Anderson Formrite Pty Ltd v Baulderstone Pty Ltd (No 7)
[2010] FCA 921
FEDERAL COURT OF AUSTRALIA
Anderson Formrite Pty Ltd v Baulderstone Pty Ltd (No 7) [2010] FCA 921
Citation: Anderson Formrite Pty Ltd v Baulderstone Pty Ltd (No 7) [2010] FCA 921 Parties: ANDERSON FORMRITE PTY LTD (ACN 097 507 652) v BAULDERSTONE PTY LTD (ACN 002 625 130) File number(s): NSD 1272 of 2007 Judge: GRAHAM J Date of judgment: 25 August 2010 Catchwords: TRADE PRACTICES – whether representations said to have been made were made – whether applicant induced thereby to enter into a formwork subcontract on 11 October 2001
CONTRACTS – termination of formwork subcontract for respondent’s sole convenience – terms and conditions surviving termination – intention of the parties – implied terms where formwork in use at time of termination whilst concrete curing – rights of subcontractor to strip and remove formwork from the site
CONVERSION – whether locking formwork subcontractor out of access to building site and/or continued use of formwork equipment thereafter constituted conversion – when did conversion occur – distinction between equipment that was owned, under a contract to purchase, and hired
DAMAGES – breach of contract – conversion- where there is difficulty in calculation
Legislation: Trade Practices Act 1974 (Cth) ss 51A, 52 and 82(1)
Federal Court of Australia Act 1976 (Cth) s 51ACases cited: Henjo Investments Pty Limited v Collins Marrickville Pty Limited (No 1) (1988) 39 FCR 546
Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180
TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130
Ratcliffe v Evans [1892] 2 QB 524
Allan v Loadsman (1975) 2 NSWLR 789
Tramways Advertising Pty Ltd v Luna Park (N.S.W.) Ltd [1938] 38 SR (NSW) 632
Luna Park (N.S.W.) Limited v Tramways Advertising Proprietary Limited (1938) 61 CLR 286
Butt v M’Donald [1896] 7 Q.L.J. 68 at 70-71
Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596
Fitzgerald v F.J. Leonhardt Pty Limited (1997) 189 CLR 215
Australis Media Holdings Pty Limited v Telstra Corporation Limited (1998) 43 NSWLR 104
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Carlton & United Breweries Ltd v Tooth & Co Ltd unreported, Supreme Court of New South Wales, 11 June 1985
B.P. Refinery (Westernport) Pty. Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266
Penfolds Wines Proprietary Limited v Elliott (1946) 74 CLR 204
Hill v Reglon Pty Limited [2007] NSWCA 295
Coleman v Harvey [1989] 1 NZLR 723
Rapid Metal Developments (Aust) Pty Ltd v Rildean Pty Ltd [2009] NSWSC 571
Chep Australia Ltd v Bunnings Group Ltd [2010] NSWSC 301
Bis Cleanaway (Trading As Chep) v Tatale [2007] NSWSC 378
Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1993) 32 NSWLR 175
Butler v The Egg and Egg Pulp Marketing Board (1966) 114 CLR 185
Livingstone v Rawyards Coal Co [1880] 5 App. Cas. 25Dates of hearing: 14, 15, 16, 17, 20, 21, 22, 23, 24, 27, 28, 29, 30 and 31 July, 3 and 4 August and 21, 22, 23, 24, 25 and 28 September 2009 Date of last submissions: 28 September 2009 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 347 Counsel for the Applicant: B A J Coles QC and A W Smith on 14, 15, 16 and 17 July 2009; B A J Coles QC on 20 July 2009; B A J Coles QC and A W Smith on 21, 22, 23 and 24 July 2009; A W Smith on 27, 28, 29, 30 and 31 July and 3 and 4 August 2009 Solicitor for the Applicant: John de Mestre & Co: B J Maher of John de Mestre & Co appeared for the applicant on 21, 22, 23, 24, 25 and 28 September 2009 Counsel for the Respondent: B D Hodgkinson SC and A C Harding Solicitor for the Respondent: Clayton Utz
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1272 of 2007
BETWEEN: ANDERSON FORMRITE PTY LTD (ACN 097 507 652)
ApplicantAND: BAULDERSTONE PTY LTD (ACN 002 625 130)
Respondent
JUDGE:
GRAHAM J
DATE OF ORDER:
25 AUGUST 2010
WHERE MADE:
SYDNEY
THE COURT:
1.Orders that there be judgment for the applicant in the sum of $4,611,317.09, inclusive of a lump sum of $1,965,000.76 in lieu of interest up to judgment.
2.Orders that the determination of appropriate orders as to costs be reserved.
3.Directs that each of the parties lodge with the Court and serve on the other party a document of no greater length than three typed pages, at or before 2.15 pm on Friday 27 August 2010, recording the form of orders as to costs which that party proposes and the submissions of that party thereon, expressed in dot point form.
4.Order that the proceedings be stood over to Tuesday 31 August 2010 at 9.30am for consideration of the appropriate orders as to costs and argument thereon.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1272 of 2007
BETWEEN: ANDERSON FORMRITE PTY LTD (ACN 097 507 652)
ApplicantAND: BAULDERSTONE PTY LTD (ACN 002 625 130)
Respondent
JUDGE:
GRAHAM J
DATE:
25 AUGUST 2010
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Index to Marginal Headings
Background........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [1] Formrite Pty Limited........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [4] WorkForce ONE........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [18] Anderson Formrite Pty Limited........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [30] A period of transition for Formrite........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [37] Formrite’s successful tender for the Woodside Building project........ ........ ........ ........ ........ ....... [40] Commencement of work and Union disruption........ ........ ........ ........ ........ ........ ........ ........ ........ [43] A Sale of Business agreement between Formrite and the applicant........ ........ ........ ........ ........ .. [46] The applicant’s pursuit of a formwork subcontract with the respondent........ ........ ........ ........ .... [64] Tender Interview Checklist And Record........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [75] The applicant as a successor to Formrite in relation to the Woodside Building project........ ...... [84] The witnesses who were called to give evidence........ ........ ........ ........ ........ ........ ........ ........ ..... [96] A contract between the applicant and the respondent........ ........ ........ ........ ........ ........ ........ ...... [98] Termination for convenience........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [103] The use of the applicant’s plant and equipment after 17 May 2002........ ........ ........ ........ ........ .. [112] Industrial Relations considerations........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [117] Progress Claim No. 18 of 3 May 2002........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [128] A loan agreement between the applicant and the respondent........ ........ ........ ........ ........ ........ ... [131] The respondent’s assessment of Progress Claim No. 18........ ........ ........ ........ ........ ........ ........ . [138] Progress Claim No. 19 of 10 May 2002........ ........ ........ ........ ........ ........ ........ ........ ........ ........ [143] Progress Claim No. 20 of 17 May 2002........ ........ ........ ........ ........ ........ ........ ........ ........ ........ [144] The respondent declines to assess Progress Claim No. 20........ ........ ........ ........ ........ ........ ...... [145] The respondent’s position in relation to use of the applicant’s equipment after 17 May 2002.... [147] Claims of wrongful conversion commence on 31 July 2002........ ........ ........ ........ ........ ........ ..... [168] A demand by the applicant for $10,409,551.80........ ........ ........ ........ ........ ........ ........ ........ ...... [171] A solicitor’s letter of demand........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [172] The respondent’s response to the applicant’s demands........ ........ ........ ........ ........ ........ ........ ... [173] Potential legal claims by the applicant........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [177] Disputation between the parties pre-17 May 2002........ ........ ........ ........ ........ ........ ........ ........ .. [179] Pre-termination litigation involving the applicant........ ........ ........ ........ ........ ........ ........ ........ ....... [185] Observations and findings........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [198] The applicant’s awareness pre-11 October 2001 of the inadequacy of the men made available by WorkForce ONE to Formrite........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [199] World War III........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [200] The current proceedings........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [208] The Trade Practices claim........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [212] The contract claim........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [232] The applicant’s claim under clause 39.13(a)(i)........ ........ ........ ........ ........ ........ ........ ........ ........ [242] The applicant’s claim under clause 39.13(a)(ii)........ ........ ........ ........ ........ ........ ........ ........ ........ [279] Reasonable removal costs........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [284] Conclusion in respect of contract claims........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [285] The conversion claim........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [286] Findings........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [312] The essence of conversion........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [313] Conclusion in respect of the conversion claim........ ........ ........ ........ ........ ........ ........ ........ ........ .. [325] Interest up to judgment........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [339] Costs........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... [346] Background
These proceedings have had a chequered history. The Application was filed on 5 July 2007 even though the issues in the proceedings relate back to events that occurred primarily in mid 2001 – mid 2002. The Application was accompanied by a Statement of Claim. An Amended Statement of Claim was filed on 23 August 2007. The original Defence to that Amended Statement of Claim was filed on 15 November 2007 and an Amended Defence was filed in Court on 14 July 2009, the first day of the trial in the proceedings. A Further Amended Statement of Claim was filed on 21 July 2009 and a Defence to Further Amended Statement of Claim was filed on 28 July 2009. A Second Further Amended Statement of Claim was filed in Court on 23 September 2009. By virtue of Order 13 rule 4(4) of the Federal Court Rules, the Defence to Further Amended Statement of Claim stands as a defence to the Second Further Amended Statement of Claim.
The dispute relates to a formwork subcontract referable to a building site at 240 St Georges Terrace, Perth on which a significant 25 plus storey, high-rise commercial building was constructed that is now known as the ‘Woodside Building’. The respondent, then known as Baulderstone Hornibrook Pty Limited, was the Head Contractor, referred to as the ‘Main Contractor’, retained to construct the Woodside Building.
An early programme for the formwork contract ‘(B1 suspended deck – Level 26 LMR)’ was ‘45 weeks from 10 September 2001’. The formwork required for the below ground works (stick formwork) differed from that generally required for the above ground works where there were typical floors and, with the use of hoists, table forms and self-climbing screens, a higher level of productivity was possible. The stick formwork required the forms to be built piece by piece.
Formrite Pty Limited
A company based to the south of Brisbane at Beenleigh in the State of Queensland, which is approximately halfway between Brisbane and the Gold Coast, known as Formrite Pty Limited ACN 064 059 981 (‘Formrite’), was an experienced formwork contracting company with a long history of working with the respondent on building projects in Queensland.
By a letter dated 19 January 2001 to the North Sydney, New South Wales office of the respondent, Formrite, under the hand of George McFarland as ‘Director’, advised the respondent of its interest in providing a formwork subcontract price for the:
‘WOODSIDE PETROLEUM TOWER PROJECT
PERTH – WESTERN AUSTRALIA’The letter included:
‘We have had preliminary discussions with the appropriate unions in Perth through our Western Australia representative and indications are that our company would be well accepted provided we meet their standard conditions of employment.
Should you require confirmation of our work experience, we would ask that you contact any of your senior Queensland staff in order to evaluate any aspect of our company performance.’
Mr McFarland lived at Noosa on the Sunshine Coast to the north of Brisbane.
A further letter dated 24 July 2001 under the hand of Mr McFarland as ‘Director’ was sent by Formrite to the respondent by facsimile on that day requesting an opportunity to quote on the formwork for the ‘WOODSIDE PETROLEUM TOWER PROJECT, PERTH’. On this occasion the request was directed to the respondent in Perth, Western Australia ‘Attention: Tony Fletcher’. The letter included:
‘Further to my discussion with Mr. Mark Lamond in Sydney early last week, I would be most appreciative if you would allow our company the opportunity to quote on the formwork to the above project.
As discussed with Mark, we are your preferred formwork contractor in the Queensland area and have successfully completed many large formwork projects on your behalf. …
Should you allow us the opportunity of providing you with a competitive formwork price on this project, we will be able to undertake an estimate immediately.
…’On 24 July 2001 an officer of the respondent, Stephen Surjan, signed a letter for Tony Fletcher, the ‘Project Director’ of the 240 St George’s Terrace Project, addressed to Formrite at Beenleigh in Queensland ‘Attention: Mr George McFarland’ under the heading;
‘RE: 240 St George’s Terrace, Perth
Formwork Tender
The letter, which was presumably forwarded to Formrite by facsimile on 24 July 2001, included:
‘As discussed with you on Friday 20th July, we were unable to provide you the opportunity to quote on the formwork for the above project as we were required to make a final decision on Monday 23rd July.
Following your discussion with Joh Van Engelen, Joh has provided you with the opportunity to quote the project in 2 days.
The documents shall be forwarded to yourself and a completely complying quotation would be required by close of business on Wednesday 25th July.
