Wagdy Hanna and Associates Pty Limited ACN 008 647 541 v Steven Gavagna

[2014] ACTSC 97

WAGDY HANNA AND ASSOCIATES PTY LIMITED ACN 008 647 541 v STEVEN GAVAGNA
[2014] ACTSC 97 (21 May 2014)

CONTRACT – claim by architect for fees for professional services – written agreement with architect signed by employed solicitor – architect claiming against employed solicitor personally for fees – whether solicitor contracted personally – whether solicitor personally liable to architect

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451

No. SC 284 of 2007

Master Harper
Supreme Court of the ACT

Date: 21 May 2014    

IN THE SUPREME COURT OF THE     )
  )          No. SC 284 of 2007
AUSTRALIAN CAPITAL TERRITORY )          

BETWEEN:  WAGDY HANNA AND   ASSOCIATES PTY LIMITED
  ACN 008 647 541

Plaintiff        

AND:  STEVEN GAVAGNA

Defendant

ORDER

Judge:  Master Harper
Date:  21 May 2014
Place:  Canberra

THE COURT ORDERS THAT:

1. Judgment be entered for the defendant.

1. The defendant’s costs be paid by the plaintiff.

1. The order as to costs be stayed for fourteen days.

1. The plaintiff sues the defendant for debt in the sum of $250,000.00 plus interest and costs.  The plaintiff is a company under which its sole director, Mr Hanna, conducted his practice as an architect.  He is now retired and the company no longer operates.  The defendant is a solicitor.  He is now the principal of his own firm, Goodman Law.  At the time of the agreement said to give rise to the debt he was an employed solicitor with the firm of O’Connor Harris. 

The pleadings

1. The plaintiff pleads that during April and May 2001 the plaintiff and the defendant entered into an agreement which was partly in writing and partly oral, that the plaintiff would carry out architectural work for the defendant.  The pleaded agreement was that the plaintiff would provide a concept plan for a residential building at Jiaxing, China, and that the defendant would pay the plaintiff $250,000.00 for that work.  The written part of the agreement was said to be a record of agreement signed by Mr Hanna on 3 May 2001 and by the defendant on the following day.  The oral part of the agreement was said to consist of a series of conversations during April and May 2001 between Mr Hanna and the defendant.  The plaintiff pleaded that it carried out the architectural work as agreed, and that the defendant had refused and failed to pay the agreed sum of $250,000.00.

1. The plaintiff commenced the present proceeding on 30 April 2007.

1. The defendant, who has been represented throughout by his own firm, with an employed solicitor having the carriage of the matter, filed a defence which was amended twice before trial.  The defence at trial put in issue the factual assertions in the statement of claim, and pleaded a number of further defences in the alternative.  The defendant pleaded that at all material times he had been employed as a solicitor by O’Connor Harris.  He asserted that in about December 2000 Scott Brothers Constructions Pty Ltd had retained O’Connor Harris as its solicitors for the provision of legal advice regarding building contracts to be undertaken in China.  The defendant had obtained instructions from that company and undertaken work on its behalf for which O’Connor Harris had rendered accounts which had been paid.  The defendant said that at all material times he had been acting as a solicitor employed by O’Connor Harris pursuant to the instructions the company had given to that firm.  He denied that he had entered into an agreement with the plaintiff.  Alternatively, if he had done so it had been in his capacity as an employed solicitor with O’Connor Harris acting on behalf of Scott Brothers Constructions Pty Ltd. If there had been an agreement made with the plaintiff it had been between either the plaintiff and O’Connor Harris or the plaintiff and Scott Brothers Constructions Pty Ltd.  The defendant further asserted that the plaintiff had not carried out the architectural work as agreed, and that payment for any work done by the plaintiff had been conditional upon a tender being accepted and the building work proceeding.  The tender had not been accepted, and no moneys had become due and payable.

1. The plaintiff subsequently filed a reply putting in issue the factual assertions in the further amended defence.

1. On the first day of the hearing, counsel for the plaintiff applied for leave to file an amended statement of claim, and an amended reply, to raise for the first time a fresh cause of action, breach of warranty of authority.  For reasons which I gave orally, I refused the application.

The factual evidence

1. Mr Hanna gave evidence for the plaintiff.  The defendant gave oral evidence, and in his case Mr Michael Scott, director of Scott Brothers Constructions Pty Ltd, was also called. 

1. Mr Hanna practised as an architect for many years until his retirement shortly before the hearing.  He has been a fellow of the Royal Australian Institute of Architects since 1982.  Over the years his work included a number of large projects, as well as residential and smaller commercial construction.  He had a reasonably significant role in the construction of Parliament House in Canberra during the 1980s. 

1. He met Mr Gavagna at a seminar at the Canberra premises of the Institute.  Mr Gavagna had given a lecture, and they met and talked to each other afterwards.  Mr Gavagna informed Mr Hanna that as well as being a lawyer he was a qualified builder.  At that time Mr Hanna was involved in litigation about an unsuccessful tender for architectural work at the National Library.  They arranged that Mr Gavagna would come to his office to talk to him about the dispute.  When he did so, Mr Gavagna invited him to present a lecture to students at a course with which Mr Gavagna was involved.  Mr Hanna subsequently did so.  Mr Gavagna gave Mr Hanna some advice about his dispute with the National Library.  Mr Hanna engaged Mr Gavagna to deal with some other legal issues.  When Mr Hanna first met Mr Gavagna, the latter was an employed solicitor with Corrs Chambers Westgarth.  He moved not long afterwards to work with O’Connor Harris.

1. Mr Hanna gave evidence that Mr Gavagna introduced him to Mr Scott, he thought probably during January 2001.  Mr Gavagna invited him to lunch at the National Press Club with Mr Scott.  He said that Mr Gavagna told him that Mr Scott had just completed a high-rise building on Northbourne Avenue, and that he was doing work in China with the national architectural firm MGT, formerly Mitchell Giurgola and Thorpe.  Mr Scott talked at the lunch about opportunities for construction work in China.  Mr Hanna said that he told him that he was building an office building there and would like some architectural work done.  Mr Hanna said that he would be happy to do so, and that he would produce a client agreement for signature.  Mr Scott or Mr Gavagna had said that there was no need for a written agreement.  The words used were “we’ll just agree verbally and you’ll do the work and if the project goes ahead you’ll be handsomely rewarded”.  Mr Hanna said that he had replied that he did not work in that way.  He had made it clear that he was not prepared to take on work on a speculative basis. 

1. Mr Hanna said that Mr Gavagna telephoned him later on the same day, and told him that he had done the right thing declining the offer of work because Mr Scott was fighting bankruptcy. 

1. Mr Hanna said that Mr Gavagna became his solicitor and was attending to five or six matters for him.  They were in regular contact.  One day, he said, Mr Gavagna had telephoned and asked him to look at some drawings urgently.  He had used the words “I’m so close to sealing a deal”.  Shortly afterwards Mr Gavagna attended at Mr Hanna’s office in Deakin, on Monday 30 April 2001.  He showed Mr Hanna some architectural drawings.  He said that one was a site plan, apparently of a residential building or buildings, with the wording on it in Chinese.  Another was a set of floor plans, apparently of individual floors in an apartment building, again with some wording in Chinese.  Another was a perspective, being an artist’s impression of two high-rise buildings. 

1. Mr Gavagna also showed him a floor plan of a floor of an apartment building, with four apartments to the floor, and two lobbies each with two lifts, with the description “Jaixing Residential Development”, bearing the logo and name and address of AMC Projects Pty Ltd.  Mr Hanna said that this was the company name under which a Canberra architect, Alistair McCallum, practised.  Mr Gavagna told him that these plans had been prepared by Mr McCallum at his request, but that they were not acceptable to the China Development Corporation.  Mr Gavagna also gave Mr Hanna a typed sheet.

1. I am satisfied that the correct name of the city in China is Jiaxing. It is a city with a population of about a million, about 100 km south of Shanghai.

1. The sheet listed some shortcomings as perceived by its author in Mr McCallum’s plans.  The principal complaints related to the orientation of the windows, the location of the lifts and the size of the balconies.

1. Mr Hanna said that he asked Mr Gavagna who the principal was.  Mr Gavagna told him that it was the China Development Authority.  Mr Hanna asked him for the names of contacts at that organisation, and Mr Gavagna gave him the names of Benny Leung and Noel Ling.  Mr Hanna wrote their names, and Mr Leung’s mobile telephone number, on the sheet, and also the name of the organisation, which he recorded as China Development Corporation. 

