| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : HAWKER as Trustee of Stewart Hawker Superannuation Trust Fund -v- OCEAN STYLE PTY LTD [2014] WADC 39 CORAM : STAUDE DCJ HEARD : 7, 8, 9 & 10 OCTOBER 2013 DELIVERED : 1 APRIL 2014 FILE NO/S : CIV 2552 of 2012 BETWEEN : STEWART HAWKER as Trustee of Stewart Hawker Superannuation Trust Fund First plaintiff
STEWART HAWKER
Second plaintiff
AND
OCEAN STYLE PTY LTD
First defendant
DAMIEN FRANCIS GILES TURNEY
Second defendant
Catchwords: Contract - Loan agreement - Whether default interest rate is a penalty
Practice and procedure - Jurisdiction - Equitable relief sought in form of declaration of resulting trust - Equitable relief not ancillary to personal action
Misleading or deceptive conduct - Representations as to ability and willingness of first defendant to do earthworks at no cost - Whether conduct in course of trade or commence
Contract - Agreement for earthworks - Work done by first defendant for the benefit of the second defendant - Whether first defendant agreed to do earthworks at no charge - Whether agreement included express or implied term to the effect that the first defendant would be paid for the work - Quantum meruit - Turns on own facts Legislation: District Court of Western Australia Act 1969
Fair Trading Act 1987
Supreme Court of Western Australia Act 1935
Trade Practices Act 1974 (Cth) Result: First plaintiff's claim against first defendant on loan agreement allowed, except claim for interest at 36% per annum.
Second plaintiff's claim against second defendant for damages disallowed.
First defendant's claim against second plaintiff for quantum meruit allowed in part.
Representation: Counsel:
First plaintiff : Mr J C Yeldon
Second plaintiff : Mr J C Yeldon
First defendant : Ms N M E Breach
Second defendant : Ms N M E Breach
Solicitors:
First plaintiff : Susan Brook
Second plaintiff : Susan Brook
First defendant : Clement & Co
Second defendant : Clement & Co
Case(s) referred to in judgment(s):
Andrews v Australia & New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205
Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215
Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488
Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208
Concrete Constructions (NSW) Pty Ltd v Nelson [1990] 169 CLR 594
Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1914] UKHL 1; [1915] AC 79
Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60
Hondros v Chesson [1981] WAR 146
Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27
MPB (SA) Pty Ltd v Gogic [1991] HCA 3; (1991) 171 CLR 657
Murcia & Associates (a firm) v Grey [2001] WASCA 240; (2001) 25 WAR 212
O'Brien v Smologonov (1983) 53 ALR 107
Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221
Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656
Spiers Earthworks Pty Ltd v Landtec Projects Corp Pty Ltd [No 2] [2012] WASCA 53; (2012) 287 ALR 360
Introduction 1 Mr Hawker and Mr Turney met and became friends when they were both working at the Golden Grove mine site, Mr Hawker as an electrician and Mr Turney as a plant operator. 2 Sometime later, in April 2010, when Mr Turney's company Ocean Style Pty Ltd (Ocean Style) needed money to buy two scrapers for its earthmoving business, Mr Hawker, through his self-managed superannuation fund, agreed to lend it $100,000 (the loan amount) for a minimum period of four months and up to eight months. The loan amount was advanced on 22 May 2010. Ocean Style was unable to repay it. 3 It happened that Mr Hawker owned, in his personal capacity, a rural property on Towie Road, Manjimup, on which there was a dam in need of repair. It consisted of a reservoir formed in a gully by an earthen retaining wall running north/south on the eastern side: exhibit 4.1. 4 Mr Turney on behalf of Ocean Style told Mr Hawker he could fix the dam and agreed to do the work required (dam works) and later, other work, including the infilling of a smaller dam on the property, the laying of fill on the site of a proposed residence, the excavation and stockpiling of gravel and the filling of the gravel pit, the construction of a gravel road and the deepening of the dam (additional work). In the course of the dam works Mr Hawker lost confidence in Ocean Style's ability to complete the work in a timely and satisfactory manner and stopped the company from doing further work. Ocean Style then invoiced Mr Hawker $169,259.00 for work done. Mr Hawker refused to pay. 5 In this action Mr Hawker as trustee for the Stuart Hawker Superannuation Trust Fund (SHSTF) claims against Ocean Style and Mr Turney an order for delivery up and sale of the two scrapers. Mr Hawker contends that either Ocean Style or Mr Turney holds the scrapers bought with the loan amount on a resulting trust in favour of the SHSTF. 6 Alternatively, Mr Hawker claims the loan amount plus interest. 7 Ocean Style also disputes that Mr Hawker is entitled to possession of the scrapers by virtue of the terms of the loan agreement. 8 Ocean Style admits the loan debt, and liability to pay an agreed lump sum interest amount of $5,000 for the first four months of the loan, but disputes the interest rate of $3,000 per month thereafter on the grounds that it is a penalty. 9 In his own right, Mr Hawker claims against Mr Turney damages in relation to the dam works for deceptive and misleading conduct pursuant to s 10 and s 79 of the Fair Trading Act 1987 (as stipulated by counsel in closing). Mr Turney denies the claim. 10 In its cross-claim against Mr Hawker, Ocean Style pleads that it carried out the dam works and additional work pursuant to a contract (the dam contract) amended from time to time as the additional work was requested by him. Ocean Style claims $169,259.00 for work done at Mr Hawker's request. It pleads also that Mr Hawker engaged in misleading and deceptive conduct, but does not allege any loss or damage, or claim any remedy in relation to such conduct. 11 It is not clear why the claim on behalf of the SHSTF is brought against both defendants when it is clear that the scrapers were bought by Ocean Style. Mr Turney was not a party to the loan agreement. Nor is it clear why the claim under the Fair Trading Act is brought against Mr Turney and not Ocean Style which actually carried out the dam works and additional work. It is not alleged that Mr Turney was the agent of Ocean Style. 12 Originally, Mr Hawker brought both claims as trustee of the SHSTF, despite the fact that he was involved with the defendants in two different legal capacities. The counterclaim was brought against Mr Hawker in his capacity as trustee also, even though Mr Hawker owned in his own right the land on which the dam works and additional work were done. 13 At the court's prompting, the writ and statement of claim were amended on the last day of trial to add Mr Hawker as a second plaintiff in his personal capacity. The amendment of the writ and the statement of claim has regularised the obvious anomaly occasioned by Mr Hawker bringing a claim in his own right within an action commenced by him in his capacity as trustee for his superannuation fund and the consequent defect in the counterclaim which is against Mr Hawker personally. 14 It is not clear why Ocean Style has pleaded allegations of misleading and deceptive conduct without seeking any remedy. 15 Ocean Style did not specifically plead a restitutionary remedy in the alternative to its contractual claim, but in final submissions counsel argued that Ocean Style, having done work at the request and for the benefit of Mr Hawker, was entitled to fair and reasonable remuneration on the basis of a quantum meruit. 16 Counsel for Mr Hawker raised no point of pleading in this respect, but argued on the merits that Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221 did not apply in the absence of a vitiating factor with respect to the alleged contract and, in relation to work done to construct the gravel road, that there was no request by Mr Hawker for that work, such a request being a prerequisite for the remedy: Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27. 17 Ocean Style's pleading of the terms of the contract for the dam works and additional work (further amended defence and counterclaim, par 10(l)) was not objected to during the proceedings or at trial, notwithstanding the fact that it is embarrassing. No particulars of it were sought. No express agreement as to the alleged terms is pleaded. Nor is it alleged that the terms were implied. Yet the trial proceeded on the basis that Ocean Style's claim was for the sum charged in its invoice, calculated according to certain rates of hire for plant and equipment. 18 I am satisfied that the trial was fairly contested on the basis that the cross-claim was, in effect, for fair and reasonable compensation for work done pursuant to a contract, an implied term of which was that Ocean Style would be paid at reasonable rates. 19 Mr Hawker pleads in the reply set-off and defence to counterclaim that if he is liable to Ocean Style for the dam works and additional work, then he is entitled to set-off amounts totalling $22,745.92, being expenses he incurred with respect to those works. 20 Mr Hawker contends that he made a non-contractual arrangement with Mr Turney, that in return for Ocean Style doing the dam works, the SHSTF would forego its entitlement to interest on the loan amount over and above the amount of $5,000 agreed for the first four months of the term. 21 Although Ocean Style did not raise illegality or any issue of public policy with respect to Mr Hawker receiving a personal benefit in consideration of his superannuation fund foregoing a contractual entitlement, the court expressed concern at the trial for the way in which Mr Hawker's position was put, bearing in mind the regulation of selfmanaged superannuation funds by the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation Industry (Supervision) Regulations 1994 (Cth). Mr Hawker's counsel submitted that it was simply a matter of Mr Hawker giving to the fund an account of any personal benefit derived by him. I doubt it is so simple, but no issue has been taken and I am not assisted by any submissions on behalf of Ocean Style or Mr Turney in that regard. 22 While it is not a necessary function of the trial judge to critique, as it were, the presentations of the respective cases, it must be said, in the hope of enjoining better assistance from counsel in future, that the pleadings in this matter were unsatisfactory. Aspects of the pleadings on both sides were liable to be struck out at an interlocutory stage as disclosing no reasonable cause of action or on the basis that they were liable to prejudice, embarrass or delay the fair trial of the action. As a result of poor pleading, issues of fact and law were obscured. That neither side took any action to correct the obvious defects in their opponent's pleading reflects on each. One is given to wonder whether the court itself needs to supervise the pleadings at the entry for trial stage. Unfortunately, come the trial it is generally too late.
