STPG Constructions Pty Ltd v Multibuild Constructions Pty Ltd

[2024] NSWDC 220

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:

STPG Constructions Pty Ltd v Multibuild Constructions Pty Ltd [2024] NSWDC 220

Hearing dates:

5 June 2024, 6 June 2024

Date of orders:

14 June 2024

Decision date:

14 June 2024

Jurisdiction:

Civil

Before:

Newlinds SC DCJ

Decision:

(1)   Judgment for the Plaintiff against the First Defendant in the sum of $982,636, together with interest at the Court rates to be agreed or determined.

(2)   Dismiss the claim against the Second Defendant.

(3)   Direct the parties to seek to agree as to interest and costs.

(4)   The matter be listed for directions at 9:30am on Friday 21 June 2024, where final orders will be made and, if necessary, submissions received as to interest and costs.

Catchwords:

Contracts – Breach – Repudiation – Termination – Damages for loss of bargain

Australian Consumer Law – Misleading or deceptive conduct – Reliance – Damages – Section 75B accessorial liability of sole director of corporation

Legislation Cited:

Australian Consumer Laws; s 18

Competition and Consumer Act 2010 (Cth); s 75B

Cases Cited:

Care A2 Plus Pty Ltd v Pichardo [2024] NSWCA 35

Council of the City of Sydney v Goldspar Australia Pty Ltd (2006) 230 ALR 437

Foran v Wight [1989] 168 CLR 385

JR Consulting & Drafting Pty Ltd v Cummings [2006] FCAFC 20

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623

Mertens v Home Freeholds Co [1921] 2 KB 526

Rawson v Hobbs (1961) 107 CLR 466

Stevenson v Hook (1956) 73 WN (NSW) 307

The Corporation of the City of Adelaide v Jennings Industries Ltd (1985) 156 CLR 274

Ventura v Svirac [1961] WAR 63

Yorke v Lucas (1985) 158 CLR 661

Texts Cited:

Carter’s Breach of Contract (2nd Ed)

Category:

Principal judgment

Parties:

STPG Constructions Pty Ltd (Plaintiff)
Multibuild Constructions Pty Ltd (First Defendant)
Samear Machlouche (Second Defendant)

Representation:

Counsel:
Mr D Edney (Plaintiff)
Mr D Allen (Defendants)

Solicitors:
Madison Marcus Law Firm (Plaintiff)
Edmund El Khoury & Associates (Defendants)

File Number(s):

2022/234245

Publication restriction:

Nil

JUDGMENT

Overview

1. By written agreement made 13 September 2021 the Plaintiff, as principal, and the First Defendant, as subcontractor agreed with respect to building work to be carried out at a development located at Kiama (“the Agreement”).

2. By amended statement of claim filed 23 February 2024 the Plaintiff seeks damages, quantified at $982,636, against the First Defendant for the loss of the benefit of the Agreement as a result of what the Plaintiff contends was its valid termination on 22 June 2022, consequent upon what it contends was conduct by the First Defendant, which amounted to repudiation of the Agreement.

The claim against the First Defendant

3. As between the Plaintiff and the First Defendant the issues are as follows:

1. The proper construction of the relevant provisions of the Agreement;

2. Whether the identified conduct of the First Defendant amounted to repudiation, giving rise to an entitlement for the Plaintiff to terminate the contract;

3. Whether the Plaintiff, at the time of purported termination, was either in breach of its obligations pursuant to the Agreement or was itself not able to demonstrate that it was ready, willing and able to perform its part of the bargain;

4. If so, whether the consequences are that the Plaintiff’s termination was invalid and/or whether any damages are available in those circumstances; and

5. The quantum of any damages.

The ACL claim against the First and Second Defendants

4. There is also a claim against the First and Second Defendants brought pursuant to s 18 of the Australian Consumer Laws (“ACL”) which relates to a payment of $55,000 made by the Plaintiff to the First Defendant, which payment is contended by the Plaintiff to have been the consequence of misleading or deceptive conduct by the First and Second Defendants.

5. The issues in that part of the case are:

1. Whether the conduct identified was misleading or deceptive;

2. Whether the conduct “caused” the loss claimed by the Plaintiff; and

3. Issues arising in the separate claim against the Second Defendant.

6. The Plaintiff, in quantifying its claimed damages for the contract aspect of the case, has brought the $55,000 payment to account. It is accepted by the Plaintiff that if the Plaintiff is successful on the contract claim against the First Defendant, then it would be double counting to be awarded the same $55,000 for the ACL claim. However, it contends it would, in those circumstances, be entitled to $55,000 in damages against the Second Defendant.

Oral evidence

7. Most of the facts are uncontroversial and are demonstrated by contemporaneous documents.

8. There was some contest between various witnesses as to the existence and/or content of a number of conversations which I will deal with throughout this judgment. However, I think it is fair to say that all three witnesses who gave evidence before me were doing the best they could to recollect events that occurred almost 3 years ago. They each couched their evidence at the highest level of generality, and when questioned as to actual memory, it was clear to me that at best their recollection was, at best, hazy and on its own probably unreliable as to detail, unless it can be seen to be consistent with the objective facts which I can identify with confidence from documents created at the time. None of the witnesses could recall precise words said in these conversations, rather the best they could do was tell me the gist of their recollection. In the context of the issues, the difference in recollection is a question of nuance and the actual words spoken, to my mind, assume importance.

