Tableau P/L v Custom Credit Corp. Ltd

TABLEAU PTY. LTD. v. CUSTOM CREDIT CORPORATION LIMITED
No. WAG5 of 1992
FED No. 333
Number of pages - 15
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Lee J(1)

CATCHWORDS

Trade Practices - misleading or deceptive conduct - building contract - representation to builder by financier as to funds available for building owner to pay for building work upon completion.

Federal Court of Australia Act 1976 s.51A

Trade Practices Act 1974 ss.52, 82

Demagogue Pty. Ltd. v. Ramensky (1992) 110 ALR 608

Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd. (1988) 79 ALR 83

HEARING

PERTH, 15, 16, 17 September 1992

#DATE 20:5:1993

Counsel for the Applicant: P.D. Martino

Solicitors for the Applicant: Leigh Warnick

Counsel for the Respondent: C.L. Zelestis QC, A. Metaxas

Solicitors for the Respondent: Phillips Fox

ORDER

THE COURT ORDERS THAT:

1. Judgment be entered for the applicant in the sum of $142,500.

2. Respondent pay the applicant's costs of the application to be

taxed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

LEE J Tableau Pty. Ltd. ("Tableau") carries on business as a builder under the business name Pindan Constructions. In August 1990 it contracted with Blakenham Enterprises Limited ("Blakenham"), which then carried on business as a property developer, to construct for Blakenham, at a cost of $1.7m, twenty-eight residential units on land situated at Belmont, a suburb of Perth.

Earlier in 1990 Blakenham had obtained an estimate from Tableau that sixty-four residential units could be constructed on the land at a cost of $3.52m and Blakenham had applied to Custom Credit Corporation Limited ("Custom Credit") for a loan to finance the construction of those units. Details of Blakenham's application for finance were not put before the Court. By letter dated 8 March 1990 Custom Credit informed Blakenham that it was prepared to lend Blakenham $2.75m. The loan was to be secured by the registration of a first mortgage against the Belmont land. It was to be a term of the loan agreement that $1.1m of the loan be applied to the payment of the purchase price of $1.2m Blakenham had contracted to pay for the land and the remainder of the loan, $1.65m, would be advanced by Custom Credit in payment of the progress claims submitted by the builder of the sixty-four units.
Custom Credit's offer to provide finance on those terms was accepted by Blakenham. The understanding Custom Credit or Blakenham held as to how Blakenham would meet the difference between the anticipated cost of construction of the units, $3.52m, and the sum of $1.65m to be advanced by Custom Credit was not exposed by the evidence and it would appear that Blakenham's ability to contribute to the cost of the development had yet to be demonstrated to Custom Credit when it offered the loan to Blakenham.
The agreement made between Custom Credit and Blakenham for the grant of a loan did not include a term that Blakenham would meet the whole or part of any of the builder's progress claims before Custom Credit would advance the loan to Blakenham by payment of the remainder of those claims.
By its letter of 8 March 1990 Custom Credit stated that the loan would be subject to the following conditions, inter alia:
". Fixed price building contract.
. Construction funding to be reviewed on

completion of each 10 unit phase. CCC to be satisfied with the sales progress (anticipated 50% presales) prior to advancing construction funds for further stages.

. All presales to be at arms length with

minimum deposit of 10%."

