PBH Contracting Services P/L v Samuel Group Australia P/L - [2013] SADC 179

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PBH CONTRACTING SERVICES P/L v SAMUEL GROUP AUSTRALIA P/L
[2013] SADC 179
Judgment of His Honour Judge Soulio
24 December 2013
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - OTHER MATTERS
The defendant entered into a contract whereby the plaintiff provided tradesmen to perform work at an apartment complex – plaintiff provided tradesmen at an hourly rate over course of lengthy building process – defendant refused to pay final accounts rendered and disputed the basis upon which the plaintiff on-charged its employees – plaintiff commenced proceedings to recover debt – defendant challenged the obligation to pay and sought a set-off and made a counterclaim.
Judgment for the plaintiff. Defendant's claim for set-off, and counterclaim dismissed.
Trade Practices Act 1974 Cth ss 53, 82, 87; A New Tax System (Goods and Services Tax) Act 1999 Cth s 9, referred to.
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors (2004) 219 CLR 165; Abram & Anor v AV Jennings [2002] SASC 417; Creeper & Anor v Cooper & Anor [2013] SASCFC 78; ACCC v Audi Australia [2007] FCA 1990; ACCC v Signature Security [2003] FCA 3; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 266; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641; Thompson v Palmer (1933) 49 CLR 507, considered.

PBH CONTRACTING SERVICES P/L v SAMUEL GROUP AUSTRALIA P/L
[2013] SADC 179
Introduction

In 2007 the defendant (‘SGA’) was building an apartment complex known as the West Lakes Infinity Apartments (‘the development’). The defendant engaged the plaintiff (‘PBH’) to provide a team of tradesmen to fix external cladding on the development.
PBH provided tradesmen at an hourly rate of $56.00.[1] The charge was for an eight hour day, including the half hour lunch break taken by each employee. The charge was exclusive of GST. The contract was reasonably substantial and over the course of the project PBH rendered accounts and, generally speaking, SGA paid the accounts in a timely fashion. In April, May and June of 2009 PBH rendered accounts totalling $38,993.54,[2] which SGA refused to pay. PBH instituted proceedings on 11 August 2009 in the Magistrates Court seeking to recover the debt.
[1] Later increased to $58.00 per hour.
[2] Outstanding invoices contained at Exhibit P1 pp 14, 28, 38.
SGA challenged the obligation to pay, sought a set-off, and made a counterclaim. The defendant’s challenge was based on an assertion that while the defendant agreed to pay an hourly rate of $56.00 for labour provided by the defendant, it had not agreed to pay that rate for the entire eight hours tradesmen were on site, given that the period included a half hour lunch break each day. The defendant asserted that, over the course of the contract, it had overpaid the plaintiff a sum in the order of $75,000. The action was transferred to this Court.
During the course of the trial in this Court the defendant sought to amend its defence and counterclaim to further assert that it was unaware that the contract hourly rate was being charged, and paid, exclusive of GST, rather than inclusive of GST. The defendant asserted, by its amended pleadings, that it had overpaid the sum of $137,724.37, either by mistake, or as a result of a false and misleading representation made by the plaintiff, contrary to s 53(e) of the Trade Practices Act 1974 (Cth)[3]. The defendant claimed the amount of loss suffered as a result of such payments of GST pursuant to s 82 of the Trade Practices Act, or in the alternative, pursuant to s 87 of the Trade Practices Act.
[3] Now Competition and Consumer Act 2010 (Cth).
The defendant sought to set-off the two amounts said to have been paid in error, against the plaintiff’s claim, and sought to counterclaim the balance.
There are, in essence, three issues for determination:
1Is the plaintiff entitled to payment for the outstanding invoices?
2Was the plaintiff entitled to charge for the half hour lunch break taken by each worker?
3Was the agreed price inclusive or exclusive of GST?
The question as to whether PBH was entitled to charge for the workers’ half hour lunch break, and whether the rate quoted was inclusive or exclusive of GST, are to be determined by a finding as to the terms of the agreement between the parties, the practice established between them, or as a matter of industry practice.
The Witnesses
The principals of PBH, Mr Hounsell and Mrs Hounsell, gave evidence on behalf of the plaintiff, as did Mr Altamura, an expert who gave evidence as to industry practice relating to labour hire contracts.
The principal of SGA, Mr Sgherza, gave evidence as did Mr Kokkianos, the site supervisor. The defendant called Mr Dunn to give expert evidence as to industry practice regarding labour hire contracts.
In addition, a number of documents were tendered, to which I will refer as necessary.
Issue 1 - Is the plaintiff entitled to payment for the outstanding invoices?
The plaintiff’s claim was not really disputed, subject to the two factors mentioned. The defendant admitted the existence of the contract. On the face of it, the plaintiff is entitled to judgment in the sum claimed.
Issue 2 – Was PBH entitled to charge for lunch breaks?
The plaintiff says that was the negotiated arrangement, consistent with its own agreement with its employees. The defendant disputed its liability to pay for that break.
