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AN13.03.400 Previously LN25A


January 1995 Previously published July 1985
The Royal Australian
Institute of Architects
ACN 000 023 012

LawNote
Liability for overshooting the budget

1.

In brief
A recurring problem for architects and their
clients is that sometimes the tender for a
building or its actual construction cost
exceeds the client's budget. It does not
necessarily indicate that the architect has
breached the conditions of engagement.
There may have been an external factor, such
as inflation in the cost of building, to a degree
that could not reasonably be predicted, or the
discovery of a latent condition on site. More
commonly, the ultimate construction cost
exceeds the budget when the client asks for
additional features in a design which is
already near the budget limit. However, there
are occasions when the architect is found to
be at fault. The five cases discussed in this
note are examples of the problems that can
befall architects and their clients when the
budget is substantially exceeded by the actual
cost.
1982 and 1983 produced three cases which
examined the architect's duty regarding the
cost of building the project. Balnaves v
McLeay1 deals with a client/architect
agreement, the terms of which were left
mainly to implication. The client had a budget
limit, but the magistrate found that this limit
was not part of the architects instructions.
The case grapples with the duty of the
architect, in the absence of express terms and
an express budget limit, to keep the client
informed of likely cost.

Nemer v Whitford2 ended in partial victories


for both the client and the architect. It was
found that the client had a budget limit which
1

Decision by a single judge of the Supreme Court of


South Australia - unreported. Appeal to the Full
Court (1986) 2 BCL 347 and (1982) 6 BCLRS 227.
(1982) 31 SASR 475. Appeal to the Full Court of
the Supreme Court of South Australia - dismissed,
(1983) 33 SASR 208.

the building tenders exceeded by between


40% and 100%. It was held that an architect
is not precluded from recovering the fee just
because a design is incapable of being
constructed within the budget. However, the
fee can only be recovered (or retained) in
such circumstances where the architect
genuinely and reasonably believes the design
will be within the budget. The distinction was
drawn between sketch plan stage, where the
architect succeeded, and developed design
stage, where the client succeeded.
In Bennetto v Kostromin3 the architect was
either unaware of, or ignored, his clients'
budget. The court found that the clients had
imposed a budget, despite the architect's
contention that there was no budget. Further,
when the architect made an estimate of the
likely final cost after building had commenced,
it was inaccurate and the court found that he
did not make a 'genuine estimate after due
enquiry'. The result was financial disaster for
the clients.
The court held that the architect was liable,
even though the clients had engaged the
builder on a 'do and charge' basis. The court
also considered how damages should be
quantified. The clients were awarded over
$62,000; more than 13 times the fee charged
by the architect.
According to the trial judge in Brian James
Coleman v Gordon M Jenkins & Associates
Pty Ltd and Another4, the job not only failed to
meet the client's budget, but to compound the
error, an architect employed by the
architectural firm left his employer and
commenced building the house on a basis
akin to construction management. The client
was left with an incomplete house, a project
3
4

(1983) 5 BCLRS 377.


1993 BCL 292 - dedicated 9 November, 1988.
Appeal reported at (1989) ATPR 40-974.

Published by RAIA Practice Services Copyright RAIA

AN13.03.400 January 1995

that, when complete, would over capitalise the


site and threatened foreclosure on the
mortgage. The matter was appealed and sent
for re-trial. The most significant aspect of the
decision of the Full Court on appeal was a
refusal to say that an estimate that is
inaccurate by more than 10% is prima facie
negligent.

architects' fee, and may even be many times


that fee.

Boston v McBratney points out that inflation


must be taken into account - even the rapid
and unpredictable inflation of a boom, but
demonstrates that if the proprietor gets value
for money, there might be no liability
regardless of the fact that the estimate was
negligent. It also clearly establishes that an
'estimate' is not a 'quote', even though there
was confusion in the minds of the proprietors.
Nevertheless, it would be wise to point out to
clients seeking estimates that they are an
educated guess as to the final cost of
building. It might also be useful to supply
them with a copy of the Client Note
AN10.06.855 How much will the building cost.

