Bettar Holdings Pty Limited v All Sydney Plumbing Pty Limited

[2019] NSWSC 940

Supreme Court

New South Wales

Medium Neutral Citation:

Bettar Holdings Pty Limited v All Sydney Plumbing Pty Limited [2019] NSWSC 940

Hearing dates:

22, 23 July 2019

Date of orders:

23 July 2019

Decision date:

23 July 2019

Jurisdiction:

Equity - Commercial List

Before:

Parker J

Decision:

Judgment in favour of the plaintiff against the second defendant, in the sum of $297,500, on account of liquidated damages, under the contract between the plaintiff and the first defendant, dated April 2015.

 

Judgment for the plaintiff against the second defendant, in the further sum of $487,000, on account of loss of bargain damages on termination of the contract.

 The second defendant pay the plaintiff's costs of the proceedings, on the ordinary basis, up to and including 19 March 2019 and thereafter on the indemnity basis.

Catchwords:

CONTRACTS — Remedies — Liquidated damages – where plaintiff Contractor claims indemnity for liquidated damages from second defendant for first defendant’s failure to complete work per contractual timetable – where first defendant sub-contractor and second defendant director of first defendant and guarantor of its contractual obligations – where by list response second defendant asserted he had not signed the contract as guarantor but no further evidence led to rebut inference from apparently regular signature on contract.

 

CONTRACTS — Remedies — Damages — Termination – where Contractor claims indemnity for damages by reason of first defendant’ failure to complete works – where second defendant is guarantor of first defendant’s contractual obligations.

  CIVIL PROCEDURE — Appearance — No appearance by second defendant guarantor.

Legislation Cited:

Uniform Civil Procedure Rules 2005, r 42.15

Cases Cited:

None

Texts Cited:

None

Category:

Principal judgment

Parties:

Bettar Holdings Pty Ltd (Plaintiff)
All Sydney Plumbing Pty Ltd (First Defendant)
Andrew Veselcic (Second Defendant)

Representation:

Counsel:
J Wright (Plaintiff)

 

Solicitors:
Colin Biggers & Paisley Pty Ltd (Plaintiff)

  No appearance
Andrew Veselcic (Second Defendant)

File Number(s):

2017/350711

Publication restriction:

Nil

Judgment – EX TEMPORE

Revised and reissued 30 July 2019

1. These proceedings concern a contract for plumbing work on a building project at Ultimo in Sydney. The contract in question was made in April 2015. The parties were Bettar Holdings Pty Limited ("BH"; described in the contract as "the Contractor"), which was the head contractor on the project; All Sydney Plumbing Pty Ltd ("ASP"; identified in the contract as "the Subcontractor"); and Andrew Veselcic, who was apparently a director of ASP (described in the contract as "the Director/Guarantor").

2. The original contract price was $758,000 (this and other figures in this judgment are exclusive of GST). Work under the contract began in February 2016. From May 2016 onwards BH complained about the quality and pace of ASP's work. Eventually in the second week of October 2016 BH gave notice under the contract, purporting to fix a date at the end of November as the date for practical completion.

3. A few days later ASP ceased work on the site. In February 2017 BH gave notice purporting to terminate the contract.

4. BH commenced these proceedings as plaintiff in November 2017. BH’s Summons named ASP as the first defendant and Mr Veselcic as the second defendant. In February 2018 ASP went into liquidation. Since then the proceedings have been continued as a claim against Mr Veselcic, as guarantor, alone.

5. The claim against Mr Veselcic is made under clause 48 of the contract. That clause provided in conventional form that Mr Veselcic both guaranteed to BH the due and punctual observance and performance by ASP of its obligations under the subcontract; and that if ASP defaulted in the due and punctual observance and performance of its obligations under the subcontract, Mr Veselcic would indemnify BH against all losses, damages, costs and expenses which might be incurred, suffered or sustained by BH by reason of ASP's default.

6. BH’s claim against Mr Veselcic is twofold. First, BH claims indemnity for liquidated damages which BH claims were due from ASP to BH for failure to complete the work in accordance with the timetable laid down by the contract. Second, BH claims from Mr Veselcic indemnity for the damages for which ASP is liable, so it is claimed, by reason of the termination of the contract.

7. The Court fixed BH’s claim for hearing on 22 July this year. On 5 July Mr Jeffrey Chard, of Paul Bard Lawyers, who had previously been acting for Mr Veselcic, filed a notice of ceasing to act. Mr Chard had previously, at the end of May, filed a notice of intention to cease acting. Since 5 July Mr Veselcic has been unrepresented. Nevertheless, and in accordance with the Rules, BH’s solicitors prepared and filed the court books for the proceedings, under the usual order for hearing. This was done last week.

8. Last Friday, 19 July, Mr Veselcic sent an email to the Court, seeking to have the proceedings adjourned. A further request for an adjournment was sent by Mr Veselcic by email about 20 minutes before the hearing was fixed to begin at 10am on 22 July.

