Supreme Court of WA|2006-02-01|Before: Mr J, Harper J, Templeman J

Badat & Anor v Dtz Australia (WA) Pty Ltd [2006] WASC 13 (1 February 2006)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : BADAT & ANOR -v- DTZ AUSTRALIA (WA) PTY LTD [2006] WASC 13

HEARD : 1114, 1720 OCTOBER, 14 & 15 NOVEMBER 2005

Contract - Managing agent agrees to "effect all appropriate insurance cover" for commercial building - Building not insured when destroyed by fire - Construction of "effect all appropriate insurance cover" - Whether principal's conduct was waiver of right to performance of contract - Whether agent's conduct negligent and, if so, whether principal contributorily negligent - Whether agent's conduct misleading and deceptive - Measure of damages

Banning v Wright [1972] 1 WLR 972

Commonwealth of Australia v Verwayen (1990) 170 CLR 394

Craine v Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64; (1920) 28 CLR 305

Hillstead v The Queen [2005] WASCA 116

Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705

Pollock v Wellington (1996) 15 WAR 1

Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; (2004) 217 CLR 424

Australian Milk Marketing Pty Ltd v Victorian Dairy Industry Authority, unreported; SCt of Vic (Harper J); 19 February 1998

B Davis Ltd v Tooth & Co Ltd [1937] 4 All ER 118

Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653

Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 446

Gaitanis v Nicholas Moss (Victoria) Pty Ltd [2003] VSCA 63

GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109

Industrial Rollformers Pty Ltd v IngersollRand (Australia) Ltd [2001] NSWCA 111

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110

Jetcity Pty Ltd v Yenald Nominees Pty Ltd, unreported; SCt of WA; Library No 990180; 9 April 1999

March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506

Owners of Dredge Liesbosch v Owners of Steamship Edison [1933] UKHL 2; [1933] AC 449

Paltara Pty Ltd v Dempster (1991) 6 WAR 85

Radford v De Froberville [1977] 1 WLR 1262

Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332

Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234

Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297

Transfield Pty Ltd v Arlo International Ltd [1980] HCA 15; (1980) 144 CLR 83

1 TEMPLEMAN J: The plaintiffs in this action are the trustees of a property at 432 Murray Street, West Perth. On 29 July 2001, the commercial building erected on the Murray Street property was destroyed by fire. It was then uninsured. I shall refer to both the building and the site as "the Murray Street property". The intended meaning will appear from the context.

2 At the time of the fire, the defendant, DTZ Australia (WA) Pty Ltd ("DTZ"), was the plaintiffs' managing agent pursuant to a written agreement made between the parties on 28 November 2000. That agreement imposed on DTZ an obligation to "use due diligence and best endeavours" on behalf of the plaintiffs to "effect all appropriate insurance cover for the improvements of the property".

3 The plaintiffs contend that DTZ breached this obligation; and that it is therefore liable to pay damages to the plaintiffs, such damages representing the cost of reconstructing the building on the Murray Street property and the loss of rent during the period of reconstruction. That, it is said, would place the plaintiffs in the position they would have been in had the property been insured appropriately.

4 Although the claim in contract is the principal claim, the plaintiffs contend, in the alternative, that DTZ was negligent; and further, that, in the circumstances to which I shall refer below, DTZ engaged in misleading and deceptive conduct.

5 DTZ denies liability. It contends that the plaintiffs required all rental moneys to be paid to them, without deduction, and that the plaintiffs "assumed sole responsibility for effecting insurance cover" for the Murray Street property, thereby releasing DTZ from its obligations pursuant to the management agreement. In essence, DTZ contends that the plaintiffs elected not to insure the property and cannot now adopt an inconsistent position.

6 The management agreement is in a standard form approved by the Real Estate Institute of Western Australia (Inc) ("REIWA") for use by its members. The obligation imposed on a managing agent to "effect all appropriate insurance cover" must therefore vary according to the circumstances of the particular case.

7 The circumstances of the present case were by no means clear and were contentious. It is therefore necessary to establish the history of the plaintiffs' dealings with DTZ and then, once the facts have been found, to determine the extent of DTZ's contractual obligations pursuant to the management agreement and to consider the plaintiffs' alternative claims. It will be convenient to commence this exercise by introducing the parties.

8 The plaintiffs are Mahomed Ahmed Badat and his wife Yasmeen Badat. Mr and Mrs Badat migrated to Australia from South Africa in 1990 with two children. They now have six children. Mr Badat gave evidence that he attended university in South Africa up to the second year. He said he had studied physical education and teaching. He said he then worked as a locum school teacher, not being fully qualified. He said he has no accounting experience.

9 On 1 June 1996 Mr and Mrs Badat became the trustees of the Yasmeen Family Trust ("the Trust") pursuant to a deed of settlement made between them and George Fiorentino as settlor. Mr Fiorentino is the Trust's accountant. The primary beneficiaries of the Trust are children of the marriage of Mr and Mrs Badat.

10 Although Mrs Badat is a trustee, it seems she has played no part in the Trust's commercial activities. She was not involved in any of the dealings with DTZ, nor is she involved in this litigation, other than as a party. It will therefore be unnecessary to make further reference to her.

11 In his witness statement (exhibit B) Mr Badat said he had not worked in paid employment in Australia. He said he worked on a voluntary basis for the Islamic Community of Western Australia. His work involves assisting refugees to re-settle in Western Australia.

12 It is not disputed that Mr Badat is involved in those activities. However, when asked in cross-examination if he would describe himself as a businessman, he said he would (TS 73). Having regard to the various real property investments made by Mr Badat both personally and on behalf of the Trust, I think that is an accurate description.

13 Mr Badat commenced purchasing property at about the time the Trust was established. He did so, he said, with moneys his mother loaned to the Trust for this purpose. There is no documentary evidence of any kind relating to the loan by Mr Badat's mother, who (Mr Badat says) is now deceased. DTZ contends that in the absence of any such evidence and the fact that no interest has ever been paid, I should conclude that there never was any such loan. However, the accounts for the Trust, prepared by Mr Fiorentino (on information provided by Mr Badat), disclose a loan of $1,405,000 as at 30 June 1997. The amount of the loan is said to have increased to $4,248,000 by 30 June 2001 and to have reduced slightly in subsequent years.

