Maimur v Equine Buildings Pty Ltd
[2000] VSC 425
•19 October 2000
| SUPREME COURT OF VICTORIA | |
| COMMON LAW DIVISION | Not Restricted |
No. 4392 of 2000
IN THE MATTER OF an appeal under Section 109 of the Magistrates' Court Act 1989
| ANDREW MAIMUR and JANNENE MAIMUR | Appellants |
| v | |
| EQUINE BUILDINGS PTY LTD (ACN 067 248 846) | Respondent |
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JUDGE: | Ashley J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6 October 2000 | |
DATE OF JUDGMENT: | 19 October 2000 | |
CASE MAY BE CITED AS: | Maimur v Equine Buildings Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 425 | |
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Appeal – whether magistrate misapprehended evidence adduced at trial – failure to give reasons.
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APPEARANCES: | Counsel | Solicitors |
For the Appellants | Mr A. Neal | Guymer Naidoo Lawyers |
| For the Respondent | Mr P. Bravender-Coyle | Law Partners |
HIS HONOUR:
The Appeal
This is an appeal under s. 109 of the Magistrates’ Court Act 1989 from final orders made in the Magistrates’ Court at Melbourne on 24 January 2000 in proceedings in which Equine Buildings Pty Ltd (“Equine” or the “Respondent”) was plaintiff and one of two defendants to a counterclaim and Andrew and Jannene Maimur (“the Appellants”) were defendants and plaintiffs by counterclaim. The other defendant to counterclaim was Mr Douglas May, a director and, in substance, the principal of Equine.
By his orders the learned magistrate made an order in favour of Equine on its claim for $20,650 plus interest and costs. He dismissed the counterclaim against Equine. It appears that he did not make any order dismissing the counterclaim against Mr May, although the natural consequence of his reasons is that he should have done so.
The Nature of the Claim
The Respondent by its particulars of claim alleged, and the Appellants admitted, the making of four contracts for construction of buildings on the Appellants’ land. The contracts were in respect of horse stables (“the Stables Contract” or “Contract 1”), a machinery shed (“the Shed Contract” or “Contract 2”), double paddock shelters (“the Double Shelters Contract” or “Contract 3”) and paddock shelters (“the Paddock Shelters Contract” or “Contract 4”).
By the contracts, made in early April 1998, provision was made for payment by the Appellants of the following sums for the work which the Respondent was to perform:
Contract 1 - $38,500;
Contract 2 - $16,700;
Contract 3 - $5,500;
Contract 4 - $2,900.
The Respondent claimed and the Appellants denied that they had breached each of the contracts – in the case of Contract 1 by failing to pay the balance of the sum payable under that contract on completion; and in the case of Contracts 2, 3 and 4 by wrongly terminating the same.
The Respondent alleged and the Appellants denied that by reason of breach it had suffered loss and damage. The amount claimed under Contract 1 was $23,650. The amount claimed in respect of Contract 2 comprised $1,942.70 construction costs net of deposit paid plus loss of profit $3,340. The amount claimed in respect of Contract 3 was $310 construction costs plus loss of profit $1,100. The amount claimed in respect of Contract 4 was $580 loss of profit.
The Nature of the Counterclaim
The Appellants’ counterclaim was founded upon the four contracts and alleged amendments thereto by an annexure (“the Annexure”) dated 25 June 1998.
According to paragraph 6 of the counterclaim there were terms of the contracts:
“(a)that the work performed by the First Defendant would be carried out in accordance with the plans supplied by the First Defendant;
(b)that the works carried out by the First Defendant would be constructed so as to comply with and observe the provisions of the directions of any Act, By-Law, Order or Regulation of any Parliament, Municipal or Local Authority, or any public utility or corporation which may be applicable to or in respect of the said works;
(c)that the works would be completed in a good and workmanlike manner; and
(d)the works would be completed within the times specified in the agreements and/or in a reasonable time.”
Reference to “the times specified in the agreements” was a reference to the Annexure. It provided, inter alia:
“[the Respondent] warrants that all on-site works shall be completed between 29 June 1998 and 14 August 1998 with such period being extended only to adverse weather or site conditions where such conditions have been notified in writing. The client shall, acting reasonably, approve such claims for site extension.”
Further according to the counterclaim:
§ the Respondent breached the agreements by breaching each of the terms that I set out a moment ago;
§ this constituted repudiation of the agreements;
§ the Appellants accepted the repudiation and terminated the agreements (reliance was placed, principally, on a letter dated 30 October 1998 from the Appellants’ solicitors to the Respondent);
§ thereby the Appellants suffered loss and damage.
The loss and damage was particularised as follows:
§ Increased cost of completion of the contracts: the total amount payable under the contracts was $63,600. Out of this sum the Appellants had paid $16,560, leaving a balance of $47,040. But the estimate to complete the works and/or rectify what had been done was $86,093. So a claim was raised for $34,053.
§ Liquidated damages: a claim was made for $100 per day liquidated damages on each of the contracts for the period 14 August 1998 to 30 October 1998, this totalling $30,800. 14 August 1998 was the date on which, according to the Annexure, work which was to be performed by the Respondent should have been complete. The claim was founded upon the following portion of the Annexure:
“[The Respondent] shall allow to the client the sum of $100 per day for any failure to meet the above dates with allowance for any extensions of time agreed to.”
The number of days between 14 August and 30 October 1998 was 77.
§ Consequential losses: these alleged losses included the cost of temporary yards for horses and foals, loss of foals, additional interest on a loan, additional insurance, additional feed, “cost of investigative building consultants report”, damages for inconvenience, loss of enjoyment and amenity. In all, the amount of consequential losses was said to be $36,126.
