Horley v Sector 7G Architecture Pty Ltd (in liq)
[2011] NSWSC 827
•04 August 2011
Supreme Court
New South Wales
Medium Neutral Citation: Horley v Sector 7G Architecture Pty Ltd (in liquidation) [2011] NSWSC 827 Hearing dates: 7 June 2011 Decision date: 04 August 2011 Jurisdiction: Common Law Before: Schmidt J Decision: The usual order as to costs is that they follow the event. If the parties wish to be heard as to costs, they should approach. Otherwise I order:
1. Leave to carry on these proceedings pursuant to s 500(2) of the Corporations Act 2001 is granted.
2. In so far as necessary, leave to appeal is granted, the appeal is upheld and the judgment of O'Shane LCM given on 23 December 2010 is set aside.
Catchwords: APPEAL - appeal under s 39 of the Local Court Act 2007 - leave sought to carry on proceedings pursuant to s 500(2) of the Corporations Act 2001 (Cth) - leave under s 40 of the Local Court Act 2007 - adequate reasons for decision not given - architectural services provided for the reconstruction of a guest house - whether claim decided in contract or quantum meruit - credit findings - terms of agreement reached - whether agreement reached as to fixed fee on implied term that reasonable sum would be paid - appeal upheld - decision below set aside Legislation Cited: Corporations Act 2001 (Cth)
Local Court Act 2007Cases Cited: Alchin v Daley [2009] NSWCA 418
Al-Atabi v Zaidi [2009] NSWCA 433
Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430
Browne v Dunn (1893) 6 R 67
Campbelltown City Council v Vegan [2006] NSWCA 284; (2006) 67 NSWLR 372
Franklin v Ubaldi Foods Pty Ltd [2005] VSCA 317
Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347
Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635
McCarthy v NRMA Insurance Ltd [2002] NSWSC 1011
Patey-Dennis v MUT Constructions (NSW) Pty Ltd [2011] NSWSC 497
Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 71 NSWLR 230
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Workers Compensation (Dust Diseases) Board Of NSW v Smith, Munro and Seymour [2010] NSWCA 19Category: Principal judgment Parties: Tony Horley (Plaintiff)
Sector 7G Architecture Pty Limited (in liquidation) (Defendant)Representation: Counsel:
Mr P Braham SC with Mr A Shearer (Plaintiff)
Mr RD Marshall with Ms DM Bampton (Defendant)
Solicitors:
Hicksons (Plaintiff)
Gillis Delaney Lawyers (Defendant)
File Number(s): 2011/19891
Judgment
By amended summons filed in March 2011, the plaintiff, Mr Horley, seeks leave to carry on these proceedings pursuant to s 500(2) of the Corporations Act 2001 (Cth); leave under s 40 of the Local Court Act 2007 ('the Act') to bring an appeal on mixed questions of fact and law in relation to a judgment given on 23 December 2010 by O'Shane LCM; and appeals under s 39 of the Act in relation to questions of law.
The proceedings below concerned a claim brought against Mr Horley by the defendant, Sector 7G Architecture Pty Limited (in Liquidation), in relation to architectural services it had provided him in 2007 for the reconstruction of the Barrington Guest House ('the Guest House') which had been damaged in a fire in 2006.
It is complained that her Honour gave no, or no adequate, reasons for her conclusion that Mr Horley was liable to the defendant in respect of the services provided, either pursuant to a contract or on a quantum meruit basis. Amongst other things, it is alleged that her Honour mistook the matters over which the parties had joined issue and applied the wrong legal test in determining payment for work which had been performed and that accordingly, the defendant was entitled to the remuneration claimed for what it had done.
Leave under s 500(2) of the Corporations Act 2001 (Cth) and under s 40 of the Local Court Act 2007
There was no issue between the parties that the leave sought under the Corporations Act should be granted. For reasons which will become apparent, I am satisfied that this leave, as well as leave under s 40 of the Local Court Act should be given, in so far as that be necessary.
The case below
The claim which was advanced in the amended statement of claim filed in the Local Court in April 2010, was brought by the liquidator of the defendant. It was there claimed that in discussions in January 2007 between Mr Horley and Mr Howieson, a former working director of the defendant, an agreement had been reached in relation to design work to be undertaken by the defendant in respect of the Guest House. The agreement was evidenced by written terms sent to Mr Horley on 26 March 2007. This agreement contained express terms entitling the defendant to submit regular invoices for progress payment of fees and to charge interest at the rate of 17%, if payment remained outstanding for more than 10 days.
It was claimed that payment of $5,000 was made on 9 February 2007 under this agreement for work which had already been performed. In October 2007, a further invoice for $34,600.01 was rendered, but was not paid. That sum was sought to be recovered. In the alternative, it was claimed that the plaintiff was entitled to recover the fair and reasonable cost of the services supplied, by way of a quantum meruit.
Mr Horley defended the claim on the basis that it had been agreed between he and Mr Howieson, that initial concept plans would be produced by the defendant for $5,000, in order that he could take the plans to China, where he had an opportunity to obtain finance for the reconstruction work. It was hoped that the defendant would then be engaged to perform further work on the project. The agreed work was performed and the $5,000 paid in February. Mr Horley did not obtain the finance he was seeking and the project did not go ahead. Subsequently, the defendant rendered a further account of some $36,000.01 for the work which had been undertaken. Mr Horley denied liability for those further fees.
At the hearing in the Local Court, despite having advised her Honour that the defendant was proceeding on the basis of the amended statement of claim, the case which the defendant then pressed, was not that which was advanced in its pleadings.
The case pressed for the defendant at the hearing abandoned the claim that the agreement sent to Mr Horley in March 2007 evidenced any agreement earlier reached between the parties. It was not in issue at the hearing that this was a proposed agreement only sent by Mr Howieson after the concept plans which the defendant had originally been commissioned to produce, had been provided. Those were the plans which Mr Horley took with him to China, where he was pursuing financing. The March agreement was intended to govern the performance of future work, once that financing was obtained. It was never furthered, because funding for the project was not obtained. The defendant performed no further work for Mr Horley, after the work supplied in February.
The defendant explained the case it pressed in opening in the Local Court to be:
"Your Honour, this is a case where at the end of the day I'll be saying that the best view one can put on the circumstances is that there was a contract for work to be done, the rate hadn't been agreed and it's implied in the circumstances that a reasonable sum should be able to be charged, akin to quantum meruit."
The nature of this appeal
In Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 71 NSWLR 230, Spigelman CJ observed at [103]:
"This Court must be concerned that the course of administration of justice in this State does not impose unnecessary cost burdens on parties by adopting a narrow interpretation of statutory powers conferred upon the Court to ensure the just and efficient administration of justice. Where no new findings of primary fact are required to be made, this Court should exercise a power conferred upon it in wide terms so as to ensure that the cost of legal disputation is minimised and thereby apply the guiding principle in s 56 of the Civil Procedure Act 2005 to the exercise of powers conferred by an Act other than that Act or by Rules of Court, so as to facilitate the just, quick and cheap resolution of the issues in dispute in civil proceedings."
For Mr Horley, it was argued that if the appeal were upheld, the appropriate course was for the Court itself to determine the matter. In this case, as to credit issues, the Court was in as good a position as O'Shane LCM, to make findings.
For the defendant, it was argued that if the appeal were to be upheld, it should be remitted for further hearing.