9. In general, unless I indicate to the contrary, the findings of fact I have made are based primarily on my analysis of the probabilities based on what I know people said and did at the time from what they wrote in contemporaneous documents at the time.

The facts

10. The general outline of facts is as follows.

11. As I have said, the Agreement was made on 13 September 2021. The Plaintiff’s case is that it was for a fixed price and that it contained an express provision that the price could not be varied by the First Defendant for any reason, but in particular if there was an increase or decrease in labour and material costs. The First Defendant takes issue with this construction of the Agreement.

12. The relevant terms of the Agreement include the following:

“Item 6

• The subcontract sum is stated to be “$1,284,219 (exclusive of GST)”;

• Timber roof designed by structural – additional $5000 plus GST;

• Optional safety hatches - $22,500 (exclusive of GST);

• Internal load bearing for level 1 or external wall framing based on the roof design of global consulting.

6. SUBCONTRACT SUM

6.1   Unless otherwise stated herein, the Subcontract Sum is the amount stated in Item 6 of the Subcontract Details and the Subcontract Sum is calculated in accordance with the Pricing Schedule and is not subject to any adjustment on account of any rise and/or fall in labour rates (including any extra amounts payable on account of the conditions in which any work is carried out and any change in the cost of statutory and/or other overheads) cost of materials and plant rates on any account whatsoever.

9. COMMENCEMENT AND COMPLETION

9.1   The Subcontractor must promptly, upon being given access and if applicable possession of the Site, commence the Works on the date nominated in Item 1 of the Subcontract Details of this Contract.

12. VARIATIONS

12.1   The Contractor or the Contractor’s Representative may vary the Works and direct the Subcontractor to do any one or more of the following:

(a)   increase, decrease or omit any part of the Works under this Contract;

(b)   execute additional work;

(c)   change the character or quality of any material or work or of anything described in this Contract;

(d)   change the character or quality of any material or work such as may be necessary due to the existence of a Latent site condition;

(e)   change the levels, Survey marks, lines, positions or dimensions of any part of the Works under this Contract.

12.2   demolish or remove material or Works no longer required by the Contractor. The Subcontractor shall not vary the Works under this Contract except as expressly directed by the Contractor or the Contractor’s Representative in writing.

12.3   The Contractor or the Contractor’s Representative must provide to the Subcontractor written notice of a proposed variation under Clause 12.1 of this Clause. The Subcontractor must notify the Contractor’s Representative within two-(2) business days in writing as to whether the proposed variation can be effected. In the event the variation can be effected, the Subcontractor must within the two-(2) business day period, in writing:

(a)   notify the Contractor’s Representative of the effect which the Subcontractor anticipates that the variation will have on the time for Practical Completion and completion of a stage of the Works to which the variation relates; and

(b)   provide an estimate of the cost for the variation supported by all measurements, quantities, rates and other information used by the Subcontractor in determining such price, delay or disruption costs and costs or effect on any applicable warranty, of the proposed variation.

12.4   If the notice referred to in Clause 12.3 related to works being decreased or omitted from the Works, the work not now required is to be deducted from the Subcontract Sum. Cost in this case means the actual expense or amount saved by the Contractor because the work is now not required to be done.

37. DEFAULT

37.1   If a party breaches or repudiates this Contract, nothing in this clause shall prejudice the right of the other party to recover damages or exercise any other right.

37.2   If either party commits a substantial breach of this Contract, the other party may give to the party who committed the breach a written notice to show cause. That notice shall:

(a)   state that it is a notice under this clause;

(b)   specify the alleged substantial breach;

(c)   require the party who committed the breach to show cause in writing why the party giving notice should not exercise a right referred to in this clause as the case may be;

(d)   specify the time and date by which the party who committed the breach must show cause (being not less than 2 calendar days after the notice is given to that party); and

(e)   specify the place at which cause must be shown.

49. FURTHER ASSURANCE AND GOOD FAITH

49.1   Each party must promptly at its own cost do all things (including but not limited to executing all documents) necessary or desirable to give full effect to this Contract.

49.2   Each party must act in good faith, honestly and reasonably in the performance of its obligations under this Contract with the object of achieving the commercial efficacy intended under this Contract.

Payment Schedule

Timber Supply, Timber roof installation & Roof sheeting supply & install

- Schedule of payments is same for each of the blocks

- For purchase of timber, full payment is required prior to order for each of the blocks

- For other payments for each block:

10% prior to commencement of work

30% on delivery of material

30% progress payment

Balance and final payment 30 days from end of the month.”