The counterclaim thus quantified at a little over $100,000.
The counterclaim was not solely founded upon repudiation of the contracts by the Respondent, such repudiation being accepted by the Appellants. But counsel for the Appellants made no reference in his submission to any other way in which the counterclaim was laid; nor did he suggest that the determination of this appeal required me to consider those other formulations of the counterclaim.
The Respondent and Mr May filed a defence to counterclaim. It admitted that the contracts were amended by the Annexure. It did not admit that the contracts were amended at that time in any other way.
The Respondent did not admit that there were terms of the contracts either that the works would be completed in a good and workmanlike manner or that the works would be completed within the time specified in the contracts and/or in a reasonable time. Both the Respondent and Mr May denied that there had been any breach of those alleged terms.
The Respondent put into issue its alleged repudiation of the contracts and the Appellants’ right to terminate them.
The Respondent and Mr May denied that the Appellants had suffered the loss and damage alleged by the counterclaim.
The Trial
There was a prolonged trial in the Magistrates’ Court in January of this year. It extended over all or part of six days. At the completion of evidence counsel for the Appellants and for the Respondent and Mr May made both written and oral submissions. The written submissions made for the Appellants contended, inter alia, that:
§ The Respondent’s failure to complete the works within a reasonable time, or by 14 August 1998, or by 30 October 1998 amounted to a repudiation of the contract.
§ The Respondent’s refusal to carry out any more work on either the stables “or the other contracts” unless the Appellants paid its invoice pertaining to the Stables Contract was a repudiation because the Annexure provided that the invoice should only be raised (and paid) if the works were completed to the owners’ satisfaction.
§ The Respondent had been unable to complete the works because it was cash-strapped. This was “a repudiation based on inability to perform”.
§ The Appellants were entitled to liquidated damages of $100 per day for each of the 77 days on each of the four contracts.
Counsel for the Appellants, by his oral submissions, repeated each of the written submissions that I have just set out. He argued that not even the Stables Contract had been completed. True it was that the Respondent claimed that construction of the stables had been completed, and had submitted a final invoice prior to the Appellants purported termination of all the contracts. But the Annexure said that the contract would not be complete until the owners were satisfied with the work done, and it was reasonable that they had not been so satisfied. In this connection counsel for the Appellants relied upon the following portion of the Annexure:
“Payment Terms
Payment terms remain as stated.
Payments shall be made within five days following reciept (sic) of the relative invoice by means of direct credit to Equine Buildings Pty Ltd Bank account and a penalty of 0.3 percent per relative contract per day shall apply in the event of late payment. It is agreed that invoices shall not be raised until appropriate stage works has (sic) been completed and both parties are satisfied as to that stage.”
The contracts prescribed a payment schedule. In the case of each agreement 30 percent of the contract price was payable “upon recieval (sic) of permit”; and 70 percent upon completion. There was no specific provision for invoicing at all. The Annexure said that invoices were not to be raised until “appropriate stage works has (sic) been completed”. There was apparently no argument below how the provision in the Annexure was to be melded with the terms of the contracts.
Counsel for the Appellants further submitted orally and below that the liquidated damages should be calculated by reference to the total number of days between 14 August and 30 October 1998 rather than by reference to “working days” as was contended for the Respondent.
I should briefly refer to several aspects of the written submissions made for the Respondent below. It was submitted that:
§ On the evidence, the stables were complete and in use without rectification. The builder was entitled to the balance of the contract price less any amount for rectification (quantification of the builder’s claim generally focussed upon the amount due under the Stables Contract. It appears to have been conceded, at least tacitly, that the claim for loss of profits on the other contracts was in each case difficult because it was at least doubtful that those contracts could have yielded a profit for the Respondent had they been performed).
§ The counterclaim, for a number of reasons, lacked any credibility.
Neither in his written or oral submissions did counsel for the Respondent specifically address his Worship about the Appellants’ contention that they had been entitled to, and had, terminated the contracts.
Resolution of the Claim and Counterclaim in the Magistrates’ Court
At the conclusion of the trial the learned magistrate delivered an extempore judgment. As I noted earlier, he found for the Respondent on its claim and rejected the counterclaim. He made a formal order on the claim for $20,650 plus interest and costs. He made a formal order dismissing the counterclaim so far as it related to the Respondent. He made no separate order for costs on the counterclaim.
The learned magistrate arrived at the formal orders which he made this way:
§ He determined that the Respondent was entitled to receive the $26,950 balance on the Stables Contract less liquidated damages (accepted as being $3,300) and the cost of necessary rectification which he rounded out at $3,000.
§ In fixing the cost of necessary rectification he allowed nothing in respect of drainage works. He decided that the parties had discussed sub-floor drainage of the stables, but that “it was not agreed to have (such) drainage”. Concerning drainage otherwise he said:
“I have no evidence that slope of the floor was required, I have no evidence as to good behaviour or good design in relation to that. I am not satisfied, therefore, that it was agreed that there be any above floor drainage, if you would like to put it that way.”
§ He concluded that the Appellants had not been justified in terminating “the contract”. However, he was not satisfied that the Respondent would have made any profit out of Contracts 2, 3 or 4.
§ He determined that the liquidated damages of $100 per day was an amount “overall, not $100 per item making it a total of $400”. The contrary, he said, was a “preposterous suggestion”.
§ Inferentially, he concluded that the days referred to in the Annexure were “working days”.
