Quilkey v Tractile Combined Pty Ltd (No 2)

[2023] QDC 223

DISTRICT COURT OF QUEENSLAND

CITATION: 

Quilkey & another v Tractile Combined Pty Ltd & others (No 2) [2023] QDC 223

PARTIES: 

STEVEN ROBERT QUILKEY AND YUKIKO NOZAKI
(Plaintiffs)

v

TRACTILE COMBINED PTY LTD ACN 627 772 212
(First Defendant)

v

TRACTILE PTY LTD ACN 142 809 381
(Second Defendant)

v

JASON DEAN PERKINS
(Third Defendant)

v

TRAC GROUP HOLDINGS PTY LTD ACN 115 007 540
(Fourth Defendant)

FILE NO:

BD No. 794/21

DIVISION:

Civil

PROCEEDING:

Claim

ORIGINATING COURT: 

Brisbane District Court

DELIVERED ON:

17 February 2023 (ex tempore)

DELIVERED AT:

Brisbane

HEARING DATES: 

17 February 2023

JUDGE:

Porter KC DCJ

ORDERS:

1.     The First Defendant’s application to amend its counter-claim is dismissed.

CATCHWORDS:

PROCEDURE – PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – OTHER MATTERS – where the first defendant brings a counterclaim against the plaintiffs – where the counterclaim alleged that certain costs were incurred by the first defendant – where on the last day of trial the first defendant sought to amend the counterclaim to allege that the costs would, in future, be incurred by the first defendant – whether the proposed amendment to the counterclaim should be permitted

LEGISLATION:

Queensland Building and Construction Commission Act 1991 (Qld), s. 42

COUNSEL:

P Travis for the Plaintiffs

S Hogg for the Defendants

SOLICITORS:

Aitken Whyte Lawyers for the Plaintiffs

Celtic Legal for the Defendants

1. This is an application by the Defendant, relevantly, the Plaintiff by counter-claim, Tractile Combined, for leave to amend its counter-claim.  That simple statement belies the complex process that led to this issue arising, and the need for these reasons.   

2. The saga began with one seemingly harmless question in evidence-in-chief.  Mr Hogg, who appears for the Defendants was leading evidence from Mr Terpstra, a director and financial controller of the First, Second, and Fourth Defendants.  Mr Terpstra was asked to explain the financial arrangements between those three corporate Defendants.  There was an objection by Mr Travis who appeared for the Plaintiffs, Mr Quilkey and Ms Nozaki (the Defendants by counter-claim).  He objected to relevance. 

3. The basis for relevance argued by Mr Hogg was explained as follows.  Tractile Combined was either the contracting party or one of the contracting parties to install a roof on a house owned by the Plaintiffs.  The roof had particular roof tiles which had solar voltaic capacity and were cooled by a water system which took away heat from the solar panels to increase their efficiency (at least, according to the defendants).  The water taking heat from the roof flowed back into a tank called a Rotex tank, which allowed the transfer of heat to water used for domestic purposes.   

4. Tractile Combined did not have the necessary building licences to undertake the work under the contract (nor did any of the Defendants). Accordingly, it was accepted on the pleadings that it was unlawful for Tractile Combined to undertake to carry out building work for which it was not licensed. Undertaking to carry out unlicenced work is made unlawful by section 42(1) of the Queensland Building and Construction Commission Act 1991 (Qld) (“QBCC Act”). 

5. The Plaintiffs, having the benefit of that section, sued for recovery of money paid under the contract. Tractile Combined counter-claimed, as is often the case, on a quantum meruit basis. That right of action is preserved, subject to statutory modification under s 42(3) and (4) of the QBCC Act. Section 42(3) provides that:

   Subject to subsection (4), a person who carries out building work in contravention of this section is not entitled to any monetary or other consideration for doing so.

6. Subsection (4) provides:

   A person is not stopped under subsection (3) from claiming reasonable remuneration for carrying out building work, but only if the amount claimed:

   (a)is not more than the amount paid by the person in supplying materials and labour for carrying out the building work; and

   (b)      does not include allowance for any of the following

   (i)         the supply of the person’s own labour;

   (ii)the making of a profit by the person for carrying out the building work;

   (iii)costs incurred by the person in supplying materials and labour if, in the circumstances, the costs were not reasonably incurred; and

   (c)is not more than any amount agreed to, or purportedly agreed to, as the price for carrying out the building work; and

   (d)does not include any amount paid by the person that may fairly be characterised as being, in substance, an amount paid for the person’s own direct or indirect benefit.