1. Mr Hanna said that he and Mr Gavagna talked about the proposed project and its prospects.  He said that Mr Gavagna told him that the plans and drawings prepared by Mr McCallum were cold and lacked warmth.  He told Mr Hanna that he wanted buildings with feelings in them.  He also said that he wanted pretty coloured pictures rather than computer-aided design drawings.  Mr Hanna said that he stuck in his mind that Mr Gavagna had again said “I’m so close to sealing this deal” and that what stood between him and getting the deal was resolving the shortcomings listed on the sheet.  He told Mr Hanna that he needed the plans and drawings urgently, by the Friday of that week. 

1. Mr Hanna said that he raised the question of his fee for the work.  He said “That’s a short period of time, so we’ll have a client agreement”.  Mr Gavagna said that he was too busy to draft such an agreement, and Mr Hanna said that he would draft it.  He discussed how his fee would be worked out.  He referred to the fact that there were a number of different approaches to architectural fees, and they agreed on a lump sum fee of $1,000.00 per apartment.  Mr Hanna said that Mr Gavagna suggested that figure, and that it was the going rate at that time.  They then worked out that there were going to be one hundred units per building, and therefore three hundred units for the whole project.  Mr Gavagna said “Just make it a quarter of a million”, and Mr Hanna said that he agreed to this.

1. Mr Hanna said that Mr Gavagna had told him that the most important thing was the floor plan, which should address the listed shortcomings.  An elevation would also be required, and a perspective, which Mr Hanna said that Mr Gavagna called a pretty picture.  Mr Gavagna had emphasised the importance of the documentation being produced by the end of the week saying “Otherwise you’ll miss out on a big deal”. 

1. Mr Hanna said that immediately after Mr Gavagna left, he started work on the project.  He said that Mr Gavagna had given him a compact disk on which he was told there was a site plan, but he was unable to open it on his computer.  Nevertheless he continued with his design.  He said that designing a typical floor did not depend on a particular site plan.  The site plan would be important when it came to designing the parking area under the building, and lower floors with some commercial space, but was not relevant to developing a typical floor plan.  He took it from the plans he had been given with the Chinese writing that the site was large and rectangular, and that there would be plenty of room on the site for the three towers.  He designed the apartments so that they were about the same size, and with the same number of rooms as the earlier plans.  Each unit had three bedrooms, a main bathroom and an ensuite, a living and dining area, a laundry and two balconies.  Mr Gavagna had told him that it was to be an upmarket development and he took this into account in relation to the size of the apartments and of the individual rooms.  He did not know the precise area of the site but he was satisfied that it was large enough for the three towers he had been told were to be built. 

1. On Wednesday 2 May 2001 he sent Mr Gavagna a fax with two preliminary drawings.  The fax coversheet was addressed to Mr Gavagna at O’Connor Harris.  He raised in the message on the coversheet his difficulty opening the compact disk.  He invited any comments on the preliminary plans, and said that he hoped to have floor plans, elevations and the perspective completed by the Friday. 

1. The plans were given the title “Proposed Residential Development – Province of Jaixing – China for China Development Corporation – Client: Mr Steven Gavagna, O’Connor Harris”.

1. Later that day Mr Gavagna telephoned Mr Hanna and left a recorded message acknowledging receipt of the preliminary plans, which he said he had faxed to Mr Leung.  He said that he had some photographs of the city and of the site. 

1. On the following morning, Thursday 3 May 2001, Mr Scott came to Mr Hanna’s office and brought the photographs to him.  Mr Scott sat down.  He said that “they” wanted to start construction in two months.  Mr Hanna said that he deliberately did not seek to engage Mr Scott in conversation about the matter.  His evidence was that he did not know what Mr Scott was doing there.  He said that the photographs were of no assistance for his task. 

1. On the afternoon of Thursday 3 May, Mr Hanna prepared a two-page document, signed and dated it and sent it to Mr Gavagna by fax.  It is this document which is said by counsel for the plaintiff to represent either the written part of the contract sued on, or alternatively the entirety of the contract.  The document is on the letterhead of the plaintiff company and reads as follows:

To: Steven Gavagna

O’Connor Harris

Fax number: 6247 0984

From: Wagdy Hanna

Number of pages including this one: 2

Date: Thursday 3 May 2001

Subject: Jaixing Residential Development – China

Message:

Thank you for yesterday’s voice mail assuring me “all is well” and that you are pleaded with the way the design issues have been resolved.

Mr Michael Scott, Chairman of Scott Brothers Constructions Pty Ltd, visited out offices today and provided the photos you mentioned in your voice mail.  Mr Scott also advised that the news is positive for the design.  He also advised that they will be starting on the project in two months time.

The agreed scope of services:

You have retained our office to provide a Concept Plan for the residential development.

Deliverable:

As agreed we are progressing to have a complete Concept Plan ready by this Friday.

By this Friday, we are hoping to have:

1.        Floor plans for a typical floor.

2.        Elevations.

3.        Perspective.

I understand that you will wish to fax these drawings to China.  I will therefore produce these drawings in A4 size to ensure they are faxable.  You will nevertheless need to post or courier them as they are in colour.

Clients and instructions

We receive instructions from you and therefore we consider you our client as well as our solicitor in this transaction.

We do understand that you are acting for the China Development Authority who is located in Brisbane.

If we receive any instructions from other people involved in the project we will immediately notify you and seek directions.

Quantum of fees:

The agreed fee is two hundred and fifty thousand dollars ($250,000.00) nett payable by instalments during the progress of the work.

Payment of fees:

We request that fees be paid by direct transfer.

Details will be clearly stated on our invoice.

Our next meeting:

Our next meeting will be before close of business on Friday 4 May 2001.

I shall contact you mid afternoon to confirm out meeting.  Please pencil in 4:30 pm.

Our records:

For our files, please countersign this fax and send it back.  It will serve as a record of our agreements and undertakings.

Agreed as true record of agreement reached on Monday 30 April 2001.

Wagdy Hanna  Steven Gavagna

Managing Director  B. Build.LLB

Wagdy Hanna & Associates Pty Ltd                Associate

Architects and property consultants                 O’Connor Harris

Barristers & Solicitors

1. Mr Hanna said that at the time he sent the document by fax to Mr Gavagna he had almost completed the work he was doing on the plans.  He had not done all the work himself.  He had utilised staff in his own office and external consultants.  There had been five people in all engaged in working on the plans.

1. Mr Hanna said that he telephoned Mr Gavagna to check that he had received the fax.  Mr Gavagna acknowledged that he had received it and said that he would get his personal assistant to fax it back when he had signed it.  Mr Hanna had not received it by the next morning, when he received a letter by fax from Mr Scott at about 10:00 am. The letter, addressed to Mr Hanna at his company, read as follows:

Thank you for the fax I received from Steven yesterday.

At this stage SBC agrees in principal [sic] with your scope of work and fee structure but cannot formally commit until the plans have been accepted by the developer.  A contract with our Chinese clients will need to be signed first.

The response has been positive so far and we look forward to viewing the elevations and perspective later today.

Yours faithfully

Michael Scott

1. Mr Hanna’s evidence was that he immediately telephoned Mr Gavagna and said “I see this fax.  I don’t understand what it is all about.  My agreement is with you for the fees.  Could you please sign it and return it?”  Mr Gavagna said “I’ll get Carol to do it”.  Mr Hanna said that he said “Steven, if I don’t get that fee agreement you are not getting the drawings”.  Mr Gavagna said that he would send it back and see Mr Hanna on that afternoon.   Mr Gavagna duly attended at Mr Hanna’s office on the afternoon of Friday 4 May.  Mr Hanna had completed the work and made a number of copies of the plans.  Mr Gavagna was shown into his office where he looked at the drawings and said “Great”.  Mr Hanna asked him about the signing of the fee agreement.  He said that Mr Gavagna replied “Didn’t Carol send it?”  Mr Hanna said that he had not received it.  Mr Gavagna said “Don’t worry, I’ll attend to that when I get back to the office”.  Mr Hanna said that he produced a copy of the fax and asked Mr Gavagna to sign it then and there.  Mr Gavagna did so.  Mr Hanna made two copies, one for each of them (there is no issue that Mr Gavagna signed the document, over the block bearing his name and description).

1. Mr Gavagna then said that he was pressed for time.  He wanted to send the plans by fax immediately to Mr Leung.  Mr Hanna prepared a cover sheet on his company letterhead addressed to Mr Leung at China Development Corporation, but showing the sender as Mr Gavagna, who signed the cover sheet document, enclosing four drawings, being the floor plan, three elevations and the perspective.  Mr Hanna endorsed a stamp on his copy of the cover sheet that it had been sent by fax at 2:00 pm on 4 May 2001.

1. Mr Gavagna then took the original drawings and left Mr Hanna’s office.

1. Mr Hanna’s evidence was that when he first met Mr Gavagna, he told Mr Hanna that he had qualifications as a builder and had had a successful building company in Sydney but had chosen to become a lawyer.  On a later occasion he had told Mr Hanna that he was the chairman and owner of St Thomas Property Trust which ran retirement villages in Queensland.

