M & B Rigging Pty Ltd v John Holland Constructions Pty Ltd
[1993] QCA 454
•11/11/1993
| IN THE COURT OF APPEAL | [1993] QCA 454 |
| SUPREME COURT OF QUEENSLAND |
Appeal No. 79 of 1993
Brisbane
Before The President
Davies JA. Ambrose J.
BETWEEN:
M. & B. RIGGING PTY. LTD.
(Plaintiff) Appellant
AND:
JOHN HOLLAND CONSTRUCTIONS PTY. LIMITED
(First Defendant) Respondent
AND:
HORTICULTURAL WORLD LIMITED
(Second Defendant)
REASONS FOR JUDGMENT - AMBROSE J.
Judgment delivered 11/11/1993
The appellant carries on business as a rigging contractor in the construction industry. By use of cranes of various sizes and kinds, it erects and demolishes structures - particularly where that involves the lifting and lowering of concrete components of those structures.
The respondent carries on business as a construction contractor - sometimes with respect to structures involving the use of concrete components.
In 1988, the respondent entered into a contract with the second defendant which is not a party to this appeal, to construct for it at Coffs Harbour in New South Wales, a tourist facility called "The Big Banana and Horticultural World Project".
Part of the facility was a "people mover" track of a length of about 5 kilometres to be laid through the land encompassing the tourist facility. The people mover track was to be used to convey tourists through the facility which was scheduled to open in March 1989.
The people mover track was composed essentially of pre-cast concrete beams constructed off site which were designed to rest upon and be fixed to pre-cast concrete head stocks also constructed off site. The head stocks were fixed by bolts to concrete foundations - either piers or pads depending upon the topography at the location - which were poured in situ.
Under the contract, the appellant was obliged to lift and fix the pre-cast concrete beams and head stocks onto the foundation piers and pads which were to be poured by or on behalf of the respondent.
In agreeing to the contract price for the work to be performed by it, the appellant had regard to the date by which it was obliged under the contract, to complete its work - 4th February 1989.
Discussions took place between 17th November 1988 and 7th December 1988 between the representatives of the appellant and those of the respondent concerning performance of work by the respondent on the site sufficient to enable the appellant to perform its obligations by 4th February 1989. The work to be performed by the respondent included:
i) Completion of the foundations (including the incorporation of holding-down bolts in them) within a time sufficient to enable the appellant to place and fix the pre-cast head stocks and concrete beams on them without delay.
ii) Completion of access to the site of the people mover track of a standard sufficient to enable cranes used by the appellant in the performance of the lifting work necessary to assemble the pre-cast concrete members of the track to function, whether or not wet weather was experienced.
The respondent failed either to construct proper access or to construct the concrete foundations to which the pre- cast concrete head stocks and beams were to be fixed within such time as to avoid delaying the appellant in the performance of its contract work.
As a consequence, the appellant was unable to complete its rigging work by 4th February 1989. In fact it was unable to complete that work prior to 22nd May 1989 - nearly four months after the contractual date for completion.
Due to that delay of four months, the appellant suffered loss including loss of profits it would have made had it completed its work by 4th February 1989. It took proceedings against the respondent to recover damages for such loss, inter alia pursuant to ss. 52 and 82 of the Trade Practices Act.
The basis of the appellant's claim is that the respondent, by misleading and deceptive conduct, led it to believe that the contract work to be performed could be completed by 4th February 1989. The appellant placed reliance upon this conduct when it agreed to do the work for the contract price.
The trial Judge dismissed the appellant's action insofar as it was based upon ss. 52 and 82 of the Trade Practices Act, essentially upon three grounds:
1) Persons making the representations on behalf of the respondent believed what they were saying was true.
2) Such representations were not shown to have been negligently made.
| 3) | In any event, the appellant would have agreed to perform the rigging work for the respondent at the contract price even if those representations had not been made. With respect to liability, the appellant appeals |
against the judgment essentially upon two grounds:
1) To the extent that representations were made on behalf of the respondent as to the future performance of work on the site, s. 51A of the Trade Practices Act placed upon the respondent the onus to prove that the persons making those representations had reasonable grounds to do so, and upon the evidence that onus was not discharged.
2) Upon the evidence the representations were an inducement to the appellant to make the contract in fact made with the respondent and the fact that it might have been made in identical terms even if no such representations had been made is irrelevant to the appellant's cause of action pursuant to ss. 52 and 82 of the Trade Practices Act.
The appellant's pleadings were drawn alleging a breach of s. 52 of the Trade Practices Act, negligent mis- statements of fact and fraudulent misrepresentations.
The allegations of fraud were abandoned in the course of the trial and the case was argued on the issues of breach of s. 52 of the Trade Practices Act and negligent representations.
It should be kept in mind of course that the appellant sued not under s. 53 of the Trade Practices Act, but under s. 52 of that Act. The representations pleaded therefore must be considered as particulars of the misleading and deceptive conduct, relied upon under s. 52(1) of the Act.
That conduct must be considered in the context of the contractual negotiations between the parties and the commercial realities involved in fixing a contract price to which each must have been alive. In Parkdale Custom Built Furniture Pty. Ltd. v Puxu Pty. Ltd. (1982) 149 C.L.R. 191 Gibbs C.J. said with respect to conduct proscribed by s. 52 at p. 199:
"The conduct of a defendant must be viewed as a whole. It would be wrong to select some words or act, which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading. It is obvious that where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words. The same is true of acts."
The representations pleaded were ones with respect to "future matters" within s. 51A(1) of the Act.
It is unnecessary to deal in detail with each of the representations pleaded in Para. 5 of the statement of claim seriatim or with the evidence called to prove them. They were hardly in dispute upon trial. Whether the deceptive and misleading conduct relied upon to establish a cause of action under s. 52(1) of the Act was in fact established, depends upon whether the persons making the representations had reasonable grounds for doing so.
For the purpose of considering the appellant's contentions in this case, it will suffice to state the nature or essence of the misleading or deceptive conduct complained of.
Matters debated upon appeal were the impact of s. 51A(2) of the Trade Practices Act upon the evidence actually led upon trial and the manner in which the appellant and respondent conducted their respective cases upon the issue as to whether the respondent had "reasonable grounds for making the representations" pleaded in Para. 5 of the statement of claim as particulars of misleading or deceptive conduct under s. 52(1). Those representations related to the future events which would impinge upon the performance by the appellant of its contractual obligations to the respondent.
Essentially the misleading or deceptive conduct upon which the appellant relied comprised various representations made by officers of the respondent between 17th November 1988 and the date of contract made on 7th December 1988 to the effect that there would be all weather access for the appellant's equipment to locations on the site where its cranes and perhaps other equipment would have to work in the assembly of the prefabricated concrete members of the structure which it had agreed to assemble, and further that the laying of the foundations necessary to support the structure which the appellant was to assemble would be sufficiently advanced to ensure that the appellant would not be delayed in the performance of its work due to foundation work not having been completed to a stage which permitted the timely assembly and fixing of head stocks and beams.
To perform the work required by the respondent, it was necessary for the appellant to hire certain equipment, employ certain additional staff, and provide accommodation in the vicinity of the project for workmen. It was important therefore to the appellant when fixing its quote for the job to know the length of time it was expected it would take to perform the contract work.
At all material times prior to date of contract on
7th December 1988, the respondent's representatives had
informed the representatives of the appellant that the
appellant's work had to be completed by 4th February 1989.
It was agreed that should the work be completed prior to
that date, there would be a bonus paid to the appellant. On
the other hand should the work not be completed by then
there would be a penalty imposed.