The loan agreement 23 According to Mr Hawker, in April 2010, Mr Turney asked him for a loan of $100,000 to enable Ocean Style to buy two scrapers worth $65,000 and $35,000 respectively. Mr Hawker obtained his accountant's advice to the effect that the SHSTF could lend the money to Ocean Style. While there was no evidence as to the specifics of this advice, and while it may have gone merely to what was legally permissible rather than what was prudent, it strikes me as unusual, to say the least, that any accountant would countenance the proposed loan in all the circumstances. 24 Nevertheless, the money was advanced on 22 May 2010. At that point it was Mr Turney's understanding, based on his telephone conversations with Mr Hawker, that the loan would be for four months and that interest would be $5,000. 25 Mr Hawker prepared a form of written loan agreement. There is an issue as to whether this was prepared and read to Mr Turney before the loan amount was paid. Mr Hawker's evidence was that it was read to Mr Turney on the occasion on which he was given the bank account details for the purpose of transferring the loan amount. This evidence was not challenged. It is admitted on behalf of Mr Turney that the contents of the document were read to him over the telephone by Mr Hawker prior to his signing the document on behalf of Ocean Style. 26 The document (exhibit 17) reads: Contract of Short Term Loan 'Stuart Hawker Superannuation Trust Fund' A.B.N. 94-373-544-388 P/O box 464 Manjimup WA 6258 Shall loan to the value off [sic]: $100,000.00 (One hundred thousand dollars) to: 'Ocean Style Pty Ltd' ABN: 89-131-826-018 Address of business: 36 Darwin Tce Mandurah WA 6210 Contact person: Damien Turney Phone: 0429144714 For the purpose of purchase: 2 x Scrapers • The loan term will be 4 (four months) from date of signatures. • The 2 x scrapers in question will remain owned by the 'Stuart Hawker Superannuation Trust Fund' until final payment with interest is made. • Interest will be $5,000 (Five thousand dollars) payable at the end of loan term 4 months. • Additional interest will be $3,000 (Three thousand dollars) per each month there after. • Maximum loan extension period will 8 months from date of signatures. • 'Ocean Style Pty Ltd' will supply and show prove [sic] of insurance for the Scrapers. • The Scrapers will be maintained in good working order during the period of loan. Identification of Equipment Scraper No. 1 Scraper No. 2 Brand/Model: Caterpillar 633C Brand/Model: Caterpillar 633C Eng. No: Eng. No: Insurance Ref: Elders Insurance Ref: Elders Other I.D. SN 66M01014 Other I.D. SN 66M794 27 Mr Hawker signed the document on 26 May 2010 in the presence of Mr Turney's father. Mr Turney signed it on behalf of Ocean Style on 8 June 2010. 28 Paragraph 6 of the further amended defence and counterclaim is as follows: a. There was a loan specifically for the purpose of the purchase of two scrapers and for working capital purposes of the first defendant; b. The terms of the loan will be referred to at the trial; c. The initial purchase price of the two scrapers was $87,786; d. The balance of the loan was spent partially funding – i. transport $6,700.00 ii. tyres $16,000.00 iii. cylinders $1,400.00 iv. oil and filters $3,000.00 v. cutting edges $4,800.00 vi. labour $4,000.00 vii. turbo, the particulars of which will be referred to at the trial; e. The interest rate referred to at the expiration of the loan term constitutes a penalty. 29 The pleadings, with respect to the loan agreement, on both sides are unorthodox and confusing. On the evidence of Mr Turney, one might have expected Ocean Style to dispute the written agreement on the basis that it was entered into after the loan amount had been advanced pursuant to an oral agreement. It did not purport to be a deed. Yet at trial there was no issue taken with the fact of a written loan agreement in the terms of exhibit 17, save for Ocean Style's contention that it did not create a resulting trust and that the default interest rate of $3,000 per month was a penalty and, accordingly, unenforceable. 30 No particulars were sought by the plaintiff with respect to par 6 of the defence and counterclaim. The purpose of this paragraph remains obscure. 31 Ocean Style has taken no issue with the construction of the loan agreement. There is no dispute that the loan was repayable at the expiration of eight months from the dates of the signatures, which can be taken to be the later date of 8 June 2010. Hence, the loan amount was due for repayment by 8 February 2011 at the latest. 32 Ocean Style denies that it holds the scrapers on a resulting trust, but admits that it owes the SHSTF the loan amount plus interest of $5,000 for the first four months. It disputes liability to pay interest thereafter at $3,000 per month on the grounds that such a high rate of interest constitutes a penalty and is unenforceable. 33 So, the issues with respect to the claim of the first plaintiff are, first, whether there should be a declaration of a trust in favour of the SHSTF with respect to the scrapers, and an order for possession, and second, whether the obligation to pay interest at $3,000 per month is a penalty.
Declaration of resulting trust 34 At the outset of the trial I drew counsels' attention to the fact that this court does not have jurisdiction to give equitable relief except where it is ancillary to principal relief within its statutory jurisdiction. I observed that the claim for a declaration of a resulting trust in favour of Mr Hawker as trustee of the SHSTF with respect to the scrapers was primary relief. It was not incidental to the alternative claim for the loan amount and interest. 35 In his closing address counsel for Mr Hawker pressed no submissions to the contrary, arguing merely for judgment for the loan amount and interest. No submissions were made on the point by the defendants' counsel. 36 It is for the court to satisfy itself that it has jurisdiction: Murcia & Associates (a firm) v Grey [2001] WASCA 240; (2001) 25 WAR 212. While this action was remitted to this court from the Supreme Court, I am not satisfied that the question of jurisdiction was addressed or determined at that time. 37 The civil jurisdiction of this court is set out in s 50 of the District Court Act 1969. Section 55 and s 57 are also relevant. 38 That this court has no general equitable jurisdiction is clear on the authority of Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers'Compensation) Ltd (1991) 5 WAR 208; and Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488. 39 In Commercial Developments it was held, following Hondros v Chesson [1981] WAR 146, that if there is a money claim within the jurisdiction of the court then the court can give ancillary relief by way of declaration or injunction, but not otherwise. Malcolm CJ (Pidgeon & Rowland JJ) held that ancillary relief is relief subservient to principal relief in the sense that it serves and assists the principal relief and makes it more effective: (219). An action for a declaration is not an action for money. It is not a personal action for the purpose of s 50(1)(a) of the District Court Act. 40 That Mr Hawker as trustee for the SHSTF seeks alternative relief in the form of a judgment for the loan amount and interest does not render the claim for a declaration ancillary in nature. The causes of action are in the alternative. Counsel expressly submitted that the scrapers were bought by Mr Turney on behalf of the SHSTF (ts 16). 41 For these reasons I conclude that this court has no jurisdiction to decide the claim for a declaration of a resulting trust and consequential orders. Even if it did, I would not allow it. The argument of Mr Hawker made in opening address, but not pressed in closing, was misconceived. The scrapers were not acquired by or on behalf of the SHSTF in a manner that gave rise to a presumption of a resulting trust. They were acquired by Ocean Style using funds borrowed from the SHSTF for that purpose. 42 No doubt Mr Hawker, by including a clause in the loan agreement to the effect that title in the scrapers would 'remain' with the SHSTF, albeit that it did not have that effect, intended to create a form of security. Indeed, the first plaintiff's position in opening address was that judgment was sought for the loan amount and interest, less the proceeds of sale of the scrapers: see plaintiff's outline of submissions par 2. This submission failed to recognise the obvious distinction between legal and beneficial ownership. 43 There was no case made for a contractual right of possession and sale upon Ocean Style's default.