Evidence
Mr Hounsell
Mr Hounsell was approached by Mr Sgherza in October 2006 to provide skilled workers to fix external cladding to the building development. Mr Hounsell subsequently had a meeting with Mr Sgherza at the proposed development site in West Lakes, was shown a plan of the building and was told by Mr Sgherza that the defendant needed approximately five to six men, for a period of 12 months, to complete the cladding job.[4]
[4] T 26 line 18-24.
Following that meeting Mr Hounsell contacted Mr Sgherza by telephone, to advise that there was insufficient information to provide a total costing for the job. Mr Sgherza then suggested Mr Hounsell provide a quote for an hourly rate for labour hire.
On 6 November 2006, subsequent to the initial discussions, Mr Hounsell wrote a letter to Mr Sgherza in the following terms: [5]
[5] Exhibit P1 p 1.
…
Further to our recent meeting, we wish to submit a proposal in regards to the cladding at the above site:
Normal time hourly rate : $56.00 per hour
Double time hourly rate : $67.00 per hour
Please note that any time and half will be charged at our normal time hourly rate.
In order to achieve these hourly rates, we have not allowed for inclement weather or downtime. Therefore, any downtime will be charged at our normal hourly rate.
Hourly rates may be subject to change in 2007 due to the requirement to renegotiate PBH Contracting Services’ current Enterprise Bargaining Agreement.
Percentage to be applied to products purchased : 2.5% administration plus 10% profit.
Please find attached our product price list, current as at today’s date.
…
Attached to the letter was a product price list of items to be supplied by PBH. No specific mention was made of GST.
Mr and Mrs Hounsell met with Mr Sgherza on 8 November 2006 at the project site office, and provided the letter to Mr Sgherza. The meeting lasted about three quarters of an hour. Mr Hounsell outlined to Mr Sgherza the hourly rate, and the way the hourly rate was calculated, in addition to other matters.
Mr Hounsell told Mr Sgherza that PBH workers worked from 7.00am to 3.00pm Monday to Friday, and from 7.00am to 12 noon on Saturdays. Mr Hounsell told Mr Sgherza that the PBH workers did not take a morning smoko break but, as a trade-off, were paid during a half hour lunch break.[6] I accept that by doing so, Mr Hounsell conveyed and Mr Sgherza understood, that PBH employees were to be on-charged for the full eight hour period including the half hour lunch break.
[6] T 31 line 19-24.
The Employee Collective Agreement 2007, (‘the Collective Agreement’) between PBH and its employees, dictated that the employees were to work from 7.00am to 3.00pm with a half hour paid lunch break.[7]
[7] Exhibit P1 p 56.
Two days after the meeting Mr Hounsell received, by facsimile transmission, an acceptance of the quote.[8] The acceptance, signed by Mr Sgherza, and on the letterhead of “Sam Sgherza Group” said simply:
Acceptance of Quote/Order Confirmation
Re: 155 Brebner Drive West Lakes
Subject: Cladding at Above Site
Tender Price: As per Rate on letter of Offer
[8] Exhibit P1 p 3.
PBH employees began working at the development site on 6 February 2007, initially with two men on site, and later up to six men.
The process of calculating the hours worked by PBH employees to be on-charged to SGA involved PBH employees faxing completed time sheets to the PBH head office at Norwood. PBH employees also sent a text message setting out the hours worked, including the half hour break, which was then crosschecked with the time sheets. An invoice was then prepared by PBH, based on the rate agreed, and provided to SGA for payment.
The invoices were essentially paid on time for the first 18 or so months of the contract. If SGA was late in paying invoices, Mr Hounsell called Mr Sgherza. On occasions Mr Sgherza advised that he was having financial difficulties, and provided an alternative date for payment.
In January 2009, Mr Hounsell called Mr Sgherza in relation to the defendant’s failure to pay the November 2008 invoice. Mr Sgherza advised he was late in payment as he was refinancing. Mr Sgherza then enquired as to why SGA was paying for the half hour lunch break. Mr Hounsell advised that that had been the arrangement for the past two and a half years, as explained during the initial meeting on 8 November 2006. Mr Hounsell was not of the opinion, as a result of that telephone discussion, that there was an issue with the workers being paid, other than that the payment would be late.
By May 2009, PBH was still yet to receive payment. Mr Hounsell again had a conversation with Mr Sgherza, which became heated. Mr Hounsell said that Mr Sgherza refused to pay, on the basis that “he had paid enough over the past two and a half years and I wasn’t going to get paid any more money.”[9]
[9] T 38 line 25-29.
In June 2009 there was a further conversation between Mr Hounsell and Mr Sgherza. Mr Hounsell could not recall whether Mr Sgherza raised the issue of lunch breaks in that conversation. At some stage, either in that conversation, or later, Mr Hounsell informed Mr Sgherza that if the invoices were not paid PBH would take out a worker’s lien over the project. Mr Sgherza said if he did so there would be a significant damages claim. Subsequently, Mr Hounsell removed PBH workers from the site.
Mr Hounsell disputed the issues in relation to, amongst other things, the performance of workers on site, raised by Mr Sgherza in his letter of 3 July 2009, which was written at a stage when the defendant had disputed its liability to pay.[10]
[10] Exhibit P1 p 13.
Mr Hounsell accepted that the industry standard, under the award, did not provide for paid lunch breaks. However he said that PBH had always had a different arrangement with its employees. It was on that basis that the agreement was made.