Should you have any queries please contact Paul Young or Stephen Surjan on (08) 9324 3544.’
A price for the supply, erection, stripping and removal of all formwork for the 240 St Georges Terrace, Perth project of $13,376,200 (exclusive of GST) was submitted by Formrite to the Perth Office of the respondent by letter dated 25 July 2001. Formrite’s letter, signed by Mr McFarland as ‘Director’, included:
‘Our price has been based on the tender documentation supplied by facsimile of 24th instant and the following variations to the Scope of Works.
…On 30 August 2001 Formrite submitted a revised offer, by facsimile to the respondent’s Perth office, to carry out the work the subject of the proposed formwork subcontract. That letter, signed by G McFarland as ‘Director’ and marked ‘Attention: Mr Tony Fletcher’, included the following:
‘Re: 240 ST GEORGE TERRACE PERTH
FORMWORK CONTRACT
Further to your recent communication with us and for the purpose of clarification, we hereby submit our revised offer of $12490000 exclusive of GST for the supply erection stripping and removal of all formwork on the above project.
Our revised offer has been based on the tender documentation supplied and use of the new motorised self climbing screens your people recently viewed at the MAB Docklands site. We believe use of this particular screen system is essential if we are to achieve your construction programme.
…We previously referred to your company offering us a performance incentive bonus for the early completion of your prescribed formwork programme for this contract. Our company and experienced staff enjoy a challenge and so suggest that an appropriate figure should be in the order of $200,000 per week.
Our revised price assumes your assistance with mobilisation costs as has been the practice on other projects between our companies.
We trust these arrangements are acceptable and look forward to being able to assist you on this project.’
On 31 August 2001 the respondent sent a letter to Formrite ‘Attn: Mr George McFarland’ under the heading:
‘RE: 240 St Georges Terrace
Formwork Package (the Works)’The letter emanated from the respondent’s Perth Office at Level 4, 220 St Georges Terrace, Perth. It was signed for the respondent by Tony Fletcher as ‘PROJECT DIRECTOR’ of the 240 St Georges Terrace Project. It provided as follows:
‘With reference to a prospective subcontract with your company we hereby confirm the following:
1. The agreed subcontract sum shall be $ 12,345,000.00.
2.The subcontract sum allows for all works included in the Scope of Works issued with the tender package dated 24 July 2001.
3.Payment terms shall be 14 day claims with 14 day payment terms.
4.2 off Bank Guarantees, each in the sum of $ 308,625.00, shall be issued in lieu of cash retentions.
5.The current price allows for motorised self climbing screens as described in Formrite letter dated 30 August, 2001.
6.The programme for the works (B1 suspended deck – Level 26, LMR) is 45 weeks from 10 September 2001.
It is both parties current intention to move quickly to execute the formal Subcontract Agreement (an executable copy of which has been forwarded to yourselves under separate cover).
For the purpose of expediting the implementation of the Works, Baulderstone Hornibrook Pty Ltd wishes Formrite Pty Ltd to commence immediate mobilisation of resources to carry out the Works, as detailed in our Scope of Work and in accordance with our programme requirement of a 10 September 2001 start date on site.
This arrangement does not constitute a contract for the entire Works and is limited to the mobilisation only of the resources necessary to carry out the Works.
Baulderstone Hornibrook Pty Ltd confirms that it will reimburse Formrite Pty Ltd for all reasonable costs associated with such mobilisation should either party not execute the Subcontract Agreement.
The following terms and conditions apply to this agreement.
a)Formrite is responsible for the care of its resources mobilised under this agreement.
b)Before commencing mobilisation, Formrite must effect and maintain adequate public insurance, and insurance against such liability that may arise in connection with the mobilisation.
c)Formrite must indemnify BHPL against all liabilities arising out of or in connection with the mobilisation in respect of personal injury of any person or damage to property.
d)The mobilisation shall form part of the Subcontract Works once the Subcontract Agreement has been executed, and any payment received shall form part of the Subcontract Sum.
e)The Subcontract Agreement is executed by 6 September 2001.
Please indicate Formrite Pty Ltd acceptance of the above by signing, dating and returning a copy of this letter.
…’
A Formrite document in relation to the ‘240 St George’s Terrace’ project entitled:
‘FORMRITE
SUMMARY
JOB COSTING REPORT – START DATE: 13.09.01’recorded an anticipated income of $12,345,000.00 and anticipated expenditure of $10,295,000.00 with an anticipated profit of 16.61% of the anticipated income i.e. $2,050,000.00. The job costing report recorded ‘BUDGET HOURS’ at 160,000.
The budgeted expense of $10,295,000.00 was broken down into 14 categories as follows:
Total wage related $6,560,000.00
Total materials $575,000.00
Total incidentals/cons $460,000.00
Total hire costs $190,000.00
Total transport $150,000.00
Design work $80,000.00
Metal work $170,000.00
Safety $220,000.00
Frames $150,000.00
Tables $160,000.00
Screens $1,000,000.00
Hoists $300,000.00
Miscellaneous $100,000.00
Travel/Accommodation $180,000.00
Total Expenditure $10,295,000.00The evidence is not clear as to what constituted the ‘Scope of Works’ issued by the respondent with the ‘tender package’ dated 24 July 2001, nor is it clear as to what documents comprised the ‘tender package’ or the ‘tender documentation supplied by facsimile of 24th’ July 2001.
One document that does appear to have been transmitted by facsimile from the respondent to facsimile number 07 5526 7811 on 24 July 2001 was a 14 page Bill of Quantities which allowed for a tenderer to insert rates and amounts by way of pricing. Under the description ‘FORMWORK-TOWER’ a number of items were recorded under a variety of subheadings. The first relevant subheading was ‘Below basement level B2 (RL8.50)’. Each of the quantities under that subheading was deleted from the form. The next subheading was ‘Basement levels B1 & B2 (RL 8.50 – RL 16.50)’. Under that heading the quantity recorded in the form against the item ‘D Formwork to retaining walls at ground slab level changes’ was deleted from the form.
The succeeding subheadings were then as follows:
‘Ground to Level 1 (RL 16.50 – RL 26.50)’
‘Level 1 to Level 8 (RL 26.5 – RL 53.80)’
‘Level 8 to Level 9 (RL 53.80 – RL 61.60)’
‘Level 9 to Level 16 (RL 61.60 – RL 88.90)’
‘Level 16 to Roof (RL 88.90 – RL 132.95)’
The Bill of Quantities then proceeded to include a number of items under the headings ‘COLUMNS’, ‘STAIRS’, ‘MISCELLANEOUS ALLOWANCES’, ‘SUNDRIES’ and ‘FORMWORK SUNDRIES’.
The 8th, 9th, 10th and 11th pages of the Bill of Quantities were headed ‘FORMWORK – HOTEL SUBSTRATUM’ and had similar subheadings for the various items making up the works. The 12th and 13th pages of the Bill of Quantities dealt with ‘FORMWORK – WESTERN BUILDING’.
Page 14 of the Bill of Quantities was a summary page which allowed for amounts to be brought forward from the earlier pages for ‘FORMWORK – TOWER’, ‘FORMWORK –HOTEL SUBSTRATUM’ and ‘FORMWORK – WESTERN BUILDING’. The Bill of Quantities then concluded with the words ‘TOTAL AMOUNT TO FORM OF TENDER’.
It may be observed that there were three distinct components making up the project – the ‘Tower’, the ‘Hotel Substratum’ and the ‘Western building’.
WorkForce ONE
The role of WorkForce ONE is of some importance in this case. WorkForce ONE was the business name under which Headlink Pty Limited traded. Headlink Pty Limited was registered on 22 December 1999. At all material times its principal place of business was located in the Robina Town Centre on the Gold Coast in Queensland. It was placed in administration on 2 August 2002 and dissolved on 20 November 2003.
It would appear that its sole director in the period 21 December 1999 to 4 February 2002 was Gregory James Lynch of Broadbeach in Queensland. He was apparently succeeded as the sole director by Kevin John McHugh on 4 February 2002 although the evidence suggests that Headlink Pty Limited was under the direction of Mr McHugh back in 2001.
Senior counsel for the respondent suggested that Mr McHugh was a ‘militant BLF [Builders Labourers Federation] man’. It was said that Mr McFarland, who had a lot of experience in the building industry in Queensland, may have so described him. Mr McFarland certainly did not like Mr McHugh.
On 10 January 2001 Mr Paul Watson, a senior executive of the respondent in Sydney whose title would appear to have been a director of new business, recorded a message for the respondent’s Damien Newton-Brown which read:
‘To commence work on Site
after 15/1/01 you need
to employ
Roy McIllrane (sic) – delegate- Peter Delaney – Safety
on books of Work Force One
for 3 month trial period.
As previously agreed.
Regards
Paul’On 18 July 2001 an officer of the respondent, Len Hall, sent an email communication to Paul Watson, with a copy to Mr Tony Fletcher, ‘Project Director’ for the 240 St Georges Terrace Perth project, under the heading:
‘Subject: 240 St Georges Terrace, Perth
Workforce One Rates’
The email provided:
‘The new rates proposed by Workforce One (ref your memo dated 11 July 01) improve our position by $120 per man per week (based on a 65 hr wk) which is a 25% improvement on our previous position.
The extra over cost to employ a man through Workforce One (based on a 65 hr wk) is approx $700.00
Workforce One are entitled to a profit
($210.00)
Workforce One premium on rates
$490.00
The improvement with the revised rates
($120.00)
Revised Workforce One premium
$370.00 or a 25% improvementWe should consider accepting this as any reduction in rates is better than nothing at all, although they are still making more than they should out of their supply of labour.’
Presumably, the respondent intended to use workers sourced from WorkForce One.
On 1 August 2001 Mr Damien Newton-Brown, an officer of the respondent sent an email to ‘[email protected]’ under the heading ‘Transfer of McIlwaine, Delaney & Cochrane’. A copy of the email was sent to Mr McHugh at WorkForce ONE and also to ‘Paul Watson/SYD/BAULD/AU@BAULD’, ‘Tony Fletcher/PTH/BAULD/AU@BAULD’ and Ian Glover/PTH/BAULD/AU@BAULD’. The email read:
‘As per agreed arrangements with Workforce One, Baulderstone Hornibrook will be engaging Roy McIlwaine, Peter Delaney and Jason Cochrane directly onto our books as of 1 August 2001.
We thank you for your assistance in their employment to date on the 240 St Georges Terrace Project.’
The email would appear to have been addressed to Mr Clint Reynolds, an employee of WorkForce ONE, who happened to be the son of Mr Kevin Reynolds, the Secretary of the Construction Forestry Mining and Energy Union (‘CFMEU’) in Western Australia.
The evidence establishes that the CFMEU in Western Australia was and was known to be a militant building industry union.
It is common ground that the tender documentation for the formwork subcontract did not include a requirement that the successful formwork tenderer would be required to use contract labour provided by Headlink Pty Limited or any other company trading as ‘WorkForce ONE’, ‘WorkForce 1’, ‘Workforce One’ or ‘Workforce 1’.
Volume 7 of Exhibit B contains, amongst other things, a number of tax invoices issued by Headlink Pty Ltd T/A WorkForce ONE and directed to ‘Formrite’. The invoices bear a variety of dates commencing with 27 September 2001 and ending with 11 October 2001. These invoices are then followed in Volume 8 of Exhibit B by a number of others directed to the applicant. The invoices directed to the applicant bear dates commencing with 18 October 2001.
It would appear that the invoices dated 27 September 2001 to 25 October 2001 were processed by the applicant on 31 October 2001.
The invoices dated 27 September 2001 relate to carpenters and labourers identified as ‘carp’, ‘Lab 2’ and ‘Lab 3’ and relate to work performed in the period commencing Tuesday 18 September 2001 and ending on Tuesday 25 September 2001.
Each of the invoices dated 27 – 28 September 2001 is supported by a WorkForce ONE timesheet. Those timesheets describe WorkForce ONE as ‘Staffing Solutions for Business’. They show the relevant client name as ‘Anderson Formrite’ rather than ‘Formrite’. For reasons which will become apparent it is appropriate to record the invoice and timesheet numbers in respect of the individual employees made available by WorkForce ONE to work on the Woodside Building project in the period mentioned.
Invoice No.
Date of Invoice
Timesheet No.
