Norfolk Estates Pty Ltd v Cardno
[2013] QDC 135
•21 June 2013
DISTRICT COURT OF QUEENSLAND
CITATION:
Norfolk Estates Pty Ltd v Cardno (Qld) Pty Ltd [2013] QDC 135
PARTIES:
NORFOLK ESTATES PTY LTD ACN 010 355 138
(Plaintiff)
v
CARDNO (QLD) PTY LTD ACN 051 074 992 FORMERLY KNOWN AS CARDNO MBK (QLD) PTY LTD
(Defendant)
FILE NO/S:
2863/2009
DIVISION:
Civil
PROCEEDING:
Trial
DELIVERED ON:
21 June 2013
DELIVERED AT:
Brisbane
HEARING DATE:
27, 28, 29, 30 May 2013
JUDGE:
Reid DCJ
ORDER:
JUDGMENT FOR THE PLAINTIFF AGAINST THE DEFENDANT IN THE SUM OF $33,243.50.
CATCHWORDS:
Contract – agency – breach – refusal to produce digital documents – implied terms – copyright – whether documents were “produced” – assessment of damages – overpayment
COUNSEL:
K Kelso for the plaintiff
D Keane for the defendant
SOLICITORS:
Hynes Lawyers for the plaintiff
Thynne & Macartney for the defendant
The plaintiff in this matter is the owner of a significant 20 stage land development known as the Central Lakes project. It is situated to the west of the Bruce Highway at Caboolture, immediately opposite the Caboolture Airport. In March 2003 the defendant, a firm of consulting civil engineers, was engaged to be the civil engineer for the development.
Over time the relationship between the defendant and the developer soured and the defendant’s services were terminated. New engineers were then appointed in their place, initially to act as superintendant of the works and later to carry out the full duties of the development consulting civil engineer including design and supervision of construction.
The litigation has two elements. The first concerns a claim for $34,320, inclusive of GST, which is said to be the cost of conversion and reconstruction of hardcopy PDF design documents to a complete AutoCad digital design suitable for obtaining operational works approval from the local authority and for use in subsequent phases of stages 6A and 6B of the Central Lakes project. The hardcopy PDF documents had been provided by the defendant to QM Properties Pty Ltd (“QM Properties”) in December 2008.
The second part of the claim is for the refund of $10,103.50, together with $260.02 interest thereon, paid by the plaintiff to the defendant and which the plaintiff says the defendant was not entitled to. That sum was paid on 27 January 2009 prior to a determination under the Building and Construction Industry Payments Act (hereinafter “BCIPA”) made on 10 February 2009. It is said that by virtue of s 100 of BCIPA the plaintiff is not precluded from bringing these proceedings for the recovery of the payment. That it is entitled to do so if factually the monies paid were an overpayment is not in dispute.
Agency
An initial issue concerned the question of whether in fact the plaintiff had engaged the defendant and had itself suffered the loss claimed, or whether any loss was that of another company, QM Properties. In the Amended Statement of Claim the plaintiff alleges, inter alia, that in relation to the Central Lakes project it acted by its agent, QM Properties. That allegation is not admitted in the Further Amended Defence.
During the trial a number of witnesses spoke of the relationship between the plaintiff and QM Properties. Richard Laws said he was a “property development manager with Norfolk Estate, employed by QM”. He said he worked on the Central Lakes project and “reported to Mike Russell of QM Properties”. Scott Willis said he was an employee of QM Properties overseeing the Central Lakes project from December 2006. At that time he had taken over from Richard Laws in that role.
Michael Russell said he had been an employee of QM Properties since 1987 and was still so employed. He said the land being developed at Central Lakes was owned by the plaintiff and said “Norfolk Estates is part of the QM group of companies. QM Properties acts basically as the project manager for various companies including Norfolk”. He said the directors of the two companies were “the same”. Exhibit 3, comprises company extracts of the two companies which show that at relevant times each company had the same two directors and the same secretary. Ownership of each company was by a different corporation, though I note each had an identical address. I think it likely the companies where closely related but so conclude from evidence in the case other than the company extracts.