§ He did not allow the Respondent interest on the amount of the Stables Contract invoice as provided for by the Annexure. To make such an allowance would be “unconscionable”. There had not been unanimity of view that the Respondent was “instantly entitled to be paid on the invoice”. There had clearly been areas of dispute.
§ Notwithstanding that he had concluded that the Appellants had not been justified in terminating the contract(s), he dealt with various aspects of the counterclaim. He said:
“I find no merit in it – in any of it… I do not know that there is much need for me to go into detail, but on the findings which I have made in relation to the termination of the contract I am satisfied therefore that the defendants should pay the cost of the machinery shed entirely themselves. The other two groups of sheds – that is the paddock sheds and stables – I am satisfied they are entitled to bear their own costs of the rectification.”
His Worship was scathing in his denunciation of other aspects of the counterclaim – which he evidently regarded as far fetched. Counsel for the Appellants did not seek, before me, to challenge the forthright expressions of opinion by the learned magistrate concerning aspects of the counterclaim; or, for that matter, conclusions reached by his Worship upon matters of disputed fact generally. Understandably so. Quite apart from the fact that appeal only lies in respect of questions of law, the trial raised serious issues of credibility – most particularly of Mr May on the one hand and the Appellants on the other. It is apparent that the learned magistrate generally preferred Mr May’s evidence in the areas of conflict.
The Master’s Order
On 16 March this year the Appellants satisfied a master that they had a prima facie case for relief in respect of questions of law involved in the orders made in the Magistrates’ Court. The “Other Matters” section of the master’s order set out no less than eight “questions of law” shown “to be raised by the appeal”. I very much doubt that, as expressed, a number of the questions raised any question of law. I consider, however, that in substance three such questions were exposed; and although the pertinent issues were not disclosed in the manner referred to by Tadgell JA in Wong v Carter and Ors[1] I consider that they ought to be addressed. The questions thus exposed were these:
1.Was there any evidence upon which the learned magistrate could have found that the relationship between the parties created one contract only? If no, did his Worship nonetheless make that finding? Did he in fact consider the question whether the Respondent had repudiated the contractual arrangement between them and whether the Appellants had accepted that repudiation and terminated the contracts; and, if so, was that consideration tainted by his finding that the relationship between the parties created one contract only?
2.Did the learned magistrate misconstrue the reference to liquidated damages of “$100 per day” by treating it as meaning “$100 per working day”? Were his reasons defective because they did not disclose why he reached that conclusion?
3.Did his Worship’s observation that “I have no evidence that slope of the floor was required, I have no evidence as to good behaviour or good design in relation to that”, unequivocally reveal a misunderstanding of the evidence (it being contended for the Appellants that – apart altogether from the question whether such evidence should be accepted or rejected – there was in fact evidence of the matters concerning which his Worship said that there was no evidence)?
[1][2000] VSCA 53 paragraph [45]
The First Question
There is no doubt that the Appellants and the Respondent approached this proceeding on the footing that they had concluded four separate contracts. That was the thrust of the particulars of claim and counterclaim and the defences thereto. The contracts went into evidence. The Respondent sought relief on a different basis in respect that the Stables Contract on the one hand and in respect of the three other contracts on the other hand. The Appellants alleged that in the case of no contract had the works been completed and that the Respondent had refused to complete the works or any of them unless it was paid what it had invoiced. In those circumstances, they alleged, the contracts had been repudiated and they had accepted that repudiation and terminated them. In the case of each contract the damages sought by the counterclaim were distinct, though similarly framed.
Despite the way in which the claim and counterclaim were framed there was a persistent tendency in the evidence for both witnesses and counsel to treat the overall works which the Respondent was to perform as being comprehended within a single contract. It is easy to see why the learned magistrate might have approached the matter on the footing that there was only one contract. Indeed, the case might well have been put that way by either party, notwithstanding the creation of the four documents. Be that as it may, neither party in fact sought to argue – whether in the Magistrates’ Court or before me – that only one contract had been created between them.
The evidence adduced at trial entitled the learned magistrate to conclude that the Respondent had performed the Stables Contract; and that its entitlement arose under the contract and not because that contract had been wrongly terminated by the Appellants. Thus viewed, the measure of the Respondent’s entitlement was the amount owing on that contract less liquidated damages and less cost of rectification. Although his Worship’s reasons are not crystal clear upon the matter, it is, I think, well arguable that he went about determining the Respondent’s entitlement in that way. Subject only to the question whether liquidated damages were calculated in accordance with the Annexure as properly construed, resolution of the Respondent’s entitlement under the Stables Contract in such a manner could not be impeached (as to the issues of construction of the Annexure and drainage – the latter bearing on the cost of rectification – see later).
It may be, however, that the learned magistrate determined that the Respondent’s entitlement in respect of the Stables Contract arose out of the Appellants' wrongful termination of that contract.[2] Counsel for the Appellants conceded before me that his Worship was entitled to conclude that the Respondent by its conduct had not repudiated that contract (or, indeed, any of the contracts). If there was no repudiation, the occasion for the Appellants to terminate the Stables Contract did not arise. Appellants’ counsel agreed that the quantum of the Respondent’s entitlement was unlikely to have been different whichever of the two approaches the learned magistrate in fact took.
[2]See his Worship’s observations at page 2, lines 1-7 of his reasons.
However his Worship’s reasons be understood, I see no reason why the award in favour of the Respondent on the Stables Contract should not stand, subject only to the possible impact of the constructional issue – that is, as to the calculation of liquidated damages.
That leaves for consideration his Worship’s resolution of the dispute concerning Contracts 2, 3 and 4.