In Boston v McBratne y5 the estimate was


inaccurate in that it did not take into account
inflation during the boom of the late 1980s
and the draftsman who prepared the estimate
did not warn the proprietors of the likely
effects of inflation. Nevertheless, the
draftsman who was also acting as supervisor
of a cost plus contract, won the court case.
The additional cost of the house did not over
capitalise the land, therefore the proprietors
suffered no loss. Although the draftsman was
negligent and was in breach of the Fair
Trading Act, judgment was in his favour.
2.

All architects should recognise their


responsibility to provide progressive cost
information to clients and, where the client
has stated a budget, to work to this. Those
who do not, do a serious disservice not only
to their clients but also to the reputation of the
profession as a whole.

Implications

Balnaves v McLeay indicates that the parties


will be left to their own devices to set budgets
or otherwise, and the decision of the Full
Court in Coleman's case supports the view
that an incorrect estimate is not prima facie
negligent. However, the history of both pieces
of litigation demonstrate the foolishness and
costliness of failing to commit to paper
decisions about budgeting, even in
circumstances where money is no object and
the client's physical and aesthetic needs are
paramount.

3.

In detail
The much appealed Balnaves v McLeay
matter went first to the Local Court of
Adelaide, from there to a single judge of the
Supreme Court of South Australia, White J
and then to the Full Court of the Supreme
Court. In his judgment, White J referred to the
client as the 'former friend of the architect'; in
itself a cautionary tale.

Nemer v Whitford is a welcome statement to


the effect that architects cannot be expected
to design exactly to price, particularly in the
early stages of a commission.

The architect had successfully sued the client


for unpaid fees of $2,366. The fees were a
percentage of $26,000 being the architect's
estimate of the cost of the works.

On the other hand, an architect who takes a


cavalier attitude and ignores the price
restraint, or who fails to exercise proper skill
and care in designing to a price, is failing to
provide the best service for the client and
could be liable for damages. Whilst it is the
architect's responsibility to provide estimates,
there may be occasions where the architect
would be well advised to obtain the
assistance of a quantity surveyor.

The client's various defences in the Local


Court of Adelaide were all unsuccessful. The
first and third are not relevant here. The
relevant defences are: the second, that the
plans, specifications and drawings were
prepared in breach of a term of the
client/architect agreement that estimated
building costs would not exceed the client's
budget of $10,000; and the fourth, as an
alternative, that the architect had breached
his professional duty by failing to keep the
client informed of likely estimated costs at
each stage of the design work before moving
on to the next stage, thus escalating his fees
without authority.

Bennetto v Kostromin demonstrates how


ruinous such damages can be. They will not
necessarily be limited to mere return of the
5

Unreported. Decision of a single judge of the District


Court of Western Australia of 12 February, 1993.

AN13.03.400 January 1995

The Chief Stipendiary Magistrate found


against the client on the first three defences
but failed to deal with the fourth. Some of the
grounds of appeal were:

'He was entitled to hedge the estimates, if


he wished, with qualifications about the
likely wide margin of error. But he should
not have decided unilaterally to deny his
client the benefit of the estimates which his
professional duty and implied terms of
contract required of him, stage by stage.'8

1. The magistrate should not have held that


the RAIA conditions of engagement and scale
of charges were, by implication, terms of the
client/architect contract. (They had been
neither shown to, nor adopted by the client).

His Honour found that the architect's failure to


keep the client informed of the cost led to the
plans being worthless to the client, as it was
accepted that the client had a $10,000 limit
even though it was not effectively
communicated to the architect. His Honour
adjudged that the client had suffered damage
equivalent to the architect's claim for unpaid
fees and was entitled to set off the damage
against the claim. In the alternative, he found
that the fee was not payable at all as the work
was done in breach of contract.

