OnQ Management Pty Ltd v Hall - [2007] WADC 78

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: ONQ MANAGEMENT PTY LTD -v- HALL [2007] WADC 78

CORAM: MCCANN DCJ

HEARD: 18 & 19 JANUARY 2007, 23 FEBRUARY 2007

DELIVERED : 25 MAY 2007

FILE NO/S: CIV 719 of 2005

BETWEEN: ONQ MANAGEMENT PTY LTD
Plaintiff
AND
GRIFF EGAN HALL
Defendant

Catchwords:

Contract - Investment agreement - Principal and agent - Partnership - Total failure of consideration - Account

Contract - Claim for contractual payments - Turns on own facts

Legislation:

Partnership Act 1895, s 7(1) and s 7(2)

Result:

Action and counterclaim dismissed

Representation:

Counsel:

Plaintiff: Mr S K Shepherd
Defendant: In person

Solicitors:

Plaintiff: Lavan Legal
Defendant: In person

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

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Ideas Plus Investments Ltd v National Australia Bank Ltd (2006) 32 WAR 467
Morgan v Pallister [2004] WASC 188
Rover International Ltd v Cannon Film Ltd [1989] 1 WLR 912

MCCANN DCJ:

INTRODUCTION:

In this action the plaintiff claims relief in relation to a business venture with the defendant which was intended to involve the purchase, processing and on‑sale of native timber. In particular, the plaintiff claims an account in relation to all timber sourced, milled, stored and/or sold pursuant to the venture and damages and/or restitution of its financial contribution to the venture, and interest pursuant to s 32 of the Supreme Court Act 1935. At the trial the plaintiff led no evidence in relation to the claim for damages and in its closing submissions effectively abandoned that aspect of its claim. Instead, it principally advances a claim for restitution based on an allegation of total failure of consideration.
By his defence, set‑off and counterclaim the defendant pleads a set‑off and counterclaim in the sum of $15,549 (plus interest) which is alleged to be due and owing by the plaintiff for his labour and other expenses incurred in relation to the milling and transport of timber which was purchased by him in furtherance of the venture.
The defendant also seeks an order that the plaintiff issue sufficient shares to him so as to render him the holder of 20 per cent of the issued capital of the plaintiff, and further seeks a declaration that he stands entitled to 20 per cent of the profits (if any) on the sale of the timber the subject of the agreement.
The plaintiff's pleaded case was different in some material respects to the case which it advanced at trial. I raised this with counsel for the plaintiff during closing submissions and later gave the parties leave to amend the pleadings.
The defendant is a craftsman who builds and sells timber furniture through the business of "Future Antiques", which is owned by his family company, Velva Pty Ltd. The defendant has a particular interest and skill in working with Australian native timbers.

The relevant pleadings

The amended statement of claim pleads that in or about November 2002 Mr Robert Roget, Mr Lewis Cross and the defendant entered into an agreement with one another for the procurement, milling, storage and sale of jarrah timber for their mutual profit and advantage. It is alleged that the agreement was entered into during a meeting in the office of Mr Cross in West Perth. It is pleaded that express terms of the agreement were that:
(i) the defendant would source (ie acquire) jarrah timber and, where appropriate, mill, store, market and sell the same;
(ii)Mr Roget and Mr Cross would pay all associated costs;
(iii)the profits of the venture would be shared between Mr Roget, Mr Cross and the defendant in proportions of 40 per cent, 40 per cent and 20 per cent respectively.
Certain implied terms are also pleaded but it is not necessary to refer to them further, save that the defendant would promptly account to Messrs Roget and Cross for timber purchased and sold. It is further pleaded that by an oral agreement entered into in or about March 2004 the interests of Mr Roget and Mr Cross in the agreement were assigned to the plaintiff and that the defendant received oral notice of such assignment in or about March 2004 in the course of discussions with Mr Roget.
The amended statement of claim then pleads that between February 2003 and April 2005 Messrs Roget and Cross and the plaintiff paid $90,000 to the defendant in furtherance of the agreement.
The amended statement of claim further pleads that the defendant failed and neglected to sell any of the jarrah timber milled and stored pursuant to the agreement, or alternatively failed to account to the plaintiff for the proceeds of any sales, that the plaintiff has received no payments from the defendant on account of the agreement and that the consideration for the agreement has totally failed.
By his defence, set‑off and counterclaim the defendant denies the plaintiff's version of the agreement and pleads as follows. First, that the defendant entered into an agreement in or about February 2003 with Mr Roget and Mr Cross for the formation of a company for the procurement, milling, storage and sale (over time) of jarrah timber for their mutual profit and advantage. It is pleaded that terms of the agreement were that, inter alia:
(i)Mr Roget and/or Mr Cross would attend to the formation of the company;
(ii)Each of the defendant, Mr Cross and Mr Roget would become directors of the company and would hold shares in the proportions of 20 per cent, 20 per cent and 60 per cent respectively;
(iii)The defendant would arrange, on behalf of the company, for the purchase of jarrah timber logs and for the same to be milled.
(iv)Mr Roget would fund all costs of the company;
(v)The company would pay the defendant $30 per hour and other costs incurred by him in relation to milling and transporting the logs and any milled timber, but in all other respects the remuneration of Messrs Roget and Cross and the defendant would be their profit share;
(vi)The company and/or Mr Roget would arrange for the storage of the logs and milled timber with such assistance as the defendant might be able to provide from time to time.
The defendant next pleads that on or about 11 March 2003 Messrs Roget and Cross "attended to the registration of the plaintiff" and arranged for themselves to be appointed as directors, that Peterborough Nominees Pty Ltd and Intercorp Pty Ltd (companies which it was established on the evidence were the trustees of the family trusts of Mr Cross and Mr Roget respectively) became the sole shareholders and that the defendant was neither made a shareholder or a director.
The defence traverses the plaintiff's allegation as to the assignment of Mr Cross's interest to the plaintiff. Next, the amended defence admits that the plaintiff and/or Mr Roget paid sums to him totalling approximately $90,000 and pleads that he fully accounted to the plaintiff and Mr Roget for such moneys on or about 24 October 2004 in so far as he provided Mr Roget with "a folder of receipts and other documents".
The defendant further pleads that he stacked certain jarrah logs and timber which he procured pursuant to the agreement at his premises, of which approximately $2,000 worth was sold.
The plaintiff claims the sum of $15,549 by way of set‑off and counterclaim as follows:
(i)$9,120 for labour for two persons at $15 per hour for 304 hours between 20 January 2003 and 31 March 2003 in respect of the milling of the timber the subject of the agreement;
(ii)$1,250 for forklift hire at the rate of $250 per week for the period 14 February 2003 to 31 March 2003 in respect of the milling of the timber;
(iii)$1,900 for the defendant's travel between Bridgetown and Myalup and return for 38 days between 20 January 2003 and 31 March 2003 at the rate of $50 per day;
(iv)$1,320 for labour of two persons at $15 per hour for 44 hours for the despatch of timber to Melbourne and Sydney;
(v)$631.94, being the balance of an amount of $792 paid to Venables Transport on or about 28 September 2004 for the transport of timber from Myalup to Pinjarra.
The total amount particularised by the plaintiff excluding item (v) is $13,590. I understand that the balance of the claim represents GST upon the sum of $13,590 (see Exhibit 7).

