BHP Steel (RP) Pty Ltd Trading as BHP Reinforcing Products v ABB Engineering Construction Pty Ltd
[2001] WASC 73
BHP STEEL (RP) PTY LTD Trading as BHP REINFORCING PRODUCTS -v- ABB ENGINEERING CONSTRUCTION PTY LTD [2001] WASC 73
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 73 | |
| Case No: | CIV:2010/1997 | 10 & 11, 14 & 15 FEBRUARY 2001 | |
| Coram: | OWEN J | 20/03/01 | |
| 54 | Judgment Part: | 1 of 1 | |
| Result: | Claim dismissed | ||
| PDF Version |
| Parties: | BHP STEEL (RP) PTY LTD Trading as BHP REINFORCING PRODUCTS ABB ENGINEERING CONSTRUCTION PTY LTD |
Catchwords: | Contracts General contractual principles Whether letters and conversations constitute a contract Turns on own facts Trade practices and related matters Consumer protection Whether letters and conversations constitute actionable misrepresentations Turns on own facts |
Legislation: | Nil |
Case References: | Australian European Finance Corporation Ltd v Sheahan (1993) 60 SASR 187 Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502 Commonwealth Bank of Australia v TLI Management Pty Ltd [1990] VR 510 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd (1989) 1WLR 379 Pacific Coal Pty Ltd & Anor v Idemitsu Queensland Pty Ltd & Ors (1992) ATPR 46-094 Re Newark Pty Ltd (In Liquidation); Taylor v Carroll (1991) 9 ACLC 1592 Sinclair Scott & Company Limited v Naughton (1929) 43 CLR 310 Smith v Lush (1952) SR(NSW) 207 Waltons Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387 Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 Contractor Services Ltd & Ors v Esanda Finance Corporation Ltd & Ors (1991) ATPR 46-081 Dennison & Anor v ACE Sohin (Aust) Pty Ltd & Ors (1987) ATPR 40-793 Egan v State Transport Authority (1982) 31 SASR 481 Foran v Wight (1989) 168 CLR 385 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Harburg India Rubber Comb Co v Martin [1902] 1 KB 778 Hillesden Securities Ltd v Ryjack Ltd [1983] 2 All ER 184 Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950 Legione v Hatley (1983) 152 CLR 406 Metropolitan Transport Authority v Waverley Transport Pty Ltd [1991] 1 VR 181 Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556 Permanent Trustee Co & NSW Ltd v Hinks (1934) 34 SR (NSW) 130 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 Taco Company of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Wright & Anor v Wheeler Grace & Pierucci Pty Ltd & Ors (1988) ATPR 40-865 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
ABB ENGINEERING CONSTRUCTION PTY LTD
Defendant
Catchwords:
Contracts - General contractual principles - Whether letters and conversations constitute a contract - Turns on own facts
Trade practices and related matters - Consumer protection - Whether letters and conversations constitute actionable misrepresentations - Turns on own facts
Legislation:
Nil
(Page 2)
Result:
Claim dismissed
Representation:
Counsel:
Plaintiff : Dr P R MacMillan
Defendant : Mr P B O'Neal
Solicitors:
Plaintiff : Gibson Lyons
Defendant : Minter Ellison
Case(s) referred to in judgment(s):
Australian European Finance Corporation Ltd v Sheahan (1993) 60 SASR 187
Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502
Commonwealth Bank of Australia v TLI Management Pty Ltd [1990] VR 510
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83
Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd (1989) 1WLR 379
Pacific Coal Pty Ltd & Anor v Idemitsu Queensland Pty Ltd & Ors (1992) ATPR 46-094
Re Newark Pty Ltd (In Liquidation); Taylor v Carroll (1991) 9 ACLC 1592
Sinclair Scott & Company Limited v Naughton (1929) 43 CLR 310
Smith v Lush (1952) SR(NSW) 207
Waltons Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387
Case(s) also cited:
Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527
Contractor Services Ltd & Ors v Esanda Finance Corporation Ltd & Ors (1991) ATPR 46-081
Dennison & Anor v ACE Sohin (Aust) Pty Ltd & Ors (1987) ATPR 40-793
Egan v State Transport Authority (1982) 31 SASR 481
Foran v Wight (1989) 168 CLR 385
(Page 3)
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Harburg India Rubber Comb Co v Martin [1902] 1 KB 778
Hillesden Securities Ltd v Ryjack Ltd [1983] 2 All ER 184
Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950
Legione v Hatley (1983) 152 CLR 406
Metropolitan Transport Authority v Waverley Transport Pty Ltd [1991] 1 VR 181
Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556
Permanent Trustee Co & NSW Ltd v Hinks (1934) 34 SR (NSW) 130
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225
Taco Company of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Wright & Anor v Wheeler Grace & Pierucci Pty Ltd & Ors (1988) ATPR 40-865
(Page 4)
1 OWEN J: A contractor, as a sub-contractor to the defendant, was performing works at a construction site. The plaintiffs were supplying the contractor with supplies on credit for use in the works. The plaintiff extended credit to the contractor but has not been paid all moneys due to it. The plaintiff asserts that the defendant agreed to, or alternatively represented that it would, ensure that the plaintiff received payment. This is a claim by the plaintiff against the defendant to recover the amount outstanding as damages or compensation under a number of heads.
Background
2 The plaintiff is a division of the BHP Corporation. Its business is the retailing of steel reinforcing products for use in the concrete industry. Prior to May 1996, BHP Corporation operated two companies in this State providing reinforcing products. One was the plaintiff. The other was Reosteel Pty Ltd ("Reosteel"). In May 1996 Reosteel was closed down and the plaintiff took over certain of the assets, staff and clients of Reosteel.
3 Monaveen Pty Ltd ("Monaveen") conducted a business in the civil engineering industry. Prior to May 1996 it had credit facilities with Reosteel. The account was frozen because of non-payment of about $9000.
4 In 1996 BHP Direct Reduced Iron Pty Ltd ("DRI") was constructing a hot briquetted iron plant at Port Hedland ("the HBI Plant"). The defendant was a contractor to DRI for part of the material handling facility at the HBI Plant ("the Project"). During June and July 1996 Monaveen was negotiating a sub-contract agreement with the defendant for the supply of civil engineering works for the Project. The works covered by the sub-contract included steel reinforced concrete foundations to carry conveyor belts. During the course of its negotiations with the defendant Monaveen sought and obtained from the plaintiff a quote for the supply of 488 tonnes of steel reinforcing bars, a quantity of steel mesh and sundry items. The quote was given on 12 July 1996 and it came to $600,000 or thereabouts.
5 On 22 July 1996 Monaveen entered into a sub-contract agreement for the provision of concrete works as part of the Project ("the Subcontract"). The Subcontract allowed for payment of $4,804,929 to Monaveen if it performed the agreed works.
(Page 5)
6 It was clear that Monaveen would need a substantial credit facility to purchase those supplies. During July and August 1996, discussions took place between representatives of Monaveen and of the plaintiff concerning credit facilities. Monaveen was represented by Mr Kenneth Hetherington, its Managing Director, Mr Stephen Jones, its Business Manager and Mr Kenneth Sharp, an independent management practitioner from the firm Crewe Sharp Pty Ltd. The main participants for the plaintiff were Mr Kenneth Manook, its Credit Manager and Mr Stephen Frew, its General Manager. The usual terms of credit offered by the plaintiff required payment within 30 days. Under the Subcontract, Monaveen would require substantial supplies of steel at an early stage and would run up a significant account in a short space of time. The plaintiff was reluctant to extend credit to Monaveen and it was not prepared to transfer the credit account that the company had previously conducted with Reosteel.
7 The plaintiff, which is related to DRI, had an interest in resolving the credit situation, as did Monaveen and the defendant. The plaintiff was under pressure from DRI to begin supplying steel to Monaveen so as not to hold up the Project. On 30 July 1996 Monaveen submitted a formal credit application to the plaintiff. Manook remained uncomfortable with the credit proposal. Further discussions were held, this time involving representatives of the defendant as well. The main representatives of the defendant is this matter were Mr Neil Tregea, its Project Manager for the Project, and Mr Gavin Duncan, its Contracts Manager. In August 1996 Sharp sent a fax to Tregea setting out what the defendant could do to assist Monaveen in relation to the credit matter. Frew then spoke to Tregea suggesting the provision of a bank guarantee, supply of material with invoices directed to the defendant for payment or an undertaking from the defendant that the plaintiff would be paid. Nothing was resolved at that stage.
8 Until the middle of September no credit facility was in place. However, the $9000 owing by Monaveen to Reosteel was paid and on 19 August 1996 Frew authorised the release of one truck load of steel. Discussions continued throughout the balance of August and in the first half of September. During that period some further deliveries of steel were made. As counsel for the plaintiff put it in opening, Frew was prepared to "stick his neck out up to a point" (not defined in dollar terms) but was not prepared to go on without some reassurance that payment would be made.
(Page 6)
9 On 23 August 1996 the defendant wrote to the plaintiff. It is one of the letters said to have contractual effect. The letter simply confirmed the existence of the Subcontract and the obligation of the defendant to pay Monaveen for the works. The letter was not acceptable to the plaintiff. Further discussions took place between Frew and Tregea and between Sharp and Duncan. On 13 September 1996 the defendant again wrote to the plaintiff. This too is a letter which is said to have contractual effect. I will set out the relevant parts of both letters in full later. It is sufficient to say, at this stage, that it is to the effect that the defendant would, before it paid any money to Monaveen, have Monaveen satisfy it that it (Monaveen) had paid all invoices for steel supplied by the plaintiff that had become due for payment. Manook and Frew were not entirely satisfied but after another conversation between Frew and Tregea, decided to accept the letter. On 21 September 1996 a credit facility was opened by the plaintiff for Monaveen.
10 From September until 20 December 1996 supplies of steel were made on a regular basis. After 20 December only one load of steel was delivered. It was a small load, with a value of about $400, delivered on 5 February 1997.
11 It appears that the relationship between Monaveen and the defendant was uneasy for most of the period during which the Subcontract was on foot. In October and November 1996 Monaveen received from the defendant "show cause" letters issued under the Subcontract. In December 1996 the defendant threatened to terminate the Subcontract. I think it is fair to say that few, if any, of Monaveen's progress claims were met by the defendant in full and without controversy. Little work was done on site in January 1997 due, at least in part, to a strike and a cyclone. On 27 February 1997 the defendant terminated the Subcontract and claimed on the bank guarantee that Monaveen had provided in favour of the defendant.
12 During the relevant period the plaintiff rendered invoices to Monaveen for steel reinforcing supplies to the value of $577,323. By February 1997 the unpaid balance of the account stood at $266,922. This figure is arrived at after taking into account payments which Monaveen paid, or caused to be paid, to the plaintiff, namely, $79,447 on 15 October 1996, $96,689 on 27 November 1996 and $100,000 on 19 December 1996. It also takes into account various credits passed by the plaintiff, totalling $34,264. In or around February 1997 Monaveen went into receivership and no further payments have been received by the plaintiff from it. In April 1997 the plaintiff's solicitors wrote to the defendant
(Page 7)
- demanding payment within 14 days. The defendant denied liability. The unpaid balance of $266,922 remains outstanding. It represents the bulk of the moneys in issue in these proceedings.
The Pleadings
13 The plaintiff pleads that, having supplied about $100,000 worth of steel by mid-September 1996, it was not prepared to extend credit facilities to Monaveen on the usual basis. Without reassurance that it would be paid the plaintiff was not prepared to increase supplies or make further supplies.
14 The pleading sets up four causes of action. The first is what I will call "the contract claim". Paragraph 5 of the statement of claim is in these terms:
"On or about 14 September 1996 the plaintiff and the defendant entered into an agreement partly oral and partly in writing ("the Agreement") pursuant to which in consideration of the plaintiff continuing and increasing supplies of steel reinforcing to Monaveen to ensure that the plaintiff was paid any monies owed to the plaintiff by Monaveen alternatively that before paying any monies owed to Monaveen to or to any other party on behalf of Monaveen the defendant would ensure that the plaintiff had been paid what it was owed by Monaveen.
Particulars
Insofar as the Agreement was:
(a) in writing it was comprised in a letter from the defendant to the plaintiff dated 13 September 1996 and a letter from the defendant to the plaintiff dated 23 August 1996;
(b) oral it is comprised in conversations between [Frew] on behalf of the plaintiff and [Tregea] on behalf of the defendant."
15 I, too, will refer to the contract referred to in par 5 as "the Agreement". Further and better particulars were given limiting the oral aspect of the Agreement to three telephone conversations between Frew and Tregea on 13 and 14 September 1996.