The nature of the appeal is as discussed by Rothman J in Patey-Dennis v MUT Constructions (NSW) Pty Ltd [2011] NSWSC 497 at [30] - [34]. At [32] his Honour observed:
" In dealing with an appeal, the provisions of s 75A of the Supreme Court Act 1970 apply. The appeal is by way of re h earing, which is not a retrial. The role and function of the Court is still confined to the correction of error. There may be ancillary powers thereafter, but it is necessary for an appellant to show error in reasons or in procedure in order to engage the jurisdiction of the Court to make any orders: Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118. The High Court, in Fox v Percy , supra, said:
"[22] The nature of the 'rehearing' provided in these and like provisions has been described in many cases. To some extent, its character is indicated by the provisions of the sub-sections quoted. The 'rehearing' does not involve a completely fresh hearing by the appellate court of all the evidence. That court proceeds on the basis of the record and any fresh evidence that, exceptionally, it admits. No such fresh evidence was admitted in the present appeal.
...
[25] Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of 'weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect'. In Warren v Coombes, the majority of this Court reiterated the rule that:
'[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.'
As this Court there said, that approach was 'not only sound in law, but beneficial in ... operation'.
...
[27] ... If, making proper allowance for the advantages of the trial judge, they conclude that an error has been shown, they are authorised, and obliged, to discharge their appellate duties in accordance with the statute.
[28] ... In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.
[29] That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being 'incontrovertible', an appellate conclusion may be reached that the decision at trial is 'glaringly improbable' or 'contrary to compelling inferences' in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must 'not shrink from giving effect to' its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process.
...
[31] Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical." (Per Gleeson CJ, Gummow and Kirby JJ.)"
In the circumstances of this case, for reasosn which I will explain, I am satisifed that the matters which have arisen may properly be determined on appeal and that the matter should not be sent for re-trial.
The defendant led her Honour into error
It should be noted at the outset, that at the hearing of the appeal, it was conceded by the defendant, that her Honour had erred in certain respects, including in awarding interest at the rate of 17%. The result of the concession is that the appeal must be upheld, at least in part.
It was accepted by the defendant that the error made in relation to interest was the result of it having led her Honour into error. That was a consequence of the way in which the hearing was conducted by the defendant and later, when her Honour came to deliver her decision, as the result of answers given for the defendant, when her Honour asked certain questions of its legal representative about the claim which it pressed.
It also became clear from the defendant's submissions that it was common ground that her Honour misunderstood the claim which the defendant had pressed; certain matters about which the parties had agreed; aspects of the evidence; and that she did not appreciate the nature of the case over which the parties finally joined issue. This led her Honour into further error.
When the hearing below commenced, her Honour enquired whether the defendant was proceeding on its amended statement of claim. She was told that it was, even though the case which was then developed and about which evidence was led, departed very significantly from the claims there made. Thereby, the defendant clearly contributed to her Honour's further errors.
There was no transcript kept of closing submissions, but the written submissions and notes which the parties' solicitors each made of the oral submissions, were in evidence. In the written submissions, it was noted by the defendant that the uncontroversial facts in the case were:
"3. In early January 2007 the defendant requested the plaintiff to provide architectural services to him.
4. There was no signed written fee agreement for the architectural services.
5. On about 9 February 2007, the defendant paid the plaintiff $5,000 (the 'Payment' ).
6. The plaintiff urgently prepared architectural plans and materials which were compiled into an A3 sized colour booklet.
7. Multiple copies of the aforementioned booklet were collected by the defendant just prior to his departure overseas on about 14 February 2007.
8. The defendant did not instruct the plaintiff to complete the design documentation for the proposed buildings on the defendant's land.
9. On 16 October 2007 the plaintiff rendered an invoice for $39,600 on the defendant and gave credit to the defendant for the Payment.
10. At all material times the defendant was the registered proprietor of the land the subject of the plaintiff's work requested by the defendant."
Mr Horley agreed with those facts. For the defendant, it was argued that the issue to be determined by her Honour was:
"Whether the payment was made on account of the fee to be rendered by the plaintiff to the defendant for the architectural services to be provided (as the plaintiff contends) or whether the payment was made in full satisfaction of the plaintiff's architectural services (as the defendant contends)."
It was argued by the defendant that Mr Howieson's version of events should be accepted and:
"In doing so, the Court is finding that there was either:
(a) a contract entered into between the parties that the plaintiff perform instructed architectural services for a reasonable fee; or
(b) in the alternative, that the plaintiff did work at the defendant's request and should be paid a reasonable sum (quantum meruit) in return."
In written submissions for Mr Horley, it was said that:
"The Defendant's case is that there was a concluded oral agreement before the Plaintiff commenced the work that the professional costs of preparing "concept drawings" would be "around $5,000.00" and that in performance of that agreement he paid $5,000 to the Plaintiff at the Plaintiff's request."
and
"1. The Defendant submits that the Plaintiff has not discharged its onus of proof in relation to the Agreement as pleaded and its terms. In addition, the quantum meruit claim at best relies only on an estimation of time spent and should also fail.
2. In those circumstances the appropriate order is judgment for the Defendant and an order that the Plaintiff pay the Defendant's costs."
On appeal it was submitted for the defendant, that in truth when the final submissions were made it no longer pressed the alternative quantum meruit claim, on which it had opened. I am unable to accept that submission. The evidence established that in final oral submissions both parties addressed that claim. Given what was submitted to her Honour in the written submissions, in opening and in closing submissions, I am satisfied that her Honour was entitled to understand that a quantum meruit claim was still being advanced. There was no error in that regard.
The defendant also urged that on a fair reading of the judgment as a whole, it would be concluded that despite the accepted errors which had been made, her Honour had not erred in the final conclusion which she reached (see Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430 at 443-4). It was also argued that it was possible to 'steer a course' through the difficulties which had arisen with her Honour's judgment, to the end result that the appeal would be dismissed.
For reasons which will become apparent, I am satisfied that this was a result not open in the circumstances which have here arisen.
O'Shane LCM's judgment
It is necessary to begin with a consideration of Honour's her judgment.
Her Honour began by noting that what was in issue was a claim for payment of an invoice of $34,600.01, plus interest, pursuant to an alleged agreement. She noted what was claimed in the amended statement of claim in relation to the provision of architectural services to Mr Horley under an agreement reached as to the fees to be charged, including interest at 17%, if payment was outstanding for more than 10 days.
It was common ground between the parties that this was not the basis of the case which the defendant had pressed at the hearing. What her Honour was referring to was the claim made in the amended statement of claim which rested on the alleged March agreement. The defendant had abandoned that claim at the hearing. It therefore accepted that the appeal must be upheld, at least in relation to the interest ordered.
After further reference to the claims made about that agreement and the particulars provided in relation to what her Honour described as 'a significant scope of works', her Honour turned to consider the evidence. She referred to the affidavit of Mr Howieson and statement of Mr Horley which were in evidence and the 'fluid state' of the instructions given by Mr Horley, up to February 2007, when he travelled to China, to speak to possible investors about the redevelopment proposal. Her Honour did not refer to the competing evidence as to what was agreed at the outset, but said in relation to the $5,000 payment made before Mr Horley went to China, that:
"In any event the sum of $5,000 was mentioned and I have to say, on my reading of the evidence it is still not clear whether that was an amount that was agreed upon, whether it was proposed by Mr Howieson or whether it was proposed by Mr Horley. But in any event the amount is $5,000, was paid by Mr Horley into the plaintiff's account at about that time."