That letter may have implied that the parties anticipated that, in part, the project would be self-funding, to the extent that funds would be received by Blakenham from settlements of sales of units completed in advance of others, or, perhaps, that the limit of the sum to be advanced by Custom Credit may be increased in the course of construction of the units.
Blakenham's decision to construct twenty-eight units instead of sixty-four did not lead to the submission to Custom Credit of a new application for a loan and as at August 1990 Custom Credit was prepared to lend Blakenham $2.75m of which $1.1m would be advanced for the purchase of the land, and $1.65m would be applied to the payment of the progress claims to be submitted by the builder of the twenty-eight units Blakenham had contracted to have built for $1.7m.
When Tableau made the building contract with Blakenham in August 1990 Tableau was informed by Hay, a director of Blakenham, that Custom Credit had agreed to provide finance to Blakenham for the construction of the units. Hay invited Tableau to confirm that fact with Custom Credit by contacting the Finance Manager, Paul Brash. Pringle, a director of Tableau, spoke to Brash and was informed that Custom Credit would be providing finance for the project but that details of that finance would have to be obtained from Blakenham. Pringle then spoke to Hay who stated that the project would be "fully funded" by Custom Credit. At the time it made the building contract with Blakenham, Tableau had sighted Custom Credit's letter approving a loan for the building of sixty-four units and would have been aware that the amount Custom Credit had agreed to advance was $50,000 less than the price set by the contract for the construction of the units.
Tableau took possession of the site and began building work in September 1990. On 4 October 1990 Tableau forwarded a facsimile message to Blakenham asking that "details of finance approved" be provided as soon as possible. No response was received from Blakenham.
On 16 October 1990 Tableau submitted its first progress claim to Blakenham under the building contract. The amount of the progress claim was $236,358.58. The claim was for the value of work completed and included the cost of variations to the contract works. The amount claimed for variations, $33,515, was the combined sum of amounts paid by Tableau on Blakenham's behalf, namely $15,000 as a bond to the local municipality and $18,515 to meet a charge levied by the Water Authority for the cost of headworks. According to the notes of a meeting held between representatives of Tableau and Blakenham before building work commenced, it was agreed that the charge levied by the Water Authority would be paid by Tableau and the payment treated as a variation to the contract price.
Although the building contract provided for payment of progress claims to be made according to progress certificates issued by an architect, Blakenham instructed a project manager, Landmark Management Pty. Ltd. ("Landmark") to assess the work completed and report on Tableau's progress claims. Hay controlled Landmark. Custom Credit agreed to pay Tableau's progress claims according to Landmark's reports. On 2 November 1990 Landmark reported to Custom Credit that the building work had been inspected and that the work for which payment was claimed had been carried out, with the exception of part of the work claimed as a variation. Landmark noted that the variation claimed in respect of the payment of the performance bond to the local municipality could not be regarded as completed work. It appeared to be accepted by Landmark that the variation claimed in respect of the sum paid to the Water Authority was duly claimed.
The progress claim was not paid in full. Custom Credit paid Tableau $149,000 and advised Blakenham by a facsimile message that it had made that payment. In that message Custom Credit requested Hay to call Brash to discuss "the accompanying fax" which apparently set out the calculations on which Custom Credit's payment had been based. No evidence was given by Brash or Hay in respect of any conversation between them in relation to "the accompanying fax".
On the following day, 6 November 1990, Custom Credit drew a cheque in the sum of $59,855 payable to Blakenham. The cheque was drawn on a "Funding Account". Blakenham endorsed the cheque to Pindan Constructions. Hay gave evidence that the cheque was the balance of a sum of $60,000 deposited with Custom Credit as the amount of the deposits paid to Blakenham by purchasers who had contracted to purchase units "off the plans". The inference is available that Blakenham had no other funds from which to pay Tableau at that time. After the payments made by Custom Credit and Blakenham the shortfall in payment of the first progress claim was $27,503.
On 13 November 1990 Tableau submitted a second progress claim to Blakenham. The payment sought was $364,840.75 which included the shortfall on the previous claim. On 16 November 1990 Landmark certified that the work for which payment was claimed had been carried out. The continued claim for a variation to the contract sum for the payment of the bond was overlooked.
On 22 November 1990 Custom Credit paid Tableau $208,123. The shortfall in the payment of Tableau's second progress claim was $156,717.75. At the same time Custom Credit paid Landmark a sum of $10,000 apparently in discharge of a claim for fees for project management.
Tableau's claim for compensation in this proceeding arises out of the events which occurred after Tableau threatened to take action against Blakenham under the building contract by reason of the shortfall in payment of the second progress claim. Tableau asserts that it was dissuaded by Custom Credit from taking that action and suffered loss in doing so. Tableau now claims under s.82 of the Trade Practices Act 1974 ("the Act") the amount of loss or damage it says it suffered by conduct of Custom Credit which it alleges contravened s.52 of the Act. Tableau has also pleaded claims against Custom Credit in contract and equitable estoppel.
Pringle gave evidence that although Tableau was not concerned about the short payment of $27,000 on the first progress claim, it was very concerned with the extent to which the second progress claim remained unpaid. Pringle said that he attempted to contact Hay on about 23 November 1990 when the short payment was received. Hay was in Hong Kong and Pringle was unable to speak to him until Monday or Tuesday the 26 or 27 November 1990. Pringle said that he made it clear to Hay that work on the project would stop unless payment of the balance of the progress claim was received by Friday 30 November 1990. He stated that he asked Hay to contact Custom Credit to sort it out as soon as possible. Pringle said Hay agreed to do so and agreed to advise Pringle of the outcome. Pringle said he then decided to contact Brash himself and did so, as he recalled it, on Wednesday 28 November 1990. Pringle said he asked Brash why payment of the progress claim had not been made in full and Brash replied that Custom Credit had to maintain its "cost to complete". Pringle asked what was meant by that and Brash said that Custom Credit had to ensure there was enough money to "complete the project". Pringle said he asked Brash if that meant that there was not enough money to which Brash replied that Pringle would have to sort that out with Hay. Pringle's evidence was then as follows:
"I said, well you know what we are doing - unless we

get payment by Friday we will stop work. And Paul Brash said, don't do that, we don't want a half finished project. And I said, well, what's the point of us continuing if we are not going to be paid at the end of the day. Paul Brash was getting pretty upset at this stage...He was saying, don't stop, we don't want a half finished project, we're all in this together, we'll guarantee you're paid at the end of the day. And I said, well, are you going to pay the money and he said, I'll organise the money by Friday. And I accepted that."