(Page 8)
16 The plaintiff goes on to plead express terms of the Agreement. It says that if Monaveen failed to pay the moneys due to the plaintiff then the defendant would itself pay such moneys or ensure that sufficient funds were made available from funds under the defendant's control to pay the plaintiff. Having set up the supplies of steel and the failure of Monaveen to pay the balance of $266,922 the plaintiff says that the defendant breached the Agreement in two respects. First, the defendant failed to pay that amount or any of it to the plaintiff and failed to ensure that payment was made to the plaintiff. Secondly, the defendant paid moneys to Monaveen or on behalf of Monaveen at times when Monaveen had not paid all the plaintiff's invoices that had become due for payment and those that were about to fall due. Particulars are given of numerous payments, totalling about $1,400,000, that were made to Monaveen or to other creditors on behalf of Monaveen at times when moneys were outstanding to the plaintiff.
17 The statement of claim then contains an alternative cause of action under the Trade Practices Act 1974 (C'th) ("the Act"). I will call it "the TPA claim". Having laid the usual ground work for such a claim the pleader says, in par 14:
"During or about September to December 1996 the defendant represented to the plaintiff alternatively created the impression that:
(a) were the plaintiff to continue and to increase supplies of steel reinforcing to Monaveen and were the plaintiff not to be paid for such supplies the defendant would itself pay such monies [to] the plaintiff ("the First Representation"); alternatively
(b) there was and/or would be little or no risk of not being paid if the plaintiff continued to and increased supplies of steel reinforcing to Monaveen ("the Second Representation"); alternatively
(c) if the plaintiff continued and/or increased supplies of steel reinforcing to Monaveen there were and/or would be sufficient funds available to and/or under the control of the defendant with respect to the construction of the concreting works … and/or the defendant would manage Monaveen's contract with the defendant in such a manner
(Page 9)
- as to ensure that the plaintiff would be paid for such supplies ("the Third Representation").
- (d) before the defendant made any payments to or on behalf of Monaveen the defendant would ensure that all monies due by Monaveen to the plaintiff had been paid ("the Fourth Representation")."
18 The representations are said to have been made orally, in writing and by silence. In so far as they are oral they are comprised in discussions between Tregea, Manook and Frew. The written aspect is to be found in the letters of 13 September and 23 August already referred to. Paragraph 14 contains a long series of particulars to support the assertion that the representations are, in part, constituted by silence. They relate, in the main, to the history of the dealings between the defendant and Monaveen concerning the Subcontract during the period September to December 1996.
19 The plaintiff pleads that it relied on the representations and continued and increased supplies to Monaveen. It says that the representations were false and that in making them the defendant engaged in misleading and deceptive conduct under s 51A and s 52 of the Act.
20 The third cause of action is what I will call "the plaintiffs estoppel claim". It relies on the same four representations and on "the defendant's conduct". The plaintiff says that as a result of the representations and the defendant's conduct it assumed that the defendant would ensure that it (the plaintiff) was paid for steel supplied by it to Monaveen during the relevant period. The reference to "the defendant's conduct" is to the same matters relied on in relation to the plea that the representations were constituted by silence, the defendant's knowledge that the plaintiff was relying on the defendant for payment and on a payment made by the defendant to the plaintiff in November 1996 of $91,000. The plaintiff pleads that the defendant induced the assumption, that the plaintiff relied on it, that the defendant knew that the plaintiff would rely on it and that the plaintiff will suffer detriment if the assumption is not fulfilled. It would therefore be unconscionable for the defendant to depart from the assumption.
21 In the fourth cause of action ("the negligence claim") the plaintiff alleges that the four representations were false or negligently made. There were no reasonable grounds on which to inform the plaintiff that the defendant intended or would ensure that the plaintiff would be paid for supplies of steel. Again, the plaintiff acted in reliance on the
(Page 10)
- representations by supplying steel and has suffered loss and damage as a result.
22 In the prayer for relief the plaintiff claims damages, alternatively damages under s 87 of the Act, alternatively damages or compensation (which I take to be equitable compensation) for loss suffered as a result of relying on the assumption induced by the defendant.
23 I do not propose to canvass the defence in its entirety. There would be little point in describing those paragraphs in which the defendant did not admit matters (because I think they were all established on the evidence) or where there are minor differences from the statement of claim. I will concentrate on the areas in which issue was joined in a substantive way.
24 In par 4 the defendant denies that the plaintiff would not continue or increase supplies without reassurance of payment. It also says that the plaintiff failed to supply or increase supplies in August and September because production levels were affected by production problems and because of the high demand for steel at the HBI Plant generally.
25 In relation to the contract claim the defendant denies that the letters or the conversations constitute an agreement. In any event, there is no sufficient note or memorandum in writing to comply with s 4 of the Statute of Frauds. If the letters or conversations did constitute an agreement, it was on different terms from those pleaded by the plaintiff.
26 In par 8A the defendant admits the payments that it made to or on behalf of Monaveen, and about which the plaintiff complains, but says that none of those moneys was due to Monaveen for work performed on the Project but was advanced as a credit against work that might be completed by Monaveen.
27 In par 8B the defendant pleads that in November 1996 Monaveen and the plaintiff advised it that Monaveen owed the plaintiff $259,931 and that this sum was due for payment on 15 December 1996. On 13 December 1996 the plaintiff and Monaveen agreed that only $100,000 of that amount would then be due and the balance would not be due until 1997 and would be payable in instalments. On 14 December 1996 the plaintiff represented to the defendant that only $100,000 was then due. Relying on that representation the defendant released over $800,000 (including $100,000 which was paid to the plaintiff) to or on behalf of Monaveen as an advance on moneys that might become due to Monaveen. The defendant says that the plaintiff is now estopped from asserting that
(Page 11)
- any sum greater that $100,000 was due to the plaintiff by Monaveen in December 1996. I will call this "the defendant's estoppel claim".
28 In relation to the TPA claim, the defendant denies that the alleged representations were made by the defendant and specifically denies that any representations are constituted by the letters, the conversations or the defendant's conduct. In par 13 the defendant denies that the plaintiff acted in reliance on the representations and says that at all relevant times the plaintiff relied on its own business judgment in supplying steel to Monaveen. The defendant says that if the defendant gave any assurances to the plaintiff about payment (which is not admitted) it had reasonable grounds to do so. The reasonable grounds are constituted by the size of the Subcontract ($4,804,929) as compared to the value of the steel to be supplied ($600,000) and the fact that the steel was to be supplied early in the life of the Subcontract. There is a denial of misleading and deceptive conduct.
29 In pars 17, 17A and 18 the defendant says that in November and again in December it reached an agreement with Monaveen that Monaveen would agree with each of its creditors what moneys were due and that the defendant would pay, on behalf of Monaveen, to each creditor the amount so agreed. The defendant says that at the time no moneys were due to Monaveen under the Subcontract and that the agreement was reached in consideration for deducting the full amount paid by the defendant from moneys that would become due to Monaveen in the future.
30 In essence, the defence to the plaintiff's estoppel claim and the negligence claim proceed on the same basis. The defendant denies that any representations were made. If any assurances were given (which is not admitted) there were reasonable grounds for them to have been made.
31 The plaintiff filed a reply to the defendant's estoppel claim. It denies that there was any such agreement between it and Monaveen. If there was such an agreement the defendant's failure to inform the plaintiff of the matters relied on in the plea that the representations were constituted by silence is such as to render it inequitable that the plaintiff be estopped as claimed by the defendant.
The Course of the Hearing
32 At the conclusion of the plaintiff's case counsel for the defendant indicated that he wished to submit that there was no case to answer. I put
(Page 12)
- the defendant to its election and counsel for the defendant elected not to call evidence. I will have more to say about the consequences of the defendant adopting that course of action later. I mention it now only because I am about to outline the evidence. The only witnesses from whom I heard were those called by the plaintiff.
33 I need to make one other preliminary comment. The relief claimed by the plaintiff is primarily damages. It puts the claim on two bases. First, the costs of the steel supplied. Secondly, any loss of profit which the plaintiff would have earned had it been paid pursuant to those supplies. The first limb presents no difficulties because, as I understand it, the measure is the state of the account between the plaintiff and Monaveen. However, at the outset of the trial counsel informed me that the state of discovery and the evidence included in the exchanges of witness statements was not sufficient to enable the Court to make findings on the second limb. The second limb arises from contentions that the plaintiff could have used the production capacity it employed in supplying Monaveen to supply other customers and that it expected to make a profit once the account had been paid in full. By consent, I made an order that to the extent that the plaintiff's claim was founded in damages on a tortious measure relating to the second limb, the issue be split from all other issues in the trial and be heard separately. Any reference I make in these reasons to "damages" has to be understood accordingly.
The Credit Facility - Events to 23 August 1996
34 There is no controversy about the relationship between Monaveen and Reosteel until May 1996. Nor is there anything of substance about the negotiations between Monaveen and the defendant leading to the signing of the Subcontract on 22 July 1996. It is common ground that all parties realised that Monaveen would require credit facilities in order for it to purchase the steel it would need for the Project. The Subcontract specifies 20 December 1996 as the date for practical completion of the Project. Annexure "B" to the general subcontract conditions provides a breakdown of the contract price of $4,804,929. There was provision for payment of the labour component of each progress claim by the middle of the month following the month in which the claim was lodged. Generally speaking, the balance of the claim was to be paid within 30 days.
35 Frew testified that the plaintiff's normal credit terms were 30 days. The usual procedure with the opening of new accounts was that the credit manager would do the assessment but it was his task to give or withhold approval. Most applications were approved automatically. Frew was
(Page 13)
- concerned about opening an account for Monaveen on the usual terms given the $9000 owing to Reosteel and the fact that a credit of $200,000 to $300,000 would be run up in a short time. Manook had reservations about Monaveen's credit worthiness and did some further checking. Hetherington asked him to continue on with the credit facility previously in existence with Reosteel. This was not an option for the plaintiff. At Manook's request Monaveen completed and lodged with him a formal credit application. It refers to an anticipated monthly trade of $90,000 per month for six months. Manook discussed the application with Frew and they decided it was not satisfactory. Manook told Jones (who had prepared the application) that it was not satisfactory and that the plaintiff would require a bank guarantee from Monaveen. Alternatively, the plaintiff could deal with the defendant direct. Manook asked Jones to submit further financial details but they were not forthcoming.
36 It is common ground that the plaintiff was under some pressure from DRI to begin supplying steel to Monaveen. The plaintiff did not want the Project held up because of difficulties on Monaveen getting supplies of steel reinforcing. Hetherington says that he discussed with Frew the schedule of supplies and the quantities of such supplies. The initial supplies were due on 6 August 1996. The first supply was actually made on 19 August 1996. Frew says that he instructed Manook to discuss the credit situation with Monaveen and to suggest a bank guarantee, a promise from the defendant to pay direct or the provision of a guarantee by the defendant. Frew decided to delay beginning supplies to Monaveen in the hope that some reassurance as to payment would be forthcoming.
37 Manook said that while discussions continued about credit arrangements he completed a contract authorisation document to enable information about Monaveen to be entered into the plaintiff's computer system. Manook said, and I accept, that this is an internal document without which invoices could not be generated. The fact that it was prepared before credit arrangements were finalised does not indicate that Manook was satisfied with the company's credit worthiness. Manook also had discussions with an officer of the defendant in Sydney and with Tregea about Monaveen's situation. Although the Sydney officer had expressed some doubts Tregea told Manook that in his view Monaveen "stacked up" in terms of credit worthiness.
38 Some time in August the $9000 existing debt was paid. Frew said that he made a deliberate decision to authorise the first shipment of steel on credit. However, he instructed the production foreman not to programme Monaveen's overall requirements into the production schedule
(Page 14)
- at that stage. This was because no arrangements had then been reached as to the credit. There was some discussion about Monaveen paying cash for the initial shipment. It did not happen and the delivery was made on a 45-day credit basis.
39 It was put to Frew in cross-examination that the reason for the delay in supplies in August was not because of the lack of credit facilities but because the plaintiff was experiencing commissioning difficulties with production and that DRI had given a direction that priority be directed to other contractors. Frew acknowledged that they had commissioning problems and that he would have mentioned this to Hetherington and Sharp. However, he denied that there was any direction to give priority to other contractors. I accept the evidence of Frew and Manook that the credit situation was an issue from the very start. These other problems may have had some effect in the early stages but I have no doubt that credit was the main issue.
