Fitzpatrick v Garvey
[2012] WADC 42
•23 MARCH 2012
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: FITZPATRICK -v- GARVEY [2012] WADC 42
CORAM: COMMISSIONER GETHING
HEARD: 23-31 JANUARY 2012
DELIVERED : 23 MARCH 2012
FILE NO/S: CIV 1994 of 2009
BETWEEN: DAVID FITZPATRICK
Plaintiff
AND
BRIAN JOHN GARVEY
First defendantALI GILLAM
Second defendantDAKA BUILDING SYSTEMS PTY LTD
Third defendant
Catchwords:
Contract - Building and construction - Illegality - Prefabricated dwelling
Contract - Building and construction - Meeting of Minds - Damage - Loss of reputation - Loss of reputation
Legislation:
Builders' Registration Act 1939 (WA)
Result:
First defendant's counterclaim against the plaintiff dismissed
Representation:
Counsel:
Plaintiff: Mr D Morris
First defendant : In Person
Second defendant : No appearance
Third defendant : No appearance
Solicitors:
Plaintiff: Havilah Legal
First defendant : Not applicable
Second defendant : Not applicable
Third defendant : Not applicable
Case(s) referred to in judgment(s):
Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Ardon Enterprises Pty Ltd v Mizen [1999] WADC 83
Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 3] [2010] WASC 141
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191
Babsari Pty Ltd v Wong [1999] QSC 326; [2000] 2 Qd R 576
Bacchus Marsh Concentrated Milk Co Ltd (in liq) v Joseph Nathan & Co Ltd (1919) 26 CLR 410
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143
City of Subicao v Heytesbury Properties Pty Ltd [2001] WASCA 140
Codelfa Construction Pty Ltd v State Rail Authority(NSW) (Codelfa/Eastern Suburbs Railway Code) (1982) 149 CLR 337
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; [1991] 174 CLR 64
Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696
Dickinson v Dodds (1876) 2 Ch D 463
Elliott v Reading [1999] WASCA 11
Ermogenous v Greek Orthodox Community of SA Inc - [2002] HCA 8; (2002) 209 CLR 95
Fink v Fink (1946) 74 CLR 127
Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393
Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1
Gelling v Crespin (1917) 23 CLR 443
Goss v Lord Nugent (1833) 5 B & Ad 58; (1833) 110 ER 713
Great City Pty Ltd v Kemayan Management Services (Australia) Pty Ltd [1999] WASC 70
Hadley v Baxendale (1854) 9 Exch 341; (1954) 156 ER 145
Heathersage Nominees Pty Ltd v Pineview Holdings Pty Ltd (Unreported WASC (Wallwork J); Library No 8478; 14 December 1990)
Herbert Clayton & Jack Waller Ltd v Oliver [1930] AC 209
Hobbs v The London & South Western Railway Co (1875) LR10QB 111
Hungerfords v Walker (1989) 171 CLR 125
Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd [2000] QSC 013
Johnson v Unisys Ltd [1999] 1 All ER 854
Kpohraror v Woolwich Building Society [1996] 4 All ER 119
Malik v Bank of Credit & Commerce International SA (in liq) [1998] AC 20
Marist Brothers Community Incorporated v Shire of Harvey (1994) 14 WAR 69
May & Butcher Ltd v R [1934] 2 KB 17
Myrine Pty Ltd v Mesti [2006] WADC 106
Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31
Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854
Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd (1999) 21 WAR 350
Raffles v Wichelhaus (1864) 2 H & C 906; (1864) 159 ER 375
Robinson v Harman (1848) 1 Exch 850; (1848) 154 ER 363
Rolin v Stewart (1854) 14 CB 595; (1854) 139 ER 245
Scriven Brothers & Co v Hindley & Co [1913] 3 KB 564
Shaw v Director of Housing of Tasmania [2001] TASSC 2
Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620
Smith v Hughes (1871) LR6QB 597
Steelhomes (1985) Pty Ltd v Hutts (1993) 9 SR (WA) 143
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 83 ALJR 390
Thomson v Broadley [2000] QSC 100
Thomson v Broadley [2002] QSC 255
Thorpe v Lochel [2005] WASCA 85
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Wachmer v Jaksic [2007] WASC 313
Walker v Citigroup Global Market Australia Pty Ltd [2006] FCAFC 101
Watts v Morrow [1991] 1 WLR 1421
White v Australian & New Zealand Theatres Ltd (1943) 67 CLR 266
Wilson v United Counties Bank Ltd [1920] AC 102
COMMISSIONER GETHING: In the trial before me, the first defendant, Mr Garvey, seeks damages for loss of bargain and for loss of reputation from the plaintiff, Mr Fitzpatrick, under a contract between the two by which the first defendant was to erect a prefabricated industrial building, supplied in kit form from a third party, on land owned by the plaintiff. The land was situated at 12 Epis Street, Broadwood, a suburb of Kalgoorlie (Epis Street Works). The contract is said to have been entered into on 28 November 2008 (28 November Contract).
This action was commenced in July 2009 as an action by the plaintiff against the first defendant for damages arising from a breach of the 28 November Contract. The plaintiff also brought claims in unjust enrichment against Mr Ali Gillam (second defendant), and Daka Building Systems Pty Ltd (third defendant) (Daka) for the return of monies alleged to have been wrongly paid to them, as well as some alternative claims against Mr Gillam. Mr Gillam was a director of Daka and it was common ground that he was the directing mind and will of this company.
The plaintiff alleges that the 28 November Contract was not only for the Epis Street Works, but also included within the contract price of $719,206 certain renovation works on the residence of the plaintiff and his de facto partner, Ms Kathleen Dunn. The residence is at Riverina Way, Hannans, also a suburb of Kalgoorlie (Riverina Way Works). The money paid by the plaintiff was for materials to be used in the construction (Mr Gillam) and for the initial deposit under the contract (Daka).
The first defendant filed a defence and counterclaim dated 26 August 2009. In it, the first defendant pleaded that at a meeting between the first defendant and the plaintiff on or about 12 January 2009, the plaintiff told the first defendant he would not proceed with the contract.
At a directions hearing on 12 March 2010, the court was advised that Mr Gillam had become bankrupt, a fact confirmed at the bar table at the commencement of the trial. The court ordered that the plaintiff's claim against Mr Gillam be stayed sine die.
At the directions hearing on 12 March 2010 the court also made a springing order against Daka. From the court file, it appears that this springing order has become operative, though no judgment has been extracted. I was advised from the bar table at the commencement of the trial that Daka is in liquidation.
On 23 February 2011 (sitting as the Principal Registrar), I made orders discontinuing the plaintiff's claim against the first defendant and for the plaintiff to pay the first defendant's costs of the claim to be taxed.
The trial before me was on the first defendant's counterclaim.
In summary terms, the plaintiff resists the first defendant's counterclaim on four grounds. The first is that if the 28 November Contract was only for the Epis Street Works, then there was no contract at all as there was no meeting of minds between the plaintiff and the first defendant. The second is that the contract is void ab initio, or alternatively unenforceable, as it was for work going beyond the first defendant's registration as a builder pursuant to the Builders' Registration Act 1939 (WA) (as it then was) (BRA). This is based on the 28 November Contract being for both the Epis Street Works and the Riverina Way Works. The third is that, in any event, the 28 November Contract was frustrated by the actions of Mr Gillam in appropriating the deposits paid. The fourth is that, if the contract was breached by the plaintiff, the first defendant suffered no compensable loss.
Witnesses
The first defendant gave evidence. He also called two witnesses. The first was Mr Paul McEvoy, a quantity surveyor. Mr McEvoy gave evidence about the cost to undertake the Epis Street Works. The second was Brian Jackman, the chairman of Fortress Building Systems Pty Ltd (Fortress). Mr Jackman was drawn into the narrative as at the salient times he was looking to employ Mr Gillam and Mr Gillam was working out of an office at Fortress.
The plaintiff gave evidence. He also called Ms Dunn. She is a joint owner of the house at Riverina Way with the plaintiff.
The plaintiff called Mr David Mitchell who is the Manager Development Services for the City of Kalgoorlie Boulder. He also called Ms Noreen Di Nicholas, an officer of the Building Commission. Ms Di Nicholas brought into court certain records of the Builders' Registration Board which the plaintiff tendered through her.
I have no hesitation in accepting Mr Mitchell, Mr McEvoy and Ms Di Nicholas as witnesses of credit. There was no challenge to their evidence. I accept their evidence.
Mr Jackman is independent, and gave evidence in a confident manner. He readily acknowledged that his initial positive opinion of Mr Gillam was 'catastrophically wrong' (ts 78). He was not cross‑examined. I accept him as a witness of credit and reliability, and on the occasions of conflicts in the evidence, prefer his version.
As to the remaining witnesses, Ms Dunn gave evidence in a concise and confident manner. Her evidence mirrors a series of contemporaneous emails. I did not sense that she was prone to embellish, nor did she seem to have any difficulties in recalling the events. With one exception, where there is a conflict between her evidence and that of the first defendant, I prefer her evidence.
The plaintiff did not have a detailed recollection of the events, though on some key areas he was adamant about his recollection. By contrast, the first defendant had a very detailed recollection of the events. So much so that, in closing, counsel for the plaintiff invited me to treat the first defendant's evidence as having an element of reconstruction after the event. I am unable to make any general conclusions about the relative reliability and credibility of the evidence of the first defendant and the plaintiff. The factual findings I make are context specific.
Overview
The narrative of events in this case is somewhat unusual in that for much of the time the plaintiff and Ms Dunn on the one hand, and the first defendant on the other, were proceeding in parallel, each dealing with Mr Gillam. Mr Gillam was not called by either party. His evidence could have bolstered the evidence of either party. I draw no adverse inference from the failure of either party to call Mr Gillam. What it does mean is that the evidence of each party's separate dealings with Mr Gillam is uncontested.
It is convenient to divide the narrative into four sections:
(a)an initial meeting at the first defendant's house Carramar in September 2008;
(b)events preceding a meeting on 28 November 2008 at Mindarie between the plaintiff, the first defendant and Mr Gillam at which the 28 November Contract is said to have been made;
(c)the 28 November meeting; and
(d) events subsequent to the 28 November meeting.
The evidence about the scope of the first defendant's building licence and damages is summarised later in the relevant parts of these reasons.
I have found that no contract was made between the plaintiff and the first defendant on 28 November 2008, because there was no meeting of the minds, even having regard to the objective circumstances. However, given that the issues were fully tried and argued before me, it is appropriate that I make provisional findings on the remaining issues. I am able to do so as there are two distinct versions of the contract said to have been entered into on 28 November 2008.
September 2008 initial meeting at Carramar
Overview
It is convenient to summarise the first defendant's evidence up to and including the September 2008 meeting, then that of the plaintiff, and then make factual findings.
Evidence of the first defendant
The first defendant is a registered builder, registration number S381. He gave evidence that since the mid 1980s he has specialised in erecting industrial sheds and prefabricated dwellings.