None of those witnesses I have mentioned was cross-examined about the relationship between the plaintiff and QM Properties.
In addition to that oral evidence, Mr Kelso, counsel for the plaintiff, relied upon a number of documents which had been admitted into evidence to prove the agency relationship between the plaintiff and QM Properties with whom the defendant had contracted.
Document 5 of the trial bundle, being Exhibit 1, was a letter from Mr Laws, the then project manager for QM Properties, to the defendant. It is headed “Central Lakes – Caboolture” and states, relevantly:
“In response to your proposal letters of 14 and 18 March 2003 in regard to the above project, I confirm Norfolk Estates Pty Ltd’s acceptance of your per lot rate of $1,000 for sub divisional civil engineering services …”
Mr Laws referred to that document in his evidence (p 44 and 45 of the first day of the transcript). He said the letter was “Norfolk Estate Pty Ltd’s acceptance in relation to the engineering services of the defendant for the project”. He was not cross-examined about that assertion. Document 7 of Exhibit 1 was a letter from the defendant to the Caboolture Shire Council (“CSC”). Attached to it was an application to develop the Central Lakes Estate. On its face the applicant shown in the document was “Norfolk Estates Pty Ltd c/ Cardno MBK” and was signed by “Norfolk Estates Pty Ltd by its duly constituted attorney Peter William MacGinley” pursuant to a nominated power of attorney. The contact on behalf of the owner, Norfolk Estates Pty Ltd, was said to be Richard Laws who, as I said, gave evidence that he was an employee of QM Properties. It is clear from those documents the defendant was aware that the plaintiff was the owner of the land and that the defendant made an application on the plaintiff’s behalf to the CSC to develop it. It was also aware Mr Laws, who it knew was an employee of QM Properties, was the nominated contact person for the plaintiff. A transmittal form attached to this application in the name of the plaintiff and submitted by the defendant to the CSC also indicated that relevant drawings referred to had been transmitted to QM Properties for the attention of Mr Laws.
Document 20 of the trial bundle comprised two emails. The first, of 12 February 2007, was from Wayne Clark, described as a “Principal” for the defendant, to Scott Willis, project manager of QM Properties. He enclosed an IDAS Development Application form and requested “signature under the landowner’s consent”. The document was returned by Mr Willis to Dominique Tydd, an employee of the defendant on 26 March 2007. The completed application had been signed on behalf of the landowner, Norfolk Estates Pty Ltd, by Michael Andrew Russell, said to be a duly constituted attorney of that company pursuant to a nominated power of attorney. Michael Russell was, as I have said, an employee of QM Properties.
In my view these matters leave me in no doubt that QM Properties was the agent of the plaintiff and that the defendant well knew that to be the case.
The Contract
The initial contract between QM Properties and the defendant for the defendant to provide engineering services for the project was reached in March 2003. Subsequently, the plaintiff became somewhat unhappy with the defendant’s performance, and as a result, agreement was reached in about May 2006 that payments would thereafter be made in stages after certain milestones had been achieved. These proposed phased payment conditions were sent by Richard Laws of QM Properties to the defendant on 11 May 2006 (document 13 of the trial bundle) and were accepted by the defendant on that day (document 14 of the trial bundle).
Subsequently, in about March 2008 the parties entered into an agreement for the defendant to provide civil engineering services for stages 6A and 6B of the Central Lakes project. There is some dispute as to whether this was a new agreement or a variation of the earlier agreement. In my view little, if anything, turns on the resolution of that issue, though I am inclined to accept that it was a new contract.
The Defendant’s proposal (Doc 24 of Ex 1) for stages 6A and 6B provided that the offer was “in accordance with the agreed Engineering Consulting Terms and Conditions”. In my view the subsequent agreement with respect to stages 6A and 6B therefore incorporated the earlier agreed terms of the document attached to document 13 of the trial bundle which was entitled “QM Properties Engineering Consulting Terms and Conditions”. Pursuant to that agreement there was provision for invoicing for 75% of the work for phase 1 upon submission of operational works application, but there was no provision allowing part payment for phase 2 works. Rather, in respect of phase 2 works the terms and conditions provided that “invoice can be presented upon approval from Council – no part claims will be accepted”.