40 Manook says that he had a number of telephone conversations with Tregea from the middle of August to around the middle of September. He repeated his concerns about Monaveen and said that the plaintiff had not received a bank guarantee from the company and required some assurance from the defendant. On 14 August 1996 Manook attended a meeting with Frew, Grant Rennett (another officer of the plaintiff), Sharp and Jones. They discussed contractual matters and credit issues. Frew said that the plaintiff wanted either a bank guarantee or some assurance of payment. Nothing was agreed at the time but an arrangement was made for Frew, Sharp and the others to meet again to discuss the issues. Manook said this was the last meeting he attended.
41 Frew says that he had a number of telephone conversations with Tregea prior to 23 August 1996. He told Tregea that he had some production difficulties but he could obtain supplies from the Eastern States if necessary. He also told Tregea about the difficulties with Monaveen's credit application. He told Tregea that he was not prepared to increase or to continue limited supplies to Monaveen without the provision of some degree of comfort with respect to payment. Frew says that Tregea told him he was sympathetic to the plaintiff's concerns about payment by Monaveen. Tregea told Frew that he would provide him with something in writing which would provide reassurance.
42 Sharp had further discussions with Frew about the plaintiff's concerns. Sharp told Frew that Monaveen had been obliged to borrow extensively to fund its contractual obligations. He told Frew that he
(Page 15)
- thought Monaveen was in a sound position but that it could not provide a bank guarantee, directors guarantees or a charge on its assets. They discussed other methods of providing comfort. Frew told Sharp that one alternative was for the defendant to give the plaintiff a sufficient assurance that the plaintiff would be paid.
43 Meanwhile, Sharp had also been speaking with Tregea. On 19 August 1996 Sharp sent a fax to Tregea with a suggested wording of "what Frew wanted". It was to this effect: "… in the event of any default in payment by Monaveen to [the plaintiff] …, [the plaintiff] will be able to call on the [defendant] for settlement of the outstanding account". Sharp said that the fax was not acceptable to Tregea. He then began discussions with Duncan about the situation. Sharp put to Duncan that the plaintiff could deal direct with the defendant or invoice Monaveen and be paid by the defendant. Duncan said that would involve substantial administrative cost for the defendant and they would charge a fee for it. Sharp thought the suggested fee was exorbitant and that suggestion did not go any further. Duncan told him that in any event it was not their preferred option. Duncan said that he would prefer to pursue the fourth option, namely for the defendant to provide the plaintiff with some assurance that if Monaveen did not pay the invoices the plaintiff would in the end receive payment. Sharp and Duncan discussed the basis on which the defendant could provide the plaintiff with a letter that would cover Frew's concerns. Duncan said that whatever he provided had to be approved by his legal people.
44 On 23 August 1996 Tregea faxed a letter to the plaintiff. It is one of the documents pleaded as having contractual effect. The relevant portion of the letter says:
"For your information and assistance we confirm that the [defendant] pursuant to the terms and conditions of the Agreement, will be paying Monaveen for all work carried out on a monthly basis. Such payments, subject to the Agreement, will be made within 30 days after the receipt of a claim from Monaveen.
We ask that should any problems or potential problems arise between [the plaintiff] and Monaveen with respect to payment for reinforcement supplied for this Project, if you could contact us and [the defendant] will use all reasonable endeavours to assist in the resolution of the matter."
(Page 16)
45 Frew and Manook discussed the letter and decided it was not acceptable. The letter was not acceptable to the plaintiff. Someone showed it to, or read it to, Sharp and indicated to Sharp that it was not acceptable. It does not appear clearly from the evidence whether it was an officer of the plaintiff or Sharp who told the defendant about the fate of the 23 August 1996 letter.
46 I should say that I accept all of the evidence that I have outlined to date.
47 Frew's evidence is that at this stage he decided that the plaintiff would supply some steel to Monaveen but that the deliveries would be as small as possible without jeopardising the plaintiff's relationship with the defendant. Frew was aware from Hetherington that Monaveen wanted more steel than was being supplied. However, Frew decided to continue on that basis for a limited period in the hope that a proper arrangement and account could be opened. Frew says that he was being informed on a daily basis of progress on the Monaveen matter and that he had decided to stop supplies when it appeared appropriate to do so. He gave this evidence in chief:
"[The plaintiff] is a cost centre for which I am responsible as general manager. The pressure which was put on me by both the defendant and [DRI] with respect to supplies for Monaveen was a factor in my beginning and to making limited supplies of steel to Monaveen
However, I intended to safeguard the [plaintiff's] position. I was not prepared to go beyond what I regarded as a sensible point. The value of steel supplied to Monaveen by the second week in September 1996 was about $120,000. There had been no payment on this contract by that stage.
Had further assurances not been forthcoming as to payment for further supplies to Monaveen, I was close to the point, by the second week of September 1996, of stopping supplies of steel to Monaveen.
After receipt of the letter, and prior to the letter of 13 September 1996, I had a number of telephone conversations with Tregea. Normally I would not have any contact with the defendant. The reason I spoke with Tregea was that in order to resolve the situation I needed some comfort as to payment. If this came from Tregea, well and good.
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- In the course of these conversations Tregea asked me whether certain supplies of steel reinforcing had been made to Monaveen. He asked me to increase supplies to Monaveen.
I told him that though I had authorised limited supplies to Monaveen, I was anxious about the plaintiff's increasing exposure. I told him I was getting close to the point where I would not continue supplies. I was not prepared to give Monaveen an open cheque.
I told Tregea that I wanted a guarantee of payment. I told him we would have no problem dealing with the defendant. Tregea told me that Monaveen was a sub-contractor and the defendant would not do this.
Tregea told me that it was not the defendant's policy to provide a guarantee of payment with respect to a sub-contractor or to deal directly with a sub-contractor's suppliers. He told me that he was concerned, as he did not want the defendant to pay twice. … Although the defendant would not provide me with a guarantee of payment, Tregea told me that he would talk to his people and see what they could offer me."
48 Frew was cross-examined on the basis that the commissioning problems were a much more significant factor than he had made out for the slow supplies in August and early September. At no stage did he try to hide the fact that there had been commissioning difficulties. Nor did he try to hide the fact that he had mentioned these difficulties to many people around that time and that this may have included Hetherington and Sharp. However, he said that the initial requests for material from Monaveen were not significant and they were not dramatically affected by the manufacturing issues. I accept that evidence.
49 He was also cross-examined on the basis that the pressure on him from DRI to supply was a much more significant factor than he was prepared to admit. Again he denied it and I accept the denial. I have not overlooked the fact that in a letter of 22 August 1996 to Tregea Hetherington said that "[the plaintiff] has been directed by DRI to give supply priority to the reactor building". In cross-examination Hetherington said this information had come to him from Sharp and Jones, not from Frew. He had not checked it with Frew. So far as I could see, neither Jones nor Sharp was asked about any such conversation with Frew.
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50 Frew also said (and I accept) that BHP does not have an internal policy, and gave no direction for BHP source material to be in used their projects. He described it as the bane of his life that when the parent company built something he had to bid with everybody else. I also accept his denial of the proposition that he had been directed to give priority to the reactor building and other contractors at the HBI Plant.
51 In cross-examination Frew agreed that in his early conversations with Tregea he had not discussed all of his concerns about the credit worthiness of Monaveen, although later in August he had spoken more candidly. He also conceded that he had not written to anyone about Monaveen's financial capacity and had not told anyone else about his resolve to cease supplies when it became appropriate. He said that it had not come as a surprise to him when Tregea said that the defendant would not provide a guarantee of payment. Nonetheless, I do not regard any of these things as a reason not to accept the evidence-in-chief that I have just set out.
The Credit Facility - Events to 14 September 1996
52 Following receipt of the letter of 23 August 1996 there were further discussions between the parties, particularly between Frew and Tregea and Sharp and Duncan. Sharp said that his discussions with Duncan "continued to be cooperative" and that Duncan was keen to get a regular arrangement in place so that difficulties with supplies could be resolved. Duncan told Sharp that he thought there may be some language in the subcontract that might allow him to give the plaintiff some comfort. He said that he might be able to send the plaintiff a letter that said that before Monaveen received the payments due to it for work done under the subcontract, the defendant would require Monaveen to satisfy it that Monaveen had paid everything due by it to the plaintiff. Sharp relayed this information to Frew. Sharp testified that Frew was positive in his response and said it "sounded better". Sharp then mentioned that conversation to Duncan.
53 Either Duncan or Tregea prepared a letter on the defendant's letterhead dated 13 September 1996. It was signed by Tregea and faxed to the plaintiff at about 5.20pm that day. The letter states:
"We refer to discussions between [the plaintiff], [the defendant] and Monaveen Pty Ltd, with respect to the supply by [the plaintiff] of steel reinforcing to Monaveen, and we advise as follows:
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- [The defendant] and Monaveen have agreed that, prior to Monaveen becoming entitled to any payment for works carried out by Monaveen on [the Project], Monaveen will satisfy [the defendant] that they have paid all invoices for steel reinforcement supplied by [the plaintiff] for the abovementioned project that have become due for payment."
54 For sake of completeness I should add that on 13 September 1996 Tregea sent to Hetherington a letter saying that the defendant was prepared, at the request of Monaveen, to write to the plaintiff in the those terms. Hetherington signed a copy of the letter acknowledging acceptance of the terms.
55 Frew testified that after he received the letter (probably on the evening of 13 September 1996) he telephoned Tregea to discuss the letter. He told Tregea he felt the letter did not address the issue of security that he had asked for and that he was not satisfied with the letter. Tregea told Frew that he understood the concerns. They talked about it and about the fact that in the absence of security of a more substantial or specific nature Frew would not be able to ensure the long-term supply of materials to Monaveen. Tregea advised that "[the plaintiff] would not be getting anything further in writing, in terms of specifics". This exchange then occurred (again in evidence in chief):
"[Tregea] advised me that he didn't see any reason Monaveen wouldn't be able to complete their works, and that the fact was that Monaveen would be on the site for some time after the completion of my supply works, and that gave him the ability there would be an amount of moneys and proceeds flowing to Monaveen after the event of the completion of my supply. I believe I recall he referred to this as the pipeline of moneys on the site and that pipeline would be ongoing for some time after I was completed, and this pipeline in effect gave him access to a group of funds, the virtue of which he assured me would ensure that I would be able to be paid.
What was your reaction to that? What did you say to him about that?---As I recall, the conversation went backwards and forwards a little, but in essence I advised him that given his assurances on the fact that there were moneys due to Monaveen for some time after my completion of supply, and taking into context the terms of the letter that I had been offered, I told him that I would be in a position to probably ensure the ongoing
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- supply of materials for Monaveen and therefore get the contract back on line.
Did he ask you anything specifically about increasing supplies or anything of that sort?---… Neil actually came back to me and asked, given the termination of our discussions at that time, was I able to assure him that materials would now start flowing to Monaveen in accord with their requirements.
What did you reply to that?---I advised him that on the surface of it that was fine; I would need to check with my people, but I would get back to him and in essence, yes, I believed that would be fine and satisfactory.
……..
Why did you do [tell Tregea that you would continue and increase supplies to Monaveen]?---I did it specifically because the advice that Neil had given me was that I could rely on the fact that there would be moneys coming through on the payment of schedule terms that the contractor was going to be receiving for some time after my practical completion, and taking back into the terms of the letter, that he would be making sure that we were paid.
Had you not had that conversation with Mr Tregea in the terms you have described, what would you have done?---I believe we would have certainly terminated our relationship with Monaveen and forced the issue to be resolved in some other manner.
When you say you "believe that we would have done that", are you saying that you would have done that?---Absolutely. My ultimate decision was the credit authorisation, and in the absence of the conversation and the letter concurrently, I would not have continued."
56 In cross-examination Frew accepted he was aware of the obvious point that Monaveen would only be paid if it completed the works satisfactorily. He was expecting to receive payment in the ordinary course of business and the prospect of relying on payments at "the tail" of the contract would arise only if Monaveen defaulted. It was put to him that the letter gave him an advantage over other creditors. He declined to describe it as an "advantage", saying it gave him some level of the
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- security he had been hoping to achieve. As a business manager he was trying to maximise his position. He was aware of other creditors who had "levers" over Monaveen that were much more substantial than his. But it was "better than nothing".
57 Frew said that after his discussion with Tregea he thought about the matter and decided to accept the letter. He wrote on it a note addressed to Manook: "Ken, accepted but to be monitored closely to exact date of 45 days". He then put the letter on Manook's desk with a view to discussing it with Manook the next day. However, he said that the decision to advance credit was made that evening.