Is the default interest rate a penalty? 44 The loan agreement stipulates a term of four months with interest of $5,000 payable at the end of that term. That sum represents an annual interest rate of 15%. The contract also provides for an extension of the term of the loan for a further four months at an interest rate of $3,000 per month. This rate represents an annual interest rate of 36%. No evidence was led of prevailing commercial interest rates at the date of the contract. 45 The doctrine of penalties applies when an instrument imposes a collateral liability upon the non-observance or failure of a primary contractual stipulation: Andrews v Australia & New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205 [9], [10]. The doctrine is not restricted to contractual liability for payments consequent upon breach of contract: Andrews [31] – [32], [46] – [50], [78]. Relief may be granted in cases of penalties for nonperformance of a condition, despite the absence of an express contractual promise to perform the condition, on the basis that a penalty conditioned on failure of a condition is in substance equivalent to a promise that the condition will be satisfied: Andrews [67]. 46 The leading decision is Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1914] UKHL 1; [1915] AC 79, followed by the High Court in Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656 [12]. At [11] the High Court adopted what Lord Dunedin said in Dunlop at 86 – 87: 2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage. 3. The question whether a sum stipulated is a penalty or liquidated damages is a question of construction to be decided upon the terms of inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach. 4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are: (a) it will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved followed from the breach. (b) it will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid. (c) there is a presumption (but no more) that it is a penalty when 'a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage'. 47 At [10] the High Court held: A stipulation prima facie imposes a penalty on a party (the first party) if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon failure of the primary stipulation, imposes on the first party an additional detriment, the penalty, to the benefit of the second party. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for, and in terrorem of the satisfaction of the primary stipulation. If compensation can be made to the second party for the prejudice suffered by the failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation. 48 Whether a condition is a penalty invites attention to the proper construction of that clause, and the contract as a whole, but it is not solely a matter of contractual construction. The court is not limited to considering the terms of the contract and any background factual matrix evidence that would be admissible for the purposes of contractual construction: Spiers Earthworks Pty Ltd v Landtec Projects Corp Pty Ltd [No 2] [2012] WASCA 53; (2012) 287 ALR 360 [25] – [26]. 49 Ocean Style's position is that the stipulation of interest at $3,000 per month after the expiration of four months from the date of execution of the agreement amounts to a penalty, i.e., a punishment for default of a contractual obligation. In summary, Ocean Style submits: 1. The parties believed the loan would be repaid with $5,000 interest at the end of four months. This was the initial verbal agreement. No other interest was discussed. 2. Interest of 36% per annum is extravagant and unconscionable by comparison with the greatest loss that could conceivably be proved by the lender, being 2.4 times the interest rate agreed for the first four months. 3. The rate of 36% is substantially more than the SHSTF could obtain on any other cash investment, as Mr Hawker conceded at ts 292. 4. Mr Hawker accepted counsel's characterisation of the higher rate as a 'fearsome incentive' to Ocean Style to repay the loan within four months: ts 292. 50 Mr Hawker submits that the onus on Ocean Style to prove that the higher rate is extravagant and unconscionable has not been discharged because there is simply no evidence of that fact. 51 The evidence of the parties is that there was no discussion of any interest rate or amount apart from the amount of $5,000 payable for the initial term of four months. The loan amount was advanced on the basis of that agreement. On the evidence there was a common intention that the loan be repaid in four months. Mr Turney expected that income from the earthmoving contract for which Ocean Style purchased the machines would enable timely repayment. He did not anticipate a default. The terms of the written agreement with respect to an extension of the loan period of up to eight months and the higher interest rate of $3,000 per month were not a matter of discussion. The terms of the written agreement were read to Mr Turney over the telephone and he simply acquiesced to them. 52 There is no evidence as to why a further loan period of four months was included, or as to why the interest for that period should have been nearly two and a half times the rate for the first four months. Mr Hawker was at a loss to deal with questions as to what the position would have been if the loan had been substantially, but not completely, repaid in the first four months. No consideration had been given as to whether a pro rata would be applied (ts 291 – 292). 53 It is clear from the evidence of the circumstances of the formation of the loan agreement and its terms that the primary stipulation was the repayment of the loan amount plus interest of $5,000 within four months. 54 Mr Hawker took advice from his accountant. Even without evidence of prevailing interest rates on cash investments, it can reasonably be inferred that in his fiduciary position as trustee of his self-managed superannuation fund he considered $5,000 (15% per annum) to be a reasonable return. 55 By reason of the fact that the loan agreement provided a maximum term of eight months, non-repayment of the loan amount within four months was not a breach of the agreement, rather a default which engaged the clauses dealing with the higher interest rate and the extension of the term. The higher rate was intended by Mr Hawker to deter Ocean Style from taking longer than four months to pay. 56 As a matter of common sense, it is out of all proportion to the rate agreed for that first period, and unquestionably amounts to more than the SHSTF could conceivably lose by being without its money for that extra time. 57 The application of an interest rate of 36% per annum for the longer period did not involve a genuine pre-estimate of the cost to the SHSTF of its funds. It is a collateral stipulation which imposes a detriment in order to secure satisfaction of the primary stipulation. The rate is extravagant and unconscionable. 58 In the circumstances Ocean Style has established that the default rate of $3,000 per month is in the nature of a penalty. It is unenforceable to the extent that it exceeds the SHSTF's proved loss which I take to be the rate of 15% per annum to which the parties initially agreed. 59 Consequently, the claim in respect of the loan agreement is allowed. The first plaintiff is entitled to judgment against Ocean Style in the sum of $100,000 plus interest of $5,000 as agreed from 8 June to 2010 to 8 October 2010 and interest in the same amount for the further period of four months by which the agreement permitted the loan to be extended. 60 Thereafter, interest is in the discretion of the court: Supreme Court Act 1935, s 32. Mr Hawker's superannuation fund has been kept out of its money. An award of interest to the date of judgment is in the nature of damages. It is compensatory: Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60, 66. The SHSTF is entitled to be compensated in interest, although in principle it is not compensation for loss of opportunity to invest the money: MPB (SA) Pty Ltd v Gogic [1991] HCA 3; (1991) 171 CLR 657, 666. 61 The court is bound to award interest as it thinks fit, provided that it exercises its discretion judicially. The loan agreement does not expressly provide for interest to be paid until repayment of the loan amount, rather for the term of the loan. No rate having been agreed, interest will be allowed on the amount of $110,000 payable under the loan agreement at the statutory rate of 6% from 8 February 2011 to the date of judgment: Supreme Court Act 1935, s 31.