14 Mr Badat's first property investments on behalf of the Trust were two BP service stations, in Port Hedland and Girrawheen. Mr Badat bought those properties at auction. He thought it would be preferable to invest Trust funds in income producing property, rather than keeping it in the bank. Mr Badat agreed in cross-examination that he had worked out a form of capitalisation equation which he applied during the auction. As the bidding proceeded, Mr Badat worked out the approximate rate of return so as to determine an acceptable price for the Trust to pay.

15 On behalf of the Trust, Mr Badat paid $460,000 for the Port Hedland service station and $720,000 for the Girrawheen service station. He paid for the properties outright.

16 At about the same time, Mr Badat purchased a residential property at 132 Star Street, Carlisle in his wife's name. This property, which became the family home, was purchased outright for $175,000.

17 Also at that time, Mr Badat purchased three other residential properties in Mrs Badat's name: at 132 Star Street, Carlisle and 8 and 10 Rowe Street, Rivervale.

18 On 26 March 1998, Mr Badat purchased the Murray Street property for $1,830,000 on behalf of the Trust. Again, this property was purchased outright, without the assistance of any loan funds. Although the Murray Street property was to be auctioned, Mr Badat pre-empted the sale. The vendor's agent told him there was a lot of competition and that if he wanted to purchase the property, he should make an offer before the auction. The agent told Mr Badat "that it would take $1,830,000" to buy the property. Mr Badat said that on his own investigations he was prepared to pay that amount of money, based on the income he was told the property was then generating from its two tenants.

19 In 1999, Mr Badat purchased a block of residential units at 60 Great Eastern Highway, Rivervale on behalf of the Trust. The price was $1,350,000, of which, $650,000 was borrowed.

20 The Great Eastern Highway property had been sold by tender shortly before Mr Badat sought to acquire it. He was informed by the original vendor's agent that if he offered $100,000 more than the purchaser had paid, the purchaser might be prepared to on-sell to him. Mr Badat did make that offer; and it was accepted. The agent was DTZ, which managed the property thereafter, on behalf of the Trust.

21 The Great Eastern Highway property was in a run-down condition when the Trust purchased it, albeit income producing. Mr Badat said he bought the property because it enjoyed river frontage which he thought augured well for its long term value.

22 In addition to investments made on behalf of the Trust, Mr and Mrs Badat purchased the property at 134 Star Street, Carlisle adjacent to their home in August 2003. The property was purchased for $270,000 of which $200,000 was borrowed. The Badats then demolished the house and commenced the construction of three units, with the assistance of a $300,000 loan. The object of the investment is to sell the units separately at a profit.

23 More recently, in June 2004, Mr Badat purchased a number of properties in Rockingham (one in his daughter's name). Some of these properties, in Merrimac Loop (numbers 39, 43, 45 and 51) are vacant blocks in a new estate. Mr Badat proposes to develop the properties and sell them in order to generate a profit. However, Mr Badat has decided to delay development in the expectation that property values will rise, and thereby increase the ultimate profit.

24 The evidence about Mr Badat's property investments, both personal and on behalf of the Trust, was adduced in cross-examination without objection by his counsel. It is, I think, relevant evidence. It demonstrates that Mr Badat is by no means naïve when dealing with property and related matters.

25 DTZ was established in 1996 by Dennis John Volk and Brad Carey who were its two directors. It operated in Perth under a licence agreement, with what Mr Volk described as "a global real estate service provider", apparently operating under a DTZ corporate name.

26 In 2000, DTZ employed Craig Robinson in the property management division and Francesco (Frank) Mattaboni who was a consultant in the agency division. The agency division was concerned primarily with leasing and selling properties. Mr Robinson was the commercial property manager, albeit under Mr Volk's supervision. I accept Mr Volk's evidence that he did not have "a hands-on role" because DTZ's employees were experienced people.

27 Mr Mattaboni, who has a degree in business economics and finance, worked for 15 years with the Main Roads Department where he was involved in land acquisitions and disposals. He joined DTZ in 1999 as a property consultant. In that role, he was involved with sales, auctions and leasing of properties. Mr Mattaboni was the representative of DTZ with whom Mr Badat dealt principally. This was not because he had any expertise in property management, but because he had a good working relationship with Mr Badat, who liked to deal with him.

28 Both Mr Badat and Mr Mattaboni gave evidence at trial, but Mr Robinson did not, because of serious illness. Medical reports relating to Mr Robinson shown to me in advance of the trial led me to believe it might be pointless to adjourn the proceedings; and I declined to do so.

29 I admitted into evidence a statement prepared for Mr Robinson by DTZ's solicitors, following conferences at which the solicitor concerned took notes. The notes were also admitted into evidence: and the solicitor gave evidence about the process he had adopted.

30 The statement thus prepared for Mr Robinson was not signed by him. However, I accepted it as his evidence pursuant to s 79C of the Evidence Act 1906 (WA). Further, I consider that insofar as the solicitor's notes contain information provided by Mr Robinson, the relevant statements are admissible on the same basis. References in these reasons to Mr Robinson's evidence are, therefore, based on these materials.

31 The Murray Street property consisted of a two-level building of approximately 1422 square metres standing on a 931 square metre site. When purchased by the Trust in 1998, the ground floor was let to Brashes Pty Ltd pursuant to a lease which expired on 31 July 1998. The lower ground floor was let to Rowe & Jarman Pty Ltd pursuant to a lease expiring 30 April 1999.

32 When the Trust acquired the property, the vendor's agent was Richard Ellis (Western Australia) Pty Ltd. That company changed its name subsequently to C B Richard Ellis (WA) Pty Ltd. I shall refer to it generally as "Richard Ellis". On 11 March 1998, the plaintiffs, as trustees of the Trust, entered into a management agency agreement with Richard Ellis in relation to the Murray Street property.