Name of employee
Employee position
Dates worked
0458
27 September 2001
H1477
Sean Croke
Lab 2
19-25/9/01
0479
27 September 2001
H1477
Sean Croke
Lab 2
18/9/01
0488
28 September 2001
H1468
Sean Croke
Lab 2
18/9/01
0459
27 September 2001
H1471
Peter O’Flannigan
Lab 2
19-25/9/01
0480
27 September 2001
H1471
Peter O’Flannigan
Lab 2
18/9/01
0489
28 September 2001
H1462
Peter O’Flannigan
Lab 1
17-18/9/01
0460
27 September 2001
H1475
Frank McMahon
Lab 2
19-25/9/01
0481
27 September 2001
H1475
Frank McMahon
Lab 2
18/9/01
0490
28 September 2001
H1469
Frank McMahon
Lab 2
18/9/01
0461
27 September 2001
H1474
John McCracken
Lab 2
19-25/9/01
0482
27 September 2001
H1474
John McCracken
Lab 2
18/9/01
0491
28 September 2001
H1461
John McCracken
Lab 1
17-18/9/01
0462
27 September 2001
H1470
Ian Walker
Carp
19-25/9/01
0483
27 September 2001
H1470
Ian Walker
Carp
18/9/01
0492
28 September 2001
H1465
Ian Walker
Carp
17-18/9/01
0463
27 September 2001
H1476
Noel Moore
Carp
19-25/9/01
0484
27 September 2001
H1476
Noel Moore
Carp
18/9/01
0493
28 September 2001
H1466
Noel Moore
Carp
18/9/01
0464
27 September 2001
H1478
Mick McElroy
Carp
19-25/9/01
0485
27 September 2001
H1478
Mick McElroy
Carp
18/9/01
0494
28 September 2001
H1467
Mick McElroy
Carp
18/9/01
0465
27 September 2001
H1473
John Osorio
Carp
19-25/9/01
0486
27 September 2001
H1473
John Osorio
Carp
18/19/01
0495
28 September 2001
H1464
John Osorio
Carp
17-18/9/01
0466
27 September 2001
H1472
Vlado Strafela
Carp
19-25/9/01
0487
27 September 2001
H1472
Vlado Strafela
Carp
18/9/01
0496
28 September 2001
H1463
Vlado Strafela
Carp
17-18/9/01
0467
27 September 2001
H0862
Tom Connolly
Carp
24-25/9/01
0468
27 September 2001
H1480
Scott Cowels
Lab 3
20-25/9/01
0469
27 September 2001
H0864
Mick Evans
Lab 2
24-25/9/01
0470
27 September 2001
H0866
Brent Horan
Lab 3
24-25/9/01
0471
27 September 2001
H0868
Denis Mitchell
Carp
25/9/01
0472
27 September 2001
H0869
Chris Moore
Carp
25/9/01
0473
27 September 2001
H0861
Steve O’Sullivan
Carp
24-25/9/01
0474
27 September 2001
H0863
Paul Rodgers
Lab 3
24-25/9/01
0475
27 September 2001
H0867
Raymond Wright
Lab 3
25/9/01
0476
27 September 2001
H1479
Sam Muchella
Carp
20-25/9/01
0477
27 September 2001
H0865
John Templeman
Lab 3
24-25/9/01
In respect of those employees for whom there are two invoices referable to 18 September 2001 the explanation appears to lie in the fact that the timesheets for the succeeding seven day period bear an endorsement under the comments column which read ‘owed 1 hour from Tues 18 Sept’. The smaller amounts referable to 18 September appear to relate to the relevant ‘1 hour’. The third invoice referable to people who worked on 17 and/or 18 September 2001 relate to the relevant hours apparently worked before the extra 1 hour was taken into account.
Importantly, all of the timesheets appear to be contemporaneous and appear to bear the signature of Chris Hemphill, to whom reference will be made shortly, under the column headed ‘CLIENT’S SIGNATURE’.
The evidence before the Court does not include a copy of the respondent’s letter of 31 August 2001 that may have been signed in the space provided, by a representative of Formrite, nor does it include any Subcontract Agreement between the respondent and Formrite ‘executed by 6 September 2001’.
Anderson Formrite Pty Limited
However, there is a copy of the respondent’s letter of 31 August 2001 to Formrite in evidence which appears to have been endorsed at the foot of the second page thereof beneath the space provided for Formrite’s acceptance, with a manuscript note reading:
‘It should be noted that a new entity has been formed to undertake all formwork in Western Australia. That entity is Anderson Formrite Pty Ltd ACN 097 507 652. The terms set out herein are accepted by Anderson Formrite Pty Ltd.’
The manuscript addition to the copy of the respondent's letter then contains words of attestation and a signature as follows:
‘Anderson Formrite Pty Ltd
by its director
[signature] George Mylonas 31/08/01.’There is no evidence to indicate that the copy of the 31 August 2001 letter bearing this endorsement was ever sent to the respondent.
The applicant, Anderson Formrite Pty Ltd ACN 097 507 652, was registered in Queensland on 16 July 2001 by Mr Mylonas a Solicitor of 1 Fraser Terrace, Highgate Hill QLD 4101. The original director and secretary was Mr Mylonas whose address became the registered office of the company.
On 19 September 2001 Warren Perry Anderson became a director and secretary of the applicant and on the following day, namely 20 September 2001, Mr Mylonas ceased to be a director and secretary of the applicant. On 11 October 2001 the registered office of the applicant became that of Hyland Lawyers, Level 19, 141 Queen Street, Brisbane QLD 4000 and on 19 December 2002 it became 1147 Mulgoa Road, Mulgoa NSW 2745, being, so it would seem, a residential address, in New South Wales, of Mr Anderson.
The principal place of business of the applicant was Lawton House, 18 Colin Street, West Perth WA 6005 from 27 September 2001 to 21 November 2002. On 22 November 2002 the principal place of business became 1147 Mulgoa Road, Mulgoa NSW 2745. However, there are documents in evidence which show the applicant’s address as that of Formrite, 81 Distillery Road, Beenleigh, Queensland as at 8 October 2001 and as that of Mr Passione, to whom reference will be made shortly, 9 Montgomery Way, Malaga, Western Australia from late October 2001 through October 2002.
Prior to 1970 Mr Anderson resided north of Perth in Western Australia where he carried on business as a farmer and bulldozing contractor. He also owned a ‘roadhouse’ at which one might assume that food and fuel could be acquired. In 1970 he moved to Perth and started building shopping centres for G J Coles and Kmart in Western Australia. In 1978 he moved to Sydney where he built more shopping centres for G J Coles and Kmart. Altogether he was involved in the development of some 60 or 70 shopping centres. He then proceeded to become involved in the development of office towers and his final development related to the construction of the Parliament House and Law Courts buildings in Darwin. Mr Anderson also developed a wildlife sanctuary at Tipperary Station in the Northern Territory to breed rare and endangered animals that were extinct in the wild.
Mr Anderson may have had extensive experience in the building and construction industry, but he says, and I accept, that he is a developer rather than a builder. He could be described as a ‘big picture’ man rather than one concerned with the ‘nitty gritty’.
Prior to 2001 Mr Anderson had come to know Mr George McFarland, a South African gentleman, who had expressed an interest in becoming involved with Mr Anderson in his development of the wildlife sanctuary at Tipperary Station. By or in early 2001 Mr Anderson came to understand that Mr McFarland worked for Formrite.
A period of transition for Formrite
In conversation with Mr McFarland in early 2001, Mr Anderson learnt that Formrite was for sale. Mr McFarland informed Mr Anderson that Mr Norm Pask, who was the ‘principal’ of Formrite, had left his wife, that there was a family dispute and that the ownership of Formrite was in the hands of Mr Mylonas, as a trustee, who was wanting to sell the company on behalf of Mr Pask’s wife and children.
In cross-examination Mr Anderson was asked about the possibility of ‘purchasing Formrite’. Mr Anderson said that there were discussions with Mr Mylonas about the matter in late 2000 or early 2001. Mr Anderson said that the proposal was that he would, through a corporate entity, purchase ‘the shares in and business of’ Formrite. He went on to explain that the proposal was that the shares of Formrite be acquired and as a consequence he would take over the business.
There is no evidence that a share sale agreement was ever entered into between the applicant and the owners of Formrite under which the applicant agreed to purchase the whole of the issued capital of that company.
Formrite’s successful tender for the Woodside Building project
By a letter dated 6 September 2001 Mr McFarland writing as ‘Director’ of Formrite replied to the respondent’s letter of 31 August 2001 as follows:
‘240 ST GEORGE’S TERRACE FORMWORK CONTRACT
We refer to your letter of 31 August 2001 regarding your acceptance of our tender for the Formwork Contract and reply as follows.
1.We have allowed to use Kingflor as shown on the drawings you sent to us and also as measured in your Bills of Quantities.
2.Our Project Team has assessed the amount of areas available to us on site to commence work. This we believe is substantially less than what we need for full and urgent mobilisation of our men and materials than anticipated. We shall therefore commence as discussed with your Steve Surjan on Monday week. We would therefore, expect the programme start date also to be the 17 September 2001.
3.Clause E of your conditions to have the contract executed by 6 September 2001 cannot be fulfilled as we still have not received the contract documents. Although you refer in your letter that you are forwarding under separate cover, we still have not received these documents.
Would you kindly forward a copy of:
a)The technical Scope of Works as amended this morning
b)Specification
c)Drawing List
d)Tender interview minutes
On receipt of these, we shall forward them to our lawyers and will be in a position to address your instructions as soon as possible.’
On 12 September 2001 Mr Tony Fletcher as Project Director of the respondent wrote from the Perth office of the respondent to Formrite at Beenleigh in Queensland as follows:
‘RE: 240 St George’s Terrace, Perth
Subcontract Agreement
Please find enclosed one copy of the Subcontract Agreement for your execution and return.
Please date and sign the Instrument of Agreement, and initial every page. Once returned, a copy executed by all Parties will be forwarded back to you.
For your reference the “blue” tags represent changes to the initial draft contract whilst the “yellow” tag identifies the section for execution.
In respect of the Tender Interview Minutes (Part M), this is to be conducted by telephone conference on 13 September 2001, marked up by yourselves and incorporated within the subcontract document.’
It would appear that on or about 12 September 2001 a formal Instrument of Agreement forwarded under cover of Mr Fletcher’s letter of 12 September 2001 from the Perth office of the respondent to Formrite at Beenleigh in Queensland, was executed by Mr George Mylonas on behalf of Formrite, his signature being witnessed by a Mr Owen G. Walker. The instrument so executed purports to have been made at Perth, WA on 12 September 2001, the numerals and word ‘12 September’ having been written into the printed document. I must say that I have difficulty in comprehending how a document apparently forwarded by post from Western Australia to Queensland on 12 September 2001 could have been executed in Queensland on the same day, especially given that the agreement was to include as ‘Part M’ Tender Interview Minutes which were to be the product of a telephone conference on 13 September 2001. It may be observed that the formal Instrument of Agreement between the respondent as the Main Contractor and Formrite as the subcontractor contained no Part M.
Commencement of work and Union disruption
The respondent’s project diary – daily report for Saturday 15 September 2001 records under the heading ‘Job Progress’:
‘□All Sub Contractors on site (other than Tom’s Crane and Plant Hire) all off Site by 1200 …
□Tom’s Crane and Plant Hire. Erection did not commence until approx. 0930 … Work was stopped by CFMEU Secretary Kevin Reynolds at approximately 1735, reason being that that (sic) the men had worked too long already that day. Truth was that the work for the day had stopped and Tom’s were packing up ready to go home. Reynolds subsequently withdrew CFMEU permission to work on Sunday to complete the erection. Demands for payment concerning the cancelled Sunday work were made to BH.
…
□Formrite. Material delivered for lobby B1.’
The respondents’ project diary daily report for Sunday 16 September 2001 recorded that the site was closed and that no work was done on that day following the intervention of Mr Reynolds on Saturday 15 September 2001.
The respondent’s project diary daily report for Wednesday 19 September 2001 included under the heading ‘Job Progress’:
‘□Formrite. Continued Basement 1 lobby formwork. Commenced platform framing adjacent RW12 for capping beam construction. 4 additional column form boxes delivered).’
A Sale of Business agreement between Formrite and the applicant
On 12 September 2001 Mr Mylonas submitted a proposed business sale contract to the applicant or its solicitors which proposed a purchase price for the business of $2,132,000.
It would appear that on 19 September 2001 a business sale contract was entered into, incorporating the Standard Conditions of Sale – Business Sale (First Edition) adopted by the Real Estate Institute of Queensland Limited (for conveyance of leasehold businesses only), between Formrite as vendor and the applicant as purchaser under which Formrite agreed to sell its formwork contracting business to the applicant. The solicitor for the vendor was identified as Mylonas & Associates and the solicitor for the purchaser as SJ Gurnsey & Co of Brisbane.