In the course of looking for work he came into contact with a Mr Peter Callo, who had a business by the name of Action Industrial Sheds. Action imported prefabricated industrial sheds from China. Mr Callo arranged for the first defendant to construct two of these prefabricated sheds for clients of Action, with the promise of further work if he did a 'first class job' (ts 85). One of these clients was the plaintiff.
The first defendant gave evidence that either the plaintiff phoned him 000or he phoned the plaintiff. It was agreed that they should meet in Perth at the first defendant's address.
The first defendant said that during this first conversation the plaintiff had told him that he wanted to construct an office building in front of the shed. The plaintiff at that time said that he had a builder in Kalgoorlie who would do that work.
A few days later, before the plaintiff came down to Perth, the plaintiff contacted the first defendant and told him that the other builder did not want to be involved. He asked the first defendant whether the first defendant could arrange for somebody else to do it. The first defendant said he would arrange for two lots of people to quote on the office buildings.
The first defendant said that the two people he had in mind were Steel Truss Solutions Modular Homes and TekBuilt. The first defendant gave evidence that TekBuilt has a division which specialises in transportable, prefabricated office buildings.
The first defendant had previously met the general manager of TekBuilt, Mr Gillam (the second defendant). In response to the inquiry made by the plaintiff, the first defendant contacted TekBuilt and was told that Mr Gillam had left, but was given his phone number.
The first defendant rang Mr Gillam, who told him that he now specialised in prefabricated office buildings. Mr Gillam said that he imported prefabricated buildings from China, and could have one landed in six weeks from the date of order. He could do the buildings for far cheaper than Australian prices.
The first defendant then gave evidence that a meeting was arranged for late September or early October 2008. This was the first time the first defendant met the plaintiff.
The first defendant said had met Mr Gillam on one prior occasion. In cross‑examination, the first defendant said that this was when he called into TekBuilt to look at their product range in response to an advertisement in The West Australian. He said that the only reason he contracted Mr Gillam was because the plaintiff wanted an office built.
The first defendant said that at the meeting he was able to give the plaintiff a ball park figure of $650,000 plus GST for erecting the prefabricated shed. There was a discussion and the first defendant recalled that the plaintiff was very keen on that price.
The first defendant also said that the plaintiff asked him if he could do home improvements. The first defendant replied that he would 'love to do them', but at that time was only doing three industrial sheds a year, each of which would take him about 16 weeks to build, totalling 48 weeks (ts 86). He said he would not do renovation work in the country as he would be competing with other people who specialised in that work. The first defendant also said that he had major commitments to his family and major health issues which meant he had to stay in Perth.
The first defendant then recalled that Mr Gillam said he was a New South Wales builder and was transferring his building registration to Western Australia. He said he specialised in home improvement. The plaintiff and Mr Gillam exchanged business cards. The first defendant observed that the plaintiff and Mr Gillam seemed to get on well together.
The first defendant then gave evidence that he said to the plaintiff that, in order to 'make sure we're on the same page' he wanted to take the plaintiff and Mr Gillam to inspect some prefabricated offices to see what would be supplied if it came from Mr Gillam (ts 87). The three of them went in Mr Fitzpatrick's four‑wheel drive to go and see the offices at TekBuilt. And they pulled up, near the gate, Mr Gillam said, 'Oh, look, I'm very embarrassed to go in there. Can't we give this a miss? Can't you call in sometime when I'm not around?' (ts 87). The plaintiff agreed.
When they arrived back at the first defendant's house, the first defendant queried the plaintiff about finance. The plaintiff advised him that he had sold his business earlier in the year for $5 million and was now employed as its general manager. The plaintiff told the first defendant that there was 'cash in the bank' (ts 88). The first defendant then said that he saw the 'the jaw of Ali Gillam drop wide open' (ts 88). Mr Gillam seemed to sit up and take more notice after that. The meeting ended and they parted their ways.
In cross‑examination, the first defendant confirmed that he had only met the plaintiff a total of three times between September 2008 and about January 2009. The first occasion was the meeting at the first defendant's house in Carramar. The second was on the day the plaintiff signed the contract. The third was when the plaintiff came around to the first defendant's house about Christmas time or early January.
In cross‑examination, the first defendant was asked whether at some point at the meeting in Carramar the plaintiff asked about the relationship between himself and Mr Gillam, in particular whether they were business partners or the like. The first defendant explained that he invited Mr Gillam to the meeting because, when he had spoken to the plaintiff on the phone on the second occasion, the plaintiff had said that he wanted somebody to construct an office building in front of the shed, and that his builder in Kalgoorlie did not want to do the job. The plaintiff had asked him to find someone who could build the office. Thus Mr Gillam was present at the meeting to quote on doing the office building in front of the shed.
The remaining key differences between the plaintiff's account of the meeting and the first defendant's account of the meeting were put to the first defendant in cross‑examination, and were denied by the first defendant.
Evidence of the plaintiff
The plaintiff gave evidence that the first time he spoke to the first defendant was when the first defendant rang him while he was still living in Kalgoorlie. The first defendant rang him at his workshop in Kalgoorlie. He said that he was a registered builder. He said that he had been speaking to Mr Callo and was aware that the plaintiff was going to make contact with him about building a prefabricated shed. The plaintiff told the first defendant to give him his mobile number and that he would call him back. The plaintiff said that he must have written the number down incorrectly because when he tried to ring the first defendant back it was a wrong number. The plaintiff thus waited until the first defendant rang him again, which he did.
In the second telephone conversation, the first defendant enquired whether or not the plaintiff was interested in him building the plaintiff's shed. It was agreed that they would meet when the plaintiff was next down in Perth, and a date was arranged.
The plaintiff gave evidence that this first meeting occurred in September 2008 at the first defendant's house in Carramar. The plaintiff said that the first 20 to 30 minutes of the conversation was just with the first defendant. The plaintiff said that the conversation would have been about the 1000 m² shed that he wanted built in Kalgoorlie. He said that the first defendant would have told how he would have run the project. The plaintiff recalls the first defendant saying that he would build a 'donga' on site and live there. He remembered that because at that time one of his employees was chasing a donga.
The plaintiff's counsel then asked him: 'do you remember anything else specifically about that initial 20 to 30 min conversation with Mr Garvey before Gillam arrived'. The plaintiff responded 'not really. It was 3 1/2 years ago, or three ‑ over three years ago so my memory is obviously not as good as his' (ts 336).
The plaintiff said that once Mr Gillam arrived he told the two of them that he had a house in Kalgoorlie that required renovation. He said that the person who built his house, Ian Anderson from Anderson Building, was going to build the shed in Kalgoorlie, but he was too busy. The plaintiff said that he had told Mr Anderson that he wanted the same builder to do the whole lot for him. He then said to the first defendant and Mr Gillam that that was what he wanted from them. His evidence was that the first defendant had said that that was good as his background is in sheds and Mr Gillam's background is in residential, and he had a flair for interior design.
At that stage, the plaintiff asked the first defendant and Mr Gillam what their relationship was, enquiring whether they were partners or something. He recalled the first defendant say that they were starting a joint venture or partnership together.
The plaintiff's evidence was then that Mr Gillam said that he had to go to a meeting. His car was parked directly behind the plaintiff's at the first defendant's house. It was only a single lane driveway. Mr Gillam then jumped in his car and said words to the effect that he and the plaintiff would chat at a later stage.
The plaintiff then said that he and the first defendant jumped into the plaintiff's car and went for a drive. The plaintiff's evidence was that he could not remember where the first defendant took him. He said that he definitely was not taken to have a look at any display homes. His recollection was 'we just basically drove around, had a chat, talked about rubbish, you know' (ts 337). The plaintiff then dropped the first defendant back at the first defendant's house. The plaintiff then said he had never heard from the first defendant again until the meeting on the boat at Mindarie on 28 November.
The plaintiff also said that he does not carry business cards.
The first defendant put his version of the facts to the plaintiff in some detail in cross‑examination which, for the most part, the plaintiff disagreed with.
In cross‑examination the plaintiff reiterated that he remembered telling the first defendant that he was not going to do the job if he could not do the residential property.
The plaintiff also reiterated in cross‑examination that the first defendant and Mr Gillam looked at each other and basically convinced the plaintiff that they were a partnership. He said that he did not know that Mr Gillam and the first defendant did not know each other previously.
Findings
It is common ground that a meeting took place in about September 2008 at the first defendant's house in Carramar attended by the first defendant, the plaintiff and Mr Gillam. The first defendant gave detailed evidence of this meeting. By contrast, the plaintiff's evidence was more vague, and at a couple of points he commented that he was having trouble remembering things (ts 336). In the main, I prefer the first defendant's evidence of this meeting. However, on some points the plaintiff's evidence was cogent and definite.
For present purposes, it is sufficient if I make the following further factual findings:
(a)there were two telephone conversations between the plaintiff and the first defendant prior to the meeting at Carramar;
(b)the meeting was arranged between the plaintiff and the first defendant in one of these telephone conversations;
(c)the purpose of the meeting was to discuss the first defendant erecting a prefabricated shed which the plaintiff had acquired from Action;
(d)in the second of the telephone conversations, the plaintiff told the first defendant that he also wanted an office constructed in front of the shed;
(e)in response to (d), the first defendant arranged for Mr Gillam to attend the meeting;
(f)at the meeting the erection of the shed was discussed;
(g)the first defendant gave the plaintiff a ball park price of $650,000 plus GST;
(h)the renovations at house at Riverina Way were also discussed;
(i)the plaintiff said that he wanted the same builder who did the shed to do the Riverina Way renovations;
(j)the first defendant said he did not want to do the renovations at Riverina Way;
(k)Mr Gillam said that he was a registered builder in New South Wales with expertise in home renovations; and
(l)Mr Gillam and the plaintiff exchanged contact details.
I accept that the plaintiff was genuine in his recollection that Mr Gillam and the first defendant were in some sort of business or joint venture relationship together. Commonsense suggests that this is something that would have been discussed at this first meeting. Whatever the answer was, I find that the plaintiff left the meeting under the clear impression that the first defendant and Mr Gillam were in some sort of business relationship together, at least in relation to the work proposed to be undertaken for him.
As to the car trip, it is common ground between the first defendant and the plaintiff that at the end of the meeting they went on a car trip. The plaintiff could not recall the purpose of the car trip. Having observed the plaintiff in the witness box, he does not strike me as the sort of person who would go on a meaningless car trip with someone he had just met. I accept the first defendant's evidence that the purpose of the car trip was to inspect prefabricated office buildings at the TekBuilt yard. It is also common ground that no inspection took place. This again suggests that the reason was as stated by the first defendant, that Mr Gillam called off the inspection. I do not need to make findings as to whether one or two cars were used. It may have been that Mr Gillam went in his car (as the plaintiff recalls) with the intent of meeting at TekBuilt, and that Mr Gillam contacted the first defendant by phone to call off the inspection shortly before he and the plaintiff arrived at the yard (largely consistent with the first defendant's evidence, yet consistent with the plaintiff’s account that the trip in the end had no purpose).
