Vivian Fraser & Associates Pty Ltd v Shipton
[1999] FCA 60
•05 FEBRUARY 1999
VIVIAN FRASER & ASSOCIATES PTY LIMITED AND VIVIAN FRASER v WILLIAM JOHN SHIPTON, JOSE DE LA VEGA AND WEDDERLIGHT-DELMO PTY LIMITED
[1999] FCA 60
No. NG 680 of 1994
Number of pages - 69
Contract - Trade Practices - Unjust Enrichment
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
LINDGREN J
Contract - intention to create legal relations - architect engaged by property developers pursuant to two contracts to prepare specific preliminary drawings - whether also contract by which architect engaged for entire project - no agreement on fee for entire project - whether property developers agreed to pay a "reasonable fee" and negotiate "in good faith" on amount of fee for entire project - whether such agreement enforceable.
Trade Practices - misleading and deceptive conduct - whether property developers represented to architect that he was to be architect for entire project - whether property developers represented to architect that they intended to engage him for entire project and knew of no reason why he would not be so engaged - whether representations misleading or deceptive - whether architect relied on representations.
Unjust Enrichment - quantum meruit - whether contract liable to be set aside and architect permitted to claim a reasonable remuneration for work done - whether remuneration provided for in contracts reasonable - whether architect entitled to reasonable remuneration for work done not covered by contracts - whether architect has quantum meruit claim for work done to assist developer win tender in circumstances in which parties assumed architect would be retained as project architect for entire project but later could not agree on his fee as such with result that he was not retained.
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1, referred to
May & Butcher Ltd v R [1934] 2 KB 17n, applied
Foley v Classique Coaches Ltd [1934] 2 KB 1, distinguished
Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, distinguished
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, referred to
Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221, considered
Planche v Colburn (1831) 8 Bing 14 (131 ER 305), referred to
Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880, distinguished
William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932, applied
Craven-Ellis v Canons Ltd [1936] 2 KB 403, considered
British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504, considered
Independent Grocers Co-operative Ltd v Noble Lowndes Superannuation Consultants Ltd (1993) 60 SASR 525, considered
Regalian Properties plc v London Docklands Development Corp [1995] 1 WLR 212, distinguished
SYDNEY, 20-24, 27-28 and 30 April 1998 (hearing), 5 February 1999 (decision)
#DATE 5:2:1999
Appearances
Counsel for the Applicant: Ms C A Needham
Solicitors for the Applicant: Minter Ellison
Counsel for the Respondent: Mr I M Jackman with Mr T Thawley
Solicitors for the Respondent: Dobes and Andrews
THE COURT ORDERS THAT:
The application be stood over to 12 February 1999 at 9.30am for mention.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
LINDGREN J
TABLE OF CONTENTS
INTRODUCTION
1
THE PLEADINGS 3
Contract claim 3
Misleading and deceptive conduct 6
Estoppel 7
Unjust enrichment 7
Quantum Meruit 8
THE FACTS 8
REASONING 52
CONTRACT 52
The applicants' case in contract generally 52
The first contract - November 1991 to 10 February 1992 55
The period between completion on or about 11 March 1992 of performance of the first contract and the making of the second contract on 15 October 1992 68
The second contract - 15 October 1992 69
The period from completion of performance on or about 19 November 1992 of the second contract to 24 September 1993 71
The third alleged contract - 22 June 1993 72
MISLEADING OR DECEPTIVE CONDUCT 72
ESTOPPEL 77
UNJUST ENRICHMENT 79
QUANTUM MERUIT 80
GENERAL 84
CONCLUSION 93
INTRODUCTION
1. The second named applicant ("Fraser") is a director of the first named applicant ("VFA"). Fraser and his wife are the only directors and members of VFA. Fraser is a distinguished architect. He has practised as an architect since 1963 and is a member of the Royal Australian Institute of Architects ("RAIA"). He has won eight RAIA design awards including the Sir John Sulman Medal and the RAIA National President's Medal for the well known redevelopment of Wharves 4 and 5 at Walsh Bay, Sydney occupied by the Sydney Theatre Company. Fraser has lectured and published journal articles on aspects of design. He established his present practice in 1975, having previously been a director of Ancher, Mortlock, Murray and Woolley.
2. The first respondent ("Shipton") has been a builder and property developer for some thirty-seven years and has been a member of the Master Builders' Association of New South Wales since 1967. The second respondent ("Vega") has been a property developer since 1976. Shipton and Vega are directors of the third respondent ("W-D"). At all material times, Shipton was also a director of a company called Wedderlight Pty Limited ("Wedderlight") and Vega was also a director of a company called Delmo Pty Limited ("Delmo"). W-D is a joint venture company which was formed by Shipton and Vega for the purpose of tendering for, and if successful undertaking, the development project with which the present proceeding is concerned.
3. W-D successfully tendered to become the lessee and developer in respect of a project for the restoration and redevelopment of the Finger Wharf and nearby Wharf No. 11 Woolloomooloo ("the Wharves"). At times this project has been loosely referred to by various names such as the "Finger Wharf redevelopment project" and the "Woolloomooloo Wharf development project" ("the Project"). W-D's tender was for a redevelopment comprising a hotel, residential, commercial, retail and sports resort complex.
4. VFA can be regarded as the alter ego of Fraser. Generally I will not distinguish between them and will speak simply of "Fraser". Fraser provided extensive services in connection with W-D's successful tender. He was initially retained by Shipton and Vega or their respective companies, Wedderlight and Delmo, in December 1991/January 1992. There were ongoing discussions between Shipton, Vega and Fraser over a long period. Fraser expended considerable time and energy in the interests of W-D, not only in creating the winning design for the Project, but in explaining it to, and securing its acceptance by, politicians, bureaucrats and interested groups. His activity continued down to the time when W-D's tender was accepted by the Maritime Services Board of New South Wales ("MSB") on or about 22 March 1993, that is, over a period of some sixteen months, and subsequently.
5. Fraser contends that it was a term of his contractual arrangement that if W-D should win the right to carry out the Project, he was to be the "project architect". His case is that he kept his initial design and drawing fees low on the basis that he was later to be remunerated as project architect if W-D's tender should be accepted. He says that while he was prepared to run the risk that W-D might not win the opportunity to undertake the Project at all, he did not take the risk that he would not be project architect if W-D's tender should succeed. And Fraser had reasons to be confident that W-D's tender would succeed. Not only did he have confidence in his design (he had designed "The Wharf" project at Walsh Bay which had involved heritage considerations similar to those touching the Project), but he also understood that he and his work were looked upon favourably by at least some of the persons who might be influential in the decision-making process.
6. The respondents say that Fraser was only ever retained to do design work and to prepare "presentation drawings", and that the considerable further work which he did, admittedly in the interests of W-D, he did as a business risk, in the hope, certainly, but without any assurance from the respondents that he would be appointed as project architect if W-D's tender should be accepted. The respondents say that in fact, in view of Fraser's efforts, they gave him more than a reasonable opportunity to be appointed as project architect, and were even prepared on that account to agree to something "above market" project architect fees in his case. They say, however, that ultimately he proved intransigent over his fees, which were so much higher than those quoted by the large architectural firm, Peddle Thorp, that the only sensible commercial decision which W-D could take was to retain that firm, rather than Fraser, as project architect.
THE PLEADINGS
7. The following is a summary of the third further amendment statement of claim filed in Court on 21 April 1998. What follows, therefore, involves no finding of fact. The applicants plead a case in contract (pars 1-26); misleading and deceptive conduct by W-D in contravention of s 52 (supported by s 51A) of the Trade Practices Act 1974 (Cth) ("the TP Act") and by Shipton and Vega in contravention of s 42 (supported by s 41) of the Fair Trading Act 1987 (NSW) ("the FT Act") (pars 27-35); estoppel (pars 28-36); unjust enrichment (pars 45-47); and quantum meruit (pars 48-50) (the former pars 37-44 were deleted).
CONTRACT CLAIM (PARS 1-26)
8. In November/December 1991, an agreement was made between the applicants and Shipton on his own behalf and for Wedderlight and Vega on his own behalf and for Delmo, by which Fraser or VFA was engaged as the project architect for the Project ("the Retainer"). The engagement was conditional on Shipton, Vega or one of their companies obtaining the right to lease and redevelop the Wharves from the New South Wales Government or the MSB or both. That condition was satisfied in due course. It was a term of the Retainer that reasonable fees would be paid and that negotiations would take place in good faith to fix the amount of those fees.
9. On or about Tuesday 21 January 1992, the applicants agreed to accept $70,000 as the fee for the design and drawing work up to the Development Application submission stage ("design and presentation drawing work"). That sum was less than the minimum recommended by the RAIA, which was the minimum fee that the applicants usually charged for such work, and was also less than the "reasonable value" of the work. The scale recommended by the RAIA "Standard Conditions of Engagement" for design and presentation drawing work was 12 per cent of 6.75 per cent of the cost of construction. Assuming a total building cost of $106,200,000, the fee for the design and presentation drawing work at the RAIA scale rate would therefore have been $860,220. On the basis of the same construction cost of $106,200,000, the "reasonable value" of that work would have been $656,279 according to the applicants' expert, Douglas Lawrence Gilling ("Gilling").
10. The applicants' agreement to do the design and presentation drawing work at a reduced rate was either in consideration of Fraser or VFA being formally engaged as project architect and receiving reasonable fees as such if the Project was won, or, alternatively, on the condition that in fact one of them was so engaged and received such reasonable fees. (The ultimate failure of that condition would have the effect that the agreement to do the work at the reduced rate ceased to be binding and freed Fraser and VFA to sue for reasonable remuneration.)
11. On or about 10 February 1992, there was a novation of the Retainer, by which W-D was substituted as proposed developer in place of Wedderlight and Delmo. At or by that time, it was also agreed that VFA was or would be project architect rather than Fraser.
12. Pursuant to the Retainer, VFA designed the Project and produced drawings for it. In further performance of the Retainer, Fraser did numerous other things. For example, he met with politicians to promote the proposal; he liaised with heritage and local action groups; he addressed public meetings about his design, with particular reference to restoration and heritage aspects; he assisted W-D in drafting press releases; he commented on letters proposed to be sent out by W-D concerning the Project; and he liaised with Concrete Construction Group Pty Ltd ("Concretes"), the construction manager for the Project, with Ove Arup Pty Ltd, ("Ove Arup") structural engineers, and with Bachy, a company with expertise relevant to the repiling and repair of the Wharves. These other activities took about 130 hours of Fraser's time. According to Gilling, their reasonable value was $100 per hour, giving a total of $13,000. (Gilling's affidavit shows that this amount of $13,000 was in fact included in the figure of $656,279 mentioned earlier).
13. In September 1992, the MSB invited tenders. On or about 12 October 1992, Fraser agreed for a fee of $15,000 to perform further design and drawing work in connection with the preparation of W-D's tender to the MSB. The amount of $15,000 was less than the minimum rate recommended by the RAIA and was below the amount that VFA usually charged for such work. VFA's agreement to do this further work at the reduced rate was also either in consideration of its being formally engaged as project architect and paid such fees as it should reasonably demand as project architect for the whole of the work, once W-D's tender was accepted, or, alternatively, on condition that in fact it was so formally engaged as project architect and paid such fees. It was a term of the agreement of 12 October 1992 or of the Retainer or of both, that in consideration of VFA's performing the work in connection with preparation of the tender documents for the reduced fee of $15,000, its full fee as project architect, reasonably demanded, would be agreed to by W-D.
14. On 4 December 1992, Fraser, "in the capacity of project architect", attended a presentation by W-D to the MSB. On or about 22 March 1993, the MSB accepted W-D's tender, and W-D commenced negotiations with the MSB for a lease of the Wharves. W-D and the MSB subsequently concluded a lease agreement.