13. By 2021, there had been a significant increase in cost of both labour and material caused, I infer at least in part, by the COVID pandemic. On 2 November 2021, there was an e-mail sent by the First Defendant to the Plaintiff. That e-mail (“the 2 November E-mail”) was created and physically sent by the Second Defendant, who was at all relevant times the sole director and guiding mind of the First Defendant.

14. The 2 November E-mail’s subject heading was “Price increase”, and it was in the following terms:

“Hi ash

There is a price increase from 1 November

15 percent on all timber and if the payment is not done you will have to pay for every increase on the whole job I have sent the invoice to you as per agreement of the contract to be paid You have till tomorrow to pay the invoice One the payment we can deliver all materials on site and give you a letter of ownership of all materials Regards multibuild constructions”

15. The Plaintiff contends it paid the sum of $55,000 as a consequence of its receipt of that e-mail and it says that two statements in the e-mail amount to misleading and deceptive conduct. It is the 2 November E-mail and the payment of the $55,000 which is the subject of the Australia Consumer Law part of the claim. It is relevant to the contract aspect of the claim because it forms the context of the conduct that follows, said to amount to repudiation of the Agreement.

16. Sometime in March 2022, there was a conversation between Mr El-Khoury of the Plaintiff and Samear Machlouche, the Second Defendant (Mr Machlouche). Mr Machlouche was the sole director of the First Defendant.

17. Mr El-Khoury’s recollection of the conversation is as follows:

“Samear:   The price of material has increased a lot. I have to increase the Subcontract Sum in the Agreement.

Me:   You can’t do that. We have an agreed contract price. Send us what you have, and we will look at it.

Samear:   Okay, I will. Is the job still going ahead?

Me:   Yes, but we will need to review the numbers.”

18. Mr Machlouche denied the conversation in his evidence in chief, but under cross-examination conceded that there was a conversation along those lines, albeit he denied that Mr El-Khoury said anything to the effect that “you can’t do that, we have an agreed contract price”. Mr Machlouche also said that the context of the conversation was, what he described as, variations to the contract, which had been requested by the Plaintiff. He gave no detail of what those variations were at all. There is no written record of any variations.

19. On balance, and in particular having regard to the very hazy nature of Mr Machlouche’s evidence and by reference to the documents each created around this time, some of which I am about to come to, I accept that something to the effect of the evidence given by Mr El-Khoury was said in a discussion between him and Mr Machlouche. The gist was that Mr Machlouche said that the contract price needed to be increased because the cost of labour and material had increased, Mr El-Khoury’s position was that was not permissible under the contract but that he would look at any proposal. I do not accept that there was any discussion about variations or that there had in fact been any variations.

20. On 14 March 2022, what was described as a “quote of works” was provided by the First Defendant to the Plaintiff which costed the entire job, the subject of the Agreement, at $1,927,605.19 cents, which was a significant increase from the actual contract sum of $1,284,219.

21. Mr El-Khoury gave evidence that shortly after that quote was received, he spoke to his assistant Nadine, and they had a conversation to the following effect:

“Mr El-Khoury:   Nadine, please call Samear (Machlouche) and find out what these numbers are. The increase is way too high, and we never agreed to pay increased labour costs.

Nadine:   Okay.”

22. Shortly thereafter, Nadine reported back to Mr El-Khoury:

“Nadine:   I have spoken to Samear (Machlouche). I told him the updated quote was way too high, and I questioned him about the delay. I also said that the updated quote also included increases in labour, and I asked him why. He said that labour has increased as well. I said I would speak to you and get back to him. There are also a few e-mails back and forth with him.

[Nadine then showed Mr El-Khoury some e-mails with Samear Machlouche regarding the price increase]

Mr El Khoury:    It is too high. We need to call him back and let him know we not accept the increases.”

23. Nadine gave evidence. She, however, gave no evidence as to the above conversations. I infer that she does not remember it. I therefore need to be very cautious before accepting and acting on Mr El-Khoury’s recollection of what Nadine said had occurred at the time.

24. The existence of such a conversation is, however, consistent with two things. The first is telephone records to confirm that around that time there was a three-minute conversation between Nadine and the Second Defendant (Exhibit E), and moreover, on 15 March 2023 Mr Machlouche sent to the Plaintiff a bundle of documents described as “all price notifications attached from October 2021”. The only apparent purpose being to demonstrate that there had in fact been a dramatic increase in both labour and material costs. In light of those two objective facts, I find that a conversation between Nadine and Mr Machlouche along those lines set out above probably occurred.

25. At around this time, the end of March, the Plaintiff started negotiating with other contractors to quote for the work, the subject of the Agreement. By 4 April 2024, the Plaintiff had in fact entered into a contract with another contractor(s) for the same work. Also, during this period, the communication between the Plaintiffs and the Defendants all but dried up. It was described in evidence and submissions as “ghosting” by the defendants. No communication about the Agreement or indeed any work under the Agreement takes place in April, May, or June.