The issues

Against this background, the issues between the parties are as follows:
1.When and where did Messrs Roget and Cross and the defendant enter into an agreement?
2.What are the relevant terms of the agreement?
3.In what way did the contractual arrangements, and hence the legal relationship, between the various parties change over time?
4.Was it a term of the agreement, either originally or by subsequent variation, that the defendant would be paid and/or re‑imbursed in respect of his personal endeavours and expenses in furtherance of the agreement? If so, what were the terms of the agreement, what did the defendant do in furtherance of the same and what sum is he owed?
5.What funds did Messrs Roget and Cross and/or the plaintiff outlay to the defendant, or each other, in urtherance of the agreement?
6.What timber did the defendant purchase in furtherance of the agreement and when and from whom did this occur?
7.What became of such timber, including transportation, processing and storage?
8.What sales did the parties make in furtherance of the agreement and what became of the proceeds of the sale?
9.Has the defendant provided an account to the other parties?
10.Was there a total failure of consideration in respect of the agreement?
11.What relief are the parties entitled to, if any?

The evidence

The parties' evidence in relation to the formation of the agreement, and its evolution or performance, was disjointed and generalised on both sides and therefore difficult to follow. It is my impression that this is reflective of the reality, namely that the contractual relationship was entered into somewhat informally in the first place and evolved during subsequent dealings.
Henceforth I propose to describe the agreement, or the parties' contractual relationship, in a neutral form, namely "the venture".
Mr Robert Roget testified that he is a director of the plaintiff. He testified that the plaintiff was originally incorporated by he and Mr Cross in 2003 and was then named Australian Feature Wood Pty Ltd. It was set up to be the recipient of their profits from the venture. The company's name was changed to ONQ Management Pty Ltd on 30 June 2004. Mr Roget testified that his wife Marina is also a director of the plaintiff.
Mr Roget testified that Mr Cross was his accountant. In 2002 Mr Cross told him that he had invested in a timber business with the defendant, and a meeting was convened with the defendant to discuss the possibility of Mr Roget becoming an investor.
Mr Roget testified that at this meeting the defendant explained to him that he had contacts with licensed timber suppliers in the south‑west of the state from whom he could purchase jarrah logs, and that the timber would increase in value owing to forthcoming government restrictions on jarrah logging. Mr Cross proposed that a new venture be formed between Mr Roget, Mr Cross and the defendant on the same basis as the arrangements which already existed between Mr Cross and the defendant. Mr Cross proposed that the defendant purchase the timber with finance provided by Mr Roget and Mr Cross, and then later sell the timber. It was proposed that the defendant receive 20 per cent of the net profits and the remaining 80 per cent be divided between Mr Cross and Mr Roget. Mr Roget testified that these financing and profit‑sharing arrangements were agreed.
Mr Roget denied that the parties agreed to form a joint venture company whose shareholders would include the defendant. He also denied that there was any discussion at the meeting about the defendant being paid on an hourly basis for work which he performed in relation to the venture. He said that the only discussion about remuneration related to the plaintiff receiving a 20 per cent profit share.
Mr Roget was unsure when this first meeting occurred, but testified that on 23 November 2002 his company Intercorp Pty Ltd paid Mr Cross the sum of $10,000, being Mr Roget's contribution towards an initial $20,000 investment in the venture. Mr Roget said that he gave Mr Cross a cheque for $10,000 on the basis that the funds would be paid to the defendant together with a further $10,000 from Mr Cross. Mr Roget identified an invoice (Exhibit 2) which he said came into his possession at "around the time of the litigation". This appears to be dated 22 November 2002 and was later identified by the defendant to be an invoice from John Tough of Bridgetown to "Future Antiques" for 46.62 tonnes of jarrah worth $20,000 inclusive of sales tax (sic: GST).
Mr Roget was next shown an invoice (Exhibit 3) from West Coast Timbers to Velva Pty Ltd dated 20 February 2003 for the sale of 10 cubic metres of jarrah slabs for $8,800 (inclusive of GST) and for 42 hours of bandsaw milling of jarrah for $7,854 (inclusive of GST), a total of $16,654. He said that the invoice came into his possession "just prior" to the commencement of these proceedings. He was next shown a butt for a cheque drawn on Intercorp Pty Ltd's bank account on 20 February 2003 and payable to Velva Pty Ltd for "timber purchase investment" in the sum of $20,000. Mr Roget was unable to specifically recall the circumstances of this payment but believed that either Mr Cross or the defendant contacted him and asked for money to purchase more timber for the venture.
Mr Roget was shown another invoice (Exhibit 5) from John Tough to "Future Antiques" dated 1 March 2003 in respect of the sale of jarrah timber for $20,000 (inclusive of GST). He testified that he did not see that invoice until "a year to two later" and that at the time he was not made aware of the amount of timber which was purchased.
Mr Roget testified about a visit to a timber mill in Bridgetown. He could not recall the date. He said that he, Mr Cross and Mr Cross' girlfriend travelled to Bridgetown to meet the defendant and inspect some logs which had been purchased. He testified that the defendant took them to a mill and showed them a "big pile of jarrah logs that he had purchased". He said that at or around the time of that meeting the defendant suggested that milling the timber would increase its sale price dramatically and would make it easier for him to sell it in the Eastern States. Mr Roget testified that he and Mr Cross agreed for that to happen.
Mr Roget testified that sometime after the visit to Bridgetown he made arrangements with the defendant to inspect some timber that had been milled. He said that he was not sure where the inspection took place, but the mill was "on the way back from Margaret River". Mr Roget said that his wife was with him on this occasion. He said that he met the defendant and was shown "a huge pile" of stacked timber. He testified that there was water playing on the timber from a sprinkler system which the defendant said he had set up to help with the drying process and that the timber was increasing in value as it dried out.
Mr Roget was shown the butt of a cheque drawn on Intercorp Pty Ltd's bank account on 8 June 2004 payable to Shaws Transport and annotated "Griff Timber" in the sum of $2,035 (Exhibit 6). Mr Roget testified that the defendant asked him to meet him at Shaws Transport to pay for a load of milled timber to be sent to the Eastern States for auction. He said that he met the defendant at Shaws Transport but did not see any timber and "just paid the bill". Mr Roget testified that the next occasion he met the defendant was, once again, when he was in transit with his wife between Margaret River and Perth. He said that they met the defendant for "coffee or lunch at the coffee lounge down south". He said the defendant told them that the timber would all be sold, that things were going well, that the timber was drying and it was "all good news".
Mr Roget testified that he recalled another occasion when he and his wife were travelling from Margaret River to Perth and met the defendant at the defendant's house. The meeting was arranged at Mr Roget's request to "find out how sales were going" and to ascertain "where the accounts were" as, Mr Roget said, the same had been requested "for a long time". He said that he and his wife had a cup of tea with the defendant and were given a box "with some information … and some invoices".
Mr Roget testified about a telephone conversation he had with the defendant when Mr Roget was in Sydney. They had a discussion about the merits of Mr Roget involving himself in the marketing of the timber. He testified that he was later contacted by a Mr Gary Black from Black's Auctions who asked him about auctioning the timber in Perth and in the Eastern States. He was unsure as to how Mr Black came to contact him, but believed that Mr Black may have said that the defendant had requested him to do so. Mr Roget testified that he made arrangements to meet Mr Black and the defendant at a "big factory" in the Pinjarra industrial area where he had been told (by the defendant) the venture's milled timber was stored. He said that the defendant did not attend the meeting. Mr Roget said that when he arrived he observed a large amount of milled timber stacked inside the factory, and another stack outside which was covered in black plastic. He said that he telephoned the defendant who informed him that the timber inside the building belonged to him (ie the defendant) and the timber outside belonged to the venture. Mr Roget said that in his opinion the timber which was stacked outside the building was of an inferior quality to the timber which was stored inside and that he discussed this with the defendant, who said that the outside timber could be sold if the ends were cut off. Mr Roget said that the defendant also informed him of the location of some other timber which was stored "down south" and that subsequently he and Mr Black travelled to inspect that timber.
Mr Roget testified that he was not informed at any time about the sale of any timber by the defendant on behalf of the venture.
Mr Roget testified about the withdrawal of Mr Cross from the venture as follows (T39):
"Mr Cross and I had several deals and we decided to not part ways but part in that company. I discussed the situation with the defendant that I could buy it and told him that I'd be taking over the company, that I could buy it at cost from Mr Cross. But Mr Cross also had other timber that the defendant had previously been in business with him on, and I asked [the price] … for that timber, which was in the raw state of Mr Cross's, to buy it at the same time. The defendant advised me that if I could get that for 12 and a half thousand dollars it would be a bargain of a lifetime. I then went to Mr Cross and advised him exactly what the defendant had said, that it would be a bargain of a lifetime and Mr Cross said, 'I'd want 15,000 for that timber', which we'd agreed on. I paid him for his half–share of the costs at cost, in other words, half–share of what we've paid out to the defendant, plus the $15,000 for the timber than (sic: that) Mr Cross had prior to us going into the business with the defendant together."
Mr Roget testified that this transaction proceeded at or about the time of his meeting with the defendant at Shaw's Transport, that is to say, on or about 8 June 2004.
In cross‑examination, Mr Roget said that he did not recall any discussions in Mr Cross' office at any time relating to the venture paying the defendant for his labour. Mr Roget said that he originally went into the venture to simply fund the purchase by the defendant of timber logs for on‑sale at a profit, but later it was agreed, at the defendant's request, that the timber would be milled. Mr Roget agreed that he met the defendant at Shaw's Transport on 8 June 2004 and signed a cheque payable to that firm in the transport yard. However, he denied that he walked around a semi‑trailer loaded with timber and said that he could not recall it. He said that the meeting was arranged at the defendant's request for the purpose of paying for the transport of the timber, which could not leave before payment was made.