15. The reasonable value of all the work rendered by VFA from and including the design and presentation drawings down to Fraser's attendance at W-D's presentation to the MSB on 4 December 1992 was $656,279.
16. On 29 March 1993 and 27 April 1993, VFA put to W-D fee proposals. The proposed fee was 5.42 per cent of building cost, then estimated at $104,500,000, giving VFA a fee of $5,670,350 "which was understated [by VFA] as $5,669,000 by error" (sic - 5.42 per cent of $104,500,000 is $5,663,900 which is less than both amounts mentioned in the pleading). VFA's fee proposal was fair and reasonable and was substantially below the minimum scale fee recommended by the RAIA, which was in fact a lump sum fee of 6.75 per cent of construction cost (6.75 per cent of $104,500,000 is $7,053,750).
17. On 22 June 1993, W-D accepted VFA's proposed fee of $5,669,000. In the alternative, on 24 September 1993, W-D, in breach of contract or of the terms of the Retainer or of both, refused in bad faith to negotiate for, or to accept, the fee proposed by VFA. W-D wrongfully and in breach of the agreements pleaded, refused to engage VFA formally as the project architect and engaged Peddle Thorp instead.
18. Had VFA received its proposed fee or a reasonable fee as project architect, it would have earned a profit of $2,546,012, or, alternatively, $2,032,514, and Fraser would have benefited as a shareholder of VFA. The amount of $2,564,012 is the net profit from the proposed fee of $5,670,350 as described in a report of the applicants' accounting expert, Brian Patrick Woodward ("Woodward"). The amount of $2,032,514 is the net profit from a "reasonable fee" of $5,156,852 as described in the evidence of Woodward and Gilling.
MISLEADING AND DECEPTIVE CONDUCT (PARS 27-35)
19. From the initial concept of the Project until 24 September 1993, each respondent stated, represented or promised to VFA and Fraser, that VFA or Fraser was or would be the project architect. Further, or alternatively, on 12 October 1992, each respondent "stated, represented, guaranteed and promised" that VFA's full fee as project architect, reasonably demanded, would be accepted once W-D won the tender. In reliance on these statements, representations, promises and guarantee, Fraser and VFA performed design work and provided other services to W-D in the belief that VFA was or would be project architect and would earn its reasonable fee as such if the Project proceeded with W-D as developer. They would not have done so but for the respondents' conduct mentioned. Further, the work was done by VFA at a reduced fee, and but for the statements, representations and guarantee, Fraser and VFA would have charged the reasonable value of such work. In further reliance on the statements, representations and guarantee, Fraser and VFA deflected enquiries from other potential clients, did not pursue other work, and geared up to undertake the work as project architect for the Project by taking a lease of larger offices at 63 William Street, East Sydney, and by negotiating with three architects to work on the Project.
20. Each of the statements, representations, promises and guarantee was made by W-D in trade and commerce and was false and misleading or likely to be so in contravention of the TP Act. When making them, W-D did not intend to honour them in good faith. Further, each of the representations, promises and guarantee was made by Shipton and Vega in trade or commerce and was misleading or deceptive or likely to be so in contravention of the FT Act. When making them, they did not intend to honour them in good faith. As a result, Fraser and VFA have suffered loss and damage and are entitled to compensation from each respondent. The compensation is the amount of the profit VFA would have earned as project architect, alternatively the amount of the reasonable value of the work done by VFA. Fraser suffered loss of dividends payable to him as a shareholder in VFA.
ESTOPPEL (PARS 28-36)
21. By reason of the matters referred to above under "Misleading and Deceptive Conduct", W-D is estopped from denying that VFA is the project architect for the Project and is estopped from denying that it is entitled to act as such and to earn its reasonable fee as such.
UNJUST ENRICHMENT (PARS 45-47)
22. Alternatively, W-D has been unjustly enriched to the extent of the difference between VFA's usual fee for design and presentation drawing work and the fees which VFA agreed to accept, the difference being $755,000. VFA's usual fee was $840,000 but it agreed to accept only $85,000. W-D's profit on the project has been correspondingly increased by the difference of $755,000.
23. Alternatively, W-D has been unjustly enriched to the extent of the difference between VFA's reasonable fee for the design and presentation drawing work and the fees which VFA agreed to accept, the difference being $571,279. VFA's reasonable fee was $656,279 but it accepted only $85,000. W-D's profit has been correspondingly increased by the difference of $571,279.
24. Alternatively, W-D has saved the fee it would otherwise have had to pay another architect for the work done by VFA and has been unjustly enriched to the same extent. Assuming that another architect would have charged at least the RAIA scale, the saving was at least $755,000, or alternatively $571,279, with a corresponding increase in W-D's profit.
25. W-D is liable to "disgorge" the amount by which it has been unjustly enriched ($755,000 or $571,279) and to pay that amount to the applicants.
QUANTUM MERUIT (PARS 48-50)
26. Further, or alternatively, VFA has done design work and provided services to W-D of a reasonable value of $656,279. VFA allows $85,000 for payment received. The agreement or variation to the Retainer evidenced by the letter dated 21 January 1992 is liable to be set aside by the Court by reason of the misrepresentation of W-D, or, alternatively, by reason of the determination of that agreement or variation for failure of condition. Accordingly, VFA is entitled to set aside that agreement or variation to the Retainer and to recover on a quantum meruit the reasonable value of its work, namely, $656,279, against which VFA allows credit for $85,000 received, leaving a balance of $571,279.
THE FACTS
27. Prior to the commencement of discussions between Fraser, Shipton and Vega about the Project in late 1991, the three men already knew each other. Fraser had known Shipton for many years and had done architectural work for him or companies with which he was associated. In particular, he had done architectural work on "The Maltings", a Sheraton Hotel project at Mittagong, for Wedderlight and Delmo, through which he had also become acquainted with Vega.
28. In November 1991, Shipton telephoned Fraser and said that he had been speaking with Vega about the possibility of their redeveloping of the Wharves which were derelict and the subject of a Government policy of demolition. Shipton told Fraser that he and Vega were contemplating a redevelopment incorporating a hotel, residential and commercial elements.
29. Shortly afterwards the three men together inspected the Finger Wharf. They later met at the offices of Shipton and Vega at Paddington. Fraser, who had previously undertaken work in connection with the Wharves for other clients, made some general observations about the Project based on his previous work.
30. On or about 28 November, Fraser received from Shipton's office a copy of a letter dated 28 November from ITT Sheraton ("Sheraton") to Shipton and Vega. The writer on behalf of Sheraton was Bill Edwards ("Edwards") with whom Shipton and Vega had developed a relationship in connection with "The Maltings". Shipton and Vega had spoken and written to Edwards about Sheraton's participation in the proposed redevelopment of the Finger Wharf. The letter expressed interest and included this paragraph:
"I and my staff are available at any time to assist in the initial planning and space management planning for the facility. As indicated during our meeting on 25 November I will arrange for our Director of Technical Services to be in Sydney on 9 December to commence this process with the Project Architect, Vivian Fraser." (emphasis supplied)
31. Shipton states that he had told Edwards only that he and Vega had spoken to Fraser about their idea for the Finger Wharf and that he (Fraser) was "interested".
32. At about the same time Fraser received from Shipton's office draft letters addressed to the Honourable Nick Greiner, Premier of New South Wales, and the Honourable Michael Yabsley, Minister for Tourism and State Development. On 29 November, Fraser responded in writing suggesting that Shipton include in his letters to Messrs Greiner and Yabsley the following:
"We have accordingly selected an experienced project team which will work with the various heritage bodies and interest groups in developing the detailed design." (emphasis supplied)
33. On 3 December, Wedderlight and Delmo, through their respective managing directors, Shipton and Vega, wrote to Mr Greiner and Mr Yabsley identical letters outlining their proposal. The letters included the following:
"A Project Team is in place ready to commence work on the project immediately the Lease Agreement is signed.
The Architect will be Vivian Fraser, who has undertaken a number of different Historical projects and has won seven Royal Australian Institute of Architects' Design Awards, six of which have been for restoration projects. The projects include the Sydney Theatre Company at The Wharf (Sulman Medal and Presidents Medal), the Australia Council Headquarters and the Sydney Dance Company Headquarters.
The piling Consultant Engineer will be Ove Arup. This Consultant has undertaken an extensive examination of the Wharf and will continue to be associated with the Project.
We have entered into an agreement in principle with a major multi national piling Contractor, Bachy, who are ready to commence work immediately upon instruction." (emphasis supplied)
34. Shipton gave Fraser copies of the letters at a meeting. Fraser states that upon reading the paragraph relating to him, he assumed that he was or would be the project architect. Shipton and Vega say that they had not engaged Ove Arup or Bachy, or, for that matter, entered into a contract with Sheraton (which was also mentioned in the letters). They say that their purpose was to assure Messrs Greiner and Yabsley that they were in contact with knowledgeable people in the industry.
35. It is appropriate to interrupt the chronological account of events here to note that any redevelopment of the Finger Wharf would inevitably have to overcome certain difficulties. The Wharf was an old dilapidated timber structure. A particular challenge would be to make the pilings safe and to provide a sound and stable weight-bearing base over water. In addition, the structure is long and thin. Finally, because of the site's prominence and historical interest, heritage considerations could be expected to be influential and to make the Project politically sensitive. In the circumstances, it would be a distinct benefit to a developer undertaking the Project to have Fraser as its architect in view of his having been the multi-award winning designer of the redevelopment of Wharves 4 and 5 at Walsh Bay.
36. According to an affidavit by Fraser sworn on 14 April 1998, only six days before the hearing, in reply to the affidavits in chief of Shipton and Vega, he had meetings with Shipton and Vega on Thursday 12 and Tuesday 17 December 1991, on which he came to rely heavily for his cause of action in contract. He states that on 12 December, after a meeting with the Hon Bruce Baird and the Hon Clover Moore in Parliament House, he, Shipton and Vega went to a coffee shop in Macquarie Street opposite Parliament House, where a conversation to the following effect occurred:
Shipton: "We are all going to have to put in our time for this to get anywhere. It may not get off the ground but if it does, it is going to be a great development for all of us. What sort of fee will you need to do the work?"
Fraser: "I can't answer that here. I'll look at what has to be done and work out a charge to cover office costs. I'll do it on the same arrangement as `the Maltings' Ö I will charge now to cover costs and overheads, and adjust my payments as part of my full fees when the project goes ahead."
Vega: "That sounds OK to me."
Shipton: "Fine, will you prepare a proposal and get it to us quickly. Keep it low."
Fraser: "Sure Bill." (emphasis supplied)
37. (The applicants do not seek to make a case that the parties made a contract which, by reference to "The Maltings" project at Mittagong, imported aspects of that arrangement as terms of the new contract - rather, they rely on the evidence touching The Maltings contract on issues of credit.)
38. Asked about this alleged conversation in the witness box, Shipton and Vega said that the conversation did not occur and that they could not remember the coffee shop meeting at all.
39. According to Fraser's original affidavit sworn 12 February 1996, at a meeting on Friday 13 December (the day after the alleged coffee shop meeting) he and Shipton conversed as follows:
Shipton: "Right, we are going to go for this scheme. We're serious. We're going to produce sketches. We believe we're going to get an inside run with the Government.
We know you've done previous schemes for the wharf, so that will help you prepare presentation drawings.
Now we're all in this together. This is a terrific project. If it works, we'll all make a lot of money out of it.
But for now can you keep your costs down as much as possible, to as low as possible?
Can you use the drawings that you've done for the other people?"
Fraser: "No I can't of course. What I do have though are the base drawings for the building and the thing that will help you and me is my knowledge of the existing wharf, the structure of the wharf and its dimensions."
Shipton: "We have limited resources for this stage, but when the project is won, the money will be in place as well."
Fraser: "Then I will keep my time down as much as possible and charge you only for my time and for office time until then. I won't charge you the scale rate at this stage."