The Appellants, as I noted earlier, alleged that each of the contracts contained four particular terms which the Respondent had breached. So far as Contracts 2, 3 and 4 were concerned the particulars of breach subjoined to paragraph 7 of the counterclaim focussed upon delay. The allegations of failure to complete works in accordance with Regulations etc, and to do so in a good and workmanlike manner, were in substance particularised by reference to the Stables Contract. An allegation in the particulars that the Respondent had “requested further progress claims despite the works not being carried out and being in a defective state” was also, in substance, a reference to the Stables Contract. In respect of Contracts 2, 3 and 4, then, the Appellants’ case as alleged and particularised was that there had been delay in undertaking works; and that this had created a situation in which the Appellants had been entitled to, and had, terminated those contracts.
This is what his Worship said:
“That brings me to the question of the termination of the contract. By the time he had completed the work on the stable he had taken far longer than was appropriate. The defendant had not at any stage queried the question of drainage, had chosen to sit tight on that, had made no real complaint until the job was complete, and then gave a list of complaints and refused to pay anything – indeed ordered the plaintiff from the job. I am satisfied that that was not reasonable. I am satisfied that there should have been a substantial payment made. I can understand their concern about their view about whether he would get the rest of the job done. But I am satisfied that they ought to have provided him with some time, some restriction, to complete the rest of the work and that they are not justified in just terminating him on the spot, as it were. I appreciate there was a letter written by the solicitors some days later, but it is quite clear that Dr Maimur’s view was that he should leave and get nothing. That was utterly untenable. In the circumstances, therefore, I am satisfied that by terminating they refused him the right to complete the work which he had already started on the machinery shed.
I am not satisfied, however, that he stood – on the figures that I have got before me – to make any profit out of that. I am not satisfied that he was going to be in the situation to make a profit in relation to the paddock sheds and stable.”
It appears to me that his Worship did in that passage treat the contracts between the parties as being constituted by a single contract. Not only did his Worship refer at the outset to “the contract”, he referred to “the job”, “the rest of the job”, “rest of the work” and “the work” in a way which suggested that he viewed “the job” and “the work” as aspects of a single contract. Note also that later in his reasons, referring to the counterclaim, he referred to “the findings which I have made in relation to the termination of the contract”.
It is true, as counsel for the Respondent submitted, that it was common ground that the parties had entered into four separate contracts. But it does not follow that the passages in his Worship’s reasons which I have just set out can be read as referring to four contracts.
Did his Worship’s error (that is, having regard to the way in which the case had been conducted) in treating the four contracts as one contract infect his consideration of the question whether the Respondent had, by its conduct, repudiated Contracts 2, 3 and 4, which repudiation the Appellants had accepted? In that connection, if his Worship’s consideration of the true question was in fact infected by error, it could be no answer to the success of the Appellants upon the appeal that by proper consideration of the matter his Worship might have reached the same effective outcome. For it could not be said with any certainty what the outcome would have been upon a proper consideration of the matter. For that reason, the frank concession by counsel for the Appellants that it had been open to his Worship to determine that in all the circumstances the Respondent’s conduct with respect to Contracts 2, 3 and 4 did not constitute a repudiation of those contracts, and thus that the Appellants were not entitled to terminate those contracts, does not foreclose a favourable outcome to the appeal. The correctness of that concession was, I should add, well demonstrated by the elaborate written submissions of counsel for the respondent. It is unnecessary to rehearse those submissions. They may very well assist the learned magistrate in his reconsideration of the matter – as to the necessity for which, see later.
I understand his Worship’s approach to have been this: the Respondent was late in completing the Stables works. The Appellants were not justified in relying upon alleged defects in performance of those works (which defects they much overstated) and concern about when the balance of the works would be completed as bases for terminating the Respondent’s engagement overall. They should have given the Respondent a definite time by which the balance of works must have been completed.
His Worship’s reasons suggest that had he considered the termination of Contracts 2, 3 and 4 on a case by case basis, he would have concluded that the true circumstances of the terminations were disclosed by what transpired at a meeting convened by the first Appellant and held between the first Appellant and Mr May at the former’s professional rooms on about 21 October 1998, and not by the discursive letter dated 30 October 1998 compiled by the Appellants’ solicitors.[3] The evidence of what occurred at that meeting could be said to have revealed that the Appellants’ termination of Contracts 2, 3 and 4 had nothing to do with the Respondent’s refusal – if refusal as distinct from bluff there was – to do further work until payment was made on the Stables Contract; nor anything to do with the supposed financial incapacity of the Respondent to perform the other contracts. Rather, the evidence could be said to have revealed simply that the Appellants had decided that the overall contractual relationship should end by reason of the Respondent’s delay thus far, and as part of a general settlement in which – upon an unjustified view as to the extent of defects in the Stables works – no money should change hands.
[3]This explains his Worship saying: "I appreciate there was a letter written by the solicitors some days later".
In my opinion it was open to his Worship to have reasoned that way, and then to have concluded that the Appellants were not entitled to terminate in the circumstances thus disclosed.
I should add this: according to the Appellants’ case the Respondent repudiated Contracts 2, 3 and 4 because it refused to perform those contracts unless it was first paid for work done on the Stables Contract. Whilst, as I perceive it, his Worship would have concluded, had he considered termination of those contracts discretely, that the supposed repudiation and the termination were unrelated, in my opinion it is far from clear - if there was any such refusal - that it would have constituted a repudiation of those contracts.