The work contemplated by phase 2 involved the contemplated receipt of a request for information from the relevant Council after submission of the initial application, and a required response thereto to be provided to Council within a specific time framework. Phase 2 work also provided for the schedule of quantities and drawings to be provided to contractors, for the purpose of providing a tender, within five days of receipt of Council approval or date of earlier request from QM Properties. On its face the conditions therefore provided that the invoice from phase 2 work could only be presented upon approval from the Council following any information requests and the resolution of issues raised thereby.
Pursuant to the proposal of 5 February 2008 for stages 6A and 6B, the phase 2 payments for the 21 lot stage 6A development was to be $7,227 inclusive of GST and for stage 6B, an 18 lot stage, was $6,188 inclusive of GST.
It is important to recall that Part 5 of the Terms of Engagement of the Defendant, being part of Document 24, became part of the agreement with respect to Stages 6A and 6B. Part 5 of those terms is headed “Copyright and Use of Documents” and provides:
“5.1. Copyright and the intellectual property in all drawings, reports, specifications, bills of quantities, calculations and other documents produced by Cardno in connection with the Services shall remain vested in Cardno.”
“5.2 Provided the Client pays Cardno in full for the Fee and, if applicable, the Reimbursable Expenses, the Client shall have a license to use the documents referred to in clause 5.1 for the purpose of completing the Project.”
Part 7 of that agreement related to termination of services. Clause 7.1 provided that the client (i.e. QM Properties and/or the plaintiff) may, by notice in writing to Cardno, terminate the agreement if:
(1) Cardno is in breach of the terms of the Agreement and the breach has not been remedied within 14 days (or longer period as the Client may allow) of the service by the Client on Cardno of a notice requiring the breach to be remedied; or
(2) the Client serves on Cardno a notice requiring that the Agreement be terminated on a date specified in the notice being not less than 60 days after the date of issue of the notice.
Subsequent clauses in Part 7 referred to the Defendant’s entitlement to suspend services or terminate the agreement.
Subsequently, on 15 February 2008 the defendant provided to QM Properties an indicative program of works for stages 6A and 6B, being document 26 of the trial bundle. The programme of works set out a timeline for completion of the variety of tasks comprising the stages 6A and 6B developments. The plaintiff accepted the defendant’s proposal by email of 4 March (Document 29), subject to the indicative programme of works, which was however, as Mr Willis conceded in his evidence, to be adjusted to reflect the delay between its submission on 15 February 2008 and its acceptance on 4 March 2008, a period of a little under three weeks. Nothing in fact turns on this extension of the indicative programme of works.
The Dispute
Work progressed significantly more slowly than contemplated by the programme of works. Under that timeframe the response to a request for information from the CSC was to be resubmitted by 17 June 2008 (or by 6 July having regard to the extension earlier referred to). In fact no response by the Defendant to the CSC request for information was ever submitted. On 27 August 2008, the CSC had issued a request for information with respect to the stage 6A development, and on the following day issued a request for information with respect to the stage 6B development. In unchallenged evidence before me it was said by Mr Geoff Curtis, the project manager for the development after Otis International Consultants (“Otis”) had become project engineers, that the content of the request for information had not been addressed and that some of the requests involved moderately significant redesign changes to the development (for example, work on Summerfield Drive in stage 6A).
It is clear that relations between QM Properties and the defendant had deteriorated very significantly. In evidence before me employees of QM Properties indicated they were concerned at the defendant’s performance and its inability to meet the timeframe for development of phase 2 of stages 6A and 6B. By the end of September 2008 the CSC’s request for information had as I have said not been addressed and consequently CSC approval had not been given.
