Eden Australasia Pty Ltd v Karneil Pty Ltd

[2024] NSWDC 366

District Court

New South Wales

Medium Neutral Citation:

Eden Australasia Pty Ltd v Karneil Pty Ltd [2024] NSWDC 366

Hearing dates:

30 April, 1 May and 2 May 2024

Date of orders:

29 August 2024

Decision date:

29 August 2024

Jurisdiction:

Civil

Before:

Cole DCJ

Decision:

(1) The plaintiff’s claim is dismissed.

Catchwords:

CONTRACTS — Breach of contract — Standard of proof

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104

Realestate.com.au Pty Ltd v Hardingham and Others; RP Data Pty Ltd v Hardingham and Others [2022] HCA 39

Category:

Principal judgment

Parties:

Eden Australasia Pty Ltd (Plaintiff)
Karneil Pty Ltd (Defendant)

Representation:

Counsel:
Mr D Allen (Plaintiff)
Ms T Harris-Roxas (Defendant)

Solicitors:
Kekatos Lawyers (Plaintiff)
WMD Law (Defendant)

File Number(s):

2022/133180

Publication restriction:

Nil

JUDGMENT

1. On 8 September 2021, Eden Australasia Pty Ltd (‘Eden’) entered into a contract in writing to purchase the property at 142-144 Imlay Street, Eden, New South Wales (‘the property’), from Karneil Pty Ltd (‘Karneil’) (‘the contract’).

2. Settlement took place on 10 March 2022, and Eden became the registered proprietor of the property.

3. The Hotel Australasia (‘the Hotel’), which is listed as a heritage item under the Bega Valley Local Environmental Plan 2013, is sited on the property.

4. In its statement of claim filed on 9 May 2022, Eden alleges that Karneil failed or neglected to complete the works set out in clause 53.1 of the contract and is therefore in breach of the contract.

The Trial

5. In the plaintiff’s case, evidence was given by Mr John Palasty, who was a Senior Consultant for Eden at the time of the events the subject of this matter. Three affidavits of Mr Palasty were provided (dated 3 March 2023, 23 March 2023 and 19 December 2023), with documentary evidence exhibited to each. Mr Palasty also provided a USB of photographs taken of the Hotel at various times.

6. Mr Peter Goncharouk, a labourer and sub-contractor, also gave evidence in the plaintiff’s case and provided two affidavits dated 3 March 2023 and 19 December 2023 respectively, with exhibits.

7. Mr Simon Mitchell, a carpenter and sub-contractor, also gave evidence in the plaintiff’s case. Mr Mitchell provided an affidavit dated 21 March 2023 with documentary evidence exhibited.

8. In the defendant’s case, an affidavit of Mr Timothy Wilson dated 8 June 2023 was read.

9. Mr Neil Rankin, who is one of two directors of Karneil, gave evidence in the defendant’s case. Mrs Karen Rankin, Mr Rankin’s wife, is the other director of Karneil. Mr Rankin provided an affidavit dated 17 August 2023 which had exhibited to it eight exhibits of documentary evidence.

The Contract

10. Eden’s claim concerns the terms of the contract described in [1] above.

11. The contract contained the following relevant clauses:

33.4   No merger

Notwithstanding Completion, any clause to which effect is not given or perfected by Completion and which is capable of taking effect after Completion does not merge on Completion but will remain in full force and effect.

…

36.1   Purchaser’s enquiries

(a)…

(b)   The purchaser warrants that the purchaser has relied upon the purchaser’s own enquiries in relation to the property and the purchaser accepts the property in its present state and condition and subject to all latent and patents defects as to which the vendor makes no warranty whatsoever and the purchaser will not be entitled to make any objections, requisitions or claims for compensation, to delay Completion or to rescind or terminate this Contract with regard to the state and condition of the Property [sic].

…

53.1   The Vendor must complete the following works on or before Completion:

(a)   Completion of the Front Façade as per the following Scope of Works:

(i)   Concrete ground floor veranda;

(ii)   Install steel columns to veranda;

(iii)   Install wrought iron railing to front veranda

(iv)   Render and paint front façade

(b)   Completion of the roof to the Building, as per the following Scope of Works:

(i)   Supply and install roof;

(ii)   Install rear facia and gutter to roof;

…

55.3   Entire Agreement

(a)   This contract constitutes the entire agreement between the vendor and the purchaser relating to the sale and purchase of the Property.

12. In the contract, “Completion” is defined as “completion of the sale and purchase of the Property pursuant to this Contract…”.

The Claim

13. In its statement of claim, Eden says:

5.   In breach of clause 53.1 of the Contract, to date the Defendant has failed to or has neglected to complete the works in accordance with clause 53.1 of the Contract.

6.   As a consequence of the Defendant’s failure to perform the works, the plaintiff has suffered loss and damage including the cost for the Plaintiff to complete the works. Particulars of which are set forth hereunder:

Particulars

I.   Concrete ground floor veranda                 $48,000.00

II.   Steel columns to veranda                        $22,500.00

III.   Wrought iron railing to front veranda      $25,000.00

IV.   Render and paint on front façade           $26,000.00

V.   Supply and installation of roof                 $25,000.00

VI.   Rear facia and gutter to roof                  $ 3,500.00

Total                    $150,000.00

14. During the hearing, on 1 May 2024, Eden provided a Schedule of Damages which did not align with the particulars in the statement of claim. The Schedule of Damages lists thirty-two items, most, but not all, of which were cross-referenced with a document included in an exhibit to an affidavit of Mr John Palasty. A slightly amended copy of the Schedule of Damages was provided with the plaintiff’s written submission. The total amount now claimed is $177,962.08, plus costs.

The Defence

15. In its defence, Karneil denies that it failed or neglected to complete the works set out in clause 53.1 of the contract. Karneil pleads that it completed the works in compliance with the contract. Karneil also pleaded that all rights under the contract merged upon the completion of the contract on 10 March 2022, but that argument was not pressed at the trial.

16. Karneil denies that Eden is entitled to the relief claimed or any relief.

Onus of proof

17. Eden bears the onus of proof on the balance of probabilities.

Interpreting the contract – what is the vendor required to do under clause 53.1?

18. Eden argued that the “operative” words in clause 53.1 are “Completion of the Front Façade” and “Completion of the roof”.

19. Eden argued that “Completion of the Front Façade” constituted what it called a “Primary obligation”, although there is no reference to those words in the context of clause 53.1 in the contract, and the term is not defined in the contract. I note that the term “Principal obligation” appears in clause 40.6 in an unrelated context.

20. Eden argued that the words “as per the following Scope of Works” indicate matters to be done, among other things, to attain the “Primary obligation”. It was said, in Eden’s written submission:

6.   …They do not make the earlier words redundant. They do not limit nor qualify the Primary Obligation. They mean, the front façade is to be completed and, “the work for this to be done includes the following…”.

7.   A reasonable person construing the words at the time would be aware:

a.   Both parties shared the common goal of restoring a heritage building.

b.   The façade was near completion and the roof work was being done.

c.   It was of benefit to the plaintiff to have both those stages completed by the defendant and Rankin wanted to complete the job. The price reflected the defendant was to finish the works.

8.   A reasonable person would not read the clause, in the circumstances of the façade works being begun by Rankin, being near completion and requiring completion, to limit the work to be performed.

21. Karneil submitted that Eden changed its case in the course of the hearing, in that the allegations in the statement of claim related only to the works set out as part of the “scope of works” in relation to both the front façade and the roof in clause 53.1, and yet, by the end of the written submissions, Eden was claiming that Karneil was responsible for completing all of the works required to complete the front façade and the roof.

22. Karneil submitted that the words of clause 53.1 of the contract are unambiguous. The words “as per” indicate that the works itemised constitute “Completion of the Front Façade” in the case of clause 53.1(a) and “Completion of the roof to the building” in the case of clause 53.1(b). There is no suggestion in the words of clause 53.1 that Karneil was intended to be bound to complete works not specified as within the “scope of works” with respect to the front façade or the roof.