4. The magistrate erred in failing to consider


whether there was an implied term that the
architect was obliged to keep the client
informed of estimated cost at each stage of
the design work.
Mr Justice White dealt in detail only with
ground 4, but made the following comment on
ground 1:
'I reject ground 1 for the commonsense
reason that the reasonable conditions of
engagement and reasonable scale of
charges in the architectural profession must
be taken to apply to this particular contract,
notwithstanding the owner's lack of
knowledge of the details thereof. The
conditions and charges in question here
were not only the usual conditions and
charges but generally speaking, also
reasonable conditions and charges'.6
On ground 4, his Honour said that had the
RAIA conditions been signed, giving an
estimate at the end of each stage would have
been an express term. Another express term
would be the requirement that the architect
should not proceed without authority. It was
common ground that this architect did not
provide the client with estimates of cost at
any stage let alone at each stage before
going on with the next. Why not? In his
Honours words:
'It seems that he did not think that it was
necessary or appropriate in this kind of
friendly informal arrangement and that there
were too many difficulties in the way of
making meaningful estimates, at least at the
end of the first stage. And he thought his
friend was 'well-to-do'. '7

The Full Court overturned the decision of


White J. It was held that the RAIA conditions
of engagement did not represent the
agreement between the parties and therefore
should not be implied into the contract
between them. It was also held that there was
no budget limit set by the client and that there
was no express or implied obligation of the
architect to provide cost estimates as the
work progressed. It is gratifying to see that the
Full Court was willing to treat both client and
architect as parties equally able to set the
terms of the agreement between them but it
cannot be assumed that such a decision will
be made in every case.
4.

Nemer v Whitford
This South Australian case was decided by a
single judge of the Supreme Court. In this
matter the architect was sued by his client.
The client sought an order that the original
client/architect agreement should be set
aside, for return of money paid to the architect
by the client and for damages, costs and
other relief. The main issue was whether the
architectural services rendered were within or
outside the terms of the client/architect
agreement.
Sangster J stated the legal position thus:

His Honour found that it was an implied term


that the architect would make cost estimates
at each stage of the design work.

6
7

Page 3 of the transcript.


Page 12 of the transcript.

'In my opinion the law is that if an architect,


having been instructed to prepare plans
(etc.) and having been given a
requirement that the structure to be designed
be capable of being constructed at a cost not
8

Page 14 of transcript.

AN13.03.400 January 1995

exceeding a named sum produced a


design incapable of being constructed within
that named cost then the architect is not
necessarily precluded from charging the
agreed fee9

When the building tenders came in, they all


excluded air conditioning equipment and
installation and all were between $140,000
and $200,000. His Honour said:
'In my opinion such a design is so far
beyond the scope of instructions to design a
project within a cost limit of $100,000 as not
to amount to a performance of the original
contract.'13

'In order to recover his fees the architect


must have produced a design which, in his
opinion, genuinely arrived at by the
exercise of proper care and skill10 was
capable of being constructed within or
approximating, as the case may be, the
named cost.'11

The client therefore recovered the amount


paid for the developed design.

His Honour added that the fact that a design


proves incapable of being built within budget
is admissible but not conclusive evidence of
the architect's opinion and/or skill and care.
His Honour applied these questions
separately to each stage of the architect's
work, that is to the original sketch plan, and
the developed plan.
The factual crux was whether the client
imposed a budget limit of $100,000, or
whether the client's instructions contained no
cost limit, as asserted by the architect. His
Honour considered that neither architect nor
client were 100% accurate in their views of
the facts.
His Honour found that there was originally a
limit of $100,000 for building work and that the
sketch plan:
' was capable of being, in the opinion of a
careful and skilful architect, within the scope
of an instruction to design a house within a
cost limit of $100,000 albeit that the
achievement of a final estimate might
have involved some modification and
some restraint in the detailed
development .'12
The client was thus unable to recover money
paid for the sketch plan.
Turning then to the final plan, his Honour
found that the client gave instructions for
development of the sketch plan without
inclusion in the instructions of any direction to
exceed the original limit of $100,000 and
without any warning from the defendant that
the instructions would take the project beyond
the original cost limit.
9
10
11
12

Emphasis added.
Emphasis added.
[1982] 31 SASR 475, 477.
[1982] 31 SASR 475, 479.

