Angsea Investments Pty Ltd v Gauci, Fox, Rincono Pty Ltd & Wade
[1995] QSC 300
•14 December 1995
IN THE SUPREME COURT
OF QUEENSLAND
No. 2954 of 1989
[Angsea Investments Pty Ltd v Gauci, Fox, Rincono Pty Ltd & Wade]
BETWEEN:
ANGSEA INVESTMENTS PTY LTD
(Plaintiff)
AND:
GEORGE GAUCI
(First Defendant)
AND:
JENNIFER LYN FOX
(Second Defendant)
AND:
RINCONO PTY LTD
(Third Defendant)
AND:
STANLEY THOMAS WADE
(Fourth Defendant)
REASONS FOR JUDGMENT - G N WILLIAMS J.
Delivered: 14/12/1995
CATCHWORDS: Contract - supply of fill - plaintiff's agents fraudulently retained part of price - supplier party to fraud - held plaintiff entitled to recover from agents and supplier - payments to supplier calculated on mistake as to quantity delivered - held plaintiff entitled to recover over-payment.
Counsel:D.J.S. Jackson Q.C. for plaintiff.
G. Gauci, first defendant, on his own behalf and on behalf of second and third defendants.
Mr McHugh for fourth defendant.
Solicitors:Barker Gosling for plaintiff.
Primrose Couper Cronin and Rudkin for fourth defendant.
Hearing Dates: 17, 20, 21, 24, 25, 26, 27, 28, 31 July 1995
1, 2, 3, 4, 9, 10 August 1995.
IN THE SUPREME COURT
OF QUEENSLAND
No. 2954 of 1989
BETWEEN:
ANGSEA INVESTMENTS PTY LTD
(Plaintiff)
AND:
GEORGE GAUCI
(First Defendant)
AND:
JENNIFER LYN FOX
(Second Defendant)
AND:
RINCONO PTY LTD
(Third Defendant)
AND:
STANLEY THOMAS WADE
(Fourth Defendant)
REASONS FOR JUDGMENT - G N WILLIAMS J
Judgment delivered 14/12/1995
The pleadings in this action raise a number of causes of action for determination. In broad terms the plaintiff, Angsea Investments Pty Ltd, through its agent and managing director John Kenny, orally agreed in about February 1988 with George Gauci, the first defendant, acting as the agent for the third defendant, Rincono Pty Ltd, that Angsea and Rincono would enter into a joint venture for the development of a complex of duplex residential units at Labrador on the Gold Coast. Rincono was to inject $150,000 by way of capital and would for that amount acquire one half of the share capital in Angsea. Thereafter the parties to the joint venture would contribute equal amounts of capital. Pursuant to that joint venture arrangement Angsea appointed Gauci to be the licensed builder and the manager of the project; included in that managerial work was the management of earthworks to be carried out on the project site.
Angsea acquired the land at Labrador (Parkview site) where the development was to occur and obtained finance in the sum of $2.894 million through Elders Lensworth Finance Limited. But Rincono did not inject the capital funds pursuant to its obligation under the joint venture agreement prior to the arrangement being terminated in June 1989. However the project proceeded between February 1988 and June 1989 as originally planned, and that failure by Rincono is not relevant for present purposes.
A substantial quantity of fill had to be placed on the subject land as the first step in the development. In giving this broad overview it is sufficient to say that Gauci on behalf of Angsea contracted with ST Wade, the fourth defendant, for the latter to deliver the necessary fill to the site. The first delivery was made on 18 November 1988 and the last on 16 June 1989.
By the date of trial the second defendant, Jennifer Lyn Fox, was married to Gauci. They had a close relationship during 1988-89. Fox was a director and nominally the controlling mind of Rincono throughout that period. But that was undoubtedly because Gauci was then an undischarged bankrupt and disqualified from being the director of a company. Throughout the relevant period prior to June 1989 Fox did clerical work in connection with the project, working in the main from the office of Angsea. From July 1988 she was an authorised signatory with the ANZ Bank with respect to the drawing of cheques by Angsea.
As part of the joint venture agreement Rincono was paid $6,000 per month on account of the services provided to Angsea by Gauci and Fox; the first payment was in August 1988.
Angsea alleges that Gauci and Fox acted fraudulently or in breach of the fiduciary duty they owed to Angsea in retaining for themselves $1 out of the amount invoiced by Wade for each cubic metre of fill delivered to the site. To that end it is alleged that fraudulently and in breach of their fiduciary duty they agreed to pay more than a reasonable price for the fill to Wade. It is alleged that they agreed to pay Wade 50 cents in cash for each cubic metre of fill delivered to the site. In consequence there is a claim against each of Gauci and Fox for an account of monies received, damages for fraud or deceit, and damages for breach of contract. Similar claims are made against Rincono, together with a further claim for an order that it repay the total of $60,000 it had received on account of the services provided to Angsea by Gauci and Fox.
As against Wade, Angsea alleges that he was a party to the fraudulent conduct of Gauci and Fox referred to above, such participation being evidenced by his invoicing Angsea for an amount for each cubic metre of fill delivered to the site which he knew included an amount to be retained illegally by Fox and Gauci, and in falsifying contractual and other documents to give apparent validity to all relevant transactions. In consequence Angsea seeks from Wade an account of the additional amounts he received, equitable damages or compensation, damages for fraud or deceit, and damages for breach of contract.
There is an additional claim made by Angsea against Wade. According to the delivery dockets (exhibit 3) a total of 241,350 cubic metres of fill was delivered between November 1988 and June 1989. According to calculations made by experts on behalf of Angsea only 127,500 cubic metres or thereabouts of fill has actually been delivered to the site and compacted. Angsea claims to recover the value of the difference between those two quantities as money had and received.
When Angsea first became aware of the alleged fraud in June 1989 it stopped payment on a cheque for $60,000 drawn in favour of Wade on 9 June (cheque 367079), and it also terminated the contract for the supply of fill. By way of counterclaim Wade claims $60,000 in respect of the dishonoured cheque, and $194,200 damages for breach of contract being lost profits upon his being wrongfully prevented from completing delivery of the fill. In addition Wade alleges that Angsea has not paid for 12,990 cubic metres of fill delivered between 7 and 16 June 1989 and claims $84,435 with respect thereto. Finally Wade also claims an additional $2,496.62 for materials supplied.
The conduct of Gauci which is at the heart of the claims made by Angsea in this action resulted in him facing criminal charges; some more detail about that will appear later. After being convicted of misappropriating money belonging to Angsea, Gauci successfully appealed to the Court of Appeal; the relevant reasons are reported at (1995) 1 Qd. R. 296. In the course of their reasons their Honours said: "We are nevertheless left with the faint impression that perhaps the full story has yet to be told." After a trial lasting 15 days resulting in 1,140 pages of evidence and 126 exhibits comprising many hundreds of pages, I have a much clearer picture of what occurred, but nevertheless I still feel quite certain that there are aspects of the dealings between the parties I have not been told about, or at least the full story has not even now been revealed to the court.
Gauci and Wade each tried to deflect allegations of fraud directed towards themselves by making accusations against Kenny. With respect to some transactions not central to these proceedings there probably is on the evidence some doubt as to the role played by Kenny, but those issues were collateral to the causes of action raised by the pleadings and I was not prepared to permit the trial to be totally deflected in order to reach definite conclusions thereon. In so far as Kenny's credibility was in dispute the issues were fully canvassed.
Kenny was subjected to lengthy cross-examination and many allegations of improper conduct were put to him. At the end of the day, on the evidence which emerged at the trial, I am prepared to accept him as a witness of truth. On the evidence I am not persuaded that he was a party to any dishonesty. On the other hand, for reasons which I will develop at some length, I formed a very unfavourable impression of both Gauci and Wade. Indeed I have felt compelled to find that each of them lied in the course of giving evidence at the trial; it is not a finding which I am ordinarily prepared to make, and in this case it is not one I have lightly made. In all the circumstances I cannot accept any evidence given by either Gauci or Wade except where it is confirmed by other reliable testimony.
The first issue which needs to be addressed relates to the terms of the agreement pursuant to which fill was supplied. An advertisement was placed in a local newspaper calling for tenders to supply and place approximately 160,000 cubic metres of fill; the advertisement gave a specification for the fill of CR 25. In response Wade submitted a quote specifying a CBR rating of 15; in fact the CBR rating can be disregarded for all purposes. Wade's tender was for $1.30 per cubic metre ex quarry and cartage on a loose measure basis of $3.70 per cubic metre, making a total per cubic metre loose measure delivered of $5. The tender required payment consequent upon the issuing of a monthly certificate by the engineer, payment being within 14 days of the issue of the certificate. It also asked that the whole of the money payable be guaranteed; it stated that the form of the guarantee should be worked out by the parties prior to the commencement of the work. It also contained the following sentence: "The above tender is a firm one and includes the cost of survey before and after completion of the work and attention during its progress."