According to Pringle, on Thursday 29 November 1990 or Friday 30 November 1990 Brash rang Pringle and advised him that a cheque would be available on Friday but it would not be for the full amount of the progress claim. The balance outstanding would be discharged by payment of the next progress claim. Pringle said that he informed Brash that that was acceptable and Tableau would continue building work under the building contract.
Hay recalled that Pringle spoke to him by telephone in respect of the part payment of the second progress claim. Pringle required payment in full and said work would cease unless payments were "brought up to date". Hay told Pringle he would speak to Brash and did so. Hay's recollection was that a number of telephone conversations took place between he and Pringle and he and Brash about the threatened cessation of the building work. In cross-examination by counsel for Custom Credit Hay maintained that Pringle had made it clear that Tableau would "walk off" the site unless it was paid and its concern about payment for future contract work "resolved definitely". Hay said that in his discussions with Brash, Brash made it clear that under no circumstances did Custom Credit want the builder to cease work. Custom Credit also required Blakenham to make a further contribution of funds toward the cost of the project. Hay had no recollection of any agreement with Brash that Blakenham would contribute a further sum of $60,000 and denied that he told Brash that such a payment would be made. According to Hay, it was left to Brash to sort out with Tableau how Tableau was to be persuaded to continue the construction work. Hay said that as discussed with Brash the alternatives were for Custom Credit to pay Tableau's claims and have the units completed or not pay Tableau and have a major problem develop. Hay said Brash had made it quite clear that cessation of building was not an option.
It was Brash's evidence that he spoke to Pringle on or about 27 November 1990 when Pringle complained of short payment of the second progress claim and that he told Pringle that because Custom Credit required sufficient funds to be available "in the account" to complete the project no more could be paid to Tableau on that claim. Brash gave evidence that payment of the progress claims submitted by Tableau depended upon there being an excess in funds to be advanced over the amount required to meet all of the costs of the building project, including construction costs. He said he advised Pringle to get in touch with Hay because it was up to Blakenham to put more equity into the project. He said that Pringle then stated that Tableau would cease work on the site. Brash said he replied that it would not be in anyone's interests, and would not resolve the situation, if work ceased but Pringle would have to discuss the matter with Hay.
Brash said that late on 27 November 1990 a facsimile message was received from Hay sent from Hong Kong. In the memorandum Hay advised that in a telephone held conversation that day between Pringle and Hay Tableau had stated its intention to cease work. The memorandum stated that if Custom Credit did not pay Tableau's progress claim "by Friday" a disaster would arise. Forwarded with the memorandum was a schedule which revised the cost of the project and set out the monies expended to date and the further monies available pursuant to the loan agreement, showing a shortfall of approximately $96,000 between the costs of the project and funds available to meet it. The memorandum did not suggest that Blakenham was able to provide any further funds. On 28 November 1990 Brash spoke to Hay and discussed the information forwarded by Blakenham. As a result of that conversation the estimate of the project costs was revised downward by Brash and another calculation of the funds available to pay the progress claim prepared. According to the calculation the amount available was $49,877. That calculation was forwarded to Hay in Hong Kong by facsimile late on 28 November 1990 with a request that Hay contact Brash by telephone on 29 November 1990. Brash said that in that telephone call on 29 November 1990 Hay had requested that "more funds" be made available by Custom Credit to which Brash had responded that he would put a submission to the State Manager requesting authority to pay "additional" monies to Tableau. It was Brash's evidence that Hay had said that Blakenham "had" $60,000 that it would pay "under the contract". Brash said he spoke to Pringle on 29 November 1990 and told him that a submission would be put to the State Manager and that he believed that it would result in "funds" being made available to Tableau. Pringle had denied that his conversation with Brash included such a statement by Brash. Brash's evidence amounted to a denial of Pringle's evidence that Brash had said that a cheque for less than full amount would be available on 30 November 1990 and that the shortfall in the payment would be picked up in the payment of the next progress claim.
On 30 November 1990 by a memorandum of even date addressed to the State Manager of Custom Credit Brash sought an extension of his authority to manage Blakenham's loan account. The memorandum read as follows:

"Re: Blakenham Enterprises Pty Ltd (sic) ...

We refer you to the variation to transaction dated 5th November 1990, wherein you approved an amended costing for the above project of $3,244,000. At that stage, it was not anticipated that the borrower would require additional funding for the project. However, he has now approached us and has indicated that although he has sufficient funds to pay the interest on the account for the next 90 days, he is having difficulty finding the balance of his equity contribution for the project. Consequently, our cost to complete will not be maintained. Based on our revised costings (which have subsequently reduced to the total sum of $3,218,000) and our approved advance of $2,750,000, Hay was required to input some $420,000 of equity to the project. To date, he has spent some $320,000 leaving a shortfall of $100,000 which he is unable to provide at this time. As a result, the builder was not paid his full claim on the last progress draw of the 22nd November 1990. Subsequently, we received a phone call from Pindan Constructions indicating that they would withdraw their labour from the project if their claim was not met. It is recommended that to enable work to continue on the site, we not insist on compliance with our cost to complete formula. It should be noted that this will result in a shortfall on completion of some $100,000 which, if approved for payment by the Corporation, would result in a (sic) advance/cost value ratio of 90% and an advance/completion value ratio of 85%.