Mr Hawker's claim for damages for misleading and deceptive conduct 62 The basis of this claim is pleaded in pars 14 to 18 of the amended statement of claim as follows: Repair of the Dam 14. In late September 2010, the second defendant and the second plaintiff had a telephone conversation in which the following exchange occurred: 15. In reliance upon the conversation pleaded in the immediately preceding paragraph and induced thereby the second plaintiff cancelled the contractor which the second plaintiff had organized to do the Dam repairs. 16. The conduct of the second defendant pleaded in paragraph 14 herein was an express, alternatively implied representation that: (a) the second defendant was capable of repairing the Dam and laying a fill foundation for the [second] plaintiff's house on the Property by reason he had the time, skill and experience to do so; (b) the second defendant would repair the Dam, at his cost, with the first defendant's equipment and lay a fill foundation for the plaintiff's house on the Property; (c) the repair of the Dam and the laying of a fill foundation for the plaintiff's house on the Property would be completed before the end of summer 2011. 17. Together each of the representations pleaded in paragraph 16 herein, was conduct which was false or misleading, or likely to mislead or deceive, by reason that each representation when made was a statement as to a future matter. 18. Further, or in the alternative to paragraph 17 herein, each of the representations pleaded in paragraph 16 herein was false or misleading, or likely to mislead or deceive the [second] plaintiff by reason that: (a) the second defendant did not at any time have the necessary time, skill and expertise to devote to the repair of the Dam and the laying of the fill foundation for the [second] plaintiff's house on the Property; (b) in the alternative to sub-paragraph (a) herein, the second defendant was not at any time during the course of the summer of 2010/2011 able to devote the necessary time, skill or expertise in to the repair of the Dam, nor the laying of the fill foundation for the [second] plaintiff's house on the Property; (c) in any case, the second defendant in fact failed to repair the Dam, and failed to lay the fill foundation for the [second] plaintiff's house on the Property. 63 Paragraph 21 pleads: [B]y reason of the matters pleaded in paragraphs 14 to 18 herein, the second defendant engaged in conduct in breach of section 52 of the Trade Practices Act 1974 (Cth), and/or the corresponding section in the Fair Trading Act 1987 (WA) and the second plaintiff has suffered loss and damage. 64 The claim is pleaded against Mr Turney personally. It is not pleaded that Mr Turney acted in his capacity as director or agent of Ocean Style. It is not pleaded that there was any contract between Mr Hawker and either Ocean Style or Mr Turney for the dam works and other work. 65 It is not pleaded that the conduct described was conduct in trade or commerce for the purposes of s 10 of the Fair Trading Act which provides that 'a person shall not, in trade or commerce, engage in conduct which is misleading or deceptive or is likely to mislead or deceive'. 66 The second plaintiff's case, therefore, is that Mr Turney represented that he would do the work in a personal capacity as a volunteer, that is, for no reward other than a non-contractual promise by Mr Hawker that Ocean Style would not be charged the default interest stipulated in the loan agreement. 67 Mr Hawker's position is that Mr Turney represented that he was competent to carry out the dam works in a skilful and timely manner and that he would do so, as well as excavate and lay fill for a foundation pad for a proposed residence, at no cost, before the following winter (par 16). In reliance on that representation Mr Hawker cancelled his arrangement with the local contractor (par 15). The work was to be done at no charge, but the SHSTF would forego interest on its loan. 68 As a consequence of Mr Turney being unable to complete the work satisfactorily, Mr Hawker engaged Capel Earthmoving (Capel) to complete the dam works. No evidence was adduced from the principals of Capel. 69 Mr Hawker's case is that none of the work done by Mr Turney or Ocean Style benefited him, except for the construction of the gravel road and the re-filling of the house pad. It is conceded on his behalf that as 6,700 cubic metres of gravel was extracted from the area of the house pad, a similar amount was required to rehabilitate the site (ts 258). His position is that Mr Turney or Ocean Style is entitled to payment from the Shire of Manjimup of $15,000 plus GST for the agreed cost of extracting the gravel. 70 Although it is pleaded in pars 6 and 7 of the amended statement of claim that in March 2010 Mr Turney told Mr Hawker that the dam could be fixed in two to three weeks for $25,000 - $30,000, and in par 8 that Mr Hawker was induced thereby to purchase the property, no claim arises from those allegations. They are immaterial. 71 The amended statement of claim does not plead what loss and damage was suffered. It does not plead any causal link between the alleged contravention of the statutes and the claimed damage as required by law: Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215. This conspicuous defect in the statement of claim, which in my opinion would have warranted an application to strike out the claim, seems to have occasioned more difficulty for the court than the defendants. In the absence of objection to the pleading, I will decide the claim according to the manner in which it was presented at trial. 72 In the amended particulars of damages dated 7 October 2013 damages are claimed pursuant to s 82 of the Trade Practices Act 1974 (Cth) in the sum of $25,767.50. This is said to be the amount which Mr Hawker eventually paid Capel to complete the dam works: see Mr Hawker's further supplementary statement of evidence (exhibit 19.3). 73 On Mr Hawker's case, Mr Turney was simply doing him a favour by undertaking the dam works and additional work. This position is consistent with Mr Turney relying on Mr Hawker to operate equipment, with Mr Turney carrying out the work when it suited him, with there being no invoice raised before the two men fell out in May 2011, and with Mr Turney's reliance on unpaid assistance from others. 74 On that basis it could hardly be said that any statements made by Mr Turney as to how the works might be done and when, which Mr Hawker would characterise as misrepresentations, amounted to conduct in the course of commerce or trade for the purpose of s 10 of the Fair Trading Act. 75 Counsel for Mr Hawker submitted that the expression 'commerce or trade' was capable of being given a wide meaning, but advanced no argument to support a conclusion that Mr Turney's statements as to how and when the dam works might be done, which were made in the context of his friendship with Mr Hawker and are not alleged to have been made on behalf of Ocean Style, constituted conduct in the course of commerce or trade. 76 It is implicit in the framing of Mr Hawker's case that there was, from his point of view, no consideration for the alleged promise by Mr Turney to do the dam works and additional work for nothing. Absent a contractual obligation and a commercial context, Mr Hawker's reliance on the Fair Trading Act is, in my opinion, misplaced. 77 The majority of the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson [1990] 169 CLR 594 favoured the view that 'in trade or commerce' should be construed as referring only to conduct which is in itself an aspect or element of activities or transactions which, of the nature, bear a trading or commercial character: (603). As the majority stated at (604): What this section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. 78 The facts pleaded by Mr Hawker, at their highest, describe a private noncommercial transaction. No nexus is pleaded with respect to the activities of Ocean Style. The conduct alleged on the part of Mr Turney in his personal capacity lacks a trading or commercial character: see O'Brien v Smologonov (1983) 53 ALR 107 (Full Federal Court). As pleaded, it amounts to no more than an assurance by one friend to another that he would provide certain voluntary assistance. In any event, the cost of getting someone else to complete the work could not constitute a loss in those circumstances. 79 The facts do not disclose a cause of action pursuant to s 10 of the Fair Trading Act. The claim for damages for misleading or deceptive conduct should have been struck at an early juncture. It must fail.