26. On 22 June 2022, the First Defendant, by its solicitors, wrote a letter recording the history of the matter and said the following:

2.   The Subcontract contained, inter alia, the following clauses:

(a)   Clause 6.1: Unless otherwise stated herein, the Subcontract Sum is the amount stated in Item 6 of the Subcontract Details and the Subcontract Sum is calculated in accordance with the Pricing Schedule and is not subject to any adjustment on account of any rise and/or fall in labour rates (including any extra amounts payable on account of the conditions in which any work is carried out and any change in the cost of statutory and/or other overheads) cost of materials and plant rates on any account whatsoever.

(b)   Item 6 of the Subcontract Details – Subcontract Sum: $1,284,219 (excluding GSR) (Subcontract Sum)

3.   On 2 November 2021, Samear Machlouche, a representative of Multibuild, represented to Nicholas El-Khoury of STPG that payment of the deposit due under the Subcontract in the sum of $98,290.50 (including GST) (Deposit) would lock in the price of the material required to complete the works pursuant to the Contract (Representation). The Representation also accorded with the Subcontract such that the Subcontract Sum specified in item 6 of the Subcontract Details was fixed pursuant to clause 6.1 of the Subcontract.

4.   STPG paid the Deposit to Multibuild as follows:

(a)   the sum of $43,290.50 on 27 October 2021; and

(b)   the sum of $55,000 on 2 November 2021.

5.   On 14 March 2022, Multibuild informed STPG that the Subcontract Sum had increased to $2,017,346.35 (excluding GST), being an increase in the sum of $733,127.35 (excluding GST). In doing so, Multibuild sought to unilaterally change the Subcontract Sum in breach of clause 6.1 of the Subcontract. It follows that by attempting to change the terms of the Subcontract without any entitlement to do so, Multibuild has repudiated the Subcontract by evincing an intention not to be bound by the terms of the Subcontract (Repudiation).

6.   STPG is therefore entitled to accept the repudiation and sue Multibuild for damages or to affirm the Subcontract.

7.   STPG hereby accepts the Repudiation.

Was the conduct of the First Defendant repudiation?

27. There is an issue as to whether the Agreement can properly be characterised as a fixed price contract. That is the Plaintiff’s submission.

28. The First Defendant does not accept the Agreement was for fixed sum because of the third bullet point against item 6, “internal load bearing for level 1…”, against which there is no price allocated.

29. It is the First Defendant’s submission that, as there is no amount specified for that part of that work, then the Agreement is not for fixed price. I reject that submission. The plain words of cl 6.1 refer to the amount stated in item 6. There is an amount stated in item 6, it is the totality of the larger number together with the amounts against the first two bullet points. In the context, where the item against which the third bullet point is but one of many items contained within the Agreement, I do not think that the parties intended that, notwithstanding the contract being very clearly expressed to be fixed sum, that in fact it was not. Apart from anything else, such a construction gives little or no work for cl 6.1 to do.

27. The conduct relied upon by the Plaintiff as repudiation needs to be assessed by reference to the fact that the Agreement was for a fixed price and was not susceptible to variation because of increases of materials and labour. It also needs to be judged against the 2 November E-mail which was, in my opinion, the First Defendant insisting on payment that it was not then contractually entitled to receive. The 2 November E-mail resulted in payment by the Plaintiff. The Plaintiff elected to keep the Agreement on foot and paid the money requested. It is not suggested to be repudiating conduct relied upon for the termination. None the less it forms important background and context for what happens next.

28. The legal test requires me to consider whether it amounts to “conduct evincing an intention no longer to be bound by the contract or to fulfil it only on a matter substantially inconsistent with the promisor’s obligation and to in any other way…”. The test is whether the conduct of one party is such as to convey to a reasonable person in the situation of the other party, renunciation of the contract as a whole or of a fundamental obligation under it: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 (“Laurinda”) at [658] per Deane and Dawson JJ.

29. The relevant unwillingness must appear to be “clear and unambiguous”: Stevenson v Hook (1956) 73 WN (NSW) 307 at [313] per Street CJ and Herron J.

30. It is the Plaintiff’s case that the clear and unequivocal message to be taken from all of the conduct I have outlined, in the context of the 2 November E‑mail, being the conversation and the Quote, and concluding on 15 March 2023, where the detailed invoices were provided, together with the lack of any work being done under the Agreement after 22 March, is conduct amounting to renunciation of the Agreement as a whole.

31. The request for the 2 November invoice to be paid was clearly not in conformity with the contract, which at the very least required invoices specifying a 30-day period to be issued and for them only to become payable at that time. There was also a debate as to whether it was appropriate to issue an invoice for the timber at that point of the job.

32. I do not need to resolve that, but what I can conclude is that the requirement to pay that invoice on the conditions outlined was contrary to an important term of the Agreement.

33. The conduct of the First Defendant shortly after payment of the $55,000 was to request a very significant increase the contract sum because of increased costs of labour and material in the conversation I have identified, followed up with the quote issued on 14 March 2021 and the supporting documents that were provided thereafter, together with what I think probably was a conversation between Nadine and Mr Machlouche, where Nadine made it clear that there was no entitlement to the extra amount claimed under the Agreement, and that the amount suggested was way too much, followed by the provision of further materials to justify the increase. During this period, work under the Agreement seems to come to a standstill.