Speaking generally, the learned trial Judge accepted that the representations pleaded in Para. 5 of the statement of claim as particulars of misleading or deceptive conduct under s. 52(1) of the Act were made. The evidence really was overwhelming and neither in the court below nor in this court was it seriously contended that the representatives of the respondent did not in fact make the representations alleged against them; to a significant extent they were contained in documents under the hand of the respondent. To the extent that they were not so recorded in writing, they were canvassed in oral evidence given by the representatives of the appellant and the representatives of the respondent.
In my view it would be unhelpful to descend to a detailed analysis of this evidence; it will suffice to deal with the learned trial Judge's findings concerning the making of the particularised representations:
1) With respect to the representation particularised in Para. 5(a)(i), on 16th November 1988 a representative of the respondent informed a representative of the appellant at the site of the works that if awarded the contract:
i) the appellant would have two rigging crews in continuous operation throughout the course of the job in order to maintain the programmed targeted finishing date of 4th February 1989; ii) by the time the appellant was required on site to perform its contractual work, there would be a bull-dozed track gravelled in those places where gravel was necessary to provide access to the work site, bearing in mind that both the appellant and the respondent were aware that heavy rough terrain cranes would be used at the work site.
Upon the whole of the evidence, although there is no specific finding on the matter, it is abundantly clear that the representations concerning the availability of suitable access for the appellant's heavy cranes by the time it was necessary to use them to perform the contract work, was based on the premise that the heavy cranes could not do the lifting required unless they could be used effectively on site, whether or not there was wet weather. To the extent that the performance of the contract work was required within a specified time and that work required the use of very heavy cranes to traverse land that had not yet been cleared, it must have been obvious from the outset of discussions that it was critical that there be access for the cranes sufficient to avoid any hindrance in the performance of their work.
Whatever the precise language used between the parties when discussing the provision of access for the appellant's cranes, the object of that discussion must have been very plain. Unless the appellant could be assured of access at all times to the work site, irrespective of wet weather, it could hardly arrive at a contract price much less one arrived at on the basis that it would have an uninterrupted opportunity to perform the work required of it by or before 4th February 1989.
2) With respect to the representation pleaded in Para. 5(b) of the statement of claim (which it is unnecessary to set forth) the learned trial Judge found that the first paragraph of a letter from the respondent to the appellant dated 6th December 1988 by its reference to the contract being in accordance with (inter alia) the previously remitted drawings and R.C.P. programme, effectively told the appellant that "the respondent intended that the appellant complete its work by the completion date prescribed by the R.C.P. programme".
The completion date so prescribed was 4th February 1989. The learned trial Judge concluded that the statement contained in the first paragraph of that letter referring to the programme and drawings was understood by both the appellant and the respondent to refer to the appellant completing its work by the completion date in the R.C.P. programme, namely 4th February 1989.
The relevant passage in the letter of 6th December 1988 from the respondent to the appellant reads as follows:
"Invitation to Contract
It is our intention as construction managers acting as agent for Horticultural World Limited to invite you to enter into a contract for the erection and grouting of the people mover track at the Big Banana and Horticultural World Theme Park at Coffs Harbour. The contract shall be in accordance with the previously remitted drawings and R.C.P. programme. Your letter's ref: RIGF.1129 dated 22 November 1988 RIGF.1139 dated 28 November 1988 and RIGF.1151 dated 1 December 1988 and our fax dated 30 November 1988."
It is convenient to draw attention also to this passage in the letter:
"Confirming your fixed price of Three Hundred and Thirty Thousand One Hundred and Thirty Dollars ($A330,130) to complete the works as specified in the tender drawings and specification."
The last paragraph of the letter states:
"We look forward to working with you on this contract and trust that you will complete it in a timely manner and to our complete satisfaction."
3) With respect to the representation pleaded in Para. 5(c) of the statement of claim, it was based upon the content of a facsimile letter dated 30th November 1988 (i.e. the letter referred to in the respondent's letter to the appellant dated 6th December 1988). It is unnecessary to do more than refer to the content of that letter in determining what the representation was.
Before doing so however, it is convenient to refer to part of a letter from the appellant to the respondent dated 28th November 1988 (also referred to in the respondent's letter of 6th December 1988).
In its letter to the respondent dated 28th November 1988, the appellant provided information which had been requested of it, part of which was:
"(4) Work force
Supervisor
a) Erection Crew 1 Erection Crew 2
Leading Hand Rigger Leading Hand Rigger Rigger Rigger Rigger Rigger R.T. crane driver R.T. crane driver
b) Lay down area 1 Lay down area 2 P. & H. driver R.B.H. driver Rouseabout Rouseabout"
The letter also contains a reference to plant
requirements
in the following term:
"(3) Plant Requirements
A) P. & H. truck crane (Lay down area No. 1)
B) B.H.B. tractor crane (Lay down area No. 2 plus pulling trailer)
C) Trailer for ferrying rails.
D) Flat top truck for ferrying head stocks.
E) 16 Tonne R.T. crane (Erection crew No. 1)
F) 16 Tonne R.T. crane (Erection crew No. 2)." I turn to the content of the facsimile letter from
the respondent to the appellant dated 30th November
1988 which reads, inter alia:"We are in receipt of your letter dated 28th Nov. 88 giving further details of your offer for the erection of the people mover track.
The size of your crew is noted and we believe it is more than adequate to complete the job to programme ...
Work to be completed by the 4th February 1989 as shown on the R.C.P. programme.
Liquidated damages to the value of 1% of the contract sum per day to apply.
Bonus for early completion to the value of 1% of the contract sum per day to apply.
Extension of time for wet weather will be granted for any lost time in excess of three days over the life of the contract.
Extension of time will be granted for any lost time due to industrial disputes outside the control of the contractor ...
Your assessment should be based on award of contract on Friday, 2nd December 1988, and access to two working fronts for action as soon as you can mobilise. While work will always be available we do not guarantee that rails will necessarily be available in strict numerical order although this will generally be the case.
We believe that you should be able to comply with the above conditions with the crew you have already nominated. We do not therefore believe that any major contract price adjustment should be necessary."
4) With respect to the representations alleged in Para. 5(d), on 6th December (the day before the contract was made) a representative of the respondent informed representatives of the appellant at the site that by 12th December 1988 the respondent would have approximately 30 holding down bolts in position ready for the appellant to assemble on them the prefabricated concrete people mover track, and on the same occasion said that by 12th December 1988 the respondent would have ready the access necessary to permit the appellant to use its heavy equipment for the purpose of erecting the pre-cast concrete members of the structure which it had to assemble.
5) With respect to the alleged representation in Para. 5(e), the completion date for the appellant's work was clearly 4th February 1989 as specified in the R.C.P. programme handed to the appellant's representative on 17th November 1988. It was referred to in the facsimile letter from the respondent to the appellant dated 30th November 1988 (to which I have already referred) and restated in writing in the letter from the respondent to the appellant dated 6th December 1988.
It is clear from the learned trial Judge's finding of fact and indeed from the terms of the documents specified that such representations were made.
Reference to the R.C.P. programme shows that it provided for the first delivery of head stocks and beams in the week ending 19th November 1988 and thereafter minimum deliveries of 80 head stocks and straight beams per week with the delivery dates for curved beams unspecified. The site construction schedule shows that the final alignment and levelling of the track would be completed in the week ending 4th February 1989.
There was no real contest upon the trial as to the making of the representations pleaded. The learned trial Judge found that in making the representations, both oral and written, the representatives of the respondent acted honestly.
It is unsurprising that this finding was made because it seems clear that the appellant did not argue upon trial that the representations had been dishonestly made.
The learned trial Judge however found that the representatives of the respondent had reasonable grounds for making the representations as to relevant future matters in issue.
It is against this finding that the appeal is brought.