23. Karneil argued that the interpretation of clause 53.1 of the contract argued for by Eden could not be correct, because the contract does not otherwise specify what would constitute the completion of the front façade or the completion of the roof.

Consideration of the meaning of clause 53.1

24. The phrase “as per” is defined in the Cambridge Dictionary (online) to mean “according to the instructions”. The Collins English Dictionary (online) and the Merriam-Webster Dictionary (online) both define “as per” to mean “according to”. The Macquarie Dictionary (online) does not define “as per” but defines “per” to mean “through; by; for each” and “through the agency of”.

25. Eden did not cite any reference to support its assertion that “as per” means “the work for this to be done includes the following”. The dictionary definitions support Karneil’s interpretation of clause 53.1 of the contract.

26. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 French CJ, Hayne, Crennan and Keifel JJ said, at [35]:

35.   Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean[36]. That approach is not unfamiliar[37]. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract[38]. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating"[39]. As Arden LJ observed in Re Golden Key Ltd[40],unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties ... intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience"[41].

27. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, French CJ, Nettle and Gordon JJ said at [46]-[51]:

46.   The rights and liabilities of parties under a provision of a contract are determined objectively[19], by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose[20].

47.   In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean[21]. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract[22].

48.   Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning[23].

49.   However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating"[24]. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.

50.   Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations[25].

51.   Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result"[26]. Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience"[27].

28. In  Realestate.com.au Pty Ltd v Hardingham and Others; RP Data Pty Ltd v Hardingham and Others [2022] HCA 39 Gordon J said, at [43]-[44]:

Principles

43 The rights and liabilities of parties under a contract – whether oral, in writing, or partly oral and partly in writing – are determined objectively. The concern is "not with the real intentions of the parties, but with the outward manifestations of those intentions". As this Court said in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd:

It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean.

And where the contract is commercial, it is necessary to ask what reasonable persons engaged in the respective businesses of the parties would have understood the words and conduct to mean.

44 As this Court held in Toll, a person who signs a contractual document conveys a representation to a reasonable reader of that document that the person has read and approved its terms or is willing to take the chance of being bound by its contents. If the document on its face appears to be a complete contract, it will contain the whole of the contractual terms. Extrinsic evidence cannot be adduced to subtract from, add to, vary or contradict those terms, except in limited circumstances. And a term will be implied only if, among other things, it is necessary to make the contract work.

29. In his affidavit of 3 March 2023, Mr Palasty said that he had a conversation with Mr Rankin in late August of 2021. Mr Palasty said, at paragraph 8 of his affidavit:

We negotiated the terms of the contract for sale of land with the following words to the effect of:

Neil Rankin:   I have all the necessary skills and contractors to finish the outside. I can get it finished if you pay me $150,000. We can document this in the contract.

John Palasty:   Okay.

Neil Rankin:   I have a lot of materials which is key to the façade, stored at my house and other places.

John Palasty:   Okay, but I also want the terms to be reflected in the contract, and everything that you removed from this project, I need it returned, including windows, artworks and any other items that you have.

Neil Rankin:   I have stored everything at Womboyne, Snugcove and garage, and I will return it. I also own the scaffolding here, which is at the front part of the hotel. I have agreed to sell my scaffolding to Neil Baker, as he is the owner of the scaffolding in the back part, and he has agreed to offset any charges in lieu of the back. So, he will not charge you anything for the back part scaffolding that I am renting.

30. Mr Rankin responded to Mr Palasty’s account of this conversation in his affidavit of 17 August 2023 at paragraphs 208 – 214, saying, relevantly:

209.   …I deny that at anytime was there any agreement that John and/or the Plaintiff would pay me and/or the Defendant an additional $150,000 to complete the “outside”. Neither the Defendant or me (in my personal capacity) have received any money from the Plaintiff (or any entity associated with the Plaintiff) to complete the “outside”.

210.   As to the allegation that I said, words to the effect, that I have “stored everything at Womboyne, Snugcove and garage” is not correct. I do not know anyone in Womboyne and no materials or items have ever been stored in that region.

211.   I do recall saying to John at some stage prior to exchange of Contracts in or around August 2021, words to the effect, “I’ve got the iron lattice work, with the mantel piece and stain glass windows at my place. Some of the timbers are stored on the Snug Cove site. I’ll leave those on site as agreed. The material costs are not part of the sale, but I’ll give them to you at no charge.” I recall at the time, John did not express any objection to me.

31. In cross-examination, Mr Rankin denied estimating that the work to complete the roof and the front façade would cost $150,000, and he denied telling Mr Palasty that the work would cost $150,000.

32. Mr Rankin also said, in his affidavit of 17 August 2023:

37.   On 11 August 2021, I received an email from John to which a document titled “Purchase offer Australia Hotel” was attached. A copy of that email and the document titled “Purchase offer Australia Hotel” is exhibited at page 63 of Exhibit NR-4. In this document, the purchaser of the Australasia is identified as “Core assets and Developments Eden Pty Ltd” and not the plaintiff [sic].

38.   I did not sign that document in any capacity (that is, either in my personal capacity or as a director and on behalf of the defendant). The Defendant did not agree to the terms proposed in the document.

39.   On 24 August 2021, the solicitor for the defendant sent a letter to Kekatos Lawyers in relation to the purchase of the Australasia from the defendant. At the time and on this letter, the purchaser is identified as “Core Asset Investments Pty Ltd” and not the plaintiff. The letter enclosed a draft contract for the sale of the Australasia. A copy of that letter is exhibited at page 66 of Exhibit NR-4.

40.   The letter dated 24 August 2021 includes a link to the draft contract. That link has expired and the draft contract cannot now be accessed.

41.   The Defendant agreed to do certain works after contract for the sale of the Australasia was exchanged and before settlement of the sale of the Australasia.

42.   Around this time, I recall saying to John, words to the effect, “I’ll do the concrete on the ground floor veranda and install the steel columns and wrought iron railing. I’ll do the render and paint the front façade and supply and install the roof, roof façade and gutter to the roof. I can get that included in the contract.” I recall John saying to me, words to the effect, “Okay” [sic].

43.   Subsequently, the works I agreed (on behalf of the Defendant) that the Defendant would perform prior to settlement of the sale of the Australasia were set out in the draft contract and remain unchanged in clause 53.1 of the Contract. In other words, the Plaintiff (and for that matter, Core Asset Investments Pty Ltd and Core assets and Developments Eden Pty Ltd) did not request any amendment to clause 53.1 between receiving the draft contract and exchange of the Contract with the Plaintiff of 8 September 2021.

33. The “Purchase offer Australasia Hotel” referred to by Mr Rankin in paragraphs 37 and 38 of his affidavit as a document which neither he nor the defendant agreed to, included, under the heading “Conditions Precedent” the words:

Vendor will finish façade and new roof and provide a scope of its works.

34. In cross-examination, Mr Palasty said that there were many conversations between him and Mr Rankin in about August 2021, leading up to the exchange of contracts.

35. In his affidavit of 3 March 2023, Mr Palasty said:

18.   In mid-to-late December 2021, being approximately around the time when the first week of invoices and wages became due and payable for the workers engaged in the project for the Property, Neil and I had a conversation with words in the following effect of [sic]:

Neil Rankin:   I can’t use my bank accounts.

John Palasty:   Why?

Neil Rankin:   I have split up with my business partner in Rankin Builders, and if I put any money into that account, and/or use that account, then my business partner, Don Hanson, will question and not allow it to happen, or take half my money.

John Palasty:   Okay, I can do whatever you want. I will pay all the workers on site and anything else required on the project, and we will adjust these at settlement. If I pay everything, then you need to hand back the $150,000 at settlement.

Neil Rankin:   Okay.