Mr Roget said that he had not seen a website for Australian Feature Wood.
It was put to Mr Roget that the Bridgetown visit referred to in his evidence‑in‑chief in fact took place at a mill at Manjimup. He appeared to accept that proposition and said (T50):
"You [ie the defendant] took us down there and showed us the timber that you said … we'd bought … or paid for, and then it was delivered to Myalup Mill where it was milled. I only saw it at the mill."
He accepted that he had been shown logs at the Manjimup mill, and had seen milled timber at the Myalup mill, but still resisted the proposition that the milled timber at Myalup came from the logs at Manjimup. Mr Roget appeared to accept that the defendant told him at their meeting at Myalup that the timber stored at that location was going to be moved.
Mr Roget accepted that the total of the receipts that he had been given by the defendant balanced with the money that had been provided to the defendant, but did not accept that there was any timber to show for such funds.
Mr Roget was cross‑examined in relation to certain steps which he and Mrs Roget undertook to market the venture's timber. He said that he and the defendant agreed that the Rogets would run a series of advertisements in the "Sunday Times" newspaper seeking expressions of interest in quantities of the timber and that potential purchasers would be referred to the defendant.
It was put to Mr Roget that after a meeting at the defendant's house at Melros (south of Mandurah) on 24 November 2004 (sic: I believe the defendant meant to say 24 October 2004), Mr Roget asked him to make up an account for his wages associated with milling the venture's timber. Due to interruptions, Mr Roget never answered that question, but said that he had no recollection of receiving an invoice a few days later. Mr Roget was shown a carbon copy of the invoice (Exhibit 7). He said that he could not say that he did not receive the invoice, but simply did not recall such occurring.
Mr Roget was questioned about timber at a place called Westbourne Farm and the timber that he inspected in Pinjarra. He said that the Pinjarra timber was stored outside with black plastic covering it so that he could not actually see the timber. He said that the owner or occupant of the premises asked him to leave. He accepted that the timber "was adequately protected" from the weather but that it had been moved from some other location where it had been exposed to the weather. Mr Roget agreed that these premises may have been operated by a firm known as "T&G Cabinets".
In order to clarify Mr Roget's evidence in relation to the premises and timber which he had visited or inspected, and the places he had been told about but had not inspected, I initiated the following exchange which is self‑explanatory (T69):
"The question is this; that at some point in time you've been shown timber at the Myalup Mill, in premises in Pinjarra and at a mill in Manjimup, which you were told by Mr Hall had been bought with the proceeds of your money?---That's correct, your Honour.
But it's been put to you that you've been told there was timber at Westbourne Farm, but you've never seen any timber or have been to Westbourne Farm?---That's correct, your Honour."
Mr Roget was cross‑examined about some correspondence of late 2004. Firstly, he was shown a letter which he wrote on the plaintiff's letterhead to the defendant on 8 December 2004 (Exhibit 8) which enclosed a copy of a letter of the same date to Mr Gary Black of Black's Auctions (Exhibit 10). The letter to Mr Black said as follows:
"Re: Timber Auction
As advised I would appreciate your listing our timber or part thereof for auction in February (the latter half would be preferable).
Please give me a ring to make a suitable time to inspect the yard at Pinjarra.
I will arrange for the logs and slabs to be brought up from Mylup (sic: Myalup) if you feel Pinjarra the most suitable auction venue.
Pinjarra
15‑20 Cubic metres of Jarrah slabs
Mylup
40 Cubic metres of Jarrah slabs
50 ton Jarrah logs
50 ton Jarrah and Marri logs
Also available 30 ton of pine marri and jarrah currently at Westborne Farm."
Mr Roget's letter to the defendant (Exhibit 8) advanced two alternative proposals for the finalisation of the venture. The first proposal was that the defendant purchase the plaintiff's interest for $100,000. The second proposal was as follows:
"The alternative is we auction of[f] the timber through Gary Black of Black's Auctions … and our 50/50 agreement on net profit stands. As advised to Blacks it would be preferable that all timber including the logs at Westbourne Farm be brought up to Pinjarra. If you agree could you get a quote to achieve this and let me know."
The letter also provided the details of some potential purchasers who had responded to advertisements in the "Sunday Times".
Both of Mr Roget's letters predicated that Mr Roget was cognisant of the whereabouts and quantities of at least some of the venture's timber, if not all of it. The defendant put to Mr Roget that this contradicted his evidence that he had not been informed of the whereabouts of the timber and he replied (T80):
"Yes, I got that from you, Mr Hall, and with your authority I passed that on to Black's. … At the time that I wrote the letter and I had your notes of where the timber was. I have never, never disputed that. … All the figures came from you, Mr Hall."
Exhibit 8 also predicated that there was an agreement between the plaintiff and the defendant for a 50/50 profit sharing arrangement. Mr Roget was cross‑examined about that and said that the defendant had previously agreed to accept such a proposal. As I understand the subsequent line of cross‑examination, the defendant understood Mr Roget to be asserting that an agreement was entered into during one of the meetings at the defendant's home in Melros, but that he (ie the defendant) did not accept that assertion. To that end he referred Mr Roget to a letter written by Mrs Marina Roget to him on behalf of the plaintiff (Exhibit 9) which was undated and stated as follows:
"On the receipts given in the folder the best estimate of costs I can come up with is as follows
$91,061.00 including BUCKO'S TRANSPORT $715 VENABLES & SON $792 & ABS TRANSPORT $1132.51. These must have been paid by you.
Receipts FOWLES AUCTION GROUP $2062.90
If we deduct the transport costs & add back the receipt for $2062.90 we then have a total cost to date of $90484.39
Then if we add the $15000 paid for Lew Cross timber it totals $105484.39 which balances to the $105,000 we have in our books.
We would be happy to agree to paying you 50% of net profit rather than the 20% originally agreed plus 50% on Lew Cross Timber.
If you agree to the above lets put our heads together on how we can generate sales & make lots of money"
I shall return to this correspondence later, but for now it suffices to point out that Exhibit 9 contained an offer of a 50/50 split of the profits of the venture in lieu of the original 80/20 split. As I understand it, the defendant cross‑examined Mr Roget on the basis that he believed that this contradicted Mr Roget's assertion that an agreement for a 50/50 split of the net profit of the venture had already been reached (T79):
"So would you conclude from the letter [Exhibit 9] that the agreement wasn't struck as you said at the house in Melros then?---Well, I don't know if agreement was struck. It might have been discussed and we were very happy to pay the 50 per cent that was discussed rather than the 20 per cent you were originally on to get this motivated, get the sales motivated.
But I put it to you that I had washed my hands of the whole matter?---Well, that's not true."
In re‑examination Mr Roget said that the first time he recalled becoming aware that the defendant had made a claim for his labour was when the defendant filed his counterclaim in these proceedings. He was asked (T84):
"Under the arrangement, how was the defendant to be paid?--- He was to be paid 20 per cent of the net profit and later 50 per cent of the net profit."
The plaintiff called Mr Lewis Cross. He testified that he had known Mr Roget for a number of years, both as a friend and as a co‑participant in occasional business ventures. He testified that he had also been an acquaintance of the defendant for many years and was a good friend of his father. He testified that in or about 2002 he and the defendant entered into a small business venture in which Mr Cross contributed approximately $12,000 to purchase timber for on‑sale and their mutual profit. Mr Cross testified that he introduced Mr Roget to the defendant with a view to Mr Roget investing in a similar venture. He said that this occurred in Bridgetown on a kind of fact‑finding tour that he and Mr Roget made in about September or October 2002. They visited the defendant's workshop in Bridgetown and a timber mill. He said that subsequent to that visit an "arrangement" was entered into between he, Mr Roget and the defendant. Mr Cross' evidence in relation to the formation of this arrangement was extremely vague and lacking in particularity. His evidence was that Mr Roget was not in favour of a 50/50 profit share with the defendant (as Mr Cross had), and proposed that the defendant receive only 20 per cent of the profit. Mr Cross testified that this was agreed within a couple of weeks of the visit to Bridgetown. He said that he could not recall whether he had a specific meeting with the defendant about this or whether they only discussed it on the telephone. He said that his recollection about the contractual process was "a bit hazy". He said (T92):
"It could well have been that we had a meeting because I also recollect we went down to have a look at another timber mill later on at Myalup. I would say we would have all been together then, but I don't think – I think that was sort of further along in the process. So there could well have been a meeting at my office in West Perth with all three of us. I really can't remember specifics along that. It's more an impression than a recollection."