The appellant contends that in fact no evidence
whatever was led by the respondent to show that it had any reasonable grounds to make the representations which it did make concerning either the provision of all weather access to the site for the appellant's use by the time it was called upon to perform its contract work, or the timely construction of foundations upon which the prefabricated concrete members of the people mover track were to be assembled by the appellant.
It is the contention of the appellant that even accepting that the statements made by the representatives of the respondent were honestly made, they were based at most upon optimism or hope and there were no reasonable grounds for making them. Stated shortly, it is the contention for the appellant that having regard to s. 51A(1) of the Trade Practices Act, whether or not the representations proved were made honestly, they were misleading by definition because they were made by people having no reasonable grounds for making them.
The learned trial Judge has made specific findings that the representations in issue were not merely honestly made but were also made on reasonable grounds. The assessment of credibility of witness giving evidence on those points, although of great importance in the determination of whether they were honestly made, is not of such significance in determining whether they were made on reasonable grounds.
Whether upon the whole of the evidence before the learned trial Judge there were reasonable grounds for the representatives of the respondent to make the representations which were found to have been made, is a matter for assessment which can be as readily made by this court as by the learned trial Judge.
For the principles upon which an appellate court will upset a finding of this sort by a trial Judge, I refer to the statement by Gibbs A.C.J., Jacobs and Murphy JJ. in Warren v. Coombes (1979) 142 C.L.R. 531 at p. 551:
""Shortly expressed the established principles are we think that in 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 ..."
It appears on the evidence that the appellant moved to the construction site on 9th December 1988. By letter of 22nd December 1988, it was claimed that during the first 11 days after commencement of work approximately 9 days had been lost due to lack of access to the site for the appellant's cranes and due also to the fact that foundation work had not been sufficiently completed to allow the appellant to assemble the head stocks and pre-cast concrete beams. Indeed by letter of 15th December 1988, concerns were raised at the failure of the respondent to complete the foundations necessary to enable the appellant to perform its contractual obligations. By close of business on Saturday, 10th December 1988 (the day after the appellant commenced
construction work on the site) according to the construction programme given to the appellant on 17th November 1988, there should have been 240 sets of foundations ready to have the head stocks and beams fixed to them. At close of business on 14th December 1988, only 25 sets of foundations were ready to have attached to them the head stocks and beams.
It is unnecessary to traverse the evidence as to the effect of wet weather upon either the construction of the access tracks or the construction of the foundations to which the head stocks and beams were to be fixed. It is clear that inclement weather did interfere with the construction of foundations by the respondent. It is equally clear however that inclement weather which was experienced about a week after the appellant commenced work on the site, made the site inaccessible to the appellant's equipment because of the effect of the rain upon the access tracks.
It is unnecessary to consider further evidence relating to either the representations that were made or to the consequences that resulted from their inaccuracy.
There was no real contest upon appeal that in making the representations, the respondent's representatives assumed that an earth moving contractor retained by the second defendant to perform earth works, etc., in the development of the site, could be relied upon for the purpose of constructing all weather access to the site of the people mover track which would be available for the appellant's cranes and machinery. It seems likely that the access would also be used by or on behalf of the respondent
in connection with the construction of the concrete foundations. The company retained to do earth works on site was Quandell Pty. Ltd. and the person who represented this company was named McAnnally. References, in the judgment under appeal, to McAnnally and Quandell Pty. Ltd. relate to the earth works contractor.
On 14th November 1988, the respondent sought to confirm with Quandell Pty. Ltd., a "fixed price offer" for the performance of certain earth works in the development of the project. This figure specifically excluded "earth works for the people mover track". The respondent also indicated that the contract would require the provision of a "construction programme which accurately reflects the proposed activities together with the sequence of interrelated works".
Subsequently on 22nd November 1988, the respondent wrote another letter to Quandell Pty. Ltd. concerning an earth works contract. In this letter it is recorded that discussions subsequent to 14th November 1988, had resulted in the "scope of the works being extended to include" inter alia the people mover track. It is asserted in that letter that "your fixed price quotation of One Million Two Hundred Thousand Three Hundred and Twelve Dollars ($1,200,312) now forms the basis of your offer".
The respondent requested Quandell Pty. Ltd. to confirm the offer by return mail.
On 28th November 1988, Quandell Pty. Ltd. sent to the respondent a letter in the following terms:
"We are confused with your two letters and fixed
prices of $989,830 and $1,200,312 respectively.
We confirm our original quote of a 'do and charge'
at fixed rates plus a final fee.We reserve our right of direct communications with the client due to the uniqueness of our association and the brief that we are constantly assessing the job on site with Ian Ditchfield which you and the project manager are aware of and this has been a direct instruction by the client to the project manager.
It would be best if you could allow us to continue direct liaison with Ian Ditchfield and complete this job without further paper warfare."
In reply to this letter the respondent requested Quandell Pty. Ltd. to enter into a formal contract in the terms of the "fixed sums" referred to in their earlier letters.
It seems clear on the evidence that the respondent was unsuccessful and Quandell Pty. Ltd. did not in fact enter into a fixed fee contract at any stage but insisted, because of the "uniqueness of association" with the second defendant in performing what work it did on a "do and charge" basis.
It seems clear then that before the end of November 1988 the respondent was aware that Quandell Pty. Ltd. refused to enter into a fixed contract to perform any work in connection with the access necessary to permit the appellant to assemble the people mover track. It was then also clear that the only earth moving contractor on site asserted that it was "constantly assessing the job on site with Ian Ditchfield" as the result of "a direct instruction by the client (i.e. the second defendant) to the project manager - (i.e. the respondent)".
An important matter then for reconsideration is whether it could be said that any time prior to the appellant signing the respondent's letter of 6th December 1988 - on 7th December 1988 - the respondent had reasonable grounds to believe that Quandell Pty. Ltd. could be relied upon to construct all weather access for the appellant's equipment and workmen sufficient to enable them to perform the track assembly work. Indeed at that stage, the question was not confined to the construction of access to the work site, only for the appellant; the respondent itself needed access for the purpose of constructing the concrete foundations upon which the head stocks and prefabricated concrete beams had to be fixed before the appellant could perform its work.
It seems clear on the uncontradicted evidence that no firm arrangements had been made for the construction of this access.
Mr. Oxley, a civil engineer employed by the respondent to organise, plan, and co-ordinate the construction of the concrete foundations for the people mover track and to supervise the erection of the head stocks and rails, said that he arrived on site on 17th November 1988. He said that the respondent had difficulty between the time of his arrival and 7th December 1988 in having Quandell Pty. Ltd. do what needed to be done in connection with the people mover track. He said he was not sure whether there was any contract between the respondent and Quandell Pty. Ltd at that time.
Mr. Hoal, a civil engineer employed the respondent as construction manager on the site, said that Quandell Pty. Ltd. refused to enter into a fixed contract to do earth moving work and that it had "an understanding" apparently with the second defendant that it would do the work required on a "do and charge" basis. Mr. Hoal said that Mr. McAnnally of Quandell Pty. Ltd. would just not enter into a formal contract for the performance of work. It emerged in the evidence of Mr. Oxley and Mr. Hoal that the intent of the construction programme to commence upon two separate construction phases for the pouring of foundations for the track in November 1988, had to be abandoned because Mr. McAnnally apparently could not be required to perform the necessary earth works to achieve this. It was not until January 1989 apparently, that pressure could be brought upon the earth moving contractor to do earth works necessary to enable a second part of the foundation work for the earth moving track to be commenced. Apparently the unreliability of Mr. McAnnally - resulting from the absence of any contract requiring him or his company to do what was required, and when required - was responsible for the hold up in the construction of foundation work for the people mover track. Mr. Hoal also gave evidence that during December 1988 problems with access to the site developed because although roads had been bull-dozed (presumably by Quandell Pty. Ltd.) they had not been surfaced properly. It would seem to have been a relatively easy matter to put an adequate surface on the road but the earth works contractor just had not surfaced it as required. It was apparently performing other earth works on and about the development site and surfacing the access track bull-dozed for use by the appellant's equipment and making it weather-proof was just one of many jobs required of it and apparently it just did not do it as and when needed. It seems from the material that the respondent had no means of requiring that Quandell Pty. Ltd. do that work in a timely fashion.
