by him for electrical works. This was originally set at $15,000.00 but ultimately was accepted at $10,000.00. In other words, the defendant says the maximum he should have paid for the initial contract was $170,000.00. However, he acknowledges his liability for extras to the original contract which total $30,000.00.

[3] An inference from the pleading is that the defendant claims some set-off for poor workmanship by way of additional defence. There was no specific pleading to that effect and counsel for the defendant advised that that aspect of the pleading was not relied upon.

The Facts

[4] There was no written contract. There were no specific plans produced for the house. There were no written specifications. There are differing views of events leading to the formation of the contract, and what the terms of the contract were. Many of these matters can only be resolved on findings of fact and assessing the credibility of witnesses.

[5] Mr Westerlund was the plaintiff's prime witness. He was the person who dealt with the defendant. Other witnesses called by the plaintiff were the site foreman/builder and an engineer who gave an initial engineering certificate and made a later inspection of the property. Those witnesses were peripheral and go only to corroborate Mr Westerlund on insignificant issues. The only witness called for the defendant was himself.

[6] Mr Westerlund's evidence on behalf of the plaintiff's concerning the contract formation and subsequent events was:

1. A few days before 11 February 2002, the defendant called at a job Mr Westerlund was completing at the cemetery of the Church of the Latter Day Saints at Fagalii. At that brief meeting, the defendant said he wished the plaintiff to build him a house.

2. On 11 February 2002 the defendant phoned Mr Westerlund to progress the matter of his house.

3. Later that same day, the defendant went with Mr Westerlund to Mr Westerlund's home at Vailima.

4. Mr Westerlund showed him his house and the defendant said he wanted a house of similar size to Mr Westerlund's and also to be of two storeys.

5. The defendant inquired as to the cost to build such a home and was advised by Mr Westerlund that it would cost between $250.000.00 and $300,000.00.

6. On 12 February 2002 Mr Westerlund and the defendant met on the site of the proposed house at Vaitola at 10am. There was general discussion about what was wanted in the house including the fact that the ground floor was to be for a workshop business and would be left open in the meantime; the first floor to be living quarters.

7. Later that afternoon Mr Westerlund returned with a set of plans. This set of plans was for another house. These were shown to the defendant. Mr Westerlund recommended the set of plans as an ideal plan for him.

8. The defendant instructed him to proceed and was anxious to do so.

9. There was no further discussion on price and certainly no mention of $180,000.00 or further reductions if the defendant did the electrical work.

10. The defendant was anxious that work start and it actually did start before a permit was obtained.

11. The plaintiff made an application to the Public Works Department for a building permit. That application was dated 3 April 2002 and in it, it contained an estimated total price of building of $271,500.00.

12. When building commenced at the end of March, the defendant produced a cheque of $30,000.00.

13. Thereafter building commenced with significant on-site input from the defendant.

14. As matters progressed the defendant indicated where he wanted rooms etc laid out. As those instructions were given, the plaintiff kept amending the initial plans which were used in support of the application for a permit.

[7] The defendant's evidence was:

1. At the beginning of 2002 he approached Mr Westerlund at a local golf course inquiring about the building of a house.

2. As arranged at that initial contact, there was a meeting at Mr Westerlund's office at 8 am. The defendant cannot remember the date. At that meeting two plans were produced by Mr Westerlund, the first for his own house and second for a house being a house for a Mr Mataali in respect of which the plaintiff had tendered.

3. At this meeting the defendant indicated he could not afford the likely cost of houses such as those depicted in these two plans.

4. There was a meeting (probably in early February) at the cemetery of the Church of Latter Day Saints where Mr Westerlund told him that he had priced the job and had come up with a figure of $180,000.00.

5. The defendant expressed dismay that this was too high and he could not afford it and asked if there were ways of cutting costs. Mr Westerlund replied that it could be $15,000.00 less if the defendant did the electrical work himself (he being qualified to do so).

6. The defendant said this price was still too high, he was not sure of his finance and did not have a loan. At his suggestion it was agreed that he would have the job started, pay the money as he went along and that the job would stop if he ran out of money.

7. That the house visit to Mr Westerlund's house on 11 February 2002 was a "sympathy meeting" where Mr Westerlund seemed anxious to show him his house and explain how he paid for it over time. The defendant remembered this visit expressly because he recalls a price of $240,000.00 being discussed but that that was too "rich" for him.

8. There was never discussion on size or structure at these meetings. The parties agreed that they would "give ourselves room to work with", depending upon what the defendant could afford.

9. The defendant had never seen the plans submitted with the building permit application until much later in the work.

10. He denied any meeting occurred on the afternoon of 12 February 2002 to look at plans.

[8] The essential differences between the plaintiff and the defendant relate to the amount to be paid for the erection of this dwelling. There were some essential agreements. These are:

1. The defendant wanted a two-storey house similar in size to Mr Westerlund's.

2. He wanted the ground floor of the house to be open initially for use as a workshop.

3. The site had an existing house which as very close to the new one.

4. Part of the existing house had to be dismantled to make way for the new one.

5. The defendant continued to live in the old part and was therefore on-site for the duration of the building programme.

6. As the building of the house progressed he was instrumental in deciding the interior layout.

7. There were adjustments made from time to time, for example a door cut into a wall, the adjustment to the slope of the ceiling of the living area, the front stairs shifted from internal to external stairs.