58 Manook's evidence is slightly different. He says that he saw the letter on 14 September 1996. Manook told Frew that in his view it was not satisfactory and that he (Frew) should ask Tregea in writing to confirm what Tregea had said to him over the telephone. However, Manook could not say whether the note to him had been written before or after he first saw the letter. Manook's evidence was abundantly clear. Had he had his way Monaveen would never at any time have been afforded credit. That was his view at the start and it never changed. I do not think the difference matters a great deal. Apart from the evidence of the telephone conversation (or conversations) on the evening of 13 September, there is no evidence that Frew spoke to Tregea again before making the decision to accept the letter. It may well have been that Manook advised Frew to get something more in writing. If he did, then so far as the evidence is concerned, it was not acted on.
59 There may also have been a conversation between Frew and Sharp. The latter testified: "… well, the letter was sent to Frew and once he had got that he then came back to me and said he's still not comfortable with the letter". Again there is no evidence that Sharp was asked to obtain anything further from the defendant or that he did so.
60 Once he received the instruction from Frew, Manook opened a credit facility for Monaveen based on payment within 45 days.
61 I accept Frew's evidence as to the conversation he had with Tregea on 13 September 1996 concerning the letter. So far as I could see from the evidence, Frew did not intend this to be a verbatim recitation of what Tregea had said to him. It was a summary or the gist of what had been said. Looking closely at that evidence, there may have been more than one conversation. Frew first recites the content of a conversation. He then says that "Neil came back to me", suggesting it may have been in a
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- separate conversation. If it was, then it seems to have occurred before Frew made the final decision to extend credit because he told Tregea "in essence" it was possible to increase supplies but he would check with his people and advise further. On 14 September 1996 Frew had one or two telephone conversations with Tregea. He confirmed that he would continue and increase supplies to Monaveen and provide it with credit facilities. He also told Tregea that the plaintiff would do its best to increase supplies to Monaveen as rapidly as possible.
62 I have looked closely at the cross-examination of Frew in this respect. In closing, counsel for the defendant invited me to find that Frew had exaggerated the conversation. I am not inclined to accede to that submission. That is not to say that I accept what Frew said as a verbatim recitation of the conversation. As I have already said, I do not think Frew put his testimony forward in that way. I think the crux of the conversation is what I might call the "pipeline" analogy or characterisation. The essence of it is in the answer to the question posed to him in evidence-in-chief: "What was your reaction to that". That answer has already been set out and I will not repeat it. I think the specific reference to Tregea saying "he assured me would ensure that I would be paid" and that he "would be making sure that we got paid" is likely to be an encapsulation of the impression that Frew took from the fact of the "pipeline" of money. If Tregea had actually said that he would ensure that the plaintiff received payment (or words to that effect), it would be tantamount to a guarantee. The evidence is clear on one thing. The defendant did not offer a guarantee.
63 That matter aside, I do not believe that the matters raised in cross-examination affect the essential integrity of that evidence. I have no doubt that the relative priorities of steel supplies to the HBI Plant exercised Frew's mind. But I accept his evidence that it was not a major concern to him and that he had received no directions to allocate supplies in any particular order. I accept also that Frew made a commercial decision to extend credit to Monaveen. He was aware that Monaveen would only be paid if it performed in accordance with the contract and, in any event, the company's entitlement to payment could be affected by things such as strikes and cyclones. His decision to extend credit was against the advice of his credit manager. But it nonetheless came after the letter of 13 September 1996 and the subsequent conversation with Tregea. I am satisfied that in making the decision to authorise credit for Monaveen Frew relied on the letter of 13 September 1996 and on what Tregea had told him.
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64 In deciding to accept Frew's evidence I have not relied on the so called rule in Jones v Dunkel. I have not used the failure of the defendant to call Tregea or Duncan as strengthening the case of the plaintiff on the relevant issues. In relation to the matters that I am presently considering, Frew gave evidence that I found to be satisfactory overall. The failure of the defendant to call Tregea to give his version of the relevant conversation means no more than that the defendant declined to take the opportunity, if it existed, to counter what I found to be a plausible and acceptable account of the material discussion. I have not used it to strengthen the drawing of inferences favourable to the plaintiff. Nor have I drawn an inference that Tregea's evidence would have been unhelpful to the defendant's cause.
65 One way that a Jones v Dunkel point is sometimes put is that the failure of one party to call evidence has the effect that any evidence called on the issue by the other party can more readily be accepted. I have often wondered what that really means in the adversary system. One party or the other will almost always bear the onus of proof. In this case, I think it means little more than that where the trier of fact finds a body of evidence to be satisfactory and not contradicted or placed in doubt by the calling of particular witnesses, he or she can accept that evidence.
The Contract Claim
66 There is, I think, a real problem with the contract claim. Regard must be had to the way the Agreement is pleaded. In par 5 of the statement of claim the defendant is said to have agreed to ensure that the plaintiff was paid any moneys owed to the plaintiff by Monaveen. Alternatively, that before the defendant paid any moneys to Monaveen the defendant would ensure that the plaintiff had been paid what it was owed by Monaveen. It is further explained in par 6(b) where it is said to be an express term of the Agreement that if Monaveen did not pay any moneys owed to the plaintiff the defendant would itself pay such moneys. Alternatively, the defendant would ensure that sufficient funds were made available from funds under the defendant's control to pay the plaintiff.
67 I am not sure why the letter of 23 August 1996 was pleaded as part of the Agreement. It says, in practical commercial terms, precisely nothing. It differed widely from the terms of the earlier letter drafted by Sharp and it came as a surprise to Sharp.
68 There is a fundamental problem with the letter of 13 September 1996 as the basis for the contract claim. For a start, the letter, on its face,
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- provides information to the plaintiff about an agreement reached between the defendant and Monaveen. The agreement apparently reached between the defendant and Monaveen is that Monaveen will satisfy it (the defendant) about payment of invoices due to the plaintiff prior to Monaveen becoming entitled to payment of moneys from the defendant. It would be difficult to construe the letter as evincing an intention by the defendant to be bound contractually to the plaintiff to do anything at all. That is not what the letter says and nor does it carry an implication to that effect. I am not saying that the provision of comfort to one providing credit can never give rise to contractual liability. Obviously, it can: Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd (1989) 1WLR 379; Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502. But each case will depend on its own facts and the critical question will always be whether the words used and the legal effect of the transaction were promissory or merely representational: Commonwealth Bank of Australia v TLI Management Pty Ltd [1990] VR 510; Australian European Finance Corporation Ltd v Sheahan (1993) 60 SASR 187.
69 There is no evidentiary basis for a finding that anyone on behalf of the defendant ever said that the defendant would "itself pay such moneys to the plaintiff". The plea extends beyond the use of moneys belonging to Monaveen and would cover a promise to pay those moneys from the defendant's own funds if necessary. Neither the letter of 23 August nor that of 13 September could be construed in that way.
70 Two things are abundantly clear, and they are things about which all the witnesses agreed. The defendant flatly refused to provide a guarantee of the indebtedness of Monaveen to the plaintiff. The defendant also declined to conduct the arrangement on the basis that the plaintiff could render invoices for steel supplies to it so that it would become primarily liable for payment. None of the conversations on which reliance is placed serve as a basis for a finding along the lines of the first limb on which the contract claim is advanced.
71 The letter of 23 August 1996 provides no assistance to the plaintiff in arriving at the alternative construction of the express term. Nor, it seems to me, does the letter of 13 September 1996. The plain ordinary meaning of the words would not countenance a construction that the defendant would ensure that sufficient funds were made available from funds under the defendant's control to pay the plaintiff. I should also add that there is no plea of an implied term to that, or any other, effect. In putting it in this way I am not confusing issues of construction or interpretation of the
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- terms of a contract with the question whether a contract exists at all. It must still be decided whether there is a contract. But if the plaintiff is to succeed it must still establish that the subject matter of the contract is as pleaded.
72 The question is whether there is anything in the conversations referred to in the pleadings as constituting the oral aspect of the Agreement that would justify such a finding. In this respect, it must be borne in mind that the further and better particulars specify that the oral aspect is to be found in three telephone conversations between Frew and Tregea on 13 and 14 September 1996. Even if regard is had to other conversations I doubt that any of them could be characterised as being of contractual effect.
73 The way the Agreement is pleaded the promissory undertaking by the plaintiff was to continue and to increase the supplies of steel to Monaveen, not to the defendant. The promissory undertaking which the letter of 13 September evidences, is one given by Monaveen to the defendant.
74 I have already mentioned the background against which the conversations of 13 (and possibly 14) September 1996 have to be seen. The primary focus of the conversation is the "pipeline" of money. As a result of the "pipeline", to repeat the words used by Frew in his evidence, there would be "a group of funds, the virtue of which [Tregea] assured me would ensure that I would be able to be paid". As I have already said, I understood this to be Frew's interpretation of what had been said rather than the precise text of the conversation. But it still falls to me to decide what it meant. In this respect I note that the conversation did not occur in a vacuum. It followed the letter. I do not think it was a statement having, or intended to have, promissory contractual effect that was, in substance, to the contrary of what was contained in the letter and what had gone before. It was not said by Frew that Tregea had told him something that was fundamentally different from what had passed before or what was contained in the letter. Indeed, Tregea told Frew that the defendant would not provide anything further in writing "in terms of specifics". If this characterisation of the "pipeline" effect of the conversations of 13 and 14 September 1996 is correct, as I think it is, it does not create a promissory relationship directly between the plaintiff and the defendant.
75 It can be tested in a slightly different way. One way of paraphrasing the Agreement for which the plaintiff contends is this: if you (the plaintiff) supply steel to Monaveen, we (the defendant) will make sure
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- you get paid, not from our own funds (that is, it is not a guarantee) but from funds which we would otherwise have to pay to Monaveen. Suppose the plaintiff had then refused or neglected to supply steel to Monaveen. It may have given Monaveen rights against the plaintiff, depending on the nature of the commitment that plaintiff undertook. But I am not at all sure what, if any, claim the defendant could raise directly against the plaintiff. This is another factor that causes me to doubt whether the arrangement was intended to have contractual effect. This is, perhaps, a makeweight, but it is another factor.
76 For all of these reasons, I do not think the contract claim has been made out.
The Contract Claim - The Statute of Frauds
77 Although it is not strictly necessary, I will say something briefly about the defence raised under s 4 of the Statute of Frauds 1677 (Imp). The section provides that "no action shall be brought … whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person; … unless the agreement upon which such action is brought or some memorandum or note thereof shall be in writing, and signed by the party to be charged … ". The defendant says in par 5(c) of the defence that there is no memorandum in writing signed by the defendant sufficient to make the defendant a guarantor of the debts of Monaveen and that the defendant will rely on s 4. This is not particularly happily phrased. I think what the pleader intended was to assert that if, which is denied, the Agreement exists as pleaded it falls within s 4 and there is no sufficient note or memorandum in writing to make an action maintainable. The only document that could be a note or memorandum in writing is the letter of 13 September 1996.
78 It is common to refer to undertakings of the type specified in the section as guarantees and to distinguish them from indemnities. The former are caught by the statute, the latter are not. In a contract of guarantee there must, in fact, be an expectation that another person will pay the debt for which the promisor makes itself liable. If the promisor makes itself primarily liable the promise is not within the statute and need not be supported by writing.
79 It seems to me that if the Agreement were to exist with an express term formulated in the manner set out in par 6(b)(i) of the statement of claim it would be a guarantee. The plea contemplates a primary debtor, namely Monaveen. It says that if Monaveen does not pay any moneys it
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- owes to the plaintiff the defendant "would itself pay such monies to the plaintiff". As I have already commented, this is not, in its terms, confined to a payment by the defendant of moneys belonging to, or otherwise payable to Monaveen. It is broad enough to cover a responsibility on the defendant to pay the plaintiff out of its (the defendant's) own funds, if necessary. That has the indicia of a guarantee. If the true nature of the Agreement were to be found in accordance with par 6(b)(ii) the opposite result would ensue. It is clear from the way the plea is formulated that it involves funds of Monaveen under the control of the defendant and not funds belonging to the defendant. This would not be a "promise to answer for the debt, default, or miscarriage of another person" and would not be within the statute.
80 If the Agreement were to be found to be a guarantee in the way that I have described I think it would fail for want of compliance with s 4. This is because the note or memorandum must be an accurate record of the parties' agreement. It will not be sufficient if it contains terms that are materially different from those of the alleged oral agreement between the parties: Sinclair Scott & Company Limited v Naughton (1929) 43 CLR 310 at 318; Smith v Lush (1952) SR(NSW) 207. To say, as the letter of 13 September 1996 does, that prior to Monaveen becoming entitled to payment from the defendant Monaveen will satisfy the defendant that the plaintiff has been paid all invoices that have become due for payment is a far cry from the Agreement as pleaded.