Mr Hounsell said in evidence that, if Mr Sgherza had not agreed to pay for the employees’ lunch breaks, then PBH would have reverted to the national award, resulting in the PBH employees being paid for a morning smoko break, not being paid for lunch, and working until 3.30pm each day to get the time up to eight hours a day.[11]
[11] T 42 line 24-27.
Gale Hounsell
Mrs Hounsell is the wife of Peter Hounsell and was responsible for the business administration and financial matters of PBH.
Mrs Hounsell said she attended with Mr Hounsell to meet with Mr Sgherza, at the site office of the West Lakes development on 8 November 2006. She said they attended to ensure that the contents of the letter, containing the quote for hourly rates, was understood by the parties. She said that the meeting lasted approximately 45 minutes to an hour.
She confirmed that Mr Hounsell explained to Mr Sgherza that PBH workers started working at 7.00am and finished at 3.00pm, with a half hour paid lunch break, but no ‘crib’ break. She said she could not specifically recall Mr Sgherza’s response in relation to that discussion.
She confirmed the process whereby PBH employees accounted for time worked, as explained in evidence by Mr Hounsell. She said an SGA supervisor signed off on PBH employee time sheets.[12] At the end of each week the time sheets were faxed to PBH. Once the time sheets were received by PBH they were checked against text messages sent by employees, at the end of each week, advising of the hours worked. Mr Hounsell would then prepare an invoice,[13] including an attached schedule showing the PBH employees name, and hours worked.[14] The invoice was calculated by multiplying the hours worked, by the relevant rate.
[12] See evidence of defendant’s site supervisor Mr Kokkianos.
[13] See, for example, Exhibit P1 p 14.
[14] T 75 line 11-15.
Mrs Hounsell said she did not recall there ever being entries by the employees in the ‘LUNCH BREAK (DEDUCT)’ column of the time sheet. To have done so, would be in breach of the Collective Agreement PBH had with its employees.
Mrs Hounsell said that PBH followed precisely the same process in relation to the collection of time sheets, and invoicing, as when PBH employees were contracted to SGA at a work site in Unley.
In July 2008 the delay in payments commenced, which she said was not a particular concern at the time. She gave as an example, Invoice number 2312 being paid in two instalments without explanation being given by Mr Sgherza.
Mr Sgherza
Mr Sgherza is the director of SGA and, at the time of trial, had been operating in the building industry for approximately 12 years. He had experience as a licensed builder for 20 years, and had been undertaking predominantly commercial building work for the past 10 years.
He said that on the development project, SGA employed a site supervisor,[15] and a leading hand. Mr Sgherza acted as the project manager. The site supervisor’s role was to deal with day to day activities. As project manager, Mr Sgherza organised quotes, organised the job, set the schedule, and organised particular tradespeople to attend on site at the right time. He said he subsequently attended to paying the contractors.
Agreement with PBH
[15] Mr Kokkianos.
Mr Sgherza said he was referred to PBH for labour hire, and subsequently met with Mr Hounsell on site. He gave Mr Hounsell a copy of the plans for the site and had a general discussion about the work required and number of workers required. He said that during that discussion Mr Hounsell agreed to provide PBH’s best leading hand, and said that he (Mr Hounsell) would be on site regularly.
Mr Hounsell later telephoned Mr Sgherza and said that the plans were not detailed enough to provide an accurate quote. Mr Sgherza said one of them suggested that the job be costed on a ‘charge up basis’ whereby the hours worked were recorded and whatever was worked was paid for, as opposed to a global quote for the entire job.
Following that conversation, they arranged to have a second meeting which took place at the development site car park during the week of 6 November 2006. He said he thought Mrs Hounsell was also present. At that meeting Mr Hounsell produced the written quote. During the meeting, there was a discussion about rates, and in particular Mr Hounsell informed him that the hourly rate was an average rate which encompassed a mixture of apprentice, beginner and qualified workers.
Mr Sgherza thought the proposed rate was appropriate, given he was paying other carpenters $50.00 an hour,[16] and said those carpenters were being paid less as they didn’t have a ‘boss’ to pay. He said that they were not paid for their lunch breaks.
[16] Mr Sgherza said that that rate was inclusive of GST but for reasons which I will refer to, I cannot accept that evidence.
Mr Sgherza said that when they discussed the work schedule at the meeting Mr Hounsell had advised that his workers would start at 7.00am with no set finishing time. Mr Sgherza said there was no mention of payment of the workers for lunch breaks, nor was anything said in relation to ‘crib breaks’. He said he had never heard of crib breaks on a building site. He said there was no discussion of time sheets.
Later, in cross examination, Mr Sgherza accepted that a crib time break is recognised in the building industry award, but maintained that he had never come across it, and said it only applied to working periods in excess of 12 hours per day.
Time Sheets
Mr Sgherza said the first time he ever saw the PBH workers’ time sheets was a couple of years into the project, in approximately December 2008. He said that Con Kokkianos, the site supervisor employed by SGA, was never given any instructions about completing time sheets, nor did he receive any requests that time sheets be signed by Con. When asked to say whether Con’s signature appeared on the time sheets he said he did not know Con's signature but was prepared to assume that where the name Con was written, it was written by the SGA site supervisor.