John Hay of Blakenham Enterprises Limited will be in Perth on Monday, 3rd December 1990 and we have scheduled a meeting with him to express our concern at the gravity of the situation. In the meantime, however, it is recommended that we not comply with our cost to complete to enable the builder to continue on the project and thus ensure the ultimate settlement of the first 14 presold units. DATE: 30/11/90"

The projected "shortfall" of $100,000 referred to by Brash appeared to accept of Blakenham's calculation of the balance likely to be outstanding at the completion of the project if the units were completed and all the builder's progress claims paid when submitted.
The State Manager endorsed an approval in these terms:

"Approved purely to keep builder on site due to closeness of completion. Debtor to be told he is in default and we shall proceed if need be. Variation required after discussion next week. DATE: 30/11/90"

On Friday 30 November 1990 Custom Credit paid Tableau $96,717. The balance outstanding on the progress claim was $60,000.
Tableau submitted its next progress claim to Blakenham on 12 December 1990. It included the unpaid balance of the previous claim and was for the sum of $251,413. It was paid in full by Custom Credit on 21 December 1990. The fourth progress claim was submitted on 15 January 1991. It was for a sum of $151,115 and was paid in full by Custom Credit on 4 February 1991. On 21 February 1991 Tableau submitted its fifth progress claim in an amount of $371,740. On 5 March 1991 Custom Credit paid Tableau $350,000.