On 1 October 2008 Scott Willis, the plaintiff’s employee overseeing the Central Lakes project from December 2006, sent an email to the defendant’s employee Dominique Tydd (document 50) as follows:
“I note your advice that your company has suspended all services in relation to the civil construction works at both the Central Lakes and Macadamia Grove Estates until a mutually agreed termination arrangement is made. While Norfolk Estates Proprietary Limited (Norfolk) reserves all its rights, in order to enable us to continue with the projects, Norfolk will pay your company under protest all undisputed outstanding tax invoices in exchange for all documents, files and information (including all electronic information) that your company holds in relation to the provision of your company’s services at both the Central Lakes and Macadamia Grove Estates. Please urgently provide us with fully itemised tax invoices so that we are able to review them and process payment.”
The letter also advised that Otis had been appointed in the interim to manage the civil construction works.
Mr Willis said that he got no response to that letter other than an automated response indicating Ms Tydd was out of the office.
On Monday 6 October 2008 Scott Willis wrote a general email to consultants and to the relevant local authority, indicating that the defendant had from that time ceased to be further involved as consulting civil engineers in respect of the Central Lakes project and indicating that QM Properties on behalf of Norfolk Estates Pty Ltd rescinded all authority previously held by the defendant.
On 10 October 2008 the defendant issued tax invoices to the plaintiff in the sums of $5,571 and $4,532, both inclusive of GST, with respect to stages 6A and 6B of the development.[1] Both invoices it can be seen were for a little under 75% of the agreed phase 2 payments despite the fact that under the agreement payment for phase 2 works was to be made only upon council approval and no part claims were to be accepted.
[1]See documents 59 and 62 of the trial bundle.
Mr Willis gave evidence he disputed those invoices but they were eventually paid on 27 January 2009. It was part of a payment made through the plaintiffs then solicitors pursuant to s.18 of the BCIPA (see Doc 82 of Ex 1)
Prior to that payment there had been extensive correspondence between the parties and the provision of PDF documentation in December which the defendant had prepared in relation to Stages 6A and 6B. Although the Plaintiff, through QM Properties, requested AutoCad digital drawings, those were not provided. Mr Willis said that as a result Opus were engaged to use those PDF documents to recreate digital drawings which he said were necessary to progress the development.
The digital document claim
The claim for $34,320 is the cost to the plaintiff of Opus’ work in recreating those digital documents.
Even if digital documents had been provided the plaintiff would still have incurred fees from the replacement consulting engineer to complete phase 2 of stages 6A and 6B. As the defendant, through its counsel, demonstrated by its cross-examination of Mark Gittens, the civil design manager for Opus, some part of Opus’ $34,320 fee was unrelated to the fact that digital drawings had not been provided by the defendant, and related to other work required to complete Phase 2.
Counsel for the plaintiff submitted that a small discount would be appropriate. My impression during the trial was that about 25% of the fee would in any case have been incurred. Mr Keane argued for a significantly greater discount and submitted the proper sum, if it was recoverable at all, was only $13,105 and certainly no more than half of the sum claimed.
He relied on the fact that the plaintiff had not attempted to provide any accurate evidence of what expenses of Opus were directly incurred due to the refusal to provide the digital AutoCad drawings over and above those expenses necessarily incurred in obtaining operational works approval from the CSC and completing Phase 2.
He submitted also that the agreed phase 2 payments for stages 6A and 6B, totalling $13,415, inclusive of GST, should be deducted from Opus’ fee because the plaintiff had agreed to pay the defendant this sum for the phase 2 work in any case. In my view that submission ignores the fact that the defendant has been paid over $10,000 for phase 2 work, although its recovery from the defendant was part of the action before me. More relevantly, if the plaintiff was entitled to the digital drawings the fact it might have received a windfall because of the defendant’s failure to complete phase 2 within the agreed timeframe, and so was not entitled to present an invoice for phase 2 work, does not in my view mean that that sum should be offset against any sum the defendant might have to pay by way of damages. To do so would effectively mean that the defendant would benefit to the full extent of the phase 2 payments, even though it had not completed phase 2 and might not be entitled to any payment because the trigger point had not been reached.