There was a powerful unreality in the Appellants’ proposition, a series of contracts having been struck between the parties, contracts relating to discrete parts of a single project, that the Respondent was required to undertake work on contracts of relatively smaller value in the face of the Appellants’ wrongful refusal (as the learned magistrate found) to pay moneys due on the contract of largest value on pain that its declining to do so would constitute a repudiation of those smaller value contracts. To treat such refusal as a repudiation would create a situation in which the Appellants became entitled, by their wrongful conduct in respect of the Stables Contract, in substance to deprive the Respondent of its entitlement to perform the smaller contracts; and subject the Respondent to risk of a liability of the kinds raised by the counterclaim.
I should further add this: according to the Appellants’ case the Respondent repudiated Contracts 2, 3 and 4 because it was financially incapacitated from performing those contracts. I doubt that the evidence of such an incapacity was patent. Further, it appears to me that, had his Worship considered the termination of Contracts 2, 3 and 4 discretely, he would have concluded that this supposed circumstance of repudiation was unrelated to the termination. But even if his Worship had concluded that the Respondent had a financial incapacity to perform Contracts 2, 3 and 4, that it was anything more than a quite temporary thing, and that this incapacity was pertinent to the Appellants’ termination of those contracts, in my opinion it would not necessarily be the case that such incapacity constituted a repudiation thereof.
There was a powerful unreality in the proposition that, in the case of a series of contracts as described, the Appellants could, by wrongfully refusing to pay moneys due on the Stables Contract, cause or contribute to a situation in which the Respondent was financially unable to perform the other contracts, and then that the Appellants could rely upon such inability to constitute a repudiation of those other contracts – so exposing the Respondent to the risk of liability outlined a few moments ago.
To repeat, if his Worship on discrete consideration of each of Contracts 2, 3 and 4 had arrived at and then set out the conclusions which seem to lie within his reasons, I consider that it could not have been said that those conclusions were not open. It would have followed that the Appellants were not entitled to terminate any of those contracts; in which circumstances their counterclaim in respect thereof must fail.
The learned magistrate, however, did not give discrete consideration to Contracts 2, 3 and 4. Whilst his reasons point to the way in which it appears that he would have dealt with the issues now under consideration, I am not willing to conclude that his reasons left those matters entirely clear. In the circumstances, I am of opinion that the order dismissing the counterclaim against the Respondent should be set aside, and the question whether the Appellants terminated one or more of Contracts 2, 3 and 4 in reliance upon any of the pleaded circumstances of repudiation should be remitted for consideration by the learned magistrate before whom the trial was conducted, such consideration being given by his Worship upon the evidence adduced at that trial.
The Second Question
The second question raises an issue of construction. Counsel for the Appellants submitted, and I agree, that the pertinent part of the Annexure had to be construed on its face; and that the private thoughts of the parties concerning it were not relevant. He further submitted, and I agreed, that the factual matrix in which the particular provision was conceived was pertinent. He finally submitted upon this matter that the Appellants had been entitled to reasons sufficient to allow them to understand why the learned magistrate had determined the issue adversely to them; and (as was evidently the case) that the reasons were silent about that matter.
In my opinion this was a matter in respect of which reasons were required. There is authority for the proposition that failure to state reasons may itself amount to an error of law. It will do so where the failure serves to frustrate a right of appeal.
Appeal lies from the final order of a Magistrates’ Court upon a question of law. One cannot be satisfied how the learned magistrate resolved the issue of construction in the absence of reasons. One cannot be satisfied what, if anything, he gleaned from the factual matrix, nor whether he erroneously paid attention to irrelevant evidence of particular witnesses as to the way in which they understood the provision would work. In the circumstances, it should reasonably be concluded that the failure to provide reasons did have the capacity to frustrate an appeal – by concealing a possible error of law. In those circumstances failure to provide reasons should itself be regarded as an error of law.[4]
[4]See, recently, Cropp v TAC and Anor [1998] 3 VR 357 at 376 per Charles JA and Perkins v County Court and Ors [2000] VSCA 171 paragraphs [54]-[56]
Both counsel submitted, sensibly, that if I resolved question 2 only in the Appellants’ favour I should myself determine the issue of construction. But if some other matter required reconsideration by the learned magistrate then, the Appellants’ counsel submitted, I should remit for his Worship’s reconsideration the proper construction of the critical portion of the Annexure. He did not submit, I note, that the only possible construction was a construction favourable to his clients. His proposal in respect of remission reflected that fact.
There is, as events have transpired, another matter that must be remitted for the learned magistrate’s reconsideration. But should the issue now under discussion also be remitted?
I think that the answer is “yes”. The Appellants’ counsel was correct, in my opinion, to accept that the construction arrived at by his Worship was an available construction if arrived at by proper means. On the other hand, it was not a construction that was compelled. Absent reasons, it cannot be said that the construction was arrived at by a legitimate process of construction. It would be unsatisfactory to let the construction stand and simply to require the magistrate to provide his reasons. Better that the matter be reconsidered and that, whatever be the construction arrived at, the learned magistrate provide his reasons (which need not be elaborate) for arriving at that construction.
In reconsidering the matter his Worship must, as I have said, approach the issue of construction only having regard to pertinent matters. In that connection I make these observations:
First, it seems that little evidence was directed to the circumstances in which the Annexure came into existence. Some of it could bear upon the factual matrix in which the phrase was conceived. Other of it was no more than private expression of opinion as to what the phrase meant. The latter evidence could not be relevant to the issue of construction.
Mr May said that the Annexure was drawn up by an employee of his company at the direction of the Appellants. He agreed with his own counsel that if all the works were not completed by 14 August the Respondent was “up for $100 per day”. This last answer could not, of course, resolve the issue of construction.