Events preceding a meeting on 28 November 2008
Overview
Once they departed from the Carramar meeting, the evidence of the plaintiff and Ms Dunn, on the one hand, and the first defendant on the other, proceeds along two separate paths. They intersect at two points. The first is that the first defendant says that about 10 days later, the plaintiff telephoned him and asked him not to contact him for 6 to 8 weeks for health reasons. The plaintiff and Ms Dunn deny this.
The second point of intersection is the first defendant's evidence that in early November 2008 he had a telephone conversation with Ms Dunn, which led to Ms Dunn phoning Mr Jackman, and Mr Jackman summonsing the first defendant to a meeting with him and Mr Gillam.
I deal with each of these two points of intersection first, then with the uncontested parts of the evidence over this period.
Telephone call about contacting the plaintiff
The first defendant's evidence is that about 10 days after the Carramar meeting, the first defendant received a telephone call from the plaintiff. The plaintiff told him that he was having a nervous mental breakdown, wanted complete rest for at least six weeks and was undergoing treatment. He asked the first defendant not to call him at home, nor at his office. The first defendant said he would respect the plaintiff's wishes.
The first defendant put this conversation to the plaintiff in cross‑examination, and the plaintiff denied emphatically. The first defendant put to the plaintiff that Mr Gillam had put him up to calling him and saying he was on stress leave. Again the plaintiff denied this. The plaintiff did say in cross‑examination that he was off work for four weeks in November 2008, starting around the 12 November or so.
Ms Dunn gave evidence that she did not make such a call, nor would the plaintiff have said what the first defendant alleged.
The plaintiff's denial that this conversation took place was so spontaneous and emphatic that it had the ring of truth to it. I accept his version of the events, and that of Ms Dunn, and find that neither of them contacted the first defendant as he asserts. However, I do also find that someone contacted the first defendant and told him not to contact the plaintiff. He may have been given the information by Mr Gillam directly. I accept that the first defendant had the understanding that he was not to contact the plaintiff for some weeks because of health issues. This explains why he did not contact the plaintiff for a number of weeks following the Carramar meeting.
Telephone call with Ms Dunn
It is convenient to commence the evidence in relation to the contested telephone conversation in early November 2008 with the evidence of Mr Jackman.
Mr Jackman gave evidence that in October 2008 Fortress was interested in engaging a building supervisor. Advertisements were placed and Mr Gillam was one of the respondents. Mr Jackman interviewed Mr Gillam, who said that he had previous building experience in the eastern states and was trying to get his building's registration in Western Australia. From the material provided to Mr Jackman, he was aware that Mr Gillam had some connection with a company called TekBuilt, a fabricator and supplier of office buildings.
Mr Gillam told Mr Jackman that he had made an approach to the WA Builder's Registration Board. A week later Mr Gillam told Mr Jackman that he had failed registration on two or three questions.
Mr Jackman said that he allowed Mr Gillam to have some office space at Fortress and that Mr Gillam retained an office assistant.
Within a week or two of Mr Gillam's first meeting with Mr Jackman, Mr Gillam introduced the first defendant to him, and said that there was work in Kalgoorlie that they were interested in getting done. Mr Jackman said that Fortress would possibly be interested in this work as a pre‑fabricator of buildings, to supply part of the office work.
A week or two later the first defendant came and told Mr Jackman that he was anxious about Mr Gillam's management of building work without his immediate supervision. Mr Jackman said that although he did not know Mr Gillam very well, he was then of the view that Mr Gillam was a 'very plausible fellow', and that he made an impression on Mr Jackman which he admitted he later found to be wrong (ts 54). Mr Jackman thought that the first defendant was being heavy handed in his approach to Mr Gillam.
In response to the first defendant's concerns, there was a meeting in Fortress' Forrestfield office on 18 November 2008. At this meeting, Mr Jackman, Mr Gillam and the first defendant sat together and had a discussion about the work in Kalgoorlie. I will return to the 18 November meeting shortly.
Mr Jackman did go on to say that a second meeting, on 26 November 2008, was organised at his instigation because Mr Gillam had complained to him that the first defendant was harassing Ms Dunn.
The first defendant's evidence is that on 18 November 2008, he telephoned Ms Dunn. The first defendant explained who he was and said he knew that the plaintiff had asked him not to make contact. He asked Ms Dunn whether the plaintiff had paid any money to Mr Gillam and explained his concerns about his other customers and that he thought Mr Gillam was a 'conman' (ts 90). He said he had 'grave trepidations' that the plaintiff and Ms Dunn might be his next victim (ts 90). The first defendant said that Ms Dunn stated her confidence in Mr Gillam and repeated some disparaging comments made by Mr Gillam about the first defendant. She then said she would call Mr Jackman.
The first defendant's evidence is that about 10 minutes later, the first defendant got a call from Mr Jackman. The first defendant said Mr Jackman expressed concern to him at what the first defendant had said to Ms Dunn. The first defendant repeated his concerns about Mr Gillam. Mr Jackman asked the first defendant to come over to his office straight away, which the first defendant did.
As to Ms Dunn, she agreed that the first defendant telephoned her in mid November 2008. Ms Dunn thought it was around 12 or 13 November. This was the first occasion in which they had spoken. She agreed that the first defendant introduced himself and inquired whether Ms Dunn had paid any money to Mr Gillam, to which she replied that she had not. In cross‑examination Ms Dunn said that the first defendant did not mention that Mr Gillam had defrauded one of his customers. She also denied that she contacted Mr Jackman. She said that the first time contact was made with Mr Jackman was in mid December after the first defendant rang her on 15 December, and after the plaintiff had made repeated attempts to send Mr Gillam messages and contact him. I return to the mid‑December telephone conversation later.
The plaintiff gave evidence that in the days before 26 November 2008, Mr Gillam had travelled to Kalgoorlie to commence work on the house at Riverina Way.
The first defendant put to the plaintiff that the first defendant had rung Ms Dunn on 18 November 2008 regarding Mr Gillam and his concerns. The plaintiff said that he was aware that the first defendant had rung Ms Dunn, but could not honestly say what was said.
The first defendant asked the plaintiff whether he was aware that on 18 November 2008 Ms Dunn had contacted Mr Jackman about the first defendant informing her that Mr Gillam had defrauded one of his customers. He said that he did not believe so.
Mr Jackman's evidence is thus that the 18 November meeting was called by him, but not in response to concerns raised by Ms Dunn. This is consistent with Ms Dunn's evidence and the plaintiff's evidence. Also, I do not accept that Ms Dunn would have lied to the first defendant about whether or not she had paid anything to Mr Gillam. As this payment was made on 14 November (see exhibit P16), this supports Ms Dunn's evidence that their conversation was on 12 or 13 November. This in turn contradicts the first defendant's evidence that there was a conversation on 18 November which was a catalyst for the 18 November meeting.
With one caveat, I prefer the evidence of Mr Jackman, Ms Dunn and the plaintiff to that of the first defendant. My sense is that the first defendant has confused the various telephone conversations he and Ms Dunn had during November and December 2008. Accordingly, I find that:
(a)the first conversation between the first defendant and Ms Dunn took place on 12 or 13 November 2008;
(b)in the conversation the first defendant introduced himself and inquired whether Ms Dunn had paid any money to Mr Gillam, to which she replied that she had not; and
(c)Ms Dunn did not ring Mr Jackman in response to the telephone conversation.
The caveat is that I do find that the first defendant raised some concerns about Mr Gillam, either in this conversation or at a later stage prior to 26 November 2008. This is for two reasons. The first is that it explains the reason for his call and his inquiry about whether any money had been paid. The second is that it is consistent with Mr Jackman’s evidence that the 26 November meeting was called, at Mr Gillam's request, because the first defendant was harassing Ms Dunn. However, any concerns conveyed to Ms Dunn prior to 14 November 2008 were not sufficient to prevent the plaintiff and Ms Dunn paying an invoice of $111,000 to Daka on that date.
I accept Mr Jackman's evidence as to his prior dealings with Mr Gillam.
I also find that the 26 November 2008 meeting was convened by Mr Jackman in response to Mr Gillam raising concerns with him about what the first defendant had told Ms Dunn. This is consistent with Mr Gillam having just returned from Kalgoorlie where he would have had an opportunity to speak to Ms Dunn.
The plaintiff's and Ms Dunn's evidence
The plaintiff's and Ms Dunn's other evidence as to what occurred over this period is uncontested, as it concerned events outside the knowledge of the first defendant. It is supported by a chain of emails. It appeared to me that Ms Dunn's evidence was more detailed and more reliable than that of the plaintiff, so I have made findings on the detail of the events in accordance with her evidence. There were, however, no material inconsistencies between their evidence. The facts I find based on their evidence are as follows.
The plaintiff gave evidence that following the Carramar meeting he thought that Mr Gillam, as a partner of the first defendant, was doing all the 'nuts and bolts to the project' (ts 338). He said that he never heard from the first defendant at all. It was Mr Gillam that was preparing everything. He thought that Mr Gillam, as the 'younger bloke' was 'running around getting all the quotes in and doing whatever' (ts 338).
After the Carramar meeting, the plaintiff paid for Mr Gillam to fly to Kalgoorlie. When he arrived, the plaintiff took him to have a look at the land at Epis Street on which the shed was to be built. The plaintiff then took Mr Gillam to the offices of the City of Kalgoorlie Boulder. Mr Gillam had told him that he wanted to have a chat with the council about the building approval. The plaintiff dropped Mr Gillam off at the council and left him there for a couple of hours while he went back to his work.
The plaintiff then took Mr Gillam to his house at Riverina Way. This was the first time when Mr Gillam met Ms Dunn. The plaintiff and Ms Dunn walked Mr Gillam around the house. Mr Gillam had a notepad and took notes of exactly what they wanted.
The plaintiff then drove Mr Gillam to the premises of a third party to use their A3 photocopier to copy the plans for the shed. The plaintiff gave evidence that he had previously arranged for an architect and an engineer to prepare plans for the shed. He then submitted the plans to the council for planning approval. Mr Gillam ended up with the original plans.
After copying the plans, the plaintiff took Mr Gillam to the airport for his return flight.
The plaintiff gave evidence that his understanding at that stage was that Mr Gillam and the first defendant were going to give him a quote for the erection of the shed and for the renovations to the house.
At an early stage, the plaintiff received a verbal quote from Mr Gillam for the shed, something like $300,000. The plaintiff said that he told Mr Gillam, and that he had better go back and redo the quote as there was $300,000 worth of concrete in the works proposed.
It thus appears that between the September meeting at Carramar and early November 2008 there were a number of conversations between Ms Dunn and the plaintiff, and Mr Gillam, about the construction of the industrial shed at Epis Street and the renovations at Riverina Way.