1. Mr Hanna remained in contact with Mr Gavagna after the events of early May 2001, in circumstances where Mr Gavagna was acting as his solicitor.  Mr Hanna said that over the next few months he asked him on a regular basis about payment of his fees.  He said that on an occasion about five months later, Mr Gavagna told him that he wanted the title on the drawings changed because he was going to China himself and would handle the matter face to face.  He wanted the title on the drawings changed to St Thomas Projects.  He gave Mr Hanna a business card which showed him as managing director of St Thomas Projects (construction design and management) with a business address and other contact details being those of O’Connor Harris.  He said that on this occasion Mr Gavagna showed him a plan of a St Thomas development in Brisbane.

1. Mr Hanna did as he was asked.  He produced the same drawings with a different legend, showing the client as Mr Steven Gavagna, St Thomas Projects, Construction Design and Management.  He delivered the amended documents to Mr Gavagna on 21 September 2001.

1. Mr Hanna in cross-examination conceded that the lunch at the Press Club with Mr Gavagna where he met Mr Scott might well have taken place on 21 December 2000.  He said that at that lunch Mr Scott had been talking about an office building in China, not a residential development.

1. Mr Hanna conceded, somewhat reluctantly I thought, that as an architect he had from time to time put work into tenders where his tender had not been accepted and he had not been paid for that work.  He seemed unable to accept that his tender for the National Library work had not been accepted, and resentful that those making the decision had given the contract to another architect whose tender had in Mr Hanna’s view been non-compliant. 

1. Mr Hanna denied that when he received his instruction from Mr Gavagna on 30 April 2001 he had known that Mr Scott had been to China and identified possible projects.  He denied any awareness that Mr Gavagna was working on behalf of or with Mr Scott in relation to any work in China.  He asserted that he had had no dealings with Mr Scott whatever, and he denied any knowledge that Mr Gavagna was acting as solicitor for Mr Scott.  He did concede that he had been told that Mr Scott was doing work in China with MGT, a national firm of architects.

1. Mr Hanna conceded that in April 2001 he had spare capacity, and had used those words to Mr Gavagna, but he denied telling Mr Gavagna that he had no work and no money. 

1. Mr Hanna agreed that he had sworn an affidavit as to documents in the course of the proceedings, and that he had not disclosed any time sheets or logs as to time spent by himself or any employees or subcontractors in producing the plans the subject of the action.  His response was that this had not been required under the fee agreement.  He said that he had not retained any of those records after closing his office and was no longer able to produce them.

1. He was asked why he had not commenced the present action until 2007.  His answer was that he had given the defendant every chance to pay him.  It was put to him that he had not produced copies of any letters of demand to the defendant.  He said he had constantly asked the defendant who had told him that “money would be received”.  He said that he had sent a letter of demand to Mr John Harris, a partner with O’Connor Harris.  He said that he had done so hoping to bring some pressure to bear on Mr Gavagna.  He had issued several verbal demands to Mr Gavagna but none in writing because he had not known Mr Gavagna’s address.

1. It was put to him that he had never rendered a tax invoice for the amount he was claiming.  His reply was that he had done so verbally.  He said that Mr Gavagna had asked him not to send an invoice.  He understood that a tax invoice was required to be in writing, endorsed “tax invoice” and setting out his company’s Australian Business Number.  He appeared to me extremely reluctant to concede that he had never issued a tax invoice to Mr Gavagna.  I have no difficulty in finding that he never did so.  Mr Hanna denied that the reason he had not done so was that he was well aware that his entitlement to charge a fee was conditional upon the signing of a contract for the construction of the residential apartment project.

1. He agreed that he understood that Mr Gavagna was not a partner or a principal at O’Connor Harris.  He explained that when Mr Gavagna left Corrs Chambers Westgarth to go to O’Connor Harris he told Mr Hanna that “he would be running his own show” and that Mr Harris had given him a free hand to do so under the O’Connor Harris umbrella.  His understanding was that Mr Gavagna was more than simply an employee at that firm. 

1. He said that he was unaware that Mr Gavagna had been admitted as a solicitor as recently as 2000.

1. He was asked why in those circumstances he had sent a letter of demand to O’Connor Harris and not to Mr Gavagna.  He referred to a stage of desperation about being paid, and he said that he thought Mr Harris would be able to bring pressure to bear on Mr Gavagna to pay the amount.  He denied that he had written to Mr Harris because he knew that Mr Gavagna was an employee of the firm and not acting on his own behalf.  He agreed that the letter of demand to Mr Harris in September 2003 was the first written demand he had made to anyone.  The letter was sent by registered post, addressed to Mr Harris at his firm, and read as follows:

Outstanding Fees

I refer to our agreement dated 3 May 2001, and request an indication as to when will your organisation be in a position to pay our fees.

To assist you with your consideration in this matter I am enclosing the following:

1.        Agreement signed by Mr Gavagna dated 3 May 2001.

2.        Copy of fax signed by Mr Gavagna on 4 May 2001 sending the   documents to his clients from our offices, before taking the originals        with him.

3.        Copy of document transmittal dated 21 September 2001 delivering         the altered coloured drawings.

I thank you in anticipation and look forward to receiving your reply and payment.

1. On 9 September 2003 Mr Harris replied to Mr Hanna on firm letterhead referring to a “recent bundle of letters to this firm” and to a brief telephone conversation between Mr Hanna and Mr Harris.  He said that he had had no knowledge of the transaction until he received the letter.  He said that the firm had never incurred any liability for fees to Mr Hanna or his firm.  He presumed that Mr Gavagna and Mr Hanna had entered into a private arrangement in respect of the matter, and said that he would pass the correspondence on to Mr Gavagna. 

1. Mr Hanna replied to Mr Harris by letter dated 20 October 2003, dealing with other matters as well as his claim for payment of fees.  The part of the letter dealing with that issue read as follows:

Jaixing Residential Development China

According to the signed agreement by your Associate, this agreement was entered on behalf of your organisation.  Your Associate signed as “Associate, O’Connor Harris Barristers and Solicitors”.  He represented himself as your Associate in this project when the agreement was signed.

You claim that “I have been made aware of the letters sent to your offices”.  Please provide a copy of such letters.  You also claim that “you were well aware that the works being undertaken were on behalf of Scott Brothers Constructions”.  So can you explain why did your Associate sign the contract?

After we carried out the documents for your Associate, Mr Scott approached our office to design an office building and a shopping mall.  We declined his invitation.  Your Associate later advised us that he had secured the services of two large national offices to carry out the assignments which we declined.  We wished him luck.  After all we wanted to be paid. 

1. Mr Harris replied to Mr Hanna by letter on 24 October 2003.  The relevant part of the letter read:

Jaixing Residential Development

We reiterate that our organisation did not enter an agreement with you.  At all material times the arrangement for the design of the project was on behalf of Scott Brothers Constructions.

As we have previously stated Mr Scott has provided us with relevant documentation which you have received and notations of conversations in which you fully understood that Mr Scott’s company was responsible for your instructions.

Further conversations were held prior to your designing of the project in which it was made clear that the offices of O’Connor Harris could never and would never be responsible for such an enterprise.

No further correspondence will be entered in relation to this matter.

1. Counsel for the defendant took Mr Hanna to the passage in the agreement in which he had said “we consider you our client as well as our solicitor in this transaction”.  He put to Mr Hanna that Mr Gavagna had not been acting as his solicitor in relation to that matter.  Mr Hanna insisted that he was.  When asked what legal work he was doing for him on the project he replied that Mr Gavagna was protecting his interests in getting his fees from the China Development Corporation.

1. Counsel asked Mr Hanna what he meant by the word “nett” in relation to the fee of $250,000.00 in the agreement.  Mr Hanna said that this meant that the fee did not include GST.

1. Mr Hanna conceded that the effect of the expression “payable by instalments during the progress of the work” was that payments were to be made at certain undefined points in the future.  He said that it was unfortunate that he had used those words, although he agreed that he had known what he had intended when he prepared the agreement.  He said that Mr Gavagna had told him that he was not going to be paid immediately so that the fee would be paid at later stages during the project.  His intention was that when Mr Gavagna received payments from China he would pass on payments to Mr Hanna in the total sum of $250,000.00 nett.  However, he did not agree that this meant that he was not entitled to be paid until completion of the construction work.  He acknowledged that there was no evidence that any construction had ever taken place pursuant to the plans he had prepared.  Mr Hanna conceded that after the last letter from Mr Harris, he did not take any further steps to pursue his claim until the commencement of proceedings against Mr Gavagna in April 2007.  He did not at any stage send a letter of demand to Mr Scott or to Mr Gavagna.  He never issued a tax invoice.  He conceded that his company was registered with an Australian Business Number for GST purposes.

