Kaldor Pty Ltd v O'Kenny

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: KALDOR PTY LTD -v- O'KENNY [2004] WADC 18

CORAM: MAZZA DCJ

HEARD: 10 & 11 FEBRUARY 2004

DELIVERED : 18 FEBRUARY 2004

FILE NO/S: CIV 889 of 2003

BETWEEN: KALDOR PTY LTD
Plaintiff
AND
JAMES O'KENNY
Defendant

Catchwords:

Contract - Oral agreement - Quantum meruit - Turns on own facts

Legislation:

Nil

Result:

Judgment for the plaintiff in the sum of $40,365

Representation:

Counsel:

Plaintiff: Mr C E Chenu
Defendant: Mr W L Goodlet

Solicitors:

Plaintiff: Durack & Zilko
Defendant: Unmack & Unmack

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

ABB Power Generation Ltd v Chapple & Ors (2001-2002) 25 WAR 221
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221

MAZZA DCJ:

The claim

In this case, the plaintiff claims that on or about 27 September 2002 it agreed to supply and deliver to the defendant and the defendant agreed to take delivery from the plaintiff of an unassembled steel shed for the sum of $40,365. The plaintiff further claims that on 30 October 2002 it was agreed that the defendant would pay for the shed in two instalments, the first being 80 per cent on completion of the assembly of the shed and the balance within 14 days of Shire approval. The plaintiff delivered the shed to the defendant and assembly of it was completed by about 18 March 2003 but the defendant, despite demand, has failed to pay the plaintiff the sum of $40,365 or any sum at all.
In the alternative, if there was no contract between the plaintiff and the defendant, the plaintiff says that it is entitled to compensation in the sum of $40,365 as a quantum meruit.

The defence

The defendant admits that the plaintiff manufactured and delivered to him the unassembled shed. However, the defendant says that he had no contract with the plaintiff. The defendant said that his contract was with a firm called Marvic Constructions ("Marvic"). The defendant says that he approached Marvic to supply the unassembled shed and that, in turn, Marvic subcontracted the work to the plaintiff. The defendant's case is that he is not obliged to pay the plaintiff because he has no contract with it nor is he obliged to pay a sum by way of a quantum meruit.
I observe that in the event that I find that there was a contract between the plaintiff and the defendant no reason has been proffered by the defendant as to why the plaintiff would not be entitled to a judgment in the sum claimed by it.

The issues to be resolved

The issues that I need to resolve are simple to express. Was there a contract between the plaintiff and the defendant for the manufacture and supply of the shed? If not, is the plaintiff entitled to a sum by way of quantum meruit?

The parties

The plaintiff is a company duly incorporated in Western Australia and carries on business in Kununurra manufacturing and supplying, amongst other things, steel sheds. It trades under the business name "Kimberley Steel". The principal officer of the plaintiff is Ian James McKenna ("Mr McKenna"). Mr McKenna was the principal witness called by the plaintiff at the trial.
The defendant carries on business on his own account as a stock and station agent. The defendant gave evidence on his own behalf at the trial.