7. My understanding of that provision is that it preserves the common law restitutionary action for quantum meruit for work actually done despite the contract itself being unlawful.  However, the action is subject to the specific limitations and modifications in subsection (4)(a) to (d).  Those limitations are, I think, generally directed at modifying the common law restitutionary claim to exclude matters which should, consistent with the policy of the section, not be permitted to be recovered. 

8. So, for example, subsection (4)(a) limits the restitutionary claim to being not more than the amount paid by the person in supplying materials and labour for carrying out the building work. That is obviously aimed at ensuring that a person who carries out unlawful building work and is unable to recover in accordance with its contract, is not put in a better position as against the consumer, than they would if they had to rely on the contract. The purpose of that statutory provision in advancing the policy, evident in section 42, is clear.

9. The same can be said of section (4)(b) which excludes, for example, from the amount that can be allowed as reasonable remuneration, any amount for the supply of the person’s own labour, or the making of profit, or costs incurred by the person if they were not reasonably incurred.  It also contains other limits.  I must come back to the proper construction of some of those limits in a minute.

10. Nonetheless, Tractile Combined, in its counter-claim claims that in “installing the Tractile system…[1] Tractile Combined, has incurred the following costs”.  Then it lists about 100 or so specific invoices.  It then alleges that, “Tractile Combined performed the works,” presumably identified in those invoices, “at the Plaintiff’s request”.  In its reply, the Plaintiff denied that Tractile Combined incurred the costs in the table, and alleges a belief as to that being untrue because Tractile Combined did not incur a liability to pay those costs at all, or for the pleaded reason.  In [3(a)(iv)] of the reply the plaintiffs say:

    Tractile Combined did not perform the works in the table in paragraph 2 and did not incur a liability to pay those costs, and did not pay them.

    [1] That seems to be language designed to identify the work done and material supplied at the site under the contract.

11. It is apparent that Tractile Combined seeks to prove its restitutionary claim by reference to the costs to it of doing the work, rather than by reference to other objective evidence of the value of such work in the open market of the kind that might be obtained from a report from a quantity surveyor.  That is not to say that in appropriate circumstances the costs incurred in actually doing the work and supplying the goods in question (subject to the limitations in s 42) might not be evidence that tends to prove what the quantum meruit value is. 

12. The reply in [3(a)(iv)] raises the question as to why such a denial would be made.  It is a little unusual given that one would ordinarily expect in a case that involves costs allegedly incurred nearly three and a half years ago, that such costs would have been paid and would have been costs incurred by the party who the Defendants say was a party to the contract.  The answer emerged when I was informed that none of the invoices are addressed to Tractile Combined.  For the most part they are addressed to Tractile P/L.

13. It was in that context that Tractile Combined sought to lead evidence from Mr Terpstra explaining the financial arrangements as between the three Tractile Defendants with a view to explaining how it could be that invoices uniformly issued to Tractile P/L actually involved costs incurred by Tractile Combined.  Now, as I have said, there are other ways of proving what a reasonable rate for work is, but that is the way the Tractile Combined sought to prove it, and thus there was a difficulty because the counter-claim does not plead that these costs were incurred by Tractile P/L on behalf of Tractile Combined, nor how that came to be done. 

14. In any event, Mr Travis’ objection was ultimately that Mr Terpstra could not give the evidence because while it might be relevant to the very broad joinder of issue on the pleadings, it was not raised in his witness summary.  I need to say a little bit more about the context of that submission. 

15. This case is on the District Court Commercial List.  The District Court Commercial List is intended by me and the other Judges who administer it, to provide prompt and efficient resolution of what are, in most cases (despite their undoubted significance to the parties), relatively small commercial disputes. 

16. The matter was placed on the list, as I recall it, without objection by either side.  I made directions to get this matter ready for trial.  We had more than one or two directions hearings, as I recall, and considerable effort was made to manage the case for it to be ready for trial.  It was listed for five days.  That is a relatively long trial in this list.   