The purchase price payable under the revised business sale contract was $1,377,000. The contract provided for completion at Brisbane on 21 September 2001 i.e. two days after the date of the contract. It also provided for the payment of a deposit of $1.
The purchase price was apportioned as to $10,000 for ‘Leasehold Premises’, $250,000 for ‘Plant’, $1,032,000 for ‘Timber’ and $85,000 for ‘Goodwill’.
The Plant was described in a fixed asset register as ‘CLIMBTRAC’ which was apparently purchased by Formrite for $250,000 on 30 June 2001 and, as one might imagine, had a book value of $250,000 as at that date.
The Business Sale contract would appear to have been executed by Mr Mylonas for the ‘Vendor’ and by Mr Warren Perry Anderson for the ‘Purchaser’ on 19 September 2001.
The Business Sale contract contained a number of special conditions. Seven of the special conditions were recorded in the Business Sale contract in typed form (one of which was deleted) and two were added in manuscript form, the last addition being in two different hands. The special conditions included:
‘1.The Purchaser shall acquire the Vendors interest in and to the following formwork subcontracts (the Projects) as and from 31 August 2001 –
(a) Grande Hotel – Sunland
(b) Aria Apartments – Sunland
(c) Republic Apartments – Mutliplex (sic)
(d) CSIRO – Baulderstone2.The Vendor shall at the cost of the Purchaser continue to diligently perform the Projects until the date of settlement and the Vendor will be responsible for payment of all expenses appearing in the job costing report for each project up to and including 31 August 2001 and the Vendor shall receive all claims made to 31 August 2001. All other expenses and claims shall be paid and received by the Purchaser.
3.The Purchaser may at its option require the formal assignment of the Projects contracts at its cost OR elect to retain the Projects contracts in the name of the Vendor whereupon the Vendor will account to the Purchaser for all moneys received and the Purchasers share of cash retentions immediately upon receipt of such retention by the Vendor.
4.It is acknowledged that in tendering for the formwork package of the project known as “240 St George (sic) Terrace” in Perth (the WA Project) the Vendor acted as agent for the Purchaser. The Vendor shall execute a Deed of Novation in favour of the Purchaser in respect of the WA Project at the cost of the Purchaser and the Vendor shall be re-imbursed for its costs and expenses in so acting as agent for the Purchaser.
5.
The Purchaser hereby notifies the Vendor in accordance with clause 20.4 of the Standard Conditions that it shall retain all of the Vendors employees.6.The parties acknowledge that the lease of the premises shall not be formally assigned to the Purchaser but from the date of completion Columbo Plant Pty Ltd shall hold the lease in trust for the Purchaser which shall fully indemnify the Vendor in respect thereof.
7. …
8. …
9.THIS CONTRACT IS CONDITIONAL UPON DUE DILIGENCE BEING CONDUCTED BY LLOYD CAREY IN RESPECT OF THE JOB COSTINGS BEING $568 099 AND APPORTIONED OVERHEADS BEING $622126. DUE DILIGENCE TO BE COMPLETED BY 24 SEPTEMBER 2001. THESE numbers ARE TO be verified by LLOYD CAREY.’
Presumably when due diligence ‘by 24 September 2001’ was agreed and inserted, the proposed completion date of 21 September 2001 was impliedly postponed to a date after 24 September.
Whatever may have been said in the Business Sale contract between Formrite and the applicant it is quite clear that Formrite’s dealings with the respondent had not been as the applicant’s agent. Formrite’s letters to the respondent of 19 January 2001 (six months before the applicant was registered) and 24 July 2001 make this abundantly clear. Formrite was treating with the respondent as a formwork contractor with a longstanding relationship with the respondent in Queensland.
The form of formwork subcontract between the respondent and Formrite included a ‘Part G – Secondary Subcontractor Deed’. Part G in fact contained a form of Deed Poll and a form of ‘Deed of Novation’.
At some stage a copy of the form of Deed of Novation was apparently signed by Mr McFarland as ‘Director’ of Formrite, referred to therein as ‘Original Subcontractor’, his signature being witnessed by Mr Mylonas, and by Mr Warren Perry Anderson as a director of the applicant, referred to therein as ‘Substitute Subcontractor’, Mr Anderson’s signature also being witnessed by Mr Mylonas. There is no evidence that the form of Deed of Novation was ever brought to the attention of or executed by the respondent as the Main Contractor. The form also made provision for the identification of a ‘Secondary Subcontractor’, but no such party was identified.
The form of Deed of Novation as executed was undated. It included the following:
‘RECITALS:
A.By agreement dated [ ] (the “Subcontract”) between Baulderstone Hornibrook Pty Ltd (ABN 56 002 625 130) (“Main Contractor”) and Original Subcontractor [Formrite], the Main Contractor engaged the Original Subcontractor to undertake the Subcontract Works (as defined in the Subcontract).
B.The Original Subcontractor has entered into an agreement (“Secondary Subcontract”) with the Secondary Subcontractor [N.B. no name inserted for “Secondary Subcontractor” at the commencement of the agreement] for the execution and completion of the [ ] (“Secondary Subcontract Works”) as part of the Subcontract Works.
C.The Main Contractor has terminated the Subcontract and has engaged Substitute Subcontractor [the applicant] to complete the Subcontract Works.
D.Substitute Subcontractor wishes to effect a novation of the Secondary Subcontract.
THIS DEED WITNESSES that in consideration, among other things, of the mutual promises contained in this deed, the parties agree:
1.Substitute Subcontractor must perform all of the obligations of the Original Subcontractor under the Secondary Subcontract which are not performed at the date of this deed. Substitute Subcontractor is bound by the Secondary Subcontract as if it had originally been named in the Secondary Subcontract in place of Original Subcontractor.
2.The Secondary Subcontractor [N.B. no name inserted at the commencement of the agreement] must perform its obligations under, and be bound by, the Secondary Subcontractor (sic) as if Substitute Subcontractor was originally named in the Secondary Subcontract in place of Original Subcontractor.
3. …’
The form of Deed of Novation contemplated that the ‘Secondary Subcontractor’ would be a third party retained to perform part of the works the subject of the formwork subcontract to be entered into between Baulderstone Hornibrook Pty Limited and Formrite and that there would be a novation of the Secondary Subcontract whereby the applicant, as ‘Substitute Subcontractor’, would perform all of the obligations of Formrite under the Secondary Subcontract with the third party which had not been performed at the date of the deed.
The ‘Deed of Novation’ is really rather nonsensical. It did not purport to release Formrite from its obligations under the subcontract between the respondent and Formrite in exchange for a promise made by the applicant to the respondent to perform the obligations of Formrite under the subcontract. Recital C in the form of Deed of Novation contemplated that any formwork subcontract, that may have been entered into between the respondent and Formrite, had previously been terminated and that the respondent had already engaged the applicant to complete the works the subject of the terminated subcontract.
At its highest, the form of ‘Deed of Novation’ as executed by Formrite and the applicant in the manner indicated above demonstrated an acquiescence by Formrite in the applicant’s engagement to complete the works the subject of a subcontract between the respondent and Formrite.
As previously observed there is no evidence that the form of ‘Deed of Novation’ was ever executed by the respondent. It is undated, there is no evidence as to the date upon which the signatures of Mr McFarland on behalf of Formrite and Mr Anderson on behalf of the applicant were applied to the document, and there is no evidence as to whether it was ever in the contemplation of Formrite and the applicant that it would be executed by the respondent. Furthermore, the lack of a date in Recital A in respect of the making of a subcontract between the respondent and Formrite, leaves open the question as to whether there ever was any such subcontract, although the respondent’s letter to Formrite of 31 August 2001 referred to above appeared to offer Formrite a subcontract limited to ‘mobilisation only of the resources necessary to carry out the Works’ which may well have been accepted by performance. Clearly, Mr Hemphill from Formrite was in Perth by early September 2001 and men sourced from WorkForce One were engaged in carrying out formwork activities from Monday 17 September 2001.
What became of the Business Sale contract between Formrite and Anderson Formrite Pty Limited is not entirely clear. Mr Anderson gave evidence that by 17 September 2001 ‘we’d severed our relationship and he’d [Mr Mylonas] transferred the shares in Anderson Formrite and the directorship to me.’
It will be recalled that Mr Anderson only became a director of Anderson Formrite Pty Limited on 19 September 2001 and that Mr Mylonas ceased to be a director on the following day, namely 20 September 2001. One might infer that the relationship which had been severed was that under which Mr Mylonas served as Anderson Formrite Pty Limited’s solicitor, sole director and secretary, rather than the relationship between Formrite and the applicant which only became the subject of an executed agreement on Wednesday 19 September 2001.
The respondent’s project diary daily report for 20 September 2001 included under the heading ‘Job Progress’:
‘●Formrite, Formed and poured Columns C16,14,18 and 19 and C17. Formwork to capping beam RW12.’
It would appear that at the time of receipt of the form of subcontract forwarded to Formrite under cover of the respondent’s letter of 12 September 2001 inviting execution and return of the subcontract by Formrite, the foreshadowed sale of business arrangement between the applicant and Formrite was still progressing.
Indeed, by letter dated 21 September 2001 from Mr McFarland as Director of Formrite to the respondent marked ‘Attention: Mr Tony Fletcher’, which was apparently sent by facsimile on that day, Mr McFarland said:
‘Re: 240 St George Terrace Perth
Formwork contractI refer to our conversation of this morning in terms of the abovementioned contract and comment as follows:
1. Novation
Anderson Formrite Pty Ltd has a contract to acquire the business known as Formrite Pty Ltd which includes all Formwork plant and equipment and all existing contracts in hand.
The contract for the Perth project has been novated to Anderson Formrite Pty Ltd by Formrite Pty Ltd and all expenses, all employees including the project manager Mr Chris Hemphill and materials are being supplied and paid for by Anderson Formrite Pty Ltd.
As you know it is critical to the project’s success that the company (Anderson Formrite Pty Ltd) is seen to be West Australian owned and controlled by Mr Warren Anderson, a prominent West Australian businessman.
Formrite Pty Ltd has always acted on behalf of Anderson Formrite Pty Ltd in all the negotiations with the Perth contract to ensure West Australian involvement.
We would therefore appreciate your acceptance of this contract structure and approval of the novation of the contract.
2. Contract Finishing Date
I refer to our meeting in Perth between you and your representatives and myself, Mr Anderson , Mr Radoydcic, Mr Hemphill, Mr McKenzie and our discussions as to possession of the site.
At the meeting it was agreed that your company was not ready to accept Formrite on site. This was because various works on the site were incomplete and our presence would have been a useless exercise. Mr Surgen (sic) agreed with Mr Hemphill on site that the following Monday week (17 September 2001) would be the preferred date and as such we have complied with this date. We have therefore extended the completion date to the date written in the contract.
We hope the above meets with your approval and your positive recommendations to head office so that we may expedite the progress on site.’
It is apparent from the terms of Mr McFarland’s letter that he understood the meeting in Perth to which reference was made as one that had taken place on some day in the week commencing 3 September 2001 for which ‘Monday week’ was 17 September 2001.
The reference in Mr McFarland’s letter of 21 September 2001 to the contract for the Perth project having been novated by Formrite to the applicant would tend to suggest that the undated form of Deed of Novation referred to above had been executed by Mr McFarland for Formrite as the Original Subcontractor and by Mr Anderson for the applicant as Substitute Subcontractor shortly before 21 September 2001.
Whilst the respondent may have ended up entering into a subcontract for the formwork at the 240 St Georges Terrace site with the applicant on 11 October 2001 (see Exhibit 4) it is not apparent that the respondent ever agreed to a novation of any contract between Formrite and the respondent.
Even though Mr Anderson’s presence at a meeting in Perth in the week commencing 3 September 2001 may have led to an introduction of the applicant to the Woodside Building project, the first formal notification of its possible interest in entering into the formwork subcontract would appear to have flowed from Mr McFarland’s letter written on behalf of Formrite to the respondent on 21 September 2001.
When cross-examined about the relationship between the applicant and Formrite Mr Anderson gave the following evidence:
Counsel:‘Mr Anderson, … you looked at this yesterday [a form of subcontract for formwork between the respondent as main contractor and Formrite as subcontractor] in the giving of your evidence … you looked at page 204 and 205 [referring to Exhibit B Volume 1], you’ll see it’s dated 12 September 2001 [at that stage no contract had been received by Formrite] and it is in the name of this – it’s been signed by Mr Mylonas?’
