SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
PICKERSGILL & HARVEY v TSOUKALAS
[2009] SASC 357
Judgment of The Full Court
(The Honourable Justice Anderson, The Honourable Justice White and The Honourable Justice Kourakis)
23 November 2009
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - ILLEGAL AND VOID CONTRACTS
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - RELATIONS BETWEEN PRINCIPAL AND THIRD PERSONS - RIGHTS AND LIABILITIES OF PRINCIPAL IN RESPECT OF CONTRACTS OF AGENT - FRAUD AND MISREPRESENTATION - OF AGENT
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - PARTICULAR CONTRACTS
Appeal against judgment for plaintiff on a quantum meruit - appeal and notice of cross-contention arises from a building dispute - appellant undertook development of land - appellants sub-divided land and sold one parcel to a non-party as part of a house and land package - appellants retained one parcel for themselves - respondent engaged by appellants to build homes on both parcels - appellants executed a written fixed price contract with the respondent for the construction of their home - respondent alleged that the contract was a sham and that the true agreement was an oral "cost plus" contract - trial Judge found that the written contract was a sham, but that the parties had not concluded an oral "cost plus" agreement.
Whether trial Judge erred in finding that the written fixed price contract between the appellants and respondent was a sham - whether the second appellant's lack of awareness that the fixed price contract was a sham makes the finding that the fixed price contract was a sham erroneous - whether trial Judge erred in failing to find that the parties' true agreement was a "cost plus" agreement - whether trial Judge erred in making an award on a quantum meruit.
Held: appeal dismissed - notice of cross-contention upheld - first appellant acting as agent for second appellant in contract negotiations - finding that the fixed price contract was a sham not erroneous - Judge should have found parties had an oral "cost plus" building agreement - award on a quantum meruit not appropriate but respondent entitled to same awards as damages.
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; Scott v Federal Commissioner for Taxation (No 2) (1966) 40 ALJR 265; Sharrment Pty Ltd v Official Trustee and Bankruptcy (1988) 18 FCR 449; Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 110; Ford Excavations Pty Ltd v Do Carmo [1981] 2 NSWLR 253; Coppleson v Federal Commissioner of Taxation (1981) 52 FLR 95; Blackburn, Low & Co v Vigors (1987) 12 AC 531; H Stanke & Sons Pty Ltd v O'Meara (2007) 98 SASR 450; Vestris v Cashman (1999) 72 SASR 449, applied.
Snook v London & West Riding Investments Ltd [1967] 2 QB 786, distinguished.
Raftland Pty Ltd v Federal Commissioner of Taxation (2008) 82 ALJR 934;
Continue reading Pickersgill v Tsoukalas
Sign in free to access the full text
Details
- AGLC
- Pickersgill v Tsoukalas [2009] SASC 357
- Case
- [2009] SASC 357
- Decision Date
CaseChat Overview and Summary
In Pickersgill v Tsoukalas, the appellants, Mr Pickersgill and Ms Harvey, appealed against a judgment in favour of the respondent, Mr Tsoukalas, in a building dispute. The appellants had developed land, sub-dividing it into two parcels, one of which they sold as part of a house and land package, while retaining the other for themselves. Mr Tsoukalas was engaged by the appellants to build homes on both parcels. A written fixed price contract was executed for the construction of the appellants' home, but Mr Tsoukalas alleged that this contract was a sham, and that the true agreement was an oral "cost plus" contract. The trial judge found that the written contract was indeed a sham but rejected the claim of an oral "cost plus" agreement. The appellants contested the judge's findings, arguing that the judge erred in finding the fixed price contract a sham and in not finding an oral "cost plus" agreement, and that the award on a quantum meruit was inappropriate.
The court held that the appeal should be dismissed, but the notice of cross-contention was upheld. The court found that Mr Pickersgill was acting as an agent for Ms Harvey in contract negotiations, and therefore, the finding that the fixed price contract was a sham was not erroneous. The court held that the judge should have found that the parties had an oral "cost plus" building agreement. The award on a quantum meruit was not appropriate, but Mr Tsoukalas was entitled to the same awards as damages.