Initially the respondent planned that two separate crews would be employed to do the foundation work for the people mover track. Each crew was to be broken up into three gangs to perform different aspects of the foundation construction. However, it was decided not to employ two crews. This seems unsurprising in the light of the difficulty that the respondent seemed to have in requiring that the earth moving contractor perform work at a time and in a manner which would permit even one crew to get on with laying foundations for the track.
According to Mr. Oxley, after investigating relevant matters, he had developed by 30th November 1988, a different programme for the construction of the people mover track from that which had earlier been developed and shown to the representative of the appellant on 17th November 1988. By that date he had, to use his own words, "put in train necessary changes to the manufacturing programme and the clearing programme to ensure that the method I was working on could be actioned". The programme given to the representative of the appellant on 17th November 1988 which involved two rigging crews in continuous operation throughout the assembly of the track, starting at a common point and going in opposite directions until they met at the completion of the assembly, was abandoned at the instigation of Mr. Oxley. By 30th November 1988, he had decided on a programme to construct foundations which differed from that proposed in the programme of 16th November 1988 which had been shown to the representative of the appellant.
It is clear on the evidence that in amending the foundation laying programme, the respondent made no allowance for wet weather or for any additional rock problems that might be encountered in laying the foundation pads or piers, nor for the fact that all weather access to the work site from which the appellant's heavy cranes had to operate, did not exist and there was no firm arrangement with Quandell Pty. Ltd. for its provision. Indeed the experience with Quandell Pty. Ltd. to that time was that it would not do what was required of it by the respondent in connection with access as required. It emerged clearly from the evidence of Mr. Oxley that no effort was made to provide all weather access. He said that he did not regard an access road "with a deep base etc." as an absolute must. He said that during the early stages of the work no gravel was placed on the roads although after rain had fallen gravel was placed on those parts of the road or track which became too boggy.
Before the contract between the appellant and the respondent was effected on 7th December 1988, the appellant had made it clear to the respondent by letter dated 28th November 1988 that:
"We have based our tender price on access and suitable hard standing areas for our erection cranes to be constructed in a suitable manner acceptable to both parties and the responsibility of others."
The respondent was later informed in the same letter:
"We have based our price on a 52-hour week for our
erection cranes and crew."
Mr. Oxley gave evidence that in a discussion that he had with a representative of the appellant on 6th December 1988, he intimated that he had "investigated" 64 foundation footings. He explained that by this he meant that the respondent's men had either drilled or attempted to drill holes for piers in various locations. He said that at that stage there were only two actually completed footings with holding down bolts and he believed that another 40 footings of some sort had been poured without holding down bolts.
Thus on 6th December 1988, there were two footings completed, 40 partly completed, and 22 footing excavations where pourings had not been commenced. He said that as at 30th November 1988, the off site work for constructing the concrete components for the track was proceeding according to plan but that the foundation construction work on site was a bit behind, but that the respondent believed that "gearing up resources on site we could meet anything required so that the end date could be achieved".
His Honour accepted the evidence of Mr. Hoal.
Accepting that the belief that he had was an honest one, there was no evidence whatever as to what "gearing up" on the site he envisaged and just what capacity there was to "gear up" work on the site which could reasonably have supported that belief. It is clear that Mr. Oxley in spite of his position as engineer co-ordinating and organising the construction of the people mover track had limited power to incur costs or expenses to "gear up" the performance of foundation construction work on site. The obligation of Mr. Oxley was to try to keep costs to a minimum. It was another person in the respondent's organisation who had to approve the acceptance of tenders etc. Mr. Oxley was working within a budget laid down for the construction of the foundations for the head stocks to bear the concrete beams. The respondent's progress report for the month of November 1988, dated 5th December 1988 (the day before the writing of the respondent's letter of 6th December 1988 constituting the offer which was accepted by the appellant on 7th December 1988), prepared contemporaneously with negotiations leading to the contract during which the representations relied upon by the appellant were made, is a useful indication not merely of what was then known by the respondent as to the progress of the work to date, but also of likely progress during the period in which the appellant was to perform its contract work. It is convenient to set forth a passage in that report headed "Critical Path and Programme":
"An overall programme of construction activities, to amend the original Overview Redevelopment Control Programme, was drawn up by Roger Platt of Resource Co-ordination Partnership Pty Ltd on site on 16th, 17th November. A neat version of this programme was issued on the 28th November, and a copy is bound with this report.
It must be emphasised that this programme is based
on continuing excellent productivity, with no
allowances for Rostered Days Off, or any delays
due to inclement weather or Industrial problems.
So that, whilst a completion date of around March
4th, 1989, is shown for all areas, giving a 2 week
period for commissioning prior to the official
opening on March 18th, this date is at risk from
delays caused by rain or Industrial problems, if
the presently envisaged levels of resources and
productivity are maintained.It is considered that the only way to realise the planned opening date will be to accelerate the programme, to allow for some slippage due to weather delays, for one, which are likely to occur over the next three months.
Productivity during November was not up to that schedule, due largely to inadequacies in planning and supervision. This resulted in part from the planned level of site staffing being originally intended to administer Contractors with their own adequate resources, and which proved to be insufficient for the changed circumstances of the CMC having to undertake several aspects of the work by day labour. The management resources on site have now been substantially increased, and the staff now allocated should be able to provide adequate coverage to all areas of this project.
Difficulty in locating Contractors interested in submitting competitive bids has proven to be a major problem.
The upgraded Site Organisation Chart is bound with
this Report.
Reference to this programme "upgraded" by Mr. Oxley prior to 30th November 1988, shows the time projected for completion of the track laying to have been postponed from the week ending 4th February 1989 to the week ending 18th February 1989. This upgrading projection bears date 28th November 1988 and so upon the material placed before the learned trial Judge, it was clearly within the contemplation of the respondent at the time the contract documents were prepared in early December 1988 and at the time discussions took place concerning completion of the track laying by the appellant by 4th February 1989 that, for reasons not disclosed to the appellant, the respondent's projected completion time for track laying had been extended by nearly a fortnight.
The finding of the learned trial Judge that the respondent, subsequent to 28th November 1988 and prior to 7th December 1988, had reasonable grounds for representing that the foundation work it had to perform and the provision of the access necessary for the performance of that work, would be done in such time as to permit completion of that work by 4th February 1989 - or even earlier if one attaches significance to the provision in the contract for bonus payments for early completion - must be viewed keeping in mind that between the making of the first projection shown to the appellant on 17th November 1988 and the signing of the contract, that projection had been reviewed to extend the time for completion of the track by nearly fourteen days.
While this aspect of the evidence is not of course determinative in itself, it is relevant when one considers the complete lack of any positive evidence from either of the expert engineers called on behalf of the respondent to show the existence of any matters of fact from which one might reasonably infer the future matters contained in the representations pleaded.
At this stage it is convenient to consider s. 51A(2) of the Trade Practices Act. The question that must be addressed is whether the respondent adduced evidence that it had reasonable grounds to make the representations which it did make as to future matters impinging upon the performance by the appellant of its contractual obligations.