Mr Baker, the employee of the Respondent to whom Mr May referred in his evidence, gave evidence of how he had calculated the invoice for the Stables Contract. That calculation took as its starting point 47 working days between 14 August and 20 October 1998. It credited the builder with 14 working days on which there had been inclement weather. 20 October was the date on which the Respondent submitted the invoice for the Stables Contract. Evidence as to the manner of calculation which Mr Baker adopted was irrelevant to the issue of construction.
The second Appellant seemed to know very little about the Annexure.[5]
[5]See transcript 285 to 287
The first Appellant gave evidence of his understanding that the $100 was a sum that applied per day; and that he had been told by the Respondent’s employee that the sum was payable per day on each of the four contracts (this version was not put to the employee). The first Appellant also gave evidence that he was offered the Annexure and was told that it went with each of the Respondent’s contracts.[6] The Annexure was produced, according to his evidence, at a meeting held in June 1998 at his professional rooms in Melton. He had requested the meeting, at least in part, because of concern about delays in getting the various works completed.
[6]See transcript 376
In resolving the issue of construction the learned magistrate would or might, I think, have regard to the following matters - which do not all tend in the same direction:
§ the circumstance that reference to an amount being payable “per day” was on its face apt to mean each calendar day.
§ The fact that the noun “day” was not qualified – whether by use of the word “calendar” or the word “working”.
§ The circumstance that, if the adjective “working” had been inserted, but the term “working day” had not been defined, it would or might have promoted uncertainty.
§ The circumstance that the factual matrix in which the Annexure came into existence was one in which the Appellants were concerned about delay, this tending in favour of the term “per day” being construed to mean each day on which they were denied use of the premises.
§ The consideration that, if he accepted the evidence of the first Appellant, the Respondent had created the term uninfluenced by any request of the Appellants; and that, on the face of the Annexure, the Respondent could claim the benefit of extension of time by reason of adverse weather or site conditions although those conditions did not necessarily relate to a day on which the builder would otherwise have worked – though perhaps see the last sentence under the heading “Programme of Works”.
§ The consideration that, if he found the Annexure to be the Respondent’s document, then ambiguity ought be resolved adversely to the Respondent.
§ The possible view that the liquidated damages provision was a pretty amateurish effort, on its face capable of meaning – though the learned magistrate plainly and justifiably rejected that construction – that $100 per day was payable in respect of each of the four contracts. If his Worship was of the opinion that the provision was a pretty amateurish effort, perhaps that would colour the way in which he sought to reconcile the reference to $100 per day with the provision pertaining to inclement weather or site conditions.
I do not suggest that the matters which I have mentioned necessarily exhaust matters legitimate for his Worship’s consideration. But I think that they could properly be called in aid in the process of construction.
The second observation I should make is this: whatever construction his Worship applied to the phrase “$100 per day”, in the case of the Stables Contract his Worship was correct to take the last relevant date as being 20 October 1998 and not 30 October 1998 as the Appellants contended. His Worship in substance found that the Stables Contract, which had to be viewed separately from the other contracts (as the Appellants strenuously contended) was completed by 20 October – on which date the Respondent submitted its invoice. If, then, his Worship found in favour of the Appellants on the point of construction, the pertinent period was 67 days overall less 14 wet days. The Respondent should therefore have allowed 53 days at $100 per day, not 33 days as it in fact allowed. That would make a difference of $2,000 on the calculation of the Respondent’s entitlement on the Stables Contract. I do not agree with the submission for the Respondent, I should add, that if the phrase was construed to require consideration of calendar days then the Respondent was entitled to the benefit of wet days falling on weekends.
A third matter is this: if his Worship found that the Appellants had been entitled to terminate and had terminated the second, third and fourth contracts, and if he found in favour of the Appellants’ construction of the phrase “$100 per day”, he should allow, in respect of one of those contracts only, 10 days at $100 – that is, in respect of the period 21 to 30 October 1998.
The Third Question
The Stables Contract made no discrete reference to drainage. The learned magistrate found, and the finding is unchallenged, that after discussion between the parties “it was not agreed to have sub-floor drainage”.
The Appellants did not by their defence or counterclaim allege that it was an implied term of the contract that above ground drainage – in the form of a slope in the concrete flooring of either the individual stables or the breezeway – be provided. They alleged, however, that it was an (implied) term of the contract that the works would be completed in a good and workmanlike manner; and that the Respondent had breached this term.
The particulars of breach referred to defects identified in reports provided by two experts. Mr Coghlan reported that the floor had no provision for general drainage, and that an adequate drain outlet should have been provided, with the floor graded slightly to the drain. This report referred to a sketch plan said to have been produced to the Respondent during contract discussions. According to a supplementary report that this expert provided during the course of the trial, “if it is found that drainage should have been provided” then the cost of rectification was nearly $7,000.[7] The second expert, Mr Lyon, opined by his report that the concrete slab was deficient because, inter alia, there was no drainage of individual horse stall floors. He described the situation as “unacceptable”. He noted further that there was no provision for drainage of the main internal slab areas. This witness referred in his report to a drawing produced by the builder in consultation with the first Appellant, which was said to show a central drainage pit with a fall in the main floor towards the pit.
[7]See item 6.3.5 and sheet 5 of Exhibit AM 15 to the first Appellant's affidavit sworn 22 February 2000 – though item 6.3.5 did not entirely relate to the issue of grading.
In light of his Worship’s finding that there was no agreement between the parties to have sub-floor drainage, reliance by each of Mr Coghlan and Mr Lyon upon a sketch plan which was said to provide for such drainage did not advance the Appellants' case.
