Mark Andrew Boulton v Gateway Accounting Solutions Pty Ltd
[2010] QDC 133
•29 January 2010
DISTRICT COURT OF QUEENSLAND
CITATION:
Mark Andrew Boulton v Gateway Accounting Solutions Pty Ltd & Ors [2010] QDC 133
PARTIES:
BOULTON
(Plaintiff)
v
GATEWAY ACCOUNTING SOLUTIONS PTY LTD ACN 109 595 477
(First Defendant)
And
IVAN REGINALD WILLEY
(Second Defendant)
And
HELEN MAREE WHELAN
(Third Defendant)
FILE NO/S:
D1719/2009
DIVISION:
Civil
PROCEEDING:
Trial
ORIGINATING COURT:
District Court, Brisbane
DELIVERED ON:
29 January 2010
DELIVERED AT:
Brisbane
HEARING DATE:
21 – 24 December 2009
JUDGE:
Searles DCJ
ORDER:
The plaintiff’s claim for damages relating to the work in progress claim be dismissed with costs;(1)
The plaintiff’s claim for the second instalment payment of $114,000 be dismissed with costs;(2)
The plaintiff’s claim for the final instalment be allowed. The plaintiff to pay the defendants $30,250.59 being the admitted counterclaim of $57,370.50 less the final instalment claim of $27,119.91; (3)
The plaintiff pay the defendant $756.26 being interest at 10% on $30,250.59 from 29 October 2009; and(4)
The defendants to pay that part of the plaintiff’s costs as relate to the final instalment claim.(5)
CATCHWORDS:
CONTRACT – CONSTRUCTION – IMPLIED TERMS – WAIVER
COUNSEL:
J. Meredith for the Plaintiff
M. Martin for the Defendant
SOLICITORS:
MacGillivrays Solicitors for the Plaintiff
ClarkeKann for the First, Second and Third Defendants
As at 4 June 2008 the plaintiff owned and operated an accounting practice under the name, Mark Boulton & Associates (Business). By contract dated 4 June 2008 (contract)[1] the first defendant (Gateway) agreed to purchase the Business for $912,000 by way of a deposit of $20,000, a first instalment of $664,000 and two further instalments, of $114,000 each. The deposit was paid upon execution of a contract and the first instalment upon completion of the contract on 1 July 2008 (Completion). As will be seen from relevant provisions of the contract, the second and final instalments were subject to adjustments downward depending on the fee levels reached for the relevant periods to which they related.
[1]Exhibit 1 Tab 6.
The plaintiff claims a total of $182,735.67. As to $141,119.91, $114,000 is for the second instalment and $27,119.91 for the adjusted final instalment. The balance of $41,615.76 is for damages for an alleged breach of contract being fees reflected in Work in Progress (WIP) for work done by him up to Completion. He alleges the contract obliged Gateway to invoice that WIP on his behalf which he says it failed to do or failed to do in a reasonable time, resulting in the loss of those fees to him. The claim against the second and third defendants is based upon their obligations as guarantors of the performance of the first defendant under the contract.
Gateway’s response to the plaintiff’s claim is:-
(a) to deny the second instalment of $114,000 is owing;
(b) as to the adjusted final instalment claim of $27,119.91 it denies it is owing. It says that, in terms of the contract, that figure is deemed to be disputed, and in those circumstances, the contract provides for a dispute resolution regime which has not been complied with; and
(c) it counterclaims for the sum of $57,370.50 representing revenue from clients who, within three years of Completion, transferred their work back to the plaintiff. The plaintiff admits this debt, so that amount will need to be offset against any monies found to be owing to the plaintiff. Apart from that exercise this aspect need not be further considered.
Relevant Clauses of the Contract
The following are the relevant clauses of the contract:-
“1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement, unless contrary to or inconsistent with the context:
…
“Second Instalment” means the amount described in item 3 of Schedule 1 as the Second Instalment less the Second Instalment Adjustment, if any, to be made under Clause 4.