36. Mr Palasty also gave an account of a conversation he said that he had with Mr Rankin after mid December 2021, but prior to settlement on 10 March 2022:

23.   I was becoming more concerned with what would happen to the Works on the front façade if it was not completed by settlement. I had another conversation with Neil using words to the following effect of [sic]:

John Palasty:   What are we doing with the $150,000?

Neil Rankin:   I will start going through my records of what I have paid.

24.   A day before settlement, Neil had still not produced the records. As such, I was getting extremely concerned and had a heated argument with him, demanding he account for the funds. During the conversation, Neil said words to the following effect of:

Neil Rankin:   Leave it with me, I will check all my records for what I have paid, and I reassure you, if there is a difference. [sic]

37. In cross-examination, the following exchange took place with Mr Rankin:

Q.   Did you have a conversation with Mr Palasty in mid-December 2021, where you said to Mr Palasty that you can’t use your bank accounts?

A.   No. That wasn’t - no. False.

Q.   Did you ask Mr Palasty to pay money that the plaintiff was going to pay you, into your wife’s account?

A.   Yes.

Q.   Did you have bank accounts at the time?

A.   Several.

Q.   There’s no reason why the payments to you could not have been made into your own bank account, correct?

A.   I’ll need to explain myself.

Q.   Can you just answer the question, please?

A.   No, they can’t.

Q.   During the period mid-late December 2021, Mr Palasty said to you words to the effect that he’d pay the workers onsite and anything else required in the project, and that you and him would sort out an adjustment to the purchase price.

A.   Definitely not.

Q.   Is it the case that, at a later point in time, there was a conversation where Mr Palasty said, “What are you doing with that $150,000?”

A.   Definitely not.

Q.   You replied that you would start going through your records and sort out what you had paid for, the works being performed under clause 53 of the contract?

A.   Definitely not.

Q.   You later said to Mr Palasty that, “Leave it to me. I’ll check my records and see what I’ve paid for, and reassure you there’s a difference”?

A.   No.

38. In re-examination, Mr Rankin said the following:

Q.   Mr Rankin, you were asked some questions about payments made to you which were paid into your wife’s account. Do you remember those questions?

A.   Yes.

Q.   What payments were they?

A.   Payments for work that I’d done. I had worked from September 8 right through to the December, mainly – not so much on my work on the outside, but mainly on the inside, taking all the internal walls down and the – the mono props, which I’d purchased myself from Canberra and put big steel beams and props in it, took all the internal walls out inside the building, which was something like a 2, $300,000 project which I had the skills to do and I –

…

A.   …John wanted payments that I’d – I’d the Karneil was a company, one of our accounts, and I thought I’d put it in – into Karen’s – it was – John was offering me 2 and a half thousand dollars a week, and I said, well, I’ll put that in – in Karen’s account, because Rankin Builders – and then my partner, Don Hassan – who could not stand the Australasia or John, or anything to do with it – wanted to have nothing to do with the project, so that’s why myself and Karen opened up a company and passively done the work ourselves, so I simply just put it into Karen’s account, and that just stopped the muddy – stopped the muddy water for putting it into Rankin Builder’s account.

39. The relationship between Mr Palasty and Mr Rankin deteriorated subsequent to the settlement of the contract on 10 March 2022, largely over the difference of views as to what work Karneil was liable to perform and pay for under the contract.

40. On 19 April 2022, Mr Palasty sent an email to Mr Rankin effectively severing the relationship. The email also said:

I further have asked our solicitors to immediately commence proceedings in recovery of the $150,000 paid to you pursuant to the contract of sale of the Australasia and require proper accounting and taxing of the costs you were paid but works you did not carry out.

41. In cross-examination, Mr Palasty agreed that there is no mention of a payment to Mr Rankin of $150,000 in the contract. Mr Palasty clarified that he had assumed that there was a clause in the contract regarding the sum of $150,000, but, in fact, there was not (transcript p 27 and 28). Mr Palasty said (transcript p 28):

The original negotiation in relationship to this contract was the purchase of the Australasia Hotel at $1.5 million. I increased that price by $150,000 because of that conversation and that’s how the number 1650 came up.

42. The sale price for the property under the contract was $1.65 million.

43. Mr Palasty believes that $150,000 of the $1.65 million paid at settlement was not consideration for the transfer of title to the property but represented a payment to Karneil for the works performed under clause 53.1 of the contract.

44. I have set out, above, the conversations relied upon as context for the interpretation of clause 53.1 of the contract.

45. It is clear from the three High Court judgments cited above that, in interpreting clause 53.1 of the contract, the task is to determine what a reasonable businessperson would have understood that clause to mean, in context. In the present context, the reasonable businessperson would be a property developer, or similar. The task of interpretation of the clause and the contract requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose of the contract. The background of the contract is relevant to determining its commercial purpose. A construction which is commercial nonsense or works commercial inconvenience is to be avoided. The actual intentions and expectations of the parties is not relevant. The task of construing a contract is concerned not with the real intentions of the parties, but with the outward manifestation of those intentions, as set out in the contract.

46. As I have said, in [24]-[25] above, the meaning of the phrase “as per” is “according to”. There is no support for the assertion on behalf of Eden that “as per” means “the work for this to be done includes the following”.

47. There is no warrant in the contract, from the events leading up to the contract, or from any other part of the context of the contract, for characterising the words “Completion of the Front Façade” and “Completion of the roof to the Building” in clause 53.1(a) of the contract as “Primary obligations”.

48. The word “scope” means “range” (Cambridge Dictionary (Online)). The Collins English Dictionary (Online) says “The scope of an activity, topic, or piece of work is the whole area which it deals with or includes”. The Merriam-Webster Dictionary (Online) says, relevantly, that “scope” means “extent of treatment, activity or influence”.

49. The terms “as per” and “scope of works” are not defined in the contract.

50. The literal meaning of the words “Completion of the Front Façade as per the following Scope of Works” is the completion of the front façade according to the following range or extent of works. A Scope of Works sets out the whole extent of the works to be performed.

51. The literal meaning of the words “Completion of the roof to the Building, as per the following Scope of Works” in clause 53.1(b) of the contract, similarly, means the completion of the roof to the Building according to the following range or extent of works.

52. There is nothing in the surrounding circumstances or the background of the formation of the contract which points to an interpretation other than the literal interpretation of the words used. I take into account the shared goal of the parties to restore the hotel.

53. Eden argued, in effect, that the works Karneil was required to perform under clause 53.1 cannot have been confined to the four items listed in clause 53.1(a), or the two matters listed in clause 53.1(b), because the completion of those items would not “complete” the front façade or the roof, respectively. For example, Eden sought to include the tiling of the veranda, by inference, in clause 53.1(a) and the drilling of holes for a downpipe in clause 53.1(b). I reject Eden’s argument. The “completion” of a front façade or a roof can mean different things from different perspectives. A carpenter will consider that they have “completed” their scope of work on a façade or a roof from a different perspective to a plumber, for example. A “scope of works” clarifies and describes the particular works to be carried out. There would be no need to include a “scope of works” in this context, otherwise. There is no warrant for reading in the words “including but not limited to” after the words “Scope of Works” in clause 53.1(a) or (b). The interpretation argued for by Eden would create uncertainty, and therefore commercial inconvenience, as the contract does not contemplate what constitutes “completion”, which, by itself, is an uncertain term in the context of a building project.

54. Had the parties agreed that the works to be performed were to be the works required to bring the building into conformity with the development approval of a nominated date, it would have been a simple matter to say so in the contract. I note that there is evidence that the development approval provided for a wooden floor to the veranda, rather than the tiling which was done.

55. Karneil was required, by clause 53.1(a) of the contract, to concrete the ground floor front veranda, instal steel columns to the front veranda, instal wrought iron railing to the front veranda and to render and paint the front façade. Karneil was further required, by clause 53.1(b), to supply and instal the roof and to instal the rear facia and gutter to the roof.