Unfortunately, the judgment does not reveal


whether the elements incorporated into the
design after sketch plan stage led to the vast
over-shooting of budget, or whether it is
unreasonable to expect any building designer
to be able to estimate accurately at sketch
plan stage. It is suggested that there must at
least have been an element of the latter,
because presumably the whole of the
overshoot could not be accounted for by
expensive fittings, etc.
5.

Bennetto and Another v Kostromin


This is a judgment of a single judge of the
Tasmanian Supreme Court, Mr Justice Cox,
given on September 5, 1983. Again it was
found that the architect failed to design to the
clients' budget, but in this case the results
were far worse, as the discrepancy was not
discovered until building work was well under
way. The clients suffered substantial financial
loss because of the architect's negligence,
and got judgment for it all. The damages
awarded were far in excess of the fees that
the architect would have charged for the
project.
The sorry tale, drawn from the judgment of
the Supreme Court, commenced in 1976. The
clients bought land in Sandy Bay, a suburb of
Hobart. They believed that, after the sale of
their previous home and settlement for the
land purchased, they would have $60,000
remaining. Of that, they wished to spend
$40,000 on the construction of their new
home and the balance on outdoor
improvements such as landscaping and the
construction of a swimming pool. The
architect produced sketch plans and the
clients suggested a number of alterations.
They claim that they asked the architect what
effect the alterations would have on cost and

13

[1982] 31 SASR 475, 480.

AN13.03.400 January 1995

that he said he would give them a figure when


he had completed working drawings.
When the clients had first approached the
architect he had shown them over his own
home and said that it was built by a Mr
Jackman, whose workmanship he praised.
Before working drawings were complete, the
architect again mentioned Mr Jackman, but
pointed out that he only worked on a 'do and
charge' or 'cost plus' basis. The clients were
not happy with this type of agreement but
were persuaded. In April 1976 the architect
telephoned his clients and told Mr Bennetto
that Jackman was available and could
probably start within three weeks.
The clients met Mr Jackman and appointed
him. They claimed that the architect was
negligent in advising them to contract on a 'do
and charge' basis. Cox J was satisfied that
the clients were adequately advised of the
merits and pitfalls of this mode of contracting
and freely chose to adopt it. Time was an
important factor and using Mr Jackman could
minimise delays while also providing a
proficient and trustworthy builder.
In May, according to the clients, the architect
gave them a revised estimate of $53,000 plus
or minus 10%. Mr Bennetto expressed
concern that only small alterations should
have raised the likely price by $13,000. The
architect indicated that it would probably be
less 10%, because he had worked out a
figure to cover all contingencies.
Notwithstanding the increase, the clients
decided to go ahead with the project. The
architect denied that any such conversation
took place.
At the end of July, the building was barely to
floor level and the clients received their first
progress claim from the builder for $16,000.
Mr Bennetto claimed that he expressed
concern to the architect that such a high
proportion should be due. He was reassured
by the architect who said that the most
expensive part of the job was the initial
stages. In September, while the architect was
overseas, Mr Bennetto spoke to Mr Jackman
on site. Mr Jackman estimated that $30,000
had been expended to date - the house was
still only at floor level with a quantity of precut
timber delivered - and the total cost would be
about $100,000. A few days later the clients
met Mr Jackman to discuss costs. They
instructed him to reduce costs where
possible, but were told that the building was
virtually at a point of no return as most of the