34. The First Defendant contends that, taken at its highest, the conversations and the various e-mails and documents I have identified, amounts to no more than a request by the First Defendant to be paid more under the Agreement and does not contain with it any implicit suggestion that if the request is not complied with, that it will not perform its obligations under the contract, viz to do the work, subject to the agreed fixed price.

35. Whilst I accept that there is no express statement to that effect, in my judgment a reasonable person looking at the communications and conduct in context and taking a sensible commercial view as to what was being communicated, would have understood that what the First Defendant was saying to the Plaintiff was that unless it agreed to the substantial increase in price, it would not perform the Agreement in accordance with its terms. Paragraph 5 of the Plaintiff’s solicitor’s letter makes it clear that is how the Plaintiff understood it at the time. Whilst the matter must be determined by me objectively, I do think the interpretation by the Plaintiff at the time was perfectly understandable and reasonable.

36. In my judgment, the message conveyed does amount to repudiation of the Agreement by the First Defendant.

Termination

40. The First Defendant has submitted, based on statements in cases like Foran v Wight [1989] 168 CLR 385 (“Foran”) at [401-403] and [430-431]; Council of the City of Sydney v Goldspar Australia Pty Ltd (2006) 230 ALR 437, that as a matter of law, if the Plaintiff was itself in default of its obligations under the Agreement, or was incapable of performance at the time of termination, then either the termination by it was a nullity as a matter of law, in which case the Agreement ought to be taken to have been abandoned, or that no damages are available for the loss of the bargain because, properly analysed in those circumstances, the Plaintiff has lost nothing by losing the bargain because it was not itself ready, willing, and able to fulfil its part of the bargain.

41. In support of this submission, The First Defendant firstly relies upon cl 9.1 of the Agreement, which provided that the First Defendant have access to and possession of the site.

42. I am not satisfied that there was any breach of that provision. It is clear that, when required, the First Defendant had access to the site. The time for it to come onto site to do the work had not occurred. In the context of a site where multiple contractors would be working at the same time, I do not think possession under the Agreement meant exclusive possession. In any event, I would not consider even if that was a breach, for it to amount to some ongoing refusal to abide by the Agreement.

43. The more significant matter relied upon by the First Defendant is the fact that the Plaintiff, by the time of termination, had entered into another agreement with another party to do the work, the subject of the Agreement. That is said either to be a breach of the Agreement itself or evidence that the Plaintiff was unwilling and unable to perform its side of the bargain with the First Defendant.

44. I do not think either of those propositions are correct. Firstly, cl 12 of the Agreement expressly allowed the Plaintiff to take works out of the contract upon the giving of notice. The fact that it had entered into a contract with another person to do the same work did not mean it was unable to perform its part of the bargain under the Agreement because all it needed to do was give an appropriate notice under cl 12, the consequences of which would be it would be left with a liability to the Plaintiff, which could be satisfied by paying money. In the context of the express terms of the Agreement I reject any notion that there was an implied term in the Agreement that the Plaintiff was not allowed to negotiate with or enter into other contracts with third parties to do the same work. I do not think such conduct amounts to a breach of the good faith obligation in cl 49. It should be noted that the contract with the third party contained provisions in similar terms to cl 12.

45. In writing, the First Defendant put it this way:

12.   Clause 12 does not assist STPG. Firstly, the clause permits variations not cancellation of works so the work can be given to another sub-contractor. To give the clause such a meaning is antagonistic to the requirement in clause 49.2 to act in good faith so the commercial purpose of the contract can be achieved for the benefit to of the parties. Secondly, it did not happen. Thirdly, the fact it did not happen shows that STPG was not willing to perform the contact. By not giving notice, STPG did not perform the contact.

13.   The idea failure to given notice was de minimus so that clause 12 can be relied upon as an afterthought, is wrong. The notice requirement is important because it lets the sub-contractor know what it is and is not to do, so that it can organise its affairs and limit the adverse consequences that may be visited upon it.

14.   The absurdity argument deals with facts alien to the current situation and if the fact contended for arose in a case, it would be a question of fact whether there was ready and willingness, which may be resolved by treating the acts as contemporaneous.

46. The Plaintiff’s submissions on this point were in part as follows:

13. Further, and perhaps more significantly for the present inquiry, the contracts entered into by STPG with the replacement subcontractors contained similar terms, entitling STPG to (at its convenience) omit any part of those contractors’ scopes of works.

14. That being the case, at all times up to and including the moment that STPG accepted Multibuild’s repudiation, STPG was entirely able to perform Multibuild’s contract in accordance with its terms (and not merely by deleting Multibuild’s entire scope of works). There was no absence of readiness or willingness in the relevant sense

15. It is obvious that STPG had decided – before it actually terminated Multibuild’s contract – that it wished to so terminate the contract in the face of Multibuild’s repudiation.