Her Honour noted that Mr Howieson received at about the same time a bushfire protection plan from the New South Wales Rural Fire Service, concluding 'on any view of the work that was proposed to the plaintiff would have had to be taken into consideration in drawing further plans'. She also noted that this plan was provided almost as Mr Horley was about to board the plane to China. On appeal, both parties accepted that this was not of any relevance to the matters over which they had joined issue. What point her Honour was seeking to make by these observations, is not apparent.
Her Honour considered that Mr Howieson had to undertake 'a great deal of work within a very limited timeframe, while having to consider and incorporate rejigging' of Mr Horley's concepts. The result, she noted, was that Mr Howieson engaged his daughter, an architect who worked for the defendant, 'in an attempt to finalise the work'. Her Honour noted the estimate made by Mr Howeison of the time which they had worked, 'without the benefit of timesheets', namely that Mr Howieson had worked 159 hours on the project and his daughter 140 hours. She then referred to charge out rates of $140 per hour for his daughter and $165 per hour for himself, observing:
"In calculating those costs he states that he had regard to a practice note from the Royal Australian Institute of Architects, and he estimated the costs of the works of the proposed redevelopment to be in the rage(sic) of about eight million dollars. Using the guidelines published by the RAIA he then estimated the plaintiff's costs in carrying out the project."
It was again common ground on appeal that in making these observations her Honour mistook the evidence. The practice note was not relevant to a determination of the matters over which the parties had joined issue. It had been used by Mr Howieson to produce the $8 million estimate which formed the basis of the proposed March agreement. The practice note did not, however, publish any charge out rates. There was no evidence that the practice note formed the basis of either the $5,000 payment made in February, or the defendant's further October invoice. The rates used were those which the defendant charged at the time for work performed by Mr Howieson and his daughter. How they were fixed, was not revealed on the evidence.
Her Honour then noted Mr Horley's case, that the $5,000 was agreed as the total cost of Mr Howieson undertaking to draw concept plans for the development proposal. She said as to this claim '[w]ith due respect to the defendant that proposition sounds preposterous'. Why her Honour took that view was not explained. Inferentially, it must have rested on her Honour's acceptance of Mr Howieson's assessment of the hours worked to produce the plans and a view that it was unlikely that he would have agreed to perform such extensive work, for such a discounted rate.
Her Honour noted that Mr Horley had no notes which evidenced the agreement by which he defended the claim, observing that he advanced his case by his statement made some three years and nine months after his initial discussions with Mr Howieson. Her Honour observed that he 'purported' to depend on his memory as to crucial matters dealt with in his statement. By way of contrast, she referred to Mr Howieson having kept contemporaneous notes of events, telephone and other conversations, and meeting dates etc.
Her Honour noted Mr Horley's evidence that Mr Howieson did not make any statements indicating that there would be extra fees for artists impression drawings; that he had not instructed him to prepare such drawings; or a range of other matters in the schedule of costs.
Again, it must be observed that the notes in evidence did not, however, contain any contemporaneous record of discussions to which Mr Howieson deposed in his affidavit. In giving his evidence, he, too, relied on his memory of the conversations to which he deposed.
Her Honour then noted that there had been no objection to the tender of Mr Horley's statement, which her Honour observed:
"... set out in paras 5 through to 9 a good deal of alleged conversations and other communications with third parties, which it has to be said are not only irrelevant to the matters that stand to be decided in these proceedings, but are also highly prejudicial to Mr Howieson."
She noted that it was claimed by Mr Horley that:
"... a significant part of one conversation was that Mr Howieson was "desperate for money", as though to imply that Mr Howieson would accept a small fee in order to get any money. It is noteworthy in that context that the plaintiff company, in fact, was in liquidation at the time when these proceedings were initiated. Mr Howieson, himself, had been given permission by the liquidator to take the action to initiate the proceedings."
Again, it was common ground that her Honour's observation was factually inaccurate. The proceedings were brought by the liquidator, not by Mr Howieson.
Her Honour then stated that she 'utterly rejects' Mr Horley's evidence, which she regarded as 'irrelevant and prejudicial'. Her Honour also found Mr Horley 'more than a 'little disingenuous'; concluded that he was an unreliable witness and that he was waiting for an insurance payment and was stalling for time. She also found him 'less than frank' in his evidence of his conversations with Mr Howieson, deposed to at [38] and [39] of his affidavit.
On appeal the plaintiff complained that the evidence which Mr Horley had given was relevant and had been admitted without objection. It was argued to be open to her Honour to reject it, but that it had to be considered in resolving the matters over which the parties had joined issue. The defendant argued that what her Honour intended to convey in her observations was not that she was excluding the evidence, but rather that she regarded it to be unreliable and so had refused to accept it.
The evidence Mr Horley gave at [38] and [39] of his statement was:
"38. Shortly after my return (I no longer recall the exact date but I believe it was the same day I returned to Australia or the day after that), I telephoned Ross Howieson and we had a conversation inter alia to the effect:
Me: "My negotiations were not successful. The bloke in China wanted complete control of the project for only partial equity. I will need to keep looking for another investor, but the redevelopment will have to wait for a while."
Howieson: "Can you give me a timeframe for when you will want that detailed plans done? I have given you a very good price for the initial plans because I expected you to proceed with the full project very soon."
Me: "I haven't even settled my insurance claim for the fire yet. I will let you know if and when I can go ahead with the project."
39. Ross Howieson rang me several times in the next few weeks to chase me up for the work. During one of these telephone conversations, on about 25 March 2007, we had a conversation inter alia to the effect:
Me: "Can you give me a written quote for your fees if you do the final plans and drawings if the project goes ahead? This will help me with my insurance claim."
Howieson: "Yes. I'll send you a quote based on RAIA scale rates."
What her Honour overlooked in relation to this evidence and the views which she formed of Mr Horley's credibility and reliability, was, amongst other things, that his account accorded with the defendant's abandonment of its claim, in relation to the March agreement.
Her Honour also said that she had no confidence in Mr Horley's evidence, concluding that it appeared from his own sketchy evidence, that he did not take issue with the drawings he took to China. She also found that:
"Without specifically stating it, he says in fact that he received those drawings on the night before he left for China. He did not make any definition statement in that part of his evidence, but he leaves the implication hanging. Frankly, the proposition is nonsensical, and in the view of this court, designed to be misleading to the court."
In fact, Mr Horley had given direct evidence in his statement that he had attended Mr Howieson's office, collected the plans and took them to China. There was no issue between the parties about this. That there was any basis on which it could have been concluded that Mr Horley's evidence about these matters were designed to mislead the Court, is not apparent.
Her Honour concluded that the defendant had undertaken extensive work on the project, which on the evidence, Mr Horley had agreed to have done and was anxious to have done. She concluded:
"It is also clear that such work would, indeed the court accepting the evidence of Mr Howieson on the matter did involve considerable effort and cost to the plaintiff. The plaintiff is entitled, as a matter of law, to proper remuneration for that work. The work was done and produced in what was clearly a very fraught set of circumstances brought about entirely in the view of this court on the basis of the evidence before it by the defendant himself."
Her Honour gave no reasons for that conclusion. She did not refer to the contractual claim which the defendant had pressed. Nor did she explain whether her order rested on contract or a quantum meruit. Without further explanation, her Honour ordered:
"In short the court is satisfied on the balance of probabilities that the plaintiff has proved its claim and judgment is entered accordingly.