After Mr Gillam’s trip to Kalgoorlie, the plaintiff went on a trip to China with his employer. From about this time, Mr Gillam started communicating with Ms Dunn. This appears to have been because it was Ms Dunn, and not the plaintiff, who was responding to Mr Gillam's emails. Ms Dunn confirmed that she ended up being the primary contact with Mr Gillam during this period as it was easier for her to deal with Mr Gillam than the plaintiff given the plaintiff's work commitments.
By email dated 7 November 2008 (exhibit P21), Mr Gillam sent to the plaintiff and Ms Dunn design drawings for the proposed renovations to the house at Riverina Way. These design drawings had been undertaken by a building designer, Zailani Zai Building. The plans were annexed to the email.
By email dated 10 November 2008 (exhibit P20), Mr Gillam sent the plaintiff and Ms Dunn a schedule of works for the renovations at Riverina Way (10 November Works Schedule). The schedule of works, which was on an attached document in landscape format, contained 26 items. Each item was priced. The total contract value was $136,285 plus GST of $13,628, totalling $149,913.
Ms Dunn responded to the email of 10 November 2008 by email dated 11 November 2008 (exhibit P19). In this email, Ms Dunn sent Mr Gillam photos of a wardrobe layout she liked. It is apparent from this email that she and Mr Gillam had had a telephone conversation that morning. A few minutes after sending the email which is exhibit P19, Ms Dunn sent a further email to Mr Gillam attaching photos of a laundry layout that she liked (exhibit P18).
By email dated 12 November 2008, Mr Gillam sent the plaintiff and Ms Dunn some preliminary drawings of the renovations to the house at Riverina Way and the various cabinets he was to have made for them (exhibit P17). By email in response dated 12 November 2008, Ms Dunn sent Mr Gillam a copy of the same plans with some annotations marked on them (exhibit P17).
By email dated 14 November 2008 (exhibit P14), Mr Gillam sent the plaintiff and Ms Dunn an invoice 'regarding imported goods required for the Workshop/Office/Renovations' (14 November Invoice). The email continued:
We have the option to pay 30% (of the total invoice amount) and then 70% when the products are ready for shipping (about three weeks later) but I would prefer to by US Dollars for the full amount now and I will stay until the goods are ready, this way we can by USD while the Aussie dollar is at a reasonable rate.
Either way I will provide a written guarantee in relation to your exclusive ownership of the goods at all times. I will also provide cert's of Insurance cover for both transport and product liability.
PS: Please send the size for the sink penetration when you get a chance.
The 14 November Invoice purported to be from Daka (the third defendant) and gave a bank account for that company. The invoice listed 14 items under the heading 'workshop/office' and 13 items under the heading 'general'. It is apparent that each of the items under the heading 'general' is for the renovation at Riverina Way. The invoice totalled $111,754.50 inclusive of GST.
The email which is exhibit P14 appears to have been sent at 4.13 pm on 14 November 2008. At 9.35 pm on 14 November 2008 Ms Dunn sent an email to Mr Gillam regarding the enquiry he had made about the specifications for the sink (exhibit P15).
On 15 November 2008 Ms Dunn sent an email to Mr Gillam containing the measurements for the washer and dryer and reporting on the enquiry she had made about the specifications for the sink (exhibit P16). In this email Ms Dunn said that she paid the invoice that Mr Gillam sent through late the preceding night, Friday 14 November 2008.
In her oral evidence, Ms Dunn confirmed that she paid the amount of $111,754.50 in the 14 November Invoice into the bank account of Daka. She said she had to telephone Mr Gillam to confirm the bank account, and was given a different account number to that on the invoice. She paid this by direct debit transfer from her home computer.
On 17 November 2008 at 11.14 am, the person by the name of Michelle sent an email from Mr Gillam's email account to Ms Dunn and the plaintiff (exhibit P13). Michelle was known to Ms Dunn as being Mr Gillam's office assistant. On its face, this email appears to have been sent at 11.14 am. This email had a document headed 'Revised Quotation' attached. The revised quotation was under the heading of 'Daka Building Systems Pty Ltd'. The quotation totalled $659,668.
Michelle sent a further email to Ms Dunn and Mr Fitzpatrick on 17 November 2008 at 1.02 pm (exhibit P13). This email contained a revised quotation, in substantially identical terms to that attached to exhibit P13 ('17 November Quotation'). The quote is from Daka. It is headed: 'Site Development and Erection of Steel Frame Shed and Offices Quotation'. It contains 11 items relating to the construction of the Epis Street Works, that is, the shed, as follows:
| Task | Amount allowed |
| Civil works/footings/slab to shed/office | $176,000 |
| Wash bay and oil separator | $26,000 |
| Plumbing services as per specs | $31,000 |
| Installation of leach drains, septic | $8,900 |
| Supply install oil/water separator | $11,500 |
| Electrical services fact/office | $17,925 |
| Erection of Prefab shed and construct office | $148,000 |
| Supply and install black chain mesh fence, gates | $16,100 |
| Landscape and Auto retic system | $1,550 |
| 40mm asphalt to all carpark and crossover | $46,000 |
| 5m concrete entry to elevation A (45.5ms) | $18,200 |
| Total | $501,175 |
The total of these items is $501,175 plus GST of $50,117.50, totalling $551,292.50. There is then an item 'extras' for $136,285.50, with GST of $13,628.50, totalling $149,913. This is the same amount as in the 10 November Work Schedule. The total sum for the quotation was $701,206 ($551,292.50 plus $149,913), inclusive of GST.
By email dated 17 November 2008, sent at 8.48 am, Ms Dunn sent Mr Gillam a document she described as 'sink specs' (exhibit P11).
The weekend prior to the 28 November meeting, Mr Gillam came up to Kalgoorlie and arranged for some work to be done at the house at Riverina Way. The plaintiff and Ms Dunn arranged to move out of their house over Christmas and come down to Perth and stay on their boat for six weeks while the house was being renovated. Mr Gillam told the plaintiff and Ms Dunn that he wanted to start on the house first because it was going to take several months to get the building licence for the shed.
Mr Gillam was only at the house at Riverina Way for a short period of time to instruct the team of workers he had arranged. The work done at that time was to pull down the back deck patio, take out the bathroom in the ensuite and paint half the house.
On 24 November 2008 Mr Gillam sent the plaintiff and Ms Dunn an email with a subject heading 'Kal shed' (exhibit P10). That email is as follows:
Still here in Perth. I went to the Kal Shire and they gave me 3 more items to complete before they will accept the Building Licence application. Paul, the guy at the shire I spoke with the first time is on holidays … New guy gave me a few extra items.
1.More detail on the energy efficiency report - should be ready by weds;
2. A detail for the entrance ramp (showing slope) - ready tomorrow.
3. More Fesa details - ready tomorrow.
I have re‑booked my trip for this coming Sunday, as I don't want to leave before the building licence has been lodged. Please don't hesitate to contact me if you have any questions.
The plaintiff gave evidence that he used to work extremely long hours. Once he got home, he would have a conversation with Ms Dunn about any emails that Mr Gillam had sent through. He said that he was aware of the emails between Mr Gillam and Ms Dunn, and that he was generally aware of their contents. He said that he was more interested in the plans and pictures, than the details about money. This included drawings provided by Mr Gillam from 'Dandy', who he understood to be the second or third biggest manufacturer of kitchens in the world. Dandy is the supplier from whom Mr Gillam was going to procure cabinetworks from for the plaintiff and Ms Dunn. Ms Dunn showed him plans and pictures from time to time.
I find that the plaintiff was aware of the general content of the email communications between Ms Dunn and Mr Gillam and knew Ms Dunn had paid the invoice sent to them by Daka. It was also clear from his evidence that he was aware of the scope of the works to be carried out at both Epis Street and Riverina Way, and of the cost of those works, and had this knowledge prior to the 28 November meeting.
The plaintiff gave evidence that the final quote given by Mr Gillam was a price for the Riverina Way Works and the Epis Street Works of $719,206, including $167,913 for the Riverina Way Works. The plaintiff gave evidence that the quote was given to him by email. There was no email to this effect tendered at trial, so it is more likely that it was given to him verbally by Mr Gillam.
The plaintiff said that he was happy with that quote because the last verbal quote he obtained from a builder in Kalgoorlie to do just the shed was $1.13 million, and that did not include the house.
The plaintiff was asked to explain the difference between the price in the 10 November Works Schedule for the Riverina Way Works ($149,913) and the final price of $167,913. He said that the change was in the roof. As part of the renovations they were going to change the colour scheme of the house. The initial plan was to paint the zinc corrugated roof. Mr Gillam told him that by the time he scrubbed, prepared and painted the roof, he would be better off just getting a whole new roof. The plaintiff responded by asking Mr Gillam to quote for a new roof. The quote came back at $16,000. So the plaintiff agreed to it.
First defendant's evidence
Aside from the details of how the two meetings came to be arranged, the first defendant's evidence as to what occurred in this period is corroborated in part by Mr Jackman. There were no material inconsistencies between the evidence of Mr Jackman and that of the first defendant. The facts I find based on their evidence are as follows.
At the same time as quoting on the plaintiff's shed, the first defendant was also involved in quoting on a shed for a Shane Gifford at Jandakot Airport. This was the second client that Mr Callo had referred to him. The first defendant had seen Mr Gifford and given him a price. When the first defendant contacted Mr Gifford some six weeks later, Mr Gifford had advised him that Mr Callo's prices were 'too dear', that he had seen the display, but also found out the name of the supplier in China. He said he intended to buy a shed from China. The first defendant suspected that Mr Gillam had been involved, as he knew that the Mr Gillam was sourcing prefabricated materials in China.
Around the same time, about six weeks after the Carramar meeting (say, early November 2008), the first defendant had a telephone call from a Mr Jared Nybo, who was from Exmouth. Mr Nybo had contracted to buy an office building from Mr Gillam. It appears that the first defendant had previously agreed with Mr Gillam to take the building to Exmouth, have it levelled, stumped and secured as required in a cyclone zoned area. In the telephone conversation, Mr Nybo told the first defendant that he wanted a sum of $11,500 back which he had paid to Mr Gillam. Mr Nybo said he was going to take the issue to the Builder's Registration Board, which was of concern to the first defendant.
The first defendant then sought to get in contact with Mr Gillam through Mr Jackman.
On 18 November 2008, the first defendant met Mr Jackman and Mr Gillam at Fortress Homes' office in Forrestfield. As I have found, this meeting was convened by Mr Jackman following the first defendant raising concerns with him about Mr Gillam.
On first arriving, Mr Jackman and the first defendant had a conversation in the absence of Mr Gillam in the lunchroom of Fortress' office. Mr Jackman repeated and reiterated his concerns about the approach of the first defendant, and the first defendant repeated and reiterated his concerns about Mr Gillam. The two of them then met with Mr Gillam.
