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[2010] NSWDC 142
District Court of NSW
2010-02-03
Original judgment source is linked above.
These proceedings first came before me as a long motion on 7 August 2009 where, by agreement, the question of liability was severed from the question of damages pursuant to Part 28 r 28.2, Uniform Civil Procedure Rules 2005 (NSW).
The parties agreed that the relevant questions of liability to be determined at the hearing were as follows: (a) What were the terms of the contract between the plaintiff and the first defendant?
(d) What was a reasonable time for completion of the works?
(e) Did the defendants fail to complete the works within a reasonable time?
(f) Was the first defendant negligent in failing to complete the works within a reasonable time?
(g) What, if any, representations were made by the parties to one another prior to entering into the contract?
(h) Did the first and/or second defendant engage in misleading or deceptive conduct in contravention of the Trade Practices Act and/or the Fair Trading Act ?
For the purpose of summarising the evidence, I agree with the submissions of the defendants that it is appropriate to break down these agreed questions into the following subheadings in relation to the cause of action in contract, negligence and misleading or deceptive conduct.
The questions the parties have agreed upon (see paragraph 12 above) may be allocated to the causes of action pleaded as follows. Questions (a) to (c) relate to the contractual claim; questions (d) to (f) relate to the negligence claim; questions (g) to (i) relate to the misleading or deceptive conduct claim and question (j) relates to mitigation.
I shall first deal with the evidence of the parties. Although, in general, lengthy summaries of evidence are undesirable, it is necessary in these proceedings, for two reasons: (a) First of all, both parties agree that a careful, detailed analysis of the objective evidence, including contemporaneous documentation, and of the timeline of events is essential in order to arrive at the facts in these proceedings; and
(b) Secondly, these proceedings were conducted without the benefit of a transcript.
I am indebted to counsel on both sides for the excellence and attention to detail in their submissions, particularly in such circumstances. In particular, I thank them for their careful chronology of events, which is of such assistance when hearing complex commercial matters without the benefit of transcript.
After issues arose during oral submissions, I ordered the transcript and provided it to the parties. I have received revised submissions from both parties to include the transcript references. I have checked the references to the evidence in submissions against the transcript. There are in fact no inconsistencies of note, but where I have quoted the evidence, I have quoted the evidence from the transcript.
Mr Romeo, the principal witness for the plaintiff, was a director of the plaintiff from the time it was incorporated until June 2005. He gave evidence under some disabilities, and I have made allowances for these. When the matter was first listed before the court for hearing, he told the court about his wife having been taken to hospital as an emergency patient the previous evening and that he was taking anxiety medication, so after consultation with the parties' legal representatives I adjourned the proceedings until his health was better. When he returned to give evidence, he was clearly still struggling at times with the stress of giving evidence and being cross-examined. I have accordingly made considerable allowance for his state of mind. I have particularly taken into account, if he had trouble remembering any details, that he was in a state of stress.
However, Mr Romeo's affidavit, which is very comprehensive, was prepared at a time when he was not labouring under these disabilities. The issues I have with Mr Romeo's account of the relevant events arise, not from his demeanour in the witness box (to which I give no weight at all, given his condition of health), but from analysis of the objective contemporaneous documentation and of the chronology of events as set out in this affidavit when compared to that documentation.
Mr Romeo's description of meeting the second defendant
Mr Romeo told the court he is a real estate agent by profession, and that in 2004 he was working at a real estate agency in Casula. He had relatives in the Griffith area. It is unclear from what source he came to know of the land for sale in Griffith. He had no prior experience with land development; this was his first attempt at taking part, in any capacity, in a land development project.
According to Mr Romeo's affidavit and evidence, he was put on to the defendants as potential developers when he attended the offices of Stephensons, on or about 15 March 2004. Stephensons was a land development firm in Griffith, which Mr Romeo had consulted about carrying out development of the subdivision into housing blocks for resale. His evidence was that Stephensons said they were too busy and referred him to the second defendant (hereafter referred to as "Mr O'Meara").
Also at this time, according to paragraph 9 of his affidavit, he telephoned Turner's Excavations, who said they were prepared to look at the development. He spoke to a Mr Lewis, who requested the Development Application ("DA") and other documentation to which Mr Romeo said he would be in touch (paragraph 9 of his affidavit).
Mr. Romeo's evidence in cross-examination was as follows: "Q. Yes. Now, just to get the sequence right, so that the court and I can follow it, what happened was, and if you want to follow any of this, it starts at about paragraph 6 of your affidavit, you were told about a property that was up for sale, 17 acres in Brayne Road, Griffith, and you were interested in it and interested in developing it, is that right? A. Yep.
Q. And you saw or considered consulting three firms who might do the construction development work. A. That's correct, yes.
Q. So that was Stephensons in Wagga-- A. No--
Q. And there was also Turners in Wagga, is that right? A. That's correct, yes.
Q. And you say that on about 15 March - how do you know it was 15 March 2004? A. How do I know?
Q. Yeah. A. I'm pretty sure I - it would be there with some of the information I've given. I'm pretty sure that's - it was on or thereabouts 15 March.
Q. And what sort of information is that you've given? A. Again, I was down, I was in Griffith and I was down there for that reason, to look around.
Q. So you'd expect there to be a document in the discovered documents dated 15 March 2004, would you? A. I'm presuming so, yes.
Q. And if there isn't, you - how would you explain that you came up with 15 March? A. Because that's the best of my recollection as well, and I'm sure I've - I'm sure I've come up with that through looking at that, whatever information I've given.
Q. Right, and so it's the best of your recollection, is it? If there is no document there that identifies that date, it's just the best of your recollection, is it? A. On or thereabouts, yes, it would be that, yes.
Q. Would you agree with me that you could be wrong about that recollection of the date? A. By a couple of days.
Q. But only by a couple of days. Right. Now, so you say that you went to see Stephensons, and on 15 March, and you went with Mr Frank Calabria and Mr Ross Lentini, is that right? A. That's correct.
Q. And you showed them the DA, the development approval, Stephensons? A. Stephensons didn't want to look at it. They had no time for it.
Q. But you had it with you when you went to see them? A. At the time, yes.
Q. And you say on 15 March, and it was Stephensons who suggested Mr O'Meara, is that right? A. As well as Mr Cavallaro from Rawlinson and Brown mentioned it, and if I remember correctly, even Danny from Midstate.
Q. So you spoke to other developers as well? A. No, real estate agents." (T 127 - 8)
It was during this meeting that Frank Calabria mentioned the name of the second defendant, and Mr. Romeo sets out in paragraphs 6, 7 and 8 what he did following this information, including contacting Turners. (I note that one of the matters raised by the defendants concerning the asserted unlikelihood of any meeting with Mr. O'Meara is the failure to call Mr. Calabria).
Mr. Romeo was then cross-examined about these events. "Q. Now, on that 15 March - so, in paragraphs 6, 7 and 8 you tell us about the various bodies and then going to see Stephensons, how they told you to go to Mr O'Meara; you then telephoned Turners at this time in Wagga, is that right? A. I missed that, sorry?
Q. --at this time, to ask whether they would be prepared to look at the development? A. Yes.
Q. That's right? A. I believe it was at that time, yes.
Q. So, on or about 15 March 2004? A. On or about that time, yeah.
Q. And you spoke to a person called Lewis? A. Yes.
Q. And he asked you to send the DA to him, is that right? A. Yes.
Q. And then you say on that same day you had a meeting with Mr O'Meara? A. Yes.
Q. And it was at that meeting that you first raised the turnkey nature of the project, you say? A. With Mr O'Meara?
Q. Yep. A. Yes, definitely with - with all of them, actually.
Q. And when you said turnkey, what did you understand by that expression? A. From start to finish, fifteen registered blocks of land.
Q. So it was just - they delivered you a package complete with fifteen blocks of land and you didn't have to worry about engineering drawings-- A. Exactly. Yes.
Q. --or anything like that, or dealing with linen plans-- A. Yes.
Q. --getting surveys. So they were just to provide the whole thing and you with an end product? A. Yes.
Q. And so you didn't care how they arranged that in the middle, it was, you just wanted to be able to, in a sense, turn the key and it all just go? A. Yes.
Q. And that's what you meant, and as far as you understood it, other people had the same understanding as you? A. Yes.
Q. And it was in that conversation you say that Mr O'Meara said to you that it should be able to be done in four to six months? A. Yes.
Q. And that tied in with your experience, didn't it, of having a property with a development application already approved - a development approval on it, should be able to be done in four to six months. That was - you were prepared to agree with that, weren't you? A. Yes. Yep."