Mr Cross testified somewhat more confidently that there was no discussion when the agreement was entered into about any arrangement for payment of the defendant other than a profit share, or about any corporate structure. He said (T93) that at that stage "we were just working out the basics in terms of the percentages, but as Bob Roget and myself were looking at some of the other areas that we might look at trying to expand the business, we agreed that a corporate structure would be the most appropriate vehicle" for their own interests. He confirmed that the registration (ie the incorporation) of the plaintiff took place in or about March 2003 and said (T94):
"So for a whole lot of good reasons we formed the company and, as far as the company's role within the original agreement, that was never really discussed as such so I suppose it just – the original agreement carried on and maybe with an understanding, an unstated understanding, that, well, now it's the company that's sort of looking after the 80 per cent side of things rather than the two individuals that started out."
He then testified that he sold his family trust's interest in the plaintiff to Mr Roget (or his nominee) for a sum equal to the amount that was "put in", but did not state what that amount was. He accepted that the transfer occurred on 16 June 2004 on the basis that an ASIC search of the plaintiff revealed that he had ceased to act as company secretary on that date.
In cross‑examination, Mr Cross repeated that he had no recollection of the parties agreeing to set up a corporate body in which all three parties were directors. He also said that he had no recollection of any agreement to pay the defendant $30 an hour for his labour in respect of the timber milling and said (T99):
"I do have recollections as things progressed that you put that forward, that you were putting a bit of time in and there should be some payment for that and I don't think I saw that as unreasonable then or now."
Later, he said that this occurred subsequent to the original agreement (T100) and was something that he supposed "was introduced and … [he wouldn't] see it as being unreasonable." He continued to state that he originally envisaged that the defendant's labour could be accommodated within his normal day to day working routine, and that he never expected that the plaintiff would work on the venture for a month and a half with no other source of income. Mr Cross agreed that the original agreement was "a bit light on in detail" and that the expectation was that the parties would "resolve any further things as things progressed".
Mr Cross agreed that the defendant created a web site for Australian Feature Wood.
The defendant's evidence‑in‑chief was quite succinct. He said (T107) that "it basically occurred as Mr Cross said in his statements about the time frames going down to the mill and the meetings in his offices". He said that he remembered saying in a meeting in Mr Cross' office, which was attended by Mr Cross and Mr Roget, that milling the timber would place him under "tremendous financial pressure" because it was a big job, would take many days working long hours and he would be obliged to make a round trip of 200 kilometres per day. He said that he asked for payment of $30 per hour, and $30 per hour for his father. He testified that he normally charged $50 per hour for his woodcraft but asked for $30 per hour because his father would be helping him. He testified that Messrs Roget and Cross "assured" him that he would be paid.
The defendant testified that he arranged for timber logs to be purchased for the venture from Mr John Tough, and that the logs were transported from Manjimup to the Myalup mill. Whilst his evidence was a little unclear, I understood him to testify that the Myalup mill was the property of Mr John Lapton who traded as West Coast Timbers. He said that the logs which were purchased from Mr Tough were milled at West Coast Timbers and the processed timber was then stored there as a favour by Mr Lapton. The defendant purchased materials for stacking the timber and set up a sprinkler system which allowed the milled jarrah to be properly stacked and dried. He said that eventually Mr Lapton became impatient to have the timber moved off his premises because he needed the space for his own business. At about this time the defendant sold his property in Bridgetown and moved his home to Melros because he was starting his own furniture factory in premises that he leased in Pinjarra. The defendant testified that he arranged for Bucko's Transport to move the timber from Myalup to the Pinjarra premises. He said that all of the milled timber was stored there, indoors, for a year, after which it was moved to other premises in the same industrial estate in Pinjarra. He said that at that time he had a meeting at his house in Melros with Mr Roget at which he told Mr Roget that he wanted to "get out of the whole deal". He said that Mr Roget informed him that Black's Auctions wanted to auction the timber.
In relation to Mr Roget's evidence about his inspection of timber at Pinjarra, the defendant testified that he was in the process of moving his factory at the time and some of the timber was located in the open, under a tarpaulin, and would have been viewed by Mr Roget in that condition. He said that some other timber, comprising various logs, that Mr Roget referred to in his evidence, had nothing to do with the venture and had been bought by him (ie the defendant) from various suppliers in the Pinjarra district. Although this part of the defendant's evidence was slightly difficult to follow, I understood him to testify that the venture's timber was originally stored at his premises in Pinjarra and was then moved to the premises of T&G Cabinets elsewhere in the same industrial estate. He said that Mr Roget was evicted from T&G Cabinets' premises when he went there to inspect the wood, because he had not notified him first and accordingly the owner of T&G Cabinets was taken by surprise.
As to the current whereabouts of the venture's timber, the defendant said (T110) that all of the timber that was taken to T&G Cabinets was still there, that there was "30‑plus tonnes of logs down in Westbourne Farm", "quite a few tonnes of logs at Myalup Mill possibly 50 to 70 tonnes" and that there were some slabs of timber stacked at Myalup. He said that Mr Roget had "been aware for a long time where all the timber is" and the venture's logs and slabs had been pointed out to him at Myalup. He said that the quantities of timber had never changed, but that some of the timber that was stored at Myalup was moved to Pinjarra.
In cross‑examination the defendant agreed that the agreement was a "profit‑splitting arrangement". In relation to his remuneration for his labour, the defendant recalled a conversation that he had with Mr Roget in Mr Cross' office in which he extolled the reasonableness of his request for $30 an hour for the labour of himself and his father by explaining that the charges of a chainsaw operator that Mr Roget had used ($45 per hour) were reasonable. It was put to the defendant that he had not rendered an invoice for his labour until October 2004 and that his claim for remuneration was, in effect, an afterthought. It was put to him that it was not agreed from the beginning and the defendant replied (T113):
"No, it was like everything else with Lewis Cross. I simply phoned him up and told him actually what was happening and I used to do it on a weekly basis …
… I was informing Lewie that I was clocking up the hours and that some money would have been appreciated because I was running low."
The defendant accepted that it was his responsibility to source and select timber, to arrange its purchase (with funds provided by Messrs Roget and Cross) and to attend to the storage and milling as required.
The defendant was questioned about providing receipts and other documents to Mr Roget. He said that all of his records for the venture, such as receipts and other documents, were provided to Mr Roget in October 2004 and that the sum total of the "receipts" (that is, tax invoices) equalled the sum of the monies that were given to him by Messrs Roget and Cross and the plaintiff.
The defendant was questioned about the sale of some of the venture's timber by Fowles Auction Group in Melbourne. Records of that transaction were tendered in evidence (Exhibit 12) and disclosed that the net proceeds were $2,062.90. The defendant said that these monies were paid to Velva Pty Ltd and were used to defray expenses which he had incurred in relation to the venture, such as transport expenses. He testified that no other sales had taken place because timber slabs take between 18 months and three years to dry and reach their full sale potential.
The defendant was questioned as to his knowledge of the plaintiff's involvement in the venture. He was asked if he became aware that Australian Feature Wood (ie the plaintiff) had taken over the rights and responsibilities of Messrs Roget and Cross and said that he was "aware that Australian Feature Wood existed". When pressed he said as follows (T130):
"Actually I don't think I became aware of that for quite a while because I didn't have another meeting with Mr Cross and Mr Roget for quite a while. Then I became aware that they'd formed a company and actually I'd been left out of it even though I'd made up the website for them and things like this."
He said that he did not know that Australian Feature Wood was an incorporated company when he prepared the website, but he was under the impression that it would be. The following exchange then occurred:
"But you were aware of the interest, weren't you?---Yes, I knew it was going to happen sooner or later; yes.
And you accepted that they took over the interest?‑‑‑Yes, I accept that; yes".