On 8 March 1991 Tableau submitted its sixth progress claim in a sum of $226,731 which included the unpaid balance of the previous claim. On 21 March 1991 Landmark advised Custom Credit that the development had been inspected and the 28 units were now practically complete. Landmark stated that within a week Tableau's contract would be complete save for minor works. On 27 March 1991 Custom Credit paid Tableau $149,766, a shortfall of $76,966 on the amount claimed.
On 5 April 1991 Tableau presented the seventh progress claim in a sum of $299,518 which included the shortfall on the previous payment. As anticipated by Landmark, the building works were completed by Tableau on or about 11 April 1991. On 3 May 1991 Custom Credit paid $140,284 leaving an unpaid balance of $159,234. On 30 May 1991 Tableau submitted its final claim under the building contract in the amount of $224,406. No payment was made on that claim. Blakenham was then and remains insolvent.
After completion of the building contract in April 1991 Tableau, through its director Allingame, and Hay, on behalf of Blakenham, discussed a price for building a second group of units described as Stage 2. The discussions continued until early May 1991 when Hay informed Allingame that there would be a shortfall of approximately $90,000 in payment of the amount due to Tableau for Stage 1 of the project. Pringle then attempted to speak to Brash and Allingame tried to contact the State Manager of Custom Credit and also a senior officer in the bank which controlled Custom Credit. On about 16 May 1991 Allingame was able to speak to Brash and asked when Tableau would be paid. According to Allingame Brash replied that there was no money and denied that any assurance had been given by him to Tableau that funds would be available to meet Tableau's accounts for the construction of the units. Allingame told Brash that he had misled Tableau by telling Pringle in November 1990 that the money would be available to pay Tableau "at the end of the day" and by saying that Tableau should continue building. Allingame told Brash Tableau would seek legal advice.
In his evidence about that telephone conversation Brash stated that Allingame had claimed that Brash had misled Tableau by telling Pringle that sufficient funds were available to cover Tableau's claims for payment. Brash said that he denied to Allingame that he had said that to Pringle and had told Allingame that whilst he may have told Tableau that an "approval was in place for the project" he had not divulged how that approved funding was to be disbursed. Brash said Allingame maintained that Tableau had been misled and would seek legal advice.
The principal questions for answer in this case are first, whether conduct by Custom Credit caused Tableau to decide to continue to perform its contract to construct the units, second, if so, was that conduct misleading or deceptive and third, did it cause Tableau to suffer loss or damage. The determination of what conduct was engaged in by Custom Credit depends upon a finding on what was said by Brash to Pringle in the conversations between them which occured in late November 1990. That finding requires an analysis of conflicting testimony.
In reviewing that conflict it is necessary to look at the evidence of the principal witnesses with the knowledge that each had some interest in the outcome of the litigation. Pringle and Allingame were the controllers of Tableau and had a direct interest in the result. Hay held some animus towards Custom Credit blaming it for Blakenham's insolvency, and success for Tableau in the litigation would relieve Blakenham from some of its outstanding liability to Tableau under the contract. Although now employed by Custom Credit's controlling bank, Brash had reason to deny conduct on his part that may bring liability to Custom Credit or suggest incompetent management by him whilst employed as Finance Manager by Custom Credit.
However, there was particular reason to treat the evidence of Pringle, Allingame and Hay with singular care. In the course of the construction of the units Hay arranged for Tableau, or its subcontractors, to carry out renovation work at Hay's residence and for the cost of that work to be claimed as a variation to the cost of the Belmont project. Tableau's progress claims and subsequent letter of demand directed to Custom Credit sought payment for that work. Although Pringle and Allingame may have believed that arrangements between Hay and Blakenham permitted Hay to instruct Tableau to carry out that work at Blakenham's expense, their preparedness to represent that work as work carried out on the Belmont project required their evidence to be treated with great caution.
Giving due regard to that reservation, observing their demeanour and assessing the consistency of their evidence with other events, I found Allingame and Pringle to be satisfactory witnesses who appeared to be providing their recollections as honestly and forthrightly as possible.
I found Brash to be less impressive. Brash agreed that since July 1990 there had been a standing instruction from the State Manager that "given the state of the market" it would be wise to take file notes wherever possible. He said that his first conversation with Pringle was on 27 November 1990 and he obtained the relevant files soon after the conversation commenced. If the call was made from Brash to Pringle as suggested by Brash it may be assumed he had the files before him when he began the call. It is surprising that Pringle's advice that Tableau intended to cease work on the units and Brash's advice to Pringle that he would have to resolve the matter with Hay were not considered to be oral statements of sufficient importance to warrant a file note being made of them nor the subsequent conversation with Pringle which caused Tableau to withdraw the threat to cease work on the project. Furthermore, Brash's account of the relevant conversations at this time were not only in conflict with the recollections of Pringle and Hay but also inconsistent in significant respects with the memorandum of recommendations submitted by him to the State Manager as a result of those conversations.