Mr Sgherza initially said that some were signed by Con and some were not, but later conceded that he had only had a quick flick through them, and it may be that only a couple were not signed by Con.
Mr Sgherza said he had never authorised Con to sign off on the time sheets as the company’s representative, and said Con did not know what the workers were being paid, or for how many hours. He said it was not Con’s role to keep track of hours worked, and did not think that PBH would assume the hours worked on the time sheets were authorised by SGA, through Con as its representative.
Assertion of Overpayment
Mr Sgherza said the first time he realised he was being charged for lunch breaks was in late December 2008, when he first saw a time sheet. Mr Sgherza said he was not provided with time sheets and assumed they were kept on the development site. He agreed that he had paid the invoices over the course of the project. He subsequently spoke to Con, who, Mr Sgherza said, claimed he was not aware of the basis upon which SGA was being charged. He said they looked at time sheets together, and noted that SGA was being charged for an eight hour day. He said he did not know how to deal with the situation as he did not want PBH labour to be pulled from the site.
As the site was shut down for three to four weeks over Christmas, Mr Sgherza waited until January 2009 to raise the issue with Mr Hounsell. Mr Sgherza said he telephoned him and said that he had only agreed to pay for hours worked. Mr Hounsell informed him it was part of the PBH workplace agreement. Mr Sgherza said no agreement was reached in that conversation. However, SGA continued to pay invoices, Mr Sgherza said, as the job was not completed at the time. He said some payments in 2009 were ‘split’ only because Mr Hounsell was taking workers off the site and he wanted to make sure some workers were still working.
In cross examination he agreed that he had said in evidence that he was deliberately drip feeding payments to PBH to make sure PBH would continue on site. He agreed Mr Hounsell was expressing concern about the delay in payments. Ultimately he conceded that the tradesmen were being taken off site by PBH because of the drip feeding of payments. He said he was drip feeding payments as he was getting less and less tradesmen on site, and he wanted the job finished more quickly, which wasn’t happening.

Mr Sgherza denied having cash flow problems, but acknowledged he was sometimes late in paying by a week or two, which he put down to the process of drawdowns and progress claims. He said if he wasn’t paid by the bank, then he couldn’t pay the tradespeople.
Mr Sgherza later stopped paying the invoices when the job was substantially finished. Mr Hounsell subsequently pulled workers from the site and told Mr Sgherza that unless the money was paid he would put a worker’s lien would be put on the property. Mr Sgherza did not want the job stopped, but, in evidence, said he could not recall what further words were said.
I do not accept the explanation given by Mr Sgherza as to the reason for “drip feeding” payments to PBH. I find, insofar as is necessary, that SGA was experiencing either financial difficulties, or at least cash flow problems, and that was the reason for the delay in payments. I accept Mr Hounsell’s account of the conversation with Mr Sgherza regarding the delay in payments, and prefer his account to that of Mr Sgherza.
System of Payment of PBH Employees by Samuel Group
Although Mr Sgherza paid the invoices issued by PBH, he said he did so on the basis that he made the assumption that what was presented was correct, and assumed the tradespeople had been on site working. He had no independent way of checking whether the invoices were correct. He said it was a gentleman’s agreement and he had never had problems in the past. Mr Sgherza said he did not know how the records of the hours worked by PBH employees were kept.
Industry Practice
Mr Sgherza noted that over the previous 12 years of being in the building industry and paying various subcontractors of various trades, he had never been asked to pay, or paid, for lunch breaks.
Mr Sgherza agreed he was aware of the National Building and Construction Industry Award and the SA Award. In relation to the SA Award, clause 17 provides that only employees, and not subcontractors, are entitled to a rest period. Mr Sgherza said he only employed office staff and not tradespeople.
Con Kokkianos
Background
At the time of giving evidence Mr Kokkianos was a builder who had been employed by SGA for eleven years. Prior to working with SGA he was self-employed in a building company, and in a takeaway food business. He held a builder’s/supervisor’s licence to build up to nine storey commercial residential buildings, and had undertaken a HIA course, and certain tafeSA courses.
Mr Kokkianos was involved in the development between 2007 and 2009. He described it as a residential complex of seven storeys, with a ground floor commercial complex, and undercroft car parking.
He said that Mr Sgherza was the project manager, whilst he (Mr Kokkianos) was the construction supervisor. He was responsible for the complex, the organisation of the tradespeople, the logistics and supervising on site. I infer from that that he had authority to sign off on the time sheets, as he had in fact done.
Mr Kokkianos was on site between approximately 6.30am until 4.30 or 5.00pm during a normal working day and said he was the permanent ‘go to man’ on site. He said contractors from a number of different fields were on site, including plumbers, electricians, concreters, window fixers, carpenters, steel fixers and structural steel contractors.
PBH
Through working at the site, Mr Kokkianos became familiar with PBH as the installers of the external cladding of the building. He said he was not aware of the type of contract pursuant to which PBH workers were engaged.
Mr Kokkianos said his role in supervising PBH workers included instructing them where to go to start the daily fixing of the external cladding, and he also checked what time they started and finished.[17]
Lunch Breaks
[17] T 175 line 19.