THE ORDERS ARE MADE THAT THE DEFENDANT PAY THE PLAINTIFF'S CLAIM IN THE AMOUNT OF $46,423.05, TOGETHER WITH INTEREST AT THE RATE OF SEVENTEEN PER CENT FROM 27 JULY 2010."
There can be no question, in these circumstances, that her Honour failed to give adequate reasons for the conclusions which she reached. While lengthy reasons were not required, the reasons given had to be adequate to permit the basis of the resolution of the parties' contest to be understood. This her Honour failed to do (see Alchin v Daley [2009] NSWCA 418 at [35]; Campbelltown City Council v Vegan [2006] NSWCA 284; (2006) 67 NSWLR 372; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 257 per Kirby P, 268-269 per Mahoney JA and 278-279 per McHugh J and Workers Compensation (Dust Diseases) Board Of NSW v Smith, Munro and Seymour [2010] NSWCA 19 at [136] - [138]).
Did her Honour resolve the claim in contract or on a quantum meruit basis?
Her Honour clearly came to the view that the defendant had made out its case. She commenced by considering the case advanced on the pleadings, which relied in the alleged March agreement. That was not the case which the defendant had pressed. She concluded that the defendant had proved its claim and that as 'a matter of law' it was entitled to 'proper remuneration' for the work Mr Howieson had given evidence about. That conclusion did not reflect any term of the March agreement, pressed in the pleadings. Nor did her Honour refer to the arguments advanced about the terms of the parties' contract. The language her Honour used is that of quantum meruit rather than contract, but the basis of the conclusion reached is unclear.
For the defendant it was accepted that the actual basis on which legal liability was found, was not stated in her Honour's reasons. Nevertheless, it was argued that her Honour had found the necessary factual elements establishing liability, in either contract or quantum meruit; on the evidence she was entitled to find in favour of the defendant in either contract or quantum meruit; and that there was no obligation on her Honour to state how the quantum meruit claim fitted with the contract.
It was also argued that reading the judgment as a whole, it would be accepted that her Honour found either:
"a. an implied term of the contract that a reasonable sum would be paid for work done, which reasonable sum was not paid and remains outstanding to Sector 7G, in circumstances where it was accepted that in early January 2007 Mr Horley had agreed that Sector 7G would provide architectural services to him; that Sector 7G undertook extensive work involving architectural services and Mr Horley agreed to have that work done; that Sector 7G had invoiced for the performance of that work, and that invoice has not been paid; or
b. a claim for a quantum meruit, where there has been a finding that "what the final concept plans indicate is that the plaintiff undertook extensive work on the project which the defendant agreed to have done, and in fact he was very anxious to have done, as is evidence from all of the evidence that was placed before the court" and in circumstances where the court has indicated it does not accept the evidence of Mr Horley regarding the extent of or lack of instructions to Sector 7G."
It was also argued that her Honour had met the obligations discussed in Franklin v Ubaldi Foods Pty Ltd [2005] VSCA 317 at [38]:
"I hope that I do not underestimate the difficulty that confronts a County Court judge who is faced with resolving applications such as this, one after the other, upon inadequately exposed material. I accept that in such circumstances reasons for decision may lack the precision which could be expected if the judge had the luxury - some would say it is most often the necessity - of hearing witnesses viva voce, and then having time for reflection; and yet that such reasons may be adjudged adequate. But one thing is clear. Reasons must be such as reveal - although in a particular case it may be by necessary inference10 - the path of reasoning which leads to the ultimate conclusion. If reasons fail in that respect, they will not enable the losing party to know why the case was lost, they will tend to frustrate a right of appeal, and their inadequacy will in such circumstances constitute an error of law."
I am unable to accept these submissions. A fair reading of her Honour's reasons can only lead to the conclusion that her Honour misunderstood the defendant's claim and failed to resolve the fundamental contest over which the parties had joined issue, namely, the terms of the contract which they had agreed. She failed to indicate clearly whether her conclusion that Mr Horley must pay the defendant the sum it claimed rested in quantum meruit or contract, although from the language her Honour used, it seems to have been a conclusion which rested on quantum meruit; and she failed to give adequate reasons for the conclusions which she did reach, including in relation to the amount of the claim.
While her Honour was not obliged to give lengthy or elaborate reasons, she did have to give an explanation sufficient for it to be understood whether she had come to the view that the orders which she made rested on the terms of the contract by which she found that the parties were bound, or as the result of an assessment of a quantum meruit. Her Honour failed to do so.
I am also unable to accept the defendant's submission that all that was finally before her Honour was the question of whether the agreement was one for the production of the concept plans for the agreed sum of $5,000, or on the basis of payment of the defendant's reasonable costs pursuant to an implied contractual term. The parties each addressed the quantum meruit claim in final submissions.
Having rejected Mr Horley's defence of the claim on the basis of an agreement that the work would be performed for $5,000, her Honour had to consider and determine whether the contract contained the claimed implied term and whether the sum which the defendant claimed it was owed, reflected what it was entitled to be paid under the implied term, for the work undertaken.
Mr Howieson's evidence was that there had been an agreement reached as to what the defendant would be paid, on two quite differing bases. That evidence did not support the case which the defendant advanced as to an implied term. It was only if her Honour came to the view that there was no contractual entitlement to the payment claimed, that the claim in quantum meruit had to be resolved.
Her Honour's conclusion was that the defendant, as a matter of law, was entitled to 'proper remuneration' for the work performed, it having performed work, which involved considerable effort and cost, for the defendant. That language is suggestive of a conclusion that her Honour was unable to resolve what contractual terms had been agreed. That is consistent with her earlier observations that she could not determine the basis of the $5,000 payment which had been made.
It was argued for the defendant that her Honour's reasons showed that she relied on the evidence regarding the defendant's hourly charge out rates and the interest proposed in the March agreement, to guide her as to the amount of the reasonable remuneration the subject of any implied contractual term. Her Honour's error in relation to the practice note was argued not to have materially impacted the decision which she reached. Mr Howieson was an architect of some decades' experience, who in his March proposal had quoted at a level below the appropriate scale for complex matters. That supported the conclusion that the hourly rates which the defendant charged were reasonable. Mr Howieson's evidence as to the charge out rates provided an ample basis for the conclusion that the rates charged were reasonable and within the range that would be charged, within an ordinary commercial context. That those rates had not been disclosed to Mr Horley was irrelevant.
Alternatively, it was argued that her Honour arrived at the correct conclusion, even if for the wrong reasons.
I am also unable to accept these submissions. A fair reading of her Honour's reasons can only lead to the conclusion that the complaints advanced for Mr Horley must be accepted. Her Honour misunderstood the case which the defendant pressed and did not resolve the contest over which the parties joined issue. Her Honour's reasons cannot be accepted in the way argued for the defendant.
It follows that on appeal, it is thus necessary to determine whether the defendant established the case which it pressed below, on the evidence.
The evidence of what the parties agreed
The claim pressed was that there was no express agreement reached as between Mr Horley and Mr Howieson as to rates, but a term was implied that a reasonable sum could be charged. Her Honour rejected Mr Horley's defence that what had been agreed was that the work undertaken in producing the concept plans he was to take to China, would be done for $5,000. In doing so, her Honour gave no consideration, however, to the evidence going to the terms of the contract which the parties entered, or indeed the evidence which Mr Howieson gave, which was inconsistent with the case which the defendant pressed.
Her Honour rejected the defence advanced on the basis of Mr Horley's credit, having earlier said of the $5,000 that 'on my reading of the evidence it is still not clear whether that was an amount that was agreed upon'. That is a difficult conclusion to understand. It was common ground that $5,000 had been agreed. What was in issue was what the payment made was intended to be for.