On my perusal of the evidence, there was no positive evidence called to this effect. Moreover in spite of the long and detailed consideration of evidence upon which the appellant relied, counsel for the respondent directed attention only to those aspects of the evidence which touched on the following matters:
a) The respondent was an experienced and reputable contractor;
b) Soil testing of the site had been carried out;
c) Overall project plans had been developed;
d) The respondent's personnel were highly experienced and professional engineers;
e) The project had an overall co-ordinator who considered the project, its requirements and risks (quite accurately) in detail;
f) Competent suppliers were engaged;
g) Competent contractors were retained; and
h) Messrs Hoal and Oxley were honest and reliable. In my view these matters, whether considered singly or
together, cannot be categorised as evidence from which it can properly be inferred that the persons making the representations found against the respondent had reasonable grounds for so doing.
Counsel for the respondent contended that it was the earth moving contractor variously referred to as Quandell Pty. Ltd. and Mr. McAnnally which was "the critical factor which led to the downfall of the project". It was contended that because Mr. McAnnally was a friend of the second defendant, the respondent could hardly think that the earth moving contractor would be likely to act against the interests of the second defendant in not assisting in the construction programme when:
a) that earth moving contractor had all the necessary resources to do the required work;
b) he had given assurances that the work would be done; and
| c) | he was an experienced, competent and reputable contractor in this type of work. To my mind, the way the case has been argued, the most |
important issue to determine is whether upon the whole of the evidence - disregarding for the moment the effect of s. 51A(2) of the Trade Practices Act - it can be said in the light of the communications that had passed between the respondent and the earth moving contractor Quandell Pty. Ltd (Mr. McAnnally) and the evidence of Mr. Oxley and Mr. Hoal as to the performance of earth moving contract work at their direction, that the mere presence on the site of the earth moving equipment in the light of Mr. McAnnally's intimation that he had a "special arrangement" with the second defendant and was prepared to deal directly only with Mr. Ditchfield who was connected with the design of the whole project and unconnected with the respondent - was sufficient reason for making the representations in question.
There is no evidence (perhaps not surprisingly) that either Mr. Oxley or Mr. Hoal had at any time between 17th November 1988 and 7th December 1988 formed the opinion that the earth moving contractor was reliable. Indeed an objective analysis of the correspondence that passed between the respondent and the contractor, and of the "difficulties" they had with that contractor prior to 7th December 1988, leads one to suspect that as far as its reliability to perform the work necessary to enable the appellant to perform its contract work by 4th February 1989 (or by 18th February 1989 for that matter) was concerned, it would be more hope than expectation that its presence with its earth moving equipment would result in the earth works being completed in time for performance by the appellant of its obligations.
To the extent that there was an onus upon the respondent to adduce evidence that it had reasonable grounds for making the representations found against it, it failed to discharge it. In my view there was no evidence that the respondent had any basis in fact as distinct perhaps from one based on mere hope or optimism to make the representations proved against it.
Ignoring altogether the possible effect of s. 51A(2) upon the only evidence placed before the learned trial Judge - which was mainly extracted from the representatives of the respondent and from the respondent's documents - there emerges no material whatever to support the existence of any reasonable ground to make any of the representations. On the contrary, the uncontested facts suggest that the representatives of the respondent had no reasonable grounds whatever to represent to the appellant between 17th November 1988 and 7th December 1988, that in arriving at a contract price for the performance of the work required in the contract made on 7th December 1988 it could assume the reliability of the matters represented.
It is convenient now to consider the effect of s. 51A(2) having regard to the way the evidence was led and the case conducted on the issue as to whether the respondent had reasonable grounds for making the representations found against it.
Misleading or deceptive conduct under s. 52(1) may involve inter alia the making of representations as to past, present or future matters.
Section 51A(1) deals only with representations as to future matters. It has effect then in actions brought pursuant to s. 52(1) only with respect to misleading or deceptive conduct involving representations with respect to future matters.
In essence the representations pleaded in Para. 5 of the statement of claim in this action were representations by the respondent as to its future conduct. On their face therefore, the representations were of a kind to which s. 51A(1) expressly applies. If the respondent did not have reasonable grounds to make them, then by force of the section they are to be taken to be misleading; if misleading they amount to conduct coming within s. 52(1).
Under s. 51A(2), for the purpose only of the application of s. 51A(1), unless the respondent adduced evidence to the contrary it was to be deemed not to have had reasonable grounds for making the representations as to its future conduct.
For the appellant, it is contended that s. 51A(2) placed an onus on the respondent to adduce evidence to prove that it did have reasonable grounds for making the representations with respect to future events. It was contended that the effect of the provision was to reverse the onus of proof which would otherwise have required the appellant to prove absence of reasonable grounds. It was contended that the effect of the section was to introduce a statutory presumption as to the absence of reasonable grounds for making the representations, unless the respondent proved that it did in fact have such grounds.
Reliance was placed on observations in Wheeler Grace & Pierucci Pty. Ltd. v. Wright & Anor (1989) A.T.P.R. 490-940 at p. 50,254.9, per Lee J., Futuretronics International Pty. Ltd. v. Gudhis (1992) 2 V.R. 217 at p. 239 per Ormiston J., Adelaide Petroleum NL & Ors v. Poseidon Ltd. (1988) A.T.P.R. 40-901 at p. 49,700 per French J., and Wright v. TNT
Management Pty. Ltd. Trading as Comet Overnight Transport
(1988) 15 N.S.W.L.R. 679 per McHugh J.A. at p. 690.
For the respondent it was contended that s. 51A(2) does
not have the effect of reversing the onus of proof at all.
Its only effect, it was said, is to call for some evidence
to be adduced by the representor on the issue and if that
evidence is only "flimsy", it will not be difficult for the
representee to satisfy the onus which always remains upon
him of proving an absence of reasonable grounds. The only
authority cited in support of this proposition is an
observation of Connolly J. in Lake Koala Pty. Ltd. v. Walker
[1991] 2 Qd.R. 49 at p. 58, where His Honour observed:
"Accordingly I am of the view that s. 51A(1) and (2) do not in the circumstances of the case operate so as to reverse the burden of proof."
That observation was made after Connolly J. had specifically found upon the evidence that the representor did have reasonable grounds for making representations as to future matters. He made this finding on the basis that the representor had made the representations reasonably assuming the soundness of the opinions of professional experts retained to advise on the matters with respect to which the representations were made. In my view, read in the context of the judgment, the observations of Connolly J. provide little support for the respondent's contentions. In the light of the facts specifically found in that case upon the evidence, reasonable grounds for making the representation in issue had been proved and indeed it appears from p. 57 of the judgment that the representor did in fact put "extensive evidence before the court" on the issue. At best for the respondent, the comments of Connolly J. in the circumstances might be regarded as obiter in which no reference is made to any of the authorities on the subject upon which the appellant relied.
One problem in construing s. 51A(2) in the way for which the respondent contends, is that it would seem to give no effect to the express deeming provision in it. On its face, the section provides that a representor "shall be deemed not to have had reasonable grounds for making the representation" unless "it adduces evidence to the contrary". One might ask, "Evidence to the contrary of what?" The only answer which immediately comes to mind is "Evidence to contradict the statutory presumption which otherwise arises that it did not have reasonable grounds".
Section 51A was included in the Trade Practices Act by amendment effected on 13th May 1986. In Thompson v. Master Touch TV Services Pty. Limited (1977) 15 A.L.R. 487, a case in which an issue to be determined was whether the defendant had made a false or misleading statement concerning the profitability of a business activity, at p. 495, Franki J. said:
"I consider that a prediction or statement as to the future is not false within the words of that section (s. 59) if it proves to be incorrect unless it is a false statement as to an existing or past fact which may include the state of mind of the person making the statement or a person whose state of mind may be imputed to the person making the statement ...
Therefore in order to establish that the words 'should earn $400 per week minimum' constituted a false statement concerning the profitability of a business activity it is necessary for the informant to prove that the defendant did not believe that the forecast or prediction would be satisfied or was recklessly indifferent concerning the forecast or prediction. I consider that the informant has not established this requirement.