9. Attached to Mr Veselcic’s emails was a chain of earlier emails, which included emails between Mr Veselcic and Mr Chard. In those emails Mr Chard advised Mr Veselcic that he (Mr Chard) had no realistic prospect of obtaining an adjournment for Mr Veselcic. Mr Chard suggested that Mr Veselcic seriously consider declaring himself bankrupt. Mr Chard also pointed out, correctly so far as I can see, that once he had withdrawn from the proceedings he had no obligation to continue to try to obtain an adjournment on Mr Veselcic's part.

10. Mr Veselcic did not appear at the hearing, which began shortly after 10am on 22 July. There was thus no formal application before the Court for an adjournment. Nor was there any evidence to support the informal request by Mr Veselcic. Mr Veselcic’s emails did assert that he was experiencing difficulties in dealing with the material which had been served on him. But so far as I can see this was nothing more than compliance by BH's solicitors with usual order for hearing.

11. As I have said, there was no evidence in support of any application for an adjournment and there is nothing otherwise to verify the assertions made by Mr Veselcic in his emails. Moreover, I saw nothing in those emails to suggest that there is any proper basis for an adjournment. Accordingly, I proceeded to hear BH’s claim. Counsel for BH read and tendered some of the affidavit and documentary evidence which had been filed in support of the case. There was of course no evidence from Mr Veselcic.

Validity of guarantee

12. One of the points taken in Mr Veselcic’s defence concerned his status as a party to the contract. Mr Veselcic’s Commercial List Response asserted that he had not signed the contract as guarantor.

13. The copy of the contract in evidence contains in its signature block space for execution on behalf of ASP and by the guarantor or guarantors. So far as the company is concerned, space is made for the name of the director or directors executing the agreement on the company’s behalf to be inserted. Mr Veselcic’s name has been entered in handwriting. A signature appears over the description of the director’s signature which has been witnessed and two other signatures appear over the name secretary’s signature.

14. In the guarantor section a signature appears which has been witnessed by the same person who witnessed the director’s signature for ASP. Those two signatures, namely that of the guarantor and of the ASP director, appear similar. At the foot of each page there is also space for initialling on behalf of ASP as subcontractor and the guarantor. Initials appear for the guarantor in each case although the initials are different from those that appear for the subcontractor, ASP.

15. The onus lies on BH as the plaintiff seeking to establish that Mr Veselcic is liable under the guarantee obligations contained in the contract to prove on the balance of probabilities that Mr Veselcic assented to the contract. On the face of it, the contract signatures appear regular. In my view, although the legal onus is on BH, in the circumstances of the present case an evidentiary onus lies on Mr Veselcic to rebut the inference that would usually arise from the presentation of an apparently regular document containing his name and a signature which purports to be his. Mr Veselcic has not displaced that inference. I am satisfied in the circumstances that he did assent to the contract and the signature which appears on it as guarantor is his.

Work related damages

16. The contract provided in conventional form for an obligation to pay liquidated damages should the Subcontractor (ASP) fail to complete the works by the specified date for practical completion. The liquidated damages were calculated at $3,500 per calendar day.

17. Clause 30.6 of the contract provided:

Notwithstanding that the Subcontractor has not given notice of a claim for an extension of time for Completion of the Subcontract Works pursuant to this Section, the Contractor may, at any time and from time to time and for any reason it considers appropriate by notice in writing to the Subcontractor, extend the Date for Completion of the Subcontract Works by nominating a date specified in the notice, as the Date for Completion of the Subcontract Works and that date so specified in the notice shall, for the purpose of this Subcontract, be deemed to be the Date for Completion of the Subcontract Works.

18. The contract was managed on BH’s behalf by a project manager retained by BH, Craig Anthony Clifford Williams. Mr Williams gave evidence by affidavit in the proceedings. His evidence establishes that on 10 October he wrote to a group of subcontractors, including Mr Veselcic on behalf of ASP, notifying them that the date for completion of the project would be Saturday 26 November 2016. The letter went on to state:

1.   If you have any concern or reason to object to meeting the Programme, you must immediately inform us in writing so that a meeting can be organised and your concerns be tabled and discussed and minuted. Reply to me directly.

2.   We wish to work in together as we do not want to incur damages nor do we wish to impose damages on anyone else.

3.   It is very important to note that the times are the longest durations, you must stay in contact with the weekly meetings or any of the site staff so that updated dates or timeframes are known. Hopefully all trades will have a good working team and complete their activities quicker than that listed on the Programme. To help you and your operatives, the program will be pinned on the wall outside the lunch room and updated weekly for all to see.

19. At this time Mr Williams was in communication with Mr Veselcic by email, complaining about the lack of progress by ASP on its part of the project. Mr Williams’ evidence establishes that after 12 October no one from ASP came to the site at all. Mr Williams went on to give evidence which identified in detail incomplete and defective aspects of ASP's contracted works.

20. There is no evidence that ASP disputed the nomination of 26 November as the date for completion of its contractual works. I am satisfied that the notice of 10 October was valid for the purposes of ASP’s contract and that ASP did not complete the works by the date specified, or at all before the contract came to an end in February.