The court found that the appellants had not presented any evidence to support the existence of a fixed price contract. The judge had rejected the appellants' evidence concerning several material matters, and the court found no error in this respect. The court found that there was sufficient evidence to support a cost plus agreement, including the parties' discussions and dealings before 4 September 2002, and the plaintiff's conduct in entering into a contract with Mr Price to build his house for $115,000 without obtaining final specifications or quotations from tradespeople. The court found that the judge's conclusion that the parties had not agreed on a cost plus basis was surprising and seemingly inconsistent with the finding that the September document was a sham. The court found that the judge's rejection of the appellants' claim of a fixed price contract and the respondent's claim of a cost plus agreement meant that the parties had gone ahead with the project without having settled on an agreement at all, which the court found unlikely.
The court found that the judge's conclusion that the parties had not agreed on a cost plus basis was influenced by the absence of express evidence showing when and where an agreement to that effect was reached. The court found that the judge looked for evidence of a "meeting of the minds" but thought it lacking. The court found that the judge's conclusion was inconsistent with the evidence and the finding that the September document was a sham. The court found that the parties had gone ahead with the project without having settled on an agreement at all, which the court found unlikely.
In conclusion, the court held that the appeal should be dismissed, but the notice of cross-contention was upheld. The court found that the judge should have found that the parties had an oral "cost plus" building agreement. The award on a quantum meruit was not appropriate, but Mr Tsoukalas was entitled to the same awards as damages. The court found that the appellants had not presented any evidence to support the existence of a fixed price contract, and the judge's conclusion that the parties had not agreed on a cost plus basis was inconsistent with the evidence and the finding that the September document was a sham. The court found that the parties had gone ahead with the project without having settled on an agreement at all, which the court found unlikely.
The court held that the appeal should be dismissed, but the notice of cross-contention was upheld. The court found that Mr Pickersgill was acting as an agent for Ms Harvey in contract negotiations, and therefore, the finding that the fixed price contract was a sham was not erroneous. The court held that the judge should have found that the parties had an oral "cost plus" building agreement. The award on a quantum meruit was not appropriate, but Mr Tsoukalas was entitled to the same awards as damages.
The court found that the appellants had not presented any evidence to support the existence of a fixed price contract. The judge had rejected the appellants' evidence concerning several material matters, and the court found no error in this respect. The court found that there was sufficient evidence to support a cost plus agreement, including the parties' discussions and dealings before 4 September 2002, and the plaintiff's conduct in entering into a contract with Mr Price to build his house for $115,000 without obtaining final specifications or quotations from tradespeople. The court found that the judge's conclusion that the parties had not agreed on a cost plus basis was surprising and seemingly inconsistent with the finding that the September document was a sham. The court found that the judge's rejection of the appellants' claim of a fixed price contract and the respondent's claim of a cost plus agreement meant that the parties had gone ahead with the project without having settled on an agreement at all, which the court found unlikely.
The court found that the judge's conclusion that the parties had not agreed on a cost plus basis was influenced by the absence of express evidence showing when and where an agreement to that effect was reached. The court found that the judge looked for evidence of a "meeting of the minds" but thought it lacking. The court found that the judge's conclusion was inconsistent with the evidence and the finding that the September document was a sham. The court found that the parties had gone ahead with the project without having settled on an agreement at all, which the court found unlikely.
In conclusion, the court held that the appeal should be dismissed, but the notice of cross-contention was upheld. The court found that the judge should have found that the parties had an oral "cost plus" building agreement. The award on a quantum meruit was not appropriate, but Mr Tsoukalas was entitled to the same awards as damages. The court found that the appellants had not presented any evidence to support the existence of a fixed price contract, and the judge's conclusion that the parties had not agreed on a cost plus basis was inconsistent with the evidence and the finding that the September document was a sham. The court found that the parties had gone ahead with the project without having settled on an agreement at all, which the court found unlikely.
Orders
Orders of the court
Full text does not contain this section.