Mr Kokkianos said that the paperwork which recorded the number of hours worked by the contractors did not reflect actual hours worked as there would have been breaks in this time. He did not concern himself with the number or length of breaks. He said he was not sure about payment in respect of breaks.
Time Sheets
When asked to look at one of the time sheets,[18] Mr Kokkianos said that it represented a fairly typical time sheet completed throughout the period that PBH was on site. He said he would sign the time sheet at the end of the week, confirming that the workers came on to the site at 7.00am and finished at 3.00pm. He said he did not take into account lunch breaks, or any other breaks, as he wasn’t sure of the agreement, and was too busy doing other things.
[18] Exhibit P1 p 18.
In cross examination Mr Kokkianos said that he only ever had a rough idea of how many men were on site and said there were about 120 contractors in total, at any one time. He knew roughly when the men started and roughly when they finished.
Mr Kokkianos was taken to examples of times sheets and asked if he could confirm from his own knowledge that the hours recorded on the time sheets were spent by those men, on the site, for that particular week. He said that he trusted the PBH leading hand, Chris Noble, to do the right thing and ensure that the men working for him were filling out the forms correctly, and said he would then sign off on the time sheets. In addition to relying on trust, he said he used his independent memory for each week when he signed the time sheets.
He agreed that although the men were taking lunch breaks, there were no deductions on the time sheets for lunch breaks. He said that had nothing to do with him, and was between PBH and SGA.
In reference to the time sheets, and the signature panel where he had signed his name as ‘company rep’, Mr Kokkianos said that this meant he was representing the defendant and signed these forms as its representative.[19]
[19] T 181 line 8-26.
He said that when he was on holidays there may be no signature on a time sheet. Prior to going holidays he did not delegate to anyone else the task of signing off the time sheets, as he did not think that was his responsibility, nor did he think that meant that PBH would not get paid.
Mr Kokkianos said typically Chris Noble would sign next to ‘Employee’s Signature’ on the time sheets. Mr Kokkianos said sometimes he would sign the time sheets without the employee having signed first. He agreed that there was no pattern attached to when an employee would sign and when they would not.
Mr Kokkianos gave evidence in a relatively straightforward manner. He acknowledged that he was signing the time sheets as the company representative of the defendant. The time sheets were retained by the defendant after they had been signed, and then faxed to the plaintiff. They were taken to the defendant’s head office in Norwood.
Issue 3 - Was the hourly rate inclusive or exclusive of GST?
Pleadings
The plaintiff says that the quoted price was intended to be exclusive of GST, and that that was both the basis of the agreement, the basis upon which it had charged and been paid throughout the course of the contract, and was the practice in the industry. The defendant asserted that pursuant to the contract it was not obliged to pay GST in addition to the rate for the labour provided by the Plaintiff. The defendant asserted that the agreed price was inclusive of GST, and says, as a result, it has been overcharged the sum of $137,724.37.
During the course of the trial the defendant sought to amend its defence and counterclaim to include an allegation that it had wrongly been charged, and had mistakenly paid, the agreed hourly rate on a plus GST basis, rather than a GST inclusive basis. By consent, I gave leave, on terms including an adjournment of the trial, to effect the amendment.
By its amended pleadings, the defendant asserted that the contract entered into between the parties was based on the written quote from the plaintiff, dated 6 November 2007. That document, as I have said, quoted a labour rate of $56.00 per hour and also the various rates for goods or materials that the plaintiff might supply during the term of the contract. The defendant asserted that the quote, which it accepted, constituted the total price payable for the supply of goods and services. The document makes no mention of the position with respect to GST.
The defendant claimed that the plaintiff had, over the course of the contract, invoiced SGA for GST over and above the agreed hourly rate. The defendant asserted that liability with respect to GST lay at all times upon the plaintiff, that the amount of GST payable by the plaintiff was 10 per cent of the value of the taxable supply, and that the taxable supply was ten elevenths of the price, pursuant to ss 9.40, 9.70 and 9.75 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth), respectively.
The defendant asserted that the amounts invoiced and paid over and above the quoted amounts were not properly payable pursuant to the contract, and were therefore paid in error.
Alternatively, the defendant claimed that the plaintiff made a false and misleading representation with respect to its quoted prices for goods and services, contrary to s 53(e) of the Trade Practices Act.
Mr Sgherza
Mr Sgherza was in the process of giving evidence in chief when it was asserted on behalf of the defendant that Mr Sgherza noticed, for the first time, that GST had been added to the hourly rates charged by PBH. As I have said, the trial was adjourned and, subsequent to the amendments being effected, Mr Sgherza gave evidence on the issue of GST.
He said that the hourly rate of $56.00 was provided for in the written quote from PBH, which the defendant accepted shortly after the meeting that took place on 8 November 2006. He said that during the course of the meeting, there was no mention of GST, nor was there any reference to GST in the written quote.
The defendant said that, given the letter dated 29 June 2007,[20] in relation to a quote for cladding, made reference to being “plus GST”, it was open to assume that the hourly rates, provided in a quote that made no mention of GST, were inclusive of GST, and that if GST were to be added to the hourly rates, it should have been stipulated. That was a somewhat opportunistic observation designed to retrospectively justify the defendant’s position.