1. Mr Gavagna’s evidence was that he was admitted as a solicitor in 2000.  He worked for a short period as an employed solicitor with Corrs Chambers Westgarth, and then moved to an employed position with O’Connor Harris.  He worked with that firm until the middle of 2004.  He then worked as an employed solicitor with Hunt & Hunt for about a year, before starting his own practice under the name of Goodman Law. 

1. He completed a building degree at the University of New South Wales in 1984.  After that he worked in the building industry but never held a building licence.  He generally worked as an employee, managing commercial building projects.  He undertook a law degree at the Australian National University in 1997, and completed it at the end of 1999.

1. He met Mr Hanna at a seminar about contract law which he was conducting at the Institute of Architects.  His understanding was that architects, like lawyers, were required to complete a specified number of hours of continuing professional education each year, and this seminar was part of that process.  After the seminar he met Mr Hanna and talked to him.  He gave Mr Hanna his business card.  Mr Hanna later rang him to talk about his dispute over the National Library tender.  Mr Gavagna obtained advice about the matter from senior counsel. 

1. Mr Hanna subsequently instructed Mr Gavagna to give him some advice about a dispute involving a tennis centre.  Again Mr Gavagna obtained advice from counsel.  Over a period of perhaps a couple of years, Mr Hanna instructed Mr Gavagna, still an employee at O’Connor Harris, in a few other matters.  He did not receive any instructions from Mr Hanna after he left that firm.  

1. Mr Michael Scott was described by Mr Gavagna as a longstanding client of O’Connor Harris.  In 2000 Mr Scott had a company called Scott Brothers Pty Ltd, which was involved in a contractual dispute.  Mr Gavagna was given the carriage of that matter within the firm. 

1. Mr Gavagna had known since his time at the University of New South Wales a man named Noel Ling.  Mr Ling had been the bursar of the college where Mr Gavagna lived while at the university.  They had kept in contact on an irregular basis over the years since.

1. In about mid-2000 Mr Ling spoke to Mr Gavagna, asking whether he knew of any builders interested in undertaking building work in China.  Mr Gavagna spoke to Mr Scott about this to see whether he might be interested, and in early December 2000 he arranged a lunch in Sydney with Mr Ling and Mr Scott.  Mr Ling explained that he had a business associate, Mr Benny Leung, who regularly travelled between Australia and China.  They discussed building opportunities in China.  Mr Ling explained that if Mr Scott was interested, it would be necessary for him to put together a project team including architects and engineers. 

1. Later in December 2000 Mr Gavagna arranged a lunch for Mr Scott to meet Mr Hanna.  He said that he was aware that Mr Hanna did not have much work on at the time, and saw this as an opportunity for Mr Scott and Mr Hanna to develop business opportunities together.  The lunch took place at the National Press Club.  Mr Scott spoke about his background and experience as a builder.  Mr Hanna talked about the projects he had been involved in as an architect.  Mr Gavagna said that the lunch was a pleasant occasion for all of them, and he had the impression that both Mr Scott and Mr Hanna were interested in developing a working relationship.  There was no specific project discussed at that time. 

1. Mr Gavagna recalled Mr Scott explaining that any work he found in China would be speculative, so that Mr Hanna as architect would not be paid until money became available following the signing of a contract and the commencement of building work.

1. Mr Gavagna said that he did not recall any conversation of the nature Mr Hanna had given evidence about.  The evidence was put to him, where Mr Hanna had said that he would want an agreement to define his role and that Mr Scott had said that there would be no need for a written agreement.  Mr Gavagna did not recall such a conversation.  His evidence was that following the lunch he had formed the opinion that Mr Hanna would be very interested in working with Mr Scott and would be happy to be involved in developing any opportunities which arose.

1. Mr Ling was a director of an Australian company called China Development Corporation.  Its role was to facilitate the development of business opportunities for Australian companies in China, particularly in the construction industry.  Mr Gavagna’s understanding was that China Development Corporation charged a fee for such introductions.

1. Following the lunch, on 22 December 2000 Mr Gavagna wrote to Mr Ling at China Development Corporation on O’Connor Harris letterhead.  The letter read in part:

Dear Noel

Re: Scott Bros Constructions

Please find enclosed a recent brochure of Scott Bros Holiday Inn Construction and the colour profile of the architect Wagdy Hanna.

To summarise the projects of the construction team I feel that the following information is relevant.

Principal

Michael Scott – Project Manager

Project team

Wagdy Hanna – Architect

Ken Murtagh – Engineer

Steven Gavagna – Construction and legal consultant

Scott Bros Constructions is a highly developed and experienced team.  Nationally, team members have either managed or designed the following projects:

[A number of projects in Canberra and Sydney were then listed]

Scott Bros Constructions and its project team are dedicated to providing quality, efficient and timely projects.  They believe that the success of any development lies in the careful preparation and documentation of the construction.

I look forward to talking to you shortly.

Yours Faithfully

Steven Gavagna

1. At the beginning of January 2001 Mr Scott instructed Mr Gavagna to incorporate a company to be called Scott Bros Constructions Pty Ltd.  Mr Gavagna arranged this by purchasing a shelf company and having its name changed accordingly.  Mr Scott was recorded as the sole shareholder and director.  The incorporation date of the company was 2 January 2001.  On 3 January 2001 Mr Gavagna wrote on O’Connor Harris letterhead to the new company confirming a retainer to act generally in relation to “China Projects” and setting out rates at which legal costs would be charged.

1. Mr Gavagna’s evidence was that thereafter the firm undertook legal work in relation to various matters for Scott Bros Constructions Pty Ltd and rendered invoices which were paid.  Some of the invoices were headed “China Development” and others “China Project”.  All bore the same file number.  During this time invoices were sent by China Development Corporation from time to time, addressed to Scott Brothers Constructions care of O’Connor Harris.  It appears that O’Connor Harris held funds in trust for Scott Bros Constructions Pty Ltd and paid the China Development Corporation invoices out of those funds.

1. Mr Benny Leung also played a role within China Development Corporation, which seems to have been a business name under which a company, Four Seas Network Pty Ltd, carried on business.  The evidence is imprecise as to the positions held by Mr Ling and Mr Leung within that business.  On 25 January 2001 Mr Leung prepared a report on a trip he had made to China.  He was away from Australia for four weeks from 19 December 2000 but spent three days between 7 and 9 January 2001 in Jiaxing and Shanghai representing Scott Brothers in an endeavour to develop some building business.  Mr Leung spent time with three of his business contacts in China with that purpose in view.  One of those was Mr Yue Ming Shen of Jiaxing Krissp Decorating Co Ltd, a Chinese building development company.  Mr Leung’s role was to give a brief introduction of Scott Brothers and to recommend them as a construction company. 

1. Apparently Mr Yue Ming Shen had had unhappy experiences with other Australian construction companies, and he expressed some concern that the information he was given did not tell him a great deal about the structure of Scott Brothers.  He gave Mr Leung some brochures about his own company to take back to Mr Scott.  They arrived at a draft proposal, to be discussed further, for the two companies to work together, with the Chinese company providing local marketing, office space and design resources.  The Australian company and the Chinese company would share the profit from any development.

1. Following this, Mr Gavagna and Mr Scott travelled to China on 20 February 2001.  They spent about a week there.  They had a number of meetings, arranged by Mr Leung, who attended the meetings and acted as interpreter.  Following a meeting at the Krissp Company, Mr Gavagna drafted a memorandum of understanding between that company and Scott Brothers Constructions Pty Ltd, which was signed by the parties.  Mr Gavagna understood that Jiaxing where Krissp was based was an economic zone where development was encouraged with government assistance or tax concessions.  Krissp was a company involved in interior fit-out of buildings. 

1. By the end of the trip, three potential projects in Jiaxing had been identified.  One was a hotel, another was an office or commercial block and the third was a high-rise residential development. 

1. While in China, Mr Gavagna and Mr Scott met Mr Hal Guida, a partner in the architectural firm MGT.  When they came back to Australia Mr Scott had further discussions with him, and also had discussions with Mr McCallum and with a firm of consulting engineers, GHD.

1. Mr Gavagna was asked about Mr Murtagh, named in his letter to China Development Corporation as the engineer who was part of the Scott Brothers project team.  He said that he had never met Mr Murtagh, but understood that he was a friend or associate of Mr Scott.  Mr Gavagna was not sure whether the people he named in that letter were aware that they were being named as part of the team. 