Shipton: "OK." (emphasis supplied)
40. Fraser states that he also said, "I will put a fee proposal to you."
41. Shipton denies saying the words in the passages emphasised in the first passage attributed to him; agrees that Fraser said he would keep his time down as much as possible and charge only for his time and his office time until the Project was won; and denies that Fraser said "I won't charge you the scale rate at this stage." He states, but Fraser denies, that he asked Fraser to give "a competitive price for the work." He states that by saying "OK", he intended only to acknowledge that he and Fraser had not reached agreement, not that they had agreed that he would later agree to a "scale" rate. He states that in his experience "it is common practice within the industry for architects and other consultants to speculate time in the early stages of a proposed project".
42. Vega states that he has "no specific recollection" of Shipton's making the statements attributed to Shipton by Fraser. He states that he recalls Shipton or himself asking Fraser to submit a fee proposal for a full set of presentation drawings describing the proposed scheme "in accordance with the brief provided by Shipton and [himself] and including Sheraton's technical department brief". He states that Fraser did not say that he could not use earlier drawings; that Fraser did not refer to the RAIA scale; and that his reason for asking Fraser for a fee proposal was that he thought that Fraser "would be able to recycle drawings that he had developed for a previous scheme".
43. Later the same day (13 December), Fraser faxed to Shipton a:
"[fee] proposal for design & presentation sketches for development of finger wharf and wharf 11 as 250 room resort hotel, with max. no. of serviced apartments, with some retail & commercial space, car parking on the finger wharf and 2 level car park & sporting facilities on wharf 11, with landscape extension from gardens."
44. The document went on to list seven "presentation drawings" followed by a statement that the "level of presentation" was to be "sufficient for discussions with government, hotelier, financiers, the press, and for first costing". The document concluded with the following paragraph:
"Fee for the above $70,000.00
Work could commence on 15 Jan'92
First alternative layouts with numbers after 2 weeks
Full completion of presentation would take 5 to 6 weeks."
45. There is no suggestion in the document that the proposal of a fee of $70,000 for the work described was conditional or qualified. It will also be noted that the design and preparation of sketch drawings were to be completed by the end of February 1992.
46. The second conversation deposed to for the first time in Fraser's affidavit of 14 April 1998 is said to have occurred the following Tuesday 17 December. Fraser states that on that day he met with Shipton and Vega in Shipton's office when they conversed to the following effect:
Shipton: "Viv, you understand there is no guarantee we'll get this. We're taking a punt. If it does work we'll all benefit - but for the time being is there any way you can reduce this submission [a reference to Fraser's proposed fee of $70,000]."
Fraser: "Bill, I understand the position. That's why I have agreed to just cover my bare costs for the time being to do the work necessary to produce a scheme to get us the job. The deal is exactly what is working for `the Maltings'. I simply can't reduce my fee any further."
Vega: "Vivian, I am sure you understand our position. We are not asking you to be out of pocket and you must feel comfortable with what is agreed. Our arrangement has worked well on the Maltings and we've now got our DA. I am sure we'll work equally well together on this."
47. Asked about this alleged conversation in the witness box, Vega and Shipton each said that the conversation did not take place and that they did not remember the meeting.
48. Fraser annexes to his affidavit a copy of the RAIA "Fee Guide" which was issued in March 1988. It provides for scales of fees according to "costs of works", the "classification" of the building in question according to the level of architectural work involved, and the "stage" of the work being charged for. The three classifications are as follows:
"Classification I Buildings of conventional character.
Classification II Buildings involving special or prolonged study or calculation, or requiring the application of special skills and experience or where the architect's work is increased as a result of the nature of the building.
Classification III Buildings where the degree of study or calculation, or a requirement for special skills, is reduced by significant consultant input, or where the architect's work is reduced as a result of the nature of the building."
49. Fraser states that the Project fell within Classification II. The percentages were higher as the cost of works fell. Thus, for a Classification II building having a cost of works of $1,000,000, the range appears (from a graph) to have been from 7.7 per cent to 9.75 per cent of project cost, whereas for a building having a cost of works of $60,000,000 in the same classification, the range was from 5.7 per cent to 6.75 per cent of project cost. The "stages" referred to and the percentages for them were:
"Schematic design stage 12%
Design development stage 13%
Contract document stage 40%
Contract administration stage 35%"
50. According to Fraser's affidavit, it was his practice to use the RAIA scale as a basis for charging for architectural work. He states that on the basis of a total building cost of $103,700,000 (including re-piling and fitouts), his normal fee for the schematic design stage would have been 12 per cent x 6.75 per cent x $103,700,000, that is about $840,000 (actually $839,970). Fraser states that if "instead of using the RAIA scale of 6.75 per cent of costs of construction", one were to use 5.42 per cent (a percentage to which he was ultimately to come down in his negotiations with W-D), one would arrive at a fee for the schematic design stage of $584,500 which he describes as "a most reasonable fee". In fact this arithmetic in Fraser's affidavit is wrong: the resultant figure is $674,465. But on any reckoning, the fee of $70,000 was very low by reference to the amount resulting from simple application of the RAIA scale to the total project cost. (Annexed to Gilling's affidavit was a new edition of the RAIA fee guide published in October 1991 which differed in relevant respects in minor ways from the earlier edition annexed to Fraser's affidavit but the differences are not of present importance.)
51. Shipton or Vega or both state, in substance, that the RAIA scale was not mentioned, let alone agreed to; that in the period 1991-1993 the building industry was in recession and architects were competing for work and paying little attention to the RAIA recommended scale; and that, in any event, their "budget to complete the project" was only some $60m to $80m.
52. Fraser says that he would not have undertaken the work described in his fax of 13 December for only $70,000 if he had known that he would not be appointed as project architect, or if he had known that Shipton and Vega would not later agree to a fee within the RAIA range. He says that he undertook the design and presentation drawing work for only $70,000, rather than say $584,500 or $840,000, only because he believed from what Shipton and Vega said to him that he would be appointed project architect if they secured the right to redevelop the Wharves, "provided of course that the project fee he requested was not unreasonable".
53. Fraser states that on the basis of what Shipton and Vega had already said to him and on the basis of his having been given copies of the two letters dated 3 December 1991 to Messrs Greiner and Yabsley, he had no doubt whatsoever that he would be Shipton's and Vega's project architect if their development went ahead. Indeed, he states that at the time he believed that he was already "their architect" for the Project.
54. Fraser states that he started to do preparatory work in about December 1991, locating and consulting relevant sketches he had prepared for previous clients and generally applying his mind to the Project. He was ultimately to complete the design drawing and presentation work in about November 1992. The work consisted of, or at least resulted in, the production of ten plans or drawings or sets of plans or drawings. He was assisted by two employees, Paul Demaine and Sharon Fraser, who is Fraser's daughter. Fraser states, based on his thirty-two years of practice as an architect, that $840,000 was a reasonable fee for the schematic design stage; that it was the minimum fee recommended at the time by the RAIA; and that it was the fee which other architects of equivalent standing were charging for similar work.
55. He states that from December 1991 he devoted about ninety percent of his time to the Project and describes the numerous "promotional" activities in which he engaged in W-D's interests. At one stage his evidence was that neither he nor his employees undertook any other work throughout the many months that he was working on the Project, but in the witness box he conceded that this overstated the position.
56. He states that he met with various politicians including the Honourable John Hewson, then Leader of the Federal Opposition; the Honourable Clover Moore, Member for Bligh in the New South Wales State Parliament; the Honourable Bruce Baird, then Minister for Transport in the New South Wales State Government; and the Honourable Michael Yabsley, then Minister for Tourism and State Development in that Government. He states that his purpose was to try to persuade them to "lobby" the New South Wales State Government to change its policy that the existing improvements be demolished and to secure for his clients, Shipton and Vega, the right to redevelop the Wharves. As well, he states that after December 1991 he had meetings and generally liaised with various heritage and local action groups to promote his clients' redevelopment proposal, including the RAIA, the Woolloomooloo Bay Protection Society, the Residents of Woolloomooloo, the National Trust of Australia, and the Friends of the Finger Wharf. He also met with and addressed the New South Wales Trades and Labour Council, and spoke at various public meetings, mostly at the request of Clover Moore or the Friends of the Finger Wharf. He generally spoke or wrote about his design, with particular reference to restoration and heritage aspects. He also corresponded with some of the people, groups and societies mentioned. He estimates that he spent about twelve hours a week doing all these things and engaging in public relations work to promote the Project. He states that he would not have undertaken any of the tasks mentioned if he had not been firmly of the understanding, based on what Shipton and Vega had told him, that he was their project architect and would be formally appointed as such at a reasonable fee if they obtained the right to redevelop the Wharves.
57. In addition, he assisted Shipton and Vega in other respects. He assisted them to draft press releases and he drafted some himself; he commented on letters proposed to be sent out by them about the Project; he liaised with Concretes, Ove Arup and Bachy; and he undertook many other tasks which would normally be undertaken by a "project architect" in relation to a development project of the size and kind in question.
58. The respondents do not dispute that Fraser undertook a considerable amount of work of the general nature described by him over and above the design and drawing work. But Shipton states that work of the kind described is ordinarily "expected of an architect in the initial stage of a project of such a sensitive nature". Fraser disagrees, stating that while "it is not unusual for an architect to liaise with local action groups (but not politicians), the volume of meetings and the intensity of the discussions in which [he] participated for this project were far in excess of what [he] would regard as normal, even for a sensitive project". I think that Fraser's evidence is probably a more accurate description of the true position. The Project was an exceptional one in terms of its prominence in Sydney and its heritage aspects as well as in the architectural challenges it presented, and Fraser was, at a personal and professional level, centrally involved in it.
59. I return to the chronological account of the facts. Fraser, Shipton and Vega met on Tuesday 21 January 1992, when, according to Shipton, he said to Fraser:
"Look, I believe that the market rate for the architectural component is about 2% to 3%."
60. According to Shipton, Fraser did not reply.
61. On the same day, 21 January, Fraser wrote to Wedderlight and Delmo referring to recent conversations and meetings with Clover Moore and Bruce Baird. The letter recorded that it appeared to Fraser that the State Government would call for expressions of interest in the redevelopment of the Wharves. The letter emphasised the need for a "fully developed and properly presented scheme" for inclusion in any submission, listed the same seven drawings which Fraser said he would prepare in conjunction with W-D and Sheraton, and concluded:
"Production of the above would take approximately 6 weeks. My fee for the work (excluding the model) would be $70,000. Payment of this fee would be for $50,000 to be paid progressively during my production time, with the final payment of $20,000 being made on 01 June 1992.
I await your instructions."
62. The respondents rely on the terms of this letter which, like those of the facsimile transmission of 13 December, specified $70,000 as the fee for the design and presentation drawings without qualification or elaboration.
63. Shipton deposes to a meeting the next day, 22 January, at which he said to Fraser:
"Now, this fee of $70,000 includes any work which you have done to date. If the project does not proceed or we cannot agree on your fees for the rest of the project, no further fees are due to you."
64. Fraser seems to accept that a meeting took place on 22 January, but is clear that Shipton did not make any such statement. He states:
"I am quite certain that Mr Shipton did not say those words to me at the meeting on 22 January 1992 or at any other time."
65. Be this as it may, on 22 January, Wedderlight and Delmo wrote to Fraser:
"We have agreed in principle to accept your offer for the design of our proposed redevelopment of the Fingerwharf and acknowledge that the documents you prepare will be up to development application stage.
We accept your fee proposal and understand that you will proceed immediately with the work. However, at this stage your work is not to exceed the fee of $10,000.00 until you have our confirmation that we have Bank approval for the funding to cover the balance of your fees.
In addition, we request you to arrange a meeting as soon as possible with the model maker.
We look forward to working with you on this exciting project."