timber and materials were already supplied


and cut, and as plumbing etc. was
incorporated into the slab which had already
been poured. The clients decided they had no
alternative but to continue.
A few weeks later the architect returned. The
clients expressed anger and dissatisfaction.
The architect said that the project would not
cost more than $70,000 - that builders always
exaggerate. Although angry and
disappointed, the clients opted to continue
with the project and retain the architects
services. He still had to complete the plans for
the joinery and they felt that appointing
another architect would only increase the
overall cost. By lock-up stage, payments to
the builder amounted to $70,000. The clients
resolved to complete the house, but sell it
immediately as they could not afford it. Total
payments to the builder were approximately
$104,000. The clients moved into the house
in May 1977 and in an attempt to minimise
expenditure, painted the exterior of the house
themselves. In addition, the clients paid
$19,000 for the land; the architect's fees of
approximately $4,700; approximately $8,200
for materials, furnishings, fittings and
appliances and approximately $4,500 for
gardens and driveway.
The clients put the house on the market as
soon as they moved in and it was ultimately
sold in August 1979 for $107,000. The clients
had spent $140,434.79 on the house and thus
incurred a direct loss of $33,434.79. It was
held that all expenditures were reasonable
and that the sale was at fair market value.
In addition, the clients claimed for indirect
losses. These were:
(a) interest on a loan of $17,900 borrowed to
buy the land at Sandy Bay which would have
been repaid on the sale of their previous
house had the building budget been
observed;
(b) bank interest and charges on additional
loans required to meet additional costs;
(c) the expenses of the sale of an investment
property and loss of income from it until
judgment;
(d) sales expenses of the Sandy Bay
property;
(e) sales expenses of a Jaguar motor car.

AN13.03.400 January 1995

It was the clients' case that the architect was


the author of their loss by failing to design to a
price and failing to keep them informed as it
became obvious what the true price would be.

which made the bank loans, sale of car and


sale of investment property necessary. With
the exception of the interest on the solicitor's
mortgage all the clients' claims were awarded.
The total damages were in excess of
$62,000.

The architect raised the defence that he had


been asked to design to requirements rather
than a budget - he acknowledged the mention
of $40,000, but not the later estimate of
$53,000 'plus or minus 10%'. He also said
that, as the clients had elected to engage a
'do and charge' builder, it was not part of his
obligation to estimate cost or warn the clients
that the budgeted $40,000 might treble.

Comment
It was found that the architect's negligence
had led his clients into debt. They would not
have continued with the project had they been
given accurate information about its cost, so
by providing inaccurate information the
architect caused his clients to make the wrong
decisions and was thus the true author of their
loss. The measure of their loss was the
difference between the amount outlaid and
the amount recovered, given that the clients
were forced to sell their house. However, at
one point in the judgment his Honour
introduced another element. He said:

Where there was a conflict on evidence, his


Honour tended to prefer that of the clients.
The crux of the findings, which imposed
liability on the architect, was his Honour's
statement that:
'I have no doubt that had a genuine
estimate of the likely cost been made and
stated it would have been very much
higher, the Plaintiffs would not have
embarked on the project and the Defendant
would have lost his commission.'14
6.

'Together with the cost of the land and other


items obtained by the Plaintiffs the
project cost over $140,000, $33,000 more
than it was worth.'15

Quantification of damages
His Honour accepted evidence that the
architect became aware, possibly as early as
July 1976, that labour and materials excluding
a heater would cost approximately $81,000;
hence the total cost with the heater and the
builder's 10% margin would be not far short of
$100,000. This information was not passed
on to the clients. Rather, the architect assured
them that the house could be completed for
$70,000 in October 1976. This was the first
time the architect had mentioned any figure in
excess of $58,300 (that is $53,000 plus 10%)
and the architect urged the clients to proceed.
This circumstance is relevant in considering
the reasonableness of their decision to
complete the house.
His Honour did not allow interest on a
solicitor's mortgage of some $6,390 as they
would not have been in a position to pay out
from the sale of their first house had the
architect's estimate of $58,300 been accurate.
The architect's budget was never intended to
cover the cost of furnishings and fittings,
driveway, garden improvements and the
architect's fee.
The bank charges, however, were
recoverable. It was the architect's breach
14

Page 15 of transcript.