56. Mr Rankin, in his affidavit of 17 August 2023, said, at paragraph 56:

56.   All the Vendor Works were completed by settlement of the Contract on 22 March 2022.

Has Eden established that Karneil is in breach of contract?

57. Eden argued that, if contractors and materials were paid for by Eden, such a payment evidences a breach of the contract by Karneil because the work and material should have been provided at Karneil’s cost, under clause 53.1.

58. Given the determination set out in [55] Eden’s argument only holds good for work which was undertaken and materials which were used in the work set out in clause 53.1 of the contract.

59. Eden set out the payments it is seeking as damages in its Updated Schedule of Damages. One version of this was provided in the course of the trial on 1 May 2024, and a further version was provided, without leave, with Eden’s written submissions in reply.

The Financial documents, including invoices

60. In Mr Palasty’s affidavit of 24 March 2023, he says:

4.   Top Class Constructions Pty Ltd (ACN 621 721 757) (“Top Class”), is a company associated with Eden. I am also the Site Manager employed by Top Class, for the Australasian Hotel.

5.   Core Asset Development Pty Ltd (ACN 644 206 324) (“Core”) is a company associated with Eden.

6.   Some contractors were paid by Top Class or Core as indicated below. When this was done, a debt was raised in the books of the Company and a corresponding credit was raised in either Top Class’s or Core’s books. I was the person who raised the debt and corresponding credit.

7.   I have obtained from the records kept by Eden, invoices issued by Eden to various contractors. Eden has paid all invoices referred to in this Affidavit. All of the invoices were for work performed on the façade of the Australasian Hotel. I supervised and saw the work to which invoices relates being performed. I was the person who received the invoices and approved payment.

61. I will refer to the financial documents relied upon by Eden to prove its claim by the numbers assigned to them in the document entitled “Plaintiff’s Issues and Updated Schedule of Damages”.

Document 1

62. Eden claims the amount of $1,722.46, evidenced by a receipt from the ANZ bank which says that Australasian Eden paid that sum to South Coast Brick Roofing Pty Ltd on 17 September 2021. There is a handwritten note on the document which says, “Roofing Materials Bricks Front Façade and Roof Main”. In his affidavit of 24 March 2023, Mr Palasty says:

13.   Exhibited hereto at page 8 of Exhibit JP3 is a true copy of Top Class’s ANZ Bank Statement, dated 17 September 2021, paying the sum of $1,722.46 to a subcontractor.

63. The handwritten note indicates that the payment was for building materials, and does not match Mr Palasty’s description, in his affidavit, set out at [62], above, of what the payment was for, namely for a “subcontractor”. There is no reliable, direct evidence to connect this payment to the work Karneil was required to perform under clause 53.1 of the contract (CB p 390).

Document 2

64. Eden claims $1,050 paid to Mr Marson, evidenced by a receipt from the ANZ Bank, which shows that there was a payment of that amount from a cheque account to Lachlan Marson on 24 September 2021 with the reference “New Invoice”. There is a handwritten note on the receipt which says “Simon Mitchell and Lachy Front Façade”. In his affidavit of 24 March 2023, Mr Palasty says:

14.   Exhibited hereto at page 9 of Exhibit JP3 is a true copy of Top Class’s ANZ Bank Statement, dated 24 September 2021, paying the sum of $1,050.00 to a subcontractor.

65. There is no direct evidence to connect this payment to the specific work Karneil was required to perform under clause 53.1 of the contract (CB 391). The entire hotel was renovated and work was being undertaken in many areas at once during the renovation.

Document 3

66. Eden claims $3,905.00 on the basis of an invoice dated 24 September 2021 from North Eden Timber Pty Ltd to Top Class, with the description “Ironbark 42 x 19 dressed with arrissed edges”. There is a handwritten note on the invoice which says, “Front Façade”. In his affidavit of 24 March 2023, Mr Palasty simply describes the invoice.

67. There are photographs in evidence showing ironbark battens being installed on the ceiling of the veranda and the balcony. This is not work that Karneil was required to perform under clause 53.1 of the contract.

Document 4

68. Eden claims $825.50 on the basis of an invoice from CA and GJ Cooper dated 27 September 2021 to John Palasty C/- CADPL for that amount. There is a handwritten note on the invoice which says, “Front Façade All”. The description on the invoice says:

Hotel Australasia

Fabricate from rough sawn 150 x 50 hardwood,

Door Jamb sets with Glass high light window reveal including bead sets

for glass (by others).

2 complete Sets 2500h x 950w x 140d

Delivery to site

69. In his affidavit, Mr Palasty simply described the invoice. It has not been established that this invoice is for work Karneil was required to perform under clause 53.1 of the contract.

Document 5

70. Eden claims $163.88 on the basis of a cash sale receipt from Bristol Paint Specialist dated 8 October 2021. On the receipt, the words Interface Scourer – Green appear, with Qty 50, price 3.28 and GST 14.90. A discount of $8.62 has been applied. There is no direct, reliable evidence that this invoice relates to work Karneil was required to perform under 53.1 of the contract.

Document 6

71. Eden claims $852.56 on the basis of an invoice from Ocean2earth Australia Pty Ltd to Top Class dated 13 October 2021. The description on the invoice is “Skip bin empty” and “Tip fees”. There is a handwritten note on the invoice which says “Front façade strip out rubbish”.

72. There is no direct evidence to link this invoice to the work Karneil was required to perform under clause 53.1 of the contract.

Document 7

73. Eden claims $6,945 on the basis of an ANZ lodgement receipt dated 22 October 2021. Eight transactions, totalling $12,068.84 are recorded on the lodgement receipt. A handwritten note on the lodgement receipt lists the names Mark Upton, Lachlan, Simon and Drew and the words “Front Façade” are written after Drew. A transfer to Mark Upton of $1,925 and a transfer to Lachlan Marson of $1,400 are recorded on the lodgement receipt. There are no entries in the name of Simon or Drew.

74. There is no direct, reliable evidence that these payments related to work that Karneil was required to perform under clause 53.1 of the contract.

Document 8

75. Eden claims $2,365.12 on the basis of a tax invoice dated 26 October 2021 from Ocean2earth Australia Pty Ltd which itemises “Skip bin empty” at $800 for two at $400 and “tip fees” at $1,350.11 for one, giving a total of $2,365.12. There is a handwritten notation on the tax invoice which says “Front Façade Part Only”. Between the words “Façade” and “Part”, “& Roof” has been written in and then crossed out.

76. There is no direct, reliable evidence that this payment related to work that Karneil was required to perform under clause 53.1 of the contract.

Document 9

77. Eden claims $495 on the basis of a tax invoice dated 29 October 2021 from Eden Glass & Aluminium. The description on the tax invoice is “Reglaze timber sash with 4mm glass”. The handwritten note on the tax invoices says, “Front Windows Facing Imlay St Front Façade”.

78. Karneil was not required to acquire or instal the front windows under clause 53.1 of the contract. Karneil is not liable for this invoice.

Document 10

79. Eden claims $770 on the basis of a statement dated 31 October 2021 from Condrill to Top Class Building. The description on the statement is “Balance forward”. The handwritten note on the statement says “Core Hole for Downpipes Roofing Front Façade & Balconies”.

80. Mr Palasty said, in cross-examination, that this expense was for the drilling of a hole in the balcony floor to allow for a downpipe to run from the roof gutter to the ground. Mr Rankin agreed that this work was done.

81. This work is not part of the scope of works set out in clause 53.1 and Karneil is not liable to pay for it.

Document 11

82. Eden claims $1,016 on the basis of a tax invoice dated 5 November 2021 from Eden Concrete to “Core Assetts & Development”. The description on the tax invoice is “15/10/21 DKT 14455 Supply Concrete 4MTRS 32MPA To Hotel Australasia This was previously invoiced to Todd Bolton sorry”. The handwritten notation on the tax invoice says “Todds Concrete To Support Columns Front Façade 32mpq”.