Although the matter of quantum ultimately involves a ballpark assessment, Mr Keane’s submission, supported by the evidence of Mr Gittens that the work involved in recreating the digital drawings was the work of relatively inexpensive junior employees of Opus, causes me to conclude that the figure of $34,320, if it is recoverable, should be discounted by about one-third to take account of work that would have been required to complete phase 2 even if digital drawings had been provided.
Consequently, if the plaintiff was entitled to obtain the digital drawings from the defendant, I would assess its loss in the sum of $22,880.
Was the defendant entitled to obtain digital drawings?
The plaintiff’s counsel submits that cl 5.2 of the terms of engagement, which I earlier set out, provide in effect that if all fees to which the defendant was entitled had been paid in full the plaintiff had a license to use those documents in order to complete the project. He further submitted that cl 5.1 and 5.2 imply an obligation on the defendant to provide all such documents listed in cl 5.1 in order to give business efficacy to the contract. He submitted that such an obligation was so obvious that it should go without saying.
Counsel for the defendant submitted that cl 5.2 gave to the plaintiff (or he submitted only to QM Properties but in view of my findings about agency this becomes immaterial) only a license to use documents in its possession or control and did not give it a right to obtain documents which it did not already possess. He submitted that cl 5 of the terms of engagement, which as I have said form part of document 23 of Exhibit 1, relate to a license to use copyrighted material and that in construing the clause it is necessary to consider the nature of such a license. He referred to Tamawood Ltd v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (No 3) [2013] FCA 410 where at para 119 the court said:
“It is well-settled that a licence, coupled with no grant of interest in any ascertainable property, is no more than a bare permission to do that which otherwise would be a trespass …”
He submitted that cl 5.2 operates as a permissive clause to the plaintiff without creating obligations on the defendant to provide such material. In support of this view the defendant relied upon a number of factors.
Firstly he referred to the heading to cl 5, namely “Copyright and Use of Documents”, which he submitted showed the clause was about ownership of intellectual property in documents created by the defendant in performing its contractual work, although I interpolate that the clause also refers to the use of documents.
Next, counsel for the defendant submitted that the use of the term “produced by Cardno” in cl 5.1 means that cl 5.2 only applies after production of the document by the defendant and that they were so produced only when they left the defendant’s hands. It was only after the defendant delivers the document to another that questions of the transfer of intellectual property arise. Until then, it was said that there is no capacity for its intellectual property to be infringed.
It was further submitted that the term “produced” meant, in effect, publicly produced or published. He referred to “Stroud’s Judicial Dictionary of Words and Phrases”, 7th edition, and its definition of the word “produced”. The learned author notes that the word “produced” is a word which “has not got any exact legal meaning, but which requires to have an interpretation placed upon it in the statute in which it is used”. The dictionary also notes that under the International Copyright Act “produced” means, as the case requires, “published or made or performed or represented”. In regard to literary works it is said that they are “produced” not where they are made but where they are “first published” or performed.
It was also submitted by counsel that any contrary interpretation would mean that the client, namely the plaintiff, would be licensed to use not only all of the documents Cardno submits to CSC or delivers to QM Properties or to any contractors but also all “workings, drafts, notes and other material” and could be required to deliver them to the plaintiff. In my view the resolution of that argument depends upon the extent of any implied term. In my view the implication sought by the plaintiff’s counsel, that is that what was required were documents reasonably required in order to complete the contractual works, would not require the production of such “workings, drafts, notes or other material”.
Next, the defendant’s counsel submitted that although AutoCad documents were no doubt useful in the hands of a replacement engineering, and also to contractors and subcontractors engaged to perform the relevant civil construction works, they were not necessary to fulfil the engineering requirements under the contract.
Mr Gittens said in evidence that for operational works approval which was the trigger for phase 2 payment, only hardcopy or PDF documents were required to be supplied to CSC. Similarly, he said that “as constructed” engineers drawings would be submitted in hardcopy or PDF format to CSC in order for the project to go “on maintenance”.