The fact that a new house costs more to build


than it can be sold for should not necessarily
be taken as proof of the architect's
negligence. The price of complete houses is
influenced by the cost of building similar
houses, but the two markets can fluctuate
independently. A shortage of completed
housing and low interest rates can raise the
achievable price, while a housing glut and
high interest rates can have the opposite
effect.
7.

Brian James Coleman v Gordon M


Jenkins and Associates Pty Ltd and
Another
This is a matter that was heard by a single
judge of the Federal Court, Einfield J, then
appealed to the Full Court of the Federal
Court.
In May or June 1983, an architect employed
by an architectural firm, went to the home of
the client, Mr Coleman. They discussed the
client's physical and aesthetic requirements
for a house and also the cost of building. At
trial, the client said that he told the employee
architect that he could not afford to spend
more than $80,000 to $85,000. He added that
the employee architect said that the job could
15

Page 18 of transcript.

AN13.03.400 January 1995

be done for that price if the client took out an


owner/builder's licence and the employee
architect oversaw and supervised
construction. The trial judge found that the
client had recently sold his house and
received $70,000 - a fact of which the
employee architect was aware.
The employee architect alleged that when
fees were being discussed, they were based
on an estimated cost of building of $150,000.
The client denied that such a conversation
took place. The client said that in June 1983
the employee architect gave an estimated
project cost of $90,000 to $100,000, despite
the upper limited previously set and in later
meetings in June 'the cost figure of $80,000
was again emphasised'.16 The client said that
when the final plans were completed in July or
August, the employee architect spoke of a
cost figure of $80,000.
The employee architect said that in midAugust he told the client that the cost would
be $125,000 excluding decks and garage or
carport, the inclusion of which would increase
the cost to $150,000. Einfield J's judgment
reports that the client insisted that no price
other than $80,000 was ever given after the
estimate of that amount. The permit
application gave a building cost of $120,000.
The client said that application was completed
by the employee architect in his presence and
this figure was used because the employee
architect said that the council would not
believe that the price would be any lower. The
employee architect denied that the client was
present. He said that he filled in the form and
provided a copy to the client.
On 1 December 1983 the employee architect
left the employment of the architectural firm
and on the same day an account was sent to
the client, based on a percentage of an
estimated cost of $150,000. The client said
that he queried the account, particularly the
estimate upon which it was based and said
that he would be paying a fee based on
$80,000. The employee architect denied that
$80,000 was mentioned at this time.
The owner/builder permit was granted on 27
February, 1984. Shortly after that, orders
were placed for various materials and work
commenced. The sorry story is summarised in
Einfield J's judgment:
'The house has never been completed. The
applicant has been abandoned by the
16

(1993) BCL 292 at 294.