There is a dispute on the pleadings as to the contract which thereafter came into existence, and that dispute became even more significant as the trial progressed. In paragraph 8 of the Statement of Claim the terms of the contract were alleged to be:"(a) the Plaintiff would pay to the Fourth Defendant the sum of $3.00 per cubic metre of loose fill delivered to the project;
(b) the Fourth Defendant would invoice the Plaintiff for an additional $1.50 per cubic metre of loose fill delivered to the project (hereinafter called "the additional sum invoiced");
(c) the Fourth Defendant would receive 50 cents per cubic metre in cash in respect of the additional sum invoiced;
(d) the First Defendant would receive the balance of the additional sum invoiced."
Those allegations appear to be based essentially on the acceptance of Wade's quotation (as amended after negotiation between Gauci and Wade) established by the following notation and signatures which were placed at the foot of a copy of the tender:
"19 September 1988
Agreed by Mr George Gauci and Mr Stan Wade that the revised price to supply loose measure would be $4.50/m3 and payments every second Friday from commencement of deliveries.
Stan WadeGeorge Gauci"
I am satisfied that as at 19 September 1988 and for considerable time thereafter Wade was not aware of the involvement of Angsea. On the balance of probabilities I would accept that he believed until about 16 December 1988 that he was dealing with Gauci as principal. It is not necessary in my view to say more about that; from the time the first payment was made it was known by all that Angsea was the principal and at all material times all parties treated Angsea as such.
I am also satisfied that Wade originally tendered on the basis that the source of the material would be his quarry at Reedy Creek. As at September 1988 he had tendered for the removal of fill from the Colgate site but that tender was not awarded to him until late November 1988. The deliveries made between 18 November 1988 and 3 December 1988 were from the Reedy Creek quarry. Wade's agreement to reduce the price from $5 to $4.50 per cubic metre was probably partly due to his expectation that cheaper material would become available from the Colgate site. There was no further price reduction once it was known that the fill would come from the Colgate site and there would be a shorter hauling distance from there to the subject site.
Angsea did not prove a specific agreement containing the terms (a) (b) (c) and (d) as pleaded. The evidence clearly establishes that until about 15 May 1989 Wade's invoices were for $4.50 per cubic metre, that he received $3.00 in payment by way of a cheque, that he received a further 50 cents cash, and that the balance of $1.00 was retained in cash by Gauci and/or Fox. The court was asked to draw the inference from what in fact occurred that there must have been an agreement to the effect pleaded.
In Wade's Defence and Counterclaim the original agreement is pleaded as follows in paragraph 4:"(b) the Plaintiff and the Fourth Defendant entered into a contract in writing dated 5 December, 1988 for supply of fill by the Fourth Defendant at a price of $4.50 per cubic metre;
(i) it was a term of the said written agreement of 5 December 1988 that the Fourth Defendant would be permitted to supply to the Plaintiff all the fill required for the Plaintiff's project and that the Plaintiff would accept the supply of all the said fill by the Fourth Defendant:
PARTICULARS
The said agreement provided inter alia:
"The contract ... shall be irrevocable by either party for the duration of filling operation of the area. In case of a sale, the rights and responsibilities shall recast to and be acquired by the new owner".
(c) In or about January 1989 the said contract was varied by oral agreement between the First Defendant on behalf of the Plaintiff and the Fourth Defendant;
(d) The following were terms of the agreement as varied:
The Fourth Defendant would accept $3.50 per cubic metre in satisfaction of the price of $4.50 per cubic metre if the payment of invoices was made strictly weekly and if the roads on the site were watered and maintained by the Plaintiff."
That pleading would appear to be based upon the document which is found at exhibits 76 and 77 (during the plaintiff's case those documents were exhibits C and D for Identification). I will not set the document out in full but the following points should be noted in addition to the extract quoted in the pleading. The principal is said to be Angsea Investments and it is signed for the principal by Gauci. It specifies that the fill shall be supplied from the Colgate site and gives Angsea the sole right to that material so long as it shall be available. The document also provided that invoices should be given on the Tuesday of each week and payment made on the following Friday. The last two sentences were as follows:
"Principal shall pay for all materials supplied for haul roads and for any machine work performed thereon.
At the termination of supply from Colgate Palmolive Site a new contract shall be negotiated for further supplies".
In his evidence at the trial Wade said that those documents were created "a little before" 5 December, and signed on that date. However, as I have already mentioned, Wade was not aware of Angsea as at that date. There is ample evidence to justify such a conclusion. The first invoice prepared by Wade was for fill supplied up to and including 16 December (exhibit 21); it is addressed to Gauci only. Subsequently, but prior to delivery, it was amended (for example, see document 8 in exhibit 5) to have "Angsea Investments Pty Ltd" typed in above the reference to Gauci. That suggests that when the invoice was first prepared it was not known that Angsea was the principal. Indeed Wade expressly conceded that in his interview with the police (exhibit 29 page 41). Under cross-examination during the trial he indicated that he became aware of Angsea through statements made by his truck drivers who were delivering the fill. There are other passages in that cross-examination which confirm that initially he believed he was dealing with Gauci. I am satisfied on the whole of the evidence that the first correctly dated delivery docket bearing the name of Angsea was that of 12 December 1988.
Wade was confronted under cross-examination with the question how could the agreement purportedly signed on 5 December have referred to Angsea if he was not aware of Angsea's involvement until about 12 December at the earliest. He responded by saying: "Well, of course, Mr Gauci told me Angsea Investments at the time, yes. I therefore must have known before that." Having considered all of the evidence - much of which will be referred to in some detail later - I have come to the conclusion that that was a deliberate lie concocted whilst in the witness box in an endeavour to explain away the impossibility which otherwise confronted him.
There are also other indicators which throw doubt on the veracity of the testimony that the document relied on by Wade (exhibit 76) was in fact executed on 5 December. As at that date there was no local authority requirement that there be a haul road and the reference in that document to the haul road does not mesh with known requirements as at the date of the document. Sometime after 5 December the local authority directed that deliveries of fill to the site cease until a haul road had been established across an adjoining public water reserve. There is also no satisfactory explanation for the inclusion in that document of the reference to change of ownership of the subject land. There was no such reference in the document signed 19 September 1988, and there is nothing in the evidence which would explain the inclusion in such a term in a document executed on 5 December. Finally, as at 5 December it would appear that Wade believed that there was sufficient material in the Colgate site to provide the 160,000 cubic metres required to satisfy the tender. In his statement exhibit 7 Wade said that in about September 1988 he had made a rough calculation that the Colgate site would yield fill in the order of 300,000 cubic metres loose (or about 187,500 cubic metres of solid fill).
At this stage it should also be noted that there is nothing apart from the say so of Wade and Gauci to support the allegations made by Wade in his Defence and Counterclaim that there was a variation of the December 5 agreement in or about January 1989. The alleged variations do not fit well with the objectively known circumstances. There was never any basis for an argument that Wade was responsible for maintaining the access roads to the site. That obligation always rested with Angsea and it is ludicrous to suggest that Wade was prepared to pay $1.00 per cubic metre to secure Angsea's performance of that obligation. Even if there was some basis for Angsea and Wade agreeing as to the cost of maintaining the access roads, that cost would have been nowhere near represented by $1.00 per cubic metre of fill delivered (a total of $232,588 was involved). So far as payment weekly is concerned that was already part of the contract between the parties if the document dated 5 December was that which evidenced the agreement. The variation added nothing of substance. Further, from almost the first week in January payments in fact were not made strictly on a weekly basis; on a number of occasions post-dated cheques were given. But Wade always gave the discount. In all the circumstances I am not satisfied that there were agreed variations in January as alleged by Wade; to some extent in arriving at that conclusion I have relied upon my findings as to matters subsequently referred to which reflect adversely on the credibility of Wade and Gauci.
It is convenient at this stage to consider the competing contentions with respect to subsequent variations of the agreement between the parties whatever it was. Angsea did not plead any subsequent variation and the witnesses called on its behalf were unable to do more than refer to invoices received and amounts paid. The statement of claim merely acknowledges that deliveries after 9 May 1989 were invoiced at $6.50 per cubic metre and paid at that rate.
In the Defence and Counterclaim as it stood at the commencement of the trial (the pleading delivered 16 January 1995) the following allegations were made in paragraph 4:"(e) By an agreement partly in writing dated 15 May 1989 and partly orally made at the same time the said agreement was further varied to increase the price of fill to $6.50 per cubic metre;
(i) The oral part of the said agreement was made between the First Defendant as agent of the Plaintiff as aforesaid and the Fourth Defendant and was that the written part of the said agreement of 15 May 1989 would pertain only for so long as the prior site for the obtaining of the fill (the Colgate Site) was inaccessible to or unavailable to the Fourth Defendant and that when the Colgate Site was accessible or available to the Fourth Defendant, then the agreement of $4.50 per cubic metre supplied from the Colgate Site would revive;
(f) In or about May 1989 the said agreement in writing was further varied by oral agreement between the First Defendant on behalf of the Plaintiff and the Fourth Defendant;
(g) The following were the terms of the agreement as varied:
The Fourth Defendant would accept $5.50 per cubic metre in satisfaction of the price of $6.50 per cubic metre if payment of invoices was continued to be made strictly weekly and if the Plaintiff continued to water and maintain the roads on site."