There is no evidence before me that the defendant had or had not any basis for making the forecast ...".
Reference to the explanatory memoranda for the Trades Practice Amendment Act placed before the Australian Parliament in 1985 shows that s. 51A was introduced to meet "difficulties that have occurred in relation to the ability of relevant provisions of Division I of Part V to deal with false or misleading statements, representations or predictions about future matters"; it is stated that problems addressed in the legislation proposed were "high- lighted" in Thompson v. Master Touch TV Services Pty. Limited (supra) in the passages to which I have referred.
I agree with the view expressed by French J. in Adelaide Petroleum NL & Ors v. Poseidon Ltd. (supra) at p. 49,700:
"Prima facie the effect of that section is that every representation with respect to any future matter is misleading or deceptive unless there are reasonable grounds for making it at the time that it is made."
In this case, the respondent made little or no attempt
to lead evidence to show that it believed or knew of any
facts which might reasonably support the making of the
representations as to future matters proved against it.
Although the respondent called as witnesses two engineers it
employed on the work site, one of whom was intimately
involved in negotiating the contract with the appellant,
neither purported to give any evidence as to grounds based
on fact for making those representations. In essence their
belief (or perhaps more accurately, hope) was based on the
assumption that Mr. McAnnally of Quandell Pty. Ltd., the
earth moving contractor would, (because of the special
relationship it claimed to have with the second defendant)
do what was required to enable the provision of all weather
access and the construction of the foundations by the
respondent within time to permit the appellant to complete
its contract work by 4th February 1989. For reasons already
stated at length, I take the view that there were no
reasonable grounds whatever for the respondent to make this
assumption. Upon the assumption however that the leading of
that evidence did tend to "contradict" the proposition that
the respondent did not have reasonable grounds for making
the representation with the consequence that the "deeming
provision" of s. 51A(2) had no application, it would become
necessary to determine upon the whole of the evidence
whether absence of reasonable grounds was proved by the
appellant. In my view for the reasons already stated at
length, absence of reasonable grounds was established upon
the whole of the evidence. It was established whether the
onus was on the appellant to show absence of reasonable
grounds, or upon the respondent to prove that it had
reasonable grounds. It is unnecessary upon the facts of
this case to determine upon whom the ultimate burden of
proof rested on the issue of reasonable grounds.
I would set aside the finding that the respondent had reasonable grounds to make the representations pleaded in Para. 5 of the statement of claim.
I would find that the respondent had no reasonable grounds for making make those representations and on this basis is liable to the appellant for misleading or deceptive conduct within the meaning of s. 52(1) of the Trade Practices Act.
With respect to the matter of inducement, the learned trial Judge made the following finding:
"Fitzgerald told me both in cross-examination and in re-examination that the representation made by Oxley to him on 6th December 1988 namely that the defendant would have at least 30 sets of holding down bolts constructed ahead of the plaintiff and would continue to cast these at a rate sufficient to keep well ahead of the plaintiff and not hold up the plaintiff had no effect upon the plaintiff's entering into its contract with the defendant. This representation by Oxley was expressly related to the lag in constructing foundations and holding down bolts - the very topic relied on in sub-para. 5(b) and yet when entering into the contract the plaintiff placed no reliance on that representation by Oxley. It appears that the plaintiff signed the contract (but not the later formal contract) on 7th December - the day after the letter of 6th December was received by Fitzgerald. I am quite unable to conclude that the plaintiff relied on the statement alleged in sub-para. 5(b) before entering into the contract ... If the allegation in sub-para. 5(b) did amount to misleading or deceptive conduct the plaintiff did not rely on that statement in entering into the contract.
Consequently not having relied on that statement in deciding to enter into the contract the plaintiff's para. 5(b) claim based on this s. 52 must fail."
I have already observed that the representation alleged in para. 5(b)(2) of the statement of claim was merely one of several particulars of the misleading and deceptive conduct relied upon to found a cause of action under s. 52(1) of the Trade Practices Act. It was inappropriate therefore to consider it in isolation from the other particulars pleaded.
It was pleaded as only one aspect of the misleading and deceptive conduct which it was necessary to consider in the context of the other particulars pleaded.
Having said that however, it is convenient to turn to the evidence to which His Honour referred. In the course of cross-examination, Fitzgerald, the representative of the appellant, gave this evidence:
"Q. If matters you rely upon in the fax of 30th November had not been in that fax at all and the matters you rely upon as having been said by Oxley on 6th December had not been said by him at all it wouldn't have mattered would it? You would have gone ahead at the price you decided upon by 22nd November; that's the case isn't it -
A. If none of those two other topics came into play your question is would I have gone ahead at the same price?
Q. Yes -
A. Yes I would have."Later Fitzgerald was re-examined on this point and
said:
"I still would have undertaken to do the works at the price that I had submitted and be complete by the targeted finish date as per what was in the documents handed to me."
"Q. Well what effect if any did the statement of 30th November and 6th December have on you? -
A. Well it really didn't have any effect on me apart from the offer of a bonus the possibility of a one per cent liquidated damages if we didn't hit the date. That's the sort of effect that we had to consider that didn't have any bearing to change the price and I committed ourselves based on discussions that we had over that fax of the 30th.
Q. Well you committed yourself based on the fax of 30 November? -
A. That's right."
In my view it is clear when the whole of the evidence
of Fitzgerald is considered in context that he was saying that if the representations of 30th November 1988 and 6th December 1988 had not been made, the appellant would still have entered into the contract, which it did enter into on 7th December 1988, at the price given on 22nd November 1988. What occurred on 30th November 1988 and 6th December 1988 were, in his view, consistent with and merely confirmed the basic information which he had been given on 17th November 1988 and gave no reason to resile from the decision that had been made based upon that information.
When the representations or conduct of 30th November 1988 and 6th December 1988 are considered in the context of the whole of the contractual negotiations that took place between 17th November 1988 and 7th December 1988, it is abundantly clear that the respondent was still then leading the appellant to believe that both the provision of access and construction of concrete foundations for the head stocks and beams to be assembled for the people mover track, would be such as to permit the appellant to completely perform its contractual obligations on or before 4th February 1989. If anything, including in the letter of 6th December 1988 provision for a bonus for completion earlier than that date and a penalty for completion later than that date, would confirm this belief.
The learned trial Judge at the outset of his judgment outlined what he conceived to be the appellant's case on the question of inducement in the following terms:
"The plaintiff further alleges that ... had the representations not been made the plaintiff would not have entered into the contract."
In my view this is not really what the appellant did allege. In para. 7 of the statement of claim it was simply alleged that "acting in reliance upon such representations the plaintiff entered into the contract and committed itself to the completion of the contract ...".
In Spencer Bower & Turner "Actionable Misrepresentation" 3rd ed. at p. 139 it is said:
"It is sufficient to prove that the representation was an inducing cause. It is not necessary to establish that it was the inducing cause. Whether if a full disclosure of the truth had been made the representee would or would not have altered his position in the manner in which he did is a question to which the law does not require an answer. It is enough if a full and exact revelation of the material facts might have prevented him from doing so - if it would have 'given him pause'."
It would therefore be irrelevant to the appellant's success upon the pleadings that it would still have signed the contract in issue on 7th December 1988 even if the conduct complained of on 30th November 1988 and 6th December 1988 had not occurred. Looking at what did occur on 30th November 1988 and 6th December 1988, when the contract was signed on 7th December 1988, the appellant regarded as important the information which had been given on 17th November 1988, and later confirmed, that access would be provided and foundations laid so that the contractual assembly work could be completed by the appellant by 4th February 1989.
