Bestwest Developments Pty Ltd v Dunsford - [2004] WASC 185

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BESTWEST DEVELOPMENTS PTY LTD -v- DUNSFORD & ANOR [2004] WASC 185

CORAM: MASTER NEWNES

HEARD: 21 JULY 2004

DELIVERED : 20 AUGUST 2004

FILE NO/S: CIV 1505 of 2004

BETWEEN: BESTWEST DEVELOPMENTS PTY LTD (ACN 075 744 688)
Plaintiff
AND
HENRY ERIC DUNSFORD
ROZANA DUNSFORD
Defendants

Catchwords:

Practice and procedure - Application for summary judgment - Turns on own facts

Legislation:

Rules of the Supreme Court1971 (WA), O 14

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr M H Zilko SC
Defendants: Mr D R Clyne

Solicitors:

Plaintiff: Redding & Associates
Defendants: Williams & Co

Case(s) referred to in judgment(s):

Eng Mee Yong v Letchumanan [1980] AC 331
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Gillon v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991
Gould v Vaggelas (1985) 157 CLR 215
Webster v Lampard (1993) 177 CLR 598
White v Johnston (1886) 8 ALT 53

Case(s) also cited:

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Evans v Bartlam (1937) AC 473
F L Schuler AC v Wickman Machine Tool Sales Ltd [1974] AC 235
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Jacob v Booth's Distillery Co (1901) 85 LT 262
Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd (1999) 21 WAR 350
Shanklin Pier & Detel Products Ltd (1951) 2 KB 854
Sunbird Plaza Pty Ltd v Boheto Pty Ltd [1983] 1 Qd R 248
The Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60
The State Bank of Victoria v Parry [1989] WAR 240
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
White v Johnson (1886) 8 ACT 53