Management of the Murray Street property by Richard Ellis

33 The management agency agreement between the plaintiffs and Richard Ellis (exhibit 7) imposed an obligation on Richard Ellis to:

"Arrange building insurances and renewals thereof as and when the Agent is given written instructions thereto by the Principal."

34 The Murray Street property was managed initially by Lincoln Paul Delahunt, who was then an associate director of Richard Ellis. On 13 August 1999, Mr Delahunt sent a facsimile to Mr Badat consisting of a letter and the re-transmission of a facsimile he had received from insurance brokers AON Risk Services Australia Ltd ("AON") setting out the proposed terms for the renewal of the insurance on the property. The total cost of that cover was $8,322.78. The period of insurance was 12 months, from 27 July 1999.

35 Mr Delahunt said in his letter that he was of the opinion that the cover offered was adequate, that the premium was very competitive in the then current market and that it was his intention to pay the premium out of the income to be derived from the new tenant of the Murray Street property. That was FILA Sport Oceania Pty Ltd ("FILA") which leased the ground floor of the property for five years from 1 September 2000.

36 Although the management agency agreement authorised Richard Ellis to pay insurance premiums only on receipt of written instructions, there is no evidence that Mr Badat did provide such instructions. Mr Delahunt's evidence was that Mr Badat telephoned him and instructed Richard Ellis to make the payment. I accept that evidence. Indeed, there is a conspicuous absence of any document written or created by Mr Badat throughout all his dealings with Richard Ellis and DTZ.

37 Mr Delahunt was assisted in his property management role by Allesandra (Sandra) Mead Watkins. Ms Watkins joined Richard Ellis in 1999, having recently obtained a real estate licence and diploma in property management and risk management from REIWA. During the first half of 2000, Ms Watkins took over the management of the Trust's properties from Mr Delahunt, albeit under his supervision.

38 On 24 July 2000, AON wrote to Mr Delahunt attaching an invoice relating to the renewal of the insurance policy for the Murray Street property. The total amount of the charge was $10,045.97, a substantial increase over the cost of insurance for the previous year.

39 No payment was made to AON in respect of this invoice. There is no evidence that Richard Ellis informed Mr Badat that the invoice had been received until Ms Watkins referred to it in the standard monthly report for September 2000. The report was sent to the plaintiffs under cover of a letter dated 10 October 2000 signed by Ms Watkins and Mr Delahunt (exhibit 15). In the report, which had been prepared by Ms Watkins, she said:

"I have the insurance premium due for the premise (sic), would you like me to forward it to you so that you can pay it direct or use the rental remittance for November to cover it, the amount is $10,045.97."

40 The report followed Richard Ellis' standard format. It consisted of a title page containing the principal's name and the address of the subject property. There was then a contents page followed by a page containing a summary of financial information and setting out the amount remitted to the principal. The third page contained a reference to arrears, rent reviews and "Building and General Matters". It was under the last heading that Ms Watkins referred to the insurance premiums in the manner set out above.

41 It was Mr Badat's evidence that he read only the page containing financial information and setting out the amount remitted to him. He said he did not read any further in the report because he could not be bothered to do so. I do not accept that evidence. I find that he read the whole report.

42 I am reinforced in that view by the fact that on Mr Badat's own evidence, at a meeting he had with Ms Watkins on 2 November 2000 (to which I shall refer below) he said he "specifically mentioned" the need to increase the rent payable by FILA. I think this is significant because in the monthly report, Ms Watkins had stated that there was a rent review due on 1 September 2001 and that no action was required at present. In fact, under the FILA lease, a rent review was due on 1 September 2000.

43 I think it probable that Mr Badat raised the question of the rent review with Ms Watkins as a result of reading in her report of September 2000 that no action was required. That statement appeared only a few lines above the reference to the insurance premium. I therefore think it implausible that Mr Badat did not read the latter.

44 Further, I think it improbable that Mr Badat, who had a $1,300,000 investment in the Murray Street property, would not look at the entirety of the brief and simple report relating to that property.

45 According to Ms Watkins, a short time after she sent Mr Badat the September 2000 report, he telephoned her to say that he wanted to pay the insurance premium himself (exhibit P, pars 49 - 50). I do not accept that evidence. It is clear from subsequent events that Mr Badat wanted to reduce the cost of insurance very considerably. I do not believe that he volunteered to pay an amount which he regarded as excessive, particularly when he had not seen the invoice.

46 I think Ms Watkins' evidence was a reconstruction based on a letter dated 26 October 2000 she sent Mr Badat by facsimile. Together with the letter, Ms Watkins sent copies of facsimiles she had received from AON which included the relevant invoices (exhibit 16).

"Please find to follow the Insurance Premiums as requested."

48 I draw the inference that there had been some communication between Mr Badat and Ms Watkins in which he had requested the relevant documents: not so that he could pay the premium himself, but so as to see how the amount of $10,045.97 could be justified.

49 Mr Badat was asked in interrogatories whether he had received Ms Watkins' letter of 26 November 2000 and its attachments. In his answers, sworn on 15 April 2004, he said he had received the documents by facsimile on or about 26 October 2000. However, under cross-examination, Mr Badat said he had not received the documents. He said he had answered the interrogatory without looking at the whole of the document. His explanation for the mistake was that:

"My solicitor was very ill at that time and he wanted to try and get the trial date done (sic) as soon as possible ..." (TS 126)

I regard that explanation as implausible and I do not accept it. I am satisfied that the answer given by Mr Badat to the interrogatory was true.

50 As I have noted above, it is common ground that a meeting took place at Richard Ellis' offices on 2 November 2000 between Ms Watkins and Mr Badat. In Mr Badat's evidence (exhibit B, par 79) he said he discussed with Ms Watkins the recovery of outgoings that she did not appear to have been recovering from FILA. He said he mentioned specifically the need to recover GST on the rent, to increase the rent and the need to recover land tax and council and water rates. According to Mr Badat, Ms Watkins apologised. She said her mother had just died or was terminally ill. She promised to attend to the matters immediately.