The first defendant confronted Mr Gillam with the fact that he had taken two of his customers' down payments, one for $11,500, the other for $10,000. The first defendant demanded that Mr Nybo (one of the customers) be refunded his money.
The first defendant also asked what was happening with Mr Gifford (the other customer). Mr Gillam confirmed that Mr Gifford was now getting his shed through him. The first defendant expressed his displeasure at the fact that Mr Gillam was 'pirating' the customers he had been given by Mr Callo (ts 89).
The first defendant expressed concern to Mr Gillam about the way in which he did business and the fact that he was avoiding him on the telephone.
Mr Gillam said that it was all just a misunderstanding and he would fix it up straight away.
Mr Jackman gave evidence that because of the first defendant's concerns, the meeting was convened to sort out their respective roles. Mr Jackman did not recall the name of the client in Kalgoorlie being raised at that meeting. He said that he had little interest in the relationship between them and the client; he was more interested in the relationship between the two of them in case at any point after that his company became a supplier.
The first defendant told Mr Gillam that the Fitzpatrick job was his job, not Mr Gillam's. He told Mr Gillam that he was not a registered builder, he could not take any money from the plaintiff. He said that there was no point in discussing matters further if Mr Gillam was not prepared to work for him.
The first defendant was very specific about putting all the arrangements with Mr Gillam in writing.
At the meeting, Mr Gillam presented the first defendant with a building contract for the Epis Street Works with Daka's name on the top of it (exhibit D9). Mr Gillam said that he had an arrangement with the plaintiff to do the work for $701,206. Exhibit D9 is the same document as the 17 November Quotation sent by Mr Gillam to the plaintiff and Ms Dunn. As I have already noted, it sets out 11 items of work totalling $501,175, which after GST is $551,292 (see par 102 above). There was then an amount for 'Extras' of $136,285, with GST totalling $149,813. The overall total was $701,206.
Mr Gillam said that he had another registered builder who would be prepared to do the work. Mr Gillam offered for the first defendant to use his builder's registration on the project in return for a payment of 1%, $7,000, cash upfront. This was not acceptable to the first defendant.
At the end of the meeting, the first defendant and Mr Gillam typed up and signed an agreement to share the profits 50:50 on the Epis Street Works (exhibit D8). Pursuant to this agreement:
(a)the first defendant was acknowledged to be the registered builder and to have control over the project;
(b)they would each be paid $50 per hour for work in the metro area and $100 per hour for work carried out in China or Kalgoorlie;
(c)they could each claim expenses; and
(d)they would share the profits 50:50.
There is no reference in this document to the Riverina Way Works.
The first defendant gave evidence that, under this agreement, he believed he had control of the situation.
The first defendant also signed a Building Licence for the Epis Street Works (exhibit D11). He appears to have done this to obtain some practical leverage or control over Mr Gillam.
A second version of the building contract was produced which had the same list of 11 items and costings as exhibit D9 (exhibit D10). It had the first defendant noted as the builder. It also had a payment schedule and space for signature by the first defendant, Daka and the plaintiff.
There was then a second meeting on 26 November which I have previously found was organised by Mr Jackman because Mr Gillam had complained to him that the first defendant was harassing Ms Dunn. It appears that Mr Jackman and the first defendant again had an initial meeting. It also appears that Mr Jackman was not present for the substantive parts of the meeting.
At this second meeting, the first defendant told Mr Gillam that he did not want to have anything further to do with him. Mr Gillam said that they had to have an ongoing association as he had control of the shed job in Kalgoorlie. According to the first defendant, Mr Gillam said that 'I've got David Fitzpatrick by the balls. I squeeze him so hard he'll do exactly what I want him to do. Now, is it me who's going to be dictating the terms?' (ts 91).
Mr Gillam gave the first defendant a document under the heading 'Fortress Homes Pty Ltd' (exhibit D4) (Fortress Quotation). It contained the same 11 items as the two documents at the 18 November meeting (exhibits D9 and D10) (see par 102 above). The overall price was increased to $719,206.40, due to the item 'Extras' increasing to $167,913.90 (including GST). Mr Gillam told him that Fortress could build the shed for the $719,206.40 in this document. The first defendant recalled that his name was on the top of the Fortress Quotation.
Mr Jackman gave evidence that the Fortress Quotation was not in the usual format of a Fortress document, and was not prepared with the authority of Fortress. The entity mentioned, Fortress Home Building Systems Pty Ltd, is not and has never been a registered builder. The address, 8 Orchard Road Maddington, is Mr Gillam's address. The telephone number is the office number, but the mobile number was Mr Gillam's. The job number is not a Fortress job number. I note here that it is apparent that Mr Jackman was not in the meeting by the time this document was being discussed, as if he were, he would inevitably have raised concerns about it at the time, and would have given evidence about it.
The first defendant's evidence was that Mr Gillam then said: 'This is what's going to happen if you don't agree' (ts 247). To which the first defendant replied that he was not going to agree.
Mr Gillam then told the first defendant that he had a verbal agreement with the plaintiff to build the shed at the $719,206 figure. Mr Gillam again offered to give the first defendant $7,000 to use his building licence, and that he would do the job.
The first defendant refused, and called off the deal reached on 18 November. The first defendant said that he wanted to take over the work for the plaintiff and made threats of legal action against Mr Gillam. It appears that the threats made by the first defendant against Mr Gillam were sufficient for Mr Gillam to say that he would allow the first defendant to take over the work.
Mr Gillam advised the first defendant that the plaintiff was coming down to Perth for his wife's birthday in the next day or so, and suggested that they write up a contract for the plaintiff to sign.
Mr Gillam gave the first defendant all his working information about the Epis Street works at this meeting.
In cross‑examination, the first defendant accepted that the figure of $719,206.40 in the Fortress Quotation (exhibit D4) is the same figure as appeared in the contract which he and Mr Gillam drafted (which became the two versions of the 28 November Contract). He said that he adopted the price as his contract price. He satisfied himself that he could do the Epis Street Works for this amount.
In cross‑examination, counsel for the plaintiff sought to get the first defendant to confirm that the scope of works for the shed totalling $501,175 (that is, the 11 specified items) was the entire scope for the Epis Street Works. The first defendant declined to do so and elaborated on the extra work that had to be done. He disagreed with the proposition that if there was anything over and above the $501,175 figure then he would have to bear the cost of it.
The first defendant said that the 11 items totalling $501,175 became the basis of his verification of what was involved in the Epis Street Works, and what it would cost him to do the job. He verified them with his own experience of what he described as decades of being involved in this sort of work.
The first defendant was asked in cross‑examination to explain why the figure of $149,903.50 as 'Extras' was the same figure that ended up in the contract (though I note that it was the $167,913 figure from the Fortress Quotation that ended up forming part of the $719,206 contract price). He said that was not related to his contract. This was the cost price used by Daka (Mr Gillam).
He was asked in cross‑examination, why, if the figure of $719,206 had nothing to do with the Fortress quotation, it ended up in the contract. The first defendant reiterated the reason was because Mr Gillam had produced to him a contract, the Fortress Quotation, saying that he had an arrangement with the plaintiff to build the shed for $719,206.
The first defendant reiterated in cross‑examination that the figure of $719,206 was first conveyed to him at the 26 November meeting. Mr Gillam showed him the Fortress Quote which contained that figure. This was the figure that Mr Gillam told him Fortress would build it for.
The first defendant also reiterated that Mr Gillam knew that his price for the shed was $715,000, being $650,000 from the initial quote plus GST.
The first defendant also gave evidence that at the 26 November meeting, he and Mr Gillam had a conversation about the house at Riverina Way. He said that Mr Gillam then asked him about the house, and said that he had work to finish at the house. He gave the first defendant a schedule of the work, and asked the first defendant whether he could organise getting that work done. The first defendant responded that if he was paid $1,000 he would go up to Kalgoorlie and assess the house, and advise the plaintiff of the best thing to do.
In cross‑examination it became apparent that the first defendant saw a copy of the 10 November Work Schedule, or a document substantially identical to it, that is, the document with the scope of works and the price list on it. He said that the schedule was on Mr Gillam's desk. He understood that this was work which Mr Gillam was doing. In cross‑examination he confirmed that he had a price list for the Riverina Way Works and that he was going to go and have a look the work for the plaintiff and Ms Dunn.
The version of the work schedule for Riverina Way tendered by the first defendant (exhibit D16), has a first page identical to the 10 November Work Schedule, including prices. The second page is dated 27 November 2008 and has an additional item from the 10 November Work Schedule, being: 'Replace Roof Sheet'. There are no prices on the second page, but the total is $167,913 (including GST).
The first defendant said that he told Mr Gillam to delete the prices from the 10 November Work Schedule and change the heading. It was late in the day, and the first defendant had to leave this with Mr Gillam to complete.
Mr Gillam's office assistant then typed up a contract based on a contract which the first defendant had for a transportable building.
At around the same time as the 26 November meeting, the first defendant telephoned the City of Kalgoorlie Boulder to find out about how the plaintiff's house was constructed.
In summary terms, the key factual findings I make from the first defendant’s evidence of the 26 November meeting are:
(a)at the 26 November meeting, Mr Gillam handed the first defendant the Fortress Quotation (exhibit D4);
(b)the Fortress Quotation was not prepared with the authority of Fortress;
(c) although Mr Gillam threatened to get Fortress to do the work based on the Fortress quote, the first defendant persuaded him to let him take over the Epis Street Works;
(d)Mr Gillam, by his conversation and the words on the Fortress Quotation, led the first defendant to believe that this related only to the Epis Street Works;
(e)Mr Gillam told the first defendant that he had agreed with the plaintiff a price of $721,206.40, inclusive of GST, for the Epis Street Works;
(f)the first defendant accepted that this was the price for the contract for the Epis Street Works;
(g)Mr Gillam or his assistant typed up a contract based on a precedent provided by the first defendant;
(h)there was a discussion of the fact that Mr Gillam was doing work on the plaintiff's house at Riverina Way;
(i)the first defendant was aware of the scope of the Riverina Way Works, including the prices; and
(j)the first defendant took away from the meeting a copy of a document substantially identical to the 10 November Works Schedule for Riverina Way, with the quote for the roof added on the second page, the prices on page 2 removed, and a total of $167,913 (including GST);
28 November meeting at Mindarie
Overview
It is common ground that there was a meeting between the plaintiff, the first defendant and Mr Gillam on the plaintiff's boat at Mindarie Marina on the morning of 28 November 2008. The evidence of the plaintiff and the first defendant differs markedly as to what occurred at this meeting. In order to make factual findings about this meeting, it is necessary for me to first summarise the first defendant's evidence and the plaintiff's evidence. I then need to look at the events subsequent to this meeting as they bear on the credibility and cogency of the evidence of each witness. I then make factual findings as to what transpired at the 28 November meeting.