[20] Exhibit P1 p 3.
During cross-examination, Mr Sgherza was unable to provide a reason as to his failure to identify the GST issue earlier. He conceded that it was plain from the PBH invoices that GST had been added to the hourly rate. Specifically, he acknowledged that, given the difference between the sale amount and the balance due, it was plain that GST had been applied to the hourly rate. The invoices had, of course, been paid by SGA.
Despite that concession, Mr Sgherza did not concede that it was clear from the first invoice that the GST was being charged in addition to the hourly rate. He said that until he had performed the calculations, there was nothing on the invoice which alerted him to the fact that he was paying GST in addition to the hourly rates. He said he believed that the code “GST” meant that GST was included, and never bothered to check the calculations, which, he accepted, clearly indicated that the prices were exclusive of GST.
I do not accept the evidence of Mr Sgherza in that regard. I consider that the approach he took in raising the issue of GST, and in defence of the claim generally, was again simply opportunistic.
Mr Sgherza asserted that industry practice was to nominate and specify whether a price was inclusive, or exclusive, of GST. He said that if no reference was made to GST, the industry practice is to assume that the price is GST inclusive.
Assessment
I formed the view that, generally, Mr Sgherza gave his evidence in a somewhat glib fashion, and in a manner designed to achieve what he thought would suit the defendant’s case.
For example, he said that when he found the time sheets, in December 2008, he flicked through them and noticed that most of them had not been signed by Mr Kokkianos. An examination of the time sheets, which were in evidence, showed that in fact most had been signed by Mr Kokkianos.
Similarly, he said that the defendant had been charged for eight hours work, per tradesman, per day, but the time sheets only showed 7.5 hours. When he was asked to examine the time sheets to point out a time sheet that showed only 7.5 hours, he conceded that there were none.
Mr Sgherza said in evidence that he was drip feeding payments to the plaintiff because the plaintiff was reducing labour on site during 2009. He was taken to documents which demonstrated that the level of provision of labour was being maintained through early 2009, whereupon Mr Sgherza said, not that he was drip feeding the plaintiff payments, but rather that problems were being experienced with the release of funds by the bank. That was the first occasion on which any difficulty with bank funds had been raised.[21]
[21] T 167 line 9. His earlier evidence in relation to reasons for drip feeding payments at T 96 and T 104 line 27-28, was that he stopped paying while there was the dispute about paying for lunch breaks, and at T 118-119, said it was because PBH was withdrawing labour from the site.
Mr Sgherza gave evidence, as I have said, that he was paying timber carpenters $50.00 per hour, and on that basis, the rate charged by the plaintiff, of $56.00 per hour, was appropriate, having regard to an allowance for the plaintiff’s profit. After the amendment to assert that the plaintiff’s charges should have been inclusive of GST, Mr Sgherza said that during the period prior to the resumption of the trial he had considered the invoices, and regarded both the carpenters charged at $50.00, and the plaintiff’s charges of $56.00 per hour, as being inclusive of GST. Mr Sgherza brought to court invoices and quotes relating to the job generally, but did not produce the invoices for the carpenters which might have supported his contention that the $50.00 hourly rate was inclusive of GST. He said, surprisingly, that he didn’t think it was appropriate to bring in carpenter’s invoices.[22] Counsel for the plaintiff made the submission that that founded an inference that the invoices relating to carpenters would not have assisted the defendant’s case. I agree.
[22] T 158 line 23-28.
Mr Sgherza maintained that he did not discover that he was being charged for a period which included the lunch break, until he chanced upon time sheets in the site office in December 2008. He said that the time sheets were never provided to his office at Norwood, but rather only to the development site. That evidence is to be contrasted with that of Mr Kokkianos, who, when asked whether he gave the time sheets to Mr Sgherza, said “I would take them into the office, yes, at the end of a couple of months”, and said that was “our head office at Norwood, and I would file them in my desk, or on my desk.”[23] I prefer the evidence of Mr Kokkianos in that regard.
[23] T 183 line 24-T 184 line 7.
Expert reports
The plaintiff obtained an expert report from Mr Altamura, Director of Rider Levett Bucknall.
Mr Altamura’s major area of expertise was described as the establishing of cost planning and contract administration of construction projects. His qualifications include a Bachelor of Applied Science Building Studies (Hons). He has worked on a number of major building projects and been engaged as an expert witness previously. I accept that he is qualified to provide an expert opinion on the issues required of him.
Mr Altamura was engaged to provide an opinion as to industry practice in relation to the quotes of prices and the charging of GST. In his report, received into evidence, he said:
In the day to day routine of preparing estimates Rider Levett Bucknall would regularly seek pricing from both suppliers and trade contractors to assist in the estimating process. These quotes obtained from the industry would be exclusive of GST and many of these “quotes” initially received would also be verbal. Rider Levett Bucknall maintains relationships with most Trade Contractors and Suppliers to ensure we maintain up to date cost data and in maintaining this cost data, cost information provided is always exclusive of GST or GST is separately identified.