51 According to Mr Badat, Ms Watkins informed him - for the first time - that the insurance premium for the Murray Street property had increased substantially to approximately $10,000. He said he had not been aware previously of the amount of the premium.

52 Mr Badat said Ms Watkins then raised the possibility of an overlap of insurance cover on the Murray Street property between the AON policy and the insurance effected by FILA. He said Ms Watkins raised the possibility of reducing the plaintiffs' insurance to the extent of any overlap. According to Mr Badat, Ms Watkins said she would need to examine the FILA policy and that she could not locate it at that meeting.

53 Mr Badat's evidence in cross-examination was to the same effect. However, he confirmed that he had not given Ms Watkins any instructions to reduce the cost of insurance for the Murray Street property; that it was her concern, not his, that the premium was too high (TS 103). Mr Badat said also that he had not dealt with the AON invoice at his meeting with Ms Watkins (TS 99 - 100).

54 Ms Watkins gave a different account. She said the meeting was arranged at her request. She wanted to discuss the insurance cover because she was "frustrated at Mr Badat's continued lack of response to my letters" (exhibit P, par 53). I do not accept that evidence, there being no evidence of any letters written by Ms Watkins to Mr Badat other than the two referred to above.

55 Nor do I accept the evidence Ms Watkins gave in cross-examination that she actually recalled telephoning Mr Badat to arrange the meeting (TS 492). That evidence was, I think, reconstruction. However, I do accept Ms Watkins' evidence that she was concerned about the fact that the insurance premium was outstanding, and that Mr Badat had said he would pay it (TS 497).

56 I accept Mr Badat's evidence that he was dissatisfied with Ms Watkins' management of the Murray Street property and that he raised with her the matters of concern to him to which I have referred above. Ms Watkins agreed that these matters were discussed (TS 506).

57 Ms Watkins said she had a definite recollection that Mr Badat made annotations on an AON invoice against various elements of the premium which he did not want to pay.

58 In her statement (exhibit P, par 61) Ms Watkins said Mr Badat had with him at the meeting a copy of the invoice, on which he had made the markings in his own handwriting. In cross-examination Ms Watkins said the document was "an original statement": although it could have been a duplicate copy from AON, it was not a photocopy (TS 505, 537).

59 The document on the Richard Ellis file which contained the handwritten annotations was a plain paper photocopy of the facsimile sent by AON to Richard Ellis on 26 October 2000. That could not have been the document Ms Watkins forwarded by facsimile under cover of her letter of 2 October. That is because I accept Mr Badat's evidence that his facsimile machine printed on the obsolete thermal paper in the form of a roll.

60 Faced with this evidence, Ms Watkins said that Mr Badat made the annotations on the document in her presence (TS 540).

61 There was a marked distinction between the way in which Ms Watkins gave her evidence generally and the way in which she gave her evidence about this aspect of the meeting of 2 November 2000. Having regard to the impression I formed of Ms Watkins' evidence in relation to this matter, I find as a fact that Mr Badat did make the handwritten annotations on the AON invoice and that he did so in the course of the meeting with Ms Watkins.

62 The only legible annotations are the words "no" written on the client coverage summary against two heads of liability. These were the theft of property "excluding money" and "specified damage". The limit of liability for the former was $10,000 and for the latter $250,000. This, I think, explains the reference to the overlap between the plaintiffs' insurance cover and that obtained by FILA. It is plausible that Mr Badat thought it unnecessary to insure against the theft of property when he was concerned only to insure the fabric of the building. This is likely to have been a matter of concern to FILA, not to the plaintiffs.

63 Further, I accept that Mr Badat was reluctant to insure against "specified damage" to a limit of $250,000 when the damage does not appear to have been specified in the client coverage summary.

64 I therefore accept Mr Badat's evidence that there was a discussion between him and Ms Watkins about a possible overlap with the FILA insurance policy. It is not necessary to make any finding beyond that because I am satisfied that the matter was never pursued.

65 I therefore find that as at 2 November 2000, Mr Badat knew that the AON policy for the insurance of the Murray Street property had fallen due for renewal, and that the cost of renewal was $10,045.97. I find that Mr Badat knew the premium had not been paid and that he did not want to pay the amount sought.

A reduction in the insurance cover for the Murray Street property

66 On 8 November 2000, Richard Ellis sent its monthly report for October under cover of a letter, again signed by Ms Watkins and Mr Delahunt. The report followed the standard format. On the second substantive page, under the heading of "Building and General Matters", Ms Watkins wrote:

"As requested I will reduce the cover of the current premium and have the policy requoted by AON. I will forward to you the revised policy once it has been amended." (exhibit 21)

67 In cross-examination, Ms Watkins' evidence about the events following the meeting of 2 November 2000 was vague and confused. Ms Watkins said she spoke to AON on that day, in accordance with Mr Badat's instructions. I do not accept that she did. That is because, on 8 November 2000, she sent the Richard Ellis monthly report to Mr Badat in which she said:

"As requested I will reduce the cover of the current premium and have the policy requoted by AON. I will forward to you the revised policy once it has been amended." (exhibit 21)

This suggests that Ms Watkins had not, at the date of the report, made any approach to AON.

68 On 7 November 2000, AON produced a statement of account, addressed to Mr Badat. It showed an outstanding amount of $10,061.08. This included $10,045.97 in respect of the renewal of the commercial policy for the Murray Street property (exhibit 20).

69 The invoice bore a stamp in large capital letters saying "URGENT". Also stamped clearly on the invoice were the words:

"Cover will be LAPSED due to non-payment at 4 pm 20/11/00."

70 Mr Badat was asked in the interrogatories referred to above, whether he had received this invoice. He said he had: that it had been "posted or possibly faxed". He said further, that he had sent it on to DTZ "as managing agents" in accordance with the arrangements he had made, that he would send all documents relating to the Murray Street property to DTZ.

71 In fact, Mr Badat had not then appointed DTZ to be his agents. And there is nothing in DTZ's discovery to suggest that Mr Badat did forward the invoice.