It was then pointed out to him that his invoice for his labour (Exhibit 7) was addressed to "Australian Feature Wood". He accepted that he looked to that company to pay the invoice, and that any profits would have been shared with that company.

Factual findings

I propose to commence with some general observations in relation to the credibility of the three witnesses. I have no hesitation in finding that Mr Roget, Mr Cross and the defendant were completely honest in giving their evidence. The trial was conducted amicably and all of the witnesses were co‑operative, frank and made concessions against their interests. Also, it is apparent from the evidence that each party acted with good conscience in relation to the others and the venture. However, for reasons which I shall elaborate on, none of Mr Roget, Mr Cross or the defendant was completely reliable and I have accepted some, but not all, of the evidence of each of them.
Mr Roget was very unclear in relation to many of the details of the agreement and the conduct of the venture (particularly in its early stages). This is understandable given that in the early stages of the venture he simply saw himself as an investor who did not have a hands‑on role. But, even then, Mr Roget's evidence as to the making of payments to the defendant was vague. All of Mr Roget's evidence about the time and place of meetings, and as to information that the defendant provided to him about the whereabouts of the venture's timber, was vague and unreliable. I am satisfied that Mr Roget was not motivated in any way by self‑interest in giving his evidence and, indeed, the evidence disclosed that Mr Roget has at all times acted towards the defendant in a generous way. For instance, Mr Roget was firmly of the view that he and his wife agreed to increase the defendant's profit share to 50 per cent. Mr Roget made a number of concessions in his evidence.
Mr Cross was frank in his evidence, but was extremely vague in his recollections and had no contemporaneous notes to assist him. He was clear about the question of the parties' remuneration, that is to say, it was originally agreed that there would be an 80 : 20 profit split and nothing was agreed about the defendant's labour or any corporate structure.
The defendant testified in a very sincere and straight‑forward manner. His evidence in relation to the activities of the venture was generally consistent and confirmed by documentary records. Like Mr Roget, I am satisfied that at all material times his primary motive has been the realisation of the objects of the venture. However, as with the evidence of Mr Roget and Mr Cross, the defendant was wrong, or at least inconsistent, in relation to certain important points of detail. For instance, he was wrong about the discussions pertaining to the corporate structure of the venture (see par 79 below).
Against that background I turn now to make some specific findings of fact.
Prior to the agreement being entered into Mr Cross and the defendant had already entered into a timber venture of their own (which I shall refer to as the "Cross‑Hall venture").
I find that pursuant to the terms of the Cross‑Hall venture the defendant agreed to buy and sell timber with funds provided by Mr Cross and was to be paid a commission (50 per cent of the net profit) upon each sale. I find that Mr Cross and the defendant intended that all of the timber the subject of the Cross‑Hall venture belonged to Mr Cross and such was the result in law. This conclusion is supported by the facts that Mr Cross was supplying all of the capital for the enterprise and the defendant's financial interest was limited to a share of the net profits (if any). Moreover, I find that it was not expected of the defendant that his involvement would be time‑consuming, so it is improbable that it was intended that he would acquire a 50 per cent interest in the timber itself.
I find that in or about October 2002 the Cross‑Hall venture was explained to Mr Roget by Mr Cross and Mr Roget expressed an interest in entering into a similar venture. I accept the evidence of the defendant and find that an agreement ("the Agreement") was entered into in the course of a meeting in Mr Cross' office in West Perth. Mr Cross was not completely clear about this aspect, but the defendant was firm about it and it is the most probable of the scenarios that is open on the evidence. I am not satisfied that the Agreement was entered into by a series of telephone calls, or in the course of the initial "fact finding" visit by Mr Roget to Bridgetown. I find that such visit occurred in or about October 2002, but no contractual negotiations took place. I find that the Agreement was entered into in or about early November 2002 since the documentary evidence (Exhibits 1 and 2) clearly establishes that the first purchase of timber occurred on or about 22 or 23 November 2002.
I turn now to consider the terms of the Agreement. It is common ground between the parties that it was agreed that Mr Roget and Mr Cross would provide all of the working capital of the venture and that the defendant would attend to all of its operational activities. In particular, the defendant was responsible for sourcing timber, obtaining funds from Mr Roget and Mr Cross, purchasing the timber, arranging for its storage and eventually arranging for its sale. I further find that the parties agreed that the defendant's profit share would be 20 per cent of the net profits of the venture and that Mr Cross and Mr Roget would share the remaining 80 per cent. I accept Mr Roget's evidence that at Mr Cross' suggestion it was agreed that the venture would be structured along the same lines as the Cross‑Hall venture. I further accept that it was an implied term of the Agreement that the defendant would account for timber purchased and sold on behalf of the venture (see The Laws of Australia at par 8.1 [42].
I next find that it was not originally agreed that any of the timber that was acquired on behalf of the venture would be processed (ie milled). I find that Messrs Roget and Cross and the defendant agreed upon that measure in or about late January 2003 when the defendant moved some of the venture's logs from Manjimup to Myalup and began milling them at West Coast Timber's mill.