There is nothing in the evidence of the appellant's representative Fitzgerald that could support the proposition that the representations of 17th November 1988 had no effect upon the contractual document of 7th December 1988 being signed. Indeed the evidence is quite to the contrary.
Fitzgerald swore that had he been informed before signing the contract of 7th December 1988 that the real completion date would be 18th February 1989 and not 4th February 1989, he would not have signed the document. He explained that the appellant had priced the job according to the information which it had been given by the respondent. A significant component of the price was the provision of equipment (some of it on hire) and accommodation for workmen at or near the site. This evidence which was not challenged is strongly supported by the terms of the quotation given by the appellant to the respondent on 22nd November 1988 which was clearly based upon the provision not merely of equipment of various kinds costed out at specified rates per hour, but also allowances inter alia for wages, overtime and accommodation.
It is clear on the evidence that the respondent was anxious to have the appellant bind itself as soon as possible to the terms of its quote given on 22nd November 1988. In a memorandum from the respondent's manager for the urgent attention of various representatives of the respondent on site, which was clearly written at the end of November or early December 1988 and before the letter of 6th December 1988, was prepared by the respondent, the following illuminating comments are made:
"1. I believe that the original price ($295,000 odd?) is high by about $50,000 - $60,000.
2. This could partly be due to the inclusion of one more rigger per crew than I believe is necessary and one more crane than I believe is necessary. That is that I think that a different approach to the job could save heaps.
3. If the current allowances of people and cranes are retained (I also reckon only one lay down area and crane is required - please refer to my memo detailing proposed job organisation) then these people should be able to go much faster than the programme currently assumes.
4. Hence it should be practicable to let the contract at the quoted price on the following basis:
a)
firm fixed price for completion by date shown on R.C.P. programme (3.2.89);
b)
liquidated damages of one per cent of contract price per day to apply from that date;
c)
CMC to provide the calculated (and agreed) ...;
Please try to negotiate a contract on this basis -
or as close to it as you can get. Please advise
outcome. Regards,
Ray BricknellP.S. Finalise the best you can today and get them on site a.s.a.p. Ray B."
The only reasonable inference which can be drawn from these observations of Mr. Bricknell made to the representative of the respondent entrusted with negotiating the final terms of the contract with the appellant, is that it was then known and indeed intended by the respondent that the information given to the appellant for the purpose of the preparation of its quote of 22nd November 1988, no longer reflected the respondent's intentions as to the progress of development work on site. It is clear from the other evidence to which I have referred that at least the respondent's men on the site at this stage proposed that the work not be completed before 18th February 1989. One must look then at the conduct of the respondent in persuading the appellant to sign the contract in issue on 7th December 1988 in the context of its determination to include in that contract a completion date of 4th February 1989 having already determined that the general programme for the work should be altered to provide completion not on 4th February 1989 but rather on 18th February 1989. The respondent was aware of the appellant's concerns regarding the timely provision of all weather access and concrete foundations for the pre-cast head stocks. The almost inescapable conclusion to be drawn from this is that the respondent desired to avoid having the appellant reconsider the basis of its quote expressly formulated on the assumption that the work could be completed by 4th February 1989.
I refer only to the observation in Spencer Bower & Turner (supra) at p. 135 in the following terms:
"The necessity for proving actual inducement as a fact however does not mean that it cannot be inferred as a fact from the same evidence as has been adduced to prove intention to induce and the materiality."
In my view the finding that the appellant failed to prove that it had been induced by the misleading and deceptive conduct of the respondent, particularised in Para. 5 of the statement of claim, to enter into the contract in issue, is contrary, not merely to the uncontradicted evidence of Mr. Fitzgerald, but indeed contrary to the intention to not disclose to him the change in programme and to induce him forthwith to commit the appellant in ignorance of that change which clearly emerges from the respondent's own documents.
The fact that during the period 17th November 1988 to 7th December 1988, the representatives of the appellant observed that the respondent had indeed fallen behind the programme given to it on 17th November 1988 does not of itself demonstrate that no reliance was placed on the representations made on that date, and indeed could not upon the whole of the evidence itself justify a finding that the conduct of the respondent in making the representations did not induce the appellant, to some extent at least, to agree to undertake the contractual obligations which it did upon execution of the agreement of 7th December 1988.
To the extent that the learned trial Judge did find that the appellant was not induced by misleading and deceptive conduct of the respondent between 17th November 1988 and 7th December 1988 to enter into the contract of 7th December 1988, I would set aside that finding and would find that such misleading and deceptive conduct was an inducement to the appellant to enter into that contract and subsequently to perform its obligations under it.
Upon the whole of the evidence I would also find that the appellant did suffer damage and loss as a consequence of the respondents misleading conduct which it is entitled to recover pursuant to ss. 52 and 82 of the Trade Practices Act.
Even though the appellant's action was dismissed, the learned trial Judge nevertheless assessed the quantum of damage suffered by the appellant upon the assumption that it did succeed in its action for damages either pursuant to s. 52 of the Trade Practices Act or for negligent mis-statement of fact. He assessed damages in the sum of $50,000. The appellant appeals against that assessment and it is convenient to turn now to consider that matter.
The measure of damages in an action based upon s. 52 of
the Trade Practices Act is that in tort and not in contract.
Gates v. City Mutual Life Assurance Society Ltd. (1985-86)
160 C.L.R. 1 at p. 6 per Gibbs C.J. and pp. 12-13 per Mason,
Wilson and Dawson JJ. In that case, the measure of damages
in deceit as defined in Toteff v. Antonas (1952) 87 C.L.R.
650 was adopted.
In Gould v. Vaggelas (1985) 157 C.L.R. 215, Gibbs J. at p. 220, observed:
"The usual rule is however only a special application of the general principle that 'in an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentation made by the defendant': Toteff v. Antonas. In other words the general principle is that the plaintiff is to be put so far as possible in the position he would have been in if he had not acted on the fraudulent inducement ..."
In Gates v. City Mutual Life Assurance Society Ltd.
(supra) at p. 13, it was observed:
"Because the object of damages in tort is to place the plaintiff in the position in which he would have been in but for the commission of the tort it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the
opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into a different contract and that it would have yielded the benefit claimed: cf. Esso Petroleum Co. Ltd. v. Marden [1976] Q.B. 801 at pp. 820-821, 828-829; Doyle v. Olby (Ironmongers) Ltd. [1969] 2 Q.B. at p. 167. The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation. In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract save that it is for the plaintiff to establish that he could and would have entered into the different contract."
At p. 15 it is further observed:
"This conclusion involves no element of injustice to a plaintiff who is entitled to damages reflecting the loss of benefits he would have obtained under a contract which he could and would have entered into but for his reliance on the contravening conduct of the defendant. Of course he must prove such loss but there is nothing unfair in requiring him to do so."
Upon the evidence, the learned trial Judge found that in fact the appellant in this case made a profit of $33,000 after it had completed the work it performed on site. It emerged clearly however that part of the work done by the appellant on site, was done pursuant to a contract it entered into with the second defendant. That contract related to the doing of grouting work which it was not required to do under the contract with the respondent. Upon this contract, the appellant in fact suffered a loss apparently of about $57,000. It was contended for the appellant that indeed this loss under its contract with the second defendant would have not occurred had not the appellant entered into the contract which it did with the respondent. It was contended that the loss it sustained therefore under its contract with the second defendant was recoverable from the respondent. In my view, such a contention is really based upon an unacceptable post-hoc approach to the assessment of damages. I take the view that the loss sustained by the appellant under its contract with the second defendant, was not reasonably foreseeable prior to 7th December 1988, and is far too remote to be recoverable.
If one ignores then the loss that the appellant suffered under its contract with the second defendant as not being referable to entering into the contract in issue with the respondent, it is clear that the appellant made a profit of approximately $90,000 in the period 7th December 1988 to mid-June 1989 under its contract with the respondent.
