Morago Nominees Pty Ltd T/As Gavin Construction v Casver Imports Pty Ltd [No 3] - [2013] WADC 116

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: MORAGO NOMINEES PTY LTD T/AS GAVIN CONSTRUCTION -v- CASVER IMPORTS PTY LTD [No 3] [2013] WADC 116

CORAM: SCHOOMBEE DCJ

HEARD: 13 JUNE & 8 JULY 2013

DELIVERED : 19 JULY 2013

FILE NO/S: CIV 1350 of 2011

BETWEEN: MORAGO NOMINEES PTY LTD T/AS GAVIN CONSTRUCTION
Plaintiff
AND
CASVER IMPORTS PTY LTD
Defendant

Catchwords:

Contract - Counterclaim for payment of outstanding sums due for performance of construction work - Plaintiff company under administration - Grant of leave by Supreme Court to defendant to continue with counterclaim - Whether order for payment of outstanding sums should be made

Legislation:

Nil

Result:

Order for payment of $83,320.12 by plaintiff to defendant subject to defendant being prohibited from enforcing payment other than with leave of the Supreme Court of Western Australia

Representation:

Counsel:

Plaintiff: Mr R D Shaw (appeared on 13 June 2013)
No appearance (8 July 2013)

Defendant: Mr B P Wheatley

Solicitors:

Plaintiff: Lavan Legal
Not applicable (8 July 2013)

Defendant: Mossensons

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

Nil

SCHOOMBEE DCJ: The plaintiff, Morago Nominees Pty Limited, trading as Gavin Construction, contracted with Superline Enterprises Pty Limited to construct a commercial office building on lot 828, Lord Street, East Perth. Gavin Construction in turn contracted with the defendant, Casver Imports Pty Limited, to supply and install the glass work to the building. The construction of the building was beset by a number of problems and was not fully completed by the date agreed between Gavin Construction and Superline.
Gavin Construction issued proceedings against Casver Imports claiming damages on the basis that it was liable to Superline for payment of damages because the building was not capable of being leased in the period from 6 July 2010 to 30 January 2011. Gavin Construction also claimed damages in respect of the alleged failure by Casver Imports to provide it with the guarantees, conditions and warranties that were required by the contract between Gavin Construction and Superline and which, according to Gavin Construction, were implied into the contract between Gavin Construction and Casver Imports.
Gavin Construction alleged that Casver Imports had initially installed glass panels in the lobby which did not comply with Australian Standards and that the need for the replacement of the 8 mm glass panels with 10 mm glass caused the delay in practical completion which exposed Gavin Construction to a claim by Superline for loss of rent.
Casver Imports alleged that the delay in completion of the building was caused by defective workmanship regarding the metal frames for the glass, the uneven level of the floors and other problems which had nothing to do with Casver Imports but needed to be rectified before the replacement glass could be installed. Casver Imports denied any entitlement by Gavin Construction to damages and filed a counterclaim for outstanding amounts that were not paid by Gavin Construction in respect of the supply and installation of the glass work by Casver Imports.
The trial was listed to start on 8 July 2013. A de bene esse hearing was conducted on 13 June 2013 at which Mr Peter Manios, a director of Superline, gave evidence. Mr Manios' evidence dealt largely with the reasons for the delay in completion of the building and to what extent they were due to Casver Imports having to replace the 8 mm thick glass with 10 mm glass.
On or about 25 June 2013 Gavin Construction appointed external administrators, Messrs Williamson and Hurt from WA Insolvency Solutions. Pursuant to s 440D(1) of the Corporations Act 2001 the counterclaim by Casver Imports against Gavin Constructions was stayed and could only be continued with the administrators' written consent or with the leave of the court.
Casver Imports applied to the Supreme Court of Western Australia for leave to continue its counterclaim. The application and supportive affidavit by Mr Pierangelo Verzeroli, the managing director of Casver Imports, were served on the administrators. The affidavit of Mr Verzeroli stated that the trial in the District Court was listed to start on 8 July 2013.
On the day prior to the hearing in the Supreme Court Mr Jimmy Trpcevski, a manager at WA Insolvency Solutions, sent an email to the solicitors representing Casver Imports indicating that the administrators did not intend to continue the proceedings instituted by Gavin Construction at that point in time. With regard to the counterclaim, Mr Trpcevski advised that the administrators did not have sufficient information to determine the position and were not able to make any submissions but opposed the application for leave to continue the counterclaim.
The administrators did not appear at the hearing in the Supreme Court on 4 July 2013. An order was made by Beech J that Casver Imports have leave to proceed with its counterclaim but be prohibited from enforcing any judgment obtained without leave of the Supreme Court. The costs of the application were held to be costs in the cause of the counterclaim.
On 3 or 4 July 2013 Ms Kathy Woods, the listings co-ordinator of the District Court, telephoned WA Insolvency Solutions, advised who she was and asked to speak to someone about the Morago matter. She was told that she needed to speak to Mr Jimmy Trpcevski who was unavailable. Ms Woods then left a message with a secretary asking whether the administrators intended to appear at the trial in the District Court on 8 July 2013. No response was received by Ms Woods from the administrators.
There was no appearance by the administrators on the first day of the trial in the District Court. Counsel for Casver Imports relied on the order granted by the Supreme Court and advised this court that the administrators had knowledge of the trial commencing by reason of the affidavit sworn by Mr Verzeroli which was served on the administrators. They also had knowledge of Casver Imports' intention to apply to the Supreme Court for leave to continue the counterclaim.
Counsel for Casver Imports informed the court that the administrators had advised him that Gavin Construction would be placed into liquidation within the next two weeks. Counsel submitted that it was necessary that a judgment be obtained in respect of the counterclaim so that Casver Imports could lodge a claim in the proposed liquidation of Gavin Construction.
In light of these circumstances this court heard the counterclaim by Casver Imports.