16. However, it will invariably be the case that a terminating party has decided it wishes to so terminate (otherwise they would not be doing so) – accordingly, unless it is suggested that a terminating party can never recover loss of bargain damages, that fact alone cannot amount to a lack of readiness and willingness in the relevant sense.

17. Rather, as held by Dixon CJ in Rawson v Hobbs, and quoted with approval by both Mason CJ and Brennan J in Foran v Wight:

One must be very careful to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness.

18. In the present case, while there may well have been a “definitive resolve” not to proceed with Multibuild in the face of its repudiation, that is not a refusal or an unwillingness to carry out what the contract requires (being what is necessary to find an absence of readiness or willingness) – rather it is a refusal and unwillingness to proceed on a basis contrary what the contract required (i.e. the basis demanded by Multibuild).

19. That being so, and there being nothing to suggest that STPG would not have continued with Multibuild if only it had itself been willing and able to comply with its substantial obligations under its contract (with the mere facts that STPG did not engage utilise a nonmandatory default notice procedure, or a dispute resolution procedure that did not purport to prohibit accepting a repudiation, hardly suggesting otherwise), the Court would not find any absence of readiness or willingness.

20. STPG was required only to be prepared to perform the contract in its terms, not to argue with a clearly-unwilling counterparty that had made known its unwillingness to so perform.

47. I accept the Plaintiff’s submissions. In my opinion, cl 12 was available to be used by the Plaintiff for any reason. It could have been activated so as to allow the Plaintiff to continue to perform. It had not been activated, which was probably a breach but, in my view, an insubstantial one. I also accept the Plaintiff’s submission that it was entitled to arrange its affairs in the way it did prior to termination in circumstances where it had formed a view that the First Defendant was unwilling to perform the Agreement on its terms.

48. For those reasons, I am not satisfied that, at the time of the purported termination, the Plaintiff was in substantial breach of any substantial provisions of the Agreement and that it was not itself ready, willing, and able to perform its part of the bargain. I find it was ready, willing, and able to perform the Agreement.

49. In any event, it seems to me that Foran, upon which so much emphasis is placed by the First Defendant, was a very different case. In that case, there was a time of the essence settlement where the plaintiff, just like the defendant, was unable to complete. The plaintiff in that case nonetheless terminated the contract and sued the defendant for loss of bargain damages. In those circumstances, it is not surprising that the High Court concluded that the plaintiff had suffered no loss of bargain damages, because as a matter of fact it was not in a position itself to perform its part of the bargain and therefore was never going to receive any benefit from the contract. That is not this case.

50. Professor Carter at [10.35] of his text Carter’s Breach of Contract (2^nd Ed) states that:

“The general rule is that prior breach by a promisee is not an impediment to an election to terminate the performance of the contract for breach or repudiation by the promisor. Nor is it an impediment to termination that, at the time of its election, the promisee may not be ready and willing to perform…”

51. At [10.36], the learned authors go on:

“But assuming that a right to terminate accrued to the promisee (and has been exercised) any lack of readiness and willingness can only go to damages”.

52. I think that is right and whilst I accept that in circumstances such as the factual scenario in Foran, such damages might be reduced to nil because the person suing for loss of bargain damages has lost nothing because it was unable to perform the bargain. This is why Dixon CJ, in Rawson v Hobbs (1961) 107 CLR 466 at [481], emphasised the need for “substantial incapacity or definitive resolve”.

53. In this case, as a matter of fact I am satisfied that as a consequence of the Agreement being terminated, the Plaintiffs did lose the benefit of the bargain which, absent the repudiation of the Agreement by the First Defendant, the Plaintiff could have and would have performed and received the benefit of. Subject to proof, the Plaintiff is entitled to damages for the loss of the benefits of the Agreement.

Damages

54. I am satisfied on the evidence that the Plaintiffs, acting reasonably, entered into a contract with a third party to do, for all intents and purposes, the same works, the subject of the Agreement.

55. The only submission that the First Defendant made in relation to this depended on a finding that the contract with the Plaintiff was not a fixed sum, which I have already rejected.

56. I think as a matter of principle, the Plaintiff is entitled to the difference between the amount it paid to get the work done under the “replacement contract” and what it would have had to have paid had the First Defendant performed it part of the bargain.

57. The ordinary measure of damage, where a subcontractor’s breach or repudiation means they do not complete their contracted works, is “the reasonable cost of completing the sub-contract less any unpaid balance of the sub-contract price”: The Corporation of the City of Adelaide v Jennings Industries Ltd (1985) 156 CLR 274 at 293-294 per Brennan J, applying Mertens v Home Freeholds Co [1921] 2 KB 526 and Ventura v Svirac [1961] WAR 63.

58. In this case, the cost of retaining alternative contractors to carry out Multibuild’s works was $2,200,000 (excluding GST). It has not been suggested that was unreasonable. The evidence is that STPG sought out multiple tenders before retaining those alternative contractors.