82. In evidence, Mr Palasty said that “Todd” was the concreter, and that 32MPa was the strength of the concrete.

83. The following exchange took place in cross-examination with Mr Palasty (transcript 1 May 2024 p 34):

Q.   You say that this material was for the base of the columns?

A.   It wasn’t necessarily the base. It was the front façade of the building, the concrete strip that was formed in front of it, to support the balcony at the front. And it could have been used into the steps, as well. So this was at the front. I put columns there, front façade. I deemed it as one area all the way along.

…

Q.   You say that this concrete would have perhaps been used for the base area of the steel column; is that right?

A.   Not quite. The building technique on that project was simple. You needed to do one column at a time because that beam covered the whole front section of that building, and, as a matter of clarification for it, there were five or six beams there, or five beams there, and each one had to be then propped up while the concrete – while the first one was set. Then we had to do the next one and the next one, and the next one, and it took a period of time to do that. Otherwise, structurally, it would be unsound, it’d be too dangerous; the whole front would collapse.

…

Q.   Just on that invoice from Eden concrete, that invoice, who paid for it?

A.   One of the companies. I would say, either Core Assets, Top Class – there was Eden Australasia set up at the time. There were numerous bank accounts. I passed those – I’d pass those invoices off to our accountant and she would process it and make the payment.

85. Mr Rankin exhibited three invoices from Eden Concrete to Rankin Builders, stamped as having been received on 14 October 2021, 19 October 2021 and 25 October 2021. The descriptions on each of the invoices are, respectively:

12/10/21 DKT 14434 Supply Concrete 1.2 MTRS 32MPA To Hotel Australasia Job Ref: Front Step Ordered by: Biggs

19/10/21 DKT 14480 Supply Concrete 2 MTRS 32MPA To Hotel Australasia

21/10/21 DKT 14503 Supply Concrete 1 MTR 25MPA To Hotel Australasia Ordered by: Peter

86. I assume that the reference to, for example, 1.2 MTRS, means 1.2 cubic metres of concrete.

87. In his affidavit of 17 August 2023, Mr Rankin says that Rankin Builders paid the three invoices, and that Karneil reimbursed Rankin Builders.

88. The project being supervised by Mr Palasty involved the renovation of the entire Hotel. Concrete was used both inside and outside of the building.

89. Mr Rankin has exhibited to his affidavit, in NR3, photographs showing the concreting work being performed on the front veranda on 15 and 19 October 2021, including the concreting of the front steps.

90. In his affidavit of 17 August 2023, Mr Rankin says, of the concreting of the front veranda:

70   Most of the invoices pertaining to this work are exhibited at pages 14-20 of Exhibit NR-8. The Plaintiff was not charged for this work by the Defendant.

91. It is unlikely that both parties ordered and paid for roughly the same quantity of concrete for the front veranda and steps at nearly the same time. Clearly, both concrete orders were not required for the front veranda. It is more likely that Rankin Builders’ concrete orders were for the front veranda and steps and Core Assets and Development’s order was for a different part of the Hotel. I prefer Mr Rankin’s evidence on this point to Mr Palasty’s. Mr Rankin was paying more detailed attention to what was occurring in relation to the work Karneil was required by the contract to undertake.

92. Eden has not proven on the balance of probabilities that this invoice was referable to works that Karneil was bound to perform under clause 53.1 of the contract.

Document 12

93. Eden claims $405.90 on the basis of a tax invoice dated 15 November 2021 from Tattam Express Pty Ltd. The description on the invoice is “2 x pallets from Renditions tiles to Australasian Hotel Eden”. The handwritten note on the tax invoice says “14 Part Delivery Façade”.

94. As I have said, Karneil was not bound to tile any part of the façade under clause 53.1 of the contract.

Document 13

95. Eden claims $6,644.40 on the basis of a tax invoice from North Eden Timber Pty Ltd dated 2 December 2021. The description on the tax invoice is Quantity 27 of Ironbark 175x175 Dress to 160x160 9/3.0 Pk#17755 (total $3,829.09), Quantity 27.6 of Ironbark 190x70 7/3.6 ½.4 Pk#17756 (total of $2,170.36) and Freightloc Delivery to the Australasia Eden ($40.91). The words “Front Façade” appear in handwriting on the tax invoice.

96. In cross-examination, Mr Palasty said that the handwriting on the tax invoice was his. He further said that the timber was for the top balcony area of the front façade. He said that the timber was structural and that it was used on the “front awning part, where the fascia would be” (transcript 1 May 2024 p 31 – 32). Mr Palasty agreed that the timber was not for use for the work listed in clause 53(1)(a) but said that it was “part of the roof, which is the balcony roof itself. It’s just part of the roof”. The following exchange took place:

Q.   Photo 24.

A.   Yes.

Q.   In this photo, do you see depicted the ironbark timber?

A.   The bearers that come across there, they’ve been cut up and they’re coming across, yes.

Q.   I’m sorry? Can you –

A.   They’ve got a bugle screw at the top of them. You’ve got a bottom plate over there and you’ve got a bugle screw. You can see the screw there, the bugle screw. It’s the rafters that are coming up that way, and there would have been rafters underneath that bugle screw, all the way along, as well, holding it together.

Q.   Going to the invoice from North East Timber, what is the date of that invoice?

A.   02/12/2021.

Q.   Was the timber delivered around that date?

A.   I’m not sure. It could have been delivered before. We may have had 30 days before that. I’m not sure. I had a relationship down there. We paid our bills and we had a great relationship down with the timberyard. I’m not sure.

Q.   Returning to photo number 24.

A.   Yes.

Q.   24, where you could say, “You could see the timber”.

A.   Yes. Sorry, I’m looking at the bottom of my one, as opposed to the – it’s covered up with the identification marking. Go ahead. Yes.

Q.   What if I was to put to you that that photo was taken in February 2021?

A.   I deny that. I deny that and – go ahead.

…

Q.   I put it to you that that timber is not what you say it was used for.

A.   No, not at all. These photos are undated. I don’t know where they’ve come from but they’re all undated.

Q.   Returning to the tax invoice by North Eden Timber Pty Ltd, who paid for that tax invoice?

A.   It would have been one of the companies in our group. I’m not sure which one. It could have been Core Assets. There were ten companies within that group and the accountants would pay from whichever company they wanted to pay.

97. I reject Mr Palasty’s evidence with respect to this invoice. It is clear from the photographs provided by Mr Rankin that the structural work on the awning over the first floor balcony was complete well before December of 2021 (see photograph 86 of NR 3, which was taken on 28 October 2021). A photograph marked as having been taken on 11 August 2021 and tendered as an exhibit to Mr Palasty’s affidavit of 3 March 2023 (JP2) shows this also.

98. Eden has not established on the balance of probabilities that this invoice relates to works that Karneil was bound to perform under clause 53.1 of the contract.

Document 14

99. Eden claims $3008.50 on the basis of a tax invoice dated 10 December 2021 from South Coast Brick & Roofing Pty Ltd. The description on the invoice in relation to the item costing $3,008.50 is “Extra Pre Primed Timber Double Hung Double Glazed Window x 1 as estimate: 36874”.

100. Karneil is not liable for the cost of this invoice because it does not relate to work that Karneil was bound to perform under clause 53.1 of the contract.

Document 15

101. Eden claims $300 on the basis of a tax invoice dated 13 December 2021 from Lance Ogier. The description on the tax invoice is “brick cleaning hr rate”. The handwritten note on the tax invoice says “Acid Wash”.

102. There is no evidence to link this invoice to Karneil’s obligation under the contract.

Document 16

103. Eden claims $3,738.63 on the basis of an “Order Confirmation” dated 17 December 2021 for “Ply 2400 x 1200 x 17mm CD Grade Structural”, quantity 57, unit price $59.63. The handwritten note on the document says “Front Façade Formwork Concrete to Front Balconies”. The “Order Confirmation” says “Date Required” is 20 December 2021.