72 In cross-examination, Mr Badat said he had never seen the invoice (TS 128). A little later in his cross-examination, he said he did not recollect receiving it. He said he had answered the interrogatory as he did, because the invoice was addressed to him and bore the stamp "posted". He therefore assumed he had received the document in that way. (I infer that the document shown to Mr Badat for the purpose of the interrogatories was AON's office copy on which the word "posted" had been stamped.)

73 I am satisfied, on the balance of probabilities, that Mr Badat received the AON invoice of 7 November 2000 and that he did not forward it to DTZ.

74 I therefore find that as at about 7 November 2000, Mr Badat knew that the insurance cover for the Murray Street property would lapse unless payment was made by 20 November 2000.

75 I find also that Mr Badat had no intention of paying the premium or authorising Richard Ellis to pay. That is because he had already told Ms Watkins the policy was too expensive and he was waiting for her to provide him with quotes, as she had said she would in her most recent monthly report.

76 The evidence does not enable me to make any finding as to the precise instructions given by Mr Badat to Ms Watkins, nor whether those instructions came unprompted from Mr Badat or whether it was Ms Watkins' suggestion that he obtain another quote. However, I think it highly improbable that Ms Watkins would have sought a reduction in the level of insurance cover for the Murray Street property of her own volition.

77 There seems to have been a delay in AON responding to Ms Watkins' request. On 28 November 2000, Ms Roberts-Henfrey of AON sent Ms Watkins by facsimile a letter and a revised invoice for insurance on the Murray Street property in an amount of $5,578.27. In her letter, Ms Roberts-Henfrey said:

"As discussed, attached is a copy of our revised tax invoice confirming alterations in cover as requested by the owner and apologise for the delay in forwarding this to you. The original documents are in the mail to you tonite (sic).

As this renewal does date back to 27 July 2000, the insurers have requested that we have the payment from the owner no later than 30 November 2000. Can you please advise whether payment will be made by that date." (exhibit 23)

78 The tax invoice sent under cover of that letter contained a transaction description in the following terms:

"This policy is renewed for a further 12-month period with effect from 27th July 2000 and replaces invoice I0899194."

The invoice referred to was that which charged Mr Badat with the amount of $10,045.97.

79 The client coverage summary attached to the tax invoice showed that the limit of liability had been reduced from $3,000,000 to $1,800,000. The declared value of the Murray Street property had been reduced from $2,510,000 to $1,510,000. However, the policy still included cover for theft of property and specified damage in the sums of $10,000 and $250,000, apparently in disregard of Mr Badat's previous instructions.

80 In his answers to interrogatories, Mr Badat said he received a copy of these documents by facsimile on or about 28 November 2000 from Richard Ellis. However, in cross-examination, Mr Badat denied having received the cover page. He claimed to have received only the invoice. Nothing turns on that inconsistency.

81 Mr Badat said in cross-examination that it was the receipt of the invoice for $5,578.27 which prompted him to telephone Mr Mattaboni at DTZ (TS 134). I shall refer below to the circumstances in which DTZ was appointed as managing agent for the Murray Street property.

82 In his evidence (exhibit B, par 98) Mr Badat said that "at about the same time" he received from Richard Ellis a copy of an invoice from AON dated 28 November 2000 which cancelled the original AON policy and credited an amount of $10,045.97 (exhibit 24).

83 Mr Badat said in his evidence (exhibit B, pars 99 - 100) that he assumed from the fact that he had been given a credit of $10,045.97, that Ms Watkins had organised a new AON policy with reduced cover because of the overlap of cover with the FILA policy. He said he assumed also, from the reference to the credit, that Richard Ellis had paid that premium previously. He said he assumed that the further premium of $5,578.27 would be paid from that credit, and that the balance of the credit would be refunded by AON. He said he had no idea that in fact Richard Ellis had not paid the premium to AON. In cross-examination, Mr Badat said that even if he had read the Richard Ellis report of October 2000, and had seen the credit, he would have believed the premium had been paid by Richard Ellis (TS 140).

84 I do not accept that evidence. There are a number of reasons. First, the so-called "credit" is expressed to be the reversal of the previous invoice, not a refund. Even if Mr Badat did not understand the terminology, I do not accept, for the reasons given above, that he believed Richard Ellis had paid the $10,045.97 premium previously. As I have said, Mr Badat had not authorised that payment and he was unwilling to pay that amount because he considered it to be too expensive.

85 Thirdly, I find that Mr Badat regarded the invoice of $5,578.27 as too expensive: and it was for that reason he contacted Mr Mattaboni at DTZ. His action in so doing is inconsistent with a belief that the premium had been paid. As will appear below, Mr Badat then thought he could obtain appropriate insurance at a cost of $1500-$2000.

86 Mr Badat's evidence was that in August 2000 he telephoned Mr Mattaboni and spoke to him about appointing DTZ to manage the Murray Street property (exhibit B, par 49). Mr Badat said he then went to see Mr Mattaboni: and that Mr Robinson was present also at the meeting. He said he told them about his problems with Ms Watkins of Richard Ellis and he asked Mr Mattaboni and Mr Robinson to take over the management of the Murray Street property and the two BP service stations.

87 Mr Badat said he was told by Mr Robinson that he would commission "a full audit" when DTZ took over the management of all three properties. Mr Badat said he told Mr Mattaboni and Mr Robinson that Richard Ellis was looking after the insurance for the Great Eastern Highway property, even though it was not managing that property. He said AON insisted that workers' compensation insurance was required as part of the residential policy for the Great Eastern Highway property even though the Trust did not need or employ any workers there. Mr Badat said Mr Robinson told him he would get "a better combined bonus premium" from DTZ's insurance brokers by combining both policies into a single combined and comprehensive policy. According to Mr Badat, Mr Robinson said that DTZ preferred to arrange all its insurance through Elkington Bishop Molineaux Insurance Brokers Pty Ltd ("EBM") and not AON.