The memorandum of 30 November 1990 did not convey to the State Manager the sense of urgency that may have been expected if implementation by Tableau of the threat to cease work unless payment of Tableau's accounts was resolved, was still imminent. The memorandum did not state that Blakenham had undertaken to make a contribution of $60,000 and to the contrary, consistent with Hay's account, recorded that Blakenham had difficulty making any further contribution of equity. The memorandum recorded that without further contribution from Blakenham there would be a shortfall of $100,000 on completion of the building project after payment of construction costs and various other costs required to be met to make the units ready for sale. The text of Brash's recommendation to his Manager was ambiguously expressed but was to the effect that Custom Credit should be prepared to meet that estimated shortfall by increasing its advance to Blakenham and have the project completed in order that soon after completion of the building Custom Credit may obtain the reduction of the advance made to Blakenham by receipt of the proceeds of sale to be received from the settlements of the sales of the fourteen units that had been pre-sold.
Furthermore, Brash said that he made a pencil note of $60,000 in the column "Paid to date - client" on his copy of the "cost to complete" calculation forwarded to Hay on 28 November 1990. He said the note referred to Hay's statement that a further sum of $60,000 was on hand and would be contributed by Blakenham. I consider it more likely that the note was made to rectify the omission in the schedule of the payment of $60,000, in round terms, already made by Blakenham likely to have been drawn to Brash's attention in that conversation. It may be noted that in "cost to complete" calculations prepared some months later (Exhibits 5, D, E) $60,000 was included in the column headed "Paid by Client" to represent the amount paid by Blakenham from the purchasers' deposits.
If regard is given to the facts in respect of which there is little or no contest the following may be stated as a summary of relevant matters.
On or after the short payment of the second progress claim on 23 November 1990, Tableau made known to Custom Credit that it intended to cease work on the twenty-eight units on 30 November 1990. Custom Credit considered that to be a circumstance to be avoided if at all possible. It sought details from Blakenham of Blakenham's ability to make a further contribution of funds to the project and found that Blakenham was unable to do more than service the interest charge on its loan from Custom Credit. Tableau would only continue work on the project if the progress claims it rendered were paid. Tableau did continue work on the project and did so as a result of conversations between Pringle and Brash. Although it was Brash's evidence that he had at first informed Pringle that Hay and Blakenham would have to resolve the problem, it was not suggested that Tableau's decision not to cease work resulted in any assurance provided to Tableau by Blakenham.
It was not in dispute that Tableau intended to give notice under the building contract that it would cease work on the project on 30 November 1990 and had informed Blakenham and Custom Credit that it would do so. It was not suggested that Tableau did not intend to give effect to that notice. It appeared to be accepted by Blakenham and Custom Credit that Tableau would have ceased work on the project on 30 November 1990 if satisfactory arrangements for the payment of past and future progress claims had not been completed by that date.
Brash made a general statement that the usual procedure for the financing of development projects was that the borrower would put its equity into a project on the first progress claim. It seems that Blakenham's ability to make such a contribution was not addressed when Custom Credit offered the loan to Blakenham. Custom Credit must have been aware of Blakenham's lack of capacity at least when the first progress claim was submitted to Custom Credit for discharge. It was not suggested in the evidence that Blakenham had represented to Custom Credit that Blakenham had access to funds in addition to the monies to be advanced by Custom Credit to enable it to meet the cost of the building project.
It was part of the funding arrangement between Blakenham and Custom Credit that Blakenham would sell units "off the plans". Therefore, both Blakenham and Custom Credit were looking to the completion of the building to enable funds to be received from settlements of the sales of the units already agreed to be sold. There was no evidence that Tableau had agreed to complete the construction of the units agreed to be sold before carrying out the remainder of the work under the building contract, although there had been discussion between Allingame and Hay about completing part of the work ahead of the rest. Tableau constructed the twenty-eight units as one project.
There was no evidence to suggest that Tableau had any understanding with Blakenham, much less an agreement, that payment of any balance of the contract price was to await the completion of the sale of sufficient units to provide funds to meet that cost. The total cost of the project including the cost of acquiring the land and ancillary costs was approximately $3.25m. Custom Credit had agreed to lend $2.75m of which $1.1m had been applied to meet the cost of the land, $1.2m. Therefore, at the date of commencement of the building contract the shortfall in the funding of the project was approximately $400,000 and an even greater shortfall would occur if the cost of construction was increased by variations to the building works or if additional costs were incurred. Therefore, on 16 October 1990 when Tableau submitted its first claim for a progress payment no funds were available to be advanced by Custom Credit by way of a payment to Tableau if the "cost to complete" calculation was applied to the figures set out in the claim. In cross-examination, Brash readily agreed that was so. On 2 November 1990 Brash requested Landmark to provide details of the percentage of contract work actually completed as at that date. By obtaining a higher estimate of work completed some two weeks after the claim had been submitted, the cost of the work to be completed was thereby reduced and a balance obtained in the applied calculation according to which a payment could be made to Tableau on its first progress claim.
In so far as Custom Credit may have suggested that consistency in its conduct supported a conclusion that no assurances as claimed had been provided, in that payments made to Tableau after 30 November 1990 were within the "cost to complete" formula, that was only true so long as Tableau's assessment of cost of work to be completed was disregarded and estimates of that cost were obtained from Landmark several weeks after the progress claims had been submitted. (Exhibit 1 - p 57 (Tableau), p 58 (Landmark) p 59; p 68 (Tableau), p 69 (Landmark) p 75; p 80 (Tableau) p 81 (Landmark): Exhibit 5 - p 111 (Tableau), p 112 (Landmark), p 114.)