Evidence regarding the counterclaim

Mr Jay Leonhardt, a former director of Casver Imports, gave evidence that Casver Imports was asked by Gavin Construction to tender for the supply and installation of the glass works for the building on lot 828. A disc containing the specifications and plans was provided to Casver Imports. Casver Imports submitted its tender by letter, dated 10 November 2008, in the total sum of $832,437 plus GST. The tender was accepted by way of a purchase order from Gavin Construction dated 5 December 2008.
Mr Leonhardt gave evidence that a plan depicting the glass for the windows and doors to lot 829 Lord Street (exhibit 19 tendered during the evidence of Mr Manios) specified 6 mm toughened glass. Mr Leonhardt explained that the building on lot 829 was constructed by Gavin Construction in close proximity to the building on lot 828 and that the specifications regarding the glass work was the same for both buildings. Mr Leonhardt also relied on an email from Palassis Architects, the architects appointed by Superline, to Mr Damian McKenna, the manager of the building works at Gavin Construction, attaching an image with the name of the chosen glass and specifying 8 mm. This email was forwarded by Mr McKenna to Casver Imports on 22 January 2009.
Mr Leonhardt gave evidence that in accordance with these instructions, 8 mm toughened glass was installed to the lobby screens, doors and windows in the building on lot 828. This work was completed towards the end of 2009.
On 15 June 2009 Casver Imports issued its first invoice in the amount of $143,000 relating to the purchase order. A total of $69,786.00 was paid by Gavin Construction in two amounts in August and December of that year, leaving a balance of $73,214.
A second invoice was issued by Casver Imports on 23 September 2009 in the total amount of $15,129.40. This invoice related to additional glass supplied and installed by Casver Imports as the doors in the lobby had been ordered with the wrong locking system by Gavin Construction and had to be replaced, including the glass. Gavin Construction paid the sum of $13,754, but inadvertently forgot to pay the GST amount. This left a balance of $1,375.40 in respect of the second invoice.
The third invoice issued by Casver Imports on 10 March 2010 again related to the purchase order and was in the amount of $1,314.52. No amount was paid in respect of this invoice.
On 11 March 2010 Mr Leonhardt sent an email to Mr McKenna, reminding him of the outstanding amounts in the total of $75,903.92. Mr Leonhardt gave evidence that there was then a meeting between him, Mr McKenna and Mr Sean Gavin, who was a director of Gavin Construction. The meeting took place on or about 11 June 2010 at the offices of Gavin Construction and Mr Gavin agreed that the outstanding monies would be paid within the next few days as long as Casver Imports agreed to fix any outstanding defects. Mr Leonhardt gave evidence that Casver Imports had already complied with a request to fix items on a list of defects prior to the meeting, but Mr Gavin wanted to provide a further list of defects.
Mr Leonhardt said his company received no further payment from Gavin Construction even though he spoke almost daily with Mr McKenna who agreed that Casver Imports was owed in the region of $75,000. Casver Imports sent several reminder notices to Gavin Construction in respect of the outstanding invoices.
On 15 June 2010, Mr Leonhardt sent an email to Mr McKenna reminding him that it had been agreed at the earlier meeting that Casver Imports would be paid the outstanding amount and would be provided with a list of defects. Mr Leonhardt gave evidence that Mr McKenna had indicated to him that Casver Imports might have to be negotiable in terms of what sum they would accept in full and final payment and Mr Leonhardt said he was prepared to negotiate in order to receive any payment at all.
On 29 June 2010, Mr Leonhardt again reminded Mr McKenna by email that an amount of approximately $75,000 was owing to Casver Imports.
Mr Leonhardt gave evidence that on or about 6 July 2010 there was a walk-through of the building at which representatives of Superline were present and also an independent architect appointed to review the numerous problems with the building. On that occasion Superline questioned whether the thickness of the glass installed by Casver Imports complied with Australian Standards. It was then established that the 8 mm toughened glass, although stronger than 10 mm laminated glass, did not comply with Australian Standards. Casver Imports then agreed to replace all of the 8 mm glass with 10 mm glass.