Before doing so, it is instructive to identify the two versions of the document said to constitute the 28 November Contract. The plaintiff's version is exhibit P4. It contains 9 pages. The first defendant's version is exhibit D6, and contains 7 pages. The first 6 pages of exhibit D6 are identical to the first 6 pages of the exhibit P4. Page 7 of exhibit D6 is identical to page 9 of exhibit P4. The two contested pages are pages 7 and 8 of exhibit P4. The contested pages comprise the 26 items in the 10 November Work Schedule, with the addition of a 27th item, 'Replace Roof Sheet'. They thus comprise the scope of the Riverina Way Works. The two contested pages also comprise exhibit D7, which the first defendant says did not form part of the 28 November Contract.
First defendant's evidence
In cross‑examination the first defendant said that 28 November 2008 was a date he remembered well because it was 'a big day in my life, wonderful day my life, because I had signed the biggest building contract I'd ever taken on myself in person without anybody else being involved, a day of great achievement as far as I was concerned' (ts 189).
The first defendant said that he arrived at the meeting on 28 November 2008 at Mindarie Boat Harbour on the back of the plaintiff's boat at about 7.30 am. Mr Gillam was already there. He said that he and the plaintiff sat opposite each other, over a small table, and Mr Gillam sat behind the first defendant on the stern of the boat.
The first defendant's evidence was that he first asked the plaintiff whether he could talk to him in private for a moment. He wanted to do so as he wanted to tell the plaintiff that it was likely that Mr Gillam would try and defraud him. The plaintiff said no, and that he wanted Mr Gillam there. The plaintiff said that he was very scared about going to the boat. He had wanted to buy the plaintiff breakfast on land. He didn't want Mr Gillam to be present.
The first defendant said that at the commencement of the meeting on the boat he had asked the plaintiff whether or not Mr Gillam had been paid. The plaintiff said that he had not paid Mr Gillam anything.
The first defendant said that he spent three hours going over the contract with the plaintiff. His evidence was that the plaintiff kept asking Mr Gillam whether particular parts of the contract we okay by him, and received positive responses. In cross‑examination, the first defendant reiterated that he had taken the plaintiff through the contract in detail. When there was a discussion about the payment of the deposit of 6.5%, which was due within three days of signing, the first defendant clarified with the plaintiff whether that was going to be a problem. The plaintiff said that that would not be a problem.
The first defendant recalled the plaintiff saying that he was happy with the price for the shed, and that he had a higher quote.
According to the first defendant, there was then a discussion about the work on the plaintiff’s house at Riverina Way. The first defendant's evidence is that he did not want to do any work on the house, but also wanted Mr Gillam 'out of the scene'.
His evidence was that he had a work schedule for $167,000, which he had not checked out. By then he had not seen the house, and he did not know what was involved.
He agreed to go to Kalgoorlie for $1,000 to look at the house. He would see if the two jobs could run together. He was having tilers, electricians, plumbers other trades go to Kalgoorlie from Perth for the shed, and thought that there may be opportunities for them to do some of the work on the house.
His evidence was that the plaintiff had told him that his wife (Ms Dunn) was coming down to Perth the following Sunday. The plaintiff said he wanted Ms Dunn to sign it. He stopped signing the pages of the contract, and said he would leave them to sign with Ms Dunn. The first defendant ended up signing all pages of the plaintiff's version of the 28 November Contract, including the two contested pages (exhibit P4), all pages of his version of the 28 November Contract (exhibit D6) and one of the two pages of exhibit D7 (that is, one of the two contested pages). His evidence was that exhibit D7, the two contested pages comprising the Riverina Way Works, was for a different contract.
The first defendant's evidence is that the document which is exhibit D6 comprised the 28 November Contract. He confirmed that he and the plaintiff signed each page of that document.
The first defendant said that he explained to the plaintiff that he would open a new bank account for the work. He told the plaintiff that he liked to open up a new account each time he did a building, explaining that he did not want the plaintiff's money in his account. The first defendant told the plaintiff that he would get the account information to the plaintiff.
In cross‑examination, the first defendant was asked whether, after the question about the bank account, he said something to the effect that he was 'too old for computers'. The first defendant denied that and said that he had been operating on computers and using the internet for several years. He denied withholding EFT details because he was not proficient with the use of computers.
In cross‑examination, the first defendant said that he had two copies of the contract which he took to the boat. He said that he gave one to the plaintiff to sign and kept the other one for himself. He reiterated that he spent about three hours with the plaintiff on the boat going through the two copies of the documents that were ultimately signed by the two of them. He also reiterated in cross‑examination that according to his evidence there are always two separate documents: 'two different subjects, two different properties, two different concepts of what is to be done, different types of buildings and so forth. Totally different' (ts 280).
He was asked to explain in cross‑examination why, after three hours of going through the two documents ‑ one of seven pages and the other of nine pages ‑ he did not notice that one copy of the contract had two extra pages in it. The first defendant said that the building contract was something they went through very carefully. Thereafter they went through the other document regarding the house.
It was put to him that the two pages of exhibit D7 were in the contract which he took to the boat, and that he subsequently ripped them out. The first defendant disagreed with this. It was also put to him that he said to the plaintiff: 'once we finish with this bit we'll just rip it out' (ts 281). He denied this.
The first defendant identified his signature and initials on exhibit P4. He confirmed that the purpose of he and the plaintiff signing the document was to bind them both to it as a contract.
In cross‑examination, counsel for the plaintiff showed exhibit P4 (the plaintiff's version of the 28 November Contract) to the first defendant. Counsel cross‑examined first defendant on the fact that there was a stain on the back page of exhibit P4, described by counsel as a coffee stain, which went through the pages of that document. Counsel also drew the first defendant's attention to the fact that there was a footprint on the first page of the plaintiff's version of the contract. The first defendant was then asked whether, having seen the coffee stain on pages 7 and 8 of exhibit P4, he still maintained that it did not form part of the document that he had brought with him to the boat and in Mindarie. He said he did.
The first defendant described exhibit D7 (his copy of pages 8 and 9 of exhibit P4) as being 'a couple of pages concerning a different property with a different address' (ts 200). He said that exhibit D7 was related to the likelihood that the first defendant would be happy to take responsibility of attending to the plaintiff's house in order to spare him a lot of trouble. He reiterated that the contract, that is exhibit D6, was for the erection of an industrial shed on 138 Epis Street, Kalgoorlie for the price set out in the contract.
The first defendant's position in relation to exhibit D7 summarised as follows (ts 217):
…it was not intended to be a contract, it was intended to be a schedule of works, that I would be going up to Kalgoorlie assessing, quoting on, making sure everything was in order if my services were required, which I rather hope they wouldn't be, but nevertheless, unfortunately I put these nice people in touch with … unbeknown to me a conman of the worst description.
The first defendant recognised exhibit D7 as a list of works to be carried out on the plaintiff's house. The first defendant accepted in cross‑examination that the scope of works in exhibit D7, a document he had with him at the 28 November meeting, was exactly the same as the scope of works that Mr Gillam had quoted on for the plaintiff for the Riverina Way Works, save with the addition of the roof item (exhibit P13 ‑ 17 November Quotation).
In cross‑examination, the plaintiff confirmed that he had initialled pages 7 and 8 of exhibit P4 (that is, the pages corresponding to exhibit D7). The first defendant was asked why he put his initials there. He said that he put his initials there so that if he went to Kalgoorlie he would know exactly what work he was being asked to give a price on. He reiterated in cross‑examination that the second page of his copy (exhibit D7) was not initialled by him because he was informed at that time that Ms Dunn (whom he referred to as Mrs Fitzpatrick) was coming to Perth, and because the contract had to be signed by three people. He said that he would never do business with a husband and wife unless both were with him and that he never got to that stage. In relation to exhibit D7 he said that the purpose of putting his initials on this document was to define what work the plaintiff wanted done, because he did not want to go to Kalgoorlie and find something else. He commented that it is always very hard dealing with home renovations and improvements because people change what they want. He said he preferred not to do the home renovation work because of his family commitments and health issues. He said that the work in the schedule was work that Mr Gillam was organising and he thought that because that he 'put these lovely people in touch with a master criminal', he was going to give them an option (ts 227). He wanted to break the nexus or connection between the two. He thought that because he was going to be building a shed for them, he should try as best as he could to coax them away from Mr Gillam.
The first defendant said that he felt that if he could get into the ear of Ms Dunn the next day, he could talk over the various options and even suggest to her that with home improvements in Kalgoorlie there are plenty of operators could do the task piecemeal. He said that if he had to bring a supervisor up from Perth to assist him with the shed so he could do two jobs, that would cost him $5000. He said that the situation was causing him a great deal of difficulty and a great deal of worry and that nobody would listen to him. He said that he had never seen the house at Riverina Way. He said the only way he could do a building contract on house renovation was to go up and see it. He reiterated that if he was paid $1000 he would go up to Kalgoorlie and see the house. He would tell them the best way to go about all the work and negotiate a contract with them if they got to that stage.
In relation to the scope of works set out in exhibit D7, the first defendant said in re‑examination that he told the plaintiff that there were a lot of things in the list that he could save money on by using local labour. He said he really needed to talk to the plaintiff and his wife about the scope of works. He said he was happy to go ahead and commit himself to give a price in organising it, but that he would get considerable savings by doing a lot of the work himself using local labour.
He confirmed that the version of the work schedule the parties had at Mindarie, that is exhibit D7, did not have the prices on it. In evidence, he went through the list in detail as to what he told the plaintiff about how he could save him money in doing the renovation work.
The first defendant reiterated that he had two distinct conversations about two distinct components. The first was the contract to build the shed. The second was a conversation in relation to exhibit D7, for the house at Riverina Way. He confirmed that at the end of the second conversation, he told the plaintiff that if the plaintiff paid him an extra thousand dollars on top of the 6.5% deposit, he would go to Kalgoorlie and give him some advice and see what he could do. He said that he could guarantee the plaintiff that he could save more than the $1,000 by doing the renovation work when his workers were up there working on the shed.
Plaintiff's evidence
The plaintiff gave evidence that he met with the first defendant on his boat on the day on which he signed a contract, being 28 November 2008. The boat was at the Mindarie Marina. The meeting was arranged by Mr Gillam. As far as the plaintiff was concerned, 'we were right to sign something up and go and build me shed and do me house' (ts 348). His evidence was that Mr Gillam has said: 'Can we come down and run through this so‑called contract and run through everything, and if everyone's happy, we'll sign it off' (ts 348). The meeting was to 'run through all the figures and the bits and pieces' (ts 348).
The plaintiff recalled that Mr Gillam 'rocked up' at 8.00 am. He said that he was staying on the boat. He also said that he was off work at that stage.
Mr Gillam first arrived, they had a general chat. He said that Mr Gillam had told him that the 'old fart' (referring to the first defendant), would not sign a standard contract and had made him do his own contract.