The facts

In or about mid‑2002 the defendant needed a steel shed built on a block in or about the Kununurra town site. The shed was apparently to be used to store machinery. The defendant approached a Mr Mark Tierney on behalf of another local business, Marvic, with a proposal that Marvic provide the shed. Marvic then approached the plaintiff and requested a quote for the plaintiff to manufacture the shed.
On 25 June 2002 the plaintiff provided Marvic with its quotation. There was no further progress on the quotation until sometime later, when Marvic asked the plaintiff to re‑quote for the work. The new quote which the plaintiff submitted to Marvic was in the sum of $40,365.
After the plaintiff re‑quoted, Mr Tierney requested the plaintiff to start organising shed drawings for submission to the local Shire. These drawings were completed by a draftsman who was retained by the plaintiff. The drawings were then submitted to an engineer in Perth for certification.
On about 12 September 2002 Mr Tierney approached the plaintiff asking if the shed could be ready by 17 October 2002. Up to this point no steel had been fabricated but the new deadline meant that the plaintiff had to start arranging for the shed components to be manufactured immediately. This, the plaintiff did. Mr McKenna testified, without objection, that Mr Tierney told him that he, Mr Tierney, was still waiting on an order from the defendant. Nevertheless the plaintiff was prepared to start manufacturing the shed components on the expectation that the defendant would give Marvic an order for the shed.
What then occurred is the genesis of the dispute between the plaintiff and the defendant. On or just after 26 September 2002 each of the plaintiff and defendant received a facsimile transmission from Marvic dated 26 September 2002 (Ex 1 Doc 13). The facsimile was addressed to the defendant but the plaintiff testified, and it was not a matter of any dispute, that it also received a copy of the facsimile. The terms of the facsimile are of some importance and are reproduced as it was written:
"James
Due to your wish not to have us pursue a Building Licence for this shed we are not able to sign your Contractual Agreement nor complete this project for you as we do not wish to jeopardise our Building Registration and Insurances.
We have contacted Kimberley Steel, Site Contractors and Andrew Cameron Carpentry who are happy for you to contact them re the supply and construction of the shed.
Contact details are:
Kimberley Steel  Ian McKenna       9169 1900
Site Contractors  Shaun                 0419 905 203
Andrew Cameron Carpenter    Curly                  0409 866 882
If any further information is required please contact me.
Thank you."
The defendant was at pains during the trial to explain that at no time did he tell Mr Tierney he did not want to apply for a building licence. Whatever the situation it is abundantly clear, taking this facsimile as a whole, that Marvic was reneging on any agreement that he had had with the plaintiff and the defendant. No reasonable person reading that facsimile could, in my view, come to any other conclusion. Whether Marvic was justified in reneging on any arrangement it had with the plaintiff and the defendant is not relevant to the resolution of the dispute as between the plaintiff and the defendant.
Clearly, the situation that confronted both the plaintiff and the defendant was unsatisfactory. By the time each of them received Mr Tierney's facsimile transmission of 26 September 2002 the plaintiff had already made arrangements for the components of the shed to be fabricated. It clearly risked having a shed but no‑one to buy it. From the defendant's point of view he needed a shed but the person he had thought was going to supply had reneged.
Not surprisingly, Mr McKenna on behalf of the plaintiff approached the defendant directly. Mr McKenna's approach to the defendant made good business sense for each of the plaintiff and the defendant.
Mr McKenna, on receiving Mr Tierney's facsimile, made an appointment to see Mr O'Kenny on or about 27 September 2002. The two men met at Mr O'Kenny's office. Mr McKenna recalled the conversation this way (T32):
"I asked Mr O'Kenny if he wished to deal direct and buy the shed direct from us. He explained at the time that he was annoyed with Marvic Constructions. They had let him down. He needed the shed completed by 17 October. He then said he would have to proceed and put the shed up himself and agreed to take the shed from us."
Mr McKenna said that he handed Mr O'Kenny a written quote for $40,385 and Mr McKenna offered to give the defendant a written guarantee to cover the material and any damage or corrosion that resulted from the shed being stored if it happened to be over the wet period. Mr McKenna was unable to produce to the court a copy of the quote that he gave the defendant because it had been retained on the plaintiff's computer system and that computer system had a malfunction resulting in a loss of data including the plaintiff's copy of the quote. Mr McKenna gave the same explanation for his inability to produce the guarantee which he said that he provided the defendant. The defendant did not produce the originals of either the quote or the guarantee. It was not suggested by the defendant's counsel that Mr McKenna had not in fact provided a quote and guarantee to the defendant and the defendant did not assert in his evidence that he had not received these documents. I formed a favourable view of Mr McKenna as a witness and I accept his testimony that he gave the defendant a quote and a guarantee.
Mr McKenna testified that the guarantee was to the effect that the plaintiff would warrant any faulty workmanship or any faulty material in relation to the shed and would rectify any problems that may occur as a result of its fault.
On or about 28 September 2002 Mr McKenna handed the defendant the guarantee and the engineer's certification on the drawings. On that day, the plaintiff invoiced the defendant for the shed in the sum of $40,365.
During the month of October 2002, Mr McKenna and the defendant were in contact with each other. Mr McKenna organised for delivery of the shed to the defendant's site which occurred sometime in the early part of October with the clear agreement of the defendant.
On 30 October 2002 Mr McKenna and the defendant had a discussion at the defendant's office. I accept Mr McKenna's account of what was said as being truthful and accurate. The defendant, whilst reserving any rights that he had against Marvic, again told Mr McKenna that he would take the shed and that he would pay the plaintiff 80 per cent of the price quoted to Marvic, that is, $40,365 in two instalments being 80 per cent on completion and the balance within 14 days after it had been inspected by the local Shire.
The plaintiff and the defendant both agree that the plaintiff delivered the shed components to the defendant. The defendant during the month of November arranged for the shed to be assembled. The defendant collected cage and footing bolts for the shed from the plaintiff in the first week of November 2002. A day or two later the defendant telephoned Mr McKenna saying that he needed some nuts for the bolts which the plaintiff delivered to the defendant on site. Within a week of the bolts being delivered the defendant telephoned Mr McKenna and told him that some purlins were missing. The plaintiff confirmed that the purlins were missing and arranged for them to be fabricated and delivered to the site. The defendant asked the plaintiff to rectify a problem with some bracing not being in the correct position. On two or three occasions between November 2002 and February 2003 various alterations and adjustments were made to the shed by the plaintiff. It is common ground that assembly of the shed was completed on or about 18 March 2003.