8. That at about the time the construction started the defendant paid a cheque of $30,000.00 to the plaintiff.

9. The work only stopped when the house was completed.

10. The defendant accepted he had not been charged for labour on some additional items such as change of roof design, steps and extra doors, change of ceiling, gib stopping, solid plastering.

11. At the time of the last payment of $30,000.00 the defendant said he would pay the balance by Christmas.

12. The house is a quite substantial one.

13. The cost of building material in Samoa is quite high as virtually all components are imported.

Decision

[9] The case falls to be determined on the credibility of Mr Westerlund and the defendant. I preferred the evidence of Mr Westerlund. He struck me as being an honest person; one likely to trust those that he dealt with. He gave answers which accorded with common sense. He made concessions when concessions need not necessarily advance his case (e.g. that to build a house of this magnitude without a written contract was unusual). His evidence was supported by other factors.

1. He kept a business diary. The authenticity and contemporaneous nature of the entries in the diary were not challenged (except for an alteration to one entry which was satisfactorily explained). His diary notes confirmed his evidence on important points; in particular the notations of 11 and 12 February 2002. His notes were made contemporaneously and noted briefly what had happened and in particular the fact that he had indicated a cost level of $250,000.00 to $300,000.00.

2. The fact that he included a price of $271,500.00 in the application for a permit at least shows that, in his estimation, the defendant was not looking to spend a maximum of $165,000.00 or even $180,000.00. If it was suggested that he knew the contract price was such, why would he include a grossly inflated total building cost figure in the application which could be so easily checked by anyone, including the defendant?

3. His diary notes confirmed the general thrust of his evidence that the scheme of the progression of the house was for the defendant to get what he wanted. For example, the diary entry of 13 June 2002 shows that he sketched the defendant's wife a first level floor plan which she was happy with but which was later countermanded by the defendant. His evidence about these issues was also confirmed by his foreman, Mr Letoa. Mr Letoa said the defendant was actively and closely involved in all facets of the building of the house.

4. His evidence concerning the presentation of the final cost on or about 21 August 2002 had the ring of truth about it. He did not attempt to play down the anger exhibited by the defendant but was certain, and recorded in his diary, that the defendant had agreed to pay the remaining figure by Christmas. It should be noted that the defendant did not deny this.

5. His evidence of the expectation of the arrangements was confirmed by the demeanour of the defendant which was described by him and his foreman (and by the defendant) as being "happy the whole time".

6. He was not shaken on cross-examination of his recollections of discussions about any matter or the detail of those discussions. Specifically, he denied any discussion of a price to build of $180,000 (or a lesser figure if the defendant was prepared to do electrical work), let alone an agreement on that price.

7. His explanations as to why he did business for a substantial house without a written contract seemed plausible and reasonable. The fact that the defendant made a first up payment as work commenced and thereafter made periodic payments without being called upon confirmed his view that the defendant was trustworthy and no doubt reinforced his view that he was dealing with a person he could trust and who had the ability to pay.

8. He gave me the impression of honesty in that he was consistent throughout his evidence. He made concessions. For example, he changed his view on the fact of the meeting at the cemetery. He resisted any opportunity to deny that the nature of this contract was unusual.

[10] On the other hand, I regret to say I was not impressed by the defendant or his evidence. His demeanour and evidence itself gave me the impression that essential elements of his evidence were embellishments added as he went along. One of the principles of conduct of litigation is that assertions made, or to be made by one party which are known to be contrary to those made by another ought to be put to that other, so that their reaction can be tested. Much of what the defendant said was not put to Mr Westerlund. I had the impression that that was not the fault of counsel, but because counsel did not know at the time he was cross-examining Mr Westerlund, what the defendant was going to say. For example, the allegation of the meeting of the defendant and Mr Westerlund at the plaintiff's office immediately after the golf course meeting where there were two plans shown to the defendant and he said there was discussion about price. This was clearly an important allegation that was never put to Mr Westerlund. For this reason, little weight can be given to the evidence of the defendant on such issues.

[11] Much of his evidence talked around the point and even when he was being examined by his own counsel, he tended to obfuscate. For example, when being questioned by his own counsel about the size and structure he required for his home and whether it was discussed in initial stages with Mr Westerlund, his answer was that at this stage he wanted to "give ourselves room to work with ... depending on what I could afford". In a similar manner, he appeared to agree with base events and then embellish his evidence with detailed explanation.

[12] His evidence of his reaction of shock when he became aware of the total cost on or about 21 August 2002 and that he did not know what to say, is inconsistent with paying $30,000.00 and agreeing to pay the balance by Christmas.