88 In Mr Mattaboni's responsive statement (exhibit H) he said he had no recollection of any such meeting. He maintained that position in cross-examination, although he did not deny that a meeting took place as alleged by Mr Badat. Mr Mattaboni thought he had met Mr Badat early in September 2000. However that, I think, is because Mr Mattaboni wrote to Mr Badat on 12 September 2000. According to Mr Robinson, he did not meet Mr Badat until early December 2000.

89 Mr Mattaboni recalled being told by Mr Badat, at some stage, about his dissatisfaction with Richard Ellis (TS 285).

90 As to Mr Badat's evidence that Mr Robinson said he would commission a full audit when DTZ commenced the management of the three properties, Mr Mattaboni said, in substance, that as far as he knew, that was standard procedure. Although Mr Mattaboni said he had no recollection of Mr Robinson actually making that statement, I accept that he did so.

91 I accept that Mr Badat was dissatisfied with Richard Ellis in general and Ms Watkins in particular. I accept that he met Mr Robinson and Mr Mattaboni in August 2000, at DTZ's offices. I think it probable that Mr Robinson was present because he, and not Mr Mattaboni, was DTZ's property manager.

92 Mr Badat's evidence is supported to some extent by the fact that on 12 September 2000, Mr Mattaboni wrote to him, enclosing management agreements for the three properties "as requested", and proposing to take over the management from 1 October 2000 (exhibit 13). He enclosed also a draft letter dated 11 August 2000 which he had prepared for Mr Badat's signature, to inform Richard Ellis of DTZ's appointment in its place. The letter requested the recipient to forward to DTZ the lease documents, copies of various invoices and notices relating to statutory charges and "current insurance details" (exhibit 13).

93 According to Mr Badat, he signed and returned the agreements enclosed in Mr Mattaboni's letter of 12 September 2000. He said he did not know why the agreement is dated 20 November 2000.

94 I accept that Mr Mattaboni sent the relevant agreements to Mr Badat for his signature. However, I find that Mr Badat did not then sign and return the agreements.

95 I find that the agreement appointing DTZ as the managing agent for the Murray Street property was made on 20 November 2000, the date it bears. The date was inserted by Mr Mattaboni in his own hand. It is not necessary to make any finding as to the precise circumstances in which the agreement came into existence. Mr Mattaboni had said in his letter of 12 September 2000 that DTZ proposed to take over the management of the various properties on 1 October 2000. However, in the agreement dated 20 November 2000, the date had advanced to 1 January 2001. This suggests that the previous proposal had been received by Mr Badat, but not then accepted by him.

96 As I have noted above, it was Mr Badat's evidence that it was the receipt of the AON invoice in the sum of $5,578.27 which prompted him to telephone Mr Mattaboni. I accept that evidence.

97 It was Mr Mattaboni's evidence that he made a contemporaneous note of the telephone conversation he had with Mr Badat and that he then made a further note which he put on Mr Robinson's desk (exhibit 170). It was in the following terms:

"Bobbo

Fila Building - Not Insured

Can we arrange a quote

Fire only $1M

Public

Liability $10M

Expects to pay $1500 - 2000

based on what he is getting

from 60 GEH

I accept that the note is an accurate summary of the information conveyed to Mr Mattaboni by Mr Badat during the course of their telephone conversation. The fact that the note was addressed to Mr Robinson (Bobbo) without any introduction or explanation, supports the finding that Mr Robinson already had some knowledge of the matter as a result of a meeting with Mr Badat.

98 As at 28 November 2000, DTZ had not been in contact with Richard Ellis. On 22 November 2000, Mr Mattaboni had prepared a letter for Mr Badat to send to Richard Ellis to inform it of DTZ's appointment and to request various documents relating to the Murray Street property and the BP service stations (exhibit 22). That letter was received by Richard Ellis on 24 November 2000 (see exhibit 169). However, Richard Ellis did not respond to it. DTZ did not receive the relevant documents from Richard Ellis until January 2001. Mr Mattaboni's note to the effect that the Murray Street property was not insured could therefore have been based only on information provided to him by Mr Badat. The statement was not strictly accurate: in fact, as has been noted above, AON was prepared to hold the Murray Street property covered until 30 November 2000. I find that Mr Badat did not appreciate that.

99 According to Mr Badat, he told Mr Mattaboni in the course of the telephone conversation of 28 November 2000 that he was "concerned at the drastic reduction in the premium" which, he assumed, reflected an equivalent reduction in the level of cover. Mr Badat said it was Mr Mattaboni's suggestion that he arrange an interim $1,000,000 cover for the Murray Street property "until the adequacy of the reduced AON insurance cover was sorted out" (exhibit B, pars 102 - 106).

100 Mr Mattaboni said it was Mr Badat who made the suggestion (TS 304).

101 I do not accept Mr Badat's evidence. I think it highly improbable that Mr Mattaboni, who would then have had little or no knowledge of the Murray Street property, would have suggested that cover of $1,000,000 be obtained. As I have noted above, Mr Mattaboni was not himself a property manager: that was Mr Robinson's role.

102 Mr Mattaboni's note to the effect that Mr Badat expected to pay between $1500 and $2000 for insurance is, I find, a summary of Mr Badat's instruction to him. Mr Mattaboni denied that Mr Badat told him about the AON quotation. I find that Mr Badat made no mention of it during the course of the conversation.

103 I am therefore satisfied on the balance of probabilities, and find as a fact, that on 28 November 2000, Mr Badat telephoned Mr Mattaboni and asked him to obtain a quote for fire insurance of $1,000,000 and public liability insurance of $10,000,000 for the Murray Street property.

104 My finding that the instruction came from Mr Badat and was not the result of any suggestion made by Mr Mattaboni, is supported by a letter dated 29 November 2000 written by Mr Mattaboni to Mr Badat (exhibit 25). It was in the following terms:

"We are proceeding to obtain quotes for the insurance you require based on:

$1M fire for the building,

$10M for public liability.

We will further obtain quotes for a more comprehensive insurance plan so you are fully informed of the options available.