21. Although the date for completion was specified in the notice as 26 November, BH only seeks to enforce a claim for liquidated damages from 30 November. calculated in accordance with the contractual entitlement of $3,500 per day, at 85 days, from 30 November to 22 February (inclusive), the amount to which BH is entitled is $297,500. There will be judgment for BH accordingly.

Termination damages

22. BH’s termination notice, which was sent on 22 February, was based on clause 38.1 of the contract, which relevantly provided:

If the Subcontractor shall make default in any one or more of the following respects, that is to say it:

(i)   without reasonable cause, wholly suspends the carrying out of the Subcontract works;

(ii)   fails to proceed with the Subcontract works with reasonable diligence or in a competent manner;

…

then the Contractor may give to the Subcontractor notice in writing, specifying the default(s), and stating the intention of the Contractor to determine the employment of the Subcontractor. If the Subcontractor fails, within a period of seven (7) days after receipt of such notice, to remedy such default(s) the Contractor may, without prejudice to any other rights or remedies that it may have under the Subcontract or a common law, deliver a written notice to the Subcontractor forthwith determining the employment of the Subcontractor under the Subcontract. Such notice shall not be given unreasonably or vexatiously.

23. On the evidence before me, both grounds (i) and (ii) are made out. I am satisfied that BH suspended the carrying out of the subcontract works after 12 October at the latest. Although the legal onus in demonstrating a lack of reasonable cause for the suspension again lies on BH, again I consider that in the circumstances an evidentiary onus lies on Mr Veselcic to justify the failure of ASP's staff to attend the site after 12 October.

24. Some allegations were made in the list response by way of justification, but there is no support for them in the evidence. Accordingly I am satisfied that the suspension was without reasonable cause. Furthermore, the evidence before me establishes that ASP failed to complete the works by the relevant contractual date, namely 26 November, or indeed at any point before the notice was given.

25. BH’s evidence shows that it retained other contractors to do most of the work necessary to complete the work ASP had undertaken to do. Mr Williams’ affidavit described the work and verified the costs which were claimed. BH also presented an expert report from a quantity surveyor, expressing the opinion that the costs were reasonable.

26. The total amount invoiced to BH by other contractors is established by the evidence as $824,683.50. Many of these costs were incurred before the termination notice of 22 February 2017. Strictly speaking, prior to that date, the contract with ASP remained on foot. ASP was obliged (and entitled) to carry out the completion and rectification works required under the contract.

27. Had ASP returned to the site a question might have arisen about BH’s ability to recover the costs of other contractors hired to undertake ASP’s work while the contract was still on foot. But in this case the point is a purely theoretical one. ASP did not return to the site.

28. The costs in question were in fact incurred by BH in order to complete the works which ASP was obliged to undertake. I cannot see any reason why those expenses cannot be claimed as a consequence of the subsequent termination of the contract.

29. BH makes an additional claim for expenses directly incurred by it. These expenses included labour hire costs for various tradesmen and the purchase of supplies and equipment hire, such as a scissor lift and waste bins. In his affidavit Mr Williams stated that each of these expenses related specifically to the completion of ASP's works, rather than completion of the project works generally.

30. Other parts of BH’s claim were significantly reduced as a result of my asking counsel whether they could be justified. The evidence on this point of claim is somewhat formulaic. However, there is no evidence to the contrary, and given that the affidavit specifically asserts that these expenses relate to the ASP contract, I think they should be allowed. The amount in question is $27,862.08.

31. The total amount incurred by BH to complete the works according to the contractual requirements is thus $852,545.58. From this must be deducted the residual amount due under the contract, which is $365,441.75 (calculated as the adjusted contract sum of $814,664.57, less the amount already paid of $448,222.82). The resulting figure is $487,103.83.

32. I consider that the damages in question, although they have been calculated with apparent mathematical precision, are unliquidated damages. I therefore propose to round them to the nearest thousand dollars. Accordingly there will be an additional judgment in favour of the plaintiff for the sum of $487,000, by way of loss of bargain damages on the termination of the contract.

Costs

33. On 19 March this year the solicitors for BH served on Mr Veselcic (then represented by Mr Chard) an offer of compromise under the Rules, which provided for a judgment in favour of BH in the sum of $385,000. The judgments which BH will receive, in aggregate, are substantially more than this. Accordingly BH is entitled under the Rules to costs on an indemnity basis, from 20 March onwards, unless the Court orders otherwise: Uniform Civil Procedure Rules 2005, r 42.15. There is no reason to do so.

34. The orders of the Court are:

1.   Judgment in favour of the plaintiff against the second defendant, in    the sum of $297,500, on account of liquidated damages, under the contract between the plaintiff and the first defendant, dated April 2015.

2.   Judgment for the plaintiff against the second defendant, in the further sum of $487,000, on account of loss of bargain damages on termination    of the contract.

3.   Order that the second defendant pay the plaintiff's costs of the    proceedings, on the ordinary basis, up to and including 19 March 2019    and thereafter on the indemnity basis.

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Decision last updated: 30 July 2019