At trial, a good deal of evidence was given concerning drainage. The evidence of Mr May well permitted his Worship conclusion that the Appellants had taken what he said was his advice that the stables should not be equipped with sub-floor drainage – advice which each of the Appellants denied was given, that denial being not readily compatible with the first Appellant’s letter to the Respondent dated 15 October 1998.
Mr John Anderson, a building consultant, was called for the Respondent. His skills in terms of horse stabling were, as he said, limited to one stable that he had constructed on his own property 25 years earlier. He made an estimate of cost if the Stables Contract had required sub-floor drainage. In cross-examination he agreed that if there was a problem with drainage of the floor it required remedy. He made the point that with hosing down there would certainly be small areas of pooling. Even with proper drainage you could get two to four millimetres of water on the floor under any circumstances. The key question was whether the building drained properly in all the circumstances.
Mr Coghlan, the first of the Appellants’ experts, gave evidence of his observations. The floor of the breezeway between the stables was basically flat. “There would not be a general flow of water over the slab”. The floors of the stalls were set lower than the rest of the floor. Liquid could not get out anywhere. The witness said that he “understood that drainage was required”, that he “didn’t know whether it was required”. He did not consider that the flooring was in fact adequately drained. If there was not be sub-floor drainage there should have been a fall off the floor.
In cross-examination the witness said that on the day he attended there was no pooling of water. He observed no evidence of any water pooling or ponding. He conducted no test to see if water did pool.
The second expert called for the Appellants, Mr Lyon, is a consulting structural engineer. His expertise included the design of a variety of buildings including 40 storey buildings and North Sea oil rigs. In oral evidence he said that if the intention was that the slab be set so that water drained, currently that was not happening. He had seen substantial ponding over the surface area. He would have “anticipated” that the slab should have been set to permit drainage of water and he would have “thought” that the floors of the horse stalls would have been set at the same level as the breezeway slab, and set with a fall. In cross-examination he agreed that an Australian standard allows three to five millimetres of ponding over certain lengths. He, the witness, “would have thought” that the ponding was closer to 10 millimetres and maybe in some instances more than 10 millimetres. He had not measured the extent of ponding.
Pretty much at the end of the evidence this interchange took place between the learned magistrate and counsel for the Appellants:
“HIS WORSHIP:
You see, there is a paucity of evidence about what is established practice in relation to the flooring of stables. I don’t have any evidence as to what is good practice except the evidence from the Parties as to such discussions they had about drainage and we’ve listened to that, but I have nothing apart from that. I don’t have anything from you saying stables ought to slope either to a central drain or to the periphery of a building”.
MR ANDREW:
I think, if I hear you correctly, Your Worship, what you’re saying is in terms of industry practice or status….”
HIS WORSHIP:
I don’t have anything about that”.
MR ANDREW:
What you have, Your Worship, is a statement by an expert I recall….”
HIS WORSHIP:
In relation to the building”.
MR ANDREW:
Mr Lyon said, and I’m not a stable expert but I’m a building engineer consultant and any building whether it’s stables or whatever, if it’s this type…”
HIS WORSHIP:
I don’t see him as an expert in the field of telling me what’s appropriate for stables, I just don’t have that”.
In his reasons, it will be recalled, the learned magistrate said, after concluding that there was no agreement to have sub-floor drainage:
“I have no evidence that slope of the floor was required, I have no evidence as to good behaviour or good design in relation to that. I am not satisfied, therefore, that it was agreed that there be any above floor drainage, if you would like to put it that way.”
Counsel for the Appellants submitted, before me, that it was simply wrong for his Worship to have said that there was no evidence that slope of the floor was required, that there was no evidence as to good behaviour or good design in relation to that. I consider, however, that his Worship’s conclusions understood in context, were open; and that the Appellants’ submission misunderstands the import of what his Worship decided.
His Worship was entitled to conclude that there was no evidence that slope, either of the breezeway or of the individual horse stalls, was required – laying emphasis upon the concept of requirement – for more than one reason. The evidence of pooling, given by Mr Lyon, pertained to the breezeway. It was for his Worship, evaluating all the evidence, to decide whether the pooling which that witness described required the breezeway floor to have been set on a slope. In considering that matter his Worship was doubtless entitled to rely upon evidence of observations on other occasions that there was no pooling.
Further upon the question of what was required, there was evidence that to set the floor on a slope to a grate could create problems.
Further again, the expert witnesses called for the Appellants made assumptions about intended drainage. Mr Coghlan “understood” that drainage was required. Mr Lyon “anticipated” that the slab would have been set on a slope and would have “thought” that the floors of the horse stalls would have been set at the same level as the breezeway, and sloped. The learned magistrate was entitled to conclude that the latter witness did not understand why the stalls had been set at a lower level than the breezeway.
Again, neither of the Appellants’ experts seem to have had revealed expertise in the design of stables. Mr May, on the other hand, not only explained why he had advised the Appellants against sub-floor drainage, in his letter to them of 16 October 1998 he reminded them why it had been agreed that a level floor would be poured.
In all, the learned magistrate was entitled to conclude that any evidence of the Appellants’ witnesses concerning the slope of the floor did not provide, in light of their experience and the manner of their giving evidence, evidence that a slope was required.
I turn to his Worship’s observation that “… I have no evidence as to good behaviour or design in relation to that”. That observation must be understood in context. His Worship was doing no more, I consider, than saying that such evidence as had been adduced was not evidence – having regard to the experience of the witnesses and the different qualifications upon their evidence – that he was prepared to treat as being evidence of “good behaviour or good design of horse stables”. In my opinion his Worship’s appreciation of that evidence was not ill-founded.