1. Mr Scott told him that he had discussed the hotel project with MGT and the office development with GHD.  He had spoken to Mr McCallum about the residential project.  Mr Gavagna recalled attending a meeting with Mr Scott and Mr McCallum, but could not remember whether he had attended that meeting as Mr Scott’s solicitor or in some other capacity, although he agreed that at that time in his career he was not doing any other work than in his employment as a solicitor, and that he was retained by Mr Scott as his solicitor at the time.

1. Mr McCallum prepared a floor plan for the residential project.  At some point Mr Scott told Mr Gavagna that Mr McCallum was not able to continue with the project.  He was not told why.  Mr Gavagna thought that Mr Scott had suggested speaking to Mr Hanna again about taking over as architect for the residential project.  He recalled Mr Scott going to China again in early April 2001, and on his return being instructed to arrange a further meeting with Mr Hanna.  He recalled going to Mr Hanna’s office at Deakin.  He did not recall the date and had no notes which might have refreshed his memory about that.  His purpose in going to Mr Hanna’s office was to ask him whether he would be interested in working with Mr Scott on the Jiaxing residential project.  He could not recall whether he took any documents to the office with him.  He was asked in chief about what was said in his meeting with Mr Hanna.  His answer was:

The nature of the conversation, again to the best of my recollection, was reasonably general because I didn’t have the specifics about what was involved.  Also that I had other matters running with Mr Hanna and my memory is that other things were discussed during that time, not just about China.  In particular, it was about the National Library because that always seemed to be on Mr Hanna’s mind and he brought it up at that time again.  So that was part of the discussions as well.   .   .in relation to the Jiaxing project was that I had, to the best of my recollection, said that Michael was having difficulty in finding someone who would be able to do something in relation to a Chinese residential development in a very short period of time to be able to do something in.  And was Mr Hanna interested in being involved in the project. 

His response to that – well – his response to that and I just want to give some context.  It was in his office.  There was no one in his office, which surprised him at the time because he had said in the past that he had difficulty in finding work and getting work and there was no one in the office.  And he asked me to look around his office.  I mean there was an oddity to some of these meetings.  And he said “Look, I have lots of capacity to be able to do something”  And that he said look, you know, he’s pointing to shelves that sort of this: “I’m sure I have something here that I can use that I have done before”.

1. Mr Gavagna was asked precisely what it was that Mr Hanna was being asked to do.  He replied:

As I understood that there was three or so high-rise office towers approximately 25 stories high and would be interested in doing – undertaking or being involved with a development proposal.   .   . Was he able to put together a presentation so that Mike would be able to get it to China Development Corporation for an upcoming meeting that he had.

1. Mr Gavagna did not specifically recall what was said about the time frame, but said that he had heard the earlier evidence and read the documents, and recollected that it was by the end of that week.  He said that Mr Hanna asked what sort of things were wanted.  Mr Gavagna said that he would like a floor plan and elevations to indicate their ability to undertake a project of that nature.

1. He was asked whether there was a discussion about payment.  His evidence was:

Yes, there was discussion about payment.  I do recall, after hearing the testimony, that in fact there was a discussion about a thousand dollars per unit, so on and so forth, but no value was agreed.  Because I recall in relation to that my comment was well it’s not up to me to decide how much, it is that you would like to charge for undertaking a project of this size.  It’s really up to you and you will have to put that down or sorry tell me what you think that is.

1. Mr Gavagna was asked whether there had been any discussion as to when payment would be made.  He said:

To the best of my recollection, your Honour, is that the discussions around payment were reasonably limited, in that we had discussed that payments would be made during a project.  Mr Hanna was very clear that he did not trust Chinese proponents and didn’t know when he was going to get paid.  And so I said well look you’ll have to identify what it is that you want for your work and how it is that you want to be paid during the progress of that work.  But until someone accepts it there is no payment.

1. He said that Mr Hanna had not responded in any specific way to what he had just said.

1. It was put to Mr Gavagna that Mr Hanna had given evidence that there had been discussions about Mr McCallum’s plan being unacceptable to the Chinese, and that they had discussed the shortcomings of that plan.  Mr Gavagna did not recall any conversation along those lines.  He did not recall the conversation of which Mr Hanna had given evidence, about the drafting of a short fee agreement and said that “it doesn’t sound like me” and that “the context doesn’t sound right”.  He did recall that Mr Hanna had expressed concern that his intellectual property in any documents he prepared would be protected. 

1. Mr Gavagna had heard Mr Hanna’s evidence the previous day, to the effect that he had sent Mr Gavagna a fax on the Wednesday of that week and that Mr Gavagna had telephoned and left a message on his answering machine.  Mr Gavagna had also heard the tape played in court of that message.  His evidence was that if he had not heard that evidence and heard the message he would not have remembered it, but that the recorded message was of his voice and he accepted that he had made that call.

1. Mr Gavagna recalled receiving the fax transmission of 3 May containing the agreement signed by Mr Hanna, which he subsequently signed.  He said that on receipt he sent it immediately to Mr Scott, but he did not recall receiving any response from Mr Scott about it.  He recalled on the following day, the Friday, having a telephone conversation with Mr Hanna to arrange for him to call to collect the plans from Mr Hanna’s office.  He said that he told Mr Hanna that he should have sent the agreement to Mr Scott rather than to him, and that he was not sure why it had been addressed to him because he was not the client.  Mr Hanna had replied “I need to be protected.  I need to know how I am going to get paid if this project is to go ahead” or words to that effect.  Mr Gavagna’s recollection was that he had then said that they would have to wait and see what Mr Scott said about it.  He recalled Mr Hanna saying words to the effect “I have spent $2,000.00 or $3,000.00 in rendering the drawings” to which he replied “Well, that’s nothing on what Mike Scott has spent on trying to get this job”.

1. On the following day Mr Gavagna said that he went to Mr Hanna’s office.  Mr Hanna told him that he had completed the drawings but said that he was not going to give them to Mr Gavagna until he had something signed.  Mr Gavagna said that he replied “Look, but Wagdy, I am not the client”.  Mr Hanna had said “Yes, but at least I want you to try and look after me”.  Mr Gavagna had replied “To the extent that I can, I will make sure that if Mike gets paid you get paid so that I will let you know as things happen”.  His recollection was that Mr Hanna was visibly agitated or upset.  He had told Mr Gavagna that he did not have much work on hand and that the project would have to go ahead.  He said that he did not want the drawings to be released until something was signed because he no longer trusted people.  Mr Gavagna recalled him saying “This is only a memo for my records.  Please countersign”.  Mr Gavagna said that he replied “Look, I will make sure that you are not screwed over about this, you know”.  Mr Gavagna then signed the document.  There was some discussion about sending the plans by fax to Mr Leung, who was shortly to travel to China again to make a presentation on behalf of Mr Scott’s company.  Mr Hanna prepared a fax coversheet on his letterhead, with Mr Gavagna’s name as sender, and Mr Gavagna signed it.  This was then transmitted by fax to Mr Leung, with the plans.  Mr Gavagna’s recollection was that he did not take the original plans, or even a copy of them, away with him from the meeting.

1. Mr Gavagna did not recall anything said during his meeting at Mr Hanna’s office to the effect that the McCallum designs had been cold or had lacked warmth or that he had wanted plans of buildings with feelings in them.  He was asked about Mr Hanna’s evidence that he had told them at that meeting that he wanted coloured pictures and not CAD drawings.  His initial answer was that he could not remember that he would say something like that.  The question was put again and he answered that he had not said anything like that, nor had he said that he wanted a pretty picture.  He also had no recollection of saying anything about being close to sealing a deal, and he made the point that there was no deal at that point about to be sealed.

1. Mr Gavagna was cross-examined at some length.  It was put to him that some months after the preparation of the plans in April 2001 he had contacted Mr Hanna and asked him to change the title on the drawings to read “Client: Mr Steven Gavagna – St Thomas Projects – Construction Design and Management”.  Mr Gavagna said that he did not recall having done so.  He gave some explanation for how this had come about, which I did not fully understand, and eventually appeared to concede that the change had been made at his suggestion.  He said that St Thomas Projects had been a family business.  He and his sister had jointly owned a small retirement village in Queensland through that company.  It had ceased to trade in about 2003 or 2004. 

1. Mr Gavagna agreed that in the second half of 2001 he had been on another trip to China with other people, including Mr Scott.  As far as he could recall he made only two trips to China during 2001, although he said that he had been to China many times over the years.  He could not remember who had paid for his trip in the second half of 2001, but he had not paid for himself.  He thought that it might have been paid for by O’Connor Harris.  Whilst he was still employed as a solicitor by O’Connor Harris at the time, he did not recall whether he had gone on the trip in his capacity as a director of St Thomas Projects.  He was unable to recall whether one of the entities participating in the group travelling to China on that occasion may have been St Thomas Projects.  He could not see any reason why St Thomas Projects would have been involved in the trip but acknowledged that it was a possibility.  He did not recall taking the documents which had been altered for him by Mr Hanna to China but could not discount the possibility that he might have done so.