The contention in that pleading that there was a written agreement dated 15 May 1989 is clearly a reference to the document exhibits 78 and 79 (which throughout the plaintiff's case were exhibits E and F for Identification). That document purports to contain an addition to the agreement said to have been executed on 5 December. There is a date "15 May 1989" and under it the body of the variation is in these terms:
"New negotiated price
Whereas supplies from the abovementioned site have become exhausted, a new price of $6.50 per cubic metre shall now apply.
All rights and responsibilities outlined above shall apply to deliveries which shall now be made from Hymix Quarries."
The document was signed by Gauci on behalf of the "principal" and Wade.
This was a managed case and the reviewing Judge gave directions that the parties exchange witness statements. The first witness statement lodged by Wade was that which became exhibit 100. In it he clearly asserted that when the agreement of 5 December 1988 was executed there was no date "15 May 1989" on it nor any of the words which appear after that date on exhibit 78. He went on in that statement to say that by "May 1989 there was extensive wet weather on the Gold Coast and I could not remove the fill from the Colgate Palmolive Site because of that wet weather". He there claimed that in consequence he "told Gauci that I could not get any more fill from Colgate Palmolive but I could get some from Hymix but the price for such fill would be greater. I told him the price would be $6.50 per cubic metre and Gauci agreed to pay the price. We signed an amendment to document number 3 on 15 May, 1989." Clearly Wade was there saying that the bottom signatures on exhibit 78 were placed there on 15 May 1989.
A little later on in that statement Wade says that he was pressured by Gauci to reduce the price to $5.50 per cubic metre because Gauci asserted he could obtain fill from another supplier at that price. Wade says that he was able to negotiate that, but his statement goes on:
"Gauci said again to me that he would rather me continue to invoice him at $6.50 because he had arranged for further finance on those terms and he would be able to use the $1.00 extra on the site. He also told me that he would still like to pay me 50 cents in cash."
It is convenient to record here that Wade at a late stage in the trial sought to distance himself from those statements on the ground that he had not read the document before he signed it. Again I am satisfied that that was a lie. Some of my reasons for so concluding will emerge later. Suffice it to say at this stage that in exhibit 100 Wade was attempting to explain away remarks made in a statement to police which he had signed and dated 14 June 1989 (exhibit 96). I will not refer to that police statement in any detail; suffice it to say that it does not support much of the critical evidence given by Wade in the course of the trial. What is important for present purposes is that in exhibit 100 Wade said with respect to exhibit 96:
"With regard to my statement to the police I say the agreement to supply fill from the Colgate Palmolive Site for $4.50 did not include consolidation but was for loose measure as agreed with Gauci in 19 September, 1988. Sergeant le Gros must have got this mixed up with the first quote or it might have been my fault. I did not re-read the statement at the Police Station. I did not have my reading glasses and was very agitated, having been taken to the Police Station without any warning at all that there might be trouble in the wind.
The statement I gave to the police is not entirely accurate because at that time I really did not know where I stood and I did not know whether I was in trouble or not want to get myself or Gauci into trouble. I also had not the opportunity to look back over the history of the matter. I had not had the opportunity of obtaining legal advice and I did not have any idea where I stood. Sergeant le Gros took me to the areas which he wanted me to comment on and after he summarised things I'd explained to him in detail. Having had the opportunity to think back over the matter, and review the documentation I am able to say that this statement is entirely correct." (my emphasis)
In the light of the last sentence in particular Wade's evidence at trial that he did not read over exhibit 100 before signing it rings hollow. It should also be noted that in the passage I have just quoted Wade seems to suggest that the basic agreement for the supply of fill was that reached on 19 September 1988 - the document relied on by Angsea.
Wade's next relevant statement was that prepared by police for the criminal proceedings against Gauci. The statement is dated 25 September 1990 (exhibit 101) and was the basis of the evidence given by Wade on 20 December 1990 in committal proceedings against Gauci. In that statement the following relevant passage appears relating to the agreement dated 15 May 1989 forming part of exhibit 78:"This is an original and photostatted copy of an amended contract, dated 15 May 1989. It bears the signature of George Gauci and myself. After signing this addendum, I would have retained an original copy and George Gauci would also kept one. This is reflected in the fact that our signatures appear in different positions on each of the copies before me, indicating that two of the same addendum have been signed on the reported date.
The wording on this amendment was derived well before its reported signing on 15 May 1989. I had formulated this amendment, in the anticipation of the Colgate Palmolive fill genuinely running out. ...
I cannot recall the exact date when Gauci verbally agreed to the conditions of this new amendment, however I believe that the addendum to the contract was signed on 15 May 1989. ... Gauci offered no argument to the signing of the new addendum, and I recall thinking it strange, at the time, that he did not negotiate as hard as he did with the previous contract."
Exhibit 7 was another statement of Wade filed pursuant to a practice direction; it was another pre-trial statement dated 10 January 1995. In it he said, relevantly for present purposes:
"Although I cannot specifically recall my conversations with Gauci leading to the supply from the Hymix Site, I believe that I must have had his verbal approval to supply from the Hymix Site before 15 May 1989. In any event, Gauci and I signed an agreement as an addendum to the contract of 5 December 1988 headed 15 May 1989 whereby it was agreed that I would supply fill from the Hymix Site at the rate of $6.50 per cubic metre. A copy of the contract of 5 December 1988 has an addendum of 15 May 1989 at the foot thereof. Gauci raised no objection to the signing of the document for the supply at $6.50 per cubic metre from the Hymix Site at the time he signed the agreement for that supply. A couple of days later he approached me however and said he could get fill material from a firm called Marshall and Rankin for $5.50 per cubic metre."
On the basis of all that material I have no hesitation in concluding that all of Wade's pre-trial statements were to the effect that the addendum agreement of 15 May 1989 was signed on or about that date by he and Gauci, and after some brief negotiations between them in which there was reference to circumstances prevailing at that time.
In the course of opening the case for Angsea Mr DJS Jackson QC said that a handwriting expert would be called to give evidence that all four documents (exhibits 76, 77, 78 and 79) were signed on the one occasion using the same pen.
Mr McHugh, counsel for Wade, asked for permission to have Wade's document expert examine those four documents in the light of the opening. That was granted. Subsequently it was conceded by counsel on behalf of Wade that there was no dispute as to the fact that the four documents were signed on the one day using the one pen. In consequence the evidence opened by Angsea was not led orally, but the expert's report was admitted as exhibit 59.
On the afternoon of the eighth day of trial counsel for Wade made an application to further amend the Defence and Counterclaim particularly with respect to allegations regarding the addendum of 15 May 1989. Leave was granted to make the amendments and in consequence the relevant portion of Wade's pleading read as follows:"(d)(i) It was further agreed on 5 December 1988 between the Fourth Defendant and the First Defendant for an on behalf of the Plaintiff that:
(a) During the course of supplying fill to the Plaintiff's site the Fourth Defendant might be obliged to supply fill from the Hymix Site;
(b) If the event referred to in (d)(i)(a) eventuated the price of the Hymix fill would be $6.50 per cubic metre;
(c) The said agreement be reduced to writing in an undated addendum to the written agreement of 5 December 1988.
(d)(ii)(a) On 15 May 1989 deliveries from the Hymix Site commenced;
(b) The addendum to the agreement of 5 December 1988 referred to in paragraph (d)(i)(c) aforesaid was dated 15 May 1989;
(e) After 5 December 1988 and prior to the supply of fill from the Hymix Site on 15 May 1989 an oral agreement was made in respect to the undated addendum being the written agreement for the supply of fill from Hymix made on 5 December 1988:
(i) The oral part of the said agreement was made between the First Defendant as agent of the Plaintiff as aforesaid and the Fourth Defendant and was that the written part of the said agreement dated 15 May 1989 would pertain only for so long as the prior site for the obtaining of fill (for Colgate Site) was inaccessible or unavailable to the Fourth Defendant and that when the Colgate Site was accessible to or available to the Fourth Defendant then the agreement of $4.50 per cubic metre supplied from the Colgate Site would revive."
There was then a further consequential amendment to the pleading which asserted that after 15 May 1989 the addendum was further varied by oral agreement to the effect that the Fourth Defendant would accept $5.50 per cubic metre in satisfaction of the price of $6.50 per cubic metre if payment of invoices was continued to be made strictly weekly and if the plaintiff continued to water and maintain the roads on site.
What perhaps those amendments do not make entirely clear, but what was made abundantly clear by statements made by counsel for Wade at the time, is that from and after the afternoon of the eighth day of trial it was Wade's case that the four documents, exhibits 76, 77, 78 and 79, were all signed in all places on 5 December; the only matter added subsequently was the date 15 May 1989 on exhibits 78 and 79.
To meet the obvious inconsistency between that position and the statements previously made by Wade referred to above, a supplementary statement was then tendered (exhibit 85). In it the following passages appear:
"On 5 December 1988, Gauci came to my house to sign a contract for the supply of fill. I prepared two copies of a contract which was the contract of 5 December 1988 (without the addendum). Gauci and I signed that contract. I gave him a copy and kept a copy for myself. Then I produced a document which was the contract dated 5 December 1988 with an addendum. There was no date above the addendum. I deliberately left the date out.