Anderson: ‘Mylonas, I think.’
Counsel:‘… Mr Mylonas on behalf of Formrite, that’s right?’
Anderson: ‘Correct, and Mr Walker, yes.’
Counsel:‘Now, up until the time that Formrite had actually received a contract your negotiations had continued and you expected to purchase as you’ve earlier described Formrite Proprietary Limited?’
Anderson: ‘Yes.’
Counsel:‘When Mr Mylonas got the contract though he suddenly and significantly increased the price that he now was demanding for the purchase of Formrite, didn’t he?’
Anderson: ‘Yes.’
Counsel:‘You didn’t agree with that increase in price?’
Anderson: ‘No, I did not.’
Counsel:‘It was at that point, I think you’ve described it as a heated discussion between you and Mr Mylonas?’
Anderson: ‘Yes, because he went back on his word.’
Counsel:‘… indeed I think there might have even been a grabbing for the contractual document?’
Anderson: ‘Well, I don’t know about that but I demanded, not the contract, I demanded the shares in Anderson Formrite and a resignation as a director.’
Counsel:‘You demanded the contract that had been received by Formrite from Baulderstone?’
Anderson: ‘It may have been. I mean, I don’t know why I’d demand because I couldn’t do anything with it.’
Counsel:‘… what you wanted to do was you wanted to thereafter, because of this breakdown in negotiations go back to Baulderstone and tell them that now you were no longer going to buy Formrite, didn’t you?’
Anderson: ‘That’s right. Yes, of course I did.’
Counsel:‘You wanted to tell Baulderstone after this had happened that your plans had changed and you wanted to see whether you could take over this proposed contract at that stage … for work that was to start in a week or so’s time in Perth?’
Anderson: ‘No, I told them that I wanted the contract in Anderson Formrite’s name.’
Counsel:‘… You wanted to take over the contract and put it into Anderson Formrite’s name?’
Anderson: ‘Yes, yes.’
Counsel:‘But until … this breakdown had happened because the price had been increased for Formrite Proprietary Limited, you had expected to take over Formrite, buy its shares, etcetera?
Anderson: ‘Before that, yes.’
Counsel:‘… and up until that time you had always told people that was your plan?’
Anderson: ‘Yes.’
The evidence is unclear as to what increase in price was demanded by Mr Mylonas and, as previously mentioned, what happened to the Business Sale contract between Formrite and the applicant. There is no evidence of the existence of any draft share sale agreement under which the applicant would buy the issued shares in Formrite.
The applicant’s pursuit of a formwork subcontract with the respondent
Mr Anderson gave evidence that to achieve a formwork contract in respect of the 240 St Georges Terrace Perth site in the name of the applicant he would have to ‘go to see Paul Watson in North Sydney to finalise that’. The evidence is not entirely clear as to when the meeting between Mr Anderson and Mr Paul Watson took place at the respondent’s North Sydney offices. Mr Anderson gave evidence that the meeting took place ‘late in September’ and that it took place after the 17th.
In relation to the Woodside Building project the respondent’s original project director was Mr Tony Fletcher, who did not give evidence. He was succeeded by a Mr David Walkenhorst on about 9 April 2002. Mr Walkenhorst did give evidence. He said that as project director for the Woodside Building project he reported to Mr Mike Frost a construction manager with the respondent who in turn reported to Mr Paul Watson.
The respondent’s administration manager in respect of the Woodside Building project was Mr Ian Glover who did give evidence. He held that position throughout the duration of the project. As administration manager he looked after the tendering process, cost controls and financial reporting for the project. Mr Glover reported to the project director, originally Mr Tony Fletcher and later Mr David Walkenhorst.
No officers of the respondent gave evidence other than Mr Glover and Mr Walkenhorst.
The only other witness called by the respondent was a Mr Benson who could best be described as an intermediary between Mr Anderson and Mr Paul Watson. Mr Benson had known Mr Anderson socially and in business for about 40 years. He had also been involved in business with Baulderstone Hornibrook Pty Limited in relation to the Aldoga Aluminium Smelter project at Gladstone in Queensland. In relation to that project he dealt with Mr Dempsey, the then Chief Executive Officer, and others involved in the senior management of Baulderstone Hornibrook Pty Limited including Brad Smith, Paul Watson and Mark Lamond.
Extracts from a statutory declaration made by Mr Paul Watson on 25 July 2002 (paragraphs 4, 31, 33, 35, 38 and 39) were admitted into evidence as Exhibit 15 and two paragraphs of a file note of a meeting between Mr Watson and the solicitor for the respondent of 3 December 2007 (paragraphs 5 and 10) were admitted into evidence as Exhibit 16. Mr Watson resides in Dubai and did not respond favourably to requests that he return to Australia to give evidence in these proceedings.
Mr Watson’s services with the respondent appear to have been terminated on or about 29 April 2002. The respondent’s view of Mr Watson was conveniently encapsulated in a file note which included:
‘We have no confidence in your [Mr Watson’s] ability to discharge your duties consistent with the organisation values’
The solicitor for the respondent, Mr Nicholas Mavrakis, gave brief evidence relevant to the admissibility of the evidence contained in Exhibit 16.
In relation to his meeting with Mr Paul Watson at the respondent’s North Sydney office that he attributed to a date after 17 September 2001, Mr Anderson gave the following evidence:
Senior counsel for the applicant:
‘When you went to see Mr Watson in his office did you tell him, in effect, that … you wished to carry out the Perth job in the name of Anderson Formrite?’
Anderson: ‘Yes.’
Counsel: ‘… Did he ask you why?’
Anderson: ‘Yes, he did. I told him that the negotiation had fallen over on Formrite and that I couldn’t proceed along those lines and that Anderson Formrite would be doing the job.’
Later in his examination in chief Mr Anderson repeated this evidence and said ‘we need a new contract in the name of Anderson Formrite.’
Mr Paul Watson’s statutory declaration of 25 July 2002 included:
‘31. I met Warren Anderson when a mutual associate John Benson introduced us. John and I had been working on another project at the time. He suggested that if BHPL were going to go to Perth that we should meet Warren Anderson because he knew everybody in Perth and had lived there all his life. John arranged for Warren Anderson, himself and me to have a cup of coffee. That meeting lasted about fifteen minutes …
…38. I met Warren Anderson again late in 2001 in Sydney to the best of my recollection. BHPL has three levels at 40 Miller Street, North Sydney. The 9th Floor holds the Building Division. The 8th Floor holds the Civil Engineering and Heavy Industry and these floors have no meeting rooms on them. The 10th Floor had the meeting rooms. The meeting either took place on the 10th Floor or if they were fully booked it would have taken place in the coffee shop downstairs. The coffee shop became the meeting room.
39. I can’t recall exactly when this meeting was or what the subject matter of the meeting was.’
It would appear that Mr Anderson had a chance encounter with Mr Paul Watson of the respondent in the Qantas Club Lounge at Sydney airport on Thursday 20 September 2001. The persons present in the Qantas Club Lounge were Mark Lamond and Paul Watson of the respondent who were heading in one direction and George McFarland and Mr Anderson who were heading in another. Mr Anderson understood Mr Lamond to be the respondent’s Director of Building.
According to Mr Anderson ‘he [presumably Mr Lamond or Mr Watson] asked us [referring to Mr McFarland and Mr Anderson] how we were going and we said we have a few men onsite that we got from Work Force One and we’re ready to fire.’
Apparently Mr Watson enquired as to what rates from WorkForce ONE were being used. Mr Anderson says that that hadn’t been finalised whereupon Mr Watson said ‘Well, these are the rates’ and proceeded to write them down on a Qantas Club Lounge paper napkin (Exhibit A). The numbers which Mr Watson wrote on the napkin were as follows:
‘$40.16 x ORD [the rate of pay for ordinary hours]
$45.00 x 1 ½
$55.00 x 2+TRAVEL PRODUCTIVITY
MEAL FRAME ALLOW [allowance]
SITE ALL [allowance]’
It is interesting to note that the rates charged to Formrite by Headlink Pty Ltd trading as WorkForce ONE were $38.96 per hour compared to $40.16 per hour for ordinary time in respect of Sean Croke as a Labourer Group 2 in the period 19-25 September 2001, that the time and half rate charged for him was $43.60 per hour rather than $45.00 per hour and that the double time rate charged for him was $53.50 per hour as opposed to $55.00. Other charges were added to cover ‘Travel Allowance’, ‘Meal Allowance’, ‘Site Allowance’, ‘Productivity’ and ‘Structural Frame’.
The rates which Headlink Pty Limited trading as WorkForce ONE charged Formrite for Ian Walker, as a carpenter in relation to the period 19-25 September 2001, were higher than the rates recorded on the Qantas Club napkin. The normal rate imposed was $42.16 per hour rather than $40.16, the time and a half rate was $47.00 per hour rather than $45 per hour and the double time rate was $57.00 per hour rather than $55.00 per hour. There were also charges imposed for ‘Travel Allowance’, ‘Site Allowance’, ‘Productivity’, ‘Structural Frame’ and ‘Crib Time – carpenter’. In respect of Mr Walker no ‘Meal Allowance’ was charged in respect of that period.
Tender Interview Checklist And Record
One of the respondent’s standard forms would appear to have been a document entitled ‘Tender Interview Checklist And Record’. In respect of the Woodside Building project a copy of the seven page form appears to have had material inserted into it by Mr Glover. On the first page of the document Formrite’s name was inserted as the ‘Tenderer’ and three dates were inserted. The first date recorded is 31 August 2001 against the words ‘TENDER DATED’ and, adjacent to that, the amount $12,345,000 against the words ‘TENDER AMOUNT’. In point of fact no tender dated 31 August 2001 was placed in evidence but the respondent’s letter to Formrite of 31 August 2001 is consistent with such a tender having been submitted by it on that day, albeit for a price that was $145,000 less than its revised offer of 30 August 2001. The second date was 21 September 2001, i.e. four days after work commenced, and the third, preceded by an arrow, was 25 September 2001.
It is clear that the tender interview, which led to the completion of the form, was conducted by a telephone conference in which the persons participating were shown as Tony Fletcher and Ian Glover of Baulderstone Hornibrook Pty Limited and George McFarland, Owen Walker and Craig McKenzie of Formrite. In respect of manpower and number of hours allowed for the project Formrite indicated that it had allowed for an average of 75 men and that the anticipated total man hours were 160,000. In section D of the checklist headed ‘Contractual’ the word ‘YES’ has been inserted against item 4 which provided:
‘4.It is acknowledged that, apart from what is contained in the Subcontract Agreement, no representations have been made by BHPL [a reference to the respondent] and there are no other understandings, agreements or arrangements with BHPL’
In evaluating the significance of section D item 4 in the context of a claim under s 52 of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’), it is important to have regard to what was said by Lockhart J, with whose reasons for judgment Burchett and Foster JJ agreed, in Henjo Investments Pty Limited v Collins Marrickville Pty Limited (No 1) (1988) 39 FCR 546 (‘Henjo’) at 561, namely:
‘… Section 52 is a section in the consumer protection provisions of an Act concerned to protect the public from misleading or deceptive conduct and unfair trade practices which may result in contravention of the Act. It has been held that exclusion clauses … cannot operate to defeat claims under s 52. It may be, as the judgment of Sweeney J in P J Berry Estates Pty Ltd v Mangalore Homestead Pty Ltd (1984) 6 ATPR 45,626 at 45,638 suggests, that such exclusion clauses will generally be ineffective because they cannot break the nexus between the conduct in contravention of s 52 and the making of the agreement in issue. …
There are wider objections to allowing effect to such clauses. Otherwise the operation of the Act, a public policy statute, could be ousted by private agreement. Parliament passed the Act to stamp out unfair or improper conduct in trade or in commerce; it would be contrary to public policy for special conditions such as those with which this contract was concerned to deny or prohibit a statutory remedy for offending conduct under the Act. …’
Whilst the Tender Interview Checklist And Record became a part of the ultimate contract between the applicant and the respondent, the response to section D item 4 was plainly given, albeit by Messrs McFarland, Walker and McKenzie on behalf of Formrite rather than the applicant, before the ultimate contract was made on 11 October 2001.
In respect of section F ‘Construction’ item 3 in the Tender Interview Checklist And Record provided:
‘3. Would you be using only your own employees to perform the work’
The answer which was inserted in the box to the right of this question was ‘NO’ and adjacent to that the words ‘WORKFORCE 1’ appear.