1. He said that at the time St Thomas Projects had been involved in two development projects in Canberra, a retirement village in Mugga Lane and another retirement village at Kaleen.  Neither project came to fruition.  The project at Kaleen had come about through connections of Mr Hanna in the Coptic Church.

1. Mr Gavagna was asked about a fax transmission of 12 February 2001 to David Gong at what appears to have been a Canberra fax number, attaching “the profiles as requested”.  The attachments were pages describing Mr Scott, Mr Guida, another architect and an engineer as consortium members, and Mr Gavagna.  Mr Gavagna was described as the general manager.  The paragraph about him read:

A qualified builder and lawyer, Steven possesses the knowledge, skill and experience of delivery of large commercial developments.  As a General Manager he delivers to any project, innovation, diligence and confidence.  From 1984 Steven has been instrumental in strategically managing commercial, high-rise residential and multi-story hospitality projects.

1. Mr Gavagna said that the documents had been shown to him but he had not composed them.  He was unable to remember who Mr Gong was.  He knew the profiles had been sent but he had not produced them.  He agreed that they had been sent by fax from his office at O’Connor Harris.  He said that he was very uncomfortable about what was proposed, in particular being described as the general manager of Scott Brothers Constructions.  Ultimately he had said that he was not prepared to be a party to the wording, but he could not recall whether the profiles had been changed.  It was put to him that when he went to China with Mr Scott in February 2001 he took with him a company profile of Scott Brothers Pty Ltd which included this description as general manager.  He said he did not “recall that occurring”.  The documents had been produced by way of coordination of Mr Scott and China Development Corporation.  He did not exactly know what Mr Scott had produced.  It was possible that Mr Scott had come into his office and asked his personal assistant to fax some documents in his absence.

1. Mr Gavagna was asked whether he saw his connection with Mr Ling as a means of promoting business for himself in his new career as a lawyer.  He said that this did not come to his mind immediately, but at some point it occurred to him.  It was possible that he begun to suggest to clients of O’Connor Harris that there might be business opportunities for them through this connection.  He denied that he saw it as a possible line of business for himself, saying that it was purely for the benefit of O’Connor Harris.  Any involvement of St Thomas Projects had not come up until later.

1. Mr Gavagna accepted that in a letter furnishing particulars between solicitors in January 2010, in relation to the agency agreement he had asserted between himself and Scott Brothers Constructions Pty Ltd, he had said that the agency agreement had been entered into in about April or May 2010 between himself and Mr Scott.  He had said in those particulars that Mr Scott had told him of a proposed construction project in China.  Mr Gavagna had agreed to identify and introduce to Mr Scott people to assist in the project.  In late April or early May 2001 he had introduced Mr Hanna to Mr Scott.  He conceded that the particulars had been incorrect and inconsistent with his oral evidence that the introduction had taken place in December 2000.  It had been his recollection at the time he gave instructions for the particulars, but he had not “really turned my mind as to the exact date and time of the function”.

1. Mr Michael Scott gave oral evidence.  He is a licensed builder.  O’Connor Harris have been his solicitors since about 1983.  He met Mr Gavagna through O’Connor Harris.  At that time he was operating through Scott Brothers Pty Ltd.  The company was involved in a dispute and ceased to trade, eventually being placed in liquidation during 2001.  In January 2001 he established another company, Scott Brothers Constructions Pty Ltd.  Mr Gavagna acted for him in the incorporation of the new company.

1. Mr Gavagna introduced him to Noel Ling at about the beginning of 2000.  Mr Ling ran a company which Mr Scott thought was called China Investment Corporation.  Mr Scott at the time was interested in becoming involved in the construction boom in China.  Mr Gavagna knew Mr Ling and introduced them at a lunch in Sydney.  At the lunch it was agreed that Mr Ling’s company would seek out potential developers in China, and that Mr Scott would need to travel to China to meet them.  He would need to have other professional consultants as part of his team.  Mr Ling’s company charged a substantial fee for the introduction, which Mr Scott paid through one or other of his companies.

1. The time came for Mr Scott to travel to China.  He was accompanied by Mr Gavagna and Mr Leung.  He saw Mr Gavagna’s role as the preparation of a memorandum of understanding with any of the Chinese companies interested in taking the matter further.  Mr Scott realised that it was important to present as a larger more professional operation than was the reality.  Over the years in Canberra he had built and developed a motel on Northborne Avenue and a few other multi-unit sites which he described as medium rise.  He had also done a lot of residential work over many years.

1. Mr Scott decided to involve some high-profile architectural and engineering firms in his project.  He had discussions with partners from MGT and from GHD.  At some point they added Mr Hanna to the team.  He had met Mr Hanna at a lunch at the Press Club in December 2000, being introduced by Mr Gavagna.  There was some discussion during that lunch of the possibility of some construction work in China.  Mr Scott explained to Mr Hanna that they would travel to China to seek out developments and contracts, and bring them to Canberra for eventual concept design.  The work would be speculative and would proceed on a contract basis if successful.  This would mean that some preliminary work would be required, possibly a week’s work, on the chance of gaining a large contract.  He said that Mr Hanna seemed very keen on the idea.  There was no discussion at the lunch about Mr Hanna’s fees.  It was clear that the work was speculative.  He said that if Mr Hanna had insisted on payment regardless of whether the project proceeded, he would not have taken the matter any further with him.

1. Mr Scott said that he had set up Scott Brothers Constructions Pty Ltd purely to undertake work in China.  At that time he had recently completed a large project at Turner and had no other building work in progress.

1. Mr Scott explained that when he prepared a brochure to promote his team to developers in China, he described Mr Gavagna as general manager.  This had been a recommendation from China Development Corporation.  The advice was that it would not look good in China to be seeking work from a developer accompanied by one’s lawyer.  It would be preferable to have someone on the team who was described as a general manager with experience in building and construction.  The brochure was prepared in Australia, translated to Chinese for use in China.

1. Mr Scott and Mr Gavagna, accompanied by Mr Leung, spent most of their time in China talking to developers and architectural firms.  Mr Leung appeared to have an existing relationship with Krissp in Jiaxing, and they spent quite some time with representatives of that company, discussing the development of a residential apartment block.  Mr Gavagna drafted a memorandum of understanding which was signed by Yue Ming of Krissp and Mr Scott.

1. Mr Scott subsequently made two more trips to China, in May and in June 2001.

1. The Chinese developers did not appear interested in the hotel project for which MGT had prepared the plans, and that did not lead to any building work or to a contract.  MGT did not charge for the work they had done. 

1. The same thing happened with the office project on which GHD had worked.  They did not charge any fees and no work eventuated. 

1. Mr Scott had only a vague and general recollection of the events of the week at the end of April 2001 when Mr Hanna prepared plans.  He recalled Mr Gavagna faxing him the document of 3 May 2001 relied on by the plaintiff as the agreement with the defendant.  He recalled that he had sent a letter to Mr Hanna and faxed it to him on the following day, making it clear that no fees would be payable unless a contract was signed and building work carried out.  He said that since then Mr Hanna had never approached him for payment of any fees.  He said that he had never discussed fees with Mr Hanna at all, and that Mr Hanna had never suggested to him that he expected to be paid any fees for preliminary work.  He had no clear recollection of having called at Mr Hanna’s office to provide photographs on 3 May but accepted that he might well have done so.  If he had, he thought it likely that he would have said something about the proposed development but could not recall the detail of any conversation.  He was certain that he would not have said anything about starting building work in two months, because there was no agreement and no basis for him to say that there was any proposed start date for any work.  He agreed that at the time he was excited about the prospect of work in China and optimistic about it.

1. He received no response from Mr Hanna to the letter of 4 May.

1. He recalled feeling a little let down when he saw Mr Hanna’s final plans.  He had told him that there were to be five buildings on the site, and he had expected a concept plan showing the five buildings and how they related to each other. 

1. He said that Mr Leung had been disappointed with the plans.  No project ensued, and in the event Mr Scott did not get any building work in China.

1. He said that at some time after his return from China he telephoned Mr Hanna and went to meet him at his house.  He felt that he needed to speak to Mr Hanna.  He told him that the developer expected more detail from the plans and drawings, and that they had not been accepted in China.  He said that Mr Hanna declined to do any more work, expressing some dissatisfaction with Mr Gavagna over a previous project Mr Scott was unaware of.  Mr Scott realised that Mr Hanna was grumbling about something which had nothing to do with him.  He thanked him and left.  He did not try to find another architect to take it any further.  He never received any tax invoice or letter of demand or anything else from Mr Hanna.