Ocean Style's cross-claim for the dam works and additional work 80 Ocean Style's claim in contract is obscured by defective pleading. As is sadly the case with other aspects of this action, the claim in contract by Ocean Style is defective in that it fails to plead facts which prove the necessary elements of a cause of action in contract, namely, formation (by offer and acceptance or otherwise), consideration, an intention to create legal relations and certainty of terms. The fundamental deficiencies in the further amended defence and counterclaim have gone seemingly unnoticed with the result that neither the defence to counterclaim, the evidence, nor the submissions by the parties at the trial, addressed adequately, if at all, these fundamental issues. 81 All that can be made of Ocean Style's pleaded case with respect to 'the dam contract' is that an agreement was made in late 2010 at the property between Mr Turney on its behalf and Mr Hawker, whereby Ocean Style would 'repair the dam by sealing the core of the dam' (par 10(a)). Paragraph 9(b) pleads that 'the arrangement' was that the work would be charged at 'the usual rates for hire of machinery and person'. 82 Paragraph 10(c) alleges that within two weeks of the work being commenced (24 March 2011) the dam contract was amended. Paragraph 10(c)(ix) seems to allege that a further agreement was made whereby Ocean Style would extract and remove gravel for supply to the Shire of Manjimup at an hourly rate of $275.00 plus GST, yet par 10(c)(xvi) says that Mr Turney, presumably on behalf of Ocean Style, agreed with Mr Reeve of the Shire to a rate of $2.50 per cubic metre. Ocean Style stockpiled 6,500 cubic metres of gravel to be sold to the Shire of Manjimup and filled the pit from which it was taken (par 10(k)). 83 By par 10(c)(xi) it is alleged that Mr Hawker gave instructions to do the 'additional work' particularised therein. 84 According to par 10(l), it was a term of the dam contract and the agreement for additional work that 'standard uniform conditions for work' applied, including plant and equipment hire at the rates eventually charged by Ocean Style and 'out-of-pocket expenses'. 85 Ocean Style's position is that there was no agreement as to the time by which the work would be commenced or completed, but that there were discussions from time to time about when the work would be done. It is pleaded that Mr Turney estimated the cost of the dam works at $30,000 - $35,000, but Ocean Style does not plead a contract price as such. Its claim is for $169,259.00: see invoice dated 9 June 2011 (exhibit 5). 86 As I understand the pleaded case, the dam contract is said by Ocean Style to have required a clay–filled trench to be constructed. Paragraph 10(e) says the contract was for a trench 2.5 m wide. 87 Ocean Style pleads that the digging was harder than predicted on the basis of three test holes that were dug at Mr Hawker's request prior to commencement, but this fact is immaterial to the claim as pleaded. As with the pleading of the estimated cost, it would appear to have no bearing on a claim based on an agreement that work would be charged per hour of equipment use. 88 According to par 10(c)(xi) the additional work included the following: 1. Digging out the gravel in the place where [Mr Hawker's] house and shed was to be erected and stockpiling it some 200 m away in a corner of the block for the Shire; 2. Using that gravel at the place where some of the surface dirt from the dam floor was to go; 3. To 'make' his house pad; 4. To build the house pad higher and mold [sic] it to ensure any run-off would go into the dam; 5. To make the house pad with loam from the dam floor to save him importing loam from elsewhere; 6. To build up the road with gravel so that the water did not run across the road on to the house pad; 7. To fill in the old failed small dam with surplus dirt from the new dam; 8. To increase the size of the dam to triple its initial holding capacity; 9. To make the dam wall with white clay for cosmetic reasons. together called 'the additional work'. 89 It is alleged that the additional work required an extra scraper to be brought to site which Mr Hawker agreed to hire at the usual hourly rates. The instructions for the additional work were given in a series of conversations in April and May 2011 between Mr Hawker and Mr Turney. 90 In par 10(k) Ocean Style pleads further details of the additional work as follows: i. The filling in of the small dam on site above the main dam; ii. The expansion of what was the small dam to a larger dam (estimated to hold 160,000,000 litres); iii. The undertaking of gravel test holes to test the quality of gravel; iv. Additional test holes to establish the white clay; v. Stockpiling of 6,500 cubic metres of gravel; vi. The building of a gravel driveway which was all but complete; vii. The digging up and mixing of gravel and stockpiling it and carting it to the edge of the property for sale to the Shire; viii. The carting and stockpiling of gravel away from the house and shed site; ix. The carting and backfilling of the gravel site (below where the house was to be built adjacent to the dam walls); x. The carting of the loam out of the dam to put back into the house pad site. 91 In par 10(l) the relevant hire rates are particularised as follows: 1. Dozer (including operator) $220.00 per hour. 2. Digger $185.00 per hour. 3. Scraper $275.00 per hour. 4. Out of pocket expenses. 92 Ocean Style further alleges that it was prevented from completing the dam works and the additional work by reason of being locked out of the property by Mr Hawker on or about 4 June 2011: par 10(n). 93 In par 1 of his defence to the cross-claim Mr Hawker says that the only 'dam contract' was that described in par 14 of the statement of claim, that is, an agreement whereby Mr Turney agreed to repair the dam and lay a fill foundation for the house for nothing. He denies the terms of the dam contract pleaded in par 10 of the defence and counterclaim. He denies any agreement as to rates for machinery hire was made. 94 It is not pleaded by Ocean Style that it was an express or implied term of the various pleaded contracts that in consideration of the work done at his request Mr Hawker would pay a fair and reasonable price, but no point is made by Mr Hawker in that regard. 95 Mr Hawker pleads by way of set-off that if he is indebted to Ocean Style, he is entitled set-off expenses that he incurred in the total amount of $22,745.92.
Issues 96 The issues that arise in respect of Ocean Style's claim in contract are: 1. By what arrangement did Mr Turney or Ocean Style undertake the dam works and other work? 2. Was there a dam contract as alleged by Ocean Style, or did Mr Turney offer to do the work for free as Mr Hawker alleges with? 3. If there were a dam contract, what were the terms? 4. If additional work was agreed to be done by Ocean Style at Mr Hawker's request, on what terms was it carried out? 5. If there were a dam contract, is Ocean Style due any payment and is Mr Hawker entitled to a set-off in respect of money that he outlaid during the course of the work?
Evidence 97 The practical identification of Mr Turney with Ocean Style resulted in both he and Mr Hawker giving evidence of what Mr Turney did without respecting the legal distinction between the two. In my references to what was said in evidence I will not endeavour to correct the witnesses in this regard. It will be necessary in my findings, of course, to distinguish between the two defendants. If I refer in these reasons to some parts of the evidence and not others it does not mean that I have not considered all of it.