“Second Instalment Anniversary Date” means the date which is 9 months after the Completion Date.
“Second Instalment Date” means the date which is 14 days after the Second Instalment Anniversary Date.
“Final Instalment” means the amount described in item 3 of Schedule 1 as the Final Instalment plus or minus the Final Instalment Adjustment, if any, to be made under Clause 4.
“Final Instalment Anniversary Date” means the date which is 15 months after the Completion Date.
“Final Instalment Date” means the date which is 14 days after the Final Instalment Anniversary Date.
...
4. PAYMENT OF BALANCE OF PURCHSAER PRICE
4.1 Payment of Balance of Purchase Price
The Vendor, Beskin and Purchaser agree that the Balance of the Purchase Price shall be paid by instalments as follows:
First Instalment: The First Instalment is to be paid on the Completion Date.
Second Instalment: The Second Instalment is to be paid on the Second Instalment Date.
Final Instalment: The final Instalment is to be paid on the Final instalment Date.
4.2 Terms
For the purpose of this clause 4, the following terms shall have the following meanings:
(a) “The Second Instalment Adjustment” means:
(i)in the case where Professional Fees earned from the completion Date to and including the Second Instalment Anniversary Date (The “Second Instalment Period”) is equal to or greater than $570,000.00, zero;
(ii)in the case where Professional Fees earned during the Second Instalment Period is less than $570,000.00, as follows:-
(A)($570,000.00 less the total of the Professional Fees earned during the Second Instalment Period) multiplied by 1.2.
(b) “The Final Instalment Adjustment” means:
(i)in the case where Professional Fees earned from the Completion Date to and including the Final Instalment Anniversary Date (the “Final Instalment Period”) is equal to or greater than $950,000.00, zero and, in the case where the Second Instalment Adjustment was not zero, then plus that Second Instalment Adjustment;
(ii)in the case where Professional Fees earned during the Final Instalment Period is less than $950,000.00, as follows:-
(A)($950,000.00 less the total of the Professional Fees earned during the Final Instalment Period) (multiplied by 1.2) less the Second Instalment Adjustment.
(c)“Professional fees earned” means all professional fees bill and calculated on an accrual basis together with all work in progress generated for the period on client matters which ought to have been billed in the ordinary course of business during such period.
4.3 In dealing with the Second Instalment:
(a)The Purchaser shall by the Second Instalment Date provide the Vendor with notice of its calculation of Professional Fees earned and of the Second Instalment Adjustment (the “Second Instalment Adjustment Notice”). If the Second Instalment Adjustment Notice is received by the Vendor after the Second Instalment Date, then the Second Instalment Adjustment shall be irrevocably deemed to be zero;
(b)Upon receipt of the Second Instalment Adjustment Notice by the Vendor, the Purchaser shall provide the Vendor with full access to all its records at the offices of the Purchaser within 3 days of the Vendor requesting such access in writing and thereafter for a continuous period of 10 days so that the Vendor may satisfy itself as to the accuracy of the calculation of Professional Fees earned and make copies of all relevant documents to assist in satisfying the Vendor. If the Purchaser does not permit the Vendor access to all its records within 3 days of the Vendor requesting such access in writing or the Purchaser does not thereafter for a continuous period of 10 days permit such access, then the Second Instalment Adjustment shall be irrevocably deemed to be zero;
(c)Upon receipt of the Second Instalment Adjustment Notice the Vendor may:
(i)Agree with its calculation by providing the Purchaser with notice in writing of its agreement (the “Agreement Notice”); or
(ii)Dispute its calculation and unless the Purchaser is in receipt of the Agreement Notice, the Vendor shall be deemed to dispute its calculation.
(d)Where the Vendor disputes the calculation of the Second Instalment Adjustment, both the Vendor and the Purchaser shall act honestly and reasonably to reach agreement on the amount of the Second Instalment Adjustment, but if no agreement is reached within 28 days of the Vendor receiving the Second Instalment Adjustment Notice then either party may request the then president of the Queensland Law Society to appoint a suitably qualified accountant (the “Adjudicator”) who shall act as an expert (whose decision shall be final) in determining the Professional Fees earned and the parties shall bear the cost of such appointment equally.