1. Mr Gavagna was still Mr Scott’s solicitor by the time of the trial, and I infer that their relationship remained a good one.  Mr Scott had been aware for some years about the present proceeding having been taken by Mr Hanna against Mr Gavagna and they had had some discussions about it.

1. Mr Scott was asked in cross-examination to agree that what had been expected of Mr Hanna had been a considerable amount of work in a very short period.  He did not agree with this, saying that a concept plan in his experience should take only two or three days, and that this had been expected of the other two firms of architects who had not complained about undue pressure.

1. Counsel for the plaintiff suggested to Mr Scott that when he went to Mr Hanna’s home, Mr Hanna had told him that he was dealing only with Mr Gavagna in relation to the matter, and had asked him to leave.  Mr Scott said that this was untrue.

1. Mr Scott volunteered during his evidence that his recollection of the events of 2001 was not particularly clear.  It was after all nearly twelve years since then, and as he said, he had not been asked to recall any of the events until 2007 when the proceeding was commenced.

1. Mr Harris was not called to give oral evidence.  He swore an affidavit in September 2010.  He said that Mr Gavagna had had been employed by his firm from 1 May 2000 to 13 August 2004.  Mr Gavagna had had no authority from the firm to enter the agreement on which the plaintiff sued, or any similar agreement.  He had found references to two files opened on behalf of Scott Brothers Pty Ltd in December 2000 (China Development) and in January 2001 (China Projects).  He had not been able to find the files and concluded that they had probably been removed when Scott Bros Constructions Pty Ltd changed solicitors. 

1. Mr Harris deposed that Mr Gavagna had had no authority to enter into any joint venture or speculative venture on behalf of O’Connor Harris.  His authority to pledge the credit of the firm was limited to the incurring of minor disbursements in the ordinary course of business as an employed solicitor.  Neither of the partners of the firm knew of any “Jaixing residential development” and neither agreed to take any equity position or incur any fees in relation to any such venture. 

1. Mr Harris’s affidavit was read in the plaintiff’s case.  He was not required for cross-examination.

Expert evidence

1. Expert evidence was called for both parties.  In the plaintiff’s case, Mr Eric Martin prepared a report which was tendered, and was cross-examined.  In the defendant’s case, a report was tendered of Mr Gerald Rihs, and he was also cross-examined.

1. In brief, Mr Martin’s opinion was that assuming that Mr Hanna had accurately set out the agreed scope of services in his fax transmission of 3 May 2001 (the agreement sued on), the drawings provided satisfied the requirements.  There were no deficiencies or shortcomings and all requirements of the contract had been carried out.

1. Mr Rihs expressed a different opinion.  His view was that the drawings provided by Mr Hanna’s company did not satisfy the criteria of a concept plan for the proposed development project.  Based upon his experience in preparing concept plans, he would expect that a competent architect would have produced significantly different drawings.  The building illustrated in the elevations and perspective showed a total of twenty-five levels above ground.  There was a clearly illustrated ground floor, a first floor podium level and a residential level at the podium roof level, with twenty-two presumably identical residential levels above those.  A basic concept plan should have included a floor plan for each of the three lowest levels as well as the standard plan for the twenty-two upper levels.  Further, the floor plan which had been prepared was of the most basic standard in terms of planning and drafting, lacking elementary information about service areas.

1. The plans did not show plant and lift motor room floor plans, which would be expected to be on the roof of the building, potentially having a significant impact on the presentation of the building.  This was of particular importance in relation to Chinese developments where there was known to be high sensitivity to the design of the top of buildings.

1. Further, the drawings did not provide what Mr Rihs called a special design quality, that being the principal reason a Chinese development company would be likely to approach an Australian architect for such a project.  The drawings lacked design identity and imagination.  There was a lack of supporting information including colours, finishes, site-specific design elements and residential amenities.  There was a total lack of regard and reference to the building site, and a complete lack of a master plan showing the positions of the proposed five buildings on site. 

1. In his oral evidence, Mr Martin disagreed with some of the comments made by Mr Rihs.  He thought that services elements had been adequately shown on the drawings, and that fine detailing of a service duct within an apartment would not normally be shown at the concept level.  He would not have expected that a basement would be shown in a concept plan.  With the exception of lift motors, he explained that plant areas on the roof of a residential building would not be particularly intrusive.  There would generally be air-conditioning units for each apartment, unlike an office building where one would expect central air-conditioning plant for the whole building to take up a much larger area on the roof.  As to “special design quality”, Mr Martin explained that this was a matter of individual opinion and would vary from architect to architect.

1. It was put to Mr Martin in cross-examination that Mr Hanna had originally been informed that the project was to consist of three towers of twenty-five stories on the one site, and that before he completed this task he was told that that would change and there were to be five towers on the site.  Mr Martin was asked whether, in order to get a proper perspective, it would be important for the client to see how the buildings sat on the site in relation to each other.  He agreed that the plans prepared by Mr Hanna had not illustrated all the components of the total development but thought it adequate to provide a perspective of a single building, in order to appreciate the detail of the building in its entirety.  He agreed that the drawings did not provide a sense of how the building or buildings would fit on the site.  The total development could not be appreciated without seeing a site plan, and it would have been a better outcome if one had been provided.  Having said that, what the architect provided would depend on the brief he had been given, and if the brief had not included detailed site information the architect could not have been expected to provide a concept plan demonstrating the relationship of the buildings to each other.

1. Mr Martin has practised as an architect in Canberra for many years.  His practice has been generally weighted towards heritage issues and disability access. 

1. Mr Rihs also gave oral evidence.  He too has been in practice as an architect in Australia for many years, but also has overseas experience with high-rise residential developments in the Middle East.  For those projects he was involved at the concept design stage.  The projects did not proceed to construction.

1. He was critical of Mr Hanna’s drawings because they provided no sense of the site and were almost abstract.  He thought it unthinkable that an architect would design a building and submit the design to a client without clear definition of its relationship with its site, its landscape and its orientation which would determine its functionality and performance.  A master plan was in his view essential, showing the land boundaries, major landscape features, surrounding infrastructure and north point.  It was unthinkable that a concept plan for five buildings on a site, or even three buildings, would not illustrate the relationship between the buildings and their position on the land.

1. As to the floor plan, he regarded it as a preliminary sketch, probably adequate for some purposes, but not meeting the requirements of a concept plan.  He accepted that the work done by Mr Hanna had provided very good basic sketch drawings, adequate for an initial discussion with a client, but falling well short of what he would have provided himself and would have expected other architects to provide in order to attract the attention of a Chinese client.  He thought that a computer-assisted three-dimensional coloured conceptual sketch would be essential to attract attention from a Chinese client.  That was certainly the case when he gave his evidence in 2012 and he thought it had probably already been the case in 2001.  He said that there was a significant cost involved in putting such conceptual sketches together which was not recoverable initially but might be if the project proceeded to construction.

1. Mr Rihs said that he found it hard to accept that any architect would launch into a major concept design without having a fair idea where the building was in relation to, for example, buildings on adjoining sites, because of shadowing and wind effects among other things.  To get to the concept plan stage he thought a lot more information would have been needed.

1. The architect was limited by the instructions given, but it was incumbent on the architect to ask for more information to achieve the proper outcome.

1. In his report, Mr Rihs gave his opinion as to reasonable architectural fees for producing the plans prepared by Mr Hanna.  His opinion was that the cost would have been between $8,000.00 and $10,000.00.  He thought $20,000.00 would be an absolute maximum, allowing something by way of a premium for Mr Hanna’s intellectual property.

Consideration of the evidence

1. The events with which this litigation is concerned took place over a few months between late 2000 and mid-2001.  The action was not commenced until April 2007, and was not heard until 2012.  The estimated length of the hearing given by the solicitors who attended the listing hearing was two days.  In fact the hearing occupied four days, the first two days in February 2012 and the last two days in October 2012.  Thus, the witnesses were giving evidence about events and conversations of some eleven years earlier.  Neither Mr Gavagna nor Mr Scott had any reason to suspect that it might be important for them to remember or record the events and conversations in which they were involved, until a number of years later.  Nothing happened to alert Mr Gavagna to the fact that he might be sued until he was served with the originating claim.

1. In the circumstances, the evidence of Mr Hanna, Mr Gavagna and Mr Scott is inherently unlikely to be particularly reliable about times, dates, or what was said.  This would be the case with anyone giving evidence about happenings so long ago, regardless of other considerations as to their reliability as witnesses.

1. Subject to that, I generally accepted Mr Scott as a witness doing his best to remember events, and to give truthful evidence. 