66. Fraser states that he understood from the last sentence that he "was or would certainly be the project architect if the development went ahead". It suffices to say that this sentence is reasonably capable of referring to the work for which Fraser was engaged by virtue of the acceptance contained in the letter and that I think that on the face of the letter this is its more obvious meaning. The respondents say that the exchange of letters on 21 and 22 January 1992 represents the whole contractual arrangement for fees for the schematic design stage until a variation involving payment of a further sum of $15,000 was agreed to in October 1992 . Shipton and Vega state that the "public relations" work in which Fraser engaged was of a kind commonly carried out by an architect retained to do design and drawing work for a "sensitive" project of the kind in question; that Fraser's "contacts," particularly his contact with Clover Moore, although useful, were not essential; and that by the last sentence in their letter of acceptance, they intended to refer to Fraser's work of schematic design and production of presentation drawings the subject of his fee proposal of 21 January.
67. On 4 February, Fraser wrote to Wedderlight and Delmo purportedly confirming advice that he had come to the point where his office costs had reached the $10,000 level. The letter noted Fraser's understanding that Shipton and Vega would not be meeting with their bankers until the following week "regarding the balance of [Fraser's] fee proposal for the balance of the presentation work". The reference to "the balance" was clearly to $60,000, representing the balance of the sum of $70,000. The letter confirmed meetings arranged with Sheraton and Clover Moore, and Fraser's understanding that he was to continue work so that drawings would be as far advanced as possible for those two appointments. He enclosed an account for $10,000 for "Completion of Stage 1 as agreed."
68. On 10 February, Wedderlight and Delmo wrote to Fraser enclosing payment of $10,000 and asking to be informed when the next $10,000 worth of work was reached. The letter confirmed that Shipton and Vega would be meeting with their bankers later in the week. Finally, the letter stated:
"Please note that the company who has engaged you for this project is Wedderlight-Delmo Pty Limited ACN No 055 074 130 and all correspondence should be refered [sic] to this company." (emphasis supplied)
69. Fraser states that he understood the words emphasised to refer to the whole of the Project. Shipton states that when writing the letter, he intended the words "this Project" to refer only to the design and presentation drawing work which had been referred to in Fraser's fee proposal of 21 January. It suffices to say here that I think the latter construction a reasonable one.
70. On or about 12 February 1992, Peter Reid of Concretes supplied to Fraser a document which had been prepared as a discussion paper prior to some meetings with politicians. It included the following:
"1. The team is established and ready to proceed:
Project Developer - WJ Shipton/J de la Vega
Project Architect - Vivian Fraser
Development Consultant - Robert C West
Construction Manager - Concrete Constructions
Piling Contractor - Bachy
Hotel Operator - ITT Sheraton
2. The project team is well balanced with experience, financial strength, technical knowledge and proven history in such developments.
3. The architect and developer are experienced in heritage projects.
4. Project design is conceptually complete." (emphasis supplied)
71. On 14 February, Fraser wrote to W-D a letter headed "Woolloomooloo Finger Wharf" which purported to confirm verbal advice that he was "to proceed with the full services on the above which were set out in [his] letter Ö dated 21 January 1992". The letter enclosed a second interim fee note for $10,000. The fee note stated particulars of the work done for which the charge was made as:
"Taking instructions, attending meetings, preparation of sketch design drawings."
72. On or about 19 February, Fraser received a copy of a letter from W-D to the Honourable Bruce Baird, Minister for Transport. Under the heading "The Project Team," the letter described "the full team" including "Project Developer" as W-D and "Project Architects" as "Vivian Fraser". In oral evidence, Vega said that of the six persons and companies listed in the letter as members of the project team, only Fraser had any contract at all at that time. Under the heading "Design Development", the letter stated:
"The conceptual design for refurbishment of the Wharf is complete and the architect is well advanced in preparing more detailed drawings.
Solutions for the piling and refurbishment of the existing structure of the Wharf are complete and will enable work to commence in October 1992."
73. In oral evidence, Vega said that he could not recall what he had been referring to when advising Mr Baird that the architect was "well advanced in preparing more detailed drawings". Again, Fraser states that he understood the reference to him as Project Architect to confirm that he was already or would be project architect if the redevelopment by W-D went ahead. Again, Shipton and Vega state that they had meant only that Fraser was the architect who was involved at the time and with whom they were in contact.
74. On 21 February, Fraser wrote to W-D enclosing a cumulative account for $35,000 for work done. Again the memo particularised the additional work ($15,000) covered by the memo as:
"Taking instructions, attending meetings, preparation of sketch design drawings."
75. According to the memo, only the first of the two interim memos for $10,000 had been paid, so that $25,000 was shown as outstanding, made up of the $15,000 for the additional work done and the second of the two earlier memos for $10,000. Shipton states that the balance outstanding was only the new $15,000 which was paid on 2 March. Fraser insists that the amount of $25,000 was correct. Nothing turns on this conflict.
76. On 11 March, Fraser billed for a further $15,000 and recorded $35,000 as having been paid. These two amounts ($35,000 previously paid and $15,000 for additional work done and now charged for) total $50,000 - the amount that was, according to Fraser's memo of 21 January, to be "paid progressively during ... production time". Accordingly, it seems that the work of production of the presentation sketches was completed on or about 11 March. This is a little, but not much, later than expiry of the period of "approximately six weeks" that Fraser had estimated in his letter of 21 January. By about 11 March therefore, Fraser had completed the work called for by the contract which had been concluded (subject to the novation on 10 February) on 22 January.
77. Also on 11 March, Mr Baird wrote to Shipton advising that the Government had decided that it would be reasonable to reconsider demolition of the Finger Wharf by seeking expressions of interest for redevelopment of the Wharves and their environs. The Minister indicated that he envisaged that the expressions of interest would be called for within a month. Shipton's office sent a copy of the letter to Fraser. Fraser states that after receiving the copy, he intensified his public appearances promoting W-D's proposal because he believed he would be the project architect. For example, on 31 March he attended a public meeting in Woolloomooloo at the invitation of Clover Moore; spoke about his background and his experience on "The Wharf" redevelopment project at Wharves 4 and 5, Walsh Bay; and said that he had been engaged by a developer and had developed a scheme for the Finger Wharf. Vega says that it overstates the position for Fraser to say that he (Fraser) developed the scheme, because he (Vega), Shipton, Concretes, Sheraton, Ove Arup, Bachy and others also contributed. But there can be no serious dispute that Fraser was at the heart of the key designing work.
78. Fraser assisted Shipton and Vega and other persons on their "development team" in preparation of a document called "A Registration of Interest by Wedderlight-Delmo Pty Limited" dated 30 April 1992. Fraser wrote the executive summary for that document, supplied his curriculum vitae for inclusion in it, and provided most of the material in the "Development Proposal" section, including the whole of the "Description of the Development". At Shipton's request, Fraser also supplied a description of the proposal to assist W-D obtain finance.
79. Again, Shipton and Vega say that Fraser overstates his contribution to the Registration of Interest document. They say that all the "consultants" referred to in the document supplied curricula vitae for inclusion in it, and that Fraser's authorial contribution was no more than that which architects with the limited retainer he had at the time ordinarily made to such a document. Fraser disputes this view. He says that his contribution was not only more than what would ordinarily be expected, but that Shipton and Vega required more assistance from him in putting the document together than any other client for whom he had worked on a comparable project. Perhaps the truth lies somewhere between the two assessments, but I think that Fraser's is not far wide of the mark. Unlike other consultants, he was responsible for the overall design. Moreover, there is no suggestion that they engaged in promotional activity with politicians and others as he did.
80. On or about 21 April, Fraser received from Shipton part of a document entitled "Project Costs". It was a "preliminary project cost feasibility" which had been prepared by Concretes. The document gave a total project cost, exclusive of the cost of borrowing, of $131,290,000. Fraser was to use the figures in the document later as the basis for calculating his "project architect's fee." Shipton states that at the time W-D's "construction budget" for the Project was only $80,000,000; that he knew W-D would have to go to competitive tender; and that he believed there were ways in which the amount of $131,290,000 could be reduced.
81. On or about 30 April, Fraser received a copy of parts of column 1 of W-D's Registration of Interest document. It contained numerous references to Fraser or VFA as the architect on the development team. Concretes provided the document to Fraser in draft for checking before completion. He checked it. He states that when he read it, he believed he was certainly going to be the project architect if W-D should be the successful tenderer. He further states that he would not have done the further work which he in fact did if he had known that he was not to be appointed, or, alternatively, that a reasonable fee proposal by him was not to be accepted.
82. On 20 May, Fraser wrote to W-D recommending the consultants to be engaged for the Project, and on 27 May he wrote to the Friends of the Finger Wharf to allay certain concerns of theirs which had apparently been raised at a meeting at the MSB the preceding day.
83. Fraser attended a presentation meeting at the MSB on 26 May and a further meeting with it on 29 May to answer questions, after which he did much further work. Believing that W-D was very likely to succeed, in June 1992 he made calculations of his fees. Based on a project cost of $107,000,000, he chose a rate of 5.75 per cent, being a percentage lying within the RAIA's band for Classification II projects. Using a project cost figure of $95,000,000 he calculated his fee at $5,500,000. He made numerous hand-written notes in contemplation of preparing a fee proposal. However, he did not submit a proposal to W-D yet. He was doing work on the design and presentation drawings (the nature of and reasons for which are not revealed by the evidence) and other things in the interests of W-D. For example, in late June, he suggested amendments to a draft press release prepared by Vega.
84. On or about 20 July, Fraser received from W-D a copy of a letter of that date from W-D to Clover Moore and read the following paragraph in it:
"i The Architect for this project won the Sulman and Presidents medals for his recycling of the Finger Wharf's sister building, Wharf 4/5 at Walsh Bay." (emphasis supplied)
85. The letter was signed by Shipton and Vega, who were clearly exploiting to their advantage Fraser's past achievements and peer recognition. Fraser states that the letter confirmed him in his belief that he "was already for all practical purposes the project architect and that [he] would be doing all of the project work". Shipton and Vega state that their understanding was that he was only "the architect for the project at that stage", that is, for the stage in respect of which there was in place a fee agreement, and not for any further stage.
86. On 29 July, Fraser made some notes for his own purposes. These reveal his thinking about fees at the time. The notes begin as follows:
"Woolloomooloo Finger Wharf 29.7.92
MSB program/Heads of Agreement end Dec'92
VF estimate end Nov'92
[therefore] aim at lodge DA docs at end Nov 92
Assume Govt announcement 1 Aug
[therefore] 4 to 5 months work to DA"
87. A period of four months would expire at the end of November 1992 and a period of five months would expire at the end of December 1992. Fraser's notes went on to list payments which he would require to be made to him in August, September, October and November totalling "$700,000 in advance of heads of agreement". He then listed amounts to be paid in respect of an environmental impact statement, a heritage report and "social planner" totalling $190,000, giving "say $900,000" to be paid by W-D by the end of November. His notes then recorded the following calculations:
"Total fee on $103.7m
6% (11% reduction) = 6 225 000
12% fee now due = 747 000
- 70000 paid = $677 000
======
(25% full Sk + DD stage) 1,556,250"
88. The notes show that Fraser had in mind a total project cost much higher than that assumed by Shipton and Vega. In oral evidence, Fraser said that the 6 per cent fee was the subject of negotiation and that 12 per cent was a percentage commonly attributed to the schematic design stage. Fraser's notes suggest, consistently with the case that he has sought to make in this proceeding, that his own view at the time was that $70,000 was a substantial underpayment for the schematic design stage.
89. In late August, Shipton and Vega requested Fraser to amend the presentation drawings. Apparently this request was prompted by the anticipated tender requirements of the MSB and certain suggestions made by Edwards of Sheraton. According to minutes of a meeting held on 26 August attended by, inter alia, Fraser, Shipton and Vega, Fraser undertook to "upgrade the drawings."