(e)Upon determination of the Professional Fees earned under the preceding subparagraph by Adjudicator, the Purchaser shall pay the Second Instalment.
4.4 In dealing with the Final Instalment:
(a)The Purchaser shall by the Final Instalment Date provide the Vendor with notice of its calculation of Professional Fees earned and of the Final Instalment Adjustment (the “Final Instalment Adjustment Notice”). If the Final Instalment Adjustment Notice is received by the Vendor after the Final Instalment Date, then the Final Instalment Adjustment shall be irrevocably deemed to be zero;
(b)Upon receipt of the Final Instalment
Adjustment Notice by the Vendor, the Purchaser shall provide the Vendor with full access to all its records within 3 days of the Vendor requesting such access in writing and thereafter for a continuous period of 10 days so that the Vendor may satisfy itself as to the accuracy of the calculation of Professional Fees earned and make copies of all relevant documents to assist in satisfying the Vendor. If the Purchaser does not permit the Vendor access to all its records within 3 days of the Vendor requesting such access in writing or the Purchaser does not thereafter for a continuous period of 10 days permit such access, then the Final Instalment Adjustment shall be irrevocably deemed to be zero;
(c)Upon receipt of the Final Instalment Adjustment Notice the Vendor may:
(i)Agree with its calculation by providing the Purchaser with notice in writing of its agreement (the “Agreement Notice”); or
(ii)Dispute its calculation and unless the Purchaser is in receipt of the Agreement Notice, the Vendor shall be deemed to dispute its calculation.
(d)Where the Vendor disputes the calculation of the Final Instalment Adjustment, both the Vendor and the Purchaser shall act honestly and reasonably to reach agreement on the amount of the Final Instalment Adjustment, but if no agreement is reached within 14 days of the Vendor receiving the Final Instalment Adjustment Notice then either party may request the then president of the Queensland Law Society to appoint a suitably qualified accountant (the “Adjudicator”) who shall act as an expert (whose decision shall be final) in determining the Professional Fees earned and the parties shall bear the cost of such appointment equally.
(e)Upon determination of the Professional Fees earned under the preceding subparagraph by the Adjudicator, the Purchaser shall pay the Final Instalment.
…
8. DEBTORS AND CREDITORS
8.1 Creditors(a)The Vendor must pay and discharge, all debts and liabilities of the Business (except where the Purchaser accepts liability) incurred before Completion.
(b)The Purchaser is solely responsible to all creditors of the Business for debts and liabilities incurred by the Purchaser from Completion.
8.2 Work in Progress as at the Completion Date
(a)The Vendor will render separate invoices to the Purchaser for each individual client for work in progress carried out, and unbilled, as at the Completion Date.
(b)Any invoice rendered under the preceding paragraph by the Vendor will be a debt due and recoverable in accordance with the succeeding clause.
8.3 Pre-completion debts
(a)The Vendor will be entitled to payment of all moneys payable to the Business as at the date of Completion and all moneys owing after issue of an invoice by the Vendor under the preceding clause 8.2 and the Purchaser will promptly account to the Vendor for all payments received in relation to all debts due to the Vendor no later than 5 Business Days after the date of receipt of those moneys.
(b)Clause 8.3(a) does not prevent the Vendor from independently recovering debts payable to the Vendor at the date of Completion or after the issue of an invoice by the Vendor under clause 8.2.
Work in Progress Claim
This claim relies on the implication of two terms into the contract which the plaintiff says are necessary to give business efficacy to clause 8.2. The terms sought to be implied are:-
“(a)That the first defendant would act in good faith and cooperate by rendering the WIP tax invoices to the relevant clients of the business, whether they be by incorporation into tax invoices rendered by the first defendant to such clients or not; and
(b)That the first defendant would do all things necessary to secure the performance of the contract, including the rendering of the WIP tax invoices to the relevant clients of the business, whether that be by incorporation into tax invoices rendered by the first defendant to such clients or not.[2]
[2]Second amended statement of claim [11].