It follows that there was originally no agreement between the parties to the effect that the defendant would be paid $30 an hour for his labour in relation to the milling of the timber and I do not accept the defendant's evidence in that regard. That conclusion is supported by the fact that his evidence was not completely consistent as I have mentioned (see par70 above) and the fact that he did not raise an invoice or document his claim in any other way for almost two years. His company's invoice (Exhibit 7) was not raised until 27 October 2004 but related to work performed in January, February and March 2003. Further, the invoice claimed $15 per hour for his labour and $15 per hour for his father's labour, instead of $30 per hour for each as allegedly agreed. Further, at the time that the milling was being performed the defendant sought and obtained funds from Mr Roget (see par 80 below). Some of those funds were disbursed to pay for 42 hours of band‑saw milling at West Coast Timbers sometime prior to 20 February 2003 (see Exhibit 3). However, the defendant did not seek any payment for himself. This is difficult to reconcile with his evidence (which I accept) that he reported to Mr Cross on a weekly basis. I am satisfied on the balance of probabilities that the defendant and Mr Cross discussed the subject of remuneration for his labour at some point. Mr Cross accepted that some discussion of that kind probably occurred, although he could not be specific as to the details. In my view it is only possible to find, and I do so, that the subject of the defendant's remuneration was discussed, whilst he was engaged in the milling of the timber at Myalup and that Mr Cross said that it was reasonable for him to be paid. I am unable to make any finding as to when this discussion took place, save that it was during the period from 20 January to 31 March 2003.
For the same reasons, I am not satisfied that there was ever any express agreement to pay for the plaintiff's travel to Myalup (which he has claimed in Exhibit 7) and the plaintiff's claim for the hire of a forklift was not dealt with in the evidence.
Next, I find that there was no agreement between the parties to the effect that the defendant would have some form of shareholding in a corporate vehicle to be set up to run the venture. I accept the evidence of Messrs Roget and Cross that this was not discussed at the time the Agreement was entered into and was only discussed between them privately. It is unlikely in my view that an accountant such as Mr Cross would be wrong about this in his recollection and actions (in attending to the incorporation of the plaintiff). Also, the fact that the defendant never contemporaneously complained about being excluded from the shareholders of the plaintiff supports my finding. Accordingly, I find as follows:
(i)After the inception of the Agreement Messrs Roget and Cross decided to utilise a corporate vehicle to hold their interests in the venture and the defendant was aware of that fact. This is supported by the fact that he was aware of the proposed name of the company, namely "Australian Feature Woods" and to that end constructed a website under that name.
(ii)In 2003 the defendant became aware of the incorporation of the plaintiff and that Mr Cross and Roget regarded the plaintiff as having replaced them in the venture.
(iii)The defendant accepted at all material times afterwards that he was dealing with the plaintiff instead of Messrs Roget and Cross. That is to say, I find on the balance of probabilities that the defendant agreed to the retirement of Messrs Roget and Cross from the venture, and the inclusion of the plaintiff in their stead.
(iv)In or about June 2004 the defendant became aware that Mr Roget had effectively bought out Mr Cross's interests in the venture, and in the Cross‑Hall venture.
I turn now to the payments which were made by Messrs Roget and Cross and/or the plaintiff pursuant to the Agreement. The defendant has admitted that the sum of approximately $90,000 was paid to him, although not all of that was accounted for in the evidence. I find that Mr Cross and Mr Roget contributed $20,000 between them on or about 23 November 2002 based on the evidence of Mr Roget, the defendant and the documentary evidence (Exhibits 1 and 2). This money was used by the defendant to purchase 46.62 tonnes of jarrah logs from John Tough on 22 November 2002. I am further satisfied that a sum of $20,000 was paid to Velva Pty Ltd by Mr Roget on 20 February 2003 (see Exhibits 3 and 4). This money was used by the defendant to purchase 10 cubic metres of jarrah slabs from West Coast Timbers on 20 February 2003 and to pay West Coast Timbers to carry out 42 hours of band saw milling. I am satisfied based on the defendant's evidence that the milled timber consisted of some of the logs that were purchased from Mr Tough in Bridgetown in November 2002. I am satisfied that a further sum of at least $20,000 was paid on or about 1 March 2003 (see Exhibit 5). This money was used by the defendant to purchase an unknown quantity of jarrah logs to the value of $20,000 from Mr Tough in Bridgetown on or about 1 March 2003.
I am unable to make any findings as to when the balance of the sum of $90,000 was paid. However, I accept the defendant's evidence that he can account for the entire sum of $90,000 and in fact did so by providing receipts (tax invoices) to Mr and Mrs Roget in the course of a meeting at his home in Melros in or about late October 2004.Based on Mrs Roget's undated letter to the defendant (Exhibit 9) I find that Mr and Mrs Roget and, therefore, the plaintiff, accepted that the defendant could vouch for all of the sum of $90,000.
I accept the defendant's evidence (see par 59 above) as to the current whereabouts of the venture's timber and I also find that Mr Roget has full knowledge of the same as evidenced by his letter to Mr Gary Black dated 8 December 2004 (Exhibit 10). I am satisfied based on the defendant's evidence, and the documentary evidence, that in June 2004 a portion of the timber was transported to Melbourne by Shaws Transport. Some of it was later sold by Fowles Auctions. The proceeds of the sale, namely $2,062.90 were paid by Fowles Auctions to Velva Pty Ltd and were disbursed in payment of expenses the defendant had incurred on behalf of the venture. The balance of the venture's timber remains at the premises of T&G Cabinets in Pinjarra, at Westbourne Farm and at West Coast Timbers at Myalup.
Next, I find that the plaintiff paid Mr Cross the sum of $15,000 on or about 16 June 2004 for Mr Cross's interest in the Cross – Hall venture. The defendant was not paid anything by either the plaintiff or Mr Cross.