90. In September, the MSB issued invitations to tender. Fraser considered the amendments to the existing drawings that would be required to meet the MSB's tender requirements.
91. On 16 September, Fraser made notes of the amendments that would be required and of the hours of his work that would be involved. The result was seventy-eight hours at $150 per hour for his labour, a total of $11,700 or, with colour, ninety hours at $150 per hour, a total of $13,500. He noted that if an "internal perspective" were omitted, the fee would be reduced by sixteen hours ($2,400) down to $9,300, or for colour, by twenty-one hours ($3,150) down to $10,350. Modifications to these figures were also noted, but on the hearing Fraser could not explain how he derived the sum of $25,000 which he was shortly to mention as his fee for the amendments (see below).
92. There are in evidence notes of Fraser's dated 23 September 1992 of things that were being done and were to be done by him on the Project, such as "Check easement access-Lincoln Crescent + City Council/resume part".
93. On 24 September, Fraser wrote to W-D following a meeting of himself, Shipton and Vega the preceding day, at which they had discussed the implications of the tender requirements. In an attached Schedule of Architectural Work on Tender Documents, he outlined the additional work required, divided into "Design Amendments" and "Tender Requirements," and concluded:
"My fee for the work is $25,000.00, with payment of 50% after 3 weeks, and the balance on completion. The changes will take approximately 6 weeks."
94. On 12 October, the three men met again. According to Fraser's affidavit, they conversed to the following effect:
Vega: "We are not able to fund your $25,000 fee for the upgrading of the drawings. We can only afford $15,000. Can you try to contain your fee to that figure?
Yes we are sorry that we cannot pay you for this work but we guarantee you that once we get the job your full project fee will be accepted without argument."
Fraser: "I will see what I can do and send you a revised proposal tomorrow." (emphasis supplied)
Fraser made a note in his diary of the discussion. A copy is in evidence. It is as follows:
"Bill & Jose meeting on fee proposal for extra work - my Sept proposal not able to be funded - they say that they can only afford $15,000 - VF to look at means of containing fee to within that figure. Jose apologises for not being able to pay for work - and guarantees that once we get the job - my full fee will be accepted without argument.
Letter with revised proposal for tomorrow." (emphasis supplied)
95. In their affidavits Shipton and Vega agreed that Vega said they could afford only $15,000 and asked Fraser to come up with a way of "containing" his fee to that level, although Vega denied apologising for their inability to pay for the work proposed by Fraser. In cross-examination, Vega said that the extra $10,000 could in fact have been found if necessary and, contrary to his affidavit evidence, Shipton denied that Vega said they could not afford $25,000.
96. Although nothing turns on this dispute, I note that I accept that Vega told Fraser that he and Shipton could only afford $15,000 at that stage. As in relation to the fee of $70,000 agreed to in the preceding January, Shipton and Vega were anxious to put a low ceiling on their commitment and were dependent on the approval of their financier. It is common ground that Fraser said that he would send a revised proposal.
97. Vega denies saying that if and when he and Shipton won the tender, Fraser's full project fee would be accepted without argument. Shipton says that Fraser's diary note is not an accurate record of the conversation.
98. I do not accept that Vega said words to the effect that if he and Shipton won the right to undertake the Project, they would agree to pay Fraser's full project fee, that is, whatever project fee might be fixed by Fraser, without raising any argument that the amount should be less. I simply think it unlikely in the extreme that they would have given such an imprudent undertaking. It was obvious that on a project of the size and complexity of this one, there was much room for legitimate debate about the reasonableness of any level of fee that Fraser might nominate. Later events showed this to be so. Why, in the circumstances would Shipton and Vega agree to pay any amount that Fraser might specify? Fraser's answer is: in order that he would perform $25,000 of work for $15,000. Even if Fraser was offering to supply his services to the extent of $10,000 to W-D without payment and Shipton and Vega understood him to be doing so, these two experienced developers would not have made such a rash promise in order to obtain that benefit. In any event, this is not what Fraser was doing: rather, he was meeting a request by Shipton and Vega to reduce the scope of the work to be done to match a reduced fee of $15,000. The nature of this request made it inappropriate for Shipton and Vega to make the foolish promise which Fraser says they made. Finally, and far less importantly in my view, Fraser's case in the present respect is weakened by the disconformity between his affidavit evidence of the conversation and his diary note - the diary note spoke of "full fee", not "full project fee". The words "full" fee have the capacity to refer to the full fee of $25,000 rather than the full project fee. But I prefer the view that in writing "full fee", Fraser did have in mind the notion of his full project fee, but that his note was not a correct record of what was said.
99. On 13 October, Fraser wrote to W-D advising that he was unable to meet properly all of the MSB's tender requirements for only $15,000. He identified items in his earlier "Schedule of Architectural Work on Tender Documents" which might be able to be omitted or amended in order that his fee might be reduced to $15,000.
100. On Friday 15 October, Fraser wrote to W-D as follows:
"This is to confirm that I am to proceed with the tender documents for the above project, as set out below:
1. My letter to you dated 24 September, 1992, and accompanying Schedule of Architectural Work on Tender Documents described the work which had to be done by me as required by the tender documents. My fee for the work was to be $25,000.00.
2. You have advised me that only $15,000.00 can be spent on this work, and I have accordingly put to you in my letter dated 13 October, 1992, a number of amendments to the tasks set out in the Tender Documents which would enable the work to be done at the reduced fee. These amendments are set out below:
ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ
3. This work can be completed by me by Friday 13 November, 1992.
4. Payment of the $15,000.00 fee would be 50% after 2 weeks (29 October, 1992), and the balance on completion (13 November, 1992)."
101. Shipton states that he telephoned Fraser and accepted this offer.
102. Again, Fraser states that he would not have reduced his fee or done further work if he had not believed that he would be appointed project architect at a reasonable fee. He states that he also believed that provided the fee proposal which he would ultimately put for the project architect work was within a reasonable range, it would be accepted without argument. Shipton and Vega state that they understood that $15,000 was a fair fee for the reduced scope of work. In reply, Fraser states that although he reduced the amount to $15,000, in fact he did all the work covered by his letter of 24 September in the belief that he would be appointed project architect and that his "full fee would be accepted".
103. On 2 November, Fraser billed W-D $7,500 representing the "first stage" of his work for $15,000 and on 19 November he billed it $7,500 for the remainder. Apparently, then, the work was completed on or about 19 November.
104. On 23 November, W-D wrote to the MSB enclosing three copies of its tender. The letter said:
"Should Wedderlight-Delmo be successful with their offer the same team will ensure the project is brought to a successful completion."
105. The tender included a statement that W-D had selected a team of leaders within their respective fields, including VFA as "architect". Two and a half pages were devoted to extolling Fraser's qualifications, experience, awards and projects. The Sydney Theatre Company project known as "The Wharf" at Wharf 4/5, Walsh Bay, for which Fraser had been awarded the Sulman Medal and the RAIA President's Medal was described as:
"Conversion of a 1914 timber finger wharf to house the company, including workshops, rehearsal rooms, 2 theatres, staff offices and a restaurant."
106. Again, W-D was making use of Fraser's success on a relevant earlier project. Again Shipton and Vega assert that Fraser was shown as "architect" because he was the only architect working on the project at that stage.
107. Fraser states that he conversed with Shipton to the following effect at about the time when W-D submitted its tender to the MSB:
Shipton: "We'd like you to make a start on the project. We are confident we will be the successful bidder. How much do you need to get you going?"
Fraser: "$100,000 a month will get me started."
Shipton: "Okay."
108. Clearly, this alleged conversation was referring to "project architect work" beyond the design and presentation drawing work. Shipton, however, states that the conversation did not occur. He states that he merely asked Fraser to give W-D a quote for the work involved in the next phase for consideration. He further states that he has no recollection of Fraser's saying that he would require $100,000 a month to get him started and that he (Shipton) did not agree to such a proposal.
109. On 4 December, Fraser, Shipton and Vega attended a "presentation meeting" at the MSB office. According to Fraser he:
"gave an oral presentation in which [he] described [his] background and experience with similar structures, [his] approach to the building and its relationship with the community, the range of uses, the treatment of the building structure and fabric."
110. Twelve individuals supporting the W-D tender attended the meeting. Of the twelve, five, in addition to Shipton and Vega, spoke. Fraser was prominent among them: according to W-D's "agenda" for the meeting he was the first to speak after an introduction by Shipton and Vega. He spoke on the "Overall Concept". Fraser states that he would not have attended the meeting and spoken at it (or at other meetings) if he had not had the understanding that he was to be appointed as project architect and that his "reasonable fee would be accepted".
111. On 7 December, Shipton, Vega and Fraser met with a public relations adviser. Professional advice was given that it was in the interests of W-D that the contact between Shipton and Vega and the media should be kept to a minimum, that one Jenny Matler should be the person to speak to the media about W-D's proposal, and that Fraser should "provide back-up for her".
112. In March 1993, in anticipation of success, Fraser was preparing documentation for the Project based on an early start, arranging for staff, looking for a larger office, and planning production. He says, but Shipton denies, that Shipton told him that W-D wished to "fast track" the Project.
113. On 9 March, Shipton and Vega met with one Ray Joy ("Joy") and appointed him as W-D's media spokesperson for the Project.
114. On 18 March, Shipton, Vega, Joy and Fraser met. A proposed press release by the Minister was before the meeting. According to the minutes of the meeting, it was agreed as follows in relation to a forthcoming media conference:
"- Viv Fraser to be available to answer media questions regarding the plan itself. Architectural and aesthetic questions.
- Viv to also act as backup for the Minister if he is asked any technical questions about the proposal which he needs assistance with."
115. The minutes also record that Fraser was to "arrange delivery of schematic drawings (six mounted on foamcore)" to W-D's public relations adviser.
116. On or about 22 March, the MSB accepted W-D's tender. W-D then commenced negotiating with the MSB for a lease of the Wharves.
117. At a time which the evidence does not clearly identify, W-D engaged a company called "Constructor Pty Ltd" ("Constructor") of which Nigel Sharpe ("Sharpe") was the managing director, to be "project manager" of the Project. (Sharpe had in fact had some involvement since June 1992.) On 26 March, Sharpe faxed Fraser an extract from Constructor's "construction budget to assist [him] with [his] fee proposal". The memo listed eight items of work which totalled only $65,150,000.00. Sharpe's fax concluded:
"Additionally your co-ordination of the FF&E [Furniture, Fittings and Equipment] hotel, main restaurant & bar & appointments would be required (plus piling)."
118. Fraser thought the amount of $65,150,000 unrealistically low. In fact, he wrote the words "WORK OF FICTION" on the fax. It will be recalled that in his own calculations of June 1992, he had worked on a project cost in the region of $95,000,000 to $107,000,000 based on Concretes' budget of the likely construction cost, at least as a starting point for his negotiations on fees. Fraser states that Concretes' budget was more detailed than Sharpe's which had consisted of only a single page listing eight buildings and the total amount. Fraser's notes are in evidence. He estimated the construction cost at $104,619,000, including building, piling and fit-out. He came up with a fee of $5,669,000, which was said to be 5.42 per cent of $104,619,000. He arrived at 5.42 per cent as a "weighted average" of 5.75 per cent of the cost of the building ($88,000,000, giving a fee of $5,060,000), 2 per cent of the cost of piling ($12,000,000, giving a fee of $240,000), and 8 per cent of the cost of fit-out ($4,619,000, giving a fee of $369,000 - 8 per cent of $4,619,000 is in fact $369,520).
119. Fraser states that the percentage rates which he chose were reasonable, particularly having regard to the fact that the Project was to be carried out on a "fast track" basis and that it would not to be possible to work "in a linear way", which, he says, is the preferable and most economical way in which to work. Shipton and Vega state that a fee of $5,669,000 was grossly excessive having regard to market rates at the time and the fact that the construction cost would be able to be kept down to a figure far lower than that used by Fraser.