104. Photographs provided by both Mr Rankin (see p 1,105 of the Court Book) and Mr Palasty (see JP2 photograph taken on 28 October 2021) establish that the façade formwork was in place by October 2021 and there is no reason to think that further formwork was required two months later. I accept Mr Rankin’s evidence that the concreting of the front veranda took place between 27 August 2021 and 21 October 2021.

Document 17

105. Eden claims the sum of $5,900 of payments to contractors, based upon a document entitled “ANZ View past payments/transfers”. The ANZ account the subject of the document is a cheque account in the name of Top Class Constructions. The document says, close to the top of the first page, “This page shows the details for the payment made on 17/12/2021”. A handwritten note on the first page says “Various Workers Payments to Front Façade”.

106. Eden claims that Karneil is liable for the following payments, made by Top Class Constructions and recorded on the ANZ document. I have also set out, in brackets, the handwritten note made after each name:

Mark Upton (Render front)            $2,200

Lachlan Marson (Concrete steel with Simon)   $840

Paul Helmore (Labourer Jack Hammering)       $1,600

Speedy (Bricklaying to Front Façade)      $1,260

107. Mr Palasty said, of the ANZ document, in the course of cross-examination (transcript 1 May 2024 p 41):

A.   There’s an invoice there and that’s why I recall this work here. There’s an invoice there from Speedy. Speedy is a 75-year-old bricklayer in town. He has the nickname of Speedy in there. He was working and there’s photos in there that I’ve seen. He was working in there, bricking up brickwork at the time, on the front façade, and that’s how I’ve identified what everybody was doing on that day. That was the best of my recollection on that day.

Q.   Bricklaying to front façade, however, isn’t listed under 53.1, is it?

A.   The requirement to get the bond back, of $20,000, that was given in relationship to this project that Mr Rankin undertook to give to the council to finish off the façade required the front façade to be completed, and it formed part of the front façade. You can’t render, you can’t do any of this without all that work being done.

Q.   Answer the question. Bricklaying to the front façade is not one of the items in clause 53.1, is it?

A.   It’s not specific on that particulars – it’s not specific.

108. In cross-examination, Mr Rankin agreed that a jackhammer was used to remove the brick concrete columns which were at the front of the Hotel. A jackhammer was also used on the front steps, to remove some rendering and to remove some brickwork. Mr Rankin also agreed that recycled bricks were used during the restoration of the front façade.

109. I have accepted Mr Rankin’s evidence that the concreting of the front verandah took place between 27 August 2021 and 21 October 2021. The contractors paid by Top Class Construction on 17 December 2021 are unlikely to have been paid for work performed months previously. It is clear from the photographs of the Hotel from December 2021 that no brickwork or jackhammering was taking place on or near the front façade. The project was more advanced than that.

110. It was Mr Rankin’s evidence that Mark Upton did much of the rendering work on the front façade in 2020 and was paid by Karneil (see Mr Rankin’s affidavit, paragraphs 91 to 95, and the photographs referred to therein). I accept this evidence.

111. Eden has not proven on the balance of probabilities that the payments to the contractors named in the ANZ document of payments made on 17 December 2021 were attributable to the work on the front façade that Karneil was bound to do under clause 53.1 of the contract.

Document 18

112. Eden claims $20,800 for the supply of porcelain tiles for the tiling of the front veranda on the basis of an invoice from The Renditions Corporation Pty Ltd to Core Asset Development Pty Ltd dated 14 December 2021.

113. Karneil was not required to tile the front veranda or any part of the front façade under clause 53.1 of the contract.

Document 19

114. Document 19 is the same as document 16 and has been dealt with above.

Document 20

115. Eden claims $275 on the basis of a tax invoice dated 16 January 2022 from Nature Coast Demolition & Asbestos to Top Class Construction Pty Ltd, Australasia Eden, Imlay St, Eden. The description of the work on the invoice is:

Removal of Asbestos from the Australasia Eden, double wrap in plastic and take the asbestos to the tip.

116. This is not work for which Karneil is liable under clause 53.1 of the contract.

Document 21

117. Eden claims the sum of $5,540.35 on the basis of an item in a statement from Inspirations Paint to John Palasty. The statement is dated 28 February 2022, and the item is dated 19 January 2022 and described as “Neil Ordered – 14^th. A handwritten note saying “Front Façade” has been placed next to the item.

118. As set out in relation to document 22 below, Mr Rankin painted the front façade in 2021, so this paint order cannot have been for paint for the front façade.

Document 22

119. Eden claims $7,326 on the basis of an invoice dated 20 January 2022 rendered by Justin Yuille – Nethercote Painting to Top Class Constructions for that sum for painting work performed on 12 to 20 January 2022. The painting is simply described on the invoice as “Painting Works to Australasia Hotel”.

120. Exhibit NR3 to Mr Rankin’s affidavit includes photograph 86, taken on 28 October 2021, photograph 88 taken on 14 December 2021 and photograph 90 taken on 17 December 2021 which show that the painting of the front façade was complete before the end of 2021. Mr Rankin said, in his affidavit at paragraphs 90 to 95, that he painted the front façade and I accept that evidence.

121. The invoice of 20 January 2022, which relates to painting done from 12 to 20 January 2022, cannot relate to the front façade and Karneil is not liable for the amount of that invoice.

Document 23

122. Eden claims $1,855.60 on the basis of an invoice dated 21 January 2022 from The Renditions Corporation Pty Ltd to Core Asset Development Pty Ltd. The invoice is for “50LM Skirting + Wastage = 12 M2” and “200 x 200 Dark Red Porcelain” for $1,755.60 plus $100 freight.

123. The handwritten note on the invoice says “Skirting Tiles Front Façade”.

124. Karneil was not required to tile the front façade.

125. Eden has not proven on the balance of probabilities that Karneil is liable for this invoice.

Document 24

126. Eden claims $4,000 based on an invoice dated 31 January 2022 from Atila Kiss Trading as Kiss Waterproofing & Tiling to Core Asset Development Pty Ltd.

127. The handwritten note on the invoice says “Part Payment Front Façade Balance was $15,000 cannot contact tiler”.

128. As I have said, above, Karneil was not required to do any tiling under clause 53.1 of the contract.

Document 25

129. Eden claims $2,375 on the basis of invoices from Merimbula Sand and Gravel Pty Ltd to “John – Australasia Pub Eden”. The first invoice is dated 12 February 2022 and relates to the purchase and delivery of 4 bags of tilers’ sand and 72 bags of cement on 2 February 2022 for $1,535. The second invoice is dated 31 March 2022 and relates to the purchase and delivery of 4 bags of tilers’ sand on 12 May 2022 for $840.

130. Clause 53.1 of the contract does not require Karneil to undertake any tiling. The concreting Karneil was required to carry out was complete well before February 2022. Karneil has no liability in relation to these invoices.

Document 26

131. Eden claims $4,692.49 on the basis of an invoice dated 23 February 2022 from Central Foundry Pty Ltd which says “Cash Sales Lace”. The description on the invoice mentions Rankin Builders and Neil Rankin. It says “Quote to supply whole cast finish lace panels” and “GF112 Panel 550 wide x 880 high-single sided. Pattern is in really poor condition”.

132. Clause 53.1 of the contract required Karneil to “instal wrought iron railing to front veranda”. Mr Rankin addresses this work in paragraphs 84 to 89 of his affidavit. At paragraph 88, Mr Rankin said:

The wrought iron railing was installed by me personally and the work took place in or around February 2022 and was the last item in the Vendor Works to be completed by the Defendant.