I then said to Gauci something like, "The Colgate Site might not give us enough fill to complete the Angsea job and we might have to get fill from somewhere else". I said I could get fill from Hymix and supply it at $6.50 per cubic metre. Gauci agreed. It was important to me to have Gauci tied down to a price from another source because I didn't want an argument when or if the occasion arose when the fill couldn't be supplied from Colgate. I wanted Gauci tied into a price for any further fill from a different site before I started the job so the fill from a source other than Colgate which was going to be dearer for me to purchase could be specified from the outset as costing more than $4.50 per cubic metre. ...
I kept the contracts with the addendum on them (but undated) in my safe in my home office. When I did have to supply material from Hymix on 15 May 1989, I inserted the date "15 May 1989" above the addendum on both copies with my IBM Composer. I gave Gauci a copy with the dated addendum on or after 15 May 1989."
Throughout his period in the witness box Wade made a valiant attempt to adhere to the revised version of events set out in exhibit 85, but he failed miserably. His whole evidence on the point was entirely unconvincing and was clearly the product of an attempt at the last minute to concoct a story which would fit the expert evidence which Angsea could lead. Once it was accepted that all four documents were signed on the one date, Wade's position had to be that all were signed on 5 December 1988. If none was signed on that date then his whole case fell to the ground. He lied in an attempt to establish that the all documents were signed on 5 December but his evidence in that regard was entirely incredible. He gave no satisfactory explanation for his many statements (referred to above) to the effect that the addendum was signed on 15 May.
Gauci was no help to Wade on this issue. In his statement (exhibit 82) he spoke of renegotiating for the supply of fill from Hymix in April-May 1989, but readily acceded to suggestions from Wade's counsel that all documents being exhibits 76, 77, 78 and 79 could have been signed on 5 December. But basically he had no real recollection, or at least none that he clearly articulated, with respect to the signing of those documents. Initially he said that exhibits 78 and 79 were signed on 15 or 16 May, but then he readily accepted they could have been signed on 5 December.
I do not propose to record in detail evidence as to the location of exhibits 76, 77 78 and 79 at material times. I accept that none was in the records of Angsea as at June 1989.
The evidence compels the conclusion that the four documents referred to were not signed on 5 December 1988. It is not strictly necessary to determine when in fact they were signed, but there are certainly indications that they were prepared and signed after matters came to a head in June 1989, and with a view to providing Wade with some material to support his position. On the balance of probabilities I would find that they were prepared after Kenny became aware of Gauci's fraud in June 1989.
I mention in passing the oddity of the proposition that the documents were in fact prepared and executed on 15 May 1989 yet they did not reflect the variation as to payment being required strictly weekly and the obligation on Angsea to maintain the haul road. According to Wade there was a further oral variation dealing with those matters. His evidence to that effect contradicts what he said in exhibit 100 about Gauci forcing him to agree to $5.50 but requesting that invoices continue to be made out for $6.50.
I have outlined the evidence in relation to the contractual position between the parties in some detail because in my view it is of the utmost importance. It proved to my mind that both Gauci and Wade lied during the trial. They were prepared to alter their evidence significantly in an endeavour to make it fit with facts which could be objectively established by Angsea. I have had regard to Wade's age and hearing disability but I have no doubt that he was a shrewd, cunning business man and was fully aware of what was happening in the course of the trial and of the changes in his evidence.
I therefore reject the contentions of Gauci and Wade that the relationship between Angsea and Wade was governed by a contract made on 5 December 1988, varied in about January 1989, and with an addendum of 15 May 1989 with subsequent agreed variations. I am satisfied that the only document evidencing an agreement between the parties is that dated 19 September 1988 to which I have referred earlier. I would make one qualification to that, a matter virtually conceded by counsel for Angsea. From about 15 May 1989 it was necessary for Wade to obtain fill from the Hymix Quarry because of prevailing weather conditions and that necessitated a somewhat higher charge. The reasonable higher fee must be taken to have been agreed to by Angsea through the person responsible for managing the project at the time, namely Gauci. Further, on the evidence I am not satisfied that I should infer an agreement in the specific terms alleged in paragraph 8 of the Statement of Claim.
As already mentioned deliveries of fill began on 18 November 1988 and continued through until 16 June 1989. Generally throughout the period Wade delivered an invoice to Gauci on the Tuesday of each week. Gauci (or some other employee in the office) would submit that invoice for certification to Messrs Herron Todd White; one Steve Herbert was the person mainly responsible for making such inspections as were deemed necessary before certification. Angsea would then write (usually under the hand of Gauci) to Elders Lensworth Finance Limited particularising the accounts and referring to certification by Herron Todd White. On receipt of that material the financier would make a further advance pursuant to the facility arrangement. That would then enable Wade to be paid, usually on the Friday after the Tuesday upon which he had submitted his invoice.
I have prepared a Schedule which is annexed to these reasons giving particulars of Wade's invoices, particulars of the cheques drawn in payment of those invoices, and particulars of the amounts actually received by Gauci.
With respect to all payments up until the end of April 1989 the cheques were signed by Fox. Two requisition forms and two cheques were drawn with respect to each payment. There would be a crossed cheque, payable to ST Wade Earthmoving in most instances, representing the invoiced quantity of fill at $3 per cubic metre, and a second open cheque made payable to ST Wade for the balance $1.50 per cubic metre. As appears from the Schedule annexed to this judgment the two cheques were often not dated the same date. It would appear that the open cheque was always dated within the week that the invoice was submitted. As the cheques were usually consecutively numbered the logical inference is that when the dates do not coincide the crossed cheque was post-dated. Fox would then take the open cheque (either on the day it was drawn or the following day) to the bank and cash it. After cheques bearing an imprinted "not negotiable" crossing began to be used the cheque bore a handwritten endorsement "please pay cash" signed by Fox.
Gauci's evidence is to the effect that Wade received all of the cash; that is, Wade received in cash the amount specified in the second cheque. Wade, of course, denies that. His case is that Gauci retained $1 per cubic metre in accordance with the terms of the agreement he asserted existed; he admits to receiving the total sum of $116,000 in cash. The only amount Gauci admits to receiving is the $12,000 being part of the last cheque, the one cashed by Fox on 14 June. Of course he had to do that seeing the police found $10,000 in Fox's handbag. Gauci claimed that the $12,000 was a loan from Wade but the latter denied that proposition. Gauci was convicted of misappropriating the total amount represented by the $1 per cubic metre but on appeal his conviction was quashed. The charge alleged that the money was the property of Angsea, but the Court of Appeal held that on the evidence there was an issue whether the money was the property of Angsea or Wade. It was because of that technicality that the conviction was quashed. It would appear that Wade's evidence on that trial as summarised in the report (1995) 1 Qd. R. 296 was vastly different to that which he gave before me.
On the whole of the evidence I am satisfied that Wade only received one-third of the amount of the second cheque in cash. I find that the remaining two-thirds, representing $1 per cubic metre, was retained by Gauci and Fox. There is no objective evidence pointing to that amount of money in the possession of either Angsea on the one hand or Gauci and Fox on the other, but I accept Kenny as a truthful witness and treat the absence of any evidence that Angsea received the money as indicating that in fact it did not do so.
If all the money was to go to Wade there was no need for two cheques, or at least no need for Gauci and Fox to cash the cheques and then deliver cash to Wade. The fact that Fox opened the second of the cheques signed by Kenny on 11 May and 1 June strongly suggests that some impropriety was involved and that Gauci and Fox were implicated in it. For the reasons I have given I conclude that Gauci received the amounts shown in the Schedule annexed to these reasons, and that Fox was knowingly concerned in bringing about that result.
There were some changes in May-June 1989 in the procedure for paying Wade. It seems that by early May the relationship between Kenny and Gauci had broken down. In his statement Kenny refers to Gauci's failure to contribute his capital share to the joint venture and also to Gauci's "drinking problem" as contributing factors to the breakdown. Around that time, possibly on or about 11 May, Kenny informed Gauci that the association could not continue. I am satisfied that at or about that time Kenny put it to Gauci that one or other would have to buy the other out. Gauci professed to be in a position to arrange for a buy out of Kenny's interest in the project, but nothing appears to have eventuated.
It was Kenny who signed each of the two cheques drawn to pay the invoice submitted on 9 May 1989; he merely signed the cheques prepared by the office staff. Though Kenny signed cheque 360032 it was then endorsed "please pay cash" and that endorsement was made and signed by Fox. Kenny does not appear to have been concerned on that occasion about the drawing of two cheques rather than one. Further, it would appear that the crossed cheque for $60,000 was post dated; see endorsements on the back. A similar pattern was followed with respect to the cheques drawn in payment of the invoice submitted 30 May 1989 for $91,000; the two cheques drawn were for $70,000 and $21,000. Again the cheque for $21,000 bore the endorsement "please pay cash" made and signed by Fox. The $21,000 was divided in the usual proportion. This was the first payment for fill from Hymix at the higher price.