120. The difference of approach to what was a reasonable fee was never to be resolved. The parties' starting points were different. They had very different opinions as to the cost of carrying the Project through to completion. And there were other, perhaps more significant, differences. Fraser contemplated being personally involved in the day to day work for the life of the Project and he accepted the appropriateness of the RAIA scales. For Shipton and Vega, the market for the provision of architectural services was the dominant consideration and, if necessary, they would retain a large architectural firm that could offer financial efficiencies (such as the use of a large staff possessing various levels of qualifications and experience according to the level of difficulty of the particular task at hand) that a smaller practice such as Fraser's could not offer. Fraser was unwilling, and perhaps unable, to meet those expectations. But it is necessary, I think, to follow the course of the parties' negotiation over fees.
121. On 29 March, Fraser faxed W-D enclosing his first "fee proposal" which provided for progressive payment. The total fee shown was $5,655,944. On the same day, 29 March, Fraser wrote a letter to W-D putting to it his fee for architectural services to take the Project through to completion. The enclosure showed a total fee of $5,669,000. The covering letter included the following:
"In preparing my fee, I am aware of the need to structure payments to keep the initial phase as low as possible.
I am also aware of the general climate, and have calculated my fee (which you require as a lump sum) on actual salaries and overheads, rather than the conventional percentage basis. The resultant fee, however, represents a 20% reduction in the Royal Australian Institute's recommended minimum percentage fee scale.
I have also taken into account the fees paid to date, totalling $85,000.00. In calculating the fee, I have also allowed for my architectural services in relation to re-piling and fit-outs."
122. Fraser states that he delivered the letter and enclosure to Shipton and Vega at a meeting he had with them the same day (29 March). Fraser's affidavit gives the following account of the conversation which, he says, took place:
Shipton: "Where did you get the building cost from?"
Fraser: "The Concrete Construction's estimate."
Shipton: "But it won't cost that."
Fraser: "Well, what do you think it will cost?"
Shipton: "$50 million."
Fraser laughed.
Shipton: "Maybe $60 million."
Fraser said nothing.
Shipton: "Can you give us an alternative fee based on a building cost of 50 to 60 million?"
Fraser: "Yes, and I will include the alternative based on a cost of $80M to $100M."
123. The following day, on 30 March, Fraser again met with Shipton and Vega. He delivered to them a letter of that date which set out a revision of his first fee proposal as follows:
124. "BUILDING PERCENTAGE VF FEE VF FEE
VALUE FEE ON ON BUILDING ON BLDG COST
RAIA SCALE COST + FIT-OUT
+ PILING
$50m 7% 5.95% 5.59%
$60m 6.85% 5.8% 5.45%
$80m to $100m 6.75% 5.75% 5.42%"
125. The reductions in rate where the cost of FF & E and piling were included is explained by the fact that the architect's role is not as great in respect of FF & E and piling as it is in relation to the construction of the building itself.
126. According to Fraser's affidavit, he said to Shipton and Vega:
"Let's not argue about who's right and who's wrong about the building costs. I'll do something for you that will benefit you if you're right. I'll stick to my lowest percentage fee which is 5.42% which is based on the highest building cost and I'll stick to it whatever the contract amount turns out to be because I'm sure that your estimate is wrong."
127 It is interesting to note that the rate of 5.42 per cent would give the following fees on the following Project costs:
Project cost 5.42% fee
$ 50,000,000 $2,710,000
$ 60,000,000 $3,252,000
$ 80,000,000 $4,336,000
$100,000,000 $5,420,000
128. Each of Shipton and Vega states that he was of the view that 5.42 per cent was far too high. No agreement was reached.
129. There was a further meeting on 14 April. According to Shipton, he and Fraser conversed as follows:
Shipton: "Your fee proposal is much too high. The banks would not accept it as it stands."
Fraser: "My fee is correct. If you don't pay me what I am asking I will walk away and I won't be your architect."
130. Fraser states that the conversation was not to that effect, and, in particular, he denies threatening to "walk away." He states that the conversation was to the following effect:
Shipton: "Our bank is not going to be able to accept your fee."
Fraser: "How can your banker at this preliminary stage of the project have a view about the architect's fee? My fee is worked out on the basis of my knowledge of this building and the work to be carried out by me to make it a success."
131. Fraser's diary contains a lengthy entry in relation to this meeting with Shipton. It begins by recording that the two men had a long discussion about design matters. Fraser recorded his view that Shipton was demonstrating "an absolute disregard of previous stances, and understanding of the nature of this building and the process". The diary note then continued:
"He also said he wants to advance the design development process etc. I said strongly a waste of time until we all start in earnest. But with discussions and looking broadly at alternatives - how can he expect anyone to proceed without even a sign of our engagement? He then went on to say that they had problems with my fee and that the Banks would not accept it at the present level. I said that the Banks have no basis for any judgement of that kind and repeated that my fee was correct and that it was going to stand or I would walk away. I reiterated that I needed an acceptance of my fee + engagement, ditto for the team before anything meaningful can be looked at. Bill promised an answer next week." (emphasis supplied)
132. I accept that Fraser did threaten to walk away. His firm view was that he understood the nature and extent of the architectural work involved, that for his involvement the fee quoted was reasonable and that a failure by W-D to agree to it could only be borne of ignorance on the part of Shipton and Vega. There was a further meeting on 20 April. According to Shipton, he and Fraser conversed as follows:
Shipton: "Look Viv, we have a real difficulty with your fee. It's much too high in to-day's climate. I think a fee of 4% of construction cost would be the most that we could look at."
Fraser: "My fee is correct due to the type and complexity of the project. It is not negotiable. I won't do anything further on the project until my position is made clear."
133. Fraser states that this conversation did not occur. In particular, he states that as at 20 April, neither Shipton nor Vega had mentioned a fee of 4 per cent of construction cost. He states that 4 per cent was first mentioned in a letter of 7 May 1993 from Constructor to him, referred to below.
134. Again, Fraser's diary entry for 20 April refers to this conversation. The diary entry is as follows:
"Meeting with Bill + Nigel: further discussion on a number of planning issues on scheme - with ultimate request that VF do some work, with the result of updating the present presentation document - 4 drawings involved. VF pointed out that a firm answer is required from client about acceptance of VF as project architect - and the fee proposal. Bill response that they have difficulty with my fee, and a suggestion that fee much too high in to-day's climate + actually mentioned 4%! VF firm response that the fee is correct due to the type + complexity of the project and the 10 to 15 tender packages expected - and that is therefore not negotiable. Will do nothing further until position made clear. Appointment made for Friday [23 April] when Jose returns, for further discussion."
292. In the result, the claim of misleading or deceptive conduct also fails.
ESTOPPEL
293. The applicants plead that as a result of the numerous statements referred to under the heading "Misleading or deceptive conduct" earlier in these Reasons to the effect that Fraser or VFA was or would be the project architect and that his or its full fee as project architect would be accepted by W-D if and when it won the Project, and Fraser's and VFA's acting to their detriment in reliance on the statements, W-D is estopped from denying that VFA is the project architect and entitled to act as such and to earn its reasonable fee as such.
294. I accept that Fraser was confident that he or his company would be appointed as project architect. I also accept that without that confidence he would not have provided all the time, energy and expertise which he undoubtedly gave in the pursuit of the interests of W-D. It is readily understandable that Fraser would have been bitterly disappointed at the ultimate turn of events.
295. In making the numerous statements that they made to Fraser at the times when they made them, Shipton and Vega were not, however, representing to him that he already was or certainly would be project architect. What they were representing to him is to be assessed against the background of what he and they knew on the subject of his retainer which was that there was no agreement on the fundamental matters of the content of the architectural work to be done in respect of the Project or the fee to be paid for it. What was represented to Fraser was largely the subject of the preceding section of these Reasons.
296. The representations, in so far as they were made to Fraser, can be formulated in one or more of various ways, such as, that Fraser was currently the architect who was providing services in connection with the Project; that the respondents were hoping to appoint Fraser as project architect for the entirety of the Project; that they had reasonable grounds for thinking that he would come to a fee level acceptable to them and so be appointed; that they did not know of any obstacle to their engaging him as project architect; that subject to agreement being reached on fees, their intentions were that he would be their project architect. But representations so formulated are not shown to have been false or falsified. In fact, representations so formulated were true.
297. An alternative way of resolving the present aspect of the applicants' case is to say that if, contrary to what I have said above, the respondents represented that Fraser was already or definitely would be their project architect, he did not rely on any representation so formulated.
298For the above reasons, in my view W-D is not estopped from denying that VFA was the project architect for the Project and was entitled to act as such and to earn its reasonable fee as such.
UNJUST ENRICHMENT
299. The case in unjust enrichment is pleaded on various bases. It is pleaded that W-D has been unjustly enriched to the extent of a difference between VFA's "usual fee" or "reasonable fee" for the design and drawing work and the sum of $85,000 which was in fact paid. On the "VFA's usual fee" basis, the amount claimed, by reference to the scales in the RAIA Fee Guide which Fraser said he usually used for the purpose of calculating his fees, is as follows:
Usual fee $840,000
Amount Paid 85,000
Balance claimed $755,000
300. On the "reasonable fee" basis, the amount claimed, based on the evidence of the applicants' expert, Gilling, is as follows:
Reasonable fee $656,279
Amount Paid 85,000
Balance claimed $571,279
301. Alternatively, it is pleaded that W-D has saved the fee which it would otherwise have had to pay to another architect for the work and has been unjustly enriched to the same extent. On this basis, the amount claimed is again $755,000, or, in the alternative, $571,279.
302. No material facts are pleaded establishing the basis of the "unjust enrichment". It does not constitute an unjust enrichment of A that A has been provided with services by B for which A has paid to B a sum less (even much less) than the fee that B usually charges for such services, or less (even much less) than the "reasonable" fee for the services provided the amount paid is, as it was in the present case, contractually agreed upon.
303. Moreover, I am not satisfied that the sum of $85,000 was less than a reasonable remuneration for the services the subject of the first and second contracts.
QUANTUM MERUIT
304. The case for remuneration on a quantum meruit basis for the services the subject of the first and second contracts must overcome the obstacle presented by the existence of those contracts. The pleading seeks to set aside the first contract (November 1991 - 10 February 1992) which stipulated the fee of $70,000 for design and preparation of presentation drawings, but not the second contract (12 October 1992) which fixed a fee of $15,000 for upgrading of the presentation drawings to reflect design changes and to comply with the MSB tender requirements. The applicants plead that the first contract "is liable to be set aside by the Court for reason of the misrepresentation by [W-D]" or, alternatively, that the first contract "determined for failure of condition".
305. The misrepresentation is not pleaded but the "particulars" to the relevant paragraph say "As described under the heading `False and Misleading Statements'". Thus, the representation in question is that Fraser or VFA "was or would be the project architect" and the "condition" in question is that Fraser or VFA "be formally engaged as project architect and receive reasonable fees as such". According to the pleading, the contract to be set aside is that evidenced by Fraser's letter dated 21 January 1992. Accordingly, any operative misrepresentation would have to precede that date.
306. For reasons given earlier in these Reasons under the headings "Misleading or Deceptive Conduct" and "Estoppel", in my opinion it was not represented prior to that date (or subsequently for that matter) that Fraser or VFA already was or definitely would be the project architect if the right to carry out the Project was won by W-D. Similarly, and for similar reasons, I do not think that it was an agreed condition of Fraser's or VFA's agreement to accept $70,000 that Fraser or VFA be so appointed.
307. An important plank of the applicants' case is that the value of services rendered far exceeded the sum of $85,000 paid. On this issue there was a conflict between the evidence of the applicants' expert, Gilling, and that of the respondents' expert, Martin. Their qualifications to express the opinions which they gave were not in question.