Background
Background to the litigation
Before addressing the defendants’ criticisms of the finding of sham, it is appropriate to say a little more of the factual background. It will aso be necessary to address the plaintiff’s contention that the Judge should have found that the parties had a cost plus agreement.Factual Background The defendants are both architects. In December 1999 they purchased a block of land in the suburb of Bowden for $100,000. Initially, they planned to build a home for themselves on the land, but later decided to sub-divide it into two unequal blocks, to sell the smaller block as a house and land package, and to build their own home on the larger block. They obtained Council approval for the development in about February 2001, but as at February 2002, had still not obtained a sub-division of the land. On 2 February 2002, the defendants entered into a contract with Mr Price for the sale of the smaller block of land at a price of $80,000. The contract was subject to a number of special conditions of which two are presently relevant. The first was the obtaining of the sub-division of the land. The second was a condition that the defendants were, on or before 18 February 2002, to enter into a building contract for the construction of a townhouse dwelling on the smaller block in accordance with certain specifications and a schedule, and at a fixed price of $115,000. It was also a condition that the building contract should provide for completion of the home on or before 30 September 2002. The parties contemplated that the defendants would assign their interest in the building contract to Mr Price. The contract provided for settlement on 15 March 2002, or within seven days of the date upon which the plan of the sub-division was deposited in the Lands Titles Office, whichever was the later. Settlement eventually took place on 14 August 2002. The Judge found that, as at 2 February 2002, the defendants had no immediate prospect of entering into a contract with a builder in the terms contemplated by their contract with Mr Price. As at that date, they had not even received any quotation from a builder. A quotation which Mr Pickersgill obtained for the construction of the two houses on 8 March 2002 was for an amount of $361,493 in addition to the costs of demolition of an existing building. Mr Pickersgill regarded this quotation as too expensive. During March, April and May 2002 Mr Pickersgill consulted with another builder, a Mr Karidis. However, by May 2002, Mr Pickersgill had concluded that Mr Karidis’ costings were too expensive as well. Mr Pickersgill then sought a quote from the plaintiff. However, the plaintiff informed Mr Pickersgill that he did not work with steel framed construction, as contemplated by the defendants’ design. Mr Pickersgill checked with his designer and shortly afterwards agreed to a timber framed construction. The plaintiff recommended a Mr Williams to do the drawings for the timber framed buildings. The Judge summarised the conflicting evidence of the plaintiff and Mr Pickersgill concerning the events which occurred between June 2002 and 4 September 2002 when the September document was signed. The plaintiff’s evidence was to the effect that the defendant asked him for a written quote; that he said it would take six to eight weeks to prepare; that the defendant said he did not have that sort of time; that he then proposed doing the job on a cost plus basis; and that he agreed to reduce his usual commission of 15 per cent to 10 per cent. His evidence was that there was tacit agreement to that arrangement.
Evidence
Evidence Before The Court
The determination of whether a document is a sham in the sense discussed above involves an examination of the parties’ subjective intentions.[16] Despite the law’s aversion to admitting evidence of subsequent conduct as an aid to the construction of contracts, such evidence is admissible in cases of alleged sham in relation to the subjective intentions of the parties at the date they entered into the impugned document.[17] It is evidence going to the existence of the parties’ contractual relationship rather than to the terms of that relationship.[16] Coppleson v Federal Commissioner of Taxation (1981) 52 FLR 95 at 99; Sharrment Pt Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 at 456-7.[17] Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [117]; Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44 at [58]-[59]; Neufeld v Secretary of State for Business, Enterprise and Regulatory Reform [2009] EWCA Civ 280 at [37]; [2009] 3 All ER 790 at 804.Evidence of Cost Plus Agreement As noted earlier, the principal submission of the defendants was that the September document should not have been found to be a sham because the Judge had not made a finding which was essential to that conclusion, namely, that the second defendant, Ms Harvey, intended the document to be a sham. It is appropriate to put that issue to one side for the moment, and to address the plaintiff’s contention that the Judge should have found that the parties had agreed on a cost plus arrangement. Apart from the oral evidence of the parties, there were a number of indications in the evidence that the plaintiff and Mr Pickersgill had agreed upon a cost plus