Late in May Kenny became concerned as to the payments made by Angsea to Wade. He became aware of the fact that one of the two cheques was being cashed; at that time he received no satisfactory explanation as to why that was being done. He had some further concerns about Gauci's control of the project; in the circumstances it is not necessary to review those matters in any detail. Suffice it to say that on or about 1 June 1989 Kenny instructed Angsea's office staff that no further accounts were to be paid without his approval. Kenny made enquiries of Angsea's bank with respect to the cheques for $70,000 and $21,000 he had signed on 1 June, and on becoming aware that the one for the smaller amount had been "opened" he decided to remove Gauci from his managerial position. On Tuesday 6 June Kenny sacked Gauci and told him "to get his gear and get off the site right away". Shortly after that Gauci informed office staff that he would be delivering Wade's invoice the following morning for processing "as usual". On the morning of 7 June Gauci handed Herbert on the project site Wade's invoice.
At that point of time Kenny decided to engage private investigators to follow up the processing of cheques drawn in the usual way. The invoice delivered by Wade for that week was for 12,000 cubic metres of fill at $6.50, a total of $78,000. Two crossed cheques were drawn and signed by Kenny. One was for $60,000 (cheque 360079) and one was for $18,000 (cheque 360078). On this occasion it was Kenny who opened the cheque for $18,000 to cash. Kenny also gave instructions to the bank to stop payment with respect to the cheque for $60,000.
One Ashford had been employed by Angsea as contracts manager from early February 1989; he worked mainly in the office. On 8 June Gauci spoke to Ashford at the office of Angsea by telephone and asked him to deliver the cheques to Wade on Friday morning. Later Ashford telephone Wade and confirmed those arrangements. About midday on Friday 9 June Ashford delivered the two cheques to Wade's home; he handed Wade an envelope containing the two cheques. Ashford asked Wade if that arrangement was correct and Wade replied that it "seems alright".
The weekend was the Queen's Birthday long weekend and the next banking day was Tuesday 13 June. Gauci claimed, and it may well be true, that he spent that weekend at Noosa. Clearly there was contact between Gauci and Wade on the Wednesday, Thursday and Friday 7, 8 and 9 June. I am satisfied that after receiving the two cheques on the Friday Wade became suspicious that something was wrong. In his evidence he asserts that as and from the time he received the two cheques he began to believe that Gauci may have been acting fraudulently, but he does not make it clear what he meant by that. Indeed there was no objective reason for Wade to believe that Gauci had been acting fraudulently if all dealings between he and Gauci had been above board as alleged in his pleadings. This was another occasion upon which Wade was prepared to manufacture evidence in an endeavour to exculpate himself.
At some stage during the period 6 to 9 June Gauci informed Wade that he was selling out his interest in the project to Japanese interests. I am satisfied that Wade on learning that decided to take further steps to extricate himself from the situation.
About 4.00pm on Tuesday 13 June Gauci (by obvious arrangement) collected the cheque for $18,000 from Wade. There is ample evidence to support the conclusion that early the following morning Fox cashed the cheque for $18,000 at the bank and gave the money to Gauci. Gauci then delivered $6,000 in cash to Wade which the latter accepted. Later that day police, acting on the complaint of Angsea or Kenny, searched the residences of both Gauci and Wade. $6,000 in cash was seized at Wade's residence. Gauci and Fox were also taken to the police station on that day, and $10,000 cash was located in Fox's handbag.
It can be seen from the Schedule annexed to this judgment that Gauci received in all $232,588, representing $1 for each cubic metre of fill allegedly delivered to the site by Wade. That far exceeds any possible reasonable cost of watering and maintaining the access road on the Parkview site. On the whole of the evidence I find that no satisfactory explanation has been given either by Gauci or Wade for the retention of that amount by Gauci. The only conclusion on the evidence, and I bear in mind the onus of proof in a matter such as this, is that both Gauci and Wade were parties to a scheme to defraud Angsea of that amount.
I am satisfied that one of the benefits Wade was to get from the scheme was the right to payment of $116,000 in cash. At no stage in the course of his evidence was Wade able to give a satisfactory explanation for his receiving the bulk of the payment by way of crossed cheque and an amount, representing 50 cents for each cubic metre of fill delivered, in cash. Further, Wade's method of dealing with the cash confirms his knowledge that the money was tainted. All the cash was stashed away in a ship container located at Wade's truck yard two miles from his house. He said: "I wouldn't take it to my house. It was too dangerous. I wouldn't let my wife bank it because it was too dangerous, but I did claim it. I entered it in my cash book." Later he said that he "wasn't going to let my family handle it. I wouldn't take it near the house. It was quite alright where it is apart from that, if I had spent it it wouldn't make any difference." He agreed that he did not bank any of it until after the initial police investigations; it was banked in two lots in July and August 1989.
I am by no means satisfied that Wade duly recorded the cash receipts in his cash book as he claimed he did. A document purporting to be Wade's cash book was one of the exhibits. It does not accurately record when money (cash or cheque) was received. It gives a total for cheque and cash, though different dates should strictly have been recorded on some occasions. There is also an error in the doubling up of the entry for $84,000. It has all the earmarks of a document subsequently prepared, rather than a document prepared on either a weekly or monthly basis. All the indications are that if the cash receipts of $116,000 had not come to light in June 1989 because of the police investigations Wade would never have disclosed receipt of those monies, for example, to taxation authorities. Clearly as at 9 June his intention was that the cash should remain in the shipping container.
It is necessary to say something about four bogus invoices which were used by Gauci in order to obtain funds from Elders. Gauci's involvement in the fraud in that regard is proven by the certificate of conviction, exhibit 80. He was convicted of the offence that by means of a fraudulent device he induced Elders to pay an amount to Angsea. The total amount involved was well over $300,000. For purposes of these proceedings it is not necessary to make findings as to which persons or companies benefited from that fraud. It is sufficient to say that Gauci was a prime mover with respect thereto.
What is more significant for present purposes is that Wade admits that he prepared and signed one of the bogus invoices, that purporting to be for the supply of fill up to 23 May 1989 totalling $162,500. The other three bogus invoices appear to be on Wade's stationery, but Wade asserted that they were forgeries. It is not necessary to make any findings in relation to that contention for present purposes. What is sufficient for present purposes is that Wade admitted that one of the bogus invoices was prepared by him and bore his signature. In his statement, exhibit 7, Wade asserted that he prepared the invoice for $162,500 (25,000 cubic metres of fill at $6.50 per cubic metre) knowing that it was false. He says he did so because he was asked by Gauci to create it for Angsea. According to Wade, Gauci told him that the invoice would create a tax advantage for Angsea which the company needed. Wade also asserts that Gauci informed him that he would clear it with his financier before using the document. Wade says that after giving the matter some thought he agreed to act as requested. He claims that in so deciding he was partly motivated by the fact that he believed Gauci was the principal of Angsea. Wade then claims that about a week later Gauci told him that he had decided not to use the document; whether or not that latter statement was made it was untrue - the dummy invoice was used to obtain $162,500 from Elders.
Under cross-examination Wade conceded that he realised that the dummy invoice had to go through office staff and be reconciled; he expressly conceded he knew there were valuers who had to certify as to the quantities involved. He further conceded that he expected to get a phone call from the financiers or the valuer about the invoice. However he did not, whilst in the witness box, give any indication as to what he would have said if such a phone call had been received.
In the circumstances the evidence satisfies me on the balance of probability that Wade knowingly participated in the fraud on Elders by preparing that dummy invoice. As I have already said, it is not necessary to make findings as to Wade's participation in the transactions based on the other three bogus invoices, but it is worth noting some aspects of the evidence which tended to suggest that he was more involved than he conceded. For at least the periods covered by three of the dummy invoices fill had actually been delivered but for some unexplained reason no invoice relating to that fill was delivered in the week in question; the fill actually delivered in that week was included in a subsequent legitimate invoice. In the week ended 23 May 1989 Wade in fact delivered over 9,000 cubic metres of fill from Hymix for which no invoice was then delivered.
The transactions involving the dummy invoices directly impact upon the credibility of both Gauci and Wade, and strongly suggest that both were guilty of fraud in the wider context alleged by Angsea.
Counsel for Wade spent much time (particularly in his address) in seeking to establish that Angsea and Kenny were parties to the fraud on Elders involving the dummy invoices. I am not concerned with that issue; it is collateral so far as this trial is concerned. The only significance for present purposes is that it affects the credit of a number of key witnesses. For the reasons given I have concluded that the evidence on this issue reflects badly on the credibility of Gauci and Wade and that it is not shown that Kenny's credibility is similarly affected. It is not necessary to make any further findings with respect to that fraud on Elders.
Wade tried to explain everything away by claiming that at all material times he believed that Gauci and Angsea were in effect the one person. He does not give any convincing reason for that belief. He knew Gauci was an undischarged bankrupt, and made no specific enquiries to find who the directors and shareholders of Angsea were. Further, it is clear from his evidence that he knew that Angsea was being financed with respect to the project, though it may well be that for much of the relevant period he was not aware of the precise name of the financier. A belief that Gauci was the controller of Angsea does not explain and justify Wade's conduct in submitting a dummy invoice knowing it would be used to obtain money from the financier on a false premise. That was also the position with respect to the charges being made for the fill. Throughout the period Wade continued to submit his invoice based on a charge of $4.50 per cubic metre (rising to $6.50 when the material came from Hymix) notwithstanding that he was only receiving a total of $3.50 (rising to $5.50). Under cross-examination Wade conceded that Herbert, the valuer, telephoned him on at least two occasions and asked whether he was being paid "in terms of the contract". On each occasion he responded by saying that he was. In the circumstances that was a false representation, and on the balance of probability I find that it was made to facilitate the fraud.