133. Mr Rankin’s account is partially substantiated by photograph 95 of Exhibit NR3 which shows that the wrought iron railing was in place on the upper balcony on 17 February 2022. Mr Palasty, in JP 2 to his affidavit of 3 March 2023, provides a photograph marked as having been taken on 28 February 2022 with the wrought iron railing in place at the front of the veranda as well.

134. In cross-examination it was put to Mr Palasty that Mr Rankin paid for the “iron lacing” and Mr Palasty said that was “a lie”.

135. In submissions, Eden claimed that the fact that the invoice was among the business records of the plaintiff was supportive of the claim. I reject that submission. Many possible courses of events could have led to the invoice being in the possession of the plaintiff.

136. There is no evidence as to whether the quote the subject of the invoice was accepted, and, if so, whether the work was done and the invoice paid. The veranda and the balcony do, however, have wrought iron lacework railings.

137. Eden has not established that it has incurred loss to the value of the invoice or that Karneil is liable to it for the value of the invoice.

Document 27

138. Eden claims the sum of $11,331.10 on the basis of an invoice from NG & KJ Baker Builders to John Palasty dated 20 April 2022 for the hire and erection of scaffolding, for the Workcover inspection and rectification of scaffolding on 20 December 2021 and for the dismantling and stacking of scaffolding on 15, 16 and 17 March 2022.

139. Mr Palasty said that the work on the upper front façade could not have been done without scaffolding.

140. The invoice description includes the erection of scaffolding on the northern and southern side of the building, for $4,361.11. The front of the Hotel is on the western side of the building, so this element of the invoice does not relate to the works in clause 53.1 of the contract. The invoice description also includes an item described as follows:

For scaffold hire at Hotel Australasia Eden. Scaffold erected to front of building for ceiling and rendering.

An amount of $1,595.35 is attributed to this item. There is no information about when this work took place or precisely what it was.

141. In cross-examination, Mr Rankin said that the scaffolding at the front of the Hotel was his property (see transcript 1 May 2024 at p 5).

142. There is insufficient evidence to prove on the balance of probabilities that the invoice or any part of it related to scaffolding used by Karneil to perform work under clause 53.1 of the contract.

Document 28

143. Eden claims $11,222, being the sum of two invoices from Justin Yuille of Nethercote painting. The first invoice is dated 1 July 2022 and relates to “painting works” performed between 24 June 2022 and 1 July 2022 inclusive, together with some materials, for the total sum of $5,842. The second invoice is dated 22 July 2022 and relates to “painting works” performed between 18 July and 22 July 2022, together with some materials, for the total sum of $5,380.

144. As I have said, it is clear that the front façade had already been painted by the end of 2021. These invoices do not relate to work that Karneil was required to perform under clause 53.1 of the contract.

Document 29

145. Eden claims $420 on the basis of a tax invoice from Jenine Grant to Top Class Construction, which is undated, for the disassembly and cleaning and repair of two broken door panels.

145. In evidence, Mr Palasty said that the invoice related to two broken door panels, with leadlight glass, being the side doors at the front entrance. Mr Palasty agreed that this was not an item under clause 53.1 of the contract.

146. Karneil is not liable to Eden for this invoice because it is not work Karneil was obliged to perform under the contract.

Document 30

148. Eden claims $363.34 on the basis of an invoice dated 2 August 2022 from Steeline to Top Class Constructions for several different lengths of flashing.

149. Mr Palasty said that the flashing the subject of the invoice was for the roof.

150. In exhibit NR8 to Mr Rankin’s affidavit, at p 1333-1334 of the Court book, there appears a two page invoice from Steeline to Rankin Builders dated 13 September 2021 for 20 items of flashing and sundry other items totalling $1,541.

151. It was put to Mr Palasty in cross-examination that the roof was installed in September 2021 and Mr Palasty said that the roof was installed partly but indicated that the invoice dated eleven months later was for the Hotel roof.

152. The evidence in relation to this invoice is not sufficient to establish on the balance of probabilities that the flashings ordered in August 2022 related to work that Karneil was obliged to do under clause 53.1 of the contract.

Claim for payments to Mr Simon Mitchell

153. Eden claims two amounts with respect to Mr Mitchell: $17,142.25 and either $113,625.85 or $114,825.87 (depending upon which Schedule of Damages is referred to).

154. Mr Simon Mitchell, a carpenter, gave evidence in the plaintiff’s case.

155. In his affidavit of 21 March 2023, Mr Mitchell says that he “undertook the labour work and carpentry at the Hotel”. He says that he issued invoices for the work he undertook on the front façade of the hotel, and he annexed seven invoices to his affidavit, totalling the sum of $17,142.25. He said that the plaintiff paid all of the invoices.

156. Each of the seven invoices was made out to “Top Class Constructions Pty Ltd”. The invoices list dates spread over the period from 24 September 2021 to 25 March 2022. The invoices record the number of hours worked by Mr Mitchell on each date given. None of the invoices record a description of the work performed.

157. In cross-examination, Mr Mitchell frankly and understandably conceded that he could not, at the time of giving evidence, remember what work he performed on 21, 22, 23 and 24 of September 2021.

158. Mr Mitchell was taken to photograph 31 in exhibit NR3 in Court Book Volume 4. He agreed that he was the person who had constructed the formwork shown in the photograph, and that the formwork was used for the pouring of concrete to form a base to act as a footing to hold up steel columns for the front of the veranda of the Hotel.

159. Mr Mitchell said that photograph 35 of exhibit NR3 shows him standing on the roof of the Hotel helping to remove the old roof and replace it with new material.

160. Mr Mitchell said that photograph 85 of exhibit NR3 showed him lining the eaves of the upper balcony of the Hotel with ironbark battens.

161. In exhibit NR6 to Mr Rankin’s affidavit, four invoices from Mr Mitchell to Rankin Builders were provided. The first two of them were stated on their face to be for work unrelated to the Hotel. The third invoice was dated 22 September 2021 and had written on it “Being for works at @ Australasia”. This invoice was for $3,657.50. The fourth invoice was dated 6 October 2021 and was also said, on its face, to be for works at Australasia. The fourth invoice had been amended by hand from $1,100 to $165 and paid as being for work at the RSL. A handwritten note on the invoice said “Works at Australasia to be paid directly from Karen”. Mr Rankin’s wife’s name is Karen.

162. Mr Rankin conceded, and I find, that Mr Mitchell performed some of the work that Karneil was required to complete under clause 53.1 of the contract. Mr Mitchell invoiced Rankin Builders for at least some of that work.

163. Mr Mitchell also performed other work on the Hotel which was not work that Karneil was required to perform under clause 53.1 of the contract. Mr Mitchell invoiced Top Class Construction Pty Ltd for that work.

164. The invoices Mr Mitchell rendered to Top Class Construction Pty Ltd overlap in time with invoices he rendered to Rankin Builders with respect to work that he performed at the Hotel. This suggests that Mr Mitchell perceived a need to charge some of his work to Rankin Builders and some of his work to Top Class Construction Pty Ltd. NR6 to Mr Rankin’s affidavit includes several timesheets of Mr Mitchell for Rankin Builders, which include work performed by Mr Mitchell at an RSL club and at the Hotel.

165. Understandably, Mr Mitchell cannot now remember what work he was doing on what day in September of 2021.

166. No basis was provided by Eden for its claim for the second amount of $113,625.85 or $114,825.87 with respect to Mr Mitchell and that claim is accordingly rejected.

167. I am unable to find, on the balance of probabilities, that the work billed to Top Class Construction Pty Ltd by Mr Mitchell in the invoices exhibited to his affidavit is attributable to work performed by him on the façade or the roof of the Hotel. Eden has not proven, to the requisite standard, that any of the work billed in those invoices relates to the obligations of Karneil under clause 53.1 of the contract.