[13] He was also prepared to post facto justify his position. In evidence he said that at 21 August 2002 he was aware he did not have sufficient money in the bank to pay the balance as at the end of August 2002. His bank statements of the period do not bear that out. He was either mistaken when he gave evidence or not telling the truth.

[14] Even at this stage he is grudging in all aspects. He does not accept that the amount being claimed has been expended on his house, notwithstanding at least the independent indication from the engineer witness Campbell that it was. He denied the amount claimed had been expended on his house but could not point to any particular thing to justify his position. Nor did his counsel question it at the time he had the opportunity to do so.

[15] He accused the plaintiff of "juggling the figures around'' to suit himself but was unable to point to specifics. He had clear recollections of differences in reconciliations given to him but could not specifically identify them.

[16] All in all I found his evidence totally unsatisfactory and I reject with the salient issues.

Findings of Fact

[17] I find that the contract/arrangement between the plaintiff and the defendant was:

1. The plaintiff agreed to build for the defendant

a) a two-storey house,

b) the same approximate size as Mr Westerlund's,

c) with approximately the same ''look'' as those on the plans shown to him and submitted by the plaintiff for the building permit (Exhibit 2),

d) the cost to be whatever it cost between the sum of $250,000.00 and $300,000.00

2. The defendant would pay the cost (without variation) provided within that range of $250,000 and $300,000.

[18] I find that the total cost of the building of the house in accordance with the contract/arrangement as invoiced by the plaintiff was within that range of cost and that the defendant has paid $200,000.00.

Quantum Meruit

[19] The plaintiff's cause of action is quantum meruit. As the evidence has fallen and as I have determined it, the cause of action is more properly founded in breach of contract. If I had been asked in closing submissions, I would have granted leave to amend the Statement of Claim to reflect this. I am tempted to do so on my own motion, but in view of the concession of defendant's counsel that the measure of damages is essentially the same between the two causes of action in the context of this case, I will not do so. Under either action, the measure of damages is the balance owing to the plaintiff for the work completed on the dwelling.

Damages

[20] The plaintiff attempted to prove his loss by submitting a raft of invoices and receipt material from suppliers, sub-contractors and itself to support a schedule which had been presented to the defendant at his request in November 2002 after the dispute between the parties arose. None of this was challenged by cross-examination of Mr Westerlund other than to suggest the ultimate schedule of costs differed from that originally shown to the defendant on site on 21 August 2003. It was the Court that pointed out a discrepancy between the schedule and one of the receipts produced in support of the schedule ie the scheduled amount of $12,090.00 and the receipted amount of $6754.50 for Pacific Aluminium. Despite there being no attack in cross-examination the defendant in his evidence disputed the cost in a general sense as already mentioned above.

[21] The onus remains on the plaintiff to prove its loss on the balance of probabilities. The explanation by Mr Westerlund for the discrepancy in respect of the Pacific Aluminium was that there was obviously a receipt missing as he was certain the amount the plaintiff had paid to Pacific Aluminium was $12,090.00. That amount has consistently been identified as the amount in question since 21 August 2002. However, that is not sufficient to overcome the onus on the plaintiff. If the amount was not sustainable then, the passage of time does not cure it. If the receipt was lost, the plaintiff always had it within its power to call the supplier to prove the amount. In the face of the general dispute as to cost, the plaintiff has not discharged the onus in respect to the sum of $6335.50.

[22] The damages proven by the plaintiff are therefore reduced by that amount to $57,232.15.

Interest

[23] The plaintiff claims interest at 13% per annum. This is supposedly based on the plaintiff's overdraft rate with its bankers. There was no evidence either of that fact or evidence that because of non-payment by the defendant the plaintiff was obliged to pay interest on the amount outstanding. As there was no agreement on the part of the defendant to pay interest, the only award for interest can be the exercise by the Court of a legal discretion to do so. Counsel for the plaintiff sought 8% pursuant to Rule 126 of the Supreme Court Rules. That rule is for post-judgment interest. I am aware that in certain instances this Court has awarded interest using its inherent jurisdiction. I do not think this is an appropriate case to do so in view of the plaintiff's willingness to wait until Christmas 2002 for the balance of payment without insisting on interest being paid. Even if it was prepared to build the house without any formal agreement, when it knew in August 2002 it would be standing out for the balance of its money it had the opportunity to renegotiate and did not do so.

Costs

[24] Costs would ordinarily follow the event and I see no reason to depart from the principle that costs should be awarded to the plaintiff in this case as it has obtained judgment. I heard some argument on costs at the end of the case. The plaintiff sought costs in excess of the schedule to the Rules; the defendant thought the schedule should not readily be departed from. This is a proceeding which was not out of the ordinary in terms of such matters. It had only the most basic of interlocutory steps, few witnesses and was generally a straight credibility matter. In those circumstances, of costs and disbursements are awarded to the plaintiff, to be fixed by the Registrar.

Outcome

[25] There is judgment for the plaintiff in the sum of $57,232.15.

[26] Costs and disbursements are awarded to the plaintiff and are to be fixed by the Registrar.

JUSTICE DOHERTY