In Codelfa Construction Pty Ltd v State Rail Authority of NSW[3] Mason J with whom Stephen and Wilson JJ, said:-
[3](1982) HCA 24; (1982) 149 CLR 337 at 347.
At page 347:
“The conditions necessary to ground the implication of a term was summarised by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20, at P. 26: ‘(1) It must be reasonable and equitable; (2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) It must be so obvious that it “goes without saying”; (4) It must be capable of clear expression; (5) It must not contradict any express term of the contract’.”
At page 352:
“The true rule is that evidence surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish subjective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification …”
The plaintiff relies on the use of the word “render” in clause 8.2(a) and relies upon two dictionary definitions of that word. The first is the Macquarie Dictionary[4] which defines render to mean “to present for consideration, approval, payment, action, etc as an account.” The second definition is the Shorter Oxford English Dictionary[5] where it is defined as “verb transitive present (as account, reason, answer, etc); submits to a person for consideration or approval …”.
The plaintiff acknowledges that, if words such as “send” or “delivery” had been used in lieu of render, he would have difficulty in arguing there was an obligation on the part of Gateway to render those invoices to the plaintiff’s clients as is his contention.
[4]4th ed. 2005 p. 1199.
[5]6th ed. 2007 p. 2528.
The plaintiff says that an ambiguity arises in clause 8.2 because of the tension between the obligation on the plaintiff’s part under clause 8.2(a) to render invoices for pre-settlement WIP and the right in the plaintiff under clause 8.3(b) to recover that WIP as fees.
I do not agree there is any ambiguity arising under clause 8.2 by virtue of the abovementioned alleged tension or otherwise. The entitlement to fees represented by the WIP prior to completion date is solely that of the plaintiff. Further, no fees are recoverable until an invoice has been rendered, so the plaintiff’s right under 8.3(b) to recover those debts necessarily involves the rendering by him of an invoice prior to recovery.
If one adopts the meaning of “render” to mean present for payment or approval within the above definitions then the use of that word in clause 8.2(a) is inapt to address the situation sought to be addressed by that subclause. There is no obligation in the contract on Gateway to either pay or approve the subject invoices. They are a matter between the plaintiff and his clients. So, to my mind, it was not the intention of the parties to use the term render to mean present for payment or approval.
But the definitions of “render” relied upon by the plaintiff are not confined to a reference to payment or approval. Both dictionary definitions include other concepts for instance, presentation for consideration or action. That more accords with what I see to be the intention of the clause, namely to keep Gateway informed as to invoices rendered by the plaintiff as referred to in paragraphs 12 & 13 following. If those meanings are given to the word “render” then it seems to me there would be difficulty in contending for the interpretation that the clause embraced an obligation on the part of Gateway to render the relevant invoices.
Clauses 8.2 and 8.3 are clauses of a type commonly found in contracts for the sale of a business. They facilitate the orderly transition from the previous proprietor to the new and anticipate all the attendant overlap in administration in relation to work done pre and post completion. They are designed to allow the vendor to render and collect fees not sold under the contract and which are rightly to remain the property of the vendor but in a context where the purchasers are kept informed of the details of those invoices. Of course it is in the interests of both parties that the transition to new ownership is effected with a minimum of inconvenience and/or concern to the client base. To my mind, clauses 8.2 and 8.3 do no more than facilitate that. There is no obligation on the part of Gateway to protect or enhance the property of the plaintiff constituted by the chose in action, the right to recover the pre-completion fees by rendering invoices for pre completion work or to follow up payment on any relevant invoices sent by the plaintiff. Its obligation in relation to them is to account to the plaintiff for any payments received by it upon those invoices. Nothing in the contract points to any other obligation in relation to those fees. The plaintiff at all times retained the right to render the relevant invoices to his clients and to recover those fees. Indeed, absent an assignment of them, he is the only one entitled to recover them.