There is another matter which in my view seriously damages Wade's credibility and strongly points to his being a knowing participant in the defrauding of Angsea. It will be remembered that on Friday 9 June Ashford delivered two cheques to Wade's home. Those two cheques were for a total of $78,000, the full amount of the invoice delivered 6 June. Though he apparently indicated to Ashford that everything was alright, Wade must have then known that something was wrong. He was getting $12,000 more than ordinarily he would have expected. As already noted he claims that he thought that something was strange and Gauci must have been defrauding Angsea. What in truth the evidence establishes is that he then believed that someone had become aware of the fraudulent conduct to which he was a party. Undoubtedly motivated by those considerations Wade on the following day, 10 June, prepared an invoice for fill delivered up to and including that day. The document in question forms part of exhibit 15. The quantity in question was 5,000 cubic metres and the charge $27,500. But what is significant, if not startling, is that the fill was invoiced at $5.50 per cubic metre. This was the first occasion on which an invoice was prepared showing the actual amount which, pursuant to the arrangement existing between Wade and Gauci, the former would receive. That invoice was never sent. Deliveries apparently continued up until 16 June when the invoice to that date was prepared by Wade; it is the handwritten document in exhibit 15. The first paragraph recites the previous invoice to 10 June, making a claim for $27,500. But it then goes on to invoice a further 5,955 cubic metres again at $5.50. With an addition for some road base the total for that invoice was $60,707. Though he was invited under cross-examination to do so, Wade gave no satisfactory explanation for invoicing fill delivered from Hymix after 6 June at the rate of $5.50 per cubic metre. The only rational inference open is that he realised that his previous invoices were submitted on a fraudulent basis. What highlights his inability or refusal to give an explanation for charging out at $5.50 per cubic metre in those documents is his statement in exhibit 7 with respect thereto; there he said:"On 16 June 1989 a further invoice was posted by me to Angsea for 12,990 cubic metres fill at $6.50 per cubic metre, total $84,435. Accordingly, I was to be paid $64,950 by cheque and $6,495 in cash. This invoice was for fill delivered between 7 June 1989 and 16 June 1989. I was never paid on that invoice. I am unable to locate a copy of that invoice."
Undoubtedly the documents he was there referring to were those produced by Angsea which became exhibit 15. There is nothing in the evidence to indicate where the figures referred to in that quoted passage came from. Certainly there is nothing to suggest that an invoice for the period was sent charging at $6.50 per cubic metre, nor is there anything to confirm a total quantity of 12,990 cubic metres. The total quantity referred to in exhibit 15 is approximately 11,000 cubic metres. Again this demonstrates in my view Wade's propensity to manufacture evidence in order to support the position he wanted to adopt. It should be noted that in the counterclaim Wade seeks to recover $84,435; the only evidence of that is to be found in the passage quoted above from his statement. As already indicated there is no evidence at all to support such a claim. In his final address counsel for Wade foreshadowed an amended claim for $60,707 in accordance with exhibit 15.
Whilst dealing with Wade's counterclaim and exhibit 7 it is convenient to refer to the claim for $2,496.62 for unpaid deliveries of material. The only evidence relating to that is to be found in paragraph 62 of the statement exhibit 7. There Wade says:
"Also in my counterclaim I have a claim for $2,496.62 in the paragraph numbered 9 of my pleading. Between January 1989 and mid-May 1989 Gauci asked that ST Wade Earthmoving place road base on a "soft spot" on the haul road to prevent further deterioration of the road. Annexed hereto and marked "STW 26" is a true copy of my invoice dated 23 May 1989 in that amount."
When one turns to that invoice it does not at all support what is said by Wade. It purports to bear the date 23 May 1989, but gives particulars of deliveries on 25 May, 1 June, 10 June and 13 June. Not surprisingly no attempt was ever made by Wade whilst in the witness box to explain the obvious inconsistencies in those dates. There is nothing in the evidence to suggest that such a document was ever received by Angsea. If, as one should assume, the last item was correct then the invoice must have been prepared on 13 June at the earliest. That was, of course, well after Wade knew that the game was up. On the whole of the evidence I can only conclude that the invoice in question is a fraud, and there is absolutely no evidence to support the claim in the counterclaim for $2,496.62.
There are some other points which, in my view, impact on Wade's credibility, and upon the issue whether he was knowingly implicated in the fraud. He gives no explanation for why he received part payment in cash. His acceptance of the unusual method of paying him strongly suggests that he had knowledge of the impropriety. That factor is of even greater significance when it is appreciated that the contract was an extraordinarily profitable one for him. As is demonstrated by his counterclaim for loss of profits, even at $3.50 per cubic metre he was making a profit of more than $2 per cubic metre on all fill delivered from the Colgate site. Another matter I mention briefly is that, at the first committal hearing dealing with criminal charges against Gauci, Wade claimed privilege from giving evidence on the ground of self incrimination. That was a surprising stance to adopt if his evidence on this trial was the truth.
So far as each of Gauci and Fox are concerned their evidence is also devoid of credibility except where confirmed by other evidence. As indicated above I am satisfied that Gauci defrauded Elders through using the dummy invoices, and I am also satisfied that he defrauded Angsea of the total sum of $232,588 referred to in the Schedule. At least Fox was knowingly concerned in that activity. Her personal relationship with Gauci during the relevant period, and her conduct in signing and cashing the cheques, is enough on which to base a finding that she was, at least, knowingly concerned in what happened.
Further, for the reasons which I have already given I am satisfied that Wade was knowingly concerned in all that transpired. He was making, as I have found, a very good profit from supplying fill even at $3.50 per cubic metre and that was undoubtedly a factor in his becoming a party to Gauci's overall fraudulent conduct. The benefit he obtained was 50 cents per cubic metre cash. At the very least it is abundantly clear that Wade closed his eyes to the very obvious fact that fraud was being committed against Angsea; but for the reasons I have given, bearing in mind the burden of proof, I am satisfied that Wade was an active participant in the fraud to the extent, at least, that he was knowingly concerned in its implementation.
On the findings I have made Gauci was an employee of Angsea. Even if he were not strictly so classified, the evidence clearly establishes that he was in a situation where he owed fiduciary obligations to Angsea. The facts as I have found them give Angsea a variety of causes of action each of which would result in recovery of $232,588. Money stolen by an employee can be recovered as a debt (Chowne v. Bayliss (1862) 32 L.J. 757). In my view the money could also be recovered in an action for money had and received. Probably a similar result could be achieved by suing for conversion of the cheques. I also am of the view that in the circumstances Gauci was in breach of the duty of fidelity he owed to Angsea as its manager. The facts could give rise either to a claim for damages for breach of that contract at common law or for breach of fiduciary duty in equity. In either event the result would be the same. (cf. Reading v. Attorney-General (1951) A.C. 507.) On any one of those causes of action, all of which are relied on in the statement of claim, Angsea is entitled to judgment against Gauci for $232,588.
But Angsea also claims to recover from Gauci an additional $116,000 being the total of the amounts received by Wade representing 50 cents cash for each cubic metre of fill delivered. The position here is a little more complex. It is rather difficult on the evidence to decide when the fraudulent arrangement was first agreed to. It probably was not in the minds of Gauci and Wade on 19 September 1988 when the agreement bearing that date was signed. It may well be that as at that date, when it was contemplated the fill would come from Reedy Creek, there was a genuine agreement to pay $4.50 per cubic metre. The probability is that the fraudulent arrangement originated in December 1988 after Gauci became aware that, with the fill coming from the Colgate site, Wade would make a considerable profit if only $3.50 per cubic metre was charged. On that basis a manager of Angsea complying with all his obligations as such would have taken steps to ensure that no more than $3.50 per cubic metre was paid. Gauci and Wade took advantage of the price of $4.50 per cubic metre mentioned in the written agreement of 19 September 1988 in order to divide up the spoils. Wade got advantages through receiving part of his payment in cash. My concern is whether or not one can really say that the amount represented by 50 cents per cubic metre of all fill delivered is recoverable. The fact that Wade was knowingly concerned in the fraudulent arrangement resulting in Gauci receiving $1 for each cubic metre of fill delivered does not necessarily mean that he had no legal entitlement to $3.50 per cubic metre for the fill delivered. In the circumstances I am not persuaded that the additional $116,000 is recoverable.
It follows that there will be judgment against Gauci for $232,588.
I have also come to the conclusion that the position of Fox is not distinguishable from that of Gauci. She was, in accordance with my findings, knowingly concerned in the fraud, and she was also an employee of Angsea. In those circumstances on a number of bases Angsea is entitled to judgment against her for $232,588.