17. Directions are made to ensure the efficient resolution of what, as I said (and with respect to the parties), are usually modest claims in respect of which too many interlocutory steps or adjournments can result in the costs becoming disproportionate to the nature of the claim.  Importantly in this case, which is relatively complex, I made directions in, at the latest, September 2022 for the filing of witness summaries.  In December 2022, for the most part if not entirely, the summaries were filed in accordance with my directions.  I made the following order:

    Unless the trial Judge grants leave no party may lead evidence from a witness that materially departs from the summaries of evidence filed in the proceeding pursuant to the order of 27 September 2022.

18. Witness summaries were provided.  I did not read them.  They were not for me to read.  It was always contemplated that evidence would be given orally, and looking at the witness summaries now, that does seem to have turned out to have resulted in more efficient conduct of the proceeding.  Whether it did or it did not, the fact is that Mr Terpstra’s witness summary says absolutely nothing about the matter about which evidence is sought to be led.  Accordingly, leave was required. 

19. Mr Travis opposed leave.  He opposed leave for the case management reasons I have identified.  He opposed leave because it would take his client by surprise, not knowing what this arrangement is or how it was to work.  He opposed leave because accepting the issue arose on the pleadings, there has been no discovery about the matter. 

20. Amongst other things, I gave Mr Hogg time to take instructions about the discovery issue.  Although, to be fair I did put it to him on the basis that I would find it extremely hard to believe that there were not documents in existence that would be directly relevant to this reimbursement arrangement or whatever the arrangement was going to be. 

21. It was just as well that Mr Hogg did take instructions.  In the circumstances as it was left, I was inclined not to grant leave because of the reasons raised by Mr Travis.  (There were more similar submissions relating to the fact that these issues were not raised in the written openings either, and so on.)  However, on my return Mr Hogg told me that it was, in fact, the case that his client did not have many documents; at most one email.  But the limited disclosure revealed that the pleading in the counterclaim was wrong. 

22. He told me that his instructions taken over the lunchtime break were that there were financial arrangements between Tractile P/L and Tractile Combined in relation to the costs of each job completed by Tractile Combined.  Once a job was finished by Tractile Combined, there would be an accounting of expenses incurred by Tractile P/L that were properly referable to the job.  Tractile P/L would then be reimbursed for the costs of the job by Tractile Combined.  His instructions were that because the job in the present case had not finished yet (I guess because this litigation might be treated as continuing it) there had been no accounting done and as such there was no entries in any accounts about it.  I should say, I thought, at the least, there would be entries in the accounts that would be relevant to the accounting exercise.  Mr Hogg’s instructions, obtained over lunchtime, were that the only document evidencing this arrangement between the companies was an email between the directors talking about the arrangement. 

23. As a result of these instructions, Mr Hogg sought leave to amend the counter-claim such that instead of saying, in “installing the Tractile System at the site for the Plaintiffs, the Defendant has incurred the following costs,” he wished to insert the words, “will incur the following costs”.

24. I raised with Mr Hogg whether he would oppose adjourning the trial for the Plaintiffs to consider their position.  He said no adjournment was necessary.  He said that was because the amendment was a minor one and that the evidence to be given by Mr Terpstra was of limited scope.  Mr Travis opposed leave to make the amendment on two primary bases: one legal, the other one case management inspired. 

25. As to the legal submission, he submitted the amendment would be futile based on a construction he advanced of section 42(4). He submitted the effect of section 42(4)(a) is that the statute imposes a limit on the quantification of a quantum meruit claim, being the amount paid by Tractile Combined in supplying materials and labour. He submitted that it was no mistake or oversight by the Parliament in choosing the word “paid” as opposed to the word “incurred”. He said there would be good policy reasons for that, the gravamen of which was: Why should someone unlicensed be able to recover more from a consumer than they have, in fact, paid out for work.