In my view the correct interpretation of those clauses is to entitle the vendor to pursue his rights of fee invoicing and recovery against his former clients for pre completion WIP. Any such invoice obviously would be addressed to the client. He was obliged under clause 8.2 to give those invoices to Gateway to keep it informed of those billings which would allow Gateway to identify payments on them for which it was to account to the plaintiff. The reference to invoices to be rendered in clause 8.2 must, sensibly, include copy invoices given that the originals would go to the client.
The checking of any payments received against the invoices, and the accounting to the plaintiff for those monies, exemplify, respectively, the “consideration” and “action” comprehended by the definitions of “render” relied on by the plaintiff. Of course the parties may well decide, post contract, that a more efficient manner of billing those fees would be for the invoices to be sent by Gateway but one must be careful not to conflate post contractual conduct of convenience with contractual obligations. Gateway has no such contractual obligation to render the invoices.
The plaintiff points to various email exchanges subsequent to the contract which he says evidences that Gateway wanted to send all the relevant invoices to the plaintiff’s clients and to control that exercise. But, as I have said, what the parties did subsequent to the contract does not alter the proper interpretation to be given to the contract, absent variation, waiver or estoppel. No relevant variation, waiver or estoppel was relied upon, or made out, by the plaintiff. I find there is no ambiguity in clause in 8.2 and no warrant for the implication of the terms contended for. There was no breach of contract by Gateway in relation to the rendering of the subject fees.
But even if I am incorrect on that issue, it seems to me that the plaintiff has a more fundamental problem in relation to the recovery of these fees. It is trite to say that an actionable breach of contract involves proof of three elements: an enforceable contract, a breach and actionable loss. Nothing was put before me to demonstrate that the plaintiff has suffered any loss.
The plaintiff rendered to Gateway WIP tax invoices totalling $51,834.76[6] and of that amount $7,190.15 were paid by his clients and accounted to him by Gateway.[7] That leaves the balance of $44,644.61 claimed by way of damages. But there was no evidence before me to establish that those balance moneys could not still be recovered by the plaintiff. All that is said[8] is that the amount of $44, 644.61 is owing by way of damages resulting from the failure of Gateway to render the invoices or, in the event that they have rendered them, for the delay in rendering them. Again, assuming, against my finding, that no breach of contract has been established, it is encumbent upon the plaintiff to establish firstly that the relevant invoice has been rendered, secondly that he has an entitlement to the quantum of each invoice and, thirdly that, as a result of Gateway’s breach, that entitlement has been lost or diminished. That has not been done. Accordingly, I dismiss the plaintiff’s claim in relation to the WIP component.
[6]Second amended statement of claim [9].
[7]Second amended statement of claim [10].
[8]Plaintiff’s submissions [44].
Second Instalment Claim
The plaintiff relies upon clause 4.3(b) of the contract. It is not disputed that under cover of a letter of 3 April 2009 Gateway sent to the plaintiff a Second Instalment Adjustment Notice[9] advising that the relevant fees to be considered under clause 4.2 were $415,349.55 being $154,650.45 below the $570,000 threshold in clause 4.2(a)(i) and further advising that, as a result, no further payment was due in respect of the second instalment.
[9]Exhibit 1 Tab 47.
The plaintiff responded to that notice by letter dated 23 April 2009[10] in these terms:-
[10]Exhibit 1 Tab 48.
“Thank you for your letter of 3 April 2009 received by me from my solicitor on 20 April 2009.
Pursuant to clause 4.3(b) of the Business Sale Agreement I request access to your records as provided in the sale agreement. If you could have the following records available for me to review it will simplify this process:
1.Detailed listing of the invoices and the work in progress amounts that total the amount of $415,349.55.
2.Detailed work in progress report for those clients purchased by you as at 31 March 2009.