Some Preliminary Comments on the Claims Based on Representations
81 I turn now to the various causes of action that rely on the alleged representations. I will commence with some preliminary comments.
82 For the purposes of this action it seems to me not to matter a great deal whether the third representation is characterised as a "representation", properly so called, or as an "impression" created by the defendant. There are obvious differences between a statutory claim that has many of the indicia of a tort and a claim based in equity arising from an estoppel. However, in the circumstances of this case there is a similar factual base which makes it convenient to deal with them together. I might just add at this stage that there is nothing unusual in the way that the plaintiff's estoppel claim is advanced. If made out it would, I think, fit within the conventional principles outlined in Waltons Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387.
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83 For the TPA claim the plaintiff has pleaded, in par 16 of the statement of claim, the falsity of the representations. This brings in the matters particularised in support of the plea that the representations were constituted by the silence of the defendant. In short, they encompass much of the history of the dealings between the parties from September to December 1996. In relation to the estoppel claim, the plaintiff says that on the basis of the representations and the defendant's conduct it assumed the defendant would ensure that it was paid. The "defendant's conduct" again incorporates the matters particularised in support of the plea that the representations were constituted by the silence of the defendant. As part of the estoppel claim, the plaintiff says it was induced by the defendant to adopt the assumption and repeats much of the same factual material.
84 Both in equity and under the statute the plaintiff must establish that it relied on the representations or the assumption. It will be apparent from what I have already said that I accept that Frew relied on what was in the letter of 13 September 1996 and on what he was told by Tregea in making the initial decision to authorise a credit facility. In the equitable claim the plaintiff must establish that the defendant knew the plaintiff would rely on the assumption. Given Frew's evidence that Tregea came back to him and asked for an assurance that materials would start flowing to Monaveen and that he had told Tregea that, subject to him checking with his people, he believed it "would be fine and satisfactory", I think this element has been satisfied. Of course, reliance may go further than the initial decision to authorise a credit facility. It may be necessary to revisit this issue in the light of what occurred later in 1996. Again, there is no material distinction between the evidence relevant to the TPA claim and that which falls to be considered in the plaintiff's estoppel claim.
85 In relation to the TPA claim, the defendant has asserted that if the representations were made, then to the extent that they relate to a future matter, they were made on reasonable grounds. Much of the material on which that plea is based would be relevant also to the defence to the plaintiff's estoppel claim.
86 Of course, if the estoppel claim is to succeed the plaintiff will have to establish that it will suffer detriment if the assumption is not fulfilled. For the TPA claim, it must establish that it suffered loss and damage as a result of the alleged misleading and deceptive conduct. Save to the extent that a discrete issue was severed from the trial, I do not think there is much controversy about the issue of detriment or the measure of damages if the plaintiff were otherwise to establish the claims. It supplied steel from September 1996 to February 1997 and it has not been paid all the
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- moneys that are due to it. The loss which amounts to the detriment, or the loss and damage arising from the alleged misleading and deceptive conduct, is $266,922.
The Formulation of the Representations
87 I think it is necessary to repeat the way in which the plaintiff formulated, in the alternative, the four representations in the statement of claim. They are alternatively characterised as representations or as impressions created by the defendant but I will continue to refer to them as representations. The first representation is that if the plaintiff were to continue and to increase supplies of steel reinforcing to Monaveen and were the plaintiff not to be paid for such supplies the defendant would itself pay such moneys to the plaintiff. Secondly, there was or would be little or no risk of not being paid if the plaintiff continued to and increased supplies of steel reinforcing to Monaveen. The third representation is in two parts. The initial part is that if the plaintiff continued and increased supplies of steel reinforcing to Monaveen there were or would be sufficient funds available to or under the control of the defendant so as to ensure that the plaintiff would be paid for such supplies. The latter part is that if the plaintiff continued and increased supplies of steel reinforcing to Monaveen the defendant would manage Monaveen's contract with the defendant in such a manner as to ensure that the plaintiff would be paid for such supplies. The fourth representation is framed in this way. Before the defendant made any payments to or on behalf of Monaveen the defendant would ensure that all moneys due by Monaveen to the plaintiff had been paid.
88 In very large measure the fate of the causes of action on the representations falls to be decided in accordance with the same body of evidence that I have described in relation to the contract claim.
89 It will be apparent from what I have already said that I do not believe that the first representation was made, and I so find. At the risk of repeating myself, no one ever said that the defendant had agreed to provide a guarantee and the first representation is, in essence, of that nature.
90 As to the second representation, I do not think that the conversations on which reliance is placed can be said to amount to a representation that there would be little or no risk of the plaintiff not being paid. In the evidence it was never put in terms of "risk". Monaveen had a bad track record with the plaintiff, through Reosteel. It was seeking credit terms
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- that were beyond the norm. It could not, itself, provide security or a guarantee for its indebtedness. The defendant was not prepared to provide a guarantee to support the obligations of Monaveen. Certainly, the "pipeline" discussion took place and it is to be interpreted according to its tenor. But I do not think it speaks in terms of risk in that sense. Frew conceded in cross-examination that he was aware of the hazards of the contracting industry and that if Monaveen fell foul of those hazards it would not be paid. Accordingly, the plaintiff cannot rely on a cause of action that arises from the second representation.
91 That brings me to the third representation. It is complicated by the use of the word "ensure". The claim based on the representations is somewhat wider than the contract claim because it brings in various conversations between Manook and Tregea and Frew and Tregea in the first half of August 1996, in mid-August 1996 and again between 23 August and the time at which the letter of 13 September 1996 arrived. I have canvassed this evidence already. In my view there is nothing in any of those exchanges that would support a conclusion that, prior to the conversations between Frew and Tregea on 13 and 14 September, anyone on behalf of the defendant said anything that could reasonably be construed as a commitment to ensure that the plaintiff was paid. There were, to coin a phrase, plenty of soothing noises and expressions of understanding of, and sympathy with, the plaintiff's position. There was also a willingness to explore possibilities. But that is as far as it went. If the plaintiff is to succeed on this ground, the representation must be found in the critical letter and conversations of 13 and 14 September 1996.
92 If the conversations between Tregea and Frew are viewed in the way that I have discussed in considering the contract claim it is not possible to conclude that the actual word "ensure" was used in the exchanges. What, then, did the pleader mean by the use of the word "ensure"? It is something quite specific and it must be related to the context. That context includes (in a critical way) the letter of 13 September 1996. It seems to me that the statements made by Tregea in the conversations on 13 September 1996 have to be taken at face value. If the plaintiff were to continue and increase supplies of steel reinforcing to Monaveen, there were or would be sufficient funds available to or under the control of the defendant for the plaintiff to be paid for such supplies. This, in my view, is the true import of the "pipeline" discussion. But the plea ties the word "ensure" to the fund of money in "the pipeline", that is, to a fund that, both in terms of size and certainty, would be sufficient to cover the indebtedness of Monaveen to the plaintiff. This is putting the issue in
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- different words from those used by the pleader but I think this is a fair reading of the representation as pleaded.
93 The same problem arises with the statements in the letter of 13 September 1996. The word "ensure" is not used. But the representation, as pleaded, is that if the plaintiff continued and increased supplies of steel reinforcing to Monaveen the defendant would manage Monaveen's contract with the defendant in such a manner as to ensure that the plaintiff would be paid for such supplies. The term "ensure" is to be seen in the same way and I just do not think that it arises from a proper consideration of the letter. I am not so concerned about the term "manage". It has to be understood in its context, and it is a limited one. The contractual arrangements between the defendant and Monaveen extended well beyond any relationship between the plaintiff and Monaveen concerning supplies of reinforcing material. The "management" of the contract would have to take into account a myriad of circumstances that had little or nothing to do with reinforcing supplies, perhaps even with concreting works. But in this context, the word "manage" has to be understood in the limited sense of the administration or control of the account as between the defendant and Monaveen in a manner consistent with the agreement apparently reached between the defendant and Monaveen and set out in the letter of 13 September 1996.
94 I think there are problems with the fourth representation for the same reasons. Again, the problem is with the word "ensure" and the comments that I have already made apply to it as well. There is nothing in the conversations of 13 and 14 September 1996 to support the strict reading that the defendant undertook to "ensure" that the plaintiff had been paid before it made any payments to or on behalf of Monaveen. In the letter of 13 September 1996 the defendant reported an agreement reached between it and Monaveen that Monaveen would have to "satisfy" it that the plaintiff had been paid before it would release any money to Monaveen. I think this is different to an undertaking given by the defendant to the plaintiff that it would ensure that Monaveen had paid all invoices that were then due to the plaintiff. The "pipeline" conversation was about the fund of money that would be available to Monaveen and hence available to satisfy obligations Monaveen had to the plaintiff. If the word "ensure" is read in the way that I have suggested it must be read for the purposes of the third representation, I do not think the fourth representation adds much to the third. It is not supported by the evidence.
95 It can be seen from this discussion that my preliminary view, based on the letters of 23 August and 13 September 1996 and the conversations
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- between mid-August and mid-September 1996, in particular on 13 and 14 September 1996, is that what was written and said does not constitute an actionable representation. But it is not as simple as that because the representation is said to have been constituted by silence and the raising of the assumption by the defendant's conduct, both of which bring into play the matters described in par (c) of the particulars to par 14 of the statement of claim. This requires an investigation of the relationship between the parties during the relevant period.
96 With those preliminary comments in mind I now turn to consider the evidence concerning the conduct of the parties in the contractual setting.
Problems With the Subcontract to November 1996
97 When it was negotiating the Subcontract, Monaveen requested that it be paid twice each month rather than on the usual 30-day schedule. In return, it agreed to a one per cent reduction in the lump sum contract price up to a maximum of $50,000. Hetherington explained in his evidence that this was an important factor for Monaveen. It was a substantial contract for Monaveen and the company had borrowed heavily from its bankers to finance the job. A large portion of the contract expenditure was for labour. The work force was to be paid weekly. Accordingly, the twice monthly payments, and payments on time, were crucial for Monaveen's cash flow. When the Subcontract document arrived it provided for a payment of the labour component of each progress claim by the middle of the month following the month in which the claim was lodged. It also provided for the one per cent reduction in the contract price. According to Jones, the labour component was about 40 per cent of the claims, not 50 per cent as Monaveen had envisaged. On 19 August 1996 Hetherington pointed this out to the defendant. The same point was raised again in a letter from Jones to Tregea dated 6 November 1996. It is not clear from the evidence whether there was a formal response.
98 I should interpolate here that it emerged in cross-examination of Hetherington and Jones that litigation was on foot between Monaveen and the defendant over the Subcontract and that Jones had been assisting the receiver of Monaveen in the litigation. In the litigation, the defendant is disputing some of the material contained in the witness statements, primarily amounts and dates of payments of progress claims. I did not see this as a reason to doubt the evidence adduced from them for the purposes of this hearing.
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99 On 31 July 1996 Monaveen lodged its first progress claim in an amount of $250,000. The first instalment of it fell due in mid-August. Jones testified that he had a number of discussions with Tregea as to the progress claim but was told that the defendant would only pay $187,500. This amount was paid in two instalments, one for $93,750 and the other for $92,500. Both were late and no reason was given for the reduction.
100 According to Hetherington difficulties with the defendant began as early as August 1996. On 29 August 1996 Tregea showed Hetherington a letter from DRI expressing concern about Monaveen's lack of progress. On 14 September Tregea wrote to Hetherington expressing "serious concern on your advised manpower levels if Monaveen are to recover lost time to date and maintain programme to completion". In other words, saying Monaveen was in delay. On 16 September 1996 Tregea wrote to Hetherington again as a result of a site inspection and set out aspects of the works that were behind schedule. The letter required Monaveen to "advise your proposal to remedy the delay in your works".
101 Jones' evidence was that he expected payment of the second progress claim in the sum of $259,708 on 14 September 1996. It was paid four days late. The progress claim lodged at the end of September was for $781,331. Some of this amount was for steel delivered to site but not then installed in the works. Tregea told Jones that he would not pay those amounts and would only pay $281,940 on the claim. According to Jones, and I do not doubt it, this had serious implications for Monaveen's ability to perform its obligations under the Subcontract. Tregea gave Jones details of his calculations justifying the figure of $281,940. Jones pointed out an arithmetical error, which Tregea accepted and the claim was paid by the defendant in the sum of $471,786 on 18 October 1996. It still did not include anything for the steel on site. The figure of $471,786 was the full amount (not 50 per cent) of the amount calculated by the defendant but it was not, of course, the full amount of the claim. Nothing was paid at the end of October.