Claim for payments to Mr Peter Groncharouk

168. Mr Goncharouk, a construction labourer, gave evidence in the plaintiff’s case.

169. Mr Goncharouk provided an affidavit dated 3 March 2023. In paragraph 4 of that affidavit, Mr Goncharouk said that he undertook the following work at the Hotel:

a.   Stripping window and doors;

b.   General labour;

c.   Demolition, including of columns;

d.   Timber work and awning; and

e.   Floor boards and restoring windows and brickwork.

170. In paragraph 5 of his affidavit, Mr Goncharouk said that he did the following work with respect to the front façade of the Hotel:

a.   Restoring windows and doors;

b.   Restoring and sandblasting brickwork;

c.   Awnings;

d.   General labour;

e.   Demolition of columns; and

f.   Refitting of windows.

171. In his affidavit, Mr Goncharouk said that he had had a conversation with Mr Rankin and Mr Palasty and that Mr Rankin had told him to separate his hours, in his invoices, between the work he had done at the front of the hotel and the work he had done at the back of the hotel because Mr Rankin was responsible for paying him for the work at the front of the hotel and Mr Palasty was responsible for paying him for the work done at the back.

172. Mr Goncharouk said that he performed work “on the front façade of the Hotel” to the “total approximate sum of $36,000.00” Mr Goncharouk said that this sum was part of the total sum of $100,000 worth of work that he had done on the hotel.

173. In cross-examination, Mr Goncharouk agreed that he had also worked on the roof of the Hotel. He had restored the chimney brickwork, specifically paint stripping and “tidying it up”. He had also assisted with stripping the roof and putting down the new roof sheets. He thought that installing the new sheets took about a week. He could not recall when this work was done.

174. Mr Goncharouk was taken to photographs 35, 36 and 37 in Exhibit NR 3, all of which showed him, with others, working on the roof of the Hotel, including installing insulation. Mr Goncharouk said that Mr Rankin had taken the photographs. Mr Goncharouk also said that Mr Mitchell and Mr Rankin were giving him instructions in relation to that work.

175. Mr Goncharouk said that, in his affidavit, when he had referred to demolishing columns, he meant the columns at the front of the hotel. He performed the demolition work with a jackhammer and a nine inch grinder. In cross-examination, he said that Mr Rankin had allocated that task to him.

176. Mr Goncharouk was taken to photograph 26, which shows him taking render off the brickwork at the front of the hotel. In cross-examination, Mr Goncharouk said that Mr Rankin gave him that task.

177. Mr Goncharouk said, in effect, in cross-examination, that the restoration work took years, so that it was not possible for him to remember when each part of the work was done.

178. In his affidavit of 19 December 2023, Mr Goncharouk said that he helped Mr Rankin instal the iron railing of the front façade.

179. Mr Goncharouk said that he did not send any invoices to Mr Rankin after September 2021.

180. Exhibit NR5 to Mr Rankin’s affidavit included four invoices from Mr Goncharouk to Rankin Builders in relation to work performed at the Hotel.

181. The first invoice is stamped as having been received on 12 August 2021. It relates to work performed by Mr Goncharouk on the Hotel from 29 July 2021 to 11 August 2021, including paint stripping, removing bricks near a doorway and cleaning bricks. The total was $2,572.50 and a second stamp on the invoice seems to indicate that payment was made on 12 August 2021.

182. The second invoice is stamped as having been received on 26 August 2021. It relates to work performed by Mr Goncharouk on the Hotel from 12 August 2021 to 23 August 2021, including “scaffolding” and “jackhammer steps”. The total was $1,977.50 and a second stamp on the invoice seems to indicate that payment was made on 26 August 2021.

183. The third invoice is stamped as having been received on 9 September 2021. It relates to work performed by Mr Goncharouk on the Hotel from 30 August 2021 to 8 September 2021, including “jackhammer steps”, “concreting” and “jackhammer columns”. The total was $2,082.50 and a second stamp on the invoice seems to indicate that payment was made on 9 September 2021.

184. The fourth invoice relates to work performed by Mr Goncharouk on the Hotel from 9 September 2021 to 15 September 2021, all of which is described as “Australasia - front entry”. The total was $1,260 and a stamp on the invoice seems to indicate that payment was made on 23 September 2021.

185. On the basis of the evidence of Mr Goncharouk and Mr Rankin, including the invoices, I find that the work performed by Mr Goncharouk on the Hotel and set out in the four invoices tendered were paid for by a company associated with Mr Rankin during the period when the façade work was being performed.

186. There is no direct, reliable evidence before me of work performed by Mr Goncharouk coming within clause 53.1 of the contract and being paid for by the plaintiff.

187. Mr Goncharouk estimated that his total charges for work performed on the Hotel was about $100,000, and that, of this, $36,000 was attributable to the façade. However, in paragraph 5 of his affidavit, set out at [171] above, Mr Goncharouk provides a list of work he performed “with respect to the front façade”, and that list included “restoring doors and windows”, “restoring and sandblasting brickwork”, “awnings”. “general labour” and “refitting of windows”, none of which are necessarily works required to be performed by Karneil under clause 53.1 of the contract. Mr Goncharouk was paid for his work demolishing the columns on the invoices he sent to Rankin Builders. Understandably, Mr Goncharouk’s estimate of $36,000 is simply an estimate of the value of his work on the façade, it does not address the terms of clause 53.1 of the contract.

188. Eden has not proven to the requisite standard of proof that it has paid Mr Goncharouk for any work which Karneil was required to perform under clause 53.1 of the contract.

Work and materials paid for by Top Class Construction Pty Ltd and Core Asset Development Pty Ltd

189. Karneil argued that work and materials paid for by Top Class Construction Pty Ltd and Core Asset Development Pty Ltd (or any other entity other than the defendant) could not form part of Eden’s claim for damages in this matter.

190. Karneil argued:

5.8   The plaintiff relies on the evidence of Mr Palasty regarding the reason why the plaintiff says it has suffered a loss through payments made by either Top Class Constructions Pty Ltd or Core Asset Developments Pty Ltd, including that the companies are associated, however the nature of the association is not made wholly transparent. In the Second Palasty Affidavit, Mr Palasty deposes at [6]:

Some contractors were paid by Top Class or Core as indicated below. When this was done, a debt was raised in the books of the Company and a corresponding credit was raised in either Top Class’s or Core’s books. I was the person who raised the debit and corresponding credit.

5.9   The plaintiff has not provided the books which are referred to [in] that paragraph. Further that description is not sufficient to establish that the plaintiff has suffered any actual loss, only that Mr Palasty adjusted figures in the books of the associated companies. The underlying basis for the allocation of any debt is not explained.

191. Karneil also argued that Top Class Constructions Pty Ltd and Core Asset Developments Pty Ltd could not be treated as agents for Eden in this matter because no agency agreement had been pleaded by Eden as required by rule 14.14 of the Uniform Civil Procedure Rules.

192. These arguments have considerable force, however, given that no breach of contract has been established, it is unnecessary to deal with them.

Summary and Conclusion

193. I have determined that Karneil’s obligations under clause 53.1 of the contract are confined to the works specified in the Scope of Works in clause 53.1(a) and the Scope of Works in clause 53.1(b) of the contract.

194. On the basis of Mr Rankin’s evidence, which is supported by the photographic evidence, I find that Karneil had completed the work specified in the Scope of Works in clause 53.1 by the settlement day of the contract, which was 10 March 2022.

195. Eden argued that, even if Karneil had performed the works, if it had failed to pay for materials or failed to pay sub-contractors, and if Eden had suffered loss as a result of that failure, then Karneil would be in breach of the contract.

196. Eden has failed to prove on the balance of probabilities that it has paid any amount that Karneil ought to have paid in relation to the performance of the work required under clause 53.1 of the contract.

197. Eden has failed in its claim, in clause 5 of its statement of claim, that Karneil failed or neglected to complete the works in accordance with clause 53.1 of the contract.

198. The following order will issue:

1. The plaintiff’s claim is dismissed.

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Decision last updated: 29 August 2024