Findings of Law

The plaintiff contends that there has been a total failure of consideration and that it is entitled to the repayment of its financial contribution to the venture. The plaintiff submitted that on the true construction of the agreement the consideration flowing from the defendant to Messrs Roget and Cross in the first instance, and subsequently to the plaintiff, was the promise of a financial return on the funds invested which has never materialised. So, the starting point is to determine the nature of the agreement and the consideration which moved between the parties.
During closing submissions I enquired of counsel for the plaintiff how the plaintiff would characterise the nature of the legal relationship between the parties. He described it as an investment agreement. That response does not take the matter very far because investments can be made by a variety of means (eg via a loan, a partnership, a trust, a share‑purchase, and so on). In my view it is arguable that the legal relationship between the parties fell within the definition of a partnership, namely "the relation which subsists between persons carrying on a business in common with a view of profit" (see s 7(1) of the Partnership Act 1895). Pursuant to s 7(2) of the Partnership Act it is necessary for the court to have regard to "the true contract and intention of the parties as appearing from the whole facts of the case". In my view the following matters support the view that there was a partnership:
(i)The parties intended that Messrs Roget and Cross would contribute financially to the venture and the defendant would contribute his know‑how, and time.
(ii)The Agreement contemplated that the parties would carry on a business, namely buying and selling native timber.
(iii)The Agreement contemplated that the parties would share the net profits of the venture after payment of all expenses.
(iv)The funding or "investment" (as counsel for the plaintiff described it) of Messrs Roget and Cross could be characterised as a loan to the partnership which the parties intended would be repaid as and when timber was sold in accordance with accounts settled between the parties from time to time.
However, in my view there are other interpretations open which must be considered. On the plaintiff's case, Messrs Roget and Cross (ie the plaintiff) necessarily did not intend to obtain any interest in the timber. The plaintiff's case is, in effect, that there was no partnership and the defendant alone purchased the timber, and that Messrs Roget and Cross simply lent him the money to do so, and to pay other expenses. That is not an unusual kind of transaction save for the method of calculating the interest or return on investment, namely a share of the defendant's profits. Another possibility is that the relationship was one of agency.
In my view, it is necessary to have regard to the factual matrix which prevailed when the Agreement was entered into with a view to ascertaining, objectively, the objects and purposes of the Agreement (see Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337). The salient features of the factual matrix were as follows. First, Mr Roget was interested in entering into a similar venture to the Cross‑Hall venture. Second, pursuant to the Cross‑Hall venture Mr Cross contributed all of the capital and owned all the timber. The defendant was authorised by Mr Cross to purchase timber on his behalf in return for a share of the net profits. Third, the defendant's involvement in the Cross‑Hall venture was not labour intensive.
In the light of these circumstances I find that the intention of the Agreement was that the defendant would purchase timber on behalf of Messrs Roget and Cross, not himself, and they formed a partnership as between themselves. They agreed to provide the defendant with all of the funds necessary to purchase the timber, and for its ancillary handling and sale. In other words, the parties intended that the partnership of Roget and Cross would stand in the same position vis a vis the defendant as Mr Cross stood in the Cross‑Hall venture. It follows, in my view, that the intention of the parties was that all of the timber that was purchased by the defendant would belong to Messrs Roget and Cross and that the defendant would act as their agent. It was intended by the parties that the defendant be paid a commission calculated at the rate of 20 per cent of the net profit realised in relation to each parcel of timber that he purchased and sold.
The next issue is whether any material change was effected upon the plaintiff being interposed for Messrs Roget and Cross. In my view the proper analysis of that transaction is that Messrs Roget and Cross sold their partnership property to the plaintiff, that is, sold the timber that belonged to them. I find that the defendant acquiesced in that change. That is to say, he agreed to treat the plaintiff as his principal, rather than Messrs Roget and Cross, on the basis that he would look to the plaintiff for the payment of any commission (ie profit share) which would otherwise have been payable by Messrs Roget and Cross. In my view the same was also implicitly agreed when the timber the subject of the Cross‑Hall venture was bought by the plaintiff.
The relevant legal principles in relation to a claim for restitution based on a total failure of consideration were set out in Morgan v Pallister [2004] WASC 188 per Pullin J at [28] – [30] as follows:
"28.In David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 382, in the joint judgment of Mason CJ, Deane, Toohey, Gaudron and McHugh JJ, their Honours said:
'… in the context of failure of consideration, the failure is judged by the perspective of the payer.' "
In Rover International Ltd v Cannon Film Ltd [1989] 1 WLR 912 at 923 Kerr LJ stated:
'The question whether there has been a total failure of consideration is not answered by considering whether there was any consideration sufficient to support a contract or purported contract. The test is whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract or purported contract?'
…
29Although the failure of consideration must be total, the court must examine whether or not the benefit bargained for, rather than any benefit which might have been received in fact, was obtained.
30In Roxborough v Rothmans of Pall Mall (Australia) Ltd (2001) 208 CLR 516, Gleeson CJ, Gaudron and Hayne JJ, at 525, stated that the concept of failure of consideration embraces payment for a purpose which has failed, as for example where a contemplated state of affairs has disappeared or where a condition has not been fulfilled. "
These principles were discussed in the recent decision of the Court of Appeal of this State in Ideas Plus Investments Ltd v National Australia Bank Ltd (2006) 32 WAR 467 per Steytler P, with whom McLure JA and Buss JA agreed, at [68] to [74]. His Honour stated at [72] that:
"the rationale behind an award of restitution in claims based upon a failure of consideration is that it is justified essentially because the payer did not intend the defendant to have the enrichment in the circumstances which occurred … ."