…
Mr Altamura made the following comment in relation to examples of Tender Form and Schedules provided in his report:
These examples clearly show that all rates and costs received are exclusive of GST and in some instances there is no mention of GST as an exclusion, but nevertheless recognised by the industry as not included within the rates provided.
Rider Levett Bucknall would receive and are privy to many hundreds of Tender Forms and Schedules during the course of the year, reflecting the many numerous projects we are involved with. We again reinforce our belief that it is standard industry practice that on commercial projects GST is not included within the rates and quotes provided. We do nevertheless note that on the few domestic projects we are involved with GST is included, typically as a separately identified figure, as GST on domestic projects is not recoverable.
In evidence-in-chief, Mr Altamura said that where quotes were provided for types of work similar to those involved in the Infinity Project, the prices were exclusive of GST, with GST to be added to the invoice. When shown a PBH invoice dated 25 May 2009, Mr Altamura identified it as having been created on the MYOB software, and described it as “a common tax invoice that we will come across on a daily basis in our office.” He said that the invoice clearly identifies the labour value ex-GST, the value of GST to be added, and the total value inclusive of GST. He went on to say that there was nothing further that he believed should have been included in the invoice.
Importantly, in evidence Mr Altamura considered that “when we receive a quote, be it verbal or a written quote, the dollar figure nominated would always be exclusive of GST. That’s the practice we take. It’s the standard practice that the industry takes.”
In cross-examination, Mr Altamura agreed that the best practice was to clearly indicate and confirm the status of GST with respect to any costing arrangement.[24] He accepted that the examples provided in the written appendices of his report, generally speaking, made mention of being exclusive of GST.
[24] T 240 line 10.
In re-examination he said:[25]
QYou were asked a series of questions about exactly how GST was treated and I think your evidence is that the price, as such, would be regarded in the commercial industry as being exclusive of GST.
AThat’s correct, yes.
QBut that best practice would be somewhere to indicate or to confirm that typically.
ATypically, yes.
[25] T 257 line 13-20.
Mr Altamura disagreed that, in the commercial building industry, failing to advertise the status of GST could be misleading. He concluded that, in his experience, he had never known a commercial quote for hourly rates to be charged inclusive of GST.
Mr Dunn
The defendant obtained an expert report and called Mr Dunn, who had been a chartered accountant for over 20 years, and worked with the building industry and associated professions.
Mr Dunn was engaged to provide an opinion as to the commonly accepted practices for price quotations, and the handling of GST in the building industry.
In his report received into evidence, Mr Dunn made the following comment:
The common practice of dealing business to business, is to quote on a GST-exclusive basis, but with clear identification that the amount does not include GST or that GST is to be added to the price. This notion has been supported in the Expert Opinion provided by Rider Levett Bucknall in which all 9 examples were on a GST exclusive basis.
It is therefore my opinion, that based on my experience and dealing with builders and trades in the industry that it would be considered best business practice to clearly show whether the price includes or excludes GST. It would be common for businesses to quote between businesses on a GST exclusive price, however there would normally be adequate disclosure that GST will apply on top of that quoted price.
In a case where such disclosure hasn’t occurred it would be considered reasonable to assume that the figure thus quoted was the total price payable, inclusive of GST.

In evidence in chief, Mr Dunn said that, in his experience, it was very rare to see a situation where there was simply a fixed price with no reference to GST. Mr Dunn acknowledged that in the commercial building industry it was largely the norm for pricing to be exclusive of GST, but said typically it was narrated as such.
In cross-examination, Mr Dunn acknowledged that he had very limited experience with the provision of labour-only rates, given that chartered accountants are not usually involved at that level of the building process. He conceded that he did not necessarily disagree with anything in the report of Mr Altamura, accepting that Mr Altamura would have had significant experience in dealing with costings in the building industry, and the manner in which they would be presented. He accepted that he would have deferred to the opinion of Mr Altamura in such respects.
Further, when asked about the invoices provided to SGA, Mr Dunn accepted that the different values for total labour and total balance indicate that a 10 per cent GST had been applied to the hourly rates, although he qualified his evidence in that he had not had the chance to check the calculations.
The Contract
The evidence as to the discussion between the parties, and relevant industry practice, was admitted principally as evidence as to what constituted the contract, rather than to assist in the interpretation of the contract.[26]
[26] cf. Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) CLR 337 p 352.
The rights and liabilities of the parties to the contract, are to be determined objectively:[27]
What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
[27] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors (2004) 219 CLR 165 [40].
Whilst there may be some uncertainty as to the extent to which the conduct of the parties, subsequent to the contract, can be taken into account,[28] I have come to the view that the post contractual conduct of the parties confirmed that the terms of the agreement were as contended for by the plaintiff.
Lunch Breaks
[28] Abram & Anor v AV Jennings [2002] SASC 417 [59].
The contract was partly oral and party written. The letter proposing the hourly rate, and the very brief letter accepting the rate, must be considered together with the discussions I find took place between Mr and Mrs Hounsell and Mr Sgherza as the basis of charging out PBH employees. The basis of charging constituted a term of the contract, and, as I have found, was agreed at the meeting on 8 November 2006.