102 On 1 October 1996 the defendant reduced the scope of the works by about $140,000. On 3 October 1996 Monaveen received a "show cause" notice from the defendant under the Subcontract. It states, relevantly:
"… we consider you are not proceeding with your works with due expedition and without delay.
We require you to provide written reasons and justification by 5pm Wednesday 9 October 1996 as to why we should not
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- exercise one of our rights pursuant to Clause GSC 36 of the [Subcontract]."
103 GSC 36 of the Subcontract is the default clause. It provides that if a show cause notice is not complied with the defendant may take the whole or part of the works out of the hands of Monaveen or terminate the Subcontract. If it removed the works, Monaveen would not be entitled to any further payments except as adjustments after actual completion.
104 Jones and Hetherington discussed the notice. Hetherington said he had never before received a notice of this type and took it seriously. On 5 October 1996 Hetherington met with a Mr Pell, who was Tregea's immediate superior. Pell told him that Monaveen lacked credibility and that the defendant should have acted earlier in giving the show cause notice. Hetherington responded to the show cause notice by letters dated 7 and 9 October 1996. The details of the response are not essentially relevant. It is sufficient to say that Hetherington felt Monaveen was not in dispute. On 11 October the defendant responded saying Monaveen had "failed to show cause to [the defendant's] satisfaction as required" and that its progress would be monitored. It seems the reply was not accepted but there was no indication that further action would then be taken by the defendant under GSC 36.
105 Jones testified that around the same time he and Hetherington discussed with Tregea putting a further 40 men on site and the prospect of accelerating costs if they did so. He prepared a claim with respect to the proposed acceleration in the sum of $790,000. Tregea subsequently told him that he could forget the acceleration as Monaveen was in delay and they should do something about it. Monaveen put an extra 25 people on site and concentrated on PC items. Jones was at Port Hedland on site from mid-October. He had regular discussions with Tregea. On many occasions Tregea complained to him about Monaveen not having men working on the PC items.
106 The progress claim lodged at the end of October was for $1,121,549. Tregea told Jones that in his view the claim was inflated and he would not pay it.
107 On 2 November 1996 Monaveen received from the defendant a letter rejecting a quote for provisional sums due in part to Monaveen's (alleged) failure to provide a breakdown as requested by DRI. On 6 November 1996 the defendant delivered a second show cause notice alleging failure to proceed with the works with due expedition and without delay. On
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- 8 November the defendant told Monaveen that information had come to hand suggesting a serious breach of the Subcontract in relation to the concrete mix and asking for details. On 14 November there was a further letter in which the defendant said Monaveen had not shown cause to its reasonable satisfaction. This time the defendant did exercise a right under GSC 36, namely, to remove from Monaveen responsibility for works the subject of PC sums on the "Stockyard area". There was a reservation of the right to take other steps as deemed appropriate.
108 On 14 November 1996 the defendant again wrote to Monaveen stating that Monaveen had not provided the details about the concrete mix that had been requested on 8 November. The letter went on to say that Monaveen had been using a concrete mix that was contrary to the specifications and that the estimated cost of rectification exceeded $1,200,000. Hetherington denied that the wrong mix had been used but told Tregea that if there was a problem with the concrete it could be rectified for $30,000. Although I could not locate it in the exhibits, Monaveen must have written to the defendant putting its response to the concrete claim in writing and giving some financial information. This provoked a further letter from the defendant, dated 18 November 1996, in these terms:
"Your facsimile indicates … Monaveen are unable to meet its commitments and pay its debts relating to Monaveen's work under the Subcontract, when they fall due.
We advise that as there is no money owing by [the defendant] to Monaveen under the terms of the Subcontract, then we have no money to pay your creditors on your behalf."
109 The letter went on to require Monaveen to provide, that day, a written assurance that the works would be completed and that Monaveen was able to pay its debts relating to work under the Subcontract (including wages bills) as and when they fell due. Negotiations between Duncan, Tregea, Sharp, Hetherington and others about the concrete problem went on through November and into December. During this time the defendant was insisting that due to the concrete problem (and other things) no moneys were due to Monaveen and (save for one series of payments which I will mention shortly) none were paid. As Sharp put it, this had serious implications for Monaveen given its need for constant cash flow in order to complete the Subcontract. Hetherington testified that by mid-November 1996 Monaveen was in serious financial difficulties with
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- respect to the Subcontract as progress claims had not been met on the due dates or in the sums claimed.
110 The was a second letter from the defendant to Monaveen on 18 November 1996. In it the defendant commented on a proposal that had apparently been put by Monaveen to "remedy the defective concrete grade". The defendant said that it was prepared to accept a bank guarantee for $2,000,000 in lieu of withholding any amounts from Monaveen.
111 Hetherington and Sharp continued to negotiate with the defendant so as, to use Hetherington's words, to salvage the contract. These negotiations resulted in two variations to the Subcontract. The first was confirmed in a schedule dated 21 November 1996 authorising the defendant, as agent for Monaveen, to pay moneys direct to nominated creditors of Monaveen. Jones says these payments totalled about $300,000 (which fits with the written schedule) but Hetherington says the amount was $565,103. I am not sure that the actual amount matters much. According to both of them the payment was less than the amount then owing to Monaveen. These payments were made during the second half of November 1996. I will deal with the second variation (which occurred in December) a little later.
112 Jones says that he continued to submit progress claims in the ordinary way in mid-November and at the end of November 1996 but that Tregea refused to pay them, saying that Monaveen was behind schedule, it had already been paid too much and that he did not propose to pay inflated claims. He says that by the end of November Monaveen's cash flow position was critical.
Problems With the Subcontract From December 1996
113 On 2 December 1996 the defendant wrote to Monaveen saying that on its calculations the approximate amount that would be due to Monaveen without adjusting for defective work was $555,000. The estimated value of rectification of the concrete problem was $210,000. The letter said that the defendant would be forwarding a payment to Monaveen of the amount due less the value of the rectification works. It also said that the defendant was prepared to pay the moneys direct to Monaveen's creditors if it so wished. I think (see exhibit 38) that $345,000 was paid direct to Monaveen on 3 December 1996.
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114 Sharp testified that by Christmas 1996 the rectification works on the concrete problem were almost complete. Some additional work was done in February 1997. Sharp agreed that Monaveen lodged a claim with its insurers for the cost of this work and that the claim was in excess of $180,000. Hetherington's evidence was that the claim had not been finalised.
115 By the beginning of December 1996 Monaveen was having trouble with P & O Caterers, which provided accommodation and catering facilities for the workforce. P & O had not been paid and threatened to turn the workers out. The consequences of an action of that nature hardly need to be described. On 6 December 1996 the defendant paid $180,000 to P & O to avoid that eventuality. On 9 December 1996 $433,000 was paid to various other creditors on behalf of Monaveen.
116 There was a third show cause notice issued on 6 December 1996 alleging failure to proceed with due expedition and without delay and again referring to the concrete problem. On 12 December 1996 Monaveen responded refuting the allegations and pointing out the cash flow difficulties caused by non-payment or late payment of the progress claims. On 16 December 1996 the defendant replied, saying it was not satisfied with the explanations and reserving its rights to act under GSC 36.
117 At around this time Hetherington and Sharp were conscious of the cash flow position and of the need to avoid "insolvent trading". They discussed the situation with the major creditors and prepared a schedule of payments to deal with the creditors. Some creditors agreed readily but others were tougher in their approach. The schedule was constructed so that all creditors would be paid by the time the contract had been completed. The plaintiff was one of the creditors with whom discussions occurred. Sharp and Hetherington were aware that all of the creditors had to agree to extend the terms of payment if Monaveen was to have a chance of completing the contract.
118 This was all part of the second variation which they were then negotiating with the defendant. Sharp testified that Duncan was interested to know whether the creditors had agreed to the schedule and said that he would have told Duncan that the creditors had agreed.
119 Those negotiations resulted in a document dated 13 December 1996 in which the parties amended the terms of the Subcontract. In it, the defendant agreed to meet Monaveen's request to advance payments to
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- Crewe Sharp on behalf of Monaveen. Crewe Sharp agreed to use the moneys received from the defendant to pay Monaveen's creditors and employees on Monaveen's behalf. The defendant agreed to make payments upon request by Monaveen on a weekly basis up to an aggregate amount not exceeding that shown in an annexure. The annexure was prepared by the defendant. It showed that as at 2 December 1996 the work completed but not paid for was $866,000 and as at 30 December it was $326,000. I interpolate here that Monaveen believed the true position was that greater sums were outstanding. The document also evidenced an agreement by which Monaveen would complete the works in the sequence and within the times specified in a schedule that was annexed.
120 It is interesting to reflect on the state of mind of Sharp and Hetherington at around this time. This exchange occurred during the cross-examination of Sharp:
"The fact is that after the December agreement was put in place and the weekly payments were being received and paid out to creditors, you actually succeeded in getting Monaveen back on its feet, didn't you?---Yes.
There was no reason from that point to expect that the job would not conclude successfully. Isn't that right?---From an operational point, no, there was no reason as long as payments continued to be made in line with the payment schedule.
That's right, and as long as the work didn't come to a halt because of a cyclone, for example. Isn't that right? ---Well, in hindsight it's easy to say that, but I mean, at that time no-one anticipated the cyclone.
No-one could have predicted either the strike or the cyclone at that time, could they?---No.
When work stopped, payments stopped and that was ultimately what caused the subcontract to be terminated. Isn't that correct?---It was one of the final blows after having gone through the last couple of months with continued late payments on the concreting issue, but the argument that we put to ABB was that payments should still continue or at least some payment continue whilst the strike was occurring in that there was sufficient moneys still owing to Monaveen by ABB. So your earlier comment about having some comfort zone, I think,
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- which is what ABB called it, is quite valid. However, there was sufficient comfort zone for some payments to be made.
In your opinion?---In our opinion.
That's right. But after the progress that was achieved in December and the payments were made, from your perspective but for the cyclone and the strike Monaveen could have gone on to complete its subcontract. Isn't that right?---Assuming that all payments were made on time.
Yes?---And the record that the company had had with ABB, that that had never happened to date."
121 Hetherington's evidence was to much the same effect:
"The fact is that in December 1996, once the weekly payments had been arranged, you began to make good progress on the job, didn't you?---I think we always were making good progress on the job.
Certainly you were able to pay your creditors in a regular way, weren't you?---Yes; we were, to the extent that we were able to make payments from the amount of money that they were releasing, yes. It was limited; it was limited.
You paid Crewe Sharp, or Crewe Sharp were paid out of the money received in December, weren't they?---There was a payment, yes.
And so far as you knew at the time, but for the strike and the cyclone you would have been able to carry on and finish the job. Isn't that right?---Yes."
122 Monaveen received the payment due under the schedule for 19 December 1996. Two further payments were received on 23 and 30 December 1996. Subsequent to those payments nothing further was received from the defendant until February 1997 when two payments were made to Monaveen's employees. On 5 January 1997 Duncan and Tregea told Hetherington and Sharp that an amount of $150,000 due the following day would not be paid. Sharp told them that the claim was for work already completed and pointed to the defendant's own figures in the schedule to the 13 December document showing an amount of $326,000
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- as the value of work completed but not paid for. The refusal to pay was maintained.
123 During January 1997 there was a strike on the site. In mid-January a cyclone went through the area and did considerable damage to the construction site. Little, if any, work was done during January. Monaveen resumed work in early February 1997. The defendant required it to carry out major repair work on the damage done by the cyclone. Hetherington says that Monaveen carried out the repair work and I understand has received, or made a claim for, reimbursement of the cost from the site works insurer. He says that by 24 February 1997 had completed 97 per cent of the original scope of the work. But the defendant still refused to make payments according to the schedule. It did make payments of $68,257 and $142,000 on 12 and 20 February 1997 respectively for wages and superannuation costs for Monaveen's employees.
124 On 24 February 1997 the defendant terminated the Subcontract and called on Monaveen's bankers to pay $465,000 under the bank guarantee.
125 I have gone to some lengths in describing the evidence on these issues. However, it is not part of my function to decide which entity, as between Monaveen and the defendant, was more or less responsible for the problems that eventually led to the termination of the Subcontract. That is a matter for another day. I was told that there is litigation on foot between Monaveen and the defendant in which Monaveen is claiming about $9,000,000 and the defendant about $2,000,000. No doubt those issues will be resolved, one way or another, in due course. But it is necessary to understand the contractual situation between the defendant and Monaveen so as to appreciate the plaintiff's position.
126 Once again, I only heard one side of the story. Generally speaking I have no reason not to accept the evidence given by Hetherington, Jones and Sharp. Once again that has nothing to do with Jones v Dunkel inferences but is based on the acceptance of otherwise credible and acceptable testimony. How this translates to specific findings of fact will emerge later.