Gauci and Fox clearly breached their common law and fiduciary obligations owed to Angsea. The arrangement with Angsea was that Rincono would be paid for the services provided by Gauci and Fox. A total of $60,000 was paid between August 1988 and May 1989. Fox was the nominal controller of Rincono and on the evidence Gauci and Fox were its only agents. On my findings both Gauci and Fox disqualified themselves from the right to any remuneration from Angsea because of their fraudulent conduct. Rincono must be taken to have had knowledge of the fraud of Gauci and Fox from December 1988. The question then arises whether or not the $60,000 paid to Rincono is in the circumstances recoverable by Angsea. Senior counsel for Angsea relied on decisions such as Morison v. Thompson (1874) L.R. 9 QB. 480 and Andrews v. Ramsay (1903) 2 K.B. 635 in support of a submission that the money was recoverable. The argument in effect was based on the proposition that in the circumstances each of Gauci and Fox and Rincono became a constructive trustee of all monies received by way of remuneration from Angsea. I accept the argument and hold that Angsea can recover payments made after Rincono had knowledge of the fraud. That means that Angsea can recover the six payments each of $6,000 for the period December 1988 to May 1989, a total of $36,000.
It is convenient at this stage to deal with the claims by Angsea against Wade (other than with respect to alleged under-delivery of fill) and Wade's counterclaim against Angsea. I have already found that Wade was knowingly concerned in, and an active participant in, the fraud committed by Gauci (and Fox) against Angsea whereby Gauci obtained $1 per cubic metre of fill delivered by Wade to the Angsea site. With respect to that fraud Angsea is clearly entitled to recover against Wade damages in the sum of $232,588.
Angsea also sought to recover by way of damages against Wade the amount represented by the 50 cents cash received by Wade for each cubic metre of fill supplied to Angsea. For the reasons given above with respect to that claim against Gauci I am not persuaded that the additional sum of $116,000 is recoverable.
Because of the stopped cheque for $60,000, and because there has been no payment for deliveries made between 6 and 16 June 1989, Angsea has not made full payment for all fill delivered. There are also accounting adjustments which have to be made with respect to the payment for fill.
As indicated by the Schedule to this judgment all fill up to that invoiced on 9 May 1989 came from either the Wade pit or the Colgate site. The invoices for that fill particularised in the Schedule give a total of 206,392 cubic metres delivered. That does not accord with the total of the dockets for fill supplied from the Wade pit and Colgate site (exhibit 3); the total of those dockets comes to 202,138 cubic metres, a difference of 4,254 cubic metres. The invoices are supposedly based on the signed dockets, and the signed dockets constitute the basic source of Wade's calculation. In the circumstances the calculation should be made on the dockets, and that means that Wade has prima facie established an entitlement to payment for 202,138 cubic metres. For the reasons I have given he is only entitled to payment at the rate of $3.50 per cubic metre. That means that with respect to fill delivered from the Wade pit and Colgate site, Wade is entitled to a total of $707,483. But as can readily be deduced from the figures in the Schedule he in fact received with respect to those deliveries $722,176. In other words Wade has been overpaid to the extent of $14,693 with respect to fill from the Wade pit and Colgate site.
Wade is also entitled to be paid for fill as docketed from the Hymix site. Those dockets are also included in exhibit 3 and the relevant ones give a total of 39,212 cubic metres of fill delivered from that site. In accordance with my findings Wade is entitled to payment for that quantity at the rate of $5.50 per cubic metre, a total of $215,666. With respect to that he has already been paid $70,000 (cheque 360069), $7,000 (part of cheque 360068) and $6,000 (part of cheque 360078). When those payments totalling $83,000 are deducted Wade is entitled to $132,666; that takes into account the stopped cheque. From that has to be deducted the $14,693 overpayment leaving a balance owing of $117,973.
For the reasons already given the evidence does not establish any entitlement to the sum of $2,496.62 referred to in the counterclaim.
Wade also claimed for loss of profits pursuant to the contract bearing date 5 December 1988 (exhibit 76). I have already found that that document was a sham; it was brought into existence as part of the fraudulent scheme to defraud Angsea. It follows that there was no contract having a term that all the fill required for Angsea's project should be supplied by Wade, nor was there any express term that a contract between the parties should be irrevocable. That is sufficient to dispose of Wade's claim for loss of profits.
But in any event, once Angsea became aware of Wade's participation in the fraud it had a clear right to determine any contract then existing between it and Wade (cf. Panama and South Pacific Telegraph Company v. India Rubber, Gutta Percha, and Telegraph Works Company (1875) L.R. 10 Ch. App. 215) and it clearly did so on or about 13 June 1989 or on 19 June 1989. In the circumstances Wade would have no valid claim for damages for lost profits.
I should also record that I am by no means satisfied that Wade's evidence establishes that he suffered any loss as a result of his inability to deliver material from the Colgate site to the Angsea site after 16 June 1989.
It follows that, if one leaves aside Angsea's claim for under-delivery of fill, it would be entitled to damages totalling $232,588 against Wade, but would have to offset against that Wade's entitlement to $117,793 for fill delivered but not paid for. That would mean that Angsea was entitled to recover from Wade a net $114,795.
It remains to consider Angsea's claim for under-delivery of fill. As already mentioned, according to the delivery dockets (exhibit 3) a total of 241,350 cubic metres of fill was delivered between November 1988 and June 1989. Angsea led a body of expert evidence suggesting that only somewhere between 127,500 and 143,000 cubic metres of fill was actually delivered to the Parkview site from Colgate.
The parties at the outset of the trial agreed that the total quantity delivered from Wade's pit was 6,255 cubic metres. As the evidence emerged that erroneously included the 408 cubic metres referred to in delivery docket 49, but Angsea adhered to the agreement.
As all deliveries from Hymix were verified by a weighbridge docket there was also no dispute as to the quantity of fill delivered to the Parkview site from the Hymix quarry. In all, as exhibit 3 establishes, 39,212 cubic metres of fill were so delivered.
The difference between the quantities delivered from the Wade pit and the Hymix quarry and the alleged 241,350 cubic metres in total delivered to the Parkview site must have come from the Colgate site. On the figures given above that means that, according to Wade, 195,883 cubic metres were delivered to Parkview from the Colgate site.
Each driver made a number of trips in the course of a day, and each load was, prima facie, recorded on the day's docket for that truck. Further, the delivery of each load was confirmed on the face of the docket by a signature (in the form of initials) placed against each delivery by an Angsea employee. Two observations should be made on that procedure with respect to deliveries from the Colgate site. Firstly, generally each load was for the same quantity, usually a round figure of 10 or 11 cubic metres. That is to be contrasted with the position when the weighbridge at Hymix was used. The evidence discloses that there was no difference in the manner of loading the trucks as between the Colgate and Hymix sites, yet the weighbridge readings revealed quite a significant variation in the quantity of each truckload. No one on behalf of Angsea made an assessment of the quantity in each truck-load from the Colgate site. Secondly, a perusal of the delivery dockets, and this is supported by the oral evidence, suggests that at least on some occasions a number of loads (perhaps even all the loads for a day) were signed for on the one occasion. In all the circumstances the dockets are not conclusive of quantity delivered, and indeed are not even a reliable indication of true quantity.
Certainly the system adopted at the Parkview site was not designed to represent a real check on the deliveries in fact made. Gauci was responsible for the system and it was extremely lax. What in fact happened has to be assessed against the background of the finding that Gauci was guilty of fraud, and stood to make a personal gain of $1 for each cubic metre of fill delivered to the site. The observation must therefore be made that he stood to gain from the adoption of a system which allowed for an exaggerated assessment of the quantity of fill delivered.
Angsea's case that there was a significant overstatement of the quantity of fill delivered to Parkview from Colgate must also be considered in the light of the fact that an independent engineer had to certify with respect to the quantities delivered before Elders made finance available for payment of the accounts. The engineer who performed that task was not called as a witness and that is a factor which must be taken into account; counsel for Wade made much of that in his final address. But the difficulties facing that engineer in making his certification were obvious. He would not sight the relevant invoice and dockets until the Wednesday or Thursday of the week following the deliveries in question. By then, on an average week, some thousands of cubic metres of fill would have been delivered to the site subsequent to the deliveries the subject of his certification. It would have been virtually impossible to verify the deliveries in question with any degree of accuracy from a mere site inspection. To a large extent he had to rely on the honesty of the people making and signing for the deliveries.
But as Wade recognised in his initial tender at the end of the job a calculation could be made by engineers as to the total quantity of fill delivered. It will be remembered that Wade's initial tender contained the following:
"The above tender is a firm one and includes the cost of survey before and after completion of the work and attention during its progress."
The survey there mentioned could only relate to a survey to determine the quantity of fill delivered in accordance with the contract.
When Angsea terminated Wade's contract steps were immediately taken to retain the services of surveyors and engineers to assess the volume of fill in fact delivered to the Parkview site. Surveys were carried out of the Parkview and Colgate sites, and a test pad was used for the purpose of assessing compaction of fill at the Parkview site. The engineers and surveyors who carried out such work on the Parkview and Colgate sites in June/July 1989 had a considerable advantage over those who were only called upon many years later to express an opinion upon the calculations involved. In particular the experts in this area called as part of Wade's case were at the singular disadvantage of not having seen either site in 1989 when the work in question was being carried out.
The exercise of calculating the volume of fill delivered included the preparing of before and after contour surveys of each site, and bringing into account bulking and compaction factors for the material in question. The presence of features such as vegetation and dams meant that there were variable factors present, and it was not possible to make a strict arithmetical calculation. Further, the factor for bulking and compaction of the same material provided another possibly significant variable; the evidence of Morrison, the expert soil engineer called by Wade, highlighted the significance of that.