Mr Hawker 98 Mr Hawker's evidence is that in early August 2010 he arranged for a local contractor Casuarina Earthmoving to re-build the dam. In crossexamination he said Casuarina Earthmoving had quoted $15,000 to build the core and $15,000 to deepen the dam and build the house pad. 99 In late September Mr Turney rang him and said that the loan would not be repaid by November 2010 and probably not until early 2011. According to Mr Hawker, he said: But I'll tell you what I'll do. If you stick to the loan at $105,000 I'll build your dam for free. 100 Mr Hawker responded: OK, if you do that I won't charge the extra interest. I'll stick to the $105,000. But, I have to have the dam built during summer so I can start building the house before it starts to rain. 101 According to Mr Hawker, Mr Turney said that he would build the dam and the house pad so that work on the house could commence before winter. 102 In late October 2010 Mr Turney informed him that he intended to start work at the end of November. In early November Mr Turney visited the property. On that occasion, according to Mr Hawker, Mr Turney said: It will still cost about $25,000 – $30,000 and take about three weeks. I'll be down in about two weeks to start. 103 In mid-November 2010 Mr Turney informed him that he was busy and would start in mid-December 2010. In mid-December 2010 Mr Turney told Mr Hawker that he was still very busy, but would be down at the beginning of January. In mid-January 2011 Mr Hawker rang Mr Turney and told him he was concerned about the late start to the work. Mr Turney told him that he was still busy. 104 Mr Turney visited the property again on 21 January 2011. According to Mr Hawker, on that occasion he said that his estimate of the price had not changed. He said he would be down in February to do the job. In late February 2011 Mr Turney rang Mr Hawker and said he was coming down on 18 March 2011. 105 On 23 March 2011 an excavator arrived at the property on the back of a truck. Mr Turney informed Mr Hawker by phone that he would be arriving the next day. He said he only required an excavator. He had not arranged for any other equipment. Mr Hawker obtained a loader from Cutts Transport. 106 On 4 April 2011, only 10 days or so after the dam works had commenced, Mr Hawker was approached by an employee of the Shire of Manjimup (the Shire) in relation to the purchase of gravel. He spoke to Mr Turney who agreed to use his equipment to dig the gravel from under the area on which Mr Hawker intended to build a house. 107 Mr Hawker signed an agreement to supply gravel to the Shire on 5 April 2011for $6.00 plus GST per loose cubic metre. He said that Mr Turney dealt with the Shire in relation to the removal of gravel. According to Mr Hawker, Mr Turney told him that he would charge the Shire $15,000 plus GST to use his equipment to remove the gravel. 108 On 8 April 2011 Mr Turney brought down a scraper which he asked Mr Hawker to drive. According to Mr Hawker, for two weeks in April he was instructed to move dirt from one place to another and back again. He began to doubt Mr Turney's ability to repair the dam. 109 For 10 days from 20 April 2011 Mr Hawker worked using the scraper or excavator to push up gravel. He said he came to the realisation about this time that he would not be able to build the house because winter was approaching and the dam repair works and the house pad were nowhere near finished. 110 During April, Mr Turney asked him for $5,000 to hire a loader and $3,500 for fuel and expenses. Mr Hawker withdrew $8,500 cash and gave it to Mr Turney. Mr Turney then asked him for $3,500 for pipes and some money for fuel and expenses. Mr Hawker gave him a further $9,500 cash on 19 April 2011. 111 At the end of April 2011 Mr Turney brought a Caterpillar D8 dozer to the property. 112 Mr Hawker said that between 4 and 10 May 2011 he left several messages on Mr Turney's phone asking him to seal the dam. His calls were not returned. He was away from Manjimup from 19 May 2011 to 26 May 2011. When he returned he saw no progress on the site. He left further messages between 28 and 31 May 2011. 113 On 31 May 2011 Mr Hawker left a telephone message for Mr Turney to the effect that he did not want him to finish the job. On that day he locked the gates for the property. He locked Mr Turney's vehicles and machines and left a message to the effect that if he wanted access to them he should ring his (Mr Hawker's) lawyer. 114 In October 2011 he engaged Capel to repair the dam by widening the trench from 1 m to 4 m and compacting it with a roller. Work commenced in February 2012. Mr Hawker stated that Capel used a 20T excavator, a D7 dozer, a roller and a scraper. They filled in the 1 m wide trench excavated by Ocean Style and then dug a trench 4 m wide and 5 m deep over the original trench. Capel moved approximately 5,000 cubic metres of soil from the dam floor and put it on the house pad site. Capel then finished off the dam wall with clay and shaped the dam. 115 In cross-examination, Mr Hawker agreed that Mr Turney or Ocean Style had done more work than Mr Turney, on his account, had initially offered to do. He agreed that Mr Turney built up a gravel road to enable gravel for the Shire to be moved from the gravel pit to the stockpile some 300 m away, and that Ocean Style's scraper was used to dig gravel and transport it to the stockpile. He agreed that the area from which the gravel had been excavated was filled. His estimate was that 6,700 cubic metres of gravel was dug and removed and that an equivalent amount of fill was required. This was taken from the floor of the dam. He denied initially that he had agreed with the Shire a rate of $2.50 per cubic metre for removing the gravel to the stockpile, but admitted that on 31 May 2011 he invoiced the Shire $15,000, plus GST, being the cost of 'pushing up' 6,000 cubic metres of gravel. He did not discover this invoice because he did not consider it was relevant, even after a copy of it had been discovered by the defendants. 116 The invoice to the Shire was sent on the same day as he locked the gate of the property and removed the key that was hidden near the gate for the use of Mr Turney. He locked and removed the keys from Ocean Style's bulldozer, scraper and excavator, as well as a utility vehicle. He said he never discussed machinery hire rates with Mr Turney for any of the work done on the property. He conceded, however, that he was 'happy to pay' for the building up of the gravel road. 117 He was challenged with respect to his evidence that Capel moved 5,000 cubic metres of earth in the course of completing the dam works. The figure was his estimate, not a measurement. It did not correspond with the hours claimed by Capel for its excavator. He accepted that Capel had built the house pad higher than it would have been had the gravel excavation not taken place, and that Capel did cosmetic shaping work around the dam which was not part of the work Mr Turney had offered to do. He appeared to accept that the filling of the small dam by Capel was unrelated to the original dam repair. 118 Mr Hawker was asked about the cash he paid to Mr Turney in April in amounts of $9,000 and $8,500. Asked why he would give Mr Turney cash if Mr Turney had offered to do the work for nothing, he said that it was necessary to hire a loader to remove overburden which was additional work. He said that the supply of pipes for the dam was not part of the work which Mr Turney had offered to do. He also likened the cash payments to a bonus paid in order to get the job done. He accepted that there was extra work involved. His evidence in this respect was not consistent and lacked cogency. 119 He was asked why he thought Mr Turney would do a $30,000 job for nothing. He said it simply meant that there would be no wages expense and no profit made. Ocean Style would benefit by not having to pay interest on the loan from the SHSTF. 120 Mr Hawker said that between 24 March and 31 May 2011 he was absent from site for only 15 days. He did not dispute, by reference to Ocean Style's invoice, that the excavator was used for 273 hours, the dozer for 123 hours and the scraper for 215 hours. He said that he operated the scraper for most of the 215 hours charged. 121 Mr Hawker disputed that he agreed with Mr Turney to pay to mobilise the scraper for the purposes of digging gravel for the Shire. 122 Mr Hawker initially disputed in cross-examination that Ocean Style had dug a trench and partly sealed it by 31 May 2011. He said it was not a core because it had not been compacted, but eventually accepted, after being referred to his statement at par 16 (exhibit 19.3), that the core had been sealed to some extent. 123 Mr Hawker identified by reference to his bank statements a total of $4,857 in payments for fuel used by Mr Turney. 124 Mr Hawker identified a bundle of 43 photographs of the property: exhibit 19.