In my view, it is clear that the provision of AutoCad documents were not necessary for the plaintiff to fulfil the engineering requirements of the development. In my view however, the question is not whether they were necessary – the fact that the project was able to proceed without them indicates that they were not necessary – but whether they were reasonably required in order to perform that work.
The defendant’s counsel also submitted that as each engineering company had different methods of operation in AutoCad, provision of the digital formatting could provide for disclosure of that proprietary commercial information to third parties to the detriment of the defendant.
In my view, that argument is untenable since, habitually, such documents were provided to others including contractors and subcontractors involved in the project and to the Caboolture Shire Council. In this case it was only because of the souring of relations that the digital documentation was not provided in this case. Furthermore, in this case the defendant called no evidence of likely harm from provision of such digital documentation, and in that circumstance, I do not accept that submission.
Finally, the defendant’s counsel submitted that no term in cl 5.2 compelled the delivery of any documentation to the client, and cl 5.2 merely permitted the client to use documents it had been provided with. Rather, it was said that the license granted by 5.2 was incidental to the performance of the works by the defendant.
In my view, whilst literary works are “produced” when they are performed before the public for the first time different considerations apply in relation to documents that are an adjunct to performance of civil engineering works, as here. The purpose of such documents is not for public display or entertainment. Rather, they are “made” (which I note is one of the possible meanings of “produced” in Stroud) in order to facilitate the development of the Central Lakes Project. In my view, the digital documents had relevantly been produced by the defendant prior to their production to third parties. They were relevantly produced when acted by the defendant.
Pursuant to cl 5.2 in circumstances where the defendant’s entitlement to fees had been fully paid, the plaintiff and QM Properties as its agent with whom the defendant had contracted were thus entitled to the use of such AutoCad digital documentation, which were, in my view, reasonably required in order to complete the contractual works.
In my view, the defendant’s refusal to provide them was a breach of this implied contractual obligation.
I therefore find with respect to the licensing issue that the plaintiff is entitled to recover the sum of $22,880, as I have previously calculated.
Repayment Claim
The plaintiff’s claim for $10,103.50 and interest of $260.02 as monies paid by to the defendant for Phase 2 work on Stages 6A and 6B is based on the submission that the defendant had no entitlement to that sum.
I have referred already to the agreement with respect to stages 6A and 6B of the development which is compendiously gathered at document 29 of Exhibit 1. The defendant’s offer of 5 February 2008, which is part of that document, refers under the heading “professional fees” to the fact that services were in accordance with the engineering consulting terms and conditions. That was, as I have already said, a reference to the previously agreed terms and conditions being part of document 13. That document contained the proviso for Phase 2 work that “invoice can be presented upon approval from Council – no part claims will be accepted”.
In support of its position the defendant relies on the fact that on 1 October 2008 Scott Willis gave a direction by email to the defendant to issue invoices for work to date and that thereafter he rescinded, on 6 October 2008, the defendant’s authority to act on the project. This meant of course that the defendant could not then ever complete the Phase 2 work. The defendant’s invoices were subsequently issued on 10 October 2008 and subsequently paid.
I note however the email of 1 October 2008 part of which is set out in [24] hereof requesting fully itemised invoices does so on the basis that they were to be provided and paid in exchange for the defendant’s agreement to provide all information including electronic information that the defendant held in relation to, inter alia, the Central Lakes project.
It seems to me that such a request does not amount to any waiver of the plaintiff’s contractual rights and that the entitlement of the defendant to issue an invoice was still governed by the terms of the contract, notwithstanding the terms of engagement of Cardno which are also part of document 29. In my view the defendant did not have any entitlement to render an invoice until the trigger of the CSC approval had been obtained in respect of Phase 2 work. In so finding I note there is no assertion in the further amended defence that the plaintiff was not entitled to terminate the defendant’s services.
In the circumstances I find the plaintiff is entitled to recover the sum of $10,363.50 as claimed.
Conclusion
I therefore give judgment for the plaintiff against the defendant in the sum of $33,243.50. I will hear argument as to interest and costs.
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