Mr Leonhardt gave evidence that the replacement glass was installed in the latter half of 2010. The very last item of work done on the replaced lobby glass was the insertion of silicone between the glass panels which was completed by a sub-contractor on 19 December 2010. Mr Leonhardt said the replacement glass was available to be installed earlier but could not be put in position because other defective work to the building had to be rectified first. The metal frames into which the glass had to be placed had been damaged by other workers and needed to be replaced. Some of the walls containing the glass panels had been placed in the wrong position and had to be relocated. The floor levels on at least two floors were uneven and had to be redone. These issues and other problems meant that the replacement glass could not be put in place until the other matters had been rectified.
Mr Manios also gave evidence during the de bene esse hearing that the replacement glass had been available since about October 2010 and supported Mr Leonhardt's evidence about the numerous defects to the building which had to be repaired, such as the damaged metal frames for the glass and the uneven floors.
Mr Leonhardt gave evidence that the levelling of the floors was only completed in about March or April 2011. He referred to an invoice by the carpet supplier, Carpet Choice, dated 18 April 2011 which indicated that the last installation of carpet had occurred on 15 April 2011. Mr Leonhardt said that any delay in having the building ready for occupation was not caused by the replacement of the glass, but by other defects and problems.
The claim by Gavin Construction for damages suffered because of the alleged delay in supplying and installing the replacement glass is not currently pursued. The only issue before me is whether Casver Imports supplied and installed the glass in accordance with the purchase order and the request to replace the glass in the doors which had the wrong locking system.
Mr Leonhardt gave evidence that in mid‑2011 Casver Imports agreed to do some further glass work for Gavin Construction which had become necessary because it was discovered that there was inadequate floor drainage on the north side of the first and second floor. The existing glass panels had to be removed and new glass had to be installed for this defect to be rectified. Casver Imports issued an invoice on 1 July 2011 in the amount of $7,416.20 in respect of this work. Nothing was paid in respect of this invoice. This brings the total outstanding amount to $83,320.12.
On 24 February 2011 Mr Leonhardt sent an email to Messrs Gavin and McKenna reminding them that it had been agreed at the meeting in June 2010 that the outstanding invoices would be paid to Casver Imports as soon as Gavin Construction received payment from Superline. Mr Leonhardt noted that the building was very near completion.
In response, Mr Gavin called for a meeting. Mr Leonhardt gave evidence that at that meeting he was again told that Casver Imports would be paid the majority of the outstanding amounts and that a list of defects would be supplied. Mr Leonhardt said that at no time was there any discussion that the work had not been fully completed, not completed to the requisite standard or had caused delays.
I am satisfied on the basis of the evidence given by Mr Leonhardt and the documentation tendered that Casver Imports performed the work as ordered by Gavin Construction. In the absence of evidence to the contrary, I accept that Casver Imports were instructed by the architect for the project and by Gavin Construction to install the 8 mm toughened glass and that they are not to blame for installing glass that did not comply with Australian Standards. In any event, Casver Imports replaced the glass with 10 mm thick glass at their own cost.
There is no evidence before me regarding any outstanding defects that Casver Imports were advised of and that were not rectified by them. Accordingly, there is no reason why Casver Imports should not be entitled to the total amount of $83,320.12, set-out in the four invoices that were not paid, or not fully paid, by Gavin Construction.

Conclusion

Casver Imports is entitled to the outstanding amounts as per the invoices in a total of $83,320.12.
It is also entitled to interest on this amount at the rate of 6% per annum from a date 30 days after the date of each invoice. Counsel for Casver Imports agreed that an order for interest from 1 August 2011, which is 30 days after the last invoice, would suffice.
Casver Imports is also entitled to the costs of the hearing of the counterclaim and the costs of the application to the Supreme Court. I will also allow Casver Imports one third of the costs of the de bene esse hearing as some of the matters covered by Mr Manios dealt with the general background to the construction of the building and the type of work performed by Casver Imports. The remainder of Mr Manios' evidence dealt with the issue of who was responsible for the delay in completing the building.