A true reflection of the management of the loan account and of non-adherence to a "cost to complete" approach to the project was displayed in the calculations in Brash's handwriting made on 6 March 1991 for the fifth progress claim set out in Exhibit 1 at p 86 where the shortfall on funds for the projected costs, including building costs, was shown as $185,194.
Custom Credit had reason to encourage the building work to proceed for, as Brash stated in cross-examination, Custom Credit looked to the improvement of its security by development of the project and it was concerned that if the building work ceased Custom Credit would be faced with a difficult situation. He agreed that Custom Credit did not "want anybody to think that there was a problem on a particular project which might result in them (sic) walking off the job".
By way of an amendment to its defence presented at the commencement of the trial Custom Credit asserted that Tableau had represented to Blakenham that if Blakenham and Tableau entered a contract to construct the units, Tableau would "contribute between $150,000 and $200,000 in equity for the project" and await repayment of that sum from the proceeds of the sale of the units after discharge of encumbrances and payment of expenses. It was further pleaded that Blakenham relied upon that representation in making its contract with Tableau. It was not part of Custom Credit's case that Custom Credit to Tableau's knowledge believed that Tableau had made such a representation to Blakenham and believed that Blakenham had relied upon that representation.
The purpose of the pleading appeared to be to counter Tableau's claim that it had relied upon the conduct alleged against Custom Credit or that it had suffered loss by reason of that conduct. Cross-examined by counsel for Custom Credit, Hay denied that Blakenham had received or relied upon any such representation. Allingame, the director of Tableau alleged to have made the representation, denied having made it. The pleading was not supported by evidence and counsel for Custom Credit did not bother to address on it.
It was submitted that Brash's account of events was to be preferred because the record of calls from Brash's telephone extension to the Tableau number and the contents of the facsimile message transmitted from Hay to Brash of 27 November 1990 made it likely first, that Pringle spoke to Hay after he spoke to Brash as Brash had suggested he should and second, that no assurance had been provided to Pringle by Brash otherwise it would have been unnecessary for Pringle to speak to Hay.
It is more likely, however, that no witness has accurately recalled the sequence or number of telephone conversations involved and the answer to the question of what conduct was engaged in by Brash on behalf of Custom Credit in the course of those calls involved consideration of what was done, as well as what was said and when it was said.
An extract from Custom Credit's telephone records (Exhibit B) showed that calls were made to Tableau from Brash's telephone extension on Friday 23 November 1990 and Tuesday 27 November 1990 and that each call was over seven minutes in duration. According to that record the time at which the call was made on 23 November 1990 was approximately 4.15 p.m. and at about 12.15 p.m. on 27 November 1990. No evidence was given about the call on Friday 23 November 1990. Tableau's records show that the cheque from Custom Credit had been received and banked on 23 November 1990 and it seems unlikely that lengthy telephone communication between Tableau and Brash at 4.15 p.m. on that day, probably a conversation between Pringle and Brash, would not have involved discussion of Tableau's attitude to the short payment of its progress claim.
Neither Pringle nor Brash made a record of their telephone conversations at this time and it is not surprising that each may be unable to recall accurately the sequence of events.
Relying on Brash's evidence, Custom Credit contended that Tableau was satisfied that action for breach under the contract with Blakenham became unnecessary when Brash informed Pringle on 29 November 1990 that Brash was "in the process of putting a submission together to be given to (his) State Manager which (he) believed would result in funds being made available" notwithstanding that Tableau was not advised as to the nature of the submission or of the amount of funds to be made available.
I consider that proposition to be inherently unlikely and find the account provided by Pringle and corroborated to some extent by Hay to be much more credible, namely that Brash, anxious that there be no cessation of work, assured Pringle that if Tableau continued construction work and completed the units it would be "paid at the end of the day", that another payment to Tableau would be made by Custom Credit on 30 November 1990 for less than the amount claimed and that Tableau would be paid in full on its next progress claim.
I have no doubt that as supervisor of this loan account, Brash was anxious that Custom Credit not be forced to execute its security in least suitable circumstances and that he considered it imperative that Custom Credit's security be improved to the fullest extent by completion of the twenty-eight units and that the builder be given whatever encouragement was required to have it continue the building work. The closer the building came to completion the stronger Custom Credit's position became.
In his discussions with Hay in late November 1990, Brash attempted to put pressure on Blakenham to make a further contribution to the cost of the project and it may have been Brash's view that if a contribution of $60,000 could be obtained, it would limit the extent of Custom Credit's increased exposure that otherwise might reach $100,000. No doubt it was the personal hope of Brash that the discussion to be held with Blakenham in Perth on 3 December 1990 may produce some further commitment from Blakenham but it was not part of Brash's submission to the State Manager that any further advance by Custom Credit be subject to a contribution of $60,000 by Blakenham.
I am satisfied on the whole of the evidence that the outcome of the telephone conversations between Brash and Pringle in the last week in November 1990 was the assurance to Pringle that Tableau would be paid "at the end of the day". Pringle stated in his evidence that Brash used the word "guarantee" in that assurance. Whether he did is doubtful and probably immaterial. I do not accept that Brash told Pringle that a submission would be put to the State Manager which Brash believed would "result in funds being made available" to Tableau. I am satisfied that Brash gave Pringle a clear assurance that Tableau would be paid for completing the construction of the twenty-eight units.