Most of the evidence given by the engineers and surveyors on this topic can only be fully appreciated when read with detailed plans and diagrams which each prepared. In consequence it is difficult, if not impossible, in reasons for judgment such as this to analyse their evidence and to give precise reasons for arriving at a particular conclusion. But after considering all of the expert evidence I have formed the clear view that I should accept and act upon, at least in broad terms, the evidence given by the expert witnesses called as part of Angsea's case. In general terms I found the evidence of the engineers (Hawkes, Guesdon and Litwinowicz) and the surveyors (Swane, Henderson, Finn and Arnold) convincing and preferable to the body of evidence to the contrary. To a significant extent that preference was fortified by the fact that most of them had the advantage of seeing the site and the work in about the June/July 1989 period. Hawkes in particular was in a very advantageous position because he visited the Parkview regularly throughout the period of Wade's deliveries; he was on site almost every second day.
Hawkes calculated that 124,738 cubic metres had been delivered to the Parkview site from Colgate. His calculation of the quantity of fill removed by Wade from the Colgate site during the relevant period gave the figure 129,055 cubic metres. In the light of evidence given by McAnany and Morrison on Wade's behalf, Guesdon, a very experience engineer, made adjustments to the calculations of Hawkes to allow ample provision for considerations such as survey accuracy, overlap in survey, the volume for the dams, and the variation in compaction factor for the fill in question. With all of those adjustments he arrived at figures, best for Wade, of 143,000 cubic metres delivered to Parkview from Colgate, and 140,000 cubic metres removed from Colgate.
Perhaps the most critical consideration is that the evidence does not support Wade's contention that 195,883 cubic metres was either removed from the Colgate site during the relevant period, or delivered to the Parkview site.
The real difficulty that I have is in determining with precision the figure which should be adopted for purposes of my judgment. As I have already mentioned there are a number of variables and due allowance should be made for them. Some weight must also be given to the fact that dockets were signed for, and deliveries certified for, but in the circumstances outlined above. In my view I should err on the side of caution in determining a figure to be adopted in calculating the actual quantity of fill from the Colgate site for which Wade is entitled to payment. In all the circumstances I have come to the conclusion that I should find that the quantity of fill delivered from the Colgate site to the Parkview site was at least 25,000 cubic metres less than that referred to in Wade's dockets. Though in my view the true figure would probably be more than 25,000 cubic metres justice will be done if allowance is made for that quantity.
Angsea claims that it can recover the amount overpaid as money paid under a mistake of fact. The basic principle is that derived from Kelly v. Solari (1841) 9 M. & W. 54; 152 E.R. 24. That principle has recently been the subject of major consideration by the High Court in Australia and New Zealand Banking Group Ltd v. Westpac Banking Corporation (1988) 164 C.L.R. 662 and David Securities Pty Ltd v. Commonwealth Bank of Australia (1992) 175 C.L.R. 353. None of the cases expressly deals with a mistake of the type in question here, that is where the operative mistake is one where the payer has promised to pay the payee for material supplied at a particular rate and payment has been made under a mistake as to the quantity delivered. But the learned authors of Goff and Jones The Law of Restitution (3rd ed.) at 91 say:
"For similar reasons, restitution should be allowed where the contract calls for payment according to a certain formula and where the payer has overpaid because he has mistakenly applied that formula."
Whilst that again is not precisely in point, the principle would clearly extend to the present situation. I am satisfied that progress payments were made by Angsea on the mistaken belief that particular quantities had been delivered, and the mistake did not come to light until June/July 1989 when experts were called in to make the necessary calculations.
In the circumstances Angsea is entitled to recover the money paid for the 25,000 cubic metres I have assessed to be the under supply of fill. That was actually charged at the rate of $4.50 per cubic metre, but I have already held that one dollar thereof is recoverable from Gauci, Fox and Wade because of the fraud. If Angsea was allowed to recover for the under supply at the rate of $4.50 per cubic metre it would be recovering the one dollar component twice. It follows that on this part of its claim Angsea is entitled to recover for 25,000 cubic metres at $3.50 per cubic metre, a total of $87,500.
It follows that Angsea is entitled to recover from Wade $87,500 in addition to the $114,795 referred to above. There should therefore be judgment for Angsea against Wade in the total amount of $202,295.
For all the above reasons the formal judgment will be as follows:
Judgment for the plaintiff against the first defendant, George Gauci, in the sum of $232,588 with costs of and incidental to the action to be taxed.
Judgment for the plaintiff against the second defendant, Jennifer Lyn Fox, in the sum of $232,588 with costs of an incidental to the action to be taxed.
Judgment for the plaintiff against the third defendant, Rincono Pty Ltd, for $36,000 with costs of and incidental to the action to be taxed.
Judgment for the plaintiff against the fourth defendant, Stanley Thomas Wade, for $202,295. Counterclaim of the fourth defendant dismissed. Further order that the fourth defendant pay the plaintiff's costs of and incidental to the action, including the counterclaim, to be taxed.
| Date of Invoice | Quantity m3 | Rate m3 $ | Amount of Invoice $ | Date of Crossed Cheque and Number | Amount of Crossed Cheque $ | Date of Open Cheque and Number | Amount of Open Cheque $ | Wade $ | Gauci $ | |||||||||||||||
| 16.12.88 | 12,392 | 4.50 | 55,764 | 6.1.89 (358842) | 37,176 | 6.1.89 (358843) | 18,588 | 6,000 | 12,588 | |||||||||||||||
| 10.1.89 | 15,000 | 4.50 | 67,500 | 12.1.89 (358848) | 45,000 | 12.1.89 (358849) | 22,500 | 7,500 | 15,000 | |||||||||||||||
| 17.1.89 | 12,000 | 4.50 | 54,000 | 26.1.89 (358800) | 36,000 | 20.1.89 (358859) | 18,000 | 6,000 | 12,000 | |||||||||||||||
| 24.1.89 | 7,000 | 4.50 | 31,500 | 26.1.89 (358867) | 21,000 | 26.1.89 (358866) | 10,500 | 3,500 | 7,000 | |||||||||||||||
| 31.1.89 | 9,000 | 4.50 | 40,500 | 10.2.89 (358880) | 27,000 | 3.2.89 (358879) | 13,500 | 4,500 | 9,000 | |||||||||||||||
| 7.2.89 | 9,000 | 4.50 | 40,500 | 17.2.89 (358895) | 27,000 | 14.2.89 (358893) | 13,500 | 4,500 | 9,000 | |||||||||||||||
| 14.2.89 | 8,000 | 4.50 | 36,000 | 17.2.89 (358904) | 24,000 | 17.2.89 (358903) | 12,000 | 4,000 | 8,000 | |||||||||||||||
| 21.2.89 | 16,000 | 4.50 | 72,000 | 3.3.89 (358915) | 48,000 | 24.2.89 (358913) | 24,000 | 8,000 | 16,000 | |||||||||||||||
| - | 8,000 | 4.50 | 36,000 | 10.3.89 (358927) | 24,000 | 3.3.89 (358926) | 12,000 | 4,000 | 8,000 | |||||||||||||||
| 14.3.89 | 26,000 | 4.50 | 117,000 | 23.3.89 (358957) | 78,000 | 17.3.89 (358958) | 39,000 | 13,000 | 26,000 | |||||||||||||||
| 21.3.89 | 12,000 | 4.50 | 54,000 | 23.3.89 (358964) | 36,000 | 23.3.89 (358965) | 18,000 | 6,000 | 12,000 | |||||||||||||||
| 28.3.89 | 10,000 | 4.50 | 45,000 | 7.4.89 (358974) | 30,000 | 30.3.89 (358975) | 15,000 | 5,000 | 10,000 | |||||||||||||||
| 11.4.89 | 24,000 | 4.50 | 108,000 | 18.4.89 (358990) | 72,000 | 14.4.89 (358991) | 36,000 | 12,000 | 24,000 | |||||||||||||||
| 18.4.89 | 12,000 | 4.50 | 54,000 | 21.4.89 (360010) | 36,000 | 21.4.89 (360009) | 18,000 | 6,000 | 12,000 | |||||||||||||||
| 22.4.89 | 6,000 | 4.50 | 27,000 | 28.4.89 (360016) | 18,000 | 28.4.89 (360017) | 9,000 | 3,000 | 6,000 | |||||||||||||||
| 9.5.89 | 20,000 | 4.50 | 90,000 | 19.5.89 (360033) | 60,000 | 11.5.89 (360032) | 30,000 | 10,000 | 20,000 | |||||||||||||||
| 30.5.89 | 14,000 | 6.50 | 91,000 | 1.6.89 (360069) | 70,000 | 1.6.89 (360068) | 21,000 | 7,000 | 14,000 | |||||||||||||||
| 6.6.89 | 12,000 | 6.50 | 78,000 | [STOPPED CHEQUE] | 14.6.89 (360078) | 18,000 | 6,000 | 12,000 | ||||||||||||||||
| TOTALS | 232,392 | 1,097,764 | 689,176 | 348,588 | 116,000 | 232,588 | ||||||||||||||||||
Total to Wade
$805,176
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0
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