The plaintiff gave evidence that the first defendant was half an hour late for the meeting, arriving at 8.30am. They sat around the table on the boat which the plaintiff said easily seats five people. The three of them sat around the table taking about the project.
The plaintiff was shown the two versions of the 28 November contract, being exhibit D6 (first defendant's version) and exhibit P4 (plaintiff's version). The plaintiff identified that exhibit D6 had two pages missing from it compared to exhibit P4. He identified the documents as the contract which the first defendant drew up and presented to him to sign. He said the contract (exhibit P4) was presented to him as a single stapled bundle of pages, exactly the same as it appeared as the exhibit. The plaintiff could not remember whether the first defendant or Mr Gillam brought the two documents, but thought it might have been the first defendant. Both documents were identical and were each stapled.
The plaintiff gave evidence that he knew that the two documents were identical because he and the first defendant went through them.
The plaintiff said that the first defendant seemed to be worried about getting paid. He told the first defendant that he was going to borrow money from the bank, but if the bank dragged their feet, he had money in the bank he could use for deposits and the like. The first defendant said as the plaintiff was funding the project, time was of the essence in relation to payments so that he could pay his people.
The plaintiff recalled that he went through things with the first defendant and Mr Gillam to make sure that they had not 'forgotten anything out of the shed' contract (ts 354). The plaintiff was asking questions to make sure that they had covered all the bases and to make sure that the price was right.
Determination – Contract to do both sets of work
On scenario that the 28 November Contract included both the Epis Street Works and the Riverina Way Works, I would for the reasons set out above have found that it would still have cost the first defendant about $531,000 to undertake the Epis Street Works. This amount is calculated by taking the contract price of $653,824, and subtracting profit of $33,000 and supervision costs of $90,000 (I have not used Mr McEvoy's cost of $670,000 as I have already factored in the difference between his price and the contract price by allowing loss of profit at the lower end of the Mr McEvoy's scale, being 5%). It can also be arrived at by adding the $30,000 or so extra costs to the $501,175 total of the 11 identified items.
Mr Gillam prepared a detailed costing of the Riverina Way Works. This totalled $152,649 (see exhibits P20 and D16). With GST, this figure became the $167,913 which appeared as 'extras' in the Fortress Quotation. From the train of email correspondence, it appears that Mr Gillam was obtaining quotes for this work. I have no way of determining the profit that Mr Gillam expected to make on this work. The first defendant said that if he were doing the Riverina Way works, he could have saved the plaintiff some money by using local trades' people. Taking that into account, I find that the Riverina Way Works would have cost at least $125,000 (excluding GST).
I therefore find that it would have cost the first defendant around $530,000 to undertake the Epis Street Works and around $125,000 to undertake the Riverina Way Works, totalling $655,000 (each excluding GST) The contract price was $653,824 (excluding GST).
I therefore find that if the 28 November Contract included both the Epis Street Works and the Riverina Way Works, the first defendant has not satisfied the onus of proof on him to establish that he would have made a profit on the contract. Nor has he satisfied me that there would have been any money available out of which he could be paid his supervision cost. The first defendant is therefore not entitled any damages. In this scenario, I would provisionally assess nominal damages only of $5: Elliott v Reading [1999] WASCA 11 [1], [2], [53] ‑ [54].
Damages - Loss of reputation
Issues
In his particulars of damages filed 22 January 2012, the first defendant stated:
As a consequence of the unjustified linking the First Defendant to the Second and Third Defendant, this became common knowledge to the informed business community, causing the Second Defendant to suffer damage to this reputation, and loss of custom, for which the Plaintiff claims Loss and Damage.
In the course of the trial, it became apparent that the essence of this claim was that the first defendant had to disclose the existence of the litigation in credit information given to potential corporate customers, thereby causing him to lose work.
The issues in relation to damages for loss of reputation are the same in relation to either version of the 28 November Contract.
Evidence
In relation to the claim for loss of reputation, the first defendant gave evidence that during 2009 he sought work erecting sheds from a number of shed suppliers which he identified. He said that these businesses had required him to complete a written application form to be considered as a registered builder for their customers. After the present writ was issued, the first defendant said that he had to disclose the existence of the litigation in these. His evidence was that this led to him not being considered for building work.
The first defendant said that he was kept very busy from 2003 to 2008 supervising the construction of sheds. He built the occasional prefabricated home, or shifted one, though his main business was sheds. He said that if on the basis of his work prior to 2009, he expected to do three sheds per year and make $25,000 profit per shed, totalling $75,000. His claim was that he lost $75,000 in 2009 because he could not obtain any work from shed suppliers because he had to disclose the existence of the litigation. The first defendant said that by 2010 he had gone into other forms of building work, in particular with prefabricated houses.
The first defendant also gave evidence that because of the way in which things had gone with the plaintiff, his relationship with Mr Callo had broken down. The work for the plaintiff was one of two jobs given to him by Mr Callo, on the expectation that he would get further work if he did a 'first class job' on them.
The first defendant was cross‑examined on the efforts he made to find other work in 2009. He went through in some detail the number of other companies who he had approached to construct sheds. He said he had a prior business relationship with a number of the supervisors working for these businesses. He said that he had built 'numerous sheds' for a number of them (ts 294).
In cross‑examination, the first defendant denied that he was prevented by illness from doing building work in 2009. He did concede that with the global financial crisis in 2009, building work was then very hard to find, in particular for someone of his age.
Relevant law
In Australian law, damages may be awarded for loss of reputation flowing from a breach of contract, but only in limited circumstances. This is because, as a general rule, in assessing the amount to be awarded for breach of contract, '[r]esentment, disappointment and the loss of esteem of friends are not proper elements': Fink v Fink (1946) 74 CLR 127, at 144; Baltic Shipping, 369.
Damages for loss of reputation were awarded in Walker v Citigroup Global Market Australia Pty Ltd [2006] FCAFC 101, [91]). In that case, the appellant was awarded damages for breach of a contract of employment, including 'general consequential damages'. The appellant cross appealed on the adequacy of the award of $5,000. The Full Court allowed the cross appeal, stating ([91]):
It is true that the evidence going to the consequential loss claimed by Walker was not great in volume but it was striking in its effect. The evidence did not need to be corroborated. It was not challenged. We do not agree that expert evidence was necessary. We are not clear what type of expert evidence would be required. The consequential effects of the loss of his job on Walker's business reputation and personal life, drastic as they were, are not out of the ordinary course of events. In the circumstances, we think the award of $5,000.00 is a significant under assessment of the loss which Walker suffered in this regard. If his evidence is accepted, as it must be, he suffered a considerable dislocation of his life with serious long term effects. In our view, the cross-appeal should succeed and an award in the amount of $100,000.00 should be substituted for the award of $5,000.00.
However, the award of damages for loss of reputation for breach of a contract of employment is properly seen as an application of the general principles governing the award of damages for a breach of contract: Johnson v Unisys Ltd [1999] 1 All ER 854, 860; Malik v Bank of Credit & Commerce International SA (in liq) [1998] AC 20, 33, 41 and 52; Thomson v Broadley [2000] QSC 100 [38]; Thomson v Broadley [2002] QSC 255 [29]. In Malik it was agreed that there was an implied term in the employment contract that the employer should not without reasonable and proper cause conduct itself in an manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between employer and employee (33, 45 – 46 and 52). In this context, Lord Steyn commented in Malik (52):
Provided that a relevant breach of contract can be established, and the requirements of causation, remoteness and mitigation can be satisfied, there is no good reason why in the field of employment law recovery of financial loss in respect of damage to reputation caused by breach of contract is necessarily excluded.
Historically, the classic example of when damages were awarded for loss of reputation arising from a breach of contract was where a bank dishonoured a customer's cheque in circumstances where there were actually funds in the customer's account to meet the cheque. In this line of cases, there was a rebuttable presumption that a customer who was a trader could recover reasonable compensation, without an allegation of special damage, for the injury done to his or her credit: Rolin v Stewart (1854) 14 CB 595; (1854) 139 ER 245; Kpohraror v Woolwich Building Society [1996] 4 All ER 119; Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31 [25]. In Kpohraror Evans LJ (with whom Waite LJ and Sir John May agreed) held that this presumption was still governed by the general rule in Hadley v Baxendale (122, 128).
The House of Lords drew on the principles in relation to dishonoured cheques in Wilson v United Counties Bank Ltd [1920] AC 102. In that case, the respondent had agreed to supervise the appellant's business while the appellant was on war service. The jury found that the respondent had agreed to take all reasonable steps to maintain the appellant's credit as a trader. The agreement was breached, ultimately resulting in the appellant's bankruptcy. Their Lordships declined to overturn an award of damages to the appellant for loss of credit and reputation, assessed without proof of special damages (112, 120, 140, 143). Viscount Findlay observed that 'the mere fact of bankruptcy imports damage to the credit of the bankrupt. It is a natural consequence, and it is for the jury to assess the damages for such a slur' (120). Lord Atkinson stated (132):
Major Wilson is not seeking to recover damages to any extent due to the breach, in such a manner as that of a contract not directly connected with his credit and reputation. He is seeking to recover damages for the injury caused to his credit and reputation by the defendant's neglect to perform the service they had by their contract bound themselves to perform – namely, to take all reasonable steps to maintain that credit and reputation. By withholding that service, the defendants directly caused Major Wilson to be ultimately made a bankrupt. It would appear to me that injury to the credit and reputation of a trader is not only a natural and reasonable result of his being made bankrupt, i.e., such a consequence as would in the ordinary course of things, flow from it, but must, in the present case, have been in the contemplation of the parties when they entered into the contract as the result which would probably follow from the breach of it, and that the damages therefore are not too remote…
In Herbert Clayton & Jack Waller Ltd v Oliver [1930] AC 209, the House of Lords affirmed the award of damages to an actor, the respondent, for loss of publicity arising out of a breach of a contract by which he was to appear in public in a 'leading comedy part' at an establishment known as the 'Hippodrome'. Their Lordships were of the view that the award of damages was merely an application of the rule in Hadley v Baxendale to the facts of the case (220, 221). Lord Buckmaster stated (220):
In the present case the old and well established rule applies without qualification, the damages are those that may reasonably be supposed to have been in the contemplation of the parties at the time when the contract was made, as the probable result of its breach, and if any special circumstances were unknown to one of the parties, the damages associated with and flowing from such breach cannot be included. Here both parties knew that as flowing from the contract the plaintiff would be billed and advertised as appearing at the Hippodrome, and in the theatrical profession this is a valuable right.
In Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393, the plaintiff's sought damages for the loss of their reputation with the 'beauty editresses' of certain ladies' papers. The loss was said to arise out of a breach by the defendant to supply certain containers in which the plaintiff was to market its summer cream. As part of the marketing the plaintiff secured favourable editorial comment from the 'editresses', and upon the cream not being able to be supplied lost their goodwill. The trial Judge, Hallett J, observed that the cases in which such damages had been awarded were ones in which 'the reputation of one party was part of what the other party, by his contracts, had undertaken to confirm' (399). His Honour stated (400):
… if pecuniary loss can be established, there mere fact that the pecuniary loss is brought about by the loss of reputation caused by a breach of contract is not sufficient to preclude the plaintiffs from recovering in respect of that pecuniary loss.