Mr Romeo's affidavit sets out that on or about 15 March 2004, following the recommendation of Stephensons, he met with Mr O'Meara at his offices, accompanied by Ross Lentini and Frank Calabria. Mr Romeo showed Mr O'Meara the DA consent and according to paragraph 10 of the affidavit, the following conversation took place:
Mr Romeo: "I want to buy 17 acres in Griffith with a DA for 15 Lots. I need you to quote the job accurately and we need to finish the job as quickly as possible. Robert Cavallaro, from Rawlinson & Brown Real Estate, recommended you for the job. He also recommended that we don't market until the work was [sic] near complete [sic]. We are very excited about the opportunity to develop the land. But it all depends on your costs and how quickly you can complete the job. It is a turnkey proposal. I have never done such a development, so I want you responsible for everything from beginning to end".
According to paragraph 10 of the affidavit, Mr O'Meara, having been shown the DA consent, said: "I have done several projects in the area. Using all my past experience, I am confident that I can quote the job accurately, from beginning to end. I can't see it taking that long. I should be able to complete the project in 4 to 6 months."
After Mr Romeo repeated that this type of project was new to him and he "really needed a full turnkey handover", Mr O'Meara said: "Don't worry, that won't be a problem. I have done other turnkey developments. Why don't you go out tomorrow morning and have a look at the site. I can also show you what's happening in the development scene around Griffith."
According to paragraph 11 of Mr Romeo's affidavit, he met Mr O'Meara "the following morning" at Mid-State Real Estate and they spent a couple of hours driving around "looking at subdivisions, some that he had done and some that others had done".
According to paragraph 11, the following conversation also took place on this day: Mr Romeo: "So you are pretty confident that you can do the job and that includes dealing with the Council and other authorities, doing the works and getting the linen plans registered so that we can have the lots up for sale by the end of the year? As I said I will be relying on you to get the job done on time and for a full turnkey handover. So the pricing has to be spot on so I can do my feasibility accurately. I can't afford the project to blow out".
Mr O'Meara: "I am sure I can get the whole job done by Christmas and I will handle everything. Don't worry you will have your blocks ready for sale in the New Year".
Mr Romeo: "If we can finish this project and have the blocks up for sale early in the new year, I have been looking at another bigger project in the area. Maybe we can do that as a joint venture or you can have a share in the project". 31. Although Mr O'Meara said he needed "a week or two" to look at the paperwork before preparing a proper quote, he gave Mr Romeo a piece of paper which Mr Romeo said, in his affidavit, he has since lost. This piece of paper contained Mr O'Meara's written estimate that the cost of development would be about $30,000 per block. Mr O'Meara described this document as "my approximate costings", according to Mr Romeo, and added: "I will do a more accurate proposal and let you know when it is ready. I think a figure of around $30,000 per block should do the job." (paragraphs 13 and 14 of Mr Romeo's affidavit).
Me: Michael, I was also getting another company to quote on the job. I am a little concerned because they said in order to give me an accurate price for the job they needed surveyor's drawings and engineering plans.
O'Meara: Don't worry Roy. Most subdivisions in the area are similar in their requirements as the soils are pretty much consistent throughout. There isn't much difference. And I am very familiar with Griffith. I will get the job done on time and the price will be accurate based on the DA you have given me."
According to Mr Romeo's evidence, following this conversation, Mr O'Meara telephoned him on 6 April 2004 to inform him that the costings for the work were complete and could be collected. Ross Lentini collected the costings and faxed them on to him.
Mr Romeo did not keep a diary or contemporaneous notes, but Mr O'Meara, the second defendant, did. The defendants draw to my attention the difference in timing of meetings and persons present in Mr O'Meara's diary entries of 6 and 10 April 2004. There is no diary entry for any meetings, and the first diary entry (6 April) refers to the "Calabria subdivision", not to Mr Romeo. Nor is there any written confirmation that on 6 April Mr O'Meara had the conversation Mr Romeo refers to (although this is not significant) or had prepared the quotation. Mr O'Meara's entry of 10 April 2004 made a note in his "To do" list that he had yet to prepare the price of the Calabria subdivision quotations. It was one of three jobs in his "To do" list for that day. His diary entry for 6 April contains Frank Calabria's telephone number, not Mr Romeo's.
Frank Calabria was not a witness in these proceedings. The defendants have asked me to draw a Jones v Dunkel inference (Jones v Dunkel (1959) 101 CLR 298) from the failure of the plaintiff to call him to give evidence.
Mr Romeo's evidence was that this was the first of three meetings (the others being on April 28 and June 9) between the defendants and Mr Romeo on behalf of the potential future purchaser. The defendants submit that only the third of these meetings took place. I shall summarise the evidence for the other two meetings before determining these factual issues.
It is not in dispute that on 13 April 2004 Mr. O'Meara faxed a quotation; the question is when, to whom and in what circumstances.
The circumstances in which he came to prepare the quotation were described in his evidence as follows: "Q. I've shown you the entry for 10 April 2004 in your diary which is in exhibit 7A and do you see the letters TTD and then a dash? A. Yes.
Q. What do the letters TTD stand for? A. Things to do.
Q. After the first dash can you read what's written there? A. Yeah, it says "Price Calabria of subdivision Brayne Road".
Q. What's that mean? A. It means I was contacted by a fellow by the name of Frank Calabria who asked me to work out a price to do the physical works at a subdivision in Brayne Road, somewhere along the line a drawing of the approved DA was dropped off at my office and I was asked if I could price it based on what I could give and what that was. I remember talking to him on the phone and saying, "Well I can't--
Q. When you say him who is that? A. This is Frank Calabria.
Q. What does that indicate as to the state of preparation of the pricing on 10 April 2004? A. Well up to that point it didn't exist.
Q. And is that what "things to do" mean, that you have yet to do it? A. I have yet to do it. I have seen this, I had seen this drawing which was of a DA, and a DA drawing is not an engineering drawing, and that's it. " (T-277)
In paragraph 21 of Mr. Romeo's affidavit, he sets out how he "again" travelled to Griffith on 27 April 2004 to meet with Mr. O'Meara. The accommodation receipt for the Kidman Wayside Inn and American Express invoices confirm Mr Romeo was in Griffith on 27 and 28 April 2004 (Exhibit C). This meeting was, according to Mr Romeo, postponed to the following morning, as Mr O'Meara had been called to one of his farms "to address some issues". On 28 April 2004, according to paragraph 22 of Mr. Romeo's affidavit, he and Frank Calabria met Mr. O'Meara (the affidavit does not refer to the place of the meeting). Mr. Romeo said he had the following conversation: Mr Romeo: "Michael, the costings you have given me look good. But I want you to look at the absolute worst-case scenario and to take into consideration any sort of problem that may be thrown in the way so that we don't have any unexpected extra costs. I am relying on you. As I said before, this is our first development and I want to be sure".
Mr O'Meara: "Everything has been taken into account. The only possible extra cost is the pump and irrigation set up for the raw water. I have made initial inquiries about this and the worst-case scenario is around $1,500 per lot, which equates to $22,500".
Mr Romeo: "I was expecting that and it won't be a problem. Is that the total costs after the trees are removed. We want to make sure it is an inclusive figure. We can't afford the funding to blow out".
Mr Romeo: "Michael, we also want certainty about completion and a schedule of the works. I am arranging a delayed settlement on the purchase on the basis that I can get immediate access to the property. How quickly can you start and what is the worst case scenario as to when we can get the lots ready for sale?"
Mr O'Meara: "I can commence work on the lodging of the CC straight away. This will give us a head start. I have done much larger developments over the past 10 years. There won't be any problem in getting the lots to market by Christmas. I will draw up a heads of agreement and a schedule of the works for you to sign on the next trip up".
What were the "costings" which "look good"? Mr Romeo's evidence was that it was the 13 April quote headed "Calabria Subdivision". This was not a final quote. The document is headed: "NOTE - ESTIMATE ONLY AND NOT BASED ON ENG PLANS (NOT AVAILABLE AS YET)"
which is indicative of Mr O'Meara's knowledge of legal concepts and language, a factor of some importance in these proceedings.
The following should be noted concerning this document: (a) Mr Romeo was certain that from the first, he told Mr O'Meara that this was to be a "turnkey" development, because Mr Romeo did not have the experience or knowledge, this being his first development. However, this document does not contain costings for matters that would be expected if this was a turnkey development, such as consulting and liaison services for preparation and lodgement of linen plans.
(b) Nor does the quotation include allowance for electricity (excepting trenching), light poles or sewers.