The defendant's case

The defendant was very upset with the treatment he received from Marvic. He did not want Marvic to walk away from what he perceived to be the contract that he had with Marvic for the supply of the shed. Much time at trial was spent on the issue of whether or not the defendant in fact had a contract with Marvic. The evidence suggests very strongly that there was no concluded contract with Marvic. There is no doubt that the defendant and Mr Tierney entered into a series of negotiations up to 25 September 2002 but it appears to me that those negotiations stopped short of there being any concluded contract. On 25 September 2002 the defendant sent to Marvic a proposed agreement for the construction of the shed with a note written on the bottom of the document in the following terms:
"Mark. If okay could you please sign and fax back."
"Mark" is clearly a reference to Mr Tierney. These words do not reflect the existence of a contract but rather suggest that the document being proffered to Marvic was one it was free to accept or reject. The document which I have already referred to which was sent by Mr Tierney to the plaintiff and defendant dated 26 September 2002 is a clear rejection of the offer. It could not have been made any plainer when Mr Tierney sent the defendant a facsimile on 8 October 2002 (Ex 1 Doc 17) which is in the following terms:
"James
Marvic Constructions will not be held responsible for this shed that you have organised.
We know that Kimberley Steel has already supplied the shed to you and invoiced you direct. Also, as you are aware, Ian McKenna from Kimberley Steel is happy to give you a written guarantee re this shed.
It should also be noted that we not have a contract with you.
Thank you."
Even if there was a concluded contract between Marvic and the defendant it is clear from Mr Tierney's facsimiles of 26 September and 8 October 2002 that Marvic had repudiated the contract. The defendant's conduct thereafter is consistent with him accepting the repudiation and then indicating an intention to sue Marvic for damages. The defendant's counsel, Mr Goodlet, submitted that the evidence showed that the defendant elected to affirm the contract, however, I find that the defendant's course of conduct does not bear out that submission.

Findings

I have no doubt that the plaintiff and the defendant entered into a contract for the supply of the shed. Specifically, the plaintiff agreed to manufacture and deliver to the defendant and the defendant agreed to take delivery from the plaintiff of the shed for the sum of $40,365. The contract was oral in nature and comprised principally the discussion which occurred between the plaintiff and the defendant at the defendant's residence on 27 September 2002. It was later agreed by the parties on or about 30 October 2002 that 80 per cent of the purchase price would be paid on completion and the balance within 14 days of Shire approval.
The evidence supporting the making of the oral agreement between the plaintiff and the defendant includes a tax invoice issued by the plaintiff to the defendant on 28 September 2002, the provision of the guarantee and engineer's certificate on 28 September 2002, the delivery of the components in October 2002 and the works that were done in November and between November 2002 and February 2003.

The claim for quantum meruit

In light of my finding that there was a contract between the plaintiff and the defendant for the supply of the shed, it is not necessary for me to consider the claim for a quantum meruit.

Conclusion

I find that on 27 September 2002 the plaintiff and the defendant entered into a contract where by the plaintiff agreed to manufacture and deliver to the defendant and the defendant agreed to take delivery from the plaintiff the shed for the sum of $40,365. There is no contest that the plaintiff has supplied and delivered to the defendant the shed and the defendant has taken delivery of it. Notwithstanding this, the defendant has failed to pay to the plaintiff the sum of $40,365. There is no justification for the defendant's refusal to pay the plaintiff the sum of $40,365 and accordingly there will be judgment for the plaintiff in that sum.

[2004] WADC 18

18 February 2004