1. I had reservations about both Mr Hanna and Mr Gavagna as witnesses. 

1. I had the impression that Mr Hanna was tailoring his evidence to suit his case against Mr Gavagna.  I am far from satisfied that he drafted the agreement which he and Mr Gavagna signed in any expectation that Mr Gavagna was to be personally liable for his fees.  I am also unsatisfied that either he or Mr Gavagna had in mind that his company would be entitled to payment of $250,000.00 for less than four days’ work and the production of a set of preliminary plans and drawings.  I am also not satisfied that either of them expected or intended that a fee for the preparation of the plans and drawings was to be payable to Mr Hanna’s company in the event that the “pitch” for construction work in China was unsuccessful.

1. I prefer the evidence of Mr Scott about whether or not Mr Hanna’s fees as an architect were discussed at the initial lunch at the National Press Club in December 2000.  I reject Mr Hanna’s evidence that he told Mr Scott and Mr Gavagna at the lunch that he was not prepared to undertake architectural work on a speculative basis.  I accept Mr Scott’s evidence that nothing like that was said, and that if it had been Mr Scott would not have considered using Mr Hanna’s services in relation to the proposed China project or projects.

1. Although Mr Scott had no recollection of it by the time he gave his evidence, I accept that he attended at Mr Hanna’s office on Thursday 3 May 2001 and gave him some photographs of the Jiaxing site.  I do not accept Mr Hanna’s evidence that Mr Scott told him that he would be starting construction in two months.  I have no doubt that Mr Hanna was well aware of Mr Scott’s involvement in the “pitch” for work in China. 

1. I accept Mr Scott’s evidence that after his return from China he telephoned Mr Hanna and went to his house to speak to him.  I accept that he told Mr Hanna that the developer wanted more work done on the plans, and that Mr Hanna declined to do any more work.  I accept that Mr Hanna expressed to Mr Scott some dissatisfaction with Mr Gavagna over some unrelated issue, and that Mr Scott then left. 

1. Having had reservations about the evidence of Mr Hanna, I did not find Mr Gavagna a particularly impressive witness either. For a solicitor, he had surprisingly poor contemporaneous records of his discussions and meetings.  At the time of his discussions with Mr Hanna at the end of April and the beginning of May 2001 O’Connor Harris were Mr Hanna’s solicitors in relation to a number of matters, and Mr Gavagna, although a relatively junior and inexperienced solicitor, seems to have had the conduct of those matters without a great deal of supervision.  The firm was also acting for Mr Scott’s companies.  Mr Scott and his company or companies had been clients of the firm, through Mr Harris and the other partner, Mrs Harris, for many years.  Mr Gavagna appears not to have recognised the real possibility of a conflict of duty in his dealings with Mr Hanna and Mr Scott at the time.  I have no doubt that Mr Hanna realised that O’Connor Harris were primarily acting for the Scott interests, but he not unreasonably saw the firm, and Mr Gavagna, as acting for him and his interests also. 

1. Mr Gavagna seems to me to have had at that time a poor understanding of his responsibilities as a solicitor, and of his fiduciary duties to the clients of the firm by which he was employed.  He seems to me to have seen himself as something of an entrepreneur and a deal maker rather than a legal representative of his clients.  I am sure that he was optimistic and thought that his endeavours were likely to be of benefit to all concerned, including the Scott interests, the Hanna interests, and his own interests, in bringing about a “deal” through China Development Corporation which would lead to profitable construction work for all involved.  I have serious doubts as to whether he was subjected to adequate supervision by Mr and Mrs Harris, the partners of the firm employing him during that period.

1. But I remind myself that this is not a case about breach of fiduciary duty by a solicitor.  This is a claim for debt arising out of a contract. 

1. I am satisfied that Mr Hanna was well aware that Mr Gavagna was an employed solicitor, and that the firm by which he was employed was acting as solicitors for Mr Scott and his corporate interests.  I am also satisfied that Mr Hanna understood that Mr Gavagna was not a principal in the development project in China.  He gave evidence at T37 that he asked Mr Gavagna on 30 April 2001 who the principal was in relation to the project, and that Mr Gavagna told him it was the China Development Authority.  I am in fact satisfied that Mr Gavagna told him that the principal was China Development Corporation, and gave him the names of Mr Ling and Mr Leung, with telephone contact numbers.  There is no suggestion that O’Connor Harris, or Mr Gavagna as their employed solicitor, were acting for China Development Corporation, or that Mr Hanna thought that they were.  But I have no doubt that Mr Hanna believed that China Development Corporation was the principal, to use his own word, for the China development projects.

1. In fact it appears to me on the evidence that China Development Corporation was a commission agent in relation to the work and not a principal, but that seems to me immaterial to the issue I have to determine.  What is important about this is that it means that Mr Hanna was under no illusion at any time that Mr Gavagna was himself a principal. 

1. The plaintiff’s case is based upon my being persuaded that the “agreement” signed by Mr Hanna on 3 May and Mr Gavagna on 4 May 2001, being the fax transmission dated 3 May 2001, is a contract between the plaintiff company and the defendant.  I am satisfied that Mr Hanna was aware at all relevant times that Mr Gavagna did not sign that document as a party to a contract.  Firstly, I am satisfied that Mr Hanna was well aware that Mr Gavagna was not a principal.  He was an employed solicitor with O’Connor Harris, and the solicitors were acting for a client.  Mr Hanna may have thought that the client was China Development Corporation, which it clearly was not, but I think it more likely that he was aware that the client of O’Connor Harris was Scott Brother Constructions Pty Ltd.  That company is identified in the preamble to the document itself.  At all events I am satisfied that Mr Hanna did not see Mr Gavagna as personally a party to any contract, but simply as having the authority to sign it on behalf of either his firm or a client of his firm.  It is unnecessary for present purposes for me to decide precisely what Mr Hanna thought in that regard.  It may be that he did not think it through to a conclusion.

1. That is probably enough for me to conclude that the plaintiff company cannot succeed in the action.

1. I should go on to say that there would have been other difficulties in its way.  One difficulty relates to the inherent improbability that Mr Hanna and Mr Gavagna would have agreed to an arrangement whereby Mr Hanna’s firm was to be paid $250,000.00 for three or four days’ work preparing a few concept plans and diagrams.  I accept the unchallenged evidence of Mr Rihs that the work itself could not have justified a fee of any more than something within a range of $5,000.00 to $20,000.00.

1. I am also persuaded that it was common practice within the architecture profession for architects to undertake preliminary work on the understanding that they would not be paid if the work did not lead to a profitable contract but would be well remunerated if it did.  I am persuaded that Mr Hanna was aware at all material times of that practice in his profession.

1. I am further influenced by the fact that the document provided that the fee was to be “payable by instalments during the progress of the work”.  This seems to me inconsistent with an interpretation that the fee was to be payable immediately and regardless of whether or not any work eventuated.  I am accordingly satisfied that the agreement should be construed as having been contingent on construction work proceeding on a contractual basis flowing from the plans and documents prepared by Mr Hanna.

1. It is plain that Mr Hanna did not regard Mr Gavagna as personally liable on the contract in the early years after 2001.  He never made demand on Mr Gavagna for payment of the fee he now claims, until he commenced the present action, almost six years after he prepared the plans.  He never sent a tax invoice to Mr Scott or any of his companies, and never made any demand upon them.  He never sent a tax invoice to China Development Corporation, or made any demand upon it.  He did send a letter of demand to O’Connor Harris but did not pursue a claim against that firm after its denial of liability during 2003. 

1. It may be that at some point Mr Hanna became suspicious that Mr Gavagna might use the plans he had prepared for his own purposes.  If that is so, those suspicions did not arise for many months after the alleged contract was entered into. 

1. I have no doubt that during those days in early May 2001 Mr Hanna became concerned that he might spend a lot of time, and expend some of his company’s money, in preparing the plans and diagrams he had been asked to prepare, and that he wished to obtain a signature on a document which would form the basis of a claim for payment at some time in the future.  However, I am not persuaded that there was any contract between Mr Hanna’s company and Mr Gavagna personally.

Submissions as to the law

1. Counsel referred me to a number of authorities as to the circumstances in which evidence is admissible about the circumstances in which a written contract has been entered: notably Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; and Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471. Because of my findings of fact, I have not found it necessary to call in aid any of the principles emerging from these decisions.

Conclusion

1. The claim by the plaintiff cannot succeed.  There will be judgment for the defendant with costs.  I shall stay the costs order for fourteen days in case some different order about costs is sought. If an application for such an order is notified by email to my associate and to the other side within fourteen days I will make an order in chambers extending the stay until further order. 

I certify that the preceding one hundred and forty seven (147) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Master Harper.

Associate:

Date:      2014

Counsel for the plaintiff:  Mr R J Arthur
Solicitor for the plaintiff:  Donohue & Co
Counsel for the defendant:  Mr G J Blank
Solicitor for the defendant:  Goodman Law
Date of hearing:  13, 14 February, 9, 10 October 2012
Date of judgment:  21 May 2014