Mr Turney 125 Mr Turney gave evidence that when he first saw the property in March 2010, prior to Mr Hawker purchasing the property, he told Mr Hawker that he thought the dam could be sealed without too much difficulty for $30,000 - $35,000. 126 In October 2010 he said that Mr Hawker called him and asked if he would seal the dam for him. He said he was busy at the time doing a contract near Perenjori. He told Mr Hawker he could do it, but not at that time. There was no talk about repayment of the loan. He suggested that Mr Hawker have some test holes dug to ascertain the ground conditions. Mr Hawker subsequently told him that he had done four test holes at good depth; that it was an easy dig and that there was good clay. As far as he was concerned the job was to seal the dam. 127 In February 2011 he visited the property and confirmed his estimate of $30,000 - $35,000. He was told that white clay had been found at the top of the hill on the property which would be excavated to provide the seal. At that stage Mr Turney proposed to build a 4 m wide trench along a 180 m wall to a depth of 5 m. At that depth he expected to find good ground, meaning clay. The trench would be backfilled with white clay compacted and brought to the level of the dam floor. Then white clay would be smeared on the wall of the dam to a thickness of 1 m to create a seal. 128 Mr Turney said that he was also asked to fill in a smaller dam and to build a house pad on the site of an old gravel pit. He gave no evidence of discussing any terms with Mr Hawker or of any agreement to charge an hourly rate for plant and equipment. He said he could not see the point of doing so. At that stage he planned to use only an excavator. 129 In March 2011 Mr Turney brought down a machine operator, Robbie Banks. He had a conversation with Mr Hawker in which they discussed sealing the dam, filling in the small dam and building the house pad. At that stage it was proposed that the seal be made of white clay sourced from a paddock on the property. The agreement was that Mr Hawker would supply the white clay for the core. 130 When excavation of the trench began, laterite clay was struck at a depth of 1.5 to 2 m. He described laterite clay as porous material, very lumpy and very hard to dig. Excavation was very slow. Digging continued to a depth of 7 - 8 m where white clay was struck. This was at the northern end of the wall. In order to get to that depth it was necessary to dig out a bench for the excavator below the floor of the dam. Across a distance of 120 m, being the internal length of the dam floor, Mr Turney dug as deeply as was required in order to reach white clay. The trench was dug to full depth for about three quarters of its length. 131 The excavation created a large stockpile on the dam floor. He estimated that 7,000 cubic metres of earth was dug from the trench. At that point a loader was hired from Cutts Transport to move some of the material. Mr Hawker operated the loader. Mr Banks operated the excavator. Mr Turney said he then arranged to hire a D7 bulldozer from Casuarina Earthmoving to push the stockpile of excavated earth away from the trench. 132 Around this this time a Mr Glen Reeves from the Shire came to the site and requested a supply of gravel from the property. Mr Hawker instructed him to dig gravel for the Shire and stockpile it. Initially, it was proposed by the Shire that Ocean Style would extract the gravel and stockpile it for $2.50 per cubic metre. Mr Hawker insisted that the gravel be stockpiled away from the gravel pit which was where he intended to build his house. Mr Turney said that he agreed with Mr Hawker to use a scraper to remove the gravel at a rate of $275 per hour for which Mr Hawker would invoice the Shire. There was no agreement to charge at a cubic metre rate. 133 Mr Turney said that the excavator was used to convey gravel from where it was excavated to a stockpile on the property at a distance by road of 300 m. The gravel was dug with the excavator and transported with the scraper. The scraper was also used for excavation. Each trip by the scraper took about eight or nine minutes. After the gravel had been removed the scraper was used to take earth from the floor of the dam to the gravel pit. He was unable to say for how many hours or days the scraper was used to remove gravel or fill the gravel pit. 134 He said he had a discussion with Mr Hawker in January or February about the cost of bringing a scraper from Perenjori by low loader. Mr Turney said that he agreed with Mr Hawker that Mr Hawker would pay the cost of bringing the scraper from Perenjori and half the cost of taking it to Burekup, which he described as mobilisation and demobilisation. 135 Mr Turney produced exhibit 12, a cheque book stub indicating a payment to Advanced Earth of $3,740 on 26 May 2011 (no other details evidenced), and exhibit 13, being a tax invoice from TL Dozing to Ocean Style dated 5 July 2011 for loader hire on 7 and 8 June 2011 to remove a dozer from the property to Smeathers Mechanical and to move the excavator to Burekup at a cost of $1,072.50. Mr Turney offered no specific proof of the cost of bringing the D8 dozer to the property. 136 Mr Turney said that the Shire wanted more clay in the gravel, but there was no evidence that this affected the commercial arrangement that was made. Mr Turney said that the scraper was being used for different jobs from time to time and that he did not keep a record of the hours for which it was used to move gravel. This evidence is somewhat inconsistent with his evidence that he agreed an hourly rate of $275 for the use of the scraper for the purposes of moving gravel. Had there been an agreement between Mr Turney and Mr Hawker, one would expect that a proper record of the hours of use of the scraper would have been maintained. Mr Turney said he objected to a cubic metre rate because the Shire measured compacted gravel which occupies less volume than loose gravel by a factor of 0.3. 137 Mr Turney denied being involved in negotiations with the Shire in relation to the movement of the gravel. His evidence directly contradicts the evidence of Mr Hawker on this point. He did not get a purchase order from the Shire. He did not invoice the Shire for any work he did in relation to the digging and stockpiling of gravel. He was aware, however, that the Shire had measured 6,000 cubic metres of gravel, and gave evidence that this was an underestimation. Mr Turney believed that 6,700 cubic metres of gravel were removed. In his evidence-in-chief (ts 159) he said that when the rate of $2.50 per cubic metre was discussed, the Shire was 'going to pay me for that job'.
138 There was also a discussion at that time of using the scraper to take dirt from the dam floor to fill the gravel pit Mr Turney estimated that he put around 20,000 cubic metres of fill into the gravel pit. He also filled in the small dam. No basis was given in Mr Turney's evidence for his estimation of 20,000 cubic metres which is considerably more than the gravel removed. 139 At that point the excavator and the scraper were being used to dig and stockpile the gravel. Two metres of loam were taken from the dam floor and used to fill the small dam. Below the loam was ironstone gravel. This needed to be ripped. Mr Turney brought down to the site a D8 bulldozer he had purchased for the purpose of another contract. By that time Mr Hawker was becoming concerned about how long the job was taking. 140 Mr Turney's evidence was that the filling of the small dam was in addition to the work he had originally agreed to do. This contradicted earlier evidence that the filling of the small dam was discussed at the outset (ts 59). The deepening of the dam was also additional work. 141 Mr Turney said that Robbie Banks was on the job for 10 days before he had to leave for family reasons. He then asked Claude Russell to operate the excavator. He also brought down Ross Sorgiovanni who mainly operated the bulldozer. 142 Mr Turney said that some of the overburden excavated from the dam had to be removed and that contouring was also required. Mr Turney had intended to put the overburden on the dam walls, but Mr Hawker said he wanted white clay walls. Accordingly, the overburden was taken out of the dam. Mr Turney said that there was contouring done around the back of the dam which was not part of the original scope of work. Mr Turney gave evidence of building up a gravel road on the property in order to remove gravel to the stockpile. 143 In relation to the reference in the evidence of Mr Lefroy to a 1 m trench, he said that a sample trench was dug through the dam wall in order to find out what was under it. The trench would have been widened in order to seal the dam. The sample 1 m trench was about 30 m long. It was intended to be 4 m wide. 144 It was Mr Turney's evidence that the dam had been sealed from the northern end to about one-third of its width with white clay that had been dug from the northern side of the dam. His view was that in the course of the works the width of the dam had been expanded by 40 to 50 m. The sealed part of the core had been compacted using an excavator bucket. The southern end of the dam wall was more difficult to dig due to ironstone. 145 Mr Turney said that the diary in which he had recorded details of the work done including the hours of use of the machinery could not be found. It was left in a utility vehicle or in the sea container on site. When he retrieved his machines and equipment he did not find the diary. 146 The last day he worked on site was 21 May. On that day the bulldozer required repair. He engaged Smeathers Mechanical of Manjimup to fix the machine. He returned to Mandurah to arrange parts. Whilst he was at Mandurah he received a call from Peter Smeathers who informed him that he could not access the property because the key to the gate had been removed from where it had been placed. 147 Mr Turney returned to Manjimup and found the property and his machinery locked. He notified the local police before accessing the property. He found a note referring him to Mr Hawker's lawyer, Ms Brook. He did not do any more work because the bulldozer was still in need of repair and the keys were missing from the machines. He was informed about that time by a friend, Paul Montgomery, who was also a friend of Mr Hawker, that he had to get off the property. At that stage he said he had done four-fifths of the work. 148 Mr Turney then instructed his accountants to prepare an invoice to Mr Hawker for the work done on the property. The invoice on behalf of Ocean Style was particularised as follows: Dozer, 123 hours at $220.00/hour $27,060.00 Digger, 273 hours at $185.00/hour $50,505.00 Scraper, 215 hours at $275.00/hour $59,125.00 Subtotal: $136,690.00 GST: $13,669.00 Subtotal: $150,359.00 Meals and accommodation: $4,600.00 Mob – emob: $14,300.00 Total: $169,259.00 149 As to how he calculated the hours of use of the machines, Mr Turney said that he had written down the start hour of the excavator on a cigarette packet which was left in the cab of the machine. The hours of use at the property were calculated by subtracting this number from the start hour at the commencement of a subsequent job, after allowing four hours of use for repairs. 