It is apparent from her Honour's explanation that her credit findings rested on a number of bases which were factually inaccurate. In part they contradicted matters about which the parties were agreed, or over which they had not joined issue. Nor did her Honour consider how Mr Howieson's evidence of what had been discussed, departed from the case which the defendant pressed at the hearing, having abandoned its reliance on the March agreement.
On appeal her Honour's conclusions in relation to Mr Horley's credit were argued to be objectively irrational, made without adequate reason and involving a denial of procedural fairness, in so far as she rejected evidence to which there had been no objection and which was clearly relevant and admissible (see McCarthy v NRMA Insurance Ltd [2002] NSWSC 1011).
It is uncontroversial that where credit is in issue, the cross-examination of the witnesses is of particular importance. As a matter of fairness, if a party proposes to submit that a witness' evidence should be rejected and another witness' evidence on the same topic preferred, the witness must be cross-examined on the matters in issue. A failure to cross-examine may give rise to a Browne v Dunn (1893) 6 R 67 point. In this case Mr Horley's evidence was rejected, even in relation to matters over which there was no issue between the parties, for factually inaccurate reasons. Nor did her Honour address the conflicting evidence which Mr Horley and Mr Howieson gave about relevant matters. It is unarguable, in those circumstances, that her Honour's credit findings must be revisited.
It is apparent from a review of the evidence, that the issues lying between the parties could not simply be resolved by a rejection of Mr Horley's evidence, as a matter of credit. Not only did her Honour fail to determine the defendant's claim on the basis advanced at the hearing, she also failed to consider and resolve the evidentiary conflict between Mr Howieson and Mr Horley, as to the terms of the agreement which they had reached.
In determining what had been agreed, what the objective evidence revealed, also had to be considered. Her Honour also did not refer to this evidence.
It is thus convenient to commence with a consideration of the October invoice, on which the defendant's claim rested. What Mr Howieson provided to Mr Horley gave no account of the work to which it related, what had been done, what hours had been worked, or by whom. All that it provided in relation to the earlier $5,000 payment, was that it was a 'deposit', for which a credit was given.
Mr Howieson's evidence was that no time records of the work done for Mr Horley had been kept by the defendant. Nor could he remember discussing with Mr Horley what the defendant's hourly rates were. They were first disclosed when the proposed March agreement was provided, after the work in question had been completed and the $5,000 paid. While agreement in those terms was never reached, it is relevant to observe that the March agreement proposed both hourly rates and 'substantiation of the charges by way of time sheets or other records to show all hours expended on the project'. That such records were not kept in relation to the earlier work performed, lends support to Mr Horley's evidence, that a lump sum was agreed for production of the concept plan.
Evidence in chief was given at the hearing by way of affidavit. Because of the way the matter was prepared for hearing, Mr Horley's statement did not respond to that of Mr Howieson and there were no reply affidavits provided. The affidavit and statement were each sworn on the same day. Mr Horley's defence rested on conversations to which he deposed as having taken place on 17 January 2007, when Mr Howieson was engaged to produce the concept drawings. Mr Howieson's affidavit did not deal with those conversations and he gave no evidence in chief about what Mr Horley claimed was then discussed and agreed. Having not disputed that evidence, Mr Howieson was not cross-examined on what Mr Horley said had been discussed that day. The result was that Mr Howieson gave no evidence about those alleged conversations.
The onus lay on the defendant to establish its claim that it had been agreed that the defendant could charge a reasonable sum for the work. That was not Mr Howieson's evidence as to what had been agreed.
In his affidavit, Mr Howieson described an initial meeting in January 2007, when he was told to 'go ahead and start work'. He opened a file, placed into it some documents and photos which Mr Horley gave him, contacted a surveyor and downloaded some route planning information, which he obtained from the Guest House website. He travelled to the site on 17 January, where he met Mr Horley, who told him that he wanted to rebuild the Guest House, as well as enlarge it. Mr Howieson's account of their conversation on 17 January was:
"I said: When do you need the design?"
He said: "Soon. I'm going to China in about 3 weeks so it has to be finished by then. I'll be away for a couple of weeks." He told me a date on which he was to leave in February. I no longer recall the date.
I said: "Alright. We have a deadline. We'll get started straight away and refine the design brief as we go. When the brief and the extent of work are bedded down, I can calculate a firm fee for the work."
He said: "Okay."
Mr Horley's evidence was that when they met at the site on 17 January, the conversation was:
"Me: "I would like some concept plans, nothing final, to show to this Chinese investor. I am going to China in February and I would like to meet him then with some plans to show him the potential redevelopment of the Property. What I want is to rebuild the same as the original guest house, but 50% wider and 50% longer. This will mean the floor area will be about 2.25 times larger than the original floor area. It should be built around the existing fireplace and chimney, which is the only part left standing. I want the guest rooms to be a little larger than originally and also want all of them to have windows instead of just fanlights over the doors. I also want to move all the storage, laundry, freezer room and parking into a basement area excavated under the building. I also want a restaurant built in a separate building next door to the guest house, where the tennis court is at the moment. I want this restaurant building to be in the same style but smaller than the guest house. There should be a covered walkway between the two buildings.
"All I need at the moment is some preliminary plans, not full designs, to give this Chinese investor an idea of what I want to do and see if he will be interested in investing in the project. If I am happy with your concept plans and the project goes ahead, then I will get you to do the proper plans to be used for the redevelopment."
Howieson: "It will cost you about $5,000.00."
Me: "Yeah, that's OK."
Mr Howieson gave no evidence about this alleged conversation. It was certainly not expressly denied.
While some extracts from Mr Howieson's diary were in evidence, the 17 January entry was not. The diary entries which were in evidence contain no account of matters Mr Howieson claims were discussed and agreed.
Mr Howieson's evidence was that he then pursued information from the surveyor and met again with Mr Horley on 29 January, when his intentions were discussed in the context of his planned trip to China in February. On his account, Mr Howieson and Mr Horley spoke again on 6 February, to this effect:
"I said: "I need something paid to cover some of our costs until you get back from China."
He said: "I can give you $5,000 for that, and I'll make sure you are paid when I get back."
I said: "yes please. I'll give you our bank account details."
Mr Horley's evidence of the February conversation was:
"27. On the same day, shortly after I received that e-mail, Ross Howieson telephoned me and said words to the effect, "Did you get my e-mail? I really need to get the $5,000.00 paid into the bank. Otherwise, I will be charged a hefty penalty on my loan." I replied to the effect, "I will make the payment. When will you finish the plans? I am flying off to Hong Kong on 14 February and I need to take the plans with me to see the possible investor in China." He replied to the effect, "The drawings are almost ready now. I'll let you know when you can come and pick them up."
28. During this conversation, Ross Howieson did not say anything to me about any further fees that I would have to pay him after he gave me the drawings.
Mr Howieson was cross-examined about the conversation he alleged had occurred in February, when he sought payment of $5,000 at a time when he claimed that he had already been working 12 hours a day, since the site inspection, a total of some 80 or 90 hours, with his daughter also having performed additional work. He explained that:
" We didn't keep accurate timesheets, we simply worked very long hours every day of the week. And so we would have known - you know, there would have been that sort of --"
Mr Howieson agreed that he did not tell Mr Horley when they met in February of the time that had already been worked, or that over $20,000 work had been performed. He said this was because:
"... there was an agreement that a fair fee would be paid and architectural fees are in that order" .