3.Detailed listing for all invoices raised by your company for the period 1 July 2008 to 31 July 2009 (I would expect that this list will show client name, invoice number, date and $ amount).
4.Access to the Handisoft Time and Billing software maintained by your company.
Please call me … so that we can agree on a mutually convenient date and time for me to attend at your office to review the records.”
Gateway responded by letter of 27 April attaching a list of the invoices totalling $415,349.55 and advised the plaintiff:-
“We did not use time and billing as a matter of procedure in our firm and therefore when we incorporated the billings of MBA clients on to our system the system in turn was not used. Therefore time and billing records will not be relevant.
However we are in the process of doing a time and billing exercise for the last 9 months and are prepared to provide access once the process is complete.”
The plaintiff says that Gateway “did not permit” him access to its records within clause 4.3(b) with the result that the Second Instalment Adjustment was thereby deemed to be zero with the result that the total of the Second Instalment of $114,000 became due and owing. The plaintiff points to the following as evidence that Gateway breached clause 4.3(b):
(a) The sending of the list of invoices under cover of the letter of 27 April did not constitute full access to records;
(b) Gateway never took up the invitation of the plaintiff in his letter of 23 April to call him to arrange a time for him to attend the office;
(c) The plaintiff had no control over the time and billing exercise being undertaken by Gateway;
(d) Gateway did not give any time estimate of when that exercise would be completed;
(e) Gateway did not advise the plaintiff when it was completed;
(f) The letter of 27 from Gateway did not offer any opportunity to the plaintiff to respond;
(g) That letter was phrased in a way as to be final as to Gateway’s intent;
(h) The letter was done in circumstances where the plaintiff alleges Gateway had told him to stop harassing them in relation to the WIP debt claim;
(i) No mention was made in Gateway’s letter of giving the plaintiff the continuous period of 10 days to satisfy himself as to the accuracy of the professional fees;
I do not accept that Gateway denied the plaintiff access to its records. I am not satisfied that the above matters relied upon by the plaintiff, either individually or collectively, make out his claim that he was denied access to the records. To my mind the severe consequences of a breach of clause 4.3(b) resulting in a debt of $114,000 rather than nothing owing on the second instalment is such as to require strict proof of any such breach. The conduct constituting a denial of access to the records would, to my mind, need to be unequivocal conduct before Gateway was to suffer those consequences
But if I am wrong in that, Gateway alleges that, if there was a breach, there has been a waiver by the plaintiff denying him the opportunity of relying upon clause 4.3(b), or that, by his conduct, he is now estopped from relying on the breach. It is as well to recall the timeline. On 3 April 2009 the Second Instalment Adjustment Notice was given by Gateway. By letter of 23 April the plaintiff requested certain information. Gateway responded to that request by letter of 27 April 2009[11] explaining that the plaintiff’s system of time and billing had been incorporated into the post-completion practice that such an exercise was underway and to which the plaintiff would be entitled to access when it was completed. The plaintiff did not object to that course and there was nothing in his conduct which would have led Gateway to believe that he was insisting on strict compliance with clause 4.3(b). Indeed, to the contrary, there was sound basis for Gateway to infer from his lack of an immediate response, that he was content with the provision of information within clause 4.3(b) in due course when the time and billing exercise was completed. The next step taken by the plaintiff over a month after Gateway’s 27 April letter was to have his solicitors write by letter dated 1 June 2009[12] advising that the plaintiff was insisting on strict compliance with clause 4.3(b).
[11]Paragraphs 17 & 18 above
[12]Exhibit 1 Tab 53
The plaintiff denies any waiver and relies upon an extract from Young, Croft and Smith in their text “on equity”[13] which states:
“Waiver has been defined as an intentional act, with knowledge, by which a party abandons or announces a right or benefit. Waiver requires a deliberate act but, like election, it does not require an intention to bring about its consequences; it is the conduct from which waiver may be inferred that may be deliberate; Verwayen (at 473).