[employee architect] and his bank is no longer


willing to finance the project presumably
because the site is over capitalised or the
[client] has no way of adequately financing
the loans already undertaken, or both. The
bank is threatening to foreclose and the
[client] is unlikely to recover anything from a
mortgagee's sale.' 17
The claims made against the architectural firm
and employee architect included breach of
Sections 52, 53 and 75B of the Trade
Practices Act, the giving of negligent advice
and breaches of contracts.
Section 52 of the Trade Practices Act
provides that a corporation shall not, in trade
or commerce, engage in conduct that is
misleading or deceptive, or likely to mislead or
deceive. Section 53 is to similar effect, but
deals specifically with making false
statements about the supply of goods and
services, particularly about their quality.
Section 75B provides that an individual (as
distinct from a corporation) may not do
various things such as aiding, abetting,
counselling and procuring a contravention of
various sections under the Trade Practices
Act, including Sections 52 and 53.
Einfield J accepted that the employee
architect was aware of the client's financial
constraints. He went on to say:
'Essentially, the [employee architect's] case is
not only that he did not represent that the
house could not be built for around $80,000,
but that he was not asked to design a house
within any budgetary limitation at all. If so, this
could be extraordinary for almost any project,
let alone one to be funded by a man of limited
means. Even if the [client] had said nothing
about any limitation of budget, the architect
would surely have asked.'18
In discussing the duty owed by the architect
to the client, his Honour quoted Savage v
Board of School Trustees of School District
No. 6019 with approval. Part of that quotation
is:
'If [the architect] furnishes an estimate as
part of his contract it must, at his peril, be
reasonably near the ultimate cost.'
17

18
19

(1993) BCL 292 at 296 - at the Full Court hearing it


was reported that the mortgagee's sale had taken
place.
(1993) BCL 292 at 300.
[1951] 3 DLR 39.

AN13.03.400 January 1995

He concluded:

The case was re-tried and heard by another


judge of the Federal Court but was not
reported. The eventual result, after the
expenditure of enormous amounts of time and
money in legal procedures, was that little if
anything was paid by either party to the other,
although there was an order that the
architects should repay $3,000 they had
received in fees.

'There is no doubt that when an architect


gives an estimate, it must not only be an
honest and carefully considered estimate
but it must also be given after due
consideration of the facts involved in the
particular case.'
He found that the estimate given in this matter
was 'wildly inaccurate.'20 At trial the client
succeeded in all his claims against the
architectural firm and the employee architect.

Comment
The Full Court was willing to draw an
inference that the Practice Notes said that an
estimate which was inaccurate by more than
10% was prima facie negligent. While this
inference is open to challenge, it is
noteworthy that the Full Court was unwilling to
rely on this inference from the Practice Notes
without further evidence.

In his judgment Einfield J made reference in


the AN13.03 series and said:
'It provides a 10 per cent margin for
estimates as reasonable.'21
Quantification of damages was to be left to a
Court Registrar - no mean feat as his Honour
said:
'The [architects] say there is no evidence to
support the claimed completion cost of about
$53,000.' and 'The [client] says that he has
spent a total of $138,000 (excluding the cost
of the land) but the evidence seems to
suggest that this is closer to $120,000, at
least as regards construction costs.'
The Full Court set aside the judgment of the
trial judge and ordered a new trial. The main
reasons were that Einfield J had informed
himself of the contents of the RAIA Practice
Notes - they were not presented in evidence
by any of the parties - and the fact that a loss
was not clearly established. Their Honours
said:
'Given the complexity of these facts and
circumstances and the uncertainties we
have mentioned, we are not able to
conclude that there was such a discrepancy
between the amount of the second
appellant's estimate and the amount spent
by the respondent that a finding of
negligence must necessarily be made. It
must follow that it is not possible for us to
say that, the Practice Notes apart, there is
material from which negligence on the part
of the second appellant should now be
inferred by us.'22

20
21
22

(1993) BCL 292 at 304.


(1993) BCL 292 at 304.
(1989) ATPR 40-974.

8.