(c) There is a great deal of handwritten alteration of the tables by an unknown person.
(d) The additional handwriting of an unknown person to allow an additional 20% on the estimate per block of $22,059 plus $3,000 for electricity and light poles.
(e) Finally, the quote is headed " Calabria Subdivision, Brayne Road", with Frank Calabria's telephone number (emphasis added). The large printing "Attention Roy Romeo", which appears down the right hand side of the document, has been written by some other person. It was not put to Mr O'Meara that this was his handwriting. Mr Romeo, in cross-examination, said he did not know who had made these crossings out and adjustments, or who added the words. It is Mr Calabria's name and telephone number which Mr O'Meara recorded in his diary, not Mr Romeo's.
Another matter to note is that despite obtaining this quotation from the defendant, Mr Romeo continued to seek quotes from two other developers up until August 2004. In addition to the approach he made to Lewis from Turners Excavations, in or about 17 June 2004, referred to in paragraph 14 of his affidavit, he also, on 13 August 2004, faxed Budd & Partners for a quote on "all works involved in getting Brayne Road to state of registered individual blocks", which is hardly suggestive of there being a final agreement in place between the plaintiff and defendants.
Senior Counsel for the defendants, in his helpful written submissions (paragraph 14(g)) notes that this final costing for a turnkey subdivision of $22,059 per block on 13 April is a substantial reduction from the estimate of $30,000 per block which Mr Romeo says was given to him after his initial meeting with Mr O'Meara on 16 March.
The first question is whether a $30,000 estimate was given at all. The affidavit of Mr O'Meara sets out, at paragraphs 10 to 19, circumstances in which he was contacted by Frank Calabria on or about 6 April concerning a potential residential development. He was asked for an estimate for costs of the completion of civil works. He made a note of Frank Calabria's telephone number and the name of the development in his diary, and provided an estimate of costs. His evidence was that this estimate is not based on the turnkey approach, as the total estimate per block was considerably below the turnkey developments for his company in that area, which were between $35,000 and $40,000 per block. His evidence was that he did not meet Mr Romeo until 9 June 2005. Mr O'Meara's work diary noted the telephone numbers of clients and other salient information on a daily basis, and the defendants submit these support his account.
The second question is whether the substantially lower 13 April 2004 quote was given to Mr Romeo as a follow-up to any meeting in March. The third question is whether this quotation was in fact prepared on a "turnkey" basis. Tied in with these disputed issues is the question of whether the representations as to completion time were made.
There is thus a significant difference between the evidence of the parties, not only as to whether these discussions and representations were made at all, but as to whether this alleged second meeting between Mr Romeo and Mr O'Meara occurred. This brings me to the meeting which Mr Romeo said was his third meeting with Mr O'Meara.
There is no doubt a meeting occurred in June; according to Mr O'Meara's diary it occurred on 9 June and according to Mr Romeo's evidence it occurred on 6 June. The difference in dates is not significant.
According to the plaintiff, at this meeting he asked Mr O'Meara "how is the CC going with the Council" and was assured that everything would be done by Christmas (paragraph 26). However, the meeting with the Council did not take place until 23 June, so if Mr. O'Meara claimed to have been doing things, it would have been untruthful.
Mr. O'Meara's version of the conversation on 9 June with Frank Calabria, Ross Lentini and Mr. Romeo, was as follows: Mr O'Meara: "Before we can start any significant works we need to get a construction certificate. Council at times can be very slow in regards to construction certificate approvals. I have experienced many delays in obtaining the approval through my own developments and those that I have undertaken however at other times when the staffing is adequate and they are focused they can be quite good".
Mr Romeo: "I understand there is an approach referred to as a turnkey development where you will undertake all of the work".
Mr O'Meara: "Yes that's right. We have done that in the past. We will take care of everything except for the selling and legal advice up until the completion of the lots".
Mr Romeo: "Michael I am particularly concerned with cost control and this is the reason I have decided to go with MED".
Mr Romeo: "The project will be fully funded. Money is not a problem. I am getting a loan from the National Bank".
O'Meara: "Payments will have to be made to MED as the claims are made so that we can see the project through".
Following this meeting, Mr. O'Meara noted in his diary that on 16 June he "sent Romeo stuff off to Hughes Trueman for a quote on Eng. Costs for Brayne Rd project." He goes on to note: "Found out Turners got [illegible] subdivision $200K under us. I don't know how they do it.
So this leaves us with very little prospective work except MEII and Romeo's subdivision in Brayne Rd. Trouble with those are the lead time involved in getting started i.e. months away."
In fact, Mr. Romeo was also in touch with Turners for a quote; on 17 June he faxed them the DA approval and attachments, saying: "Please find plan + DA approval attached. Please note: looking for turnkey handover [illegible] time is of the essence".
There is no doubt about the accuracy of the date of this fax, and the defendants submit that the reference in Mr. Romeo's affidavit at paragraph 15 to receiving a request from Mr. Lewis of Turners for surveyor's drawings and engineering plans, which Mr. Romeo says occurred in March, must have occurred in June, following this email, because Mr. Romeo says in his affidavit he told Mr. Lewis: "I have sent you the only information I have. O'Meara's in Griffith got the same information and said they could accurately price the job on that."
The defendants also suggest that the approach by Mr Romeo to Stephensons of Griffith may have occurred at the same time (paragraph 10, page 4 of the summary). Stephensons told Mr Romeo that there was no point even looking at the DA as they were flat out and in no position to start work in the immediate future (Mr Romeo's affidavit, paragraph 8). If the approach to Turners and Stephensons were at about the same time as each other, and we know that the approach to Turners was by fax dated 17 June, this is probably correct. This would also explain the other, inconsistent, statement by Mr. Romeo in his affidavit ( see the extract set out at paragraph 26 above) that he was actually referred to the defendants by Robert Cavallaro, the local real estate agent.
On 23 June Hughes Trueman sent a fee proposal ($17,140) for the preparation of relevant engineering documents for lodgment with the council for issue of a construction certificate. On the same day, Mr. O'Meara met with Gordon Griffith at the Council to discuss the most appropriate water detention basin for the development (Mr. O'Meara's affidavit, paragraph 25); he noted this in his diary.
There is no relevant activity, according to the parties' chronologies, between 23 June and 19 August 2004. During this period, on 13 August 2004, Mr. Romeo sent a fax to Budd & Partners seeking a further quote for the development (Exhibit 2).
Mr Romeo, in cross-examination was asked: "Q. Now, Mr Romeo, you were also asked some questions about when you actually reached agreement with Mr O'Meara, and I think you indicated that agreement had been reached in June, well before, I think your answer was, well before the heads of agreement had been signed? Do you recall that? A. Yes.
Q. And then you were asked why it is after that date you wrote to Turners? A. That's correct.
Q. Do you recall that? And you indicated that you wanted to see what they could come back with? A. See what sort of figures they would come back at.
Q. Then you were also given a document dated 13 August to Buddy and Partners? A. Budd and Partners, yeah.
Q. Yes. And you asked for a quote from them. Can you indicate why you did that? A. Also just to see what the comparable price was from another contractor in Griffith. Just to compare, just to see what sort of figures they would come back at.
Q. So what, just double checking Mr O'Meara's costings? A. Yeah. Well, one was from out of town and one was a local." (T-242 - 3) 59. Settlement occurred on 19 July. It was not until 19 August 2004 that the plaintiff and first defendant entered into the written agreement for $37,500 per lot. The reason for not doing so earlier, if time was so vital to the project, is not explained.
Mr Romeo's discussions with Mr O'Meara between 9 June and 19 August
Mr Romeo's evidence concerning the June meeting and other discussions he had with Mr O'Meara up to the date of signing of the heads of agreement is also the subject of challenge. These differences have been analysed in detail in the next section of this judgment. Briefly, it is the evidence of Mr O'Meara that this was the first time that the turnkey subdivision was first discussed. However, Mr Romeo's affidavit, at paragraph 26, does not refer to any discussion of the turnkey issue. He says that on 9 June the following conversation occurred: Mr Romeo: "How is the CC going with the Council? We came up to organising the picking of the crop and agree on prices for the sale of the Lots with the agent. Do you anticipate any problems with the timing?"
Frank Calabria: "Have you taken into account the Christmas break?"
Mr O'Meara: "The Christmas break doesn't come into play. It will be done by then". (Paragraph 26 of Mr Romeo's affidavit).
If this conversation is predicated upon Mr O'Meara having volunteered, in the meeting of 28 April 2004, to commence work on the lodging of a construction certificate, it is hard to see how he could have done so in circumstances where he had not been told the name of the plaintiff company (which had yet to be incorporated) and where contracts were not exchanged until 31 May 2004.