The principle enunciated in Morgan v Pallister at [29] is exemplified by the facts of Rover International Ltd itself. In that case the plaintiff and the defendant entered into an agreement whereby the plaintiff agreed to make copies of motion pictures owned by the defendant, to dub them with Italian soundtracks, and then distribute them in Italy. The parties agreed they would share the gross proceeds produced. It was a term of the agreement that the plaintiff pay advances to the defendant. The plaintiff did so and was then provided by the defendant with master copies of certain films. The Agreement was terminated at an early stage for reasons which are not presently relevant, leaving the plaintiff holding the master copies of the films and the defendant holding the monetary advances. The English Court of Appeal held that the plaintiff was entitled to an order for restitution of the advances on the basis that there had been a total failure of consideration in so far as the plaintiff had not obtained what it bargained for under the contract, namely a share of the proceeds of the distribution of the films. The Court of Appeal held that it was not relevant that the plaintiff had received a benefit because of the contract, namely the master copies of the films, since that was not what the plaintiff bargained for in the contract.
The plaintiff submits that the facts in the present matter are similar to those in Rover International Ltd. It is submitted that Messrs Roget and Cross (hence the plaintiff) bargained to receive a monetary return on their investment (calculated as a percentage of the net profits of the venture) and did not bargain to purchase quantities of timber. I do not understand the plaintiff to concede that it is the owner of any timber, or entitled to possession of the same, but in any event it is submitted that such rights are analogous to the position of the plaintiff in Rover International Ltd in so far as it found itself possessed of the master copies of certain motion pictures.
In my opinion Rover InternationalLtd is distinguishable. Clearly, Messrs Roget and Cross entered into the venture with a view to obtaining a return on their investment. However, in my view the Agreement was a simple agency agreement whereby the defendant agreed to source and purchase timber on their behalf as his principals and, subsequently, to make arrangements for the transportation, handling, and storage and sale of the timber. It was agreed that the defendant would be paid a commission based on the profits of the venture. In other words, the relevant consideration moving between the parties was a promise on the part of the defendant to carry out certain services and acquire timber and a promise of the part of Messrs Roget and Cross to place him in funds to perform his duties and to pay him a commission if any profits were realised.
Based on my findings of fact, the defendant set about providing the services that he contracted to perform and the plaintiff is now the owner of a considerable quantity of timber. The defendant, has, indeed, sold some of the timber that was purchased. Under these circumstances it can not be said, in my opinion, that the consideration moving from the defendant to the plaintiff has totally failed. On the contrary, the defendant has performed his contractual obligations to date and the plaintiff has therefore obtained what its predecessors bargained for. The fact that the defendant has not completed the services, by selling the timber, thereby depriving the plaintiff of a return on its investment, does not mean that there has been a total failure of consideration from the plaintiff's point of view. Indeed, at this juncture it could not be said that the venture itself has even ended, let alone failed (see par 98 below).
Accordingly, in my view the plaintiff's claim for restitution based on a total failure of consideration fails. If I am wrong in my finding that the parties' relationship was one of agency, then my ultimate finding remains the same, because in that case the relationship should be characterised as a partnership. Once again there could be no total failure of consideration since Messrs Roget and Cross partly obtained what they bargained for, namely the defendant's services and a quantity of timber.
I turn now to the plaintiff's claim for an account. An account is both a contractual right and a discretionary equitable remedy which is available at the suit of the principal, or at the suit of partners. In my opinion the defendant has already fully accounted to the plaintiff for all monies received and expended on its behalf. In October 2004 he provided documentation to Mr and Mrs Roget. Mrs Roget checked the documentation and confirmed that the accounts more or less balanced. Further, the defendant has informed Mr Roget of the location of all of the timber that was purchased on behalf of the venture and I find that the timber is still located in those places.
At the hearing the plaintiff testified that he told Mr Roget that he wanted to end his relationship with the plaintiff. I accept that evidence. However, on the evidence it is clear that the plaintiff never accepted the defendant's resignation and instead endeavoured to re‑motivate him by offering him an increased commission. Further, neither party has suggested that the Agreement has come to an end by the effluxion of time or by performance, since most of the timber is still to be sold. In my opinion the Agreement is still on foot.
Finally, whilst I have dismissed the plaintiff's counterclaim for contractual payments for his labour, on the evidence there was a basis for a claim to be considered on a quantum meruit basis, in so far as Mr Cross on behalf of Mr Roget and Mr Cross agreed in early 2003 that it would be reasonable for the defendant to be paid for the milling work that he was then performing which was additional to his agency responsibilities and from which the plaintiff benefitted. However, the defendant has not pleaded a claim based on quantum meruit. I will hear the parties in relation to that matter.

Conclusion

In conclusion, I find as follows:
1.The relationship between Messrs Roget and Cross and the defendant, and later between the plaintiff and the defendant, has at all material times been one of principal and agent.
2.All of the timber that was purchased by the defendant with funds provided by Mr Roget and Mr Cross was purchased on their behalf and now belongs to the plaintiff.
3.The intention of the parties when entering into the Agreement was to establish relations as set out in pars 1 and 2 and the consideration moving from the defendant to the plaintiff was the provision of agency services directed towards the acquisition and sale of native timber by the plaintiff. The defendant has partly provided those services in that he purchased timber on behalf of the plaintiff. Accordingly, there has not been a total failure of consideration.
4.The Agreement has not been fully performed and therefore the plaintiff has not received the complete consideration for which it bargained, in so far as most of the timber has not yet been sold. The defendant will have discharged his obligations as the plaintiff's agent when that occurs. At that time he will be entitled to receive a commission for his services calculated at the rate of 20 per cent of the net profit of the timber sales. In the meantime the Agreement remains on foot.
5.With the Agreement of Messrs Roget and Cross (and, therefore the plaintiff) the defendant and his father carried out a large amount of milling of timber in January, February and March 2003. However, there was no express agreement between the parties to the effect that the defendant would be paid $30 per hour for his labour, or that he would be reimbursed for his expenses. There is no pleaded claim for payment on a quantum meruit basis
6.Therefore, the plaintiff's claim for restitution of the sum of $90,000 fails, as does the defendant's counterclaim.
7.The plaintiff's claim for an account fails, as the defendant fully accounted to the plaintiff in October 2004 and there is no further need for an accounting to take place since there has been no material change in circumstances since then.