Relevantly, in relation to matters of representation, Mr Paul Watson’s evidence, for what it is worth, included ‘I have never given Warren Anderson any advice in relation to using Work Force One’ (see Exhibit 15).
On 3 December 2007 Mr Watson also denied saying to Mr Anderson at any stage that the respondent required as a condition of the successful award of the tender that Formrite or Anderson Formrite engage Workforce One to supply labour to execute the works. He said ‘under no circumstances did he ever require Formrite or any sub-contractor to use Workforce One labour’ (see Exhibit 16).
It would appear that the completed Tender Interview Checklist And Record was forwarded by the respondent to Formrite in the early afternoon of 25 September 2001 to allow for its execution by Formrite and return. The fifth page of the Tender Interview Checklist And Record made provision for its signature by the Tenderer. It is apparent that the form which was completed by Mr Glover and sent by facsimile from the respondent’s office in Perth to Formrite in Queensland was signed by Mr McFarland, who signed as the Tenderer’s ‘Director’, by Mr Owen Walker, who signed as the Tenderer’s ‘GM Construction’, and by Mr Craig McKenzie, who signed as the Tenderer’s ‘GM Projects’. Mr Walker had been the person who witnessed Mr Mylonas’ signature on the form of formwork subcontract sent by the respondent to Formrite under cover of its letter dated 12 September 2001 and which had the date ‘12 September 2001’ inserted into it.
The date 25 September 2001 was added below each of the three signatures.
The facsimile imprints appearing on the document, as so executed, indicate that on the morning of 27 September 2009 Formrite sent a facsimile copy of it to the respondent, presumably in Perth.
As it transpires the Tender Interview Checklist And Record referable to a tender received from Formrite, became part of a later executed formwork subcontract between the applicant and the respondent. When asked why he included the Tender Interview Checklist And Record referable to a contract with Formrite in a contract with Anderson Formrite Pty Ltd Mr Glover said ‘it’s my belief that those parties all represented Anderson Formrite Pty Ltd at a later date’. In the subcontract made on 11 October 2001 (see Exhibit 4), the applicant’s address was shown as that of Formrite, in Beenleigh, south of Brisbane.
The applicant as a successor to Formrite in relation to the Woodside Building project
On 21 September 2001 Crown Hire Pty Ltd sent a quotation to the applicant ‘Attention: George McFarland’ for the hire of self-climbing safety screens to the external perimeters of the main tower on the Woodside Building project. The tender was directed to the applicant at ‘PO Box 1009 NOOSA HEADS QLD 4567’ which it might be presumed was Mr McFarland’s postal address. A copy of the Crown Hire Pty Limited quotation was signed by Mr McFarland ‘For Anderson Formrite Pty Ltd’ beneath the words ‘I agree to the above subject to Anderson Formrite signing a Contract with Baulderstone Hornibrook for this project’.
It is not entirely clear how Mr McFarland came to find himself on the Formrite side of the record and also on the Anderson Formrite Pty Limited side of the record. He was not called to give evidence.
Furthermore it is not clear how the applicant came to succeed Formrite as the original tenderer for the subcontract work which was offered both a mobilisation contract and the ultimate subcontract. Perhaps the explanation lies in the matrimonial dispute which emerged in the Pask family to which reference was made earlier.
When asked whether the catalyst for him becoming interested in Formrite was the family dispute involving Mr Pask or something to do with the business that Formrite was hoping to conduct in Perth, Mr Anderson said:
‘It was really to purchase the business and the cash-flow attached to it and the profitability attached to it. George McFarland was going to take an interest in it, Joe Passione was going to take an interest in it and I was going to take an interest in it, and it was another business. And that developed before I was told about the project in Perth. That was earlier on.’
In about mid-January 2002 Mr Norm Pask found himself in Perth providing assistance to the applicant in relation to the Woodside Building project. According to Mr Bell:
‘He came into the job to do an independent review and he made a lot of unrealistic statements and suggestions to Warren [Anderson] about how the site should be run. He came from Queensland. … They do things differently in Queensland to how they do in WA.’
The evidence establishes that Formrite was a competent formwork company with extensive experience in Queensland. On the other hand the applicant was a start up company which included the word ‘Formrite’ in its name, but which had no formwork experience whatsoever and no or insufficient working capital.
The witnesses who gave evidence for the applicant were Mr Anderson, Mr Giuseppe (Joe) Passione and Mr Gordon Bell. Mr Passione was a bricklayer by trade, a developer, a registered builder and a registered real estate agent. He had undertaken some business courses at Harvard University in its Advanced Management Programme.
Mr Passione had 20 to 25 years of experience with building works across Australia having built more than 10,000 homes and carried out in excess of $1 billion of construction work including a hospital, schools, prisons, showrooms, factory units etc. However, apart from his involvement in the Woodside Building project he had not constructed any high-rise buildings.
He became involved in the Woodside Building project in early October 2001 after receiving a telephone call from Mr Anderson. Mr Anderson informed Mr Passione that he had purchased a company called Formrite based in Queensland but that the deal had fallen through. He asked if Mr Passione was in a position to assist him with some contract administration and payroll duties for his new company, Anderson Formrite Pty Limited.
Mr Anderson informed Mr Passione that he had won the Woodside job in the name of Anderson Formrite Pty Limited. When they first spoke Mr Anderson informed Mr Passione that the job had already started.
Mr Passione agreed to go and see Mr Anderson and talk further about his proposal for assistance. He then went to see Mr Anderson who, at the time, was in the company of Mr McFarland. Mr Anderson introduced Mr McFarland to Mr Passione as ‘the man running Formrite and his partner in Anderson Formrite’. Mr Passione informed Mr Anderson and Mr McFarland that they should seek some advice. He mentioned the name of George Ferrara who ran a very successful formwork company trading as F&F Construction, a company based in Western Australia which had completed the last high-rise building to be erected in Perth, just across the road from the Woodside Building construction site. Mr Anderson indicated his agreement with Mr Passione’s proposal. Either Mr Anderson or Mr McFarland informed Mr Passione that the people then running the project were Mr Chris Hemphill, as site foreman, and Mr Alan Watson as his assistant. On 16 October 2001 Formrite (Qld) Pty Ltd invoiced the applicant for Mr Hemphill’s and Mr Alan Watson’s wages up to and including that day.
Mr Passione proceeded to become involved in the project himself. His recollection was that this was in the first week of October 2001. At that time he contemplated that he would be helping with the administration of the project and obtaining assistance from several people in his own office in so doing. He also had in mind engaging some very good tradespeople and labour and seeking a lot of advice and assistance from successful people in the formwork business.
Mr Passione had an office in the Perth suburb of Malaga where he had about a dozen employees working for his business. Mr Passione was of the opinion that to run a successful formworking job one needed to have a ratio of three to four carpenters for every labourer.
In October 2001 Mr Passione’s role in relation to the Woodside Building project evolved into that of a full-time project manager for Anderson Formrite Pty Limited.
On 26 April 2002 Mr Passione swore an affidavit in proceedings in the Supreme Court of Western Australia where he said:
‘9.My initial involvement was to provide an administrative office to handle site payroll, accounts payable, accounts receivable, secretarial support and general administrative duties for the Woodside Building project only. The [applicant’s] Western Australian office continued and still continues to be based in Lawton House, West Perth.
10.I commenced on site within a day or two of my initial meeting with Warren Anderson and George McFarland and was introduced to Chris Hemphill and Alan Watson, both site managers for Formrite Pty Ltd of Queensland. They provided me with the background to the project over the ensuing week as they were both returning to Queensland.’
The third witness called for the applicant was Mr Gordon Bell of Bell Constructions Pty Limited. Mr Bell was a man with over 30 years experience in the building and construction industry. He was a carpenter by trade who progressed through the industry to become a foreman, an estimator, a project manager and a territory manager. He became the State Manager Building Operations for John Holland in Western Australia and later the State Building Manager for Victoria.
Mr Bell established his own building company, Bell Constructions Pty Limited. He is now a builder and developer. In the period 1988-1990 Mr Bell worked for a company called Interstruct on the construction of the 44 storey building in Perth known as the ‘QV1 Building’ which was across the road from what later became the Woodside Building construction site.
In the course of his building industry experience at varying levels and on a number of projects, Mr Bell became acquainted with the formwork side of construction jobs.
Mr Passione described Truform as ‘a laminated beam that forms the main structure in creating the stick form work that the ply then is applied to it’.
The plywood that was used by the applicant was approximately 20mm thick. Mr Passione gave evidence that the plywood was reused many times over. When asked how he knew that the plywood that he observed on the site after 17 May 2002 was the applicant’s he said:
‘I was involved in the purchasing of it; I was familiar with the site. I was there on a daily basis for … approximately nine months. I knew the site like the back of my hand.’
(emphasis added)
I accept Mr Passione’s evidence in relation to the continued use by the respondent of the applicant’s formwork materials and equipment in the weeks that followed the respondent’s termination for its sole convenience of the formwork subcontract between the respondent and the applicant.
Mr Walkenhorst gave evidence that the respondent engaged a new formwork subcontractor on the site after 17 May 2002 – West Swan Formwork. Mr Walkenhorst could not remember the exact date when West Swan Formwork commenced work on the site but said that it was ‘Early-July’. He said that West Swan Formwork did the formwork for the typical floors pretty well up to the top level of the tower. He said ‘they got virtually to the very top and went broke’.
In relation to the formwork undertaken by West Swan Formwork Mr Walkenhorst gave the following evidence:
Senior counsel for the respondent:
‘What form of formwork did West Swan … utilise for the work on the tower?’’
Walkenhorst: ‘They used their own formwork system.’’
Counsel:‘Did that formwork have a name, as you understood it?’
Walkenhorst: ‘No.’
…
His Honour: ‘You understand the difference between stick formwork and tableforms?’
Walkenhorst: ‘Yes.’
His Honour: ‘… What did they use? Stick form, tableforms or what?’
Walkenhorst: ‘For the levels where they – well, level 8 to 9 was the I think it was the right level, was the mechanical services level and they had to use stick form for that. But prior to that and up to the top level they used a table form system.’
Mr Walkenhorst gave evidence that he observed West Swan Formwork bringing tableforms on to the site which were used by them on the tower. When asked whether he saw West Swan formwork utilise any other tableforms than the ones they brought onto the site, Mr Walkenhorst replied in the negative. He then gave the following evidence in chief:
His Honour: ‘Were there any other table forms on the site that you observed, at the time when these people came onto the site?’
Walkenhorst: ‘I think there were still the Anderson Formrite table forms on the site.’
…
His Honour: ‘Did you lock Anderson Formrite out of the site?’
Walkenhorst: ‘Yes.’
Counsel:‘… when their contract was terminated on 17 May, did you make, after the time of that termination, any observation as to the positioning of the table forms that they had brought onto site?’
…
Walkenhorst: ‘Yes.’
Counsel:‘Where were they in relation to the building?’
Walkenhorst: ‘They were in the tower … They were incorporated into the works. So they were supporting the concrete and reinforcement.’
…
Counsel:‘Now, the stick form, did it have any particular name – manufacturer name or the like?’
Walkenhorst: ‘Rapidshor.’
…
His Honour: ‘…What I think we need to know is what component items did you observe when Anderson Formrite were carrying out work, towards the end of the project, so far as they were concerned, what component items did you observe that they had on site?
Walkenhorst: ‘Okay. The table forms, which were a complete set of forms, manufactured specifically for the placement of concrete and reinforcement for the tower and then in the Knoxville area, Rapidshor with stick form with Truform and plywood.’
His Honour: ‘Now, when you say “with Truform and plywood” where did the Truform and plywood go in relation to the Rapidshor?’
Walkenhorst: ‘On top of it.’
His Honour: ‘Can you describe the components? What’s Rapidshor?’
Walkenhorst: ‘Rapidshor is the steel tubing, framing, that supports – it’s adjustable in height, supports the Truform and the plywood on top of the Truform.’
His Honour: ‘The vertical members are the Rapidshor, then there are – what are they called – beams, what’s the word?’
Walkenhorst: ‘The beams. I’d call them – they’re Truform, but they’re beams.’
His Honour: ‘Yes, that’s laminated beams, are they?’
Walkenhorst: ‘Yes. I’m not sure.’
His Honour: ‘In any event they’re the horizontal members that run across the top of the vertical supports and the plywood goes on top of that. Is that right?’
Walkenhorst: ‘That’s correct, yes.’
His Honour: ‘Right, and it says some bracing, how do they brace them?’