MASTER NEWNES: This is an application by the plaintiff for summary judgment under O 14 of the Rules of the Supreme Court1971 (WA).
The defendants carry on a business known as Challenge 2000, which undertakes property development projects. In about March 2002, the defendants were seeking investors for a property development project involving the development of nine residential units in Bickley. The first‑named defendant (Mr Dunsford) and a Mr Peh of the plaintiff had discussions concerning the provision by the plaintiff of funds for the development. Ultimately, the plaintiff agreed to provide an amount of $415,000 on the basis that, on completion of the project, it would be paid its capital of $415,000 plus 80 per cent of any profit on the project.
Mr Peh, on behalf of the plaintiff, requested the defendants to provide the plaintiff with a guaranteed minimum return on the investment and, following discussions, Mr Dunsford agreed that the defendants would guarantee a minimum profit equivalent to 15 per centum per annum of the moneys invested by the plaintiff.
On 11 June 2002, the plaintiff and the defendants entered into a written joint venture agreement. It was a somewhat modified version of a form of joint venture agreement earlier proffered by the defendants. The agreement provided that the defendants were the sole and exclusive project manager for the development and were to provide all services, including the planning, the design and the awarding of building contracts and ancillary work. The plaintiff was to pay a deposit of $41,500 immediately upon the signing of the agreement, with the balance to be provided on or before 4 July 2002. The defendants were to repay the sum of $415,000 by no later than 14 days after settlement of the sale of the last unit in the development. At the end of the development, the plaintiff was entitled to receive 80 per cent of the project profit, before tax.
Clause 7 of the agreement provided:
"DEVELOPERS GUARANTEE
In order to express the profound confidence and credibility in the feasibility of the project, the [defendants] hereby guarantees the [plaintiff] a minimum profit investment return of 15% (calculated per annum) of the operating capital sum invested."
On about 11 June 2002, the defendants provided to the plaintiff a "letter of guarantee". The letter, after referring to the project, went on to say:
"This is to certify that we Henry Eric Dunsford and Rozana Dunsford both of 191 Riverton Drive Shelley WA 6148, personally guarantee the investment agreement mentioned above, and that full payment is made when the project ends.
We are aware that the principal sum invested by you is Four Hundred and Fifteen Thousand Dollars (A$415,000.00). Your capital plus profits will be as per agreement attached.
We further acknowledge that the minimum returns are 15% per annum.
This guarantee is irrevocable and unconditional and forms part of the investment agreement dated 11 June 2002."
The sum of $415,000 was advanced by the plaintiff in accordance with the agreement. The development was duly undertaken and the last of the nine units was sold on or about 19 March 2004. Mr Dunsford says the net profit on the project was $48,440.20.
The plaintiff claims the sum of $415,000 and interest at the rate of 15 per centum per annum on that sum. The total amount claimed in the writ is $530,915.89 with interest accruing at the rate of $170.54 per day from 16 April 2004 when the current action was commenced.
The defendants deny that the plaintiff is entitled to 15 per cent interest on the money it lent for the development. Mr Dunsford, on behalf of the defendants, says that the plaintiff agreed to invest the funds in the project on the condition that Icon Homes, a company controlled by the plaintiff, was appointed as the builder. Mr Dunsford goes on to say that before the agreement was entered into:
"I told Tony Peh the guaranteed return of 15% was based upon the Challenge Place project being constructed within the time limits and budget that he and I had reviewed and agreed. I recall telling Tony Peh that one of the biggest risks of developments such as the Challenge Place project was the performance of the builder. In response, I recall Tony Peh saying words to me to the effect that he understood 15% profit was related to the actual profit from the Challenge Place project as forecast in the feasibility summaries that he and I had reviewed and agreed upon and that despite Icon Homes inexperience with development such as Challenge Place (and that neither Mrs Dunsford or I, or Challenge 2000 had ever used Icon Homes before), he had every confidence in Icon Homes, and if there were any performance issues with Icon Homes, he would resolve those directly with Icon Home."
The defendants contend that Icon Homes was approximately seven months late in commencing the construction of the units and was approximately 10 months late in handing over the site. They allege that Icon Homes also exceeded the agreed budget of $676,050 for the project. It is alleged that Icon Homes was paid a total amount of at least $53,419.02 in excess of the amount contemplated by the budget.
Mr Dunsford says that, by approximately May or June 2003, it was apparent that Icon Homes would not be able to complete the project within the time allowed or within budget. He says he spoke to Mr Peh and Mr Monteiro, the project manager of Icon Homes, regarding the problem. In the discussions, Mr Peh and Mr Monteiro each said to him that to the extent expense was incurred above the agreed project budget, that amount would be deducted from the plaintiff's investment and profit at the conclusion of the project.
According to Mr Dunsford, as a result of the delay in the completion of the units the defendants had to draw upon credit facilities that were intended to be used for a separate 15‑unit development they were constructing. As a result of having to draw on those funds, the funding on the other project has been restricted.
Mr Dunsford says that as a result of the delays and additional expenditure involved in the project, the defendants have incurred additional expense in the sum of at least $60,076.77 (being the additional payments to Icon Homes and the cost of certain work the defendants had to carry out), additional interest upon a debt facility the defendants were required to call upon, which he estimates to be in the order of $36,000, and a potential liability for interest incurred by reason of the delay in the project.
The defendants admit that the plaintiff is entitled to the sum of $424,303.47, that is, the amount originally claimed less the sum of $96,000, being the amount of the alleged additional payments to Icon Homes and additional interest charges incurred by the delay in completion of the project, but say that the plaintiff is not entitled to any more than that. The defendants have tendered the sum of $424,303.47, but it was rejected.
Mr Peh denies that he insisted Icon Homes be appointed as the builder for the project and says that he had no involvement in its appointment. He denies that there was ever any agreement that the profit guarantee of 15 per cent was subject to the actual profit from the project. He says that he was told by Mr Dunsford that he (Mr Dunsford) was confident of the project's profits and for that reason was willing to guarantee a minimum return of 15 per cent per annum and to provide an unconditional personal guarantee to that effect.