Such a plaintiff has to overcome two difficulties. In the first place, he must prove with sufficient certainty the occurrence of the pecuniary loss, and, in the second place, he must prove that such pecuniary loss was within the contemplation of the defaulting party at the time when the contract was made. Otherwise it is not recoverable, having regard to the law respecting remoteness of damage.
His Honour found that the plaintiff had failed to overcome these two difficulties.
The award of damages for suffering is analogous to the award of damages for anxiety, disappointment and distress: Baltic Shipping (370). The general rule is that damages for anxiety, disappointment and distress are not recoverable in action for breach of contract: Baltic Shipping, (361), (368 – 369), (381), (383) and (404 – 405); Thorpe v Lochel [2005] WASCA 85 [23], [40], [145]. There are a number of exceptions to this general rule, summarised by Mason CJ in Baltic Shipping (363) (see also Thorpe, [23], [40]). It is instructive to briefly examine two of these exceptions in order to assist in discerning the principles by which damages for loss of reputation may be awarded.
One example is that damages may be awarded for distress, vexation and frustration where the very object of the contract has been to provide pleasure, relaxation or freedom from molestation: Baltic Shipping (363), (370 – 371), (381), (383) and (405); Thorpe [146]. The classic example is a failed holiday. Thus, in Baltic Shipping damages under this head were awarded to a passenger of a cruise ship that sank 10 days into a 14 day cruise.
A second exception is where damages are awarded as compensation for mental suffering consequent upon physical inconvenience as a result of the defendant’s breach of contract: Baltic Shipping (363), (381), (383) and (405); Thorpe [23] ‑ [31]; [40] and [148] ‑ [149]. The head of damages was discussed by the Court of Appeal in Thorpe. In that case the respondent claimed damages from their former solicitor, the appellant, arising out of the manner in which he represented them in certain proceedings. It was claimed that the solicitor had conducted the proceedings in 'such a way as to cause undue delay, stress, hardship and unnecessary expense' to the respondents. They claimed damages for mental anguish anxiety, pain, physical discomfort and inconvenience.
Pullin JA, with whom Roberts‑Smith JA agreed, overturned the decision of the trial Judge to award damages under this head. The third member of the Court, Steytler P, agreed with the trial Judge on the facts, but stated the law in similar terms to the majority. Steytler P stated the principle to be [23]:
Courts have awarded compensation for physical inconvenience suffered by a plaintiff as a consequence of a breach. They have also awarded damages for mental suffering which is a direct consequence of physical inconvenience resulting from a breach.
Pullin JA stated the principle to be that 'damages may be awarded as compensation for mental suffering consequent upon physical inconvenience as a result of the defendant's breach of contract' [148]. His Honour referred to the decision in Hobbs v The London & South Western Railway Co (1875) LR10QB 111 as being an example of this exception (and one observed to be an example by members of High Court in Baltic Shipping, see for example 397 ‑ 389). In that case, the plaintiff was entitled to damages for the inconvenience of having to walk home in the early hours of the morning when a train failed to stop at the station for which he had bought a ticket. Damages were awarded because the inconvenience was the 'immediate' effect of the breach.
The decision in Baltic Shipping is instructive for present purposes as the members of the High Court seemed careful not to extend the exceptions beyond the principle in Hadley v Baxendale, or to do so as little as possible consistent with the authorities. Thus Mason J, with whom Toohey and Gaudron JJ agreed, stated (365):
[A]s a matter of ordinary experience, it is evident that, while the innocent party to a contract will generally be disappointed if the defendant does not perform the contract, the innocent party's disappointment and distress are seldom so significant as to attract an award of damages on that score. For that reason, if for no other, it is preferable to adopt the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation. In cases falling within the last-mentioned category, the damages flow directly from the breach of contract, the promise being to provide enjoyment, relaxation or freedom from molestation. In these situations the court is not driven to invoke notions such as "reasonably foreseeable" or "within the reasonable contemplation of the parties" because the breach results in a failure to provide the promised benefits.
Brennan J quoted the following passage from the decision of Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445:
Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead. If the law did not cater for this exceptional category of case it would be defective.
His honour then continued (371, footnotes omitted):
I respectfully agree. To ascertain whether the obtaining of peace of mind is the object of a contract or, more accurately, an object of a contract, reference is made to its terms, express or implied, construed in the context of facts which the parties know or are taken to have known. Thus, if peaceful and comfortable accommodation is promised to holidaymakers and the accommodation tendered does not answer the description, there is a breach which directly causes the loss of the promised peacefulness and comfort and damages are recoverable accordingly. In cases of this kind, a statement by the promisor commending a service or facility to be provided under the contract is frequently a term of the contract, not a mere representation.
Deane and Dawson JJ also quoted with approval the passage from the decision in Watts v Morrow set out above. Their honours then stated (382):
The object of the contract between Baltic and Mrs Dillon in the present case was to provide Mrs Dillon with the relaxing enjoyment and entertainment of a fourteen-day pleasure cruise. It was an implied term of the contract that Baltic would take all reasonable steps to provide such a cruise. The direct consequence of Baltic's admitted breach of contractual duty was that Baltic failed to provide the latter part of that promised pleasant holiday. Instead, it provided an extraordinarily unpleasant experience. Subject to the ordinary need to avoid double compensation, Mrs Dillon was entitled to recover damages for the disappointment and distress which she suffered as the result of Baltic's breach of contract.
McHugh J stated (405, citations omitted):
The application of basic principle concerning the awarding of damages for breach of contract requires an award of damages for distress or disappointment where it is an express or implied term of the contract that the promisor will provide pleasure or enjoyment or personal protection for the promisee. … [D]amages must also be recoverable for distress or disappointment consequent upon the suffering of physical inconvenience as the consequence of a breach of contract. Furthermore, because damages for personal injury may be recovered in an action for breach of contract and because psychiatric illness constitutes personal injury, damages for mental distress associated with a psychiatric illness or physical injury must also be recoverable in an action for breach of contract.
In the context of Baltic Shipping, Brennan J summarised the authorities on the award of damages for loss of reputation by stating that 'damages have been awarded without proof of pecuniary loss for damage caused in direct breach of a contractual promise where the damage consists in a general loss of reputation [citing Wilson and Herbert Clayton], but, except in the 'direct breach' cases, damages are not awarded for general loss of reputation without proof of pecuniary loss' [citing Foaminol Laboratories ](370). The two other classes of case in which damages for loss of reputation have been awarded ‑ dishonoured cheques and employment contracts – are not relevant for present purposes. They are still subject to the general principles governing causation and remoteness. They are perhaps best seen as examples of the first of the two categories set out by Brennan J, based on an implied term. Consistent with the general principle in Robinson v Harman, the award of damages for loss of reputation in each of these cases will place the plaintiff in the position he or she would have been in had the contract been performed in accordance with its terms. This analysis is also consistent with the analysis of the remaining members of the High Court in Baltic Shipping on the award of damages for anxiety, disappointment and distress, and the analysis adopted by the Court of Appeal in Thorpe. It thus seems to me to be the approach I ought to adopt in the present case.
Determination
In the present case, it cannot be said that an object of the contract was to maintain or promote the reputation of the first defendant. On either version of the 28 November Contract, it was a building or construction contract. The losses claimed were not direct, but indirect. They arose out of litigation commenced as a result of the breach of the contract. Even in relation to the loss of other potential business from Mr Callo, if it was causally related to the works done for the plaintiff, the loss was an indirect result of the issues between and plaintiff and first defendant, and not a direct consequence. Neither is there any basis to imply a term that the plaintiff would maintain, promote or not diminish the reputation of the first defendant. The claim does not fall within the first of the two categories identified by Brennan J in Baltic Shipping.
As to the second category, there is no evidence that the first defendant has actually lost the opportunity to construct a particular shed, from which he would have derived a particular profit, as a result of the breach of the contract by the plaintiff. The claim for $75,000 for the profit on the three sheds that the first defendant says he would have constructed in 2009, is based on the first defendant's general expectations. In any event, I am not persuaded that any difficulties the first defendant had in obtaining work were not as a result of the global financial crisis and consequent difficulties with builders obtaining work generally.
I am not aware of any case law setting a specific exception to the general principles where the institution of litigation and its consequent, inevitable, impact on creditworthiness, has been sufficient to found an award of damages for loss of reputation, in particular damages to be assessed without proof of actual pecuniary loss. Indeed, such a principle would open the floodgates as it would be open to every successful defendant to make such an argument.
On either version of the 28 November Contract, the first defendant has not made out his claim for damages for loss of reputation. I provisionally assess these damages at $0.
Summary of determination
The central issue in the trial was whether there was a contract formed between the plaintiff and the first defendant on 28 November 2008 and, if so, what were its terms. For the reasons I have set out above, I find that the plaintiff and the first defendant each genuinely believed that they had entered into different contracts, a belief supported in each case by the objective circumstances. In the plaintiff's case, the contract was for both the Epis Street Works and the Riverina Way Works. In the first defendant's case, it was for the Epis Street Works only. Their respective beliefs were the product of their separate dealings with Mr Gillam. They were at cross purposes at the meeting on 28 November 2008, and kept so by Mr Gillam. As a consequence, I find that there was no actual meeting of the minds between the parties, and thus no contract came into existence. I therefore find that the first defendant has not discharged the onus of proof on him to satisfy me on the balance of probabilities that a contract was made between him and the plaintiff on the terms he alleges.
As the matter was fully heard before me, it is appropriate that I make provisional findings on the remaining issues. However, I can only do so on the basis of the two alternate versions of the 28 November Contract.
If the 28 November Contract was as asserted by the first defendant, that is, for the Epis Street Works only, I would have found that:
(a)the contract was terminated by the plaintiff in or about January 2009;
(b)it was not unenforceable by reason of the BRA;
(c)the first defendant is entitled to damages of $122,691 for loss of bargain; and
(d)the first defendant is not entitled to any damages for loss of reputation.
If the 28 November Contract was as asserted by the plaintiff, that is, for both the Epis Street Works and the Riverina Way Works, I would have found that:
(a)the contract was frustrated by no later than 31 January 2009 by the conduct of Mr Gillam;
(b)if it was not so frustrated, the plaintiff would not have discharged the onus on him to satisfy me that the contract was unenforceable by reason of the BRA; and
(c )if was terminated by the plaintiff rather than being frustrated, the first defendant would not have suffered any loss, either for loss of bargain or loss of reputation, and I would have provisionally assessed damages nominally at $5.
The first defendant’s claim against the plaintiff should thus be dismissed. I will hear from the parties on the issue of costs.
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