Walkenhorst: ‘They’re braced with the steel bracing. It’s all part of the Rapidshor.’
…
Counsel:In relation to the Knoxville area of this site, in the days immediately following the termination on 17 May did you observe any formwork?’
Walkenhorst: ‘Yes’.
…
Counsel:‘At the time of your observation, at the immediate time, was it performing any function?’
Walkenhorst: ‘It was performing the function of formwork.’
Counsel:‘In what …?
Walkenhorst: ‘Supporting the concrete and reinforcement.’
His Honour: In that area of the works what was the time for the concrete to cure before the formwork could be stripped?’
Walkenhorst: ‘I’m not – I can’t answer. I don’t know.’
His Honour: ‘So that you know … a little bit about formwork but not enough about … time when you can [move] on to the next floor?’
Walkenhorst: ‘It varies and it varies on the strength of the concrete.’
His Honour: ‘And the spans?’
Walkenhorst: ‘More the strength of the concrete and it is -which is related to timing and testing of concrete cylinders.’
(emphasis added)
In the light of the evidence I would incline to the view, as previously indicated, that all formwork supporting reinforced concrete members that were the subject of concrete pours up to and including 17 May 2002 would have been ready for stripping in the space of 1-2 weeks thereafter. Certainly by 31 May 2002 there would appear to be no reason for denying the applicant the opportunity to enter upon the Woodside Building Project site to strip all the formwork that had been put in place by it on or before 17 May 2002 so as to allow the applicant to remove from the site all Temporary Works and Construction Plant and other things used in the work under the subcontract.
In addition the respondent had no right to re-use any of the applicant’s formwork materials or equipment to further progress the building works after 17 May 2002.
The respondent submitted that it ‘unincorporated these goods as soon as they were able to be unincorporated from the Works’. Reference was made to, inter alia, a letter sent by the respondent to RMD Australia on 17 June 2002 which included:
‘Truform material on site and not temporarily incorporated in the works is currently being gathered and stacked ready for collection by the rightful owner of that material. This exercise should be completed by 28 June 2002.
We will then prepare a list of that material and invite you to provide satisfactory evidence of your ownership.
We have also written to Anderson Formrite Pty Ltd in respect of your claim and asked them to confirm whether or not they have a competing claim to that material.’
I do not accept that the respondent ‘unincorporated these goods as soon as they were able to be unincorporated from the Works’. In any event the respondent had no right to lock the applicant out of access to the site thereby denying it the opportunity to remove from the Woodside Building project site all Temporary Works and Construction Plant and other things used in the work under the subcontract. It was not a case of the respondent having a discretion to unincorporate goods at its convenience and advise the applicant when, if at all, they would be ready for collection by it.
Findings
I find that
(a)the applicant had formwork materials on site when the formwork subcontract was terminated for the respondent’s sole convenience on 17 May 2002;
(b) it also had hand tools and items of communication equipment on site;
(c)some of the formwork materials were currently utilised supporting reinforced concrete members that had been poured within the preceding two week period;
(d)on 17 May 2002 the respondent locked the applicant out of access to the Woodside Building project site thereby denying it the opportunity to remove
(i)its hand tools and items of communication equipment,
(ii)its formwork materials in the form of stick formwork (Rapidshor), Truform, tableforms and plywood which were then being used to support recently poured reinforced concrete members,
(iii)other formwork that had been put in place for future pours which had steel reinforcing placed thereon or within it, that was awaiting a concrete pour, and
(iv)those items which were not then supporting recently poured reinforced concrete members or with steel reinforcing in place awaiting a concrete pour.
(e)the applicant was continuously denied access to the Woodside Building project site thereafter thereby denying it the opportunity to remove items of formwork that had been supporting recently poured reinforced concrete members as at 17 May 2002 after the concrete had cured sufficiently to enable the formwork to be stripped and removed and all of its hand tools, items of communication equipment and other formwork equipment remaining on the Woodside Building project site;
(f)some of the items referred to were owned by the applicant, some were the subject of contracts to purchase same and in relation to which the applicant had an immediate right to possession at all material times from and including 17 May through to at least 31 May 2002 and some items of hired equipment in relation to which the applicant had an immediate right to possession at all material times from and including 17 May 2002 through to at least 31 May 2002;
(g)by its conduct in notifying ‘everybody from whom Anderson Formrite was hiring equipment that as of the 17th [of May 2002] the hire arrangement was over’, and in notifying the respondent of that fact, the applicant deprived itself of the right to maintain an action for conversion in relation to hired equipment that may have been on the Woodside Building project site when it was denied the opportunity to return to the site after 17 May 2002.
The essence of conversion
The essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has the property or special property in the chattel. It may take the form of a disposal of the goods by way of sale, or pledge or other intended transfer of an interest followed by delivery, of the destruction or change of the nature or character of the thing, as for example, pouring water into wine or cutting the seals from a deed, or of an appropriation evidenced by refusal to deliver or other denial of title. An intent to do that which would deprive ‘the true owner’ of his immediate right to possession or impair it may be said to form the essential ground of the tort (per Dixon J, as his Honour then was, with whose observations Starke J agreed in Penfolds Wines Proprietary Limited v Elliott (1946) 74 CLR 204 at 229).
In Hill v Reglon Pty Limited [2007] NSWCA 295 (‘Hill v Reglon’) Beazley JA at [122], with whose reasons for judgment Spigelman CJ and Ipp JA agreed, accepted as correct the following statement of principle in relation to conversion as stated by Somers J, with whose judgment Richardson J agreed and with whose observations on conversion Cooke P. also agreed, in Coleman v Harvey [1989] 1 NZLR 723 at 730 namely:
‘Conversion is the wrongful act of dealing with goods in a manner inconsistent with the owner’s rights with the intention of denying the owner’s rights or asserting a right inconsistent with them. One of those rights is possession or the immediate claim to it.’
In Hill v Reglon Beazley JA said at [154]:
‘The correct principle, it would seem, is … that the measure of damages [for conversion], ordinarily, is the full value of the thing converted. In Palmer on Bailment at 214, the author explains the basis of damages as being, that the act of conversion is a sufficiently serious infringement of the plaintiff’s right of control over the converted goods to justify “the drastic sanction of compelling the wrongdoer to buy the plaintiff out”. …’
Hill v Reglon was applied by R.A. Hulme J in Rapid Metal Developments (Aust) Pty Ltd v Rildean Pty Ltd [2009] NSWSC 571 at [110] et seq.
An intent to do that which would deprive ‘the true owner’ of his immediate right to possession or impair it, will be established if there has been an intentional performance of an act of dominion over the goods in question inconsistent with the rights of ‘the true owner’ (per McDougall J in Chep Australia Ltd v Bunnings Group Ltd [2010] NSWSC 301 (‘Chep v Bunnings’) at [181]-[182].
In Chep v Bunnings McDougall J said in respect of goods that were the subject of a bailment, at [24]-[26]:
‘… where a stranger to a bailment terminable at the bailor’s will, is in possession of goods, both the bailor and the bailee could maintain conversion, because each has, as against the stranger, the right to immediate possession. In the bailee’s case, the right flows from the bailment. In the bailor’s case, it flows from the right to terminate the bailment at will: equivalent to the right to immediate possession.
It is clear … that the defence of ius tertii may be set up against an owner (or bailee) who is not in possession of the goods. … for the defence of ius tertii to succeed, the third party must have a better right to possession than the plaintiff. …
… the defendant bears the onus of identifying the third party and proving that the third party has a right to possession superior to that of the plaintiff.’
(see also Bis Cleanaway (Trading As Chep) v Tatale [2007] NSWSC 378 at [38]-[47]).
In Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1993) 32 NSWLR 175 Giles J, as his Honour then was, said, at 177-178, in respect of conversion:
‘In an action in conversion, the plaintiff claims damages for the wrong done to him by the interference with his goods. The wrong is the act of conversion, and the remedy is a personal remedy. …
The normal measure of damages in conversion is the value of the goods converted at the date of conversion (Mercer v Jones (1813) 3 Camp 477; 170 ER 1452; Henderson & Co v Williams [1895] 1 QB 521; Solloway v McLaughlin [1938] AC 247; Caxton Publishing Co Ltd v Sutherland Publishing Co [1939] AC 178; General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd [[1963] 1 WLR 644]), together with damages for any consequential loss flowing from the conversion and not too remote to be recoverable in law: Re Simms; Ex parte Trustee [1934] Ch 1; General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd.’
Butler v The Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 (‘Butler v The Egg Board’) was a somewhat unusual case of conversion. The appellants were producers of eggs. Under the Marketing of Primary Products Act 1958 (Vict.) the property in the eggs, when they came into existence, was divested from the appellants and vested in and became the absolute property of the Board. The rights and interests of the appellants in the eggs thereupon were converted into claims for payment in accordance with the Act. The appellants did not deliver the eggs in question to the Board. Instead they sold and delivered them to a person other than the Board and this was the act of conversion which gave rise to the action the subject of the proceedings. The question then arose as to the manner in which the Board’s entitlement to damages should be assessed. The Board contended that it was entitled to the full value of the eggs converted. The appellants, on the other hand, contended that the Board’s loss was represented by the difference between the price for which it would have sold the eggs had they been delivered to it by the appellants and the amount which in that event it would have had to pay them.
In this context Taylor and Owen JJ referred to the general principle upon which compensatory damages were assessed, that principle being that the injured party should receive compensation in a sum which, so far as money can do so, will put the injured party in the same position as he would have been in if the tort had not been committed, referring to Livingstone v Rawyards Coal Co [1880] 5 App. Cas. 25 at 39.
In Chep v Bunnings McDougall J referred to the general rule that damages in tort are compensatory (at [224]). His Honour then proceeded to point out that the application of the general rule requires careful consideration of all relevant facts. He pointed out that damages that might not be allowed against an innocent wrongdoer may well be allowed against one who has acted wilfully and intentionally. His Honour proceeded to point out that damages ‘should be assessed robustly against a wrongdoer where the wrong itself has made quantification difficult’ (at [225]-[226]).
The general principle upon which compensatory damages are assessed is as much applicable to actions of conversion as it is to the case of other actionable wrongs.
Taylor and Owen JJ proceeded to say, in Butler v The Egg Board, at 191:
‘In most cases of conversion it is, of course, obvious that its application will result in the injured plaintiff recovering the full value of the property converted since that will usually represent the loss that he has sustained by the defendant’s wrongful act. Hence the statement which appears so often in the books that the general rule is that the plaintiff in an action of conversion is entitled to recover the full value of the goods converted, but this statement should not be allowed to obscure the broad principle that damages are awarded by way of compensation.’
Their Honours went on to say, at 191, in relation to the peculiar circumstances in Butler v The Egg Board:
‘Th[is] case is one of compulsory acquisition. It is true that the appellants, by their wrongful act, put it out of their power to make delivery with the result that the Board came under no obligation to pay them but … it would be singular if the same act which saved the Board the price of the eggs should vest in it a right of action for their full value without deducting the price. The Board’s loss must, in our opinion, be determined by considering what sum of money would be required to place it in the same position as it would have been in if the appellants had performed their statutory obligation.’
Menzies J’s reasoning at 192, was to like effect.
In relation to the applicant’s claim of conversion, the relevant cause of action was pleaded in the Second Further Amended Statement of Claim as follows:-
‘CAUSE OF ACTION – CONVERSION
40.On 17 May 2002 certain goods which were the property of the Applicant and certain other goods of which the Applicant was lessee, each of which the Applicant had possession of or the right to immediate possession of, were located on the Site (the “Goods”).
Particulars
Particulars of (a) the goods owned by the Applicant and (b) the goods leased by the Applicant will be provided in a separate schedule prior to trial.
41.On or shortly after 17 May 2002 the Respondent intentionally took possession of all of the Goods and, contrary to a written direction given by the Applicant to the Respondent, the Respondent and/or by its contractors acting at the Respondent’s direction used all of or some of the Goods to further perform the Works.
42.By reason of the facts pleaded in paragraphs 40 and 41 the Respondent has converted the Goods.
43.By reason of the facts pleaded in paragraphs 40, 41 and 42 the Applicant has suffered loss and damage.
Particulars
(i)The Goods either remain in the possession of the Respondent or have been disposed of by the Respondent;
(ii)By the use of the Goods pleaded in paragraph 41 the Goods, or some of the Goods, were destroyed or damaged;
(iii)The value of the Goods which the Applicant owned was not less than $2,160,583.84;
(iv)By reason of the conversion of those of the Goods which were leased by the Applicant, the Applicant has paid to or become indebted to the lessors of those leased Goods and is alleged to owe Rapid Metal Developments (Australia) Pty Ltd $3,183,986.60 plus interest accruing at the rate of 18% per annum.