Mr O'Meara's version of events, as set out in paragraph 21 of his affidavit, was that it was on this occasion that he was asked what kind of work his company would undertake if the project was a turnkey project, and he made enquiries about the funding for the project. None of this is referred to in Mr Romeo's affidavit.
Mr Romeo says, in paragraph 31 of his affidavit, that he relied on the representations made by Mr O'Meara when the company exchanged and settled the purchase and that if he had not been aware that Mr O'Meara could not or would not complete the subdivision within 4 to 6 months, he would have gone back to the other two developers referred to above to lock in a time. He said he prepared all his figures with an April deadline. However, as the defendants have noted in their written submissions, bank records, such as applications for finance and other documentation which would support this contention, have not been tendered.
The circumstances surrounding the entry into the contract by the parties
On 19 August 2004 the plaintiff and defendants signed heads of agreement prepared by Mr O'Meara. The contents of this document are as follows: "HEADS OF AGREEMENT:
DEVELOPMENT OF FARM 2616 PORTION 806 BRAYNE RD GRIFFITH
This is an interim agreement between Cazazure Pty Ltd ABN 1209287087 [sic] of 1/39 Barbara Street Fairfield 2165 as the owner of farm 2616 portion 806 Brayne Road Griffith and Murrumbidgee Estate Developments Pty Ltd ABN 280 669 829 38 [sic] for the development of the above property and subdivision into 15 rural residential allotments as per the approved plan and development approval granted by Griffith City Council.
Murrumbidgee Estate Developments Pty Ltd (Murrumbidgee Estate Developments Pty Ltd) agrees to undertake all necessary works to enact the subdivision to councils [sic] satisfaction from the start of the design phase to registration of linen plan and certificate of title to the 15 lots. The work will include all approvals from relevant authorities and the payment of fees necessary to enact the subdivision as well as all physical works which are required. Murrumbidgee Estate Developments Pty Ltd agrees to carry out the works in a time manner not withstanding delays beyond its control including but not limited to approval times and the effects of weather.
Cazazure Pty Ltd agrees to pay Murrumbidgee Estate Developments Pty Ltd the sum of $562,500.00 exclusive of GST for the above works on the basis of regular and progressive payments as work proceeds. The basis of the contract shall be as per Australian Standards - Design and Construct, a copy of which will be included in the main contract.
SIGNED ON BEHALF OF SIGNED ON BEHALF OF CAZAZURE PTY LTD MURRUMBIDGEE ESTATE DEVELOPMENTS Name: Roy Romeo Name: Michael O'Meara Signature [Mr Roy Romeo's signature] Signature: [ Mr Michael O'Meara's signature] Witness: Illegible Witness Illegible Date: 19/8/04 Date: 19/8/04
Frank Calabria was also present, according to paragraph 32 of the plaintiff's affidavit. According to the conversation set out in Mr Romeo's affidavit, Mr O'Meara indicated once the construction certificate was ready, a builder's contract could be prepared and he repeated his statement that he was still quite confident that the development could be completed by Christmas.
According to Mr Romeo's affidavit, he said: "Michael, I think we should allow for completion by the end of February 2005. That allows for Council closing over Christmas. That's still okay in terms of my financing".
"In case of any more unexpected delays, I will work on April 2005 as being the absolute deadline. I have to finalise the signage and advertising by the agent, so I need an absolute deadline".
Mr O'Meara said that the end of April gave him "lots of time" as the Lots would be ready "long before then". Mr Romeo says, at paragraph 34 of his affidavit, that at the time of signing the agreement Mr O'Meara said:
"I'll prepare a formal contract that will outline all the relevant information, including the Christmas completion date, as well as outlining the works".
This version of the conversation is contradicted by Mr O'Meara at paragraphs 27-31 of his affidavit. He said he did not include in the heads of agreement a specified completion date, as he was unable to commit to one (paragraph 28), and that he had included in the contract the words that the first defendant would "undertake to complete the work in a timely manner notwithstanding any delays" followed by the references to the council and the weather. Mr O'Meara said he pointed this out to Mr Romeo, and said words to the effect that he had included other legitimate delays, of which the weather was an obvious example. He said that the time he gave to finish the project was that typically it should take around 12 months, but that there could be a lot of things outside his control that caused delay.
Mr Romeo's version of "in a timely manner" is set out at paragraph 37 of his affidavit as meaning "by Christmas 2004". In September 2004 Mr Romeo returned to Griffith with his brother, Mr Joe Romeo (who was also not called by the plaintiff). During this visit further assurances were given that the project would be completed well before April 2005, according to paragraphs 40 and 41.
Between October and December several "emerging delays" are referred to in the affidavit of Mr Romeo at paragraphs 42 to 46. According to Mr Romeo's affidavit he was having "regular telephone discussions" with Mr O'Meara, complaining that things were moving very slowly. He had the properties on the market for sale off the plan and said that there were interested parties but there was "not much to look at yet".
Mr O'Meara said he was still waiting on the construction certificate from Council.
Two important conversations between Mr Romeo and Mr O'Meara occurred in December 2004 and January 2005.
On 17 December 2004 the defendants, according to Mr O'Meara's affidavit, issued and posted an invoice for work that had been completed up to that point, for a total of $42,790. Mr Romeo said in evidence he did not receive it.
According to paragraph 56 of Mr Romeo's affidavit, he did not receive the first invoice from Mr O'Meara dated 17 December 2004 until 14 February 2005 when "at my request, it was faxed to me". He says in his affidavit that the invoice was for $42,790 and Exhibit 11 to his affidavit is a copy of the fax cover sheet, indicating that the original would be mailed.
In fact, the facsimile transmission which is attached encloses both the December and January invoices.
However, prior to this facsimile transmission being sent, on 6 January 2005, another letter was sent to the plaintiff by the defendants. The text of this document (which refers to the December 17 invoice in its contents) is as follows: " MURRUMBIDGEE ESTATE DEVELOPMENTS PTY LTD ME ABN 28 066 982 938 PO BOX 2423 GRIFFITH NSW 2680 Telephone: (02) 6964 4409 Facsimile: (02) 6964 4458
To: Roy Romeo Date: 6/01/05 Fax: 02 9821 3566 SUBJECT: Brayne Road Rural Residential Subdivision (15 lots)
Enclosed is a summary of costs as per our agreement and broken down to activity based costs. Included also is a projection on a monthly basis of the costs of each activity. The project should be finished in April.
Please contact me if further information is required.
[Signed M. O'Meara] Michael O'Meara Managing Director" BRAYNE ROAD SUBDIVISION COSTS 6/01/05
Roadworks $ 139,069.00 Kerb $ 36,480.00 Water (Potable) $ 51, 528.00 Common Trench for Electricity Gas, Telstra & Road Crossings $ 17,100.00 Stormwater Pits & Drainage $ 56,123.00 Drainage Detention Works $ 20, 520.00 Erosion Control $ 5,700.00 Cleaning $ 6,840.00 General Earthworks $ 17,100.00 Council Contribution & Fees $ 78,660.00 Testing & QA $ 17,100.00 Electricity $ 51,300.00 Engineering /Survey/Linen Plan $ 51,300.00 Restoration $ 13,680.00 TOTAL $ 562,500.00
Cleaning $ 6,000.00 Engineering Design Works $ 19,000.00 Consulting & Liaise with Authorities $ 7,400.00 Initial Earthworks $ 6,500.00 Sub Total $ 38,900.00
Jan-05 - (subject to Council approving construction certificate)
Earthworks $ 5,000.00 Erosion Control $ 5,000.00 Roadworks $ 40,000.00 Road Crossings $ 5,000.00 Testing $ 3,000.00 Stormwater & Drainage $ 20,000.00 Engineering & Consulting $ 10,000.00 Sub Total $ 88,000.00 Cont
Earthworks $ 5,000.00 Roadworks $ 50,000.00 Stormwater & Drainage $ 20,000.00 Drainage Detention Works $ 10,000.00 Engineering & Consulting $ 10,000.00 Testing $ 6,000.00 Water $ 20,000.00 Sub Total $ 121,000.00
Drainage Detention $ 10,000.00 Roadworks $ 15,000.00 Kerb $ 36.480.00 Water $ 20,000.00 Stormwater & Drainage $ 6,000.00 Common Trench $ 10,000.00 Testing $ 5,000.00 Engineering & Consulting $ 5,000.00 Sub Total $ 107,480.00
Roadworks (Bitumen) $ 31,800.00 Water $ 11,500.00 Testing $ 8,000 00 Common Trench $ 7,100.00 Survey & Linen Plan $ 7,000.00 Restoration $ 12,000.00 Electricity $ 51,300.00 Council Contributions $ 78,420.00 Sub Total $ 207,120.00
The first of these invoices, dated 17 December 2004, was for $42,790 and the second, dated 31 January 2005, was for $97,900. Mr O'Meara's evidence was that both accounts had been posted on the date indicated and that these were replacements sent to Mr Romeo at his request. The first of these documents, but not the second, is referred to in the 6 January letter.