Mr Monteiro has also filed an affidavit in which he denies any extra payments to Icon Homes and denies that there was ever any arrangement that Icon Homes would be appointed the builder for the project.
The defendants put their case on two principal bases. It was submitted first, that the agreement between the parties was partly written and partly oral and it was either an express oral term, or an implied term, of the agreement that the guaranteed return of 15 per cent to the plaintiff was conditional upon Icon Homes completing the work within time and within budget. That was said to arise from the discussion between Mr Peh and Mr Dunsford before the written agreement was executed.
Secondly, it was submitted that there had been misleading and deceptive conduct by the plaintiff in asserting that Icon Homes had the capacity to carry out the work on time and within budget when there was no reasonable basis for such a representation. That was based on the statements in Mr Dunsford's affidavit that the plaintiff had required that Icon Homes be appointed as builder for the development, in circumstances where the defendants had not used Icon Homes before and where Mr Dunsford had emphasised that the success of the project was critically dependant on the performance of the builder, and Mr Peh, on behalf of the plaintiff, had said that he had every confidence in Icon Homes. In the circumstances, there was, it was submitted, thereby a representation by the plaintiff that Icon Homes had the capacity to carry out the work on time and within budget. The defendants then entered into the agreement with the plaintiff and the building contract with Icon Homes.
According to Mr Dunsford, it was plainly not the case that Icon Homes had the capacity to carry out the work on time and within budget and there was no reasonable basis for the representation that it did. Icon Homes was seven months late in starting the work, a delay which representatives of Icon Homes subsequently explained as being a result of its inability to obtain builder's indemnity insurance for the site and its heavy commitment to existing work. Mr Dunsford also says Icon Homes did not complete the work within the construction timetable or the project budget and there were also problems with some of the workmanship.
As a result, the defendants say they suffered damages which they are entitled to set off against the plaintiff's claim. They have accordingly tendered the balance of $424,303.47 to the plaintiff in discharge of their liability.
Counsel for the defendants also submitted, in the alternative, that the arrangement was a tripartite contract, by which the plaintiff agreed to enter into the joint venture agreement with the defendants on condition that the defendants entered into a building contract with Icon Homes, and the agreement between the plaintiff and the defendants was subject to a warranty by the plaintiff that Icon Homes would complete the work on time and within budget. As Icon Homes failed to do so, the defendant was entitled to damages against the plaintiff being the loss and expense incurred by the defendants.
The principles to be applied on an application of this sort are well established. It is clear that the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99. The need for exceptional caution is nowhere more important than where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact: Webster v Lampard (1993) 177 CLR 598. It was never intended that, when the facts are in dispute, actions should be disposed of summarily (White v Johnston (1886) 8 ALT 53) and the Court does not dispose of the factual merits by rejecting the defendant's affidavit evidence because of its arguable inconsistency with documentary evidence adduced by the plaintiff: Gillon v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991. But the Court is not bound to accept uncritically as raising a dispute of fact calling for further investigation every statement in an affidavit, however equivocal, lacking in precision or inconsistent with contemporary documents or other statements by the deponent: Eng Mee Yong v Letchumanan [1980] AC 331 at 341.
The plaintiff contended that, on the affidavit material, the defendants had no arguable defence. It was submitted in relation to the claim of misleading and deceptive conduct that there was no evidence the defendants had relied on the alleged conduct and, in addition, what was alleged to constitute the conduct were simply a few vague comments in the course of a conversation.
In my view, on the material before me there is an arguable defence. It is the case that the defendants do not specifically depose to having acted on the basis of the alleged misleading conduct, but I do not consider that to be fatal. The defendants say that the plaintiff required Icon Homes to be engaged as the builder, the defendants had not used Icon Homes previously and Mr Dunsford told Mr Peh that the performance of the builder was critical. Mr Peh is alleged to have represented, in substance, that Icon Homes was capable of carrying out the work successfully. Subsequently, the defendants entered into the agreement with the plaintiff and into the contract with Icon Homes for the construction of the units. Wilson J said in Gould v Vaggelas (1985) 157 CLR 215, if a material representation is likely to induce the representee to enter into a contract and the person actually enters into the contract, a fair inference arises that the representation operated as an inducement. I consider that such an inference arguably arises on the basis of the facts alleged by the defendants.
Whether the plaintiff engaged in misleading or deceptive conduct as alleged by the defendants is a matter that can only be determined at trial. It will depend, among other things, on a careful examination of the evidence of the relevant witnesses to determine specifically what (if anything) was said on the subject and, if it is found that anything was said, whether in the particular circumstances it was misleading or deceptive. Those are not matters appropriately dealt with on affidavit evidence. For present purposes, it is sufficient to say that, on the basis of the affidavit material, the defendant's contention is arguable.
Accordingly, there is, in my view, an arguable issue as to whether the defendants entered into the contract with Icon Homes as a result of misleading or deceptive conduct on the part of the plaintiff, and, if so, whether the defendants suffered damage which they are entitled to set off against the plaintiff's claim.
In those circumstances, it is unnecessary to consider the other defences advanced by the defendants. It is also neither necessary nor appropriate to comment on the prospects of any of the defences advanced by the defendants succeeding at trial.
As the defendants have established an arguable defence to the amount of the plaintiff's claim which exceeds the sum of $424,303.47, being the amount tendered by the defendants, the application for summary judgment must be dismissed. I will hear the parties on the appropriate form of orders.