(v)The conversion of those of the Goods leased by the Applicant has directly led to litigation between the Applicant and some of the lessors of some of the leased Goods in which the Applicant has incurred legal costs of not less than $200,000.
The relief sought by the applicant in respect of its conversion claim was recorded at the end of the Second Further Amended Statement of Claim as follows:
‘D.Further or alternatively, damages for the tort of conversion in the sum of $2,160,584 plus any further amounts payable by the Applicant to Rapid Metal Developments (Australia) Pty Ltd.’
The respondent’s defence to the applicant’s conversion claim is to be found in the Defence to Further Amended Statement of Claim filed 28 July 2009 paragraphs 28-30 inclusive which provided as follows:
‘28. In answer to paragraph 40 of the Claim, the Respondent:
(a)denies that, following the termination of the AF Subcontract on 17 May 2002, the Applicant had possession of any goods that were located on the Site;
(b)admits that, on 17 May 2002, the goods listed in Schedules 1 to 3 to this Defence were located on the Site and that those goods were either owned by the Applicant, or were then or had previously been the subject of either a contract of sale or a contract of hire between the Applicant and a third party;
(c)admits that, on 17 May 2002, the Applicant had a right to immediate possession of those goods listed in Schedule 1 (AF Goods);
(d)denies that, from 20 May 2002, the Applicant had title to or had a right to immediate possession of those goods listed in Schedule 2 (RMD Goods), and says that any title or right of possession in respect of those goods which the Applicant had was terminated by Rapid Metal Developments (Australia) Limited (RMD) on or about 20 May 2002;
(e)says that the right to possession of the goods listed in schedule 3 was contested as between the Applicant and third parties (Disputed Goods);
(f)otherwise does not admit the paragraph.
29.In answer to paragraph 41 of the Claim, the Respondent:
(a)admits that, following the termination of the AF Subcontract on 17 May 2002, the goods listed in Schedules 1 to 3 to this Defence were located on the Site and came into the Respondent’s possession;
(b)says that, at the time of, but before the termination of the AF Subcontract on 17 May 2002, certain goods listed in Schedules 1 and 3 to this Defence (namely, certain items of truform and table systems) had been incorporated in the Works at the Site, and were unincorporated in or about July 2002;
(c)otherwise denies the paragraph.
30.The Respondent denies paragraphs 42 and 43 of the Claim, and further says that:
(a)so far as the AF Goods and the Disputed Goods are concerned:
(i)despite requests from the Respondent, the Applicant did not collect the AF Goods or the Disputed Goods;
(ii)pursuant to orders made under the Disposal of Unclaimed Goods Act 1970 (WA) (Disposal Act) by the Magistrates Court of Western Australia on 4 August 2003 and on 2 December 2003, the AF Goods and the Disputed Goods were disposed of at auctions held on 23 March 2004 and 21 April 2004;
(iii)on or about 19 July 2006, pursuant to s.28(1) of the Disposal Act, the Respondent:
A.paid the sum of $181,064.58 (being the balance of the proceeds of sale of the AF Goods and the Disputed Goods, after deduction of auctioneer’s commission and other costs) to the Treasurer of Western Australia;
B.furnished to the Treasurer of Western Australia a record prepared under s.25(2) of the Disposal Act, together with a Record of Goods Disposed of Pursuant to a Court Order;
(iv)by reason of s.28(2) of the Disposal Act, any rights which the Applicant had against the Respondent or another person in respect of the sum of $181,064.58 are extinguished.
(b)so far as the RMD Goods are concerned, such goods were collected by or returned to their true owner, RMD, and the Applicant has no title to sue in respect of them.’
Conclusion in respect of the conversion claim
In my opinion the respondent was guilty of conversion in respect of those formwork materials, hand tools and items of communication equipment owned by the applicant or the subject of contracts to purchase same and in relation to which the applicant had an immediate right to possession that were on the Woodside Building project site when the formwork subcontract between the applicant and the respondent was terminated for the respondent’s sole convenience on 17 May 2002.
The respondent has failed to establish that any third party had a right to possession superior to that of the applicant at the time of the conversion.
The acts of conversion occurred when the applicant was shut out of access to the site by the respondent and denied the opportunity to deal with its formwork materials, hand tools and items of communication equipment by removing same from the site on 18 May 2002 and, in the case of reinforced concrete members as at 17 May 2002, after the concrete had cured sufficiently to enable the formwork to be stripped and removed. The acts of conversion were committed progressively from 18 May 2002 through to 31 May 2002.
By locking the applicant out of access to the Woodside Building project site the respondent intentionally performed acts of dominion over the goods in question inconsistent with the rights of the applicant as ‘the true owner’.
To the extent to which it is necessary to make a finding on this matter I find that the respondent continued to carry out formwork activities on and after 18 May 2002 and before the engagement of West Swan Formwork using the applicant’s formwork materials, hand tools and items of communication equipment in a manner inconsistent with the applicant’s immediate right to possession.
For the reasons previously indicated, I do not consider that the respondent was guilty of conversion in respect of items of hired equipment. Mr Passione was cloaked with authority to deal with matters such as the hire arrangements in respect of plant and equipment that had been used by the applicant up to 17 May 2002 in such manner as he may have seen fit.
He notified all hirers of equipment that as of 17 May the hire arrangement was over and notified the respondent of that fact to give it the opportunity to take on a hire arrangement in respect of the hired equipment if it wanted to do so.
Whilst the applicant incurred legal costs and other expenses in relation to disputes that it had with Rapid Metal Developments (Aust) Pty Limited in relation to the tableforms which that company manufactured for the applicant, I do not consider that there should be any damages awarded to the applicant in respect thereof. Such losses did not flow from the conversion.
In my opinion the applicant is entitled to damages equal to the value of the goods converted at the relevant date of conversion. The applicant’s claim in respect of goods said to be owned by it was for $2,160,582.84 although this amount appears to be referred to in the Second Further Amended Statement of Claim as $2,160,583.84.
The amount claimed was recorded in a four page document handed up by the solicitor for the applicant at about 2.20pm on 22 September 2009. It was said to record details of the several invoices under which the applicant acquired formwork materials and equipment being the subject of the invoices which are to found in Exhibit B Volume 6 at pp1898-2040. Whilst it is tempting to say that the value of the several items of equipment equals the amounts paid or agreed to be paid for them, some allowance has to be made, in my opinion, for the depreciation in the value of the items by virtue of their use in the period through to 17 May 2002.
I am satisfied that the items for which claims are made were on the Woodside Building project site at the time when the applicant was locked out of access to the site and thereafter kept out of the site following the termination of the formwork subcontract by the respondent for its sole convenience on 17 May 2002. I find that such items were acquired for a total cost of $2,160,582.84. Whether there were monies owing in respect of the purchase of some of the items as at 17-31 May 2002 is not determinative of the applicant’s immediate right to possession of such items.
In the foregoing circumstances, a document entitled ‘ANDERSON FORMRITE PTY LTD Trial Balance as at ’ has some significance in this case. It was recorded on two pages (pp1696 and 1697 in Vol 5 of Exhibit B). The document was the product of the application of a computer software programme prepared for Mr Passione’s company, Prime Projects, and two other builders who together shared the cost of developing it, which he described as a ‘Building Construction System’, to the applicant’s Woodside Building formwork subcontract. That programme has become one used by about 6 builders across Australia for book-keeping purposes. The document recorded information in three major columns. The first column included a series of numeric codes such as 750/000. The second column listed against the several numeric codes expenditure items including expenditure on capital items. The third column recorded under the heading ‘2002 and 2003 combine Total Cost’ various monetary amounts representing total expenditure to 30 June 2003.
The Trial Balance document showed plant and equipment, being hand tools, hammers, drills, levels etc at a total cost of $51,724.14 with table and blockout forms obtained from Rapid Metal Developments (Aust) Pty Limited with a cost of $1,269,994, Truform with a cost of $348,464.24 and plywood with a cost of $522,326.49.
The Trial Balance showed the allowance of an amount of $137,542.30 for depreciation in respect of ‘PLANT & EQUIPMENT’.
As I understood Mr Passione’s evidence in relation to the ‘Trial Balance’ he was suggesting that the amount of $1,269,994 in respect of table and blockout forms was net of depreciation which had been allowed in the sum of $137,542.30. Taking the invoice cost for the supply of the table forms of $1,242,993.40 and $154,000 for the supply of blockout forms, the total of these items if $1,396,993.40. If one reduces that amount by the allowance for depreciation of $137,542.30 the net figure for table and blockout forms becomes $1,259,451.10 which is certainly not identical with the figure of $1,269,994.00 shown in the trial balance, but the difference is not significant.
In my opinion the amount which should be allowed by way of damages for the value of the goods converted by the respondent is 90% of the total cost of $2,160,582.84 after making an appropriate allowance of 10% for depreciation. Such an allowance would produce a figure of $1,944,524.55 as the appropriate amount to be awarded by way of damages for conversion. The applicant is entitled to an award of damages for such amount, together with interest up to judgment from 31 May 2002.
Interest up to judgment
Section 51A of the Federal Court of Australia Act 1976 (Cth) (the ‘Federal Court Act’) provides for the making of orders for the inclusion in the sum for which judgment is given of interest up to judgment or a lump sum amount in lieu thereof, in any proceedings for the recovery of any money, including any debt or damages or the value of goods in respect of a cause of action that arose after the commencement of the section on 22 November 1984.
Section 51A of the Federal Court Act confers a wide discretion on the Court. The Court may determine the rate of interest, the amount of principal on which interest up to judgment should be allowed and the period for which the interest up to judgment should be allowed. The section also confers a power on the Court to include a lump sum in lieu of a calculated amount by way of interest. A recent Practice Note suggests that interest rates will generally be determined by reference to the cash rates published from time to time by the Reserve Bank of Australia to which an additional 4% should be added and that the calculations should be made by reference to six monthly periods commencing on 1 January and 1 July.
Section 51A of the Federal Court Act provides for orders for interest up to judgment to be made unless good cause is shown to the contrary.
The Reserve Bank of Australia’s published cash rate was 4.5% as at 17 May 2002. It rose, progressively to 7.25% as at 1 July 2008, fell to 3% as at 1 July 2009 and rose to 4.5% as at 1 July 2010. The allowance of interest up to judgment should not in my opinion be seen to be a penalty but rather a proper means of compensating a successful litigant that has been held out of its money with an appropriate amount of compensation for the loss which it has sustained in that way.
In my opinion the applicant should, in respect of each of the amounts to which it is entitled to judgment, other than the allowance for GST, have an order that there be included in the sum for which judgment is given, interest on the whole of the component amounts from 17 May 2002 until 24 August 2010 at the applicable rates of 8.5%, 8.75%, 9.25%, 9.5%, 9.75%, 10.25%, 10.75%, 11.25%, 8.25%, 7%, 7.75% and 8.5% or a lump sum amount approximating but marginally less than a calculated amount. The lump sum alternative will reduce the likelihood of any dispute as to the proper calculations where (say) a leap year is involved.
Notwithstanding the merit of having a precise calculation, it seems to me that in respect of the several amounts on which interest up to judgment should be allowed, there should be included in the sum for which judgment is given a series of lump sums in lieu of a precise interest calculation. The lump sum amounts which should be included are as follows:
Judgment sum Lump sum to be included in the sum for which judgment is given in lieu of interest $637,991.62 $485,000.00 $1.00 $0.76 $1,944,524.55 $1,480,000.00 No interest should be awarded on the GST of $63,799.16.
For the foregoing reasons the applicant is entitled to judgment against the respondent in the sum of $4,611,317.09.
Costs
The parties have expressly asked for an opportunity to be heard on appropriate orders as to costs. In the light of the abandonment of two of the applicant’s major claims and its loss in respect of its Trade Practices claim one can well understand why the Court would be assisted by having the benefit of submissions from the parties on the question of costs. Whilst the parties did not oppose the provision in these reasons of a tentative view as to an appropriate costs order, they left me with the impression that they would not be assisted by the expression of a tentative view. They also indicated that there may be questions of offers of compromise or Calderbank letters referable to what might ultimately be the appropriate orders as to costs.
In the circumstances I propose to reserve the question of costs to a later date and invite the provision of succinct written submissions supplemented by oral argument thereon.
I certify that the preceding three hundred and forty-seven (347) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. Associate:
Dated: 25 August 2010
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