The background to this letter is as follows. From 19 August 2004 the first defendant carried out work on the development pending the issuing by the Council of a construction certificate. The application for this certificate, and plans for a proposed drainage system, were lodged on 29 November 2004 and on 17 December 2004 the first defendant issues its first invoice for payment for $42,790, headed "Progress Claim 1".
According to Mr. O'Meara, just after this invoice was sent, Mr. Romeo asked Mr O'Meara to say he had received it, but more importantly to ask him to provide a schedule showing an April 2005 finishing date. It is common ground that this was not for his own or for the plaintiff's use. He had never sought written confirmation in the form of a schedule of works. The purpose of obtaining this letter was to help get bank funding for the project, according to Mr. O'Meara, who said the following conversation took place: Mr Romeo: "I have received your invoice and was wondering if you could provide me with a schedule showing an April finish date so that I can get my funding with NAB in order".
Mr O'Meara: "Yeah that's fine but it does concern me a bit that you assured me the project was fully funded, banks just don't put up this kind of money overnight you know. I will send you a schedule showing an April finish date, which is the absolute earliest finish possible and when we would need final payment, if it speeds up our ability to be paid when we submit our invoices to you".
This is why on 6 January 2005 Mr. O'Meara provided a schedule to Mr. Romeo personally, which said: "Enclosed is a summery [sic] of costs as per our agreement and broken down to activity-based costs. Included also is a projection on a monthly basis of the costs of each activity. The project should be finished in April."
As can be seen from the document set out above, this was followed by a profile of the activities of the first defendant. The next two pages set out that an invoice had been dispatched in December 2004. This was followed by a subheading: "Jan -05 (subject to Council approving Construction certificate)".
As can also be seen from the schedule set out above, a full set of entries also appear for February, March and April 2005.
The program and letter of 6 January 2005 are pivotal documents in the proceedings, because the plaintiff claims that these documents are contractual documents between the parties, forming part of the agreement entered into on 19 August 2004, while the defendants claim it is a post-contractual document prepared by Mr O'Meara to assist the plaintiff to obtain funding from the bank.
The parts of the document to which the plaintiff has drawn my attention, at paragraphs 29 ff in the written submissions are as follows: (a) The document amounts to a "program" and as such falls within clause 32 of the Australian Standards ("AS") contract (Exhibit D) which provides that a program which is a written statement showing the date by which, or the times within which, the various stages or portions of work are to be carried out or completed, and thus a contract document.
It is asserted that by reason of the provisions of the AS contract, which is referred to in the heads of agreement as being the basis of a contract and a document which will be included in the main contract, becomes thereby a contractual document.
(b) The heading "order of work" and "timing of payment claims" is in accordance with what would be expected from a program and the completion date of April 2005 makes this clear.
(c) In addition to amounting to a programming document and thereby forming a part of the contract, the reference to April 2005 as the final date for completion of all works is confirmed by the "For Sale" signs and sale advertisements in newspapers placed by the plaintiff on the premises for a considerable period of time (see Tender Bundle documents 10-18). It is submitted that this is "subjective" evidence of the parties' intention to complete the works by April 2005.
(d) The program does not state that the April completion date is subject to council or weather delay and the plaintiff submits that this is consistent with the plaintiff's construction of the heads of agreement and construction of the word "notwithstanding". The only exception is the reference under "January 2005" to "subject to council approving construction certificate".
I pause to note that the 6 January statement states quite clearly, next to the December 2004 entry, the words "Invoice dispatched" with a subtotal of $38,900. If this subtotal is multiplied by 1.1 (to add GST) the total is $42,790, which is the total referred to at [71] and [72]. This is consistent with an invoice having in fact been issued on 17 December 2004 to the plaintiff and not February 2005, as claimed by Mr Romeo.
The plaintiff submits that the failure of the council to issue the construction certificate did not prevent the defendants from complying with the order or works and the timing of payment claims set out in the program of works evidencing no delay due to this possible impediment. In fact, the construction certificate was issued on 19 May 2005 (affidavit of Mr O'Meara, paragraph 75), not January 2005. The plaintiffs have not, however, made any allowance for this delay, despite it being, on their own case, a matter of concession and agreement between the parties.
In addition, the payment program does not refer to the withholding of any percentage (let alone 30%) of the payment instalments. I note the explanations given to me in oral submissions to the effect that it is business practice not to do so but the fact remains that even on the plaintiff's evidence, no mention of the withholding of 30% of the payment instalments was ever made prior to the telephone conversation Mr Romeo had with Mr O'Meara on 27 March 2005.
This brings me to the circumstances in which the 17 December 2004 invoice (which, as I have noted, is identified as having already been issued in the 6 January 2005 letter and schedule of works) and 31 January 2005 invoice (at the request of Mr Romeo, sent to him on 14 February) came to be paid.
As I have already noted, Mr Romeo was well aware, from the contents of the 6 January schedule, that there was an amount outstanding of $38,900 for December 2004, even if he was not aware beforehand. Mr Romeo says that the first payment was not late because the request for the invoice was only made by him on 14 February, which meant the payment was due on or about 14 March and on 23 March 2005, the sum of $29,953 was paid. It is submitted that this was not a significant delay. However, the second claim, dated 31 January, was also payable, if not at the time when this invoice was sent out (if it was sent out), then one month after it was invoiced to the plaintiff.
Both these payments are made later than the dates upon which they were, on their face, due. The explanation for the lateness of the first (which I do not accept) is that it was never received, and the 6 January 2005 letter did not amount to a request for payment of this first claim for the sum set out in the schedule. The plaintiff submits (submissions, paragraph 123(b)) that the second claim required a construction certificate to be issued; this was only issued on 9 May 2005, and accordingly, the payment was not due.
I note an inconsistency here. The plaintiff expected the defendant to go ahead with performing works, notwithstanding the failure of the Council to issue a construction certificate, while at the same time taking the position that the plaintiff was not liable to pay for these works because a construction certificate had not been issued.
However, the importance of these events is not that these payments were late, or that the excuse for not paying them is unlikely or inconsistent. This brings me to the circumstances in which the plaintiff asserts that after payment of the 17 December 2004 invoice on 23 March 2005, in the sum of $29,953 (leaving a balance of $12,837) Mr O'Meara called Mr Romeo about the shortfall. It should be recollected that the sum paid ($29,953) was in response to the fax from Mr O'Meara's secretary, Megan, sending the December and January invoices for $42,790 and $97,900. Both had the words "Terms 30 days" on them.
According to Mr Romeo, the following conversation took place: O'Meara: "Roy, I received your payment today which was less than the invoiced amount".
Romeo: "Michael, as I told you, the bank is only lending 70% on the project and that is why we are only releasing 70% of payment until completion".
The "as I told you" is a reference to the conversation in paragraph 48 of his affidavit.
In paragraph 48 of his affidavit, Mr Romeo states that the schedule of works was required by the bank to finalise their paperwork for the granting of the loan facility. The loan application was approved at or about this time. According to paragraph 48 of his affidavit, the loan application was approved with only 70% of the total value. This led to him having a conversation with O'Meara along the following lines: Mr Romeo: "Michael, the bank has finally approved the loan, but it is only 70% of the purchase price. That means all your payments will be made on the same basis".
Mr O'Meara: That's fine, as long as I get the balance in the end".
In other words, without any demur, Mr O'Meara was agreeing to receive only 70% of the payments until the contract was completed.
There is no doubt that 70% only was paid in relation to each of the progress payment claims. The explanation given in the affidavit and to Mr Romeo was, however, admitted on behalf of the plaintiff, in oral submissions, to be false. The truth was that full funding had been given by the bank.
Mr Romeo admitted as much in his cross-examination: "Q. And the National Australia Bank came up with a loan facility up to 1.1 million dollars? A. Sorry?