That evidence contradicted the case advanced for the defendant, that there had been no express agreement reached as to fees to be paid for the work.
Mr Howieson also agreed that under the code of conduct fixed for architects there was an obligation to disclose to clients as soon as possible, the likely costs involved. He explained that he had not done so, because 'we didn't have the brief'. He could not recall having disclosed the hourly rates and agreed that he had not rendered any invoice for the $5,000 paid in February. Mr Howieson denied, however, that he took the course he did, because it had been agreed that there would be a fixed price of $5,000.
Mr Howieson also explained that the estimate of the hours which he had worked in producing the concept plans, which appeared in his affidavit, had only been prepared after these proceedings were brought, some two and a half years later, with no assistance from any written records. He explained the reason was:
"Because we hadn't - we hadn't - it wasn't done on an hourly basis, it was to be done on a fee scale. So we had an idea of our hours because - simply of the days and times and whatever. So I've said - I believe I said to you that this they may not be absolutely accurate but they are very, very close and indicative of the amount of work that went in. So, I'm sorry, that's it."
Again, this evidence that it had been agreed the work was to be done on a fee scale and not on an hourly basis was inconsistent with the case which the defendant pressed at the hearing. The defendant led no evidence about any applicable fee scale.
Mr Howieson's explanation of this subsequent estimate of the hours he and his daughter had worked was:
"If I might explain, our office - we have a small office building and our office and house are directly conjoined. We both work long hours all the time into the night and whatever. My daughter was living there at the time. So I'm well aware of what she was doing and how long - how much time and effort she put into it, as did I. It was a very short timeframe to prepare a design for such a large project. So I am - I'm aware that she was there working on it. She lived there and she worked very long hours."
In cross-examination Mr Horley explained that when he went to China he was seeking finance for some five and a half to six million dollars, a ball park figure he had derived after discussion with various people. He had been underinsured and at the time was in dispute with the insurer for over $700,000, in respect of the fire at the Guest House. He needed concept plans to take with him to China. That was what Mr Howieson produced. Mr Horley's negotiations failed and as a result the project had not gone ahead.
Mr Horley denied that when he met with Mr Howieson, he was not able to tell him exactly what he needed. He agreed that after information was obtained from the surveyor, it became apparent that a proposed conference centre would not fit. Mr Horley was cross-examined over his account of the conversation at the site. It was suggested that:
"Q. It wasn't the case, sir, that Mr Howieson was in any position on 17 January at the site visit to tell you how much anything was going to cost. It just didn't happen.
A. It did happen."
Mr Horley was further cross-examined about this discussion and that in February over payment of the $5,000. The cross-examination was:
Q. Sir, you remember that there was a site visit on about 17 January.
A. There was.
......
Q. Sir, at no time during that site visit were fees discussed at all with Mr Howieson.
A. They were. That was the purpose of it. Ross said he had to go up and have a look at - I hadn't given the job to him. I'd been talking to other architects about it and he was going to give me an estimate when he saw the scope of the works, what he had to do.
Q. The trouble was, you hadn't made your mind up about exactly what you wanted and you weren't able to tell Mr Howieson exactly what you wanted.
A. I told him exactly what I wanted.
Q. Mr Howieson told you that there were problems with the site because of fitting stuff in.
A. No.
Q. You wanted a conference centre, for example.
A. Yes.
Q. But somebody knew at some stage that the conference centre wouldn't fit.
A. When the survey come back, I detected that it wouldn't fit.
Q. What occurred was after the site visit, Mr Howieson and you then had several briefing sessions, if we can call it. You had several meetings with Mr Howieson at his place.
A. Yes.
Q. The process we've already talked about where plans were reviewed by you and Mr Howieson - took place then. Isn't that right?
A. It did.
Q. During that period after 17 January and before you went to China, Mr Howieson said to you something like, "I'll need some money to cover my costs."
A. No, that's not what he said at all.
Q. You proposed $5,000 on account.
A. He said, "I need the five because I've got a loan repayment due and they will hit me with a big penalty if I don't' pay it."
Q. Sir, what happened was --
HER HONOUR
Q. Sorry, he said, "I need the $5,000 now."
A. Well, he said the five meaning 5,000.
Q. He said, "I need the five now."
A. Because he had a loan repayment due and he'd be hit with a huge penalty if he didn't pay it.
MARSHALL
Q. There were two stages, weren't there? The first stage was Mr Howieson said, "I need some money to cover my costs" and then there was one of the two of you mentioned the figure of $5,000 for that. That's the proposition I'm putting to you. Do you deny that?
A. That's totally wrong, yes.
Q. Okay, all right.
A. It's a lie.
HER HONOUR
Q. Sorry, what's a lie?
A. The fact that he said he needed some money and I proposed $5,000.
Q. So you say it's a lie.
A. It's a lie.
MARSHALL
Q. Then the next stage was Mr Howieson contacted you and said, "Could I have the $5,000 now because I need the money for a payment."
A. Yes, he said that."
Later he said:
"Q. What had occurred was a couple of days before was the conversation that I've already asked you questions about when you volunteered, I think, that you could pay $5,000 on account of costs.
A. No.
Q. There wasn't a separate conversation on 8 February, for example, was there sir, about you paying $5,000 into his bank account.
A. I'm not sure if there was a separate conversation that day or not.
Q. You don't remember one.
A. No, I don't.
Q. You see, sir, when Mr Howieson is saying "organise a $5,000 payment", that's because you knew when you received this email that that wasn't going to be all you were going to have to pay for the work Mr Howieson was doing.
A. That's untrue."
And finally:
"Q. You thought that Mr Howieson's request for an upfront payment of $5,000 during the time that he was spending a lot of time on your plans was a reasonable one, didn't you?
A. Well, I thought he wanted the final payment upfront. He needed it, he was desperate for it. So I gave it to him."
Mr Horley was also cross-examined about the invoice which he received in October. His evidence was:
"41. Over the next few months, Ross Howieson continued to telephone me from time to time. During one of our telephone conversations, he said to me words to the effect, "You know my bill now is for a little bit more than $5,000.00?" This was the first time that he mentioned his fees for the concept plans to me since his conversation with me on or about 8 February 2007. I replied to the effect, "How come?" He replied to the effect, "The extra work my daughter did making up the computerised artist's impression drawings was not part of the price I quoted you."
42. During this conversation, Ross Howieson did not tell me how much the "little bit more than $5,000.00" for his fees was. I did not ask him how much that was either."
Mr Horley denied that he made no complaint at the time, about the invoice Mr Howieson sent. He also denied that he was seeking to block Mr Howieson being paid his reasonable fee for the work he had done. Mr Horley denied that he was not happy to pay for the work. He said 'I'm happy to pay what I agreed to pay'.
The email and invoice which Mr Howieson sent on 24 October 2007, provided:
"Hello Tony,
I hope your meeting went well yesterday.
I have attached my letter and invoice posted to you by express post to PO Box XXX Sylvania Southgate NSW 2224 on the 16 th October. I think it is all self explanatory. I understand your position, but I am unable to simply let things drift any longer. The matter must be addressed - so I will make a claim under the Security of Payments Legislation. Hopefully one of your other projects will come to fruition and this sort of thing will be of no importance. I'm sure you understand this is not a personal issue, and I genuinely hope you succeed with the gas project and become mega-wealthy.