26. There is no doubt that the statute uses the word “paid”. No one could point me to authority about this question. I was inclined to think Mr Travis may be right about his argument, except for the language in section 42(4)(b)(iii). That section limits what can be recovered on a restitutionary claim, by prohibiting allowance for costs incurred by the person in supplying materials and labour if the costs are not reasonably incurred. That seems to contemplate that a restitutionary claim could include an allowance for costs incurred by a person if the costs were reasonably incurred. Thus 42(4)(a) and 42(4)(b)(iii) are inconsistent, seemingly, on this question.

27. If it was just a question of law, I would give leave so that I could have some time to try and work out what the proper construction of the Act is on this point.  I would not refuse leave to make the amendment on that basis, consistent with the general principle that if a legal proposition is reasonably arguable, you would not strike out a pleading; and, similarly, you would not refuse leave to make an amendment if the amendment gives rise to a cause of action that is reasonably arguable.  I am not saying Mr Travis is wrong in the construction that he contends for.  I am just saying it is not a reason I would refuse leave. 

28. The second basis that Mr Travis urged me to refuse leave is, in my respectful view, a stronger one and the reason I do refuse leave.  He points primarily to the unfairness to his client of having to deal with this evidence without having been given notice of it, whether by a proper pleading or by the witness summary.  I agree with that.  I can understand why Mr Hogg would contend that the amendment is minor and the evidence is simple, but it I have noticed that it frequently looks like a simple proposition for the other side to deal with when you are the party seeking to amend.  I note some matters on that point. 

29. One immediate difficulty is that the evidence that Mr Hogg opened was itself incomplete.  I asked questions about who was responsible for carrying out this adjustment and by what principles the adjustment would occur; and further instructions had to be taken to find out that it was, according to Mr Terpstra, himself.  What that really points to, though, is that the discipline of pleading this arrangement could expose all sorts of difficulties and ambiguities about it.  Is it an agency?  Is it a contract?  Is it an obligation that is not legally enforceable between the parties?  I have no idea and neither do the Plaintiffs.  I think it would be quite unfair to permit the Tractile Combined to lead this evidence and leave it up to the Plaintiffs, to have to work out what cross-examination to conduct and why and on what basis. 

30. Another difficulty is linked to the amendment that is sought.  In my respectful view, what is suggested as to the arrangement between these companies is so vague that the Plaintiffs would be entitled to an amendment which pleads the arrangement fully (contract, agency, whatever it might be).  No such amendment was able to be formulated or offered.  As such, I think that the proposed amendment of the very limited kind Mr Hogg articulates would not be sufficient properly to raise this argument even if it had been done outside the exigencies of the last day of a five-day trial.

31. There is a further difficulty.  It is not known what Mr Terpstra is going to say in respect of all of these invoices.  Mr Terpstra will explain why some or all of the invoiced amounts are amounts which ultimately will be visited upon Tractile Combined.  Apparently, he will do so by reference to criteria that are not articulated and presently not even known, it seems, by the counter-claimants’ representatives beyond saying that he will form some view about whether they are properly referable to this job.  At present the accounting that is supposed to occur, has not happened.  Even if Mr Terpstra is supposed to be the one who does it, he will apparently be doing it in the witness box for the first time, which strikes me as a most unsatisfactory way to proceed with the trial.

32. Finally, Mr Travis pointed out that he might have wanted to cross-examine Mr Perkins about this arrangement, and I can certainly understand why that might have been relevant.

33. This issue was raised for the very first time about an hour before lunch on the fifth day of a five-day trial.  Concerns about this issue had been earlier communicated by the Plaintiffs and nothing had been said about it by the Defendants.  I cannot see, without taking a significant risk at the expense of the Plaintiffs, how I could fairly let this happen without it being fully pleaded and without the Plaintiffs having a full opportunity to investigate it.

34. I would have had to grapple with questions of adjournments and whether that could be done on a basis that would be fair, despite the relatively modest amounts involved in this case, in the overall scheme of commercial matters, and the extensive case management that has gone into getting the case ready for its five-day hearing.  I am relieved of that burden by the position of the Defendants that no adjournment is required for the other side to deal with the proposed amendment and further evidence. 

35. But I should say that even if an adjournment was sought there would be, I think, significant difficulties in working out terms for that which would be fair in the circumstances of this case at this stage.  For those reasons I refuse leave to make the proposed amendment, and I uphold the objection to the question that was asked about two and a half hours ago.