The learned magistrate went on to say that he was not satisfied “therefore that it was agreed that there be any above floor drainage if you would like to put it that way”. I think that all his Worship was saying was that, absent evidence of a requirement that there be a sloping floor, and absent evidence of good practice requiring that the floor be set in such a way, he would not imply a term into the contract that such a slope be provided. The contract as I have pointed out, did not allege such a term in fact. The Appellants sought to prove a different term: that the stables would be completed in a good and workmanlike manner; and breach of that term by, inter alia, the Respondent not setting the floor (of the entire complex or at least the breezeway) on a slope. In that they failed at least because his Worship in substance found that failure to set the floor either of the stalls or the breezeway on a slope was not a failure to complete the stables work in a good and workmanlike manner. Insofar, then, as his Worship said he was not satisfied that there had been any agreement about above floor drainage, that observation could be put to one side as surplusage without detracting from the validity of his overall conclusion.
In deciding that his Worship’s resolution of the issue under discussion did not reveal any misconception that there was no evidence of particular matters I have assumed that it was open to the Appellants to contend that a term was to be implied into the Stables Contract along the lines which they alleged; and that the builder’s failure to set the floor of the breezeway or the individual stalls, or both, on a slope could constitute – always depending upon the evidence – a breach of such a term. It is unnecessary to decide, in the circumstances, whether those assumptions were sound.
Conclusions Summarised
It was necessary for the learned magistrate to separately consider, in the case of Contracts 2, 3 and 4, whether the Respondent had by its conduct repudiated any of those contracts and whether the Appellants had accepted that repudiation and terminated that contract. His Worship did not clearly approach the matter in that way. His reasons strongly suggest that, had he done so, he would have held that the Appellants had terminated the contracts for reasons unrelated to any of the alleged circumstances of repudiation, and wrongly. It was open to him, but he was not compelled, to reach such conclusions. The manner in which his Worship couched his reasons means, regrettably because it will delay finality of this litigation, that the order he made on the counterclaim must be set aside and the circumstances of termination must be considered by his Worship, contract by contract. The determinations must be made upon the evidence adduced at the trial from which the present appeal was brought. Counsel should be accorded the opportunity, if they wish, of making further submissions concerning relevant legal principles.
If the learned magistrate resolves the counterclaim adversely to the Appellants, that will have no impact upon the quantum of the Respondent’s claim for his Worship previously determined that the Respondent had not established loss of profit in respect of any of Contracts 2, 3 or 4.
If the learned magistrate resolves the counterclaim favourably to the Appellants as against the Respondent in the case of one or more of Contracts 2, 3 and 4 he should determine the Appellants’ monetary entitlement, subject to one consideration, only having regard to the claim raised by paragraph 9.1 of the counterclaim – so far as any of sub-paragraphs (a),(b) or (d) were relevant. That does not mean that his Worship would be obliged to act upon the amended figures alleged by those sub-paragraphs. Rather, of course, he would have to decide whether the evidence established any loss and damage by reason of completion and/or rectification in the case of the particular contract.
The exception or consideration to which I referred a moment ago is this: If the learned magistrate resolved the issue of construction pertaining to the phrase “$100 per day” favourably to the Appellants, it would be necessary to add to the amount payable by the Respondent, but in respect of one contract only, the sum of $1,000. That would represent $100 per calendar day for the period 21 to 30 October 1998, the period up to and including 20 October already having been provided for by adjustment of the amount due to the Respondent on the Stables Contract.
In saying that if the counterclaim – in respect of any one or more contract - is resolved favourably to the Appellants then the learned magistrate should consider only the claim for loss and damage raised by paragraph 9.1 of the counterclaim and, in the case of one contract only that his Worship should add liquidated damages of $1,000 if the issue of construction is also resolved favourably to the Appellants, I emphasise that the Appellants should not be at liberty to pursue any of the other aspects of their counterclaim which were raised by paragraph 9.3 of the counterclaim. Those other aspects were plainly rejected by the learned magistrate. Whether or not he dealt with those matters as obiter, his conclusions were well open; and it would be entirely unsatisfactory to require his Worship to reconsider issues in respect of which his conclusions were not subject to challenge. Counsel for the Appellants, I add, did not suggest to the contrary. Finally, concerning the counterclaim I should add that, regardless whether the Appellants succeeded against the Respondent it was not suggested before me that they should succeed against Mr May. The counterclaim so far as it concerns him should in any event be dismissed.
The order made in favour of the Respondent on the Stables Contract must also be set aside. The Respondent, let me make it quite clear, is entitled to an order for the amount of the invoice less cost of rectification which his Worship fixed at $3,000 and less liquidated damages. If his Worship determines the issue of construction of the phrase “$100 per day” favourably to the Respondent then the overall amount of the order will be exactly the same as it was in the original order. But if the issue of construction is resolved in favour of the Appellants, the amount of the order will be $2,000 less than the order from which this appeal was brought.
The costs of the proceeding before the Magistrates' Court, including the costs of trial, will of course be a matter for reconsideration by the learned magistrate – to be determined in light of his resolution of the claim and counterclaim generally.
Orders
Subject to anything that counsel may say I shall make orders in accordance with the following minutes:
1. Appeal allowed.
2.Set aside orders made on the claim and counterclaim in the Magistrates’ Court at Melbourne on 24 January 2000.
3.Remit the claim and counterclaim for reconsideration by the magistrate before whom the trial of the claim and counterclaim was conducted, such reconsideration to be in accordance with these reasons.
I will hear the parties upon the question of costs.
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