Q. The NAB, the National Australia Bank-- A. Afterwards, yes.
Q. --eventually-- A. Eventually, yes, that's correct.
Q. Eventually, in about February 2005? A. That's - um--
Q. Came up with a 1.1 million dollar loan facility; that's right, isn't it? A. No, I actually - the 1.1, no, that was an - that was way back. It was actually less than that, well less than that if I remember correctly. It was well less than that. (T-105)
Q. And that was opened on 16 February 2005, wasn't it? A. Yes, that's what it says, so I believe, so yeah.
Q. And that was the facility that was put in place to allow you to draw down, to make payments in relation to this development, wasn't it? A. Um, not totally, no. At the time we had money that was probably to oversee that money, so yeah, we did put - it was supposed to be reimbursed, yes, so I do apologise, yes.
Q. Yes, that was right? A. Okay, that's the way - yes. (T-106)
Q. So, the facility that started on 16 February 2005 went right through until 15 April 2008, didn't it? A. Yes.
Q. And you had the capacity under that facility to draw down up to 1.1 million? A. That's - I believe so, yes.
Q. Yes, so by February 2005 you had funding 320,000 from Mr Zoric; 80,000 from Tiger One Pty Limited and 1.1 million dollars from the NAB, didn't you? A. Yes. No, no, 1.1? That was later if I remember correctly. It was less than that, the original. (T-107)
Q. Now when the bank facility was put in place in February, as her Honour has already pointed out, there was more than enough capacity for you to draw down 562,000 to pay, indeed the whole of the contract price that was to become due to Mr O'Meara, wasn't there? A. Yes.
Q. And the situation is, isn't it, that you did not have a loan application at that stage approved for 70 percent of the total value, did you? That is in February 2005? A. I don't understand what you mean.
Q. Well was it correct to say that in February 2004 you had a loan contract approved with 70 percent of the total value? A. That's correct.
Q. And then later when we got to 2006, 2007, it came to a hundred percent of the total value did it? A. That's correct.
Q. Right. A. Or thereabouts because I know that - probably more than that--
Q. And the total value included much more than the construction cost for the subdivision didn't it, the construction cost payable under Mr O'Meara's contract? A. That's correct. My affidavit states the reason also.
Q. Now the conversation that you suggest took place in paragraph 48 of your affidavit, where you said - do you have paragraph 48? A. Yes I do. Is ..(not transcribable)..
Q. Do you see that? And there's a conversation between yo u and Mr O'Meara you say took place, page 13? A. Actually on this one here - yeah, there's no conversation(T-111)
Q. Do you see at the bottom of that you say, "Me, Michael, the bank has finally approved the loan, but it's only for 70 percent of the purchase price? A. That's correct, yeah. That's correct.
Q. That's, to say that it's only 70 percent of the purchase price isn't right is it? A. No, that's what I've said, and unfortunately that's how I remember it, so.
Q. But it's not correct is it, it's not 70 percent of the purchase price? A. I apologise for that if that's the case, if I - incorrect choice of words, but yeah, no, that's what I've written so I can't--
Q. So it was wrong? A. What, the conversation was wrong, or that one bit of - please clarify.
Q. Well did you say those words? A. The way I remember it, yes, that's how I probably said it, so yes, if I've chosen the wrong words, I do apologise, but that's roughly - it's, the conversation to the following effect, so it's probably, I've made probably a wrong choice of words in trying to remember the conversation, but yes, it would have been along those lines.
Q. But you agree with me now - I don't want to labour the point, but it wasn't 70 percent of the purchase price was it? A. No. It was 70 percent of the - I borrowed 70 percent of the price, the purchase - of the purchase price.
Q. But the purchase price was only 380-- A. Of the, sorry, of the project price, the overall project, sorry.
Q. Of the total price? A. Yes, that's correct, so I've used the wrong words.
Q. Including-- A. That's correct, okay, that's - yes.
Q. --all sorts of things, not only the purchase price-- A. Yes, you're right.
Q. --the construction price, but-- A. You're right.
Q. --many hundreds of thousands, right. (T-113)
Q. And then you say that Mr O'Meara in effect accepted that all his payments would be made on the same basis? A. That's correct.
Q. And so what you are asking the court to accept is that Mr O'Meara agreed, did he, that he would only get 70 percent of his payments? A. Yes.
Q. And so you're asking the court to accept that Mr O'Meara agreed, in effect, to fund for you, 30 percent of the cost of construction? A. No--
Q. Yes? A. No, the answer is no. I didn't expect him to pay 30 percent of the development, so.
Q. No, I didn't say pay, I said fund, that is provide the funds until the properties were sold?
HER HONOUR: How about a bank roll, would bank roll?
Q. That would, yes, so you wanted him to bank roll 30 percent of the cost of construction pending completion and sale? A. That's why it was brought - that's the mount of funds and not get a healthy return on the profit, but by way of profit. Do you remember that, we looked at exhibit 6? A. Yes. (T-113)
Q. And what I also put to you, is that to suggest by saying that the bank only agreed to provide 70 percent of the purchase price, therefore your payments will be on the same basis, was not something that occurred either. You didn't say that? A. I did.
Q. And you didn't need to because you had enough funds to pay him in full, whenever it was required, didn't you? A. Yes.
Q. And there was no reason why you should have paid him only 70 percent and not 100 percent of the work that he invoiced you for, when it was invoiced? A. Explain - like you're trying to confuse me with all these questions. Can you ask these questions please? I really - you're starting to confuse me of how you're asking these questions, so you can - " (T-115)
I have set out this extract from the cross-examination in full, because of its importance to the credibility of Mr Romeo concerning his version of events.
In submissions, Senior Counsel for the defendant pointed out that AS contracts generally contain a retention clause. The fact remains, however, that whether or not the AS contract contains retention clauses (which I note, according to submissions on the subject, tend to be around the 5% mark) there was never any discussion of any percentage of the progress payments being withheld prior to this discussion. Mr Romeo was lying to Mr O'Meara about the financing of the project. His admissions in cross-examination directly contradict what he told Mr O'Meara.
I note, in addition, a pattern of such conduct: (a) He asks the Court to accept that progress claim No 1 sent on 17 December never arrived.
(b) He asks the Court to accept it was not as a result of this first progress payment arriving that he asked for the letter of 6 January 2005 to be prepared for his bank.
(c) He asks the Court to accept that the 6 January document, which lists the December 17 invoice as having been sent, and for a specified total, did not alert him to the fact that the first progress payment invoice was listed as having been sent, and for a specific amount.
(d) In fact, the bank loan was approved on 16 February 2005 in terms in which he had more than ample funds with which to pay Mr O'Meara's progress claim in full. If he sought to retain some percentage, he could have negotiated this on the basis of this being a retention fee, rather than telling a lie about the bank only giving approval for 70%.
(e) He continued to pay only 70% of the progress payments, despite having the funding to enable him to pay in full.
(f) The invoice of 31 January for $97,900, which was sent at the latest on 14 February 2005, was also paid late (16 May 2006) and only 70% was paid. The explanation in the submissions was that this was not payable until the certificate was issued by council is not an explanation offered in the affidavit. The construction certificate date was 19 May 2005, according to Mr D. O'Meara (paragraph 75 of his affidavit) which was three days after this payment.
According to both witnesses, the first time any suggestion of the 70% payment was made to Mr O'Meara was after he received payment on or about 27 March 2005. As I have indicated above, the statement that the bank was only lending 70% on the project (and that this was why he, Mr Romeo, was only releasing 70% of the payment until completion) was untrue.
In his evidence, Mr O'Meara said that following this unilateral act by the plaintiff, he had a choice of walking away from the project, at considerable financial loss, or going ahead with it, and he chose the latter course.
What was Mr O'Meara's version of the conversation? According to paragraph 69 of Mr O'Meara's affidavit, he rang to say that the amount paid was less than the invoiced amount and "I need you to pay the balance". Mr Romeo replied: "The bank will only release 70% of the finance until completion". Mr O'Meara said: "Roy, I am your developer and not your bank. There is no way I will finance 30% of the project. You will need to pay me the money." Mr Romeo replied: "Okay". However, no such payment was forthcoming".
Work did continue on the project. Mr O'Meara requested Polkinghorne Harrison & Longhurst to prepare Linen Plans for the project in May, and council issued a construction certificate on 19 May. On 27 May 2005 the National Bank allowed a draw-down of $140,690. This was an amount equivalent to the full amount invoiced by the first defendant for the progress claims Nos 1 and 2, which had been issued, but the balance was not paid.
The next discussion which I regard as being one of significance between the parties occurred shortly before the National Australia Bank drawdown, namely around 20 May 2005.
The 20 May 2005 conversation between Mr O'Meara and Mr Romeo
Mr O'Meara asserts that on 20 May 2005 he received a telephone call from Mr Romeo asking for an invoice to lodge with the bank so he could obtain funds. According to him, Mr Romeo said: "I want you to provide me with the next claim invoice so that I can give it to the bank and they will pay the next claim".