The contents of the agreement were then confirmed by the ongoing business relationship which proceeded between the parties over the ensuing two or so years. The acceptance of that aspect of the contract is evidenced by the course of conduct between the parties, including the signing off of time sheets by Mr Kokkianos, and the payment of invoices.
I found Mr Hounsell to be a careful and honest witness. I made a similar assessment of Mrs Hounsell. I found Mr Sgherza to be somewhat casual, even glib, as I have said, in his approach to giving evidence.[29] He said things which he thought suited his case. I cannot rely upon his evidence, and certainly cannot rely upon it where it conflicts with that of Mr and Mrs Hounsell, or indeed Mr Kokkianos, or the documentary evidence.
[29] I bear in mind the observations made and the caution expressed in Creeper & Anor v Cooper & Anor [2013] SASCFC 78 as to such findings after a lengthy delay.
I accept the evidence of Mr and Mrs Hounsell as to the content of the discussions with Mr Sgherza. I find that Mr and Mrs Hounsell proposed, and that Mr Sgherza accepted, that PBH employees would be charged out, at the hourly rate, for an eight hour day, which incorporated a half hour lunch break. I find that that is consistent with the agreement PBH had with its employees.
The letter of 6 November 2006, which I find was discussed on 8 November 2006, makes specific reference to the PBH Enterprise Bargaining Agreement. (the Collective Agreement) For PBH to have reached agreement with SGA on any other basis would have been somewhat illogical.
It may be that at the time Mr Sgherza did not regard the precise arrangements as matters of great importance. I do not accept his evidence that the issue was not discussed at the meeting on 8 November 2006.
GST
Similarly, in relation to the issue of GST, as I have said, I find that the quote was, as a matter of intention between the parties, and as a matter of industry practice, made exclusive of GST. That that is so is evidenced by the fact that invoices were rendered on a monthly basis, were rendered on the basis that GST was charged in addition to the labour charge, and were paid by SGA.
I find that the parties intended and knew that the hourly rates quoted were in addition to GST. I accept the evidence of Mr Altamura that it was industry practice to quote in GST exclusive terms. I note that, in relation to commercial building projects such as the present one, GST paid by the developer is recoverable.
In administering a contract of this order, it would be suggestive of fundamental incompetence on the part of SGA, and in particular, Mr Sgherza, to find that he was unaware that GST was being charged. I reject the submission that SGA, and in particular, Mr Sgherza, had proceeded on the basis that the price was quoted inclusive of GST, and yet paid GST totalling well over $100,000, in error.
I reject the defendant’s argument that the plaintiff made a false or misleading representation with respect to the price of services, within the terms of s 53(e) of the Trade Practices Act.[30]
[30] Trade Practices Act 1974 (Cth) as at the time of discussions resulting in the agreement between the parties.
The defendant sought to rely on the decision in ACCC v Audi Australia,[31] where it was held that the advertising of a price that did not include all dealer delivery costs, and statutory charges, was misleading or false. In the present case, in dealings between parties involved in the commercial building industry, I do not consider that that authority is of relevance. For the same reason I would distinguish another decision relied upon by the defendant, ACCC v Signature Security.[32]
[31] ACCC v Audi Australia [2007] FCA 1990.
[32] ACCC v Signature Security [2003] FCA 3.
I find that the quote provided by PBH as to the hourly rate was exclusive of GST, that Mr Sgherza knew that, that Samuel Group paid on that basis knowingly, and that the issue was belatedly raised only in the course of litigation in an attempt to bolster the defendant’s position.
I find that there was an industry practice, that quotes, in such circumstances, were made exclusive of GST, and that the payments by SGA were not made by mistake. The defendant is not entitled to the return of the monies paid.
Estoppel
Having reached a conclusion as to the terms of the agreement, it is not necessary for me to formally consider the issue of whether the defendant is now estopped from denying liability, or raising the lunch break issue, or the GST issue. Had it been necessary to do so, I would have found that the course of dealings between the parties was such that the plaintiff was entitled to assume that the agreement proceeded on the basis that payments included payment for the lunch break, and that the price quoted was exclusive of GST.
The defendant is estopped by the conduct of relations between the parties on the basis of an agreed or assumed state of facts.[33] The plaintiff has acted in accordance with the course of dealings, to its detriment, including by paying its employees for the lunch breaks, and, I infer, remitting GST on the basis of the amount charged to SGA, and paid by SGA.[34]
[33] Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 266.
[34] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 p 404; and see Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 p 675; Thompson v Palmer (1933) 49 CLR 507 p 547.
Conclusion
Issue 2
I find that the agreement between PBH and SGA was for the provision of labour by PBH, at the nominated hourly rate, for an eight hour day, which included payment for the half hour lunch break. That was the basis upon which the business relationship between the parties proceeded for a period of the order of two years.
Issue 3
I find that the hourly rate quoted by PBH was exclusive of GST and that the parties intended and knew that. I also find that as a matter of industry practice, in commercial building developments such as the present one, quotes where GST is not mentioned, are recognised as being exclusive of GST.
It follows that the plaintiff is entitled to judgment for the amount claimed, namely $38,993.54.
I dismiss the claim for a set-off and the counterclaim.
I will hear the parties as to consequential orders.