Boston v McBratney and Another


This Western Australian case concerns not an
architect, but an architectural draftsman. At
the time of the commission he was enrolled in
a course which would lead to qualification as
a builder. The proprietors and draftsman first
discussed the project in January, 1989. The
proprietors say that they were willing to spend
$70,000, but were told by the draftsman that
this was insufficient and a figure of $80,000
was mentioned. Drawings were sent to the
proprietors on 23 March, 1989. These were
rejected because the estimated cost of
building was $98,000. Further discussion led
to agreement that the draftsman would redraw
the plans and according to the proprietors the
cost of the house was to be ' in the 80s'.
The draftsman prepared working drawings
then spoke to a number of builders about
getting a price. One said that he would
construct the house for $150,000 and another
said that he was too busy to even
contemplate the job. The draftsman never
actually received a quote. Time was running
out because the proprietors needed the job
finished by September 1989. On 4 May 1989
the draftsman wrote to the proprietors
enclosing drawings and estimating the cost of
construction at $89,699 which included a
supervision fee for the draftsman of $5,240.
According to Mrs McBratney, during the
course of 'that telephone conversation'
(presumably a telephone conversation
subsequent to the receipt of the letter) the
draftsman had suggested that he build and
supervise for $84,500 and $5,000
respectively. She said she understood that

AN13.03.400 January 1995

the draftsman would build for a set price. On


10 May 1989 the proprietors and the
draftsman signed an agreement which
included the provisions that:

His Honour said:


'Whilst the plaintiff may not have the same
degree of expertise as an architect, in the
circumstances he owed to the defendants a
duty of care to take reasonable steps to
ensure his estimate of the cost of
constructing the house was reasonably
accurate'.23

the draftsman would supervise construction


based on 'an owner/builder arrangement';
on accepting the quote for each trade, 50%
would be sent to the draftsman prior to trade
commencement and it would be held in a trust
account with the final 50% to be paid on trade
completion;
the estimated cost of construction was to be
$89,679, but 'as there may be selections of
other items then this cost may vary'.
Mrs McBratney said she did not understand
the expressions 'owner/builder' and 'estimate'
and when she spoke to the draftsman he
reassured her without explaining them. Mr
McBratney said that he did not think the word
'estimate' meant that the cost would increase.
In the draftsmans suit for unpaid accounts, he
claimed that the actual cost of construction,
excluding the supervision fee, was
$114,126.87. The proprietors counter claimed
for the excess over what they asserted was
the agreed contract sum ($89,679) which they
had spent or would have to spend in order to
complete the house in accordance with the
plans and specifications. The amount claimed
was $7,906.48.
In the judgment, Judge Barlow cited a
number of cases which support the view
that, in general, other evidence is not
admissible to prove that the intention of the
parties was other than that which is
apparent from the written agreement. The
decision was that the contract was a cost
plus contract, rather than fixed price. The
judge then went on to consider whether the
proprietors could succeed against the
draftsman for negligence or for breach of
the Fair Trading Act 1987. The Fair Trading
Act is the State equivalent of the Trade
Practices Act. In respect of
misrepresentation, the only real difference
is that the Trade Practices Act applies only
to corporations, whereas the Fair Trading
Acts of various States and Territories apply
to individuals as well. It was admitted by the
draftsman that he knew the proprietors had
a budget limit of $90,000.

He found that the draftsman was liable in


breach of duty for negligently calculating and
misstating the accuracy of the estimate and in
particular for failing to make any allowance for
the effect of inflation, both by taking it into
account in the estimate and by warning the
proprietors of the possible effects. It also
amounted to a misrepresentation within the
meaning of the Fair Trading Act.
Although the draftsman was negligent in the
preparation of the estimate, he won the case.
This was because his Honour assessed the
proprietors potential loss by considering
whether the land had been over capitalised.
He found that it had not. The proprietors had
incurred greater expenditure than they
budgeted for, but they still got value for
money. It was ordered that the proprietors pay
the draftsman $15,449.79; approximately two
thirds of the amount claimed.
Comment
It was fortunate for the draftsman that his
negligence did not lead the proprietors into
serious financial difficulties. If it had, the result
would probably have been more in line with
that in Bennetto v Kostromin. It is also
noteworthy that none of the earlier cases
reported in this note were cited in the
judgment or in argument.

These Notes are issued by the RAIA for general guidance


only. No responsibility for their accuracy or currency is
accepted by the RAIA, its office-bearers, members or staff or
by the author.

23

Page 41 of transcript.

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