For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence…”
[13]2009 Thompson Reuters Lawbook Co., para 12.340, pg 832
He further relies on Crane v Colonial Mutual Fire Insurance Co. Ltd[14] in which Knox CJ, Isaccs and Starke JJ said:
“A waiver must be an intentional act with knowledge (per Lord Chelmsford LC in Earl of Darley v Proprietors of London Chatham & Dover Railway. First ‘some distinct act ought to be done to constitute a waiver’ (per Park B in Doed). Nash v Birch and per Williams J in Perry v Davis; next it must be ‘intentional’ that is, such as either expressly or by imputation of law indicates intention to treat the matter as if the condition did not exist or as if the forfeiture or breach of condition had not occurred; and lastly, it must, with knowledge’, an essential supported by many authorities, from Pennant’s case and down to Matthews v Smallwood.
‘Waiver’ is a doctrine of some arbitrariness introduced by the law to prevent a man in certain circumstances from taking up two inconsistent positions (see per James LJ in Pilcher v Rawlins). It is a conclusion of law when the necessary facts are established. It looks, however, chiefly to the conduct and position of the person who is said to have waived, in order to see whether he has ‘approbated’ so as to prevent him from ‘reprobating’ – in English terms, whether he has elected to get some advantage to which he would not otherwise have been entitled, so as to deny him a later election to the contrary (see Lord Shaw in Pittman v Crum Ewing. His knowledge is necessary, or he cannot be said to have approbated or elected.”
[14](1920) 28 CLR 305 at 326
The plaintiff argues that he was not obliged to respond to Gateway’s letter of 27 April and that he did not act in any way inconsistent with his rights under the contract to demand a zero adjustment under clause 4.3(b). He further says that Gateway did not alter its position to any extent and never gave him notice of completion of the time and billing exercise.
I do not agree with those submissions. The evidence shows that, for a month after receipt of the letter of 27 April containing Gateway’s proposal for access to records, the plaintiff did nothing to pursue access to the records. As I have said, the inference open, an obvious one, was that he had made the conscious decision to await the completion of the time and billing exercise rather than insist on strict compliance with clause 4.3(b). By doing that he led Gateway to believe he would not be insisting on strict compliance with clause 4.3(b). Gateway acted to its detriment in reliance upon that. Had he not so acted, but instead, advised Gateway he was insisting on strict compliance with clause 4.3(b), the latter could have, and, I am satisfied, on the balance of probabilities, would have, offered him immediate access to the records. His insistence would have triggered in the mind of any reasonable person in Gateway’s position the message that the contractual terms were being strictly relied upon and should be strictly observed by that person. By not looking to its own strict contractual compliance as a result of the plaintiff’s conduct, Gateway acted to its detriment. The plaintiff is thereby estopped from denying that access to the records was available to him. Alternatively, he waived his right to strict compliance with clause 4.3(b) and acquiesced in the proposal put forward by Gateway for inspection of the records when the time and billing exercise was completed.
Final Instalment Claim
By Final Instalment Adjustment Notice dated 8 October 2009[15] Gateway gave the plaintiff notice that its calculation of professional fees for the relevant period 1 July 2008 to 30 September 2009 was $722,949.55 and that its calculation of the Final Instalment Adjustment under clause 4.2(b) was $86,880.09 which when deducted from the Final Instalment of $114,000 left a final instalment to be paid of $27,119.91.
[15]Exhibit 1 Tab 61.
There was no dispute as to access to Gateway’s documents in relation to this payment. That figure of $27,119.91 was accepted by the plaintiff[16] although not strictly by the service of an agreement notice. In my view the acceptance is effective. Clause 4.3(c)(i) providing for the sending of an Agreement Notice is a clause for the benefit of the plaintiff only and can be waived by him which I find he has done by claiming payment of this amount in his statement of claim. I accordingly find that $27,119.91 is payable by the defendants to the plaintiff subject to the offset of $57,370.50 agreed by the plaintiff as owing to the plaintiff leaving a net amount due by the plaintiff to the defendant of $30,250.59 which I order the plaintiff to pay to Gateway.