Contact With the Plaintiff Over Contractual Matters
127 The next step is to consider to what extent, if any, the plaintiff was aware of the situation with the Subcontract.
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128 In the cross-examination, particularly of Frew and Hetherington, counsel went to some lengths to explore whether the plaintiff had supplied steel in accordance with the programme laid down by Monaveen. I think one of the points the defendant wished to establish was that the failure of the plaintiff to supply steel timeously in accordance with the programme advised by Monaveen in July was a significant factor in the delays experienced in the Project. If that was the point I do not so find. I have already explored this issue a little in discussing Frew's evidence. Hetherington said that there were delays in the early stages (Frew did not deny it) but by September the steel problem had been "clearly resolved". This is in accord with Frew's evidence that on 14 September 1996 he told Tregea that the plaintiff would do its best to increase supplies to Monaveen as rapidly as possible. Hetherington was referred to a fax from Monaveen to the plaintiff dated 5 October 1996 about steel deliveries. However, Hetherington explained that this was about future deliveries, not the situation before that date. He was concerned to confirm that all reinforcing material was required on site by the end of November. The impression I gained from Hetherington was that late deliveries of steel did not impede the works in or after September.
129 Frew conceded in cross-examination that from October 1996 he was aware that Monaveen had cash flow problems and that they were finding it difficult to manage. He said that he had conducted credit checks on Monaveen and found they "were not flush with funds". He knew that they were unable to provide security or a bank guarantee. He was aware that in August and for some of September Monaveen was having difficulty specifically related to the Project. Manook testified that he heard rumours that Monaveen owed its creditors over $1,000,000. Frew could not recall whether Manook had told him about the rumours but he may have done. Some time in October 1996 he learned there was a problem between Monaveen and the defendant about a concrete pour. He discussed it with Monaveen and with Tregea. Monaveen told him it was inconsequential and nothing was going to happen over it. Tregea told him they were still investigating it and that it was a major problem. Frew thought it was Monaveen, not Tregea, who told him that the claim might be a very large number. This exchange occurred in the cross-examination:
"However, because of what you had heard in October and because of what you already knew about Monaveen's position, you began to feel uncomfortable with their credit position, didn't you?---Yes, I did.
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- Or let me put it another way: you felt uncomfortable about the prospects of being paid by Monaveen, didn't you?---Yes."
130 It was put to Frew that this caused him to telephone the defendant and to stop a payment that would otherwise have gone to Monaveen. He was referred to the letter of 6 November 1996 from Crewe Sharp to the defendant, to which I have previously referred. He said he could recall the letter but not the specifics of any conversation to which it may have related. At around this time Monaveen was pressing the defendant for payment. Sharp testified that someone from the defendant told him the reason Monaveen was not being paid was because of certain discussions that were being held between the plaintiff and the defendant. Monaveen had been unaware of any such discussions. Evidence was then given by Sharp that he or one of his employees sent the letter to Frew. Sharp also gave evidence (admitted as evidencing a communication rather than as going to the truth of what was said) that Frew rang him back and said that it was nonsense. In his cross-examination Frew did not deny that the conversation with the defendant had taken place. At the time he was aware of Monaveen's cash flow problems. He said: "… as we became more concerned, we became more focussed on account management and there were a number of conversations and this was a result of one of them."
131 Manook's evidence on this point was not helpful. He could not recall the letter or any conversation with Frew to that effect. He was not saying it did not occur but merely that he could not recall it.
132 I take into account that after this time the plaintiff continued to supply steel to Monaveen notwithstanding its concerns about Monaveen's cash flow position. The plaintiff's account due on 15 October 1996 was paid on time. The next payment was due on 15 November 1996. Frew agreed that after this exchange (that is, the letter of 6 November and whatever telephone conversations between the plaintiff and the defendant had precipitated it) the plaintiff received a payment direct from the defendant. The full amount of the account then due was discharged by that payment. I note from the plaintiff's Account Transaction Report (which is exhibit 17) that an amount of $96,688.67 was paid on 27 November 1996 and I presume that this is the relevant payment. I find, notwithstanding the communication between Sharp and Frew, that at some time before 6 November 1996 someone on behalf of the plaintiff approached the defendant about Monaveen's position. That approach was a contributing factor (almost certainly not the sole factor, but a factor
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- nonetheless) in the delay experienced by Monaveen in getting its money on that occasion.
133 Manook testified that he was in regular contact with Tregea throughout this period. On a few occasions he told Tregea of the amount outstanding to the plaintiff and was interested in ensuring the plaintiff got paid. In his conversations with Tregea he had tried to confirm when moneys were going to be paid to Monaveen. On one occasion he asked if the money could be sent by electronic funds transfer. He denied that Tregea ever told him about problems between the defendant and Monaveen over the contract. He also said that Frew had not told him about the concrete pour problem even though a possible claim against Monaveen of $1,000,000 or thereabouts would have been a "credit matter". He also said that he was not aware of the problems between Monaveen and P & O. I have some difficulty with this aspect of Manook's evidence. It seems hard to understand why Frew would not have mentioned something of that degree of significance to his credit manager, especially as there had been concerns about Monaveen's credit worthiness from the very outset of the relationship. Manook struck me as a person who took his responsibilities to control customers' accounts very seriously. It would be surprising if he had not been told and, having been told, had not then confronted Tregea about it.
134 Frew's evidence was that late in November 1996 Tregea told him that the defendant was checking with the plaintiff before they paid Monaveen. Jones said that at no time during December 1996 was he asked by anybody on behalf of the defendant whether any moneys were due to the plaintiff. Sharp said that he was asked that question only once. This was during the negotiations for the second variation, that is the variation in December 1996. So far as I can recall, Hetherington was not asked any questions on this issue. I think the appropriate finding is that there was minimal contact between the defendant and Monaveen about what moneys were due from time to time. But this was probably because of the assiduous attention that Manook gave to the plaintiff's account with Monaveen. I have little doubt that Manook made sure that Tregea was aware of the account situation.
135 Frew also says that he was not aware that the show cause notices had been issued, that the scope of the works had been reduced, that progress claims were being paid late or that there was a dispute about payment for steel delivered to site but not then used. Frew testified that had he been aware of these matters he would not have continued to supply Monaveen without some further reassurance. I think Frew must have known that
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- progress claims were being paid late. He acknowledged that he had seen the letter of 6 November 1996 in which the issue was raised. If Frew did not know that the scope of the works had been reduced, Manook certainly did. On 15 November 1996 Tregea sent a fax to Manook advising him that the Stockyard area had been removed from Monaveen's works and asking for assistance to reconcile what steel had been delivered at that stage. It also said that reinforcement not yet delivered for the Stockyard area would be ordered and purchased direct by the defendant.
136 This brings me to the December variation to the Subcontract. Frew's evidence was that in November 1996 Sharp told him that he was putting a financial proposal on behalf of Monaveen to the defendant but he did not go into detail. Not long before Christmas 1996 Sharp spoke to Frew and showed him a payment schedule for payments by the defendant to Monaveen. It included a payment of $100,000 to the plaintiff in the week ending 20 December 1996, with further payments of varying amounts in specified weeks from then until 14 February 1997. At that time the plaintiff had all but completed its schedule of supplies to Monaveen. Monaveen owed $259,931 to the plaintiff as at 16 December 1996 but this would have been covered by the schedule of payments that Sharp showed to him.
137 In cross-examination Frew said that when he looked at the schedule he could see that the first week had already gone by and that a total of $433,000 had already been paid. He saw that in the next week the plaintiff would receive $100,000 from a total payment of $485,000. This exchange occurred:
"Of course you could have stood on your rights under the 13 September letter and said, 'Hang on a second. We're owed $259,000. We'll have that out of the 485.' You could have done that, couldn't you?---Yes, I could.
But you made a commercial decision at the time, didn't you?---I made a commercial decision and a legal decision.
The commercial decision was you didn't want to bring down the Monaveen house of cards?---That's right."
138 Frew said that after his conversation with Sharp he had little contact with the defendant or Monaveen because initial payment was made the following day and they were not due for a payment for a couple of weeks. What contact he did have was with Sharp, who told him things were going relatively well.
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139 Sharp's evidence in chief about his conversation with Frew was as follows:
"When you spoke with Mr Frew, what did you tell him about that payment schedule in the sense of did you ask for his approval or did you put it to him on some other basis? ---The schedule had been drawn up uncompleted, I think, on the Friday before. I made an appointment to go and see Frew on I believe it was the Monday, more as a matter of courtesy to say, "This is how BHP were going to be paid." As opposed to faxing it through, I actually went there to go and see him. Really the purpose of the visit was to demonstrate to Frew that he would be paid the money.
Was there or was there not any negotiation on that occasion between you and Mr Frew?---No. I delivered the document."
140 In cross-examination Sharp acknowledged that if the plaintiff had not agreed to accept payments in the manner set out in the schedule, then Monaveen would not have been able to go ahead with the arrangement. But he said he did not "really give [the plaintiff] much option, to be honest. It was really a schedule that had been prepared and really was to show creditors, and particularly in this case [the plaintiff], how they were going to get paid". He said that Frew agreed to the payment schedule. In his evidence in chief Frew was asked whether the schedule had been presented to him for your approval or on some other basis. He said: "Basically as far as I'm concerned it was a fait accompli. It was a presentation to me of an outcome previously agreed between [the defendant] and Monaveen, right down to the methodology that it was to be paid in, and my agreement I thought was very much secondary to the issue".
141 On 6 January 1996 Frew met with Tregea, Duncan, Sharp and Hetherington. The major issue discussed were the production difficulties in the early phases of the contract. Frew's involvement in the meeting was to assist the parties in the substantiation of a variation that Monaveen had lodged for acceleration of their works. He could not recall any mention being made of whether Monaveen was going to receive the next payment. His recollection of that meeting was that it concentrated on operational issues.
142 The payments due to the plaintiff in the weeks ending 10, 17 and 31 January 1997 in accordance with the schedule were not made. There
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- was no evidence as to what, if any, steps the plaintiff took during that period. It is clear that Frew was aware of the strike and of the cyclone. He accepted in cross-examination that he would have realised that if no work was being done on site the defendant would not have been making payments.
143 Frew's evidence was that it was not until he spoke to Tregea late in January 1997 that he became aware that Monaveen's contract with the defendant was in jeopardy. By that time the plaintiff had all but completed its supplies to Monaveen. In that respect, I have checked the plaintiff's account transaction report. I assume that invoices accompanied deliveries. On that assumption, the only deliveries made after the second variation were on 17 December 1996 (to the value of $8,500 or thereabouts), 20 December 1996 ($1974) and 5 February 1997 ($407).
144 On about 12 February 1997 Manook relayed to Frew a request from the defendant for the plaintiff to approve a release of funds to Monaveen so as to allow Monaveen to pay its workforce. Frew gave the approval. As a result, the defendant made payments to Monaveen of $68,257 on 12 February 1997 and $142,000 on 20 February 1997. When asked about this matter in cross-examination, Frew conceded that he could have exercised a veto and stopped the payments from being made. He chose not to "for the very sensible commercial reason that if [he] had done that it would have unquestionably brought Monaveen down".
145 For the purposes of trial, Manook prepared a schedule detailing the history of the invoices, payments and balances as between the plaintiff and Monaveen and payments made by the defendant to or on behalf of Monaveen so far as they were relevant to this litigation. I have adapted Manook's schedule by inserting the February payments. It is included as a table at the end of these reasons.
146 The schedule did not, of course, purport to set out all of the payments made by the defendant to or on behalf of Monaveen. The schedule itself was not evidence but (subject to three things that I am about to mention) I am satisfied, on the evidence as a whole, that it accurately reflects the position. The first point is that I am not sure of the source of the figure $1,000,000 (6 December 1996) in column 7. The only mention of a payment early in December that I can recall was $180,000 which the defendant paid to P & O to avoid the workforce being turned out of their accommodation. Secondly, on the basis of exhibits 10 (the second variation) and 11 (the payment schedule that Sharp showed to Frew around 16 December 1996) the sums paid to Monaveen or its creditors on
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- 9 December 1996 would have been $433,000 rather than $436,845.30. Neither of those things matters a great deal because as at 6 and 9 December 1996 no moneys were due by Monaveen to the plaintiff. Thirdly, an issue was raised as to whether any moneys in excess of $100,000 were "due" to the plaintiff after the arrangements reached on 13 and 16 December 1996. I will return to that issue later.