150 In the course of his evidence about the use of machines Mr Turney admitted that he had been invoiced by Casuarina Earthmoving for 22.5 hours use of a D7 bulldozer. He billed Mr Hawker 49 hours; more hours than were recorded on the hour meter. He said he turned the key off in order to stop the hour meter in order 'to help Mr Hawker out'. His dishonesty in relation to both Casuarina Earthmoving and Mr Hawker in this respect was candidly admitted. His credibility is seriously diminished by his tendency to defraud. 151 Mr Turney was taken to a diary which he commenced in relation to a job in Burekup which he started on 9 or 10 June 2011. He used the diary to reconstruct the course of the dam works and other work. He had no record of the hours of operation of the D8 bulldozer other than his reconstructed diary, but he professed to have a good recollection of the hours of operation of the D8. I ruled at the time of this evidence that the number of hours of use of the machines could not be proved by a diary that was not a contemporaneous business record, but a reconstruction. It was no more probative than Mr Turney's recollection at the date of trial. 152 The invoice from Casuarina Earthmoving to Ocean Style dated 15 June 2011 (exhibit 6) showed that Ocean Style paid $4,367, including GST, for 22.5 hours of hire of a D7 bulldozer at a rate of $170 per hour. On Mr Turney's evidence the bulldozer was operated by a person from Casuarina Earthmoving. Ocean Style's invoice to Mr Hawker did not differentiate in its charges between the hire of the D7 and the provision of its D8 machine. Mr Turney admitted that his witness statement indicated 100 hours of operation of both machines whereas Ocean Style invoiced 123 hours. He was not able to explain the discrepancy. His memory of the use of the dozer was based on the reconstruction of events which he performed after he had left the property. His evidence in this regard was patently unreliable and unsatisfactory, although it can be accepted that two dozers were put to use from time to time to rip the dam wall and push up earth. 153 The figure of 123 hours was made up of 49 hours with respect to the hired D7 dozer and 74 hours use of Ocean Style's D8. Mr Turney gave no reliable evidence as to his computation of either figure. 154 In relation to the excavator, Ocean Style charged for 273 hours. The start hour recorded on the cigarette packet was 20,248. The finish hour taken on 11 June 2011 was 20,524 which Mr Turney said he read and wrote down at that time. The difference of 276 hours was arbitrarily reduced to 273 because the excavator had been used between jobs for another purpose. 155 Mr Turney said that the hours for the scraper were, according to the readings of the hour meter, 4,222 at the start and 4,438 at the end, that is, prior to the start of the next job. 156 Mr Turney also charged for meals and accommodation. He accepted that this had not been discussed or agreed with Mr Hawker. It was included in his estimate of $30,000 or $35,000 for the job. Invoices from the Manjimup Motor Inn showed that Mr Turney was charged for accommodation from 23 March to 9 April 2011, from 12 April to 21 April 2011 and from 2 May to 21 May. 157 Mr Turney also paid for some accommodation for Robbie Banks, Paul Montgomery and Ross Sorgiovanni. He recalled that Robbie Banks worked for 10 days on the excavator. The court received a handwritten note of the hours worked by Mr Banks (exhibit 9) as proof of the information available to Mr Turney, but not as evidence of the truth of its contents. Mr Banks was not called to give evidence. 158 Mr Turney said that Claude Russell worked on the excavator for 120 hours. He based this on what Mr Russell had told him. Paul Montgomery also worked for 14 hours on the excavator over two days. The number of hours was an estimate made by Mr Turney. Mr Turney said that he worked for four hours on the excavator. Mr Turney said that Ross Sorgiovanni worked on the D8 dozer for two days and also worked an hour in the scraper. Mr Turney said that he worked for 37 hours on the dozer ripping and pushing. Mr Turney said that Mr Hawker operated the scraper, but he did not know for how many hours. 159 Ocean Style's invoice to Mr Hawker for plant hire was based on a wet rate, that is, including an operator and fuel. Ocean Style's invoice did not take into account the fact that Mr Hawker was the main operator of the scraper and that neither Mr Russell nor Mr Sorgiovanni was paid for his work. In relation to the scraper, Mr Turney said he agreed with Mr Hawker a wet hire rate of $275 per hour to include fuel and operator costs, yet on the evidence Mr Hawker did most of the operation of the scraper. Initially, Mr Turney said that the wet rate included fuel, but then he said that sometimes fuel would be supplied by the client. A machine would use 30 litres of diesel per hour. 160 His evidence as to the applicable rates suggested an arbitrary approach, consistent with no agreement having been made with Mr Hawker in this regard at all. It is highly improbable that Mr Turney would have agreed a commercial wet hire rate in circumstances where he was expecting Mr Hawker to operate the machine and contribute to fuel costs. 161 When he was asked whether he had any discussion with Mr Hawker about any rate at which the excavator would be charged, he said that he was pretty sure that it was discussed in February 2011. He stipulated $150 per hour, excluding fuel, but it emerged from his evidence that this was in relation to a request by a neighbour who had some work to be done and wanted to know what the rate was. 162 Mr Turney said that the normal charge out rate for the D8 bulldozer was $220 per hour, excluding fuel. He charged Mr Hawker for the D7 hired from Casuarina and the D8 he supplied at that rate. 163 In relation to the loader that was used on site, Mr Turney said that no charge had been made in the invoice because the loader hire was a separate arrangement made for the purposes of shifting overburden. He said that Mr Hawker had paid him cash to hire the loader from Cutts Transport. Mr Hawker also paid him money for pipes which he bought from a Mr Georgeff (exhibit 10). The effect of the evidence was that Ocean Style paid $6,006 to Cutts Transport for loader hire and $3,550 to Mr Georgeff for pipes. It was reimbursed $9,000 in cash by Mr Hawker. 164 Ocean Style did not issue any progress claims, but Mr Turney said that in April 2011 he asked Mr Hawker how he was going to pay for the work. He said that Mr Hawker responded by saying 'If you are worried about the super money, don't worry about it'. Mr Turney said he kept working on the site because he thought that the cost of the work would be covered by the loan amount. His evidence, however, did not prove any agreement with Mr Hawker whereby the value of the work would be offset against the loan from the SHSTF. 165 Mr Turney gave evidence that he spent $29,379.39 on diesel fuel. He arrived at that figure by reference to his bank statements. Mr Turney produced exhibits 14 and 15, being credit card statements for the periods 9 November 2010 to 28 July 2011 and 7 November 2010 to 30 August 2011 respectively showing, amongst other things, fuel expenses incurred from Palmwood Holdings Pty Ltd, BP Manjimup and Thompson's Garage. These included an expense which, according to the statement, was incurred on 13 June 2011, some days after he had left the property. He attributed this to the work done on the property on the basis that he was sometimes charged some days after purchase. 166 The evidence of expenditure on fuel is not directly relevant to any issue of fact as Ocean Style's claim is based on an agreement to charge according to machine hire rates, but I would observe that the evidence that between 13 April and 13 June 2011 Mr Turney bought over $18,000 worth of fuel from Palmwood Holdings in addition to that bought by him from BP Manjimup and Thompson's Garage, and by Mr Hawker, was unconvincing. 167 A comparison of exhibit 14 and exhibit 24 suggests that Mr Turney bought six quantities of fuel from 28 March to 4 April at an average cost of $553.38 (total $3,320.28). From 2 April to 16 May Mr Hawker bought seven quantities at an average cost of $495.12 (total $3,465.90). Mr Hawker also paid $1,392.05 for lubricants. The $3,500.00 paid to Mr Turney by Mr Hawker on 7 April broadly corresponds with what Mr Turney had expended on fuel to that date. On the evidence the fuel storage unit on Mr Turney's utility was 440 litres. 168 Mr Turney was asked how much of the amount which Ocean Style invoiced to Mr Hawker represented the work done on the dam. He said he had 'never really tried to work it out'. 169 He was taken to the amended defence and counterclaim at par 10(c) where it was alleged that the dam contract changed within two weeks of commencement. At par 10(c)(xiv) it was alleged that 'the totality of the additional work emanated from the Plaintiff's desire to sell gravel to the Shire'. 170 He denied that it was not always his position that the dam contract was limited to constructing the core. His estimate of the costs anticipated that an excavator would be required and a roller. He disagreed that as a minimum requirement he would need an excavator, a bulldozer and a scraper. 171 Mr Turney recalled that at one stage during the works he told Mr Hawker that he should get a new contractor. He left the property for four or five days before Mr Hawker called to request him to return. Mr Turney disputed telling Mr Hawker that it would cost him $25,000 to $30,000 to seal the dam and dig it deeper. He denied offering to do the dam work for free if Mr Hawker did not charge interest on the loan from the SHSTF. He remembered that Mr Hawker was keen to get the job done, but he denied that he told him that he had to have the dam built during summer so that he could start building the house before it started to rain. |