[16]Further amended statement of claim [34].
The admission by the plaintiff of the final instalment of $27,119.91 has a further dimension and that relates to the second instalment. I have already found that the plaintiff was not denied access to Gateway’s records and that, as a consequence, the deemed zero adjustment under clause 4.3 [b] was not triggered. In my view any right in the plaintiff to dispute the second instalment payment has been lost because of his conduct in accepting the final instalment figure and the rolling nature of the operation of clauses 4.2(a) and (b) dealing with the adjustments for the second and final instalments. The Second Instalment Adjustment refers to fees earned from the completion date 1 July 2008 to the Second Instalment Anniversary Date which is 9 months from the completion date, namely, 1 April 2009. Under clause 4.2(a) the Professional Fees to be earned in that period to avoid any adjustment were to be $570,000 or greater.
When one turns to the final instalment adjustment provision in clause 4.2(b) the relevant period is from completion on 1 July 2008 to the Final Instalment Anniversary Date 15 months from completion, namely, 1 October 2009. It includes the second instalment fee period. The corresponding fees to be earned in that period to avoid an adjustment were $950,000 or greater which figure includes the abovementioned figure of $570,000 or greater.
It can be seen by the combination of those provisions that, to arrive at the Final Instalment figure to determine what, if any, adjustment was to be made, it was necessary to strike the fees for the period between completion and the Second Anniversary Instalment Date.
It follows, in my view, that the plaintiff, in accepting the final instalment figure of $27,119.91 thereby accepted the correctness of Gateway’s assertion of the fees relevant to the calculation of the Second Instalment Adjustment. That being the case, the plaintiff, in so accepting that figure, waived any right he may have had to dispute the Second Instalment Adjustment Notice of 3 April 2009. He has accepted the Final Instalment Adjustment Notice in order to obtain the benefit of the monies owing under that notice. The claim for the second instalment payment of $114,000 was based, in effect, on deemed fees of $570,000 or greater with a consequential deemed zero adjustment.
To assert that the fees for that period were not as asserted by Gateway in its notice but then, for the purpose of achieving payment of the final adjusted instalment figure, to accept that those fees were as so asserted, would be, at the same time, to approbate and reprobate. The Plaintiff cannot have it both ways. He accepts that Gateway gave access to its records for the purpose of satisfying him that the final instalment figure was correct. That was the time to raise any concern about the second instalment fees. He did not do that. Rather, he agreed the final instalment which agreement necessarily involved acceptance of the second instalment fees He says[17] that the entitlement to the deemed second instalment of $114,000 arises as a result of denial of access to records which are separate events from those surrounding the final instalment claim. There was no such denial. He further says that, by accepting the final instalment claim as he has done, it cannot be said that there is a deemed acceptance of the second instalment figure of Gateway. For the reasons I have given, I disagree.
[17]Submissions, paragraph 96
The result is that the plaintiff is entitled to recover the final instalment of $27,119.91 to be offset by the admitted counterclaim of $57,370.50 leaving the amount of $30,250.59 to be paid by him to the defendant. The defendant is entitled to interest at !0% on that sum from 29 October 20009 the date of the amended counterclaim first claiming $57,370.50.
I order that:-
(a) the plaintiff’s claim for damages relating to the Work in Progress claim be dismissed with costs;
(b) the plaintiff’s claim for the Second Instalment payment of $114,000 be dismissed with costs;
(c) the plaintiff’s claim for the final instalment be allowed. The plaintiff to pay the defendants $30,250.59 being the admitted counterclaim of $57,370.50 less the final instalment claim of $27,119.91;
(d) the plaintiff pay the defendant $756.26 being interest at 10% on $30,250.59 from 29 October 2009 ; and
(e) the defendants to pay that part of the plaintiff’s costs as relate to the final instalment claim.
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