Representational Character of Defendant's Conduct
147 I will now return to the matters specified in par (c) of the particulars to par 14 of the statement of claim to see if they, taken together with the relevant letters and conversations, amount to representations.
148 I accept, of course, that silence may be an actionable misrepresentation. This will usually arise where the circumstances give rise to an obligation to disclose facts: Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 95. However, it is not limited to circumstances where a duty of disclosure arises. The essential question is whether, in all the circumstances constituted by the acts, omissions, statements or silence, there has been conduct likely to mislead or deceive: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32.
149 The first of these items is that during the period from August to late October or early November 1996 the defendant paid Monaveen's progress claims on a 14-day basis in order to provide Monaveen with sufficient cash flow to continue its contract with the defendant. It is probably not correct to say that Monaveen was paid on a 14-day basis because the evidence is that some payments were not made at all and others were late. But it is a convenient encapsulation of the contractual provision in the Subcontract that the labour component of each progress claim by the middle of the month following the month in which the claim was lodged with the balance to be paid within 30 days of the claim. Of course this itself was a matter of controversy between the defendant and Monaveen.
150 The difficulty I have with this aspect, from the plaintiff's perspective, is that the plaintiff, through Manook, knew about the arrangement. Manook was constantly in touch with Tregea and knew that Monaveen was receiving money "at the middle and the end of the month" although he could not confirm what they had actually received.
151 A number of the paragraphs refer to the "show cause" notices and to the letters of 14 and 18 November 1996 from the defendant to Monaveen in which the former threatened to cease payments altogether and
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- demanding that the latter provide proof of solvency. I accept the evidence of Frew and Manook that they were not made aware of this correspondence. But the question is whether it has an impact on the relationship between the plaintiff and the defendant. I do not think that it does. The correspondence is not, in itself, representational. I can well see how, had the starting point been a finding that the conversations and letter of mid-September 1996 constituted a representation as pleaded, that this correspondence may have had considerable impact. It might, for example, have raised an issue whether the defendant had reasonable grounds to make the representation as to future matters. I say this because the first show cause notice was issued on 3 October 1996 and it had been preceded by a demand to bring the work schedule into line with the contractual specifications.
152 It might also have been important if, in a situation of continuing reliance, the defendant had become aware that there had been a material change in circumstances. These are all matters of substance. But they depend on there being an identifiable representation to which they can attach. I do not think that these matters, of themselves, have the character of representations. It might also go the falsity of the representation. If Tregea said to Frew, as I think he did, words to the effect that this was a good contract, there was no reason why Monaveen would not perform and there would be plenty of money from which the plaintiff could extract payment, then if Tregea knew of the circumstances that led to the sending of the letter of 16 September 1996 it might help to establish the falsity of what was said. However, it still depends on the those words being characterised as a representation in accordance with the pleading.
153 Another matter complained of by the plaintiff is the reduction in the scope of Monaveen's works by taking out the Stockyard area. The defendant took this action on 14 November 1996 and on the following day it wrote to Manook advising him that it had done so. I do not see how this could constitute silence on the defendant's part. I think it is a fair reading of Manook's evidence that he did not attach much significance to it because he did not refer the letter to anyone else or ask about it.
154 The plaintiff also says that in September or early October the defendant refused to pay Monaveen for steel delivered to site but not fixed or used in the construction work. There are a couple of things that could be said about this. It seems to have been, and perhaps still is, a matter of dispute between the defendant and Monaveen as to the contractual entitlement of Monaveen to be paid in those circumstances. That entitlement was not addressed in this case and I am not in a position to
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- pass any comment on it. Nor did the evidence address the issue when Monaveen was due to pay the plaintiff for the steel in question. Bearing in mind that Monaveen was on extended credit terms with the plaintiff but was receiving, or due to receive, payments from the defendant at fortnightly intervals, the delay may or may not have had an impact on the account as between the plaintiff and Monaveen.
155 A further matter raised by the plaintiff is that there might not be funds available to pay the plaintiff in a situation where Monaveen breached the Subcontract but the defendant chose to withhold payments rather than terminate the contract. The consequence of that choice would be that the plaintiff would continue to supply steel to Monaveen. Again, I cannot see the representational character of that choice. It seems to be a conclusion about which there could not be much dispute. But it has implicit within it a duty on the defendant to make commercial decisions about the exercise of contractual rights, if and when they arose, in such a way as would benefit the plaintiff. I just do not think that the situation supports such an implication. There was some evidence given by Hetherington of a conversation he had with Pell to the effect that it may have been kinder had the defendant terminated the contract earlier rather than allow Monaveen to suffer "a death of 1000 cuts". The defendant, the plaintiff and Monaveen were all making considered commercial decisions throughout the relevant period. No doubt, and with hindsight, they all wish that some of these decisions had been different. But that does not raise an implication of the type to which I have referred.
156 Some of the other matters canvassed in the evidence are relevant to this point. I am satisfied that Frew was aware of the so-called concrete problem. He may not have been aware of the details but he knew that there was a dispute between the defendant and Monaveen about it and that, from the defendant's perspective at least, it was a major problem. He also knew, certainly from November, that Monaveen was experiencing significant cash flow problems.
157 The final matter relates to the events of early and mid-December 1996. The plaintiff complains about the payments to creditors of Monaveen that are set out in par 10 of the statement of claim. It also complains that an agreement was made on or about 13 December 1996 between the defendant, Monaveen and Crew Sharp Pty Ltd as to weekly payments to be made in advance to Monaveen by the defendant pursuant to an agreed schedule.
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158 I accept the evidence of Frew and Manook that they were not specifically aware of the payment of $180,000 to P & O on 6 December 1996. Frew said that he was aware generally of Monaveen's cash flow position at the time but not of this particular issue. However, I think the P & O payment fits into a particular and peculiar category. Hetherington conceded in his evidence that P & O had threatened to turn the workers out of their accommodation and had they done so "that really would have been the end of that job for Monaveen". Even if the payment to P & O were contrary to an actionable representation there could be a causation issue in relation to loss. I say this because, by 6 December 1996, the supply schedule had all but been completed.
159 The other payments referred to in par 10 of the statement of claim all appear on the schedule of payments that Sharp showed to Frew around 16 December 1996. Several things are clear about this issue. By this time Frew was well aware that Monaveen was in a serious predicament. A rescue effort was being put in place. He knew about it, in fact he was part of it. I accept his evidence that Sharp put the payment schedule to him as a fait accompli. Nonetheless, he agreed to it. He did so by exercising his commercial judgment and taking into account the legal position. By that I presume he meant that had he forced the issue he may have put the plaintiff in a position where it had to disgorge previous payments. He may have felt somewhat powerless to do anything other than that which he did. But I am not sure how the fact of the 13 December agreement between Monaveen and the defendant can now be said to constitute, or add to, a representation of the pleaded type.
160 It must also be borne in mind that, so far as Monaveen was concerned, the December agreement with the creditors rehabilitated the company. At that time, so far as Sharp and Hetherington were concerned, Monaveen was able to complete its obligations under the Subcontract and thus comply with the payment schedule. There is no evidence that Tregea or Duncan had a contrary view. There is no evidence from which it could be inferred that the defendant's participation in the second variation was a sham. It would be somewhat surprising if the defendant were to pay out something in the vicinity of $850,000 between 16 and 31 December (as it did) unless the agreement was genuine.
161 I need to add one thing. Counsel for the defendant placed great stress on the wording of the letter of 13 December 1996: "Monaveen will satisfy [the defendant] that they have paid all invoices … that have become due for payment" (my emphasis). Counsel submitted that as a consequence of Frew agreeing to the payment schedule only $100,000 of
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- the $259,000 was then "due". He referred to Re Newark Pty Ltd (In Liquidation); Taylor v Carroll (1991) 9 ACLC 1592. The issue is whether, for testing the solvency of a company, a debt becomes "due" on the date originally stipulated for its payment or whether, if there is a course of dealing whereby a debt is not payable and the parties do not expect it to be paid until a future time, it becomes "due' at the future time. In Re Newark the Court held that it was the latter. However, Thomas J, at 1595 recognised that solvency was a question of fact to be decided as a matter of commercial reality in the light of all of the circumstances and not merely by looking at the accounts and making a mechanical comparison of assets and liabilities. At 1596 Thomas J noted some other authorities to the effect that the distinction depended on whether the creditor had held back because of some legal agreement (for deferment) or whether it had been because of the creditor's hesitation for commercial reasons to enforce its rights. His Honour went on to say:
"I do not think that any distinct legal question arises here as to the precise point at which a course of dealing or an understanding between a creditor and debtor allows it to be treated as a realistic basis for holding that a particular debt was not 'due'."
163 In my view there is no sufficient basis in par (c) of the particulars to par 14 to remedy the shortcomings that I have found to confront the plaintiff in establishing that the relevant conversations and letter constitute actionable representations or form the basis of an estoppel claim.
Other Matters
164 It will appear form what I have already said that I have found against the plaintiff on the simple basis that I do not think the relevant conversations and letters constitute a contract or that they provide a basis
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- for the TPA claim or the plaintiff's estoppel claim. It goes without saying that if no representations were made, they could not have been made negligently.
165 Had I needed to move on to consider reliance and causation I would have found in favour of the plaintiff on those issues. There is one possible exception to that general statement and it is in relation to whether loss was occasioned by the 6 December 1996 to P & O. Had the plaintiff succeeded in establishing one or other of its causes of action, I think it would have been entitled to judgment of $266,992.
166 I will make a couple of short (gratuitous) comments about the defence. The defendant's estoppel claim would not have succeeded. It proceeds on the basis (par 8B(d)) that the plaintiff represented to the defendant or alternatively permitted Monaveen to represent to the defendant that only $100,000 was then due. I have already indicated that I do not think that the plaintiff and Monaveen did agree that only $100,000 was then "due". There was no representation to that effect.
167 The final comment relates to the plea that if representations were made, the defendant had reasonable grounds on which to make them. Where a litigant alleges that it had reasonable grounds to make the representations that it did make as to future matters, the onus is on that litigant to establish the fact. The test is objective rather than subjective. Nonetheless, given the close proximity to the critical dates of the defendant's letters to Monaveen of 16 September 1996 and 3 October 1996, I think the failure of the defendant to call witnesses in support of the plea that it had reasonable grounds might have counted against it.
Conclusion
168 The question is: where should the loss fall? Monaveen has collapsed. Litigation is on foot in which Monaveen says that it is entitled to damages from the defendant. If it succeeds, the creditors of Monaveen (including the plaintiff) will benefit. On the other hand, the defendant says that Monaveen is liable to pay it damages arising from the Subcontract. This suggests that the defendant is out of pocket, presumably because it had to pay others to complete the Project. If it succeeds, its loss will diminish and the creditors of Monaveen will not benefit. But all of that is speculation. I have to deal with the situation that confronts the parties now. It has not been suggested that the plaintiff did not deliver the steel or that, for any other reason, Monaveen was entitled to withhold payment. Either the plaintiff sustains the loss which it
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- is currently facing from Monaveen's failure to pay or the defendant increases its exposure to costs incurred in the Project.
169 The plaintiff has called in aid the letter of 23 August 1996 but I think it is of no assistance. Nor do I think that the letter of 13 September 1996 can establish liability. It seems to me that the critical conversations which support the letter go no further than the "pipeline" analogy. The plaintiff is entitled to have the cumulative effect of the conversations and the letters examined: Pacific Coal Pty Ltd & Anor v Idemitsu Queensland Pty Ltd & Ors (1992) ATPR 46-094 . But having done so I am not persuaded that a cause of action has been established.
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170 SCHEDULE
(1) DATE OF STATEMENT | (2) AMOUNT | (3) DUE | (4) DATE PAID | (5) AMOUNT PAID |
31/08/96 |
|
|
|
|
30/9/96 |
|
|
|
|
31/10/96 |
|
|
19/12/96 |
|
30/11/96 |
|
| ||
31/12/96 |
|
| ||
28/02/97 |
|
|
(6) Dates of payments by Defendants to Monaveen And/or Monaveen's Creditors | (7) Sums paid to Monaveen and/or Monaveen's creditors by the defendant | (8) Sums owed to the plaintiff by Monaveen as of dates in column 6 |
6 December 1996 | $1,000,000.00 | $0 |
9 December 1996 | $436,845.30 | $0 |
16 December 1996 | $461,145.70 | $247,899.16 (pd $100,000 on 19/12/96) |
23 December 1996 | $216,206.00 | $147,899.16 |
31 December 1996 | $166,000.00 | $147,899.16 |
12 February 1997 | $68,257.00 | $237,997.58 |
20 February 1997 | $142,000.00 | $266,923.13 |
0
21
0