308. Gilling said that, in the period from late 1991 to late 1993, the scales in the RAIA Fee Guide were "little more than a reference point for architects bidding for projects of this nature". He added that the period mentioned embraced a period of deep recession in the building industry and that "many major architectural firms accepted commissions below cost in order to keep their office structures intact". He stated as follows:
"6.9 With the competitive atmosphere prevailing amongst architects at this time, I do not agree that a reasonable fee for this project should have been based on the RAIA recommended scale.
6.10 This is not to say, however, that elements of the scale, such as the margins for degrees of difficulty for various projects, or the proportionate amount applicable for a given stage of service, should not be taken into account. Matters such as these have been formulated over years of experience and are still accepted by practising architects as being reliable economic guidelines when formulating their fee offers. Accordingly, it is my view that these factors must be considered in determining the reasonable fee for Fraser's work."
309. By a course of reasoning which I need not detail, but which made some use of the RAIA Fee Guide as a reference point, Gilling concluded that a reasonable fee for the preparation of the schematic drawings was $643,279.00. He added this:
"... for attending meetings, providing promotional material and attending upon regulatory authorities, institutions and the like, charges should be based on an hourly rate basis for the time spent in such activities. If Fraser had been commissioned to provide full architectural services, these services would normally have been absorbed into the overall percentage fee. In my opinion, $100 per hour would be a reasonable hourly rate for this work."
310. Taking Fraser's estimate that he had spent some 130 hours on such work, Gilling arrived at an amount of $13,000 for it. Accordingly, the total "reasonable fee" according to Gilling became:
Preparation of schematic drawings $643,279.00
Attending meetings, etc - 130 hours @ $100 per hour 13,000.00
TOTAL $656,279.00
311. Martin put the RAIA Fee Guide entirely to one side, saying that the Australian property industry was in deep recession from 1990, particularly from 1991 to 1994, and that for this reason, but also for others, fees were negotiated in that period commercially between architect and client and without any reference to RAIA publications. He described negotiations of fees in which he was involved in the period from 1992 to 1996 when he was a director of Davenport Campbell companies, associated with the architectural and interior design practice of Davenport Campbell ("DC").
312. From the examples given, Martin drew the following conclusion:
"- Fees negotiated between architects and clients do not relate to any RAIA published guides
- Fees negotiated generally reflect hours calculated to be committed, then adjusted up or down sometimes very substantially based on the circumstances of each case
- Fees for DA stage even on quite complex projects range from nil (in expectation of an ongoing role) to amounts significantly less than the percentages suggested by Fraser and Gilling."
313. Martin rejected any approach to the question of reasonable remuneration of a project architect or to the question of reasonable remuneration for the work in fact performed by Fraser, based on the scales contained in the RAIA Fee Guide.
314. On the question of the role played (or not played) by the RAIA Fee Guide, on one view the evidence of Gilling and Martin is not at odds. Where they differ on this issue, I prefer that of Martin. He had had a considerable experience in negotiating over architects' fees on both the architect's and the developer's side. He gave seven detailed examples. My finding is that competitiveness and individual negotiation so dominated the market that the RAIA Fee Guide had virtually lost all influence in respect of the fixing of architects' fees for projects of the present kind. This is not to say that a consideration mentioned in the Guide might not have a role to play in the market, but it is to say that if it did, its influence was not attributable to the Guide.
315. In relation to Fraser's description of work additional to design and drawing carried out by him, Martin said this:
"A project of this nature would be expected to involve activities of the type described by Fraser which an experienced architect would anticipate and have regard to in calculating time commitment and hence a total fee. This would not generally be compensated additionally."
316. I will return to this subject later.
317. Martin went on to outline DC's practice when DC was asked to do work of a preliminary nature and when there was no certainty that the project would proceed or that if it did DC would be retained as project architect. He said this:
"58 Whenever requested to participate in such a situation, we would have to make a judgement about likelihood of success before committing either to participate or to our remuneration.
59 Frequently we would be, as Fraser claims to be, discounting an initial fee on the basis that our ongoing involvement in the project was certain or likely. In that event and in line with normal practice, we would document that commitment up front. Therefore, if our situation was as Fraser asserts his to be at the time of his initial fee letter (Ö) we would have most likely written along the lines of `Our total fee for the project is ........ ... Our initial fee of $70,000 for the initial services described below will be credited against the total fee if or when the project proceeds'.
60 Alternatively, if that were unacceptable we may have said `Our fee for the initial design and associated services is $840,000, however we will accept $70,000 as an initial payment. In the event that the project does not proceed, no further amounts will be payable by you. In the event that the project does proceed the fee paid will be credited against the balance of the total fee'.
........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .
61 I have used Fraser's figures above not because I necessarily accept them but to illustrate an appropriate way of making a clear arrangement with a client in accordance with common practice.
62 From time to time we chose to carry out initial design work for a discounted fee without an ongoing commitment. We would do this if, for example, we were dealing with a prospective client and wished to build a relationship or demonstrate our expertise. In that event, the discount was a calculated bet. From time to time, the bet did not pay off."
318. Finally, Martin expressed the view that the amounts of $70,000 and $15,000 charged by Fraser were not unreasonable levels of remuneration for, apparently, the work covered by the contractual arrangements.
319. In giving the chronological account of the background facts set out earlier, I have sought to emphasise what seem to me to be relevant aspects of the first and second contracts. The first contract was for approximately six weeks' design and presentation drawing work which was apparently completed by about 11 March 1992. In my view, on the evidence, the fee of $70,000 is not shown to have been unreasonably low for that work. The second contract was for some four weeks' upgrading work. Again, in my view, the fee of $25,000 initially proposed is not shown to have been unreasonably low for the work originally contemplated and the actual fee of $15,000 is not shown to have been unreasonably low for the upgrading work which was provided for in the second contract dated 15 October 1992 and which was completed on or about 19 November 1992.
GENERAL
320. In my view, a question remains as to whether W-D is liable to pay, on a quantum meruit basis, for the services provided by the applicants outside those covered by the first contract and the second contract.
321. The quantum meruit claim as pleaded seeks a setting aside of the first contract and remuneration for all the work that Fraser did, allowing credit for the sum of $85,000 received. The claim is for $656,279 less $85,000, that is, $571,279. I will return to the question of the pleading later.
322. As noted earlier, the last of the services covered by the first contract for which $70,000 was charged were provided on or about 11 March 1992 and the last of the upgrading work for which the second contract provided and for which $15,000 was charged was done on or about 19 November 1992. But between 11 March 1992 and the making of the second contract on 15 October 1992, and between 19 November 1992 and the parting of the ways on or about 24 September 1993, Fraser rendered to W-D at its request other services based on Fraser's professional expertise from which W-D benefited.
323. The services in question are not covered by the two written contracts on which the respondents rely (successfully as I have held). Those contracts provided ultimately for the production of drawings over six week and four week periods and performance took, in each case, only a little longer The accounts which Fraser rendered pursuant to those contracts totalling $70,000 and $15,000 did not, of course, include any charge for the services provided in the other periods to which I have referred. This other work included, but was not limited to, explaining and promoting the Project to a wide variety of people, drafting and assisting in drafting letters, attending meetings, contributing to discussions and analysing consultants' fee proposals. I exclude from the services with which I am presently concerned correspondence, meetings and discussions associated with negotiation over Fraser's fees since Fraser's activity of those kinds was in his own interests alone.
324. The kind of quantum meruit obligation with which I am presently concerned is not one arising out of a contract for the performance of work which contains an express or implied contractual promise to pay reasonable remuneration for the services to be supplied. Rather, it is the kind that the law imposes outside contract in situations which share a unifying concept of "unjust enrichment" and which are often dealt with under the name "restitution": cf Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 and, for example, Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 (Byrne J).
325. In determining whether W-D is liable to pay a reasonable sum to Fraser for this other work to which I have referred, I find it convenient to consider three issues: first, whether W-D received a benefit at Fraser's expense; second, whether it is unjust that W-D should be able to retain that benefit without payment of a reasonable sum; and third, whether Fraser assumed the risk that, if W-D won the right to undertake the Project but the parties did not reach agreement on his fees or otherwise on his appointment as project architect, he would not receive any remuneration for the work. The third issue is perhaps simply an aspect of the second (if Fraser assumed the risk described, it would not be unjust for him to remain unpaid) but in the present case it assumes sufficient importance to merit separate consideration: see Goff and Jones, The Law of Restitution (5th ed, 1998), pp 664-665.
(a) BENEFIT
326. The work was requested and accepted by W-D. Therefore, W-D cannot be heard to say, for present purposes, that the work was of no benefit to it: Planche v Colburn (1831) 8 Bing 14 (131 ER 305); Brenner v First Artists' Management Pty Ltd [1993] 2 VR 221 (Byrne J) at 258-259. In any event, it could hardly be disputed that the work was in fact of benefit to W-D. Fraser's work, particularly in explaining and promoting W-D's proposal, was an integral part of its activity in support of its successful tender.
(b) UNJUSTNESS
327. There is considerable uncertainty regarding the question what circumstances will make it unjust for a person, having received the benefit of services supplied in circumstances where the parties had in prospect the making of a contract which would ensure to the benefit of the supplier of the services, not to pay a reasonable amount for the services supplied where the contract does not eventuate. In Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880, Sheppard J found that no agreement was reached because the Council decided to abandon a project under which the plaintiff would have been lessee (from the Council) and developer of a valuable site. The Council was held obliged to pay a reasonable amount for the services it had requested and accepted from the plaintiff and which had been provided in the interests of the project. By contrast, in the present case the failure of the parties to reach agreement was neither party's "fault" in my opinion.
328. I do not accept Fraser's submission that W-D knew at an early stage that it would not engage him yet "strung him along" to think that he had a chance of being appointed, in order that he would continue to assist W-D. With the benefit of hindsight, we can see that the two parties approached the question of Fraser's fee from very different starting points, as noted earlier. Fraser's was based on the scales in the RAIA Fee Guide and on views that his continued involvement in the Project was essential and that a premium should be payable for that involvement as well as for the "fast track" method of project administration. W-D's approach was based on the competitive market in which architectural services were bought and sold, a willingness to favour Fraser to only a minor extent and the view that there was nothing very unusual about the project administration that would be called for.
329. That W-D was negotiating in good faith is indicated by Sharpe's letter of 7 May 1993 conveying to Fraser W-D's proposal of a fee of 4.5 per cent of the nominated builder's gross costs paid by W-D excluding certain items, the most substantial of which was piling. In cross-examination, Fraser agreed that the question of payment of some fee in respect of piling was not closed off by Sharpe's letter and was a matter for negotiation. Yet Fraser's response to Sharpe's letter was to assert in a letter of the same date simply that his 5.42 per cent already represented a 20 per cent reduction below the level of fee recommended in the RAIA Fee Guide for a "conventional" building contract rather than a "fast track" one; that he had no alternative but to reject the "arbitrary" fee put by Sharpe; that there was, on the other side, a "seeming lack of acknowledgment of the extent and quality of the Architectural services which [would] be required on [the] complex and highly controversial project" which gave Fraser "serious cause for concern"; and that if the proposal conveyed by Sharpe was "serious", he (Fraser) would have to believe that his engagement as W-D's architect would not continue.
330. In making its offer of 7 May 1993, W-D was indicating a willingness to agree to a percentage fee rather than its preferred lump sum. There is room for argument as to the amount which the percentage would have given. But certainly if Fraser's predicted cost level was correct, and perhaps even if W-D's was correct, the amount that W-D was offering Fraser would have exceeded the amount later agreed upon with Peddle Thorp. It is true that the offer in Sharpe's letter of 7 May was expressed to be made "without prejudice", subject to further documentation and subject to approval by W-D's financiers, but I think that it was a bona fide offer which, subject to a little further negotiation, could well have led to the retainer of Fraser as project architect. But Fraser would have none of it. Of course, he was he entitled, as a matter of negotiation, to take this stance. Whether his criticisms of the offer had substance is beside the point. I think that W-D was negotiating in good faith hoping that Fraser would reduce his level of expectation and accept its offer. Further evidence of W-D's good faith is to be found in the fact that it "kept the door open" for such a long time during which it expressly gave Fraser the chance more than once to reduce his fee.