59. As for the balance due to Multibuild under its contract (with all figures excluding GST):

1. STPG had paid $94,355 to Multibuild before the contract’s termination. This amount includes the $55,000, the subject of the ACL claim;

2. The original contract price, including both optional extras, was $1,311,7196, translating to a remaining balance of $1,217,364; and

3. Deducting that remaining balance from the $2,200,000 cost of the replacement contractors translates to a loss of $982,636.

Conclusion

60. For those reasons I have found that the conduct of the First Defendant did amount to repudiation of the Agreement, which repudiation was accepted when the Plaintiff terminated the Agreement on 22 June 2022, and that the Plaintiff has proved the damages it has suffered by losing the benefit of the Agreement in an amount of $982,636.

Misleading or deceptive conduct

61. I have already set out the terms of the 2 November E-mail.

62. The first question is whether, properly understood, that e-mail conveyed the representations pleaded.

63. The Plaintiff says that what was represented by the conduct was:

1. If a fee of $55,000 was paid, there would be no further increases sought in relation to the cost of timber.

2. That if the invoice was paid, the timber would be ordered and delivered to site and a letter giving title to the Plaintiff would be provided.

64. I find that the 2 November E-mail does convey those representations.

65. The second question is whether the conduct was misleading and deceptive. The Plaintiff characterises both representations as to future matters, and contends that, pursuant to the statute, the onus therefore shifts to the Defendants to demonstrate that, at the time, the representations were made as to the future matters, that the Defendants had reasonable grounds to believe them to be true. The Plaintiff observes that neither Defendant has sought to discharge that onus.

66. As to the first representation, viz that there would be no further increases in relation to the cost of timber, it has been demonstrated that there was in fact a further increase sought by the by the quote on 14 March. That demonstrates that the representation as to what would not happen in the future was false. There is no evidence or attempt by either Defendant to demonstrate that they had any belief at the time that there would be no further claims. I am satisfied that aspect of the representation was misleading or deceptive and in breach of the Competition and Consumer Act 2010 (Cth) (“the Act”).

67. As far as whether the timber would be delivered on site, again I think that is a statement as to a future matter. Whilst the 2 November E-mail is in the present tense, “can”, obviously enough it was not speaking of immediately or instantly. The statement could only reasonably have been understood as a statement as to what would happen at some point in the future.

68. The Defendant’s answer to this aspect of the claim is factual. It says that the reason the timber was not delivered to site was because the Plaintiff requested it to not be delivered and instead be stored by the First Defendant. To my mind, this is entirely inconsistent with all of the contemporaneous material, which included clear statements by the Plaintiff that they were very anxious to be satisfied that the timber would in fact be delivered. I do not accept that such a request was made. It is inconsistent with the objective facts and implausible. To the extent that Mr Machlouche gave evidence of such a request, I am not prepared to act on it. At best this evidence on this point was unreliable.

69. I am satisfied that, in at least two respects, the e-mail was misleading or deceptive.

70. I then turn to the question of reliance. The Plaintiff’s case is that, but for the representations, it would not have paid the money. On the other hand, the Defendants say that when the Plaintiff’s affidavit evidence is properly understood, what Mr Machlouche was saying is that, whilst he understood that the money was not otherwise payable that day under the Agreement, he was prepared to do so simply because he had been asked to. I’m conscious that it is dangerous to rely on people’s remembered state of mind long after an event as to what they would or would not have done in other circumstances, especially in a court case where they know the thing that they did or did not do at the time has caused damage. I prefer to approach the matter by analysing what was actually conveyed in the representations and then forming a view as to whether, on the balance of probabilities, I think there was reliance on those representations.

71. I think common sense compels the conclusion that it was the combination of the promise that there would be no further requests for increase in timber prices and the immediate delivery and passing of title if payment was immediately made, which was at least a significant cause of the decision to pay the money there and then.

64. That of course does not mean that the money would not have been paid at some later point in time. The amount claimed was an amount which, if the Agreement had been performed, would have been payable by the Plaintiff to the First Defendant at some point in the future. If that point occurred prior to the termination of the contract, then the reliance on the misleading and deceptive conduct I have identified would have caused no loss other than perhaps some small amount of interest. I have no evidence one way or the other as to when the timber may have been delivered and invoiced. However, in light of the fact that the job was going incredibly slowly and seemed to have ground to a halt, the parties were at loggerheads, and the “ghosting” was going on, I think on balance it is highly unlikely that the payment would have been made prior to the termination of the Agreement.

65. I am satisfied as against the First Defendant, that it has a separate and distinct liability of $55,000 for breach of the Act. However, it is not entitled to that amount over and above the amount I have determined it is entitled to under the contract claim. As I have explained, in the way the damages for breach of contract have been calculated, that amount has been taken into account and it would be double counting to allow it again for the separate and distinct cause of action. For that reason, I will not award any damages to the First Defendant for the breach of the ACL I have identified. If I am wrong about the contract claim, the First Defendant would be entitled to $55,000 for the ACL claim.

Claim against the Second Defendant

74. Having determined that the conduct was misleading or deceptive, and that it did cause the payment of the invoice and prima facie loss to the Plaintiff of $55,000, the question becomes is Mr Machlouche also liable?