Mr O'Meara said he would issue the invoices only as he did the work, and the work Mr Romeo was asking him to claim for had not yet been carried out. He said he was concerned he was being asked for invoices for work not yet done when he was nearly $30,000 short on the first two invoices, and they had been paid late in any event. He asked "How do I know that you are not putting the money for this project elsewhere?" According to him, Mr Romeo replied "Listen, I could have fucked you over already but I haven't so don't ask me about money okay".
Mr O'Meara said: "Roy, I am now concerned about the funding for this project. I want you to supply me with an irrevocable letter of credit. I will not continue this conversation following your comments".
Mr O'Meara wrote this conversation up in his diary (Exhibit 7B) where he noted: "Had words with Roy Romeo over him putting in claims for work not done yet. When he said "I could have fucked you over already but I haven't…" really [sic] gave me the chills. He is now going to have to come up with an irrevocable letter of credit over this deal or I'm out of here."
Mr Romeo's cross-examination about this conversation was as follows (T-204ff): "Q. Right. Do you remember ringing Mr O'Meara on 20 May 2005? A. No.
Q. Do you remember now, sitting in the witness box, ringing Mr O'Meara? A. No.
Q. No. No recollection? A. No, offhand, no.
Q. Well I suggest to you that you did ring him up and you said, "Michael, I need you to provide me with an invoice to lodge with the bank so that we can get funds from them". Do you remember saying something like that? A. I disagree totally.
Q. So you can't remember it, but-- A. No, no, I disagree, I realised where you were going then, that's what date it happened, and I disagree, are you saying that's suggested it happened.
Q. Mr Romeo, are you trying to answer my questions or are you trying to work out where I'm going? A. No, no.
Q. And give the answer that suits your case? A. I disagree.
Q. I asked you which one are you doing? Are you actually trying to recollect for the court what occurred, or are you trying to work out where I'm going and give an answer-- A. I disagree that conversation - sorry.
Q. --which is suitable for your case. Which are you doing? A. I disagree that the conversation took place.
Q. Can you answer my question please Mr Romeo? A. I disagree that that conversation took place.
Q. That wasn't the question Mr Romeo. The question was, are you attempting to recollect what actually occurred in 2005 or are you trying to work out where my questions are going and give an answer that suits your case? A. I disagree that that conversation took place.
Q. And that's the answer to my question is it? A. That is the answer to your questions.
Q. Thank you. A. You asked me about that question - that conversation taking place and I answered it. It didn't take place.
Q. And I also suggest to you that Mr O'Meara said, "What do you need the invoice for?"? A. I disagree.
Q. And that you replied, "I want you to provide me with the next claim invoice so that I can give it to the bank and they will pay the next claim". Do you remember something like that occurring? A. I disagree.
Q. And Mr O'Meara said to you, "Roy, I will make the claims as I do the work and the work that you are asking me to claim for has not been carried out. I will not provide you with documents for a claim that's incorrect"? A. I disagree.
Q. Did he say in this conversation or any other conversation about this time that you recollect, "I am concerned that you are asking me for invoices for work not done when you are nearly 30 grand short on our first two invoices, and they are overdue anyway. How do I know that you are not putting the money for this project elsewhere?"? A. I disagree.
Q. What I'm suggesting to you is that your statement Mr Romeo, in paragraph 73, that Mr O'Meara did not question the payment in relation to the second payment claim is quite false? A. I disagree. No.
Q. And then did you say to Mr O'Meara, and I'm quoting. "Listen, I could have fucked you over already but I haven't, so don't ask me about money, okay". Did you say that? A. I--
Q. Did you say that in a telephone conversation with Mr O'Meara in about May? A. I may have used those words at some stage, but it wasn't at that time like from--
Q. And how do you recollect that? A. Because I never had that conversation with Mr O'Meara in regards to funding at that time, with the retention--
Q. It certainly wouldn't - sorry, I interrupted you Mr Romeo. A. With the retention and it was always agreed on that it was a retention and
Q. Did Mr O'Meara then say to you, "Roy I am now concerned about the funding for this project, I want you to supply me with an irrevocable letter of credit, I will not continue this conversation following your comments"? A. No.
Q. And if you assume that in the diary of Mr O'Meara for 20 May 2005, these words are recorded, "Had words with Roy Romeo"-- A. What date, sorry what date was that?
Q. 20 May 2005. The following words are recorded, "Had words with Roy Romeo over him putting claims in for work not done yet. When he said, I could have fucked you over already but I haven't, really gave me the chills. He is now going to have to come up with an irrevocable letter of credit over this deal or I'm out of here". Are you suggesting that those words were just made up by Mr O'Meara and put in his diary on that date? A. I wasn't near to see him write them in, so I can't answer that question. I'm assuming, I'm suggesting he may have.
Q. He may have? A. He may have put them in afterwards, but I definitely don't - I definitely did not have that conversation with Michael O'Meara.
Q. Well you said at one point that you may have said words-- A. No, I've said those - I had conversations well after that and they were in - they were said, or sorry--
Q. Can you tell me what it means? What does that mean, "I could have fucked you over already but I haven't, so don't ask me about money". I mean what does that mean? A. Towards the end of the year, later on in the--
Q. No, what does it mean? A. What's that?
Q. What does that phrase mean, "I could have fucked you over", what could you have done to him? A. No, I could have ripped him off and I could have stolen from him and not paid him anything if - when I owed him more money your Honour. But I knew I owed him a lot more money than at this stage he's saying now it's $30,000, right, and it wasn't at that stage anyway. It was a conversation we've had way past our original deadline, and I didn't - and I said to him, "I don't know what the problem is, we've been going on, we're over our deadlines", many conversations along those - but they weren't important conversations because they were never major issues."
Subsequent conversations between Mr Romeo and Mr O'Meara
According to paragraph 61 of Mr Romeo's affidavit, he was in continuous communication with Mr O'Meara by telephone over this period (no telephone records were tendered) and Mr O'Meara had one feeble excuse after another for the work not proceeding. He said Mr O'Meara had a number of excuses for delays in the work, such as "bloody Council can't get their act together"; "I can't get any answers from Council"; "I'm just waiting for material to arrive"; coupled with the assurance that once these matters had been sorted out, "the work will only take around six weeks to finish" and the assurance that "we are not too far behind" (paragraph 62 of Mr Romeo's affidavit).
In particular, on about 4 May 2005, Mr Romeo said he received a copy of a letter of 22 February 2005 sent by Council, concerning a list of outstanding matters which he thought Mr O'Meara had been attending to. The outstanding matters included: written approval from Murrumbidgee Irrigation; three comments concerning three of the drawings submitted; and the need for a pavement design and traffic control plan.
On 16 June 2005, Griffith Council wrote to Mr O'Meara, complaining that the drainage channel was, seemed to be excavated to a greater depth than that approved in the construction design drawings. Mr Romeo travelled to Griffith on 24 June 2005 and spoke to Graham Gordon. He told Mr O'Meara the Council told him the reason for delays was that Mr O'Meara was not complying with the requirements and that it was "not the first time either", to which Mr O'Meara replied that he was confident he could resolve the issue with the drainage very soon.
He repeated this in another conversation in July or August 2005. He received a telephone call from a man named "Bob" to say that Mr O'Meara's machine operator said work was slow because the owner did not like paying. Mr Romeo says he telephoned Mr O'Meara and said: Romeo: "Do I owe you any money and did you ever have to wait to be paid?"
O'Meara: "No, there has never been any issue regarding payment. Why the question?"
Romeo: "You should go speak to your employees and tell them to refrain from making false allegations. Bob told me your machine operator is spreading these rumours".
O'Meara: "I assure you I will get to the bottom of this". (Mr Romeo's affidavit, paragraph 81) 114. According to Mr Romeo, he subsequently learned that Mr O'Meara has abused "Bob" and had sacked his machine operator because of what was said. The fact remained, though, that there had been significant late payment of the first and second payment claims.
The third payment claim was dated 31 October 2005. Of the $139,730.80 claimed, $97,811.56 was paid, leaving a balance of $41,919.24 on the basis of this being 70% of the total claimed and it is asserted that: "Again there was no issue raised about this by O'Meara, as agreed at the outset." (paragraph 84)
The claim was due on 3 December but paid on 9 December, a few days late. Similarly, the fourth claim, dated 21 March 2006, was due on 21 April 2006 but paid on 2 May 2006, in the sum of $98,945. Mr O'Meara states that in April 2006, as a result of this series of reduced and late payments, he decided to reduce the rate of physical work on site, although some work continued to be carried out on the site by his employees.