331. Fault, however, is not the only element of "injustice" which will give rise to a liability to pay a reasonable sum for services received. In William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932, the plaintiff tendered for the rebuilding of the defendant's war damaged premises. The plaintiff's tender was the lowest and the defendant led it to believe that it would receive the contract. At the defendant's request, the plaintiff performed calculations, submitted successive estimates and provided particulars, in large part to support the defendant's claim on the War Damage Commission for compensation under the War Damage Act 1943 (UK). This work was extensive and it assisted the defendant to obtain an increased amount from the Commission. The defendant then decided to employ another builder to do the work. Subsequently, however, he sold the premises rather than having them rebuilt.
332. The plaintiff claimed damages for breach of a contract for the reconstruction, or, in the alternative, remuneration, as on a quantum meruit, for the work done, with the exception of that done on the plaintiff's original tender. Barry J held that no contract had been concluded but that the quantum meruit claim succeeded. His Lordship thought that the work fell outside that which a builder normally performs gratuitously when invited to tender. He noted the defendant's submission that
"[t]he existence ... of a common expectation that a contract would ultimately come into being and that the plaintiffs' services would be rewarded by the profits of that contract, leaves no room ... and, indeed, wholly negatives any suggestion, that the parties impliedly agreed that these services would be paid for in any other way". (at 936)
333. His Lordship then noted that the modern form of action called "quasi-contract" is not dependent on "the actual views or intentions of the parties at the time when the work was done or the services rendered". He referred to Craven-Ellis v Canons Ltd [1936] 2 KB 403, a case of a purported appointment of a person as managing director of a company, ineffective because both the plaintiff and the directors who represented the company had not obtained their share qualification, in which the plaintiff nonetheless recovered on a quantum meruit basis for services rendered, then added (at 939):
"I am unable to see any valid distinction between work done which was to be paid for under the terms of a contract erroneously believed to be in existence, and work done which was to be paid for out of the proceeds of a contract which both parties erroneously believed was about to be made. In neither case was the work to be done gratuitously, and in both cases the party from whom payment was sought requested the work and obtained the benefit of it. In neither case did the parties actually intend to pay for the work otherwise than under the supposed contract, or as part of the total price which would become payable when the expected contract was made. In both cases, when the beliefs of the parties were falsified, the law implied an obligation - and, in this case, I think the law should imply an obligation - to pay a reasonable price for the services which had been obtained. I am, of course, fully aware that in different circumstances it might be held that work was done gratuitously merely in the hope that the building scheme would be carried out and that the person who did the work would obtain the contract. That, I am satisfied, is not the position here. In my judgment, the proper inference from the facts proved in this case is not that this work was done in the hope that this building might possibly be reconstructed and that the plaintiff company might obtain the contract, but that it was done under a mutual belief and understanding that this building was being reconstructed and that the plaintiff company was obtaining the contract."
334. This decision was followed by Robert Goff J (as his Lordship then was) in British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 in which a contractor issued a "letter of intent" to a proposed subcontractor and requested it to commence the subject work immediately. The subcontractor did so and had all but performed all of the manufacturing for which the subcontract was to provide when negotiations over the subcontract broke down. His Lordship analysed the position in the following terms (at 511):
"Both parties confidently expected a formal contract to eventuate. In these circumstances, to expedite performance under that anticipated contract, one requested the other to commence contract work, and the other complied with that request. If thereafter, as anticipated, a contract was entered into, the work done as requested will be treated as having been performed under that contract; if, contrary to their expectation, no contract was entered into, then the performance of the work is not referable to any contract the terms of which can be ascertained, and the law simply imposes an obligation on the party who made the request to pay a reasonable sum for such work as has been done pursuant to that request, such an obligation sounding in quasi contract or, as we now say, in restitution."
335. In that case, unlike the William Lacey case, the work was done in actual performance of the envisaged contract. In the William Lacey case, like the present one, the work done lay outside the proposed contract but in each case the provider of the services may be taken to have thought that the profit under the expected contract would amply "cover" the extraneous work in question. In the present case, the reasonable value of the work would represent a very small fraction of the profit which VFA would have made from the work as project architect.
336. The supplier of services was also permitted to recover remuneration on a quantum meruit basis where an expected contract which would have benefited it failed to materialise, albeit without wrongful conduct by the other party, in Independent Grocers Co-operative Ltd v Noble Lowndes Superannuation Consultants Ltd (1993) 60 SASR 525 (FC).
337. In the present case, in so far as they thought about the matter, both parties made a general assumption that they would enter into a contract of retainer, subject always to W-D's tender being successful. This is not to say that their state of belief was that a contract would definitely materialise. They knew that it might not. Moreover, Fraser's confidence that it would was probably stronger than W-D's. Fraser was confident that his undoubted eminence would carry the day and he did not recognise that W-D's approach was so strongly market-driven. But W-D also hoped and expected that a deal would be struck with Fraser. To find otherwise would be to say that Shipton and Vega's representation that Fraser was the "project architect" for the life of the Project was made with no belief that he probably would be. The fact that Shipton and Vega treated Fraser as though he was in some sense bound (not legally but morally) to undertake the additional work suggests that they believed their relationship with him was or would probably be an ongoing one.
338. Again, the services with which I am presently concerned were not in the nature of work carried out by a person to enable him or her to tender for a contract. Rather, the tender was to benefit W-D. To paraphrase Barry J in William Lacey (Hounslow) Ltd v Davis at 935, Fraser was carrying on a business and, in normal circumstances, if asked to render services of the kind in question, the obvious inference would be that he would expect to be paid for so doing. No one could expect a business person or business firm to do this sort of work for nothing, and again, in normal circumstances the law would imply a promise to pay on the part of the person who requested the services.
339. In saying that Fraser would have expected to be paid for the work if the tender was won, I do not mean to say, or think it necessary to say, that the terms of the contract would have reflected an allocation of a charge to that work. In fact, in this case Fraser did, in his fee proposal, apportion part of his proposed fee to work done before acceptance of W-D's tender and his engagement. But W-D was interested in only "the bottom line". In any event, I think it is a fair reflection of the situation to say that Fraser should be taken to have had in mind in doing this work that his retainer as project architect would compensate him not only for the work done after it was concluded, but also for the subject work and that a reasonable person in the respondents' position would have understood this to be the case.
(c) THE ASSUMPTION OF RISK
340. Fraser should not be entitled to a reasonable fee for the work done by him not covered by the two contracts if he is properly to be seen as having assumed the risk, not only that W-D would not win the tender but also, if it did, that the parties would not reach agreement on the terms of his retainer as project architect. In William Lacey (Hounslow) Ltd v Davis, Barry J noted (at 939) that he was
"fully aware that in different circumstances it might be held that work was done gratuitously merely in the hope that the building scheme would be carried out and that the person who did the work would obtain the contract".
On the facts of that case his Lordship was not satisfied that the plaintiff who had done the work had accepted the risk that a contract would not materialise. In this case the respondents submit that I should reach the opposite conclusion. In the Independent Grocers case, Duggan J dissented precisely on the ground that the plaintiff superannuation consultants had accepted the risk that the superannuation fund might not be established with the result that their services might prove abortive, just as Fraser accepted the analogous risk if W-D's tender was unsuccessful.
341. I think it clear that Fraser understood and accepted that he was not to be remunerated for the additional work if W-D did not win the tender. In that case all his work would prove to have been of no benefit to W-D. Moreover, if he was to be paid irrespective of the success of W-D's tender, one would expect the parties not to have waited until after the result of the tender was known before negotiating over the amount of his fee. Finally, Fraser knew that W-D was borrowing to finance the tender and that if the tender did not succeed, it would simply have no money with which to pay him for the work.
342. I do not think it at all clear, however, that Fraser also accepted the risk that agreement might not reached on his appointment as project architect. There was no obvious reason for him to do so: he was entitled to assume that, if the project was won, W-D would be able to obtain sufficient funds to pay him the amount in question, which is obviously relatively small. I do not think that Fraser's numerous concessions in cross examination that his being retained as project architect was contingent upon successful conclusion of a negotiation over his fee amount to a concession that if that did not occur, he was not to be remunerated for the services with which I am presently concerned. Indeed, if that negotiation had been successful, that work would have lost its separate significance and would have been treated as encompassed by the much larger project architect's fee.
343. The parties simply did not turn their minds to the question whether Fraser should be paid for this work if the tender was won but Fraser was not engaged. Given that the work was, as I have said, requested and accepted by W-D and of benefit to it and work for which Fraser would normally be expected to be remunerated, I see no reason to conclude that Fraser accepted the risk that he would not be paid even if W-D won the tender.
344. Martin gave evidence that DC sometimes discounted a fee for initial work on the basis of their assessment that they would certainly, or probably, be retained to do further work in connection with the project. He said that in such cases DC sometimes secured a commitment that if the project went ahead they would be retained, while at other times they did not do so, and in the latter "calculated bet" situation it sometimes transpired that they were not retained.
345. This generalised evidence of what one firm sometimes did is not of much assistance in relation to the present issue. In any event, as I have held earlier, in the present case the sums of $70,000 and $15,000 were not fees of the kind contemplated by Martin's evidence. They were not charges for all the work done by Fraser. Rather, they were charges for much more limited work carried out over quite a short period of time. So regarded, they appear to have represented little if any discount but left untouched the other work performed by Fraser, no doubt at a less intensive level of activity but over a much longer period. I am not persuaded that Fraser accepted the risk, if W-D's tender was successful, of his not being remunerated for those professional services, excluding always those covered by the first and second contracts and by his accounts totalling $85,000, that W-D requested of Fraser and accepted from him. Some support for the view that he should not be understood to have undertaken this risk is to be found in the fact that both the first and second contracts were the result of close negotiation - a consideration that suggests that Fraser should not lightly be taken to have "ventured" these other services even if the Project was won.
346. The present case is distinguishable from Regalian Properties plc v London Docklands Development Corp [1995] 1 WLR 212. In that case, a developer sought reimbursement from a landowner of amounts which the developer had paid to various professional firms. It had paid those amounts in connection with its attempt to satisfy conditions imposed by the landowner, both as landowner and as planning authority, in order to put itself in a position to obtain a building lease from the landowner. Both parties proceeded on the assumption that "subject to contract" the lease would be granted. Ultimately, through the fault of neither party, they were unable to reach agreement with the result that the developer's expenditures were wasted.
347The case is distinguishable from the present one because the landowner did not request the developer to engage the firms for its benefit or "accept" their services, and the developer's action, whether regarded as the procurement or the provision of the services, did not in fact benefit the landowner. In the present case, Fraser did not undertake the work in question in order to qualify himself for appointment as project architect; rather, W-D requested him to provide his services for its benefit; W-D accepted the services; and the services did in fact benefit W-D.
348. It is necessary now to return to the third further amended statement of claim. As noted earlier, the quantum meruit claim as pleaded was for, or included, the work done pursuant to the first contract, and therefore necessarily sought a setting aside of that contract. Neither the pleading nor submissions addressed the possibility of an entitlement to remuneration on a quantum meruit basis only for work not covered by the first and second contracts. It would be inappropriate for me to enter judgment for the applicants without affording the parties an opportunity to be heard on the question discussed in this section, including such issues as whether an amendment to the pleading is necessary and, if so, whether it should be allowed at this late stage.
349. Another matter is that the evidence does not permit me to fix the amount of the applicants' entitlement on the basis described. On any reckoning, it seems that the amount would not be large. Perhaps the parties could agree on the amount.
CONCLUSION
350. At present I will make no order other than to stand over the proceeding to a date for mention.
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