Regards
Ross Howieson"
"Dear Tony,
As you are aware, we carried out the sketch design and produced images and brochures for the Barrington project at the beginning of the year. We have carried out the work to a high standard and have provided assistance to you in good faith whilst awaiting the insurance settlement on the building. I am unable to delay payment for our work any longer and have now attached our invoice for the work done to date which is payable within 7 days.
Please note that this invoice is a claim under the terms of the Building and Constructions Industry Security of Payments Act 1999 NSW, and that the work produced by this office is subject to copyright.
Yours faithfully
Ross Howieson
Sector 7G Architecture"
Mr Horley was cross-examined about his email response, which was to this effect:
"You must be fucking joking!!!!!
First you ring up asking if I got your crappy letter and apologising for sending it because you're "under pressure" then you email me the same bullshit.
You know as well as I do what the arrangement was: there was NO promise that you would get the final job which, as we both also know, depends on me being able to finance the whole thing successfully. It all depended on whether I was happy with the initial sketches, some of which pleased me and some of which was not what we agreed on. Still I was still willing to stick with you if we could have come to a mutually agreeable financial arrangement.
Now you get the shits with waiting for "so long" and send me a bullshit bill so far out of left field that I am tempted to laugh except that I'm sure you have some devious plan to con money out of me.
The only reason you got the original job was that Joe begged me to give you some work because you were so deep in financial crap he thought you were going to go under.
I concede you said at one stage it was a 'leetle' (sic) bit of over the $5000 now because of the artistic renditions your daughter did at the end but ..... thirty five odd grand more???????
If you want to persist with this try-on I'll see you in court arsehole."
Mr Howieson made no reply, nor were the foreshadowed proceedings brought. It was only after the liquidator was appointed that proceedings were brought, wrongly alleging that an agreement had been reached in terms of the March proposal. That case was abandoned at the hearing. It was then seemingly for the first time alleged that an implied term of the agreement was that the defendant would be paid a reasonable sum. Mr Howieson gave evidence to quite a different effect in cross examination. That evidence finally did not support the existence of an agreement with the implied term claimed by the defendant. On one version, it had been agreed that the defendant would be paid 'a fair fee' and on another, that it was not to be paid an hourly rate, but on a fee scale.
The evidence did not support the conclusion that an agreement on the terms alleged by the defendant had been made
On the evidence, it is apparent that the defendant did not establish that an agreement had been reached in relation to fees on the basis pressed at the hearing, namely that there had been no agreement reached in relation to fees, with the result that a term in respect of payment had to be implied. Neither Mr Howieson nor Mr Horley gave evidence on which it could have been concluded that was the basis of the agreement which had been reached.
Even if Mr Howieson's evidence in cross examination could be preferred over that of Mr Horley, it did not establish the case advanced by the defendant. Also to be considered is whether Mr Horley's evidence as to what had been agreed, should have been preferred. Given the inconsistencies in Mr Howeison's accounts of what was agreed, proper consideration had to be given both to the objective evidence and to Mr Horley's account, in resolving that question.
On the evidence, an agreement for production of the concept plans for a fixed sum of $5,000 was consistent with the payment made by Mr Horley in February; with the defendant not maintaining any records of the hours worked by Mr Howieson and his daughter in producing the concept plans; with its failure to render an invoice to explain the work to which the $5,000 payment related; and with the failure to provide any explanation for the basis on which the further invoice provided in October rested, or what the earlier payment had related to.
At the time the defendant had usual hourly charge out rates for both Mr Howieson and his daughter. Not discussing those rates, or the hours which would be potentially involved in producing the concept plans with Mr Horley, before the work was done or when payment was sought, was consistent with an agreement as to a fixed amount for the work having been reached.
Had it either been agreed that the defendant would be paid 'a fair fee' for the work performed, or even a 'scale fee', as was variously Mr Howieson's evidence, it seems entirely unlikely that no record at all of the work performed in producing the concept plans would have been kept by the defendant. That approach is, however, entirely consistent with an agreement to a fixed fee. That conclusion is also supported by a consideration of what was proposed in the March agreement, where, by way of contrast, identified hourly charge out rates and the keeping of time records was proposed.
The October invoice provided no explanation of the work to which it related, the hours involved, or the rates by which it was calculated, or how the total sum of $39,600 had been calculated. All that it disclosed was that 'a credit' had been given for the earlier $5,000 payment, which was described to have been a 'deposit', but it provided no other information from which any assessment could have been made of the reasonableness of what was being charged.
Mr Howieson's assessment of the time worked was produced from memory, only after the proceedings were commenced, some years later. His calculations rested on the defendant's charge out rates at the time, not any fee scale, as he finally claimed had been agreed.
In my assessment, the defendant's conduct up until the time the October invoice was sent, was consistent with an agreement that the concept plans would be produced for a fixed fee. Thereby it was unnecessary for time records to be kept, for an agreement on rates to be reached, or for an invoice to be provided, giving an account of the work for which the charge was being made.
How the defendant conducted itself, when considered together with Mr Horley's preparedness to pay $5,000 without an invoice and before the work was even completed, also suggests that the payment was being made for the only work which it had to that point been agreed the defendant would be engaged to perform, for the agreed amount of $5,000.
The October invoice simply does not reflect a claim for payment under an agreement of the kind pressed by the defendant, or on either of the agreed terms about which Mr Howieson gave evidence that the defendant would be paid fair fees for the work which had been performed, or that scale fees would be paid. The invoice neither refers to the existence of such an agreement, a record of any hours worked being kept and on its face was not calculated by reference to any such an agreement.
Against that evidence, Mr Horley's reaction to the October invoice must be considered. His reaction was immediate and to the effect that the claim was a 'try on'. Mr Howieson's lack of any response to Mr Horley's outraged email, when considered with the course which these proceedings later took, suggests the acceptance at the time of some basis for Mr Horley's complaints, at least on Mr Howieson's part.
In cross-examination, only Mr Howieson's email was put to Mr Horley. It had been annexed to Mr Horley's statement, but his reply was not. Mr Horley insisted that he had replied and the hearing was adjourned, in order for Mr Horley to retrieve the reply. There was no suggestion then made that it was a reply which Mr Howieson had not received. Clearly, in fairness the reply ought to have been put to Mr Horley by the defendant, if a complete and frank account of the parties' dealing was to be given.
Even so, it had earlier been put to Mr Horley that he had not responded to the email, which he denied. He also denied that he had not attached the email to his statement, because it did not assist his case. Mr Horley explained that he had overlooked his response initially, because of where he had archived it and that when he found it shortly before the hearing, he had taken it to his solicitor for advice. He agreed that he found his email a bit embarrassing and that at the time he wrote it, he was angry. He did not agree, however, that it went against his case. Clearly it did not. His reaction to the October invoice was entirely consistent with the existence of the agreement he alleged.
Mr Horley insisted that he had paid the initially agreed $5,000 and that it had been contemplated that if the project proceeded, Mr Howieson would do the further work necessary. That was why the March proposal had been prepared.
I am satisfied on all of this evidence that the defendant established no basis on which it could be concluded that an agreement of the kind which it pressed at the hearing below existed, namely, that 'there was a contract for work to be done, the rate hadn't been agreed and it's implied in the circumstances that a reasonable sum should be able to be charged'. The onus fell on the defendant to make out its case. That onus was not met.