75. As I have said, as a matter of fact, Mr Machlouche, who was the sole director and guiding mind of the First Defendant, is the person who actually wrote and sent the 2 November E‑mail, and of course is also the person who on behalf of the First Defendant, made the decision to do so.

76. The law in this area was recently very helpfully summarised by the Court of Appeal in Care A2 Plus Pty Ltd v Pichardo [2024] NSWCA 35 (“Pichardo”), where the Chief Justice set out at [106]-[117] the following propositions:

1. More than one individual may engage in the same or related misleading or deceptive conduct at the same time.

2. That does not, however, mean that a corporation that purports to do no more than pass on information supplied by another must nonetheless be engaging in misleading or deceptive conduct if the information turns out to be false.

3. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or its falsity, merely passing it on for what it is worth, the corporation can not properly be said to be itself engaging in misleading or deceptive conduct.

4. The status of an employee or officer does not necessarily immunise that person for liability for contravening conduct engaged in that capacity. The question is whether the role of the individual was more than merely ministerial.

5. The question of whether a person is a mere conduit of information involves a holistic assessment of the nature of the information conveyed, surrounding circumstances, and the relationship between the parties.

6. An intermediary is more readily inferred to be merely passing on information where the intermediary does no more than provide or refer to a document, that on its face, was prepared by another.

7. Conversely, an intermediary is more likely to have adopted information where the representation concerns a “relatively simple matter” supposedly within the intermediary’s professional judgment.

77. In the case of a sole director corporation, the question of whether the director is an intermediary or whether the conduct of the director was merely ministerial becomes a little complicated. If a director, in a sole director company, in his or her personal capacity, is doing no more than passing on information from the corporation the actual source of that information can only be a decision made by that same director. If the director is simply doing his or her job in conveying a corporate decision on behalf of a company, does that make sense when the decision-maker for the company was the same director?

78. I think the better way to look at it is not by reference to whether Mr Machlouche was an intermediary or a minister, but rather by whether the representation conveyed could sensibly have been understood as a representation by both the company and its director. I think on the plain words of the e-mail, that cannot be said. The sender of the 2 November E-mail is the corporation. It is from the corporation’s e-mail address. Mr Machlouche does not sign or mark the 2 November E-mail with his name at all. Objectively and sensibly, what is contained in the 2 November E-mail on its own can only have been representation by the corporation.

79. I then turn to the more difficult question as to whether in these circumstances I have identified Mr Machlouche was acting as some sort of conduit only, or alternatively by his conduct in passing on the material, he was endorsing it. This is again a difficult notion because the question becomes somewhat artificial, was he endorsing his own decision? Again, I think a fair reading of the 2 November E‑mail does not allow that conclusion. The statement in the 2 November E-mail is by the First Defendant company. The First Defendant company is a separate legal person to Mr Machlouche, albeit he was its sole director. Mr Machlouche did nothing to endorse the statement. I do not think the law in this area has got to the stage where every time a director of a corporation makes a decision on behalf of that corporation and then conveys that decision mechanically to another person, that the director has themselves engaged in misleading or deceptive conduct.

80. Finally, the Plaintiff puts its case against Mr Machlouche relying on s 75B of the Act, contending that Mr Machlouche either aided or abetted, induced, was party to, or was knowingly concerned in the contravention by the First Defendant.

81. A considerable hurdle to this aspect of the claim is the requirement explained in cases like Yorke v Lucas (1985) 158 CLR 661 to the effect that for a person to be liable in such a way, it is necessary for it to be demonstrated that the person was an “intentional participant”, the necessary intent being based upon knowledge of the essential elements of the contravention.

82. Directors of companies can be liable for contraventions of the Act by the company if they directed or procured the contravention, had a close personal involvement in the contravention, and their conduct goes beyond causing the corporation to take a commercial or business course of action or directing the corporation’s decision-making in good faith and reasonably discharging their duties and obligations as a director: JR Consulting & Drafting Pty Ltd v Cummings [2006] FCAFC 20.

83. It seems to me in circumstances where the representation as to a future matter, and notwithstanding the reversal of onus that applies in relation to a party alleged to have contravened, for the purpose of s 75B liability, there needs to be demonstrated some form of intention or lack of good faith. Something more than making a decision as the guiding mind of a company. In this case there is no basis for me to make such a conclusion, and for those reasons the claim pursuant to s 75B also fails.

84. For these reasons, I have concluded that the claim against the Second Defendant for breach of the ACL must fail.

Conclusion and orders

85. For these reasons, I will order:

1. Judgment for the Plaintiff against the First Defendant in the sum of $982,636, together with interest at the Court rates to be agreed or determined.

2. Dismiss the claim against the Second Defendant.

3. Direct the parties to seek to agree as to interest and costs.

4. The matter be listed for directions at 9:30am on Friday 21 June 2024, where final orders can be made and, if necessary, submissions received as to interest and costs.

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Amendments

17 June 2024 - Amended parties for clarity

Decision last updated: 17 June 2024