Can we arrange to 'borrow' your leases for FILA and BP for photocopying while we await CB Ellis forwarding details. Our property manager Craig Robinson has queried why is it that this insurance is not part of the lessee's requirements to procure and we would like to check further ..."

105 I have no reason to doubt that Mr Mattaboni was correct in referring to the quotes for the insurance "you require", again reflecting his instructions. I do not accept the submission made by counsel for the plaintiffs in their closing submissions (par 123) that Mr Mattaboni used the word "require", rather than "request", to differentiate between a requirement arising from advice received from DTZ and a request originating from Mr Badat himself. In any event, I accept Mr Mattaboni's evidence.

106 In his evidence, Mr Badat said that "around 29 or 30 November" he met Mr Mattaboni and Mr Robinson and gave them the two AON invoices. That is, the invoice for the reduced cover in the sum of $5,587.27 and the cancellation of the invoice in the sum of $10,045.97.

107 Mr Badat said that at the meeting he again told Mr Mattaboni and Mr Robinson that he thought the old AON policy had been cancelled and that the new AON policy had been taken out, but he was not confident that the policy overlap had been properly considered by Ms Watkins. According to Mr Badat, Mr Robinson said he would telephone Ms Watkins to confirm that the overlap justified the reduction, that he would sort the matter out; and that he might get the old AON policy reinstated in the meantime until DTZ took over the management.

108 Mr Badat said Mr Robinson also said he would have a "surveyor" evaluate the appropriate insurance cover for the Murray Street property: and that once he had the surveyor's report he would evaluate the AON and FILA insurance policies himself. It was in that context, according to Mr Badat, that Mr Mattaboni repeated his advice that an interim policy of $1,000,000 should be obtained as a precautionary measure.

109 Mr Badat said that it was after the meeting that he found the facsimile from Mr Mattaboni dated 29 November 2000. However, he said they had discussed the matters referred to in that facsimile at a meeting (exhibit B, pars 107 - 115).

110 The facsimile transmission sheet relating to Mr Mattaboni's letter of 29 November 2000 shows it was transmitted at 5.14 pm on that day. Although Mr Badat gave no evidence about the time at which the meeting took place, any such meeting is likely to have been held during business hours. In other words, the facsimile is likely to have been transmitted after the meeting took place.

111 In my view, if Mr Badat is correct in saying that he attended a meeting with Mr Mattaboni and Mr Robinson on 29 November 2000, it is surprising that the letter made no reference to it. Further, if Mr Badat had met Mr Robinson on that day, it seems odd for Mr Mattaboni to refer to him in his letter as "our property manager Craig Robinson". In my view, Mr Mattaboni's letter gives the appearance of raising matters for the first time: not in confirmation of a meeting which (if Mr Badat is correct) must have taken place a short time before the letter was written.

112 There is the possibility that Mr Mattaboni had written the letter before the meeting but had not altered it to take account of the fact that a meeting had then taken place. However, if that was the sequence of events, there would have been no need to send the letter by facsimile. It could have been given to Mr Badat at the meeting.

113 If, as he contends, Mr Badat had given the AON invoices to Mr Mattaboni and Mr Robinson at the meeting, it would, I think, have been obvious to them that AON was not crediting Mr Badat with an amount of $10,045.97. This would have prompted them to ask Mr Badat whether Richard Ellis had paid the other invoice. If Mr Badat did not know, it would have been a simple matter for DTZ to find out: and there would have been no need to arrange "interim cover".

114 Further, if Mr Badat had given DTZ the AON invoices, it is probable they would have been placed on DTZ's file relating to the Murray Street property. However, according to Mr Volk's affidavit of discovery on behalf of DTZ, the documents do not appear there.

115 These considerations lead me to find that there was no meeting on 29 November 2000 as alleged by Mr Badat.

116 On 11 December 2000, AON issued a notice of cancellation of the second policy. The notice (exhibit 26) was in the form of an invoice showing a credit in an amount of $5,528.27. Under the heading "Cancellation", the invoice contained the statement:

"This policy is cancelled with effect from 28th July 2000 due to non-payment."

117 Mr Badat said he received the notice from AON and forwarded it to Mr Mattaboni (exhibit B, par 117). Mr Mattaboni denied receiving the notice (exhibit H, par 54). Mr Badat was not cross-examined about this matter. It was put to Mr Mattaboni in cross-examination that Mr Badat had sent the notice to him. Mr Mattaboni said he was not aware of the document. It was not discovered by DTZ.

118 Mr Badat said he did not turn his mind to the notice because he was confident that DTZ would deal effectively with the matter (exhibit B, par 118). I do not accept Mr Badat's evidence that he sent the notice to DTZ. However, I accept that Mr Badat was not concerned about the cancellation. Although he knew the Murray Street property was uninsured, he was expecting DTZ to obtain the quotes he had sought on 28 November 2000.

119 It is not clear when Mr Badat received the cancellation notice of 11 December 2000 (a Monday). It appears to have been sent to him by post, in which case it probably arrived on 12 or 13 December 2000.

120 Mr Mattaboni wrote to Mr Badat on 12 December 2000 to inform him that DTZ had not received any documents relating to the Murray Street property or the BP service stations from Richard Ellis, although two letters had been sent. He therefore asked Mr Badat to make available copies of the respective leases for photocopying "as the 1st of January is fast approaching ..." (exhibit 27).

121 Mr Mattaboni said he did not recall receiving any such documents: and I find that Mr Badat did not deliver them. This finding is consistent with the fact that DTZ continued to press Richard Ellis for the relevant material.

122 Although Mr Mattaboni had said in his letter of 29 November 2000 that "we are proceeding to obtain quotes", it seems he did not do so until 19 December 2000. On that day, he telephoned EBM and spoke to Deborah Ulerick and asked for "an indicative quote".

123 Ms Ulerick gave evidence. She was an impressive witness. She is an experienced insurance broker who holds (as she did in 2000) a professional qualification for insurance brokers, being a Qualified Practising Insurance Broker (or QPIB).