In my assessment, for the reasons I have explained, the evidence supported the conclusion that the agreement reached between the parties was in the terms which Mr Horley claimed. His evidence ought not to have been rejected. Not only did her Honour err in her credit findings, she clearly erred in preferring Mr Howieson's evidence over that of Mr Horley. Mr Howieson's various accounts of the nature of the agreement which had been reached, was not only inconsistent with the case which the defendant finally pursued, it was also inconsistent with the way in which he acted. His conduct was entirely consistent with Mr Horley's account of what had been agreed between them.
There was no evidentiary basis for the conclusion that the amount claimed in the October 2007 invoice represented a reasonable payment for the work performed
The defendant's case was that in the absence of an express agreement as to the basis of the payment to be made for the architectural services it had provided, the contract contained an implied term that it would be paid reasonable remuneration for the work performed. In the alternative a quantum meruit was claimed. Her Honour appears to have decided the claim on the basis of the quantum meruit. In the circumstances, it seems to me that such a claim was not available to be pursued.
It has long been established that '[w]hen a man does work for another without any express contract relating to the matter, an implied contract arises to pay for it at its fair value.' (see Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347). As discussed in Al-Atabi v Zaidi [2009] NSWCA 433 :
"Liebe v Molloy
65 In the light of that conclusion, there is, as Mr White submits, no room for the operation of the principle in Liebe v Molloy . That principle may apply to entitle a contracting party to relief where, notwithstanding failure to comply with a contractual stipulation such as cl 12, the court finds there was an implied or express request that the work which should have been the subject of such a stipulation be done: Liebe v Molloy (at 353); see also Trimis v Mina [1999] NSWCA 140 (at [56]) per Mason P (Priestley and Handley JJA agreeing); GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 50 (at [217]) per Finn J.
66 It is clear from Liebe v Molloy and the subsequent cases that if the work claimed for was work the contract required be done, the builder could not recover a quantum meruit for it: see also Smith v Leon Dupuy Dozer Hire [2000] VSC 212 (at [9]) per Balmford J; Concrete Constructions Group v Litevale Pty Ltd & Ors (No 2) [2003] NSWSC 411 per Mason P. That is the case here. The Liebe v Molloy claim must fail. "
A quantum meruit is a payment for the reasonable value of services provided, where the service provider has no contractual entitlement to payment for the work performed, for one of a number of possible reasons. It is a claim which rests on the law of restitution and unjust enrichment. Even in such a case, the terms of the parties' contract, if there is one, has to be considered in reaching a conclusion (see Lumbers v W Cook Builders Pty Ltd (in liq ) [2008] HCA 27; (2008) 232 CLR 635 at [79] - [80]).
In the face of the claimed term implied in the parties' contract, there was no basis on which a claim in quantum meruit could be pressed. What had to be established, if the contractual claim had succeeded, was that the sum claimed represented a reasonable payment for the work performed.
Her Honour plainly accepted Mr Howieson's assessment of the time involved in performing the work undertaken, notwithstanding that it was not one made at the time the work was performed. The defendant claimed payment for those hours at the rates which it charged at the time for such services, even though on Mr Howieson's evidence, those rates had never been discussed or agreed with Mr Horley. While not dealt with by her Honour, it is apparent that she accepted that those rates were reasonable. Why she reached that conclusion was not explained. The defendant led no evidence on which that conclusion could have rested.
In neither a contractual Liebe v Molloy claim, nor a quantum meruit claim is it sufficient for a plaintiff to establish simply that the services in question have been provided and that a claim for payment has been made. More is required if the onus falling on a plaintiff to make out the case pressed, is to be met. There has to be evidence led either as to the fair value of the work, or its reasonable value.
The defendant's case rested entirely on the evidence it called from Mr Howieson, as to his assessment, made after the proceedings below were commenced, of the hours worked by he and his daughter, to produce the plans which Mr Horley took to China. On Mr Howieson's evidence, that was not how the October invoice had been calculated. The defendant had kept no records at the time, as to the work performed. The basis on which the October invoice was calculated at the time, was not revealed in the invoice itself, or on the evidence.
What was proposed by the defendant in the March agreement, after the work had been performed under the contract which the parties had entered in January, was not a basis upon which conclusions could be reached in relation to the terms of the earlier agreement. Nor did what was there proposed establish the fair value of the work earlier performed, or a reasonable sum for that work.
On Mr Howieson's evidence, it was in the March agreement that the defendant's hourly rates were first revealed to Mr Horley, in the context of the proposed further work. He could not remember otherwise disclosing to Mr Horley the defendant's hourly charge out rates. On Mr Horley's evidence, what Mr Howieson told him before the March agreement was sent was that 'I'll send you a quote based on RAIA scale rates'. There was no evidence that the rates then charged by the defendant rested on such scale rates. While a scale was referred to in the March agreement, it was not tendered in these proceedings.
In fact, there was no evidence at all from which it could be concluded that the charge out rates pressed by the defendant in these proceedings represented fair or reasonable rates for the work performed by Mr Howieson and his daughter. All that is known about those rates is that they were the rates which the defendant charged at the time.
The defendant argued that it had not been established on appeal that any finding of fact which her Honour had made had no evidentiary basis, so as to result in an error of law. In this case there was no requirement for it to call either expert or lay evidence as to what market rates were, or what cost plus mark up amounted to, because that would be 'evidentiary overkill' and would ignore that Mr Horley had called no evidence to rebut the reasonableness of the rates the defendant claimed.
These submissions may not be accepted. The onus lay on the defendant to establish its case, on the balance of probabilities. That required evidence. On the case which it pressed, the defendant had to prove that the rates it claimed represented reasonable remuneration for the work performed. That could not be established simply by leading evidence that the claim had regard to the rates which it charged at the time, no matter Mr Howieson's experience as an architect. Something more was required. There was no onus on Mr Horley to rebut the reasonableness of the rates the defendant claimed.
There was no agreement as to rates and no evidence as to what market or commercial rates were at the time. Her Honour misunderstood that the Royal Australian Institute of Architects practice note provided such information. It did not. While the March agreement referred to scale rates, they were not in evidence. Nor was there any evidence as to matters such as the costs incurred in the defendant's provision of the services in question, its overheads, or what allowance for profit was made.
As I noted earlier, in opening it was submitted for the defendant below that:
"Your Honour, this is a case where at the end of the day I'll be saying that the best view one can put on the circumstances is that there was a contract for worked to be done, the rate hadn't been agreed and it's implied in the circumstances that a reasonable sum should be able to be charged, akin to quantum meruit."
There was no evidence led on which it could be concluded that the sum of $34,600.01 in issue between the parties represented a 'reasonable sum' for the work performed, in addition to the $5,000 which had already been paid, even if Mr Howieson's evidence of the hours worked was accepted. Evidence of the mere making of a claim, of itself, cannot provide an evidentiary foundation for such a conclusion.
It follows that even if the defendant's claim could have been accepted and Mr Horley's defence that it had been agreed that the plans which he took to China would be produced for $5,000, rejected, it must also be accepted that the defendant failed to establish that the payment it claimed, represented a reasonable sum for the work performed.
In all of those circumstances, there can be no question that this appeal must be upheld.
Orders
The usual order as to costs is that they follow the event. If the parties wish to be heard as to costs, they should approach. Otherwise I order:
1. Leave to carry on these proceedings pursuant to s 500(2) of the Corporations Act 2001 is granted.
2. In so far as necessary, leave to appeal is granted, the appeal is upheld and the judgment of O'Shane LCM given on 23 December 2010 is set aside.
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Decision last updated: 04 August 2011
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