A great deal of expert evidence from accountants was called upon trial with a view to quantifying the appellant's loss. This evidence was of a very theoretical kind based essentially upon hypotheses made upon estimates by the representatives of the appellant as to work that may have been available to the appellant (apart from the work the appellant performed for the second defendant) between 4th February 1989 and mid-June 1989 - the period during which, upon the appellant's case, it was committed to work upon the project as a consequence of the misleading conduct of the respondent, and during which it would otherwise have been available for the performance of other contracting work.
Before descending to a very brief consideration of this expert evidence, it is convenient to refer to the history of the net profit of the appellant in years prior and subsequent to the period in question. These profits may be tabulated as follows:
Year ended 30th June Gross Sales Net Profit
1987 $1,304,843 $2,392 1988 $1,817,951 $2,126 1989 $1,918,455 $2,317
There is no evidence as to the financial returns for the year ended 30th June 1990.
For the year ended 30th June 1991, gross sales of $1,930,368 yielded a net profit of $1,664.
The first thing to note therefore upon the evidence concerning the loss suffered by the appellant in the second half of the 1989 financial year is that during that period while working at the project site, the appellant in fact made a net profit of $33,000. With respect to the performance of the work under its contract with the respondent, the appellant in fact in that period made a net profit of $90,000. In spite of this however, for the whole of the year ended 30th June 1989, it made a net profit of $2,317.
Counsel for the appellant sought to explain that the appellant attempted so to manage its financial affairs as to produce each year a taxable income as low as possible.
Reference was made to evidence given by one of the expert witnesses called for the appellant. However to my mind those explanations appear quite unpersuasive when one looks at the net income in fact produced by the appellant in three consecutive financial years, in the last one of which it was alleged the loss was suffered, the absence of any evidence as to what profit or loss was suffered in the year ended 30th June 1990 and the evidence that for the year ended 30th June 1991, a profit of only $1,664 was made.
Doubtless the approach adopted by the experts called to give evidence as to loss, was in accord with that approved in Gates v. City Mutual Life Assurance Society Ltd. (supra) and Gould v. Vaggelas (supra). Both accountants purported to take the same approach in principle which was expressed by the accountant called for the respondent in these terms:
"A loss of profits is calculated by establishing the difference if any between the profit which is claimed would have been achieved on the alternative projects and the profit which was actually achieved on the Big Banana Project."
The learned trial Judge did not dissent from that approach and indeed it was not contended upon the appeal that the approach was an incorrect one. However, in calculating what profits would have been achieved on other construction projects between 4th February and June 1989, both accountants made substantially the same assumptions which in my view were quite flawed for the purpose of assessing damages. The accountants did not arrive at the same result but this was due to different categories into which each placed certain estimated hypothetical expenses.
Each approached his task by dividing the projected hypothetical costs which it was assumed for the purpose of the exercise would have accrued in the performance of alternate work into "variable costs" and "fixed costs and overheads".
Applying the same basic formula but with divergent approaches as to whether certain overheads should be treated as "variable" or "fixed costs and overheads", the accountant, called for the appellant, arrived at a loss of approximately $180,000,
while the accountant called for the respondent arrived at a loss of between $41,000 and $48,000, the difference reflecting uncertainty as into which of the categories of overhead expenses certain hypothetical wage bills should be placed.
The learned trial Judge preferred the evidence of the accountant called for the respondent to that of the accountant called for the appellant. He expressed the view that he thought the respondent's accountant was if not more conservative than the accountant for the appellant then certainly more orthodox. However he expressed the view that that accountant's estimates "may be rather on the low side" and then assessed damages in the round figure of $50,000.
It is clear that the learned trial Judge assessed damages in accord with the principles stated in Gates v. City Mutual Life Assurance Society Ltd. (supra).
However it is also clear that he certainly did not accept that the accountants had chosen the right starting point in assessing the profit "which would have been achieved" by the appellant had it not been working at or about the project site after 4th February 1989.
Each of the accountants seems to have assumed that the whole of the plant and labour used by the appellant between February and June 1989 could have been profitably used for the whole of that period elsewhere.
The learned trial Judge rejected this approach,
observing:
"About one third of the income was derived from the two cranes which as I have said were not owned by the plaintiff but were hired locally specifically for the Big Banana job. I find on the evidence it was unlikely that the plaintiff would have used these cranes elsewhere had it not been engaged on the Big Banana contract. There was simply no evidence to fill that gap. Further as I have already pointed out the assumption in the calculations before me was that each of the units would have been fully employed during the whole of the relevant period and in my view of the evidence such an assumption was not justified.
Furthermore there should be subtracted the profit which the plaintiff actually made on the Coffs Harbour harbour contract."
It would clearly be incorrect upon the facts of the case before His Honour to adopt for the calculation of damages the hypothetical gross income that could have been earned employing all the equipment and labour assembled on the project site upon alternate construction work for a consideration which involved the assumed profit mark-up which the appellant would recover should it negotiate alternate contracts on conditions as favourable to it as were the conditions of the contract negotiated with the respondent. Reference has already been made to the observations of Mr. Bricknell on 30th November 1988 that he thought that the appellant's contract price was "high by about $50,000 - $60,000". The contract which the appellant performed for the second defendant during the period in question in fact resulted in a loss to it of about $57,000.
The evidence of Mr. Fitzgerald that there were other contract jobs available for tender at the relevant time, in my view was quite insufficient to support an inference that if in fact the appellant had procured such work, it would have used the same sort of equipment or the same staff numbers to perform it as were used on the "Big Banana Job", or that whatever equipment and staff were used, the profit that would actually have been recovered, assuming there was a profit made rather than a loss, could be assessed on the basis adopted by the expert witnesses called upon trial.
Whatever validity such an approach may have for accounting purposes, budget prognostications, or feasibility studies, in my view they were inappropriate for the purpose of assessing the quantum of damages in this case.
The learned trial Judge clearly recognised the
deficiencies in the accounting evidence placed before him.
That is clear from his indication that even accepting the
figures advanced by the accountant, called for the
appellant, it would be necessary substantially to discount
them.
There was no evidence placed before the learned trial Judge as to precisely what construction jobs became available in the period in question which might have been profitably performed by the appellant. There was no or no sufficient evidence as to the size of such jobs; the terms upon which they were to be completed; the profit margins available, or the security offered to contractors for payment of the contract price to which they might become entitled. It is notorious that persons in the construction industry sometimes have difficulty in obtaining payment to which they are legally entitled, for work which they have performed. Indeed in this case the appellant suffered a loss of $57,000 in respect of work it performed under the contract it entered into with the second defendant.
In my view the evidence placed before the learned trial Judge was such as to make it exceptionally difficult for him to assess quantum. As I read his judgment, he did as best he could and assessed the appellant's loss in the sum of $50,000.
He did this against the background that the appellant had in fact made a profit in the vicinity of $90,000 for the work done under its contract with the respondent, within a period of six months. He made it upon irrefutable financial evidence that in respect of four financial years out of the five during which the period in question fell, the highest net annual profit did not reach $2,400.
In my view upon the evidence before the learned trial Judge, the award of damages was a generous one. It is not the subject of cross-appeal by the respondent. I am unpersuaded that any ground has been shown to interfere with that assessment of damages.
I would therefore allow the appeal upon the findings already indicated. I would award damages as assessed by the learned trial Judge in the sum of $50,000. I would assess interest on that sum at 12 per cent per annum from 2nd June 1989.
I would order that judgment be entered for the appellant in the sum of $50,000 plus interest on that sum at the rate of 12% per annum from 2 June 1989.
Subject to any submissions on the question of costs, I would order that the respondent pay the appellant's costs of and incidental to the trial and to this appeal to be taxed.
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