124 I am satisfied that Ms Ulerick had a good recollection of the relevant events and that she had an efficient record-keeping system, which enabled her to refresh her memory, insofar as that was necessary.

125 According to Ms Ulerick, Mr Mattaboni told her that cover of $1,000,000 was required for the Murray Street property with a public liability cover of $10,000,000. In response to Ms Ulerick's standard questions, Mr Mattaboni told her that the Murray Street property was not insured.

126 Ms Ulerick then telephoned several insurers to obtain the information required by Mr Mattaboni. She considered that cover offered by Zurich Australia Ltd ("Zurich") was the most appropriate.

127 During the afternoon of 19 December 2000, Ms Ulerick telephoned Mr Mattaboni and gave him the indicative prices. Mr Mattaboni said that was sufficient for his purposes. It was his evidence that he then sent a facsimile to Mr Badat, setting out the information and the basis on which it had been given. This included the statement "currently not insured" (exhibit 29).

128 The facsimile is dated "219/12/00". Mr Mattaboni said he thought he sent it on 19 December: that it could not have been sent on 29 December because DTZ's offices were closed between Christmas and New Year.

129 Because Mr Mattaboni's previous letter to Mr Badat was dated 12 December 2000, I suspect that he (or the typist) omitted to delete the number "2" when the word processor was updated. I discount the possibility that the facsimile was sent on 21 December 2000 because there was another facsimile sent on that day to which I shall refer below. On the balance of probabilities, I find that Mr Mattaboni did send the facsimile on 19 December 2000.

130 Mr Badat said in his evidence that he did not "specifically recall" receiving the facsimile. He said that if he had received it he had not read it "too closely" (exhibit B, par 124).

131 Mr Mattaboni said in his facsimile that "verbal estimates" had been received from EBM "as you require" based on $1,000,000 for fire insurance at an approximate price of $3465 and $10,000,000 for public liability at an approximate price of $594.

132 It was Mr Mattaboni's evidence that on receiving the verbal quotations from EBM on 19 December 2000 he telephoned Mr Badat and gave him that information. According to Mr Mattaboni, Mr Badat said words to the effect that the prices were much better than he had been paying and asked for the details of the cover to be sent to him. Mr Mattaboni said he did not obtain further quotes for any more comprehensive insurance plans because Mr Badat had said he only wanted $1,000,000 for fire cover and $10,000,000 for public liability.

133 In cross-examination, Mr Mattaboni said he thought that during the course of the telephone conversation in which he informed Mr Badat about the figures Mr Badat "indicated along the lines that he was happy with that and progress it" (TS 322).

134 Mr Badat denied having any such conversation with Mr Mattaboni (exhibit C, par 45). However, under cross-examination, he said only that he did not recall receiving a phone call from Mr Mattaboni (TS 143).

135 I accept that Mr Mattaboni did telephone Mr Badat to inform him of the EBM quote. However, I do not accept that Mr Badat gave any instructions to Mr Mattaboni to proceed. Such an instruction would have been inconsistent with the facsimile sent by Mr Mattaboni to Mr Badat on 21 December 2000 in which he informed Mr Badat about the receipt of lease details from Richard Ellis on the previous day. Mr Mattaboni also asked in the facsimile:

"Have you thought about the insurance?" (exhibit 183)

136 Mr Mattaboni also asked Mr Badat in that facsimile when he would be going overseas and for how long.

137 It is clear from travel documents produced by Mr Badat, and his passport, that he travelled to Mauritius on 14 January 2001, returning on 3 February 2001. It was Mr Badat's evidence that in early January, he received a telephone call from Mr Robinson who said he had received all the documents requested from Richard Ellis, but was still awaiting "statements and balances". According to Mr Badat, Mr Robinson told him he had received the "Outgoing Budget" from Richard Ellis, for July 2000 to July 2001; that "the insurance is on the outgoings budget" or words to that effect and that the Murray Street property was insured (exhibit B, par 125).

138 I accept that DTZ received a copy of the Richard Ellis Outgoings Budget on 9 January 2001, when it was transmitted by Ms Watkins to Mr Mattaboni by facsimile (exhibit 88). The Budget refers to "Building Insurance" in an amount of $10,120. However, it gives no indication whether any payment had been made.

139 I accept that Mr Badat had a conversation with Mr Robinson in which he was told about the Budget. However, I do not accept that Mr Robinson told Mr Badat that the Murray Street property was insured. I think it improbable he would have made such a representation given that (on Mr Badat's evidence) he was still waiting for "statements and balances" from Richard Ellis.

140 Further, if Mr Robinson then believed the Murray Street property was insured, it is likely he would have informed Mr Mattaboni, who would not then have pursued the $1,000,000 cover later in January in the circumstances to which I shall now refer.

141 Returning to the events of December 2000: it was Ms Ulerick's evidence, which I accept, that Mr Mattaboni did not, on 19 December, accept the verbal quotation she had given him that day.

142 I find that Ms Ulerick heard nothing further from Mr Mattaboni until 19 January 2001 when he sent her a facsimile in which he said:

"You would recall my earlier phone calls where you quoted us ballpark figures for the following insurance, which we subsequently confirmed acceptance to.

Fire only $1 Million Quote $3465.44

Public Liability $10 Million Quote $594.00

The insurance was to be taken out in the names of:

Mohamed Ahmed Badat and Yasmeen Badat as trustees for the Yasmeen Family Trust.

We have not received confirmation that the insurance has since been placed and need your confirmation of this in writing today please." (exhibit 194)

Badat & Anor v Dtz Australia

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (429 paragraphs)

Badat & Anor v Dtz Australia (WA) Pty Ltd [2006] WASC 13 (1 February 2006)

Management of the Murray Street property by Richard Ellis

A reduction in the insurance cover for the Murray Street property

Insurance arrangements for the Great Eastern Highway property

DTZ's defence based on Mr Badat's assumption of sole responsibility for insurance

The plaintiffs' claim based on misleading and deceptive conduct

Parties

Legislation Cited (1)

Cases Cited (18)