The implied text of the assurance given to Tableau was either that Custom Credit was satisfied that Blakenham had sufficient monies, including the funds to be advanced to it by Custom Credit, to pay the sum it had contracted to pay for the construction of the units or that Custom Credit had agreed with Blakenham that it would make available additional funds under the loan agreement to enable Blakenham to pay Tableau's accounts as they fell due under the building contract.
The assurance provided by Brash did not reflect the true position in that Blakenham had not demonstrated to Custom Credit that it had the ability to pay any shortfall under the building contract if Custom Credit allocated only part of the sum it had agreed to lend to payment of the costs incurred by Blakenham under the building contract and the remainder to meet other costs incurred by Blakenham incidental to preparing the units for sale. Further, it was not the fact at the time the assurance was given that Custom Credit had agreed with Blakenham to vary the loan agreement to increase the limit of its advance to Blakenham.
In his submission to the State Manager on 30 November 1990 after Brash had assured Tableau that it would be paid "at the end of the day", Brash may have anticipated that his recommendation would be approved and that such an approval would provide the foundation for the assurance.
As it transpired the State Manager's approval of the submission was qualified. Apparently the authority granted to Brash was regarded by Custom Credit as sufficient only to permit Brash to make advances to Blakenham by paying Tableau's progress claims irrespective of any "cost to complete" formula and not authority to increase the advance to Blakenham by $100,000 to meet the anticipated "shortfall" in the funding of the project as Brash had requested. Apparently that step was to await the outcome of the meeting to be held on 3 December 1990. No evidence was presented of a meeting between Hay and Brash in Perth on 3 December 1990 nor whether a "variation" was effected as the State Manager had indicated would be required in his qualified approval. It seems that Brash did not disclose to the State Manager that he had given an oral assurance to Tableau in the terms found above and Custom Credit did not consider that it had ratified such action by approving the recommendation submitted by Brash on 30 November 1990.
On the facts as found above Custom Credit, in commerce, by the actions of its Finance Manager engaged in conduct that was plainly misleading and the provisions of s.52 of the Act were contravened providing Tableau with a right under s.82 of the Act to recover the amount of any loss suffered by that conduct. (See Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd. (1988) 79 ALR 83; Demagogue Pty. Ltd. v. Ramensky (1992) 110 ALR 608.)
It was further pleaded by Tableau that Custom Credit had engaged in misleading or deceptive conduct by making payments to Tableau on its progress claims on and after 30 November 1990. It was said that Tableau was thereby misled to believe that all of its claims would be paid in full. I have difficulty in understanding how the bare conduct described could be conduct in contravention of s.52 of the Act and the pleading cannot stand unless it is expanded to include the conduct already described.
It is unnecessary to deal with the further claim based on equitable estoppel. That claim depends upon the same facts as the claim made under the Act and in this case would not provide any greater relief than that available under s.82.
With respect to the claim that Tableau and Custom Credit entered an oral contract on about 28 or 29 November 1990, the evidence falls well short of demonstrating that either Tableau or Custom Credit had any intention of entering a binding legal relationship in the nature of a contract in the telephone discussion held by Pringle and Brash on about 29 November 1990 and the claim in contract must fail.
Tableau sought to recover the whole of the amount remaining unpaid under its building contract with Blakenham as the loss suffered by that conduct. The original amount claimed by Tableau for variations to the building contract was $80,680 which excluded the bond recovered from the local municipality but included $31,202 for work carried out for Hay. After deduction of the sum improperly included for that work, Tableau's claim for variations was $49,478 of which $10,669 was a claim for the balance of the sum claimed for earth works and site works that had included work carried out for Hay. No details were provided in the evidence of the work carried out on the Belmont land in that regard. Although the cost of variations was not admitted, there appeared to be no reason why variations supported by claims detailed in writing should not be allowed and those claims were not seriously contested. However, I consider that the unvouched claims for earth and site works should be reduced substantially in the absence of any evidence to support them. The cost of variations should be allowed at $40,000 making the total cost of the work carried out under the contract $1,740,000. The unpaid balance of that sum is $183,726.
Evidence adduced by Tableau that it would have ceased work on 30 November 1990 and taken action against Blakenham under the contract if it did not receive the assurance given by Brash was not challenged. However, if that evidence is accepted it does not follow necessarily that Tableau would have been saved from loss. At that time the value of work completed and unpaid would have been approximately $300,000. It was not suggested that Blakenham was better placed to meet a claim for that sum in November 1990 than it was at any time thereafter.
Tableau could have reduced its loss only if Custom Credit considered that it was likely to be further out of pocket in attempting to exercise its security over land on which there stood an unfinished building project than it would be if it advanced additional funds to have the units completed and sold on strata title.
A clear inference was provided by the evidence that Custom Credit was most anxious that the building work not cease and that its security be improved by completion of the building work. There was no evidence to the contrary from Custom Credit and I consider it to be most probable that if Tableau had ceased work under its contract with Blakenham, Custom Credit would have varied its loan agreement with Blakenham by increasing the funds to be advanced thereunder, whether or not Custom Credit was able to obtain further or better security from Blakenham to support that additional advance. I am satisfied that Custom Credit would have regarded the completion of the units as better security for the increased advance than existing security for the funds already advanced.
It was likely, therefore, that Tableau would not have suffered loss to the extent it did under its building contract with Blakenham if it had not been persuaded by that misleading assurance to refrain from terminating work under the building contract.
However, it does not follow that the unpaid balance of the contract price after completion of the contract represented the loss suffered by Tableau by reason of the conduct of Custom Credit. Had Tableau ceased work in November 1990 it is likely that after negotiations the parties would have reached an accord under which Tableau resumed work under the contract. However, it is quite possible that the terms of the accord may have been that Custom Credit increase the sum advanced to Blakenham to meet a higher proportion of the project costs and that Tableau defer payment of part of the contract price until Blakenham was in a position to discharge it after selling the completed units. In fact, as stated above, Custom Credit by its State Manager had intended to keep its options open and, no doubt, negotiation to spread the risk by having Tableau carry some part of the building cost was one of those options. Tableau would have had to assess whether it was an acceptable risk to carry a minor part of the contract price against an assurance from Custom Credit to meet the remainder as part of its advance of funds to Blakenham. If Tableau had agreed to the deferment of payment of that part of the contract price, it would have suffered loss to that extent in any event.
I consider that an appropriate assessment of loss having regard to those contingencies would be a sum of $125,000. No evidence was adduced of any consequential loss. As part of its loss Tableau sought to include a claim for interest at the rate provided in the building contract for late payment by Blakenham of payments due under the contract. However, that calculation does not refect a loss flowing from Custom Credit's conduct. If Tableau had not been misled as described, $125,000 of the sum due and owing under the contract since May 1991, $183,726, would have been paid by Custom Credit on behalf of Blakenham by that date. The claim against Custom Credit by way of interest is in respect of the loss of use of that money since May 1991. The claim against Blakenham for breach of contract including default in payment of interest remains on foot but that unfulfilled contractual right is not a loss occasioned by the conduct of Custom Credit. Section 51A of the Federal Court of Australia Act 1976 may be applied and 7 per cent may be considered to be an appropriate rate of interest to compensate Tableau for being out of pocket in the sum of $125,000 between May 1991 and May 1993. That would be a sum of $17,500. Unless counsel wish to make further submissions on the matter of interest, judgment may be entered in the sum of $142,500.

[1993] FCA 333

20 MAY 1993