arrangement. In relation to the period before 4 September 2002, there was the following evidence. The plaintiff and Mr Pickersgill had, at the least, discussed the possibility of the plaintiff carrying out the construction on a cost plus basis and the two building cost summaries prepared by Mr Pickersgill before 4 September 2002 both provided for a builder’s commission of 10 per cent. The plaintiff entered into a contract with Mr Price to build his house for $115,000 without having obtained the final specifications, without seeking any quotation from the individual tradespersons who would be involved, and without preparing a quotation for Mr Price. That conduct is explicable only if the plaintiff knew that he could recover any additional costs from the defendants. The defendants accepted that it was likely to cost more than $115,000 to build Mr Price’s house, and that they would have to pay the excess. The defendants’ grounds of appeal challenged the Judge’s finding that that price was effectively guaranteed by the defendants. However, the finding concerns the amount to be paid by Mr Price, and not his payment of that sum. The Judge’s meaning is made plain by the sentence which immediately follows the impugned finding:Apart from extras to be negotiated separately by Mr Price, he would have to pay the plaintiff $115,000 for his house and the defendant would pay the rest.[18]The finding was in any event well established by the evidence. In the letter of 21 June 20002 which Mr Pickersgill wrote to Mr Price concerning the compensation which the defendants would pay for the delay, he said:We will pay this sum up front on settlement of the original contract of sale when we sign the building contract (you for $115,000, us for the balance of the building contract value).[18] Tsoukalas v Pickersgill & Harvey [2008] SADC 32 at [22].
Decision
Reasons for decision
ANDERSON J
(dissent)
KOURAKIS J
Apart from the September document itself, it is less easy to find evidence to support the parties’ agreement being a fixed price contract. It is true that Mr Pickersgill’s evidence was to that effect, but the Judge rejected his evidence concerning a number of material matters. The Judge was not prepared to draw certain adverse inferences sought by the defendants from the terms of the plaintiff’s pleadings, or from the terms upon which an expert retained by the plaintiff had been instructed. It was not suggested that the Judge was in error in this respect. The defendant did submit that the evidence of the discussions and dealings between the plaintiff and Mr Pickersgill was too vague and imprecise to give any reliable basis for a finding that there had been any agreement reached before 4 September 2002.The Conclusion of the Judge Concerning An Oral Cost Plus Agreement The conclusion of the Judge that the plaintiff and Mr Pickersgill had not agreed on an oral cost plus arrangement is, in my respectful opinion, surprising. First, it does not give effect to the strength of the evidence pointing to a cost plus agreement, and, in particular, the matters which I have summarised above. Secondly, the conclusion is seemingly inconsistent with the Judge’s finding that the September document was a sham. A finding that the parties had, at least by 4 September 2002, agreed upon some other kind of arrangement than that disclosed in the September document was a necessary step in the reasoning that the September document was a sham. If the parties had not in truth reached some other agreement, how could it be said that the September document was “merely a disguise, a façade, a sham, a false front” (to use the words of Windeyer J in Scott v Federal Commissioner of Taxation (No 2)[27]) for some other kind of arrangement. The defendants relied upon this inconsistency in their challenge to the finding that the September document was a sham, contending that it was a reason to set aside that finding. However, the finding of sham was a firm finding of the Judge, made with regard to the seriousness with which such a finding should be approached. I do not consider it appropriate to resolve the inconsistency in that way.[27] (1966) 40 ALJR 265 at 279. Thirdly, the rejection of the defendants’ claim of a fixed price contract, and the plaintiff’s claim of a cost plus agreement meant, as the Judge found, that the parties had gone ahead with the project without having settled on an agreement at all. While it is not impossible for that to have been the case, it is, in my respectful opinion, unlikely. The Judge seems to have been influenced to his conclusion that the parties had not agreed on a cost plus basis by the absence of express evidence showing when and where an agreement to that effect was reached. The Judge looked for evidence of a “meeting of the minds” but thought it lacking. He said:…[Mr Pickersgill] may have been willing to proceed with the plaintiff on a cost plus basis, but on the evidence I have heard I am not satisfied that there was an oral agreement reached on 4 September. I am not satisfied that there was a meeting of minds on a cost plus contract.[28][28] Tsoukalas v Pickersgill & Harvey [2008] SADC 32 at [42]. See also [59(2)].
Ratio Decidendi
Legal Principle Established
Established by: KOURAKIS J
Full text does not contain this section.