A fifth claim of 31 May 2006 was again paid in a reduced sum, and not until 10 July 2006. A significant issue in dispute is whether the shortfall in payments played any role in the three years taken for the release of the Linen Plan in August 2007, with $71,550 worth of incomplete work that had to be bonded.
Contemporaneous records concerning problems caused by the shortfall in payment
The plaintiff points to the lack of complaint in correspondence, such as letters enclosing copies of the invoices, or entries in Mr O'Meara's diary concerning the shortfall in payment, or any written threat that work would only continue if Mr O'Meara and the first defendant were paid. I note the following diary entries over this period: (a) Friday, 20 May 2005: "He is now going to have to come up with an irrevocable letter of credit over this deal or I'm out of here".
(b) Friday, 7 April 2006: "Had words with Brownie after R. Romeo phoned to say he had some rather unpleasant things re the job, payment and me being at the rice farm".
(c) 11 April 2006: "Asked him about our payment and he said Tuesday 18/4".
(d) 19 April: "We are still in dire straits if Romeo doesn't come to the party and pay Brayne Road works".
(e) 21 April 2006: "Still no payment from R. Romeo. I can't see this job finishing".
(f) 24 April 2006: "Roy Romeo rang. Still no payment. He is making all the excuses in the world but still expects us to keep working. He will have to pay all external costs from here on because we bloody well can't".
(g) 27 April 2006: "Spoke to Frank Romeo re Brayne Road. (Roy's cousin). He said cheque for claim would be sent tomorrow if funds went into his account. He wants a detailed timetable for completion and I told him I couldn't give it, due to Council likely delays and also LTO".
(h) 20 May 2006: "Get letter to R. Romeo re amounts to be paid".
(i) 24 May 2006: "Spoke to R. Romeo. Told him release of plans was pretty much up to Council. Also told him a heap of fees, contribution and bonds would have to be paid to Council".
(j) 5 July 2006: "Problems developing re Brayne Road. It appears Romeo expects us to continue to work and spend money while they are nearly $200,000 in arrears and don't appear to have the funds to both pay the Council contributions as well as bond, outstanding works. They have still not sent back the completed water transfer papers for the Council, nor paid the contributions".
(k) Sunday, 27 October 2006: "Get payment from Romeo - spoke to F. Romeo".
(l) 17 November 2006: "Had a visit from Roy Romeo. This guy is unreal! Says now job is nearly done he could "fuck you off" and not pay, but says because he's a nice bloke he wouldn't do that! I got stuck into him when he said that".
(m) 4 May 2007: "Spoke to Frank Romeo re outstanding fees".
(n) 10 May 2007: "Spoke to Frank Romeo re Cazazure - he has promised another $15,000 into the account".
(o) 18 June 2007: "I asked for his bank to put up my security. He carried on like a right wally". (See also entry Thursday, 21 June 2007).
(p) 22 June 2007: "It's going nowhere until Cazazure or their bank can provide me security for outstanding fees and bonds for future work".
(q) 1 August 2007: "Spoke to R. Romeo again. What with Council and MI - this Brayne Road is going nowhere".
(r) 7 August 2007: "Roy reckons he's now got the money ready to pay. Spoke to Carla Gash and she asked if there were any outstanding issues and I said: Yes, plan is not going anywhere until Cazazure made arrangements to pay my $70,000 in outstanding fees going back a long time. She rang while I was at Trevor Hill's property on Envirowise bus trip. Tried to get Carla - again but she did not return my call".
(s) 10 August 2007: "Had a bit of a yelling match with R. Romeo re non-payment (back to October 2005) of account. I am sick of the bullshit from these pricks. He said he would put $30,000 into MED account today".
In addition, there are a number of entries in Mr O'Meara's diary about his financial difficulties generally, which he said in his evidence were exacerbated by the shortfalls in payment of the plaintiff. These are as follows: (a) 12 May 2004 - "I don't think I can take much more of this";
(b) 22 August 2004 - "get as much money in as you possibly can";
(c) 2 September 2004 - "feeling v desparate [sic] … have got to get out of it before it breaks me mentally …";
(d) 22 September 2004 - "feeling incredibly stressed and anxious";
(f) 30 September 2004 - "A lot of pressure back at office financially";
(i) 22 October 2004 - "Creditors meeting… I'm just so stressed";
(j) 25 October 2004 - "dreadful feeling of despair… nothing going right";
(k) 12 November 2004 - "feeling extremely stressed most of the time";
(l) 25 November 2004 - "met with Doyles… total cost… $150K…";
(m) 5 December 2004 - "concern with litigation… Doyles… action MEII" (MEII is the defendant's own 300 lot development);
(o) 20 April 2005 - "seeking funding for ME… things are desparate [sic]";
(p) 11 July 2005 - "distressed… going to close everything down… being stuffed around by council re ME… almost suicidal but would not do that to my family";
(q) 2 April 2006 - "starting to despair about the situation… RRG & MED. We just seem to be going nowhere. I can't go on looking after the farm and being able to manage what these other guys should be doing back in town".
In addition, there are references to financial difficulties in other documents. I note the following helpful summary from paragraph 142 of the plaintiff's submissions: (a) Tender Bundle 24 states: "I do not have the discretion to pay creditors; I have always strived to collect as much as I possibly can on behalf of creditors and am still working to that end; 03/04 must have been a shocker; cashflow is tight; we do have good rice crop this year and harvest has just finished; the rice crop and livestock operation should ensure the farm will make a profit for a change this year (2006); land sales in Griffith have crashed and we may be forced to firesale… in order to repay our bridging finance to complete the works; as for destroying records of the O'Meara group, I would suggest they are records that we paid a considerable amount of money over many years for and as such would regard them as being our property…";
(b) Tender Bundle 49 makes references to farm problems and includes: "… nightmare [sic]. Tanks are empty - cattle … (problems listed)";
(c) Tender Bundle 5 states: "… so this leaves us with very little prospective work except MEII and Romeo subdivision".
These diary entries tell a different story to that put before the court by the plaintiff. They paint a picture of Mr O'Meara as being desperate to get money from the plaintiff. By contrast, according to the affidavit of Roy Romeo, the first time that Mr O'Meara raised the question of non-payment was in a telephone conversation on or about 24 April 2006, when Mr O'Meara said: "Go and get fucked. You haven't paid my last invoice. I am taking my machinery and materials across to my subdivision as I have my own job I can do".
They had a "yelling match" in a subsequent conversation, in which Mr Romeo says he said: Romeo: "I am furious. If I wanted to rip you off, I would have done it a lot sooner when I owed you a lot more money. Don't play any more games with me and don't threaten me again. I have been very patient with you and your lies and the frustration has been growing. What you just did was very stupid".
O'Meara: "You don't understand that I've got suppliers ringing me for payment and threatening me with legal letters unless I pay my bills".
Romeo: "I don't understand. We have paid all your invoices. Rather than ringing me the way you did, you should have told me of your dilemma and I would have tried to accommodate. I will chase up the bank to see if we can get payment to you earlier. But you should understand what pressure I'm under with all these delays".
O'Meara: "I am sorry. I'll get on to the work and have it finished by the end of the month".
According to Mr Roy Romeo, from April 2006 his cousin, Frank Romeo, became involved and participated in discussions with Mr O'Meara, because the relationship between Mr Romeo and Mr O'Meara had clearly broken down (paragraph 95). The diary entries of Mr O'Meara record 15 entries from April 2006 onwards where he is contacting both of them to complain about non-payment. This includes a report of a visit by Mr Roy Romeo on 17 November 2006.
Frank Romeo was not called as a witness in these proceedings.
The plaintiff submits that this shows Mr O'Meara and his company were in significant financial difficulties and in addition that as a result of his own 300 lot development and farm problems he had serious financial difficulties. It is submitted that these were "significant distractions" that were the direct cause of the subdivision taking three years before the linen plan could be released (written submissions paragraph 44).
However, what these records clearly demonstrate is that as someone who is already suffering financial difficulties, Mr O'Meara and the first defendant simply could not cope with the add burden of the plaintiff unilaterally deciding to pay only 70% of the agreed contract price. There is no evidence to support the contention that the defendants had so much other work that they were unable to attend to the plaintiff's development application. The defendants 300 lot development is referred to in a number of the exhibits (I note the list set out by the plaintiff at paragraph 142 of his written submissions) but there is no break down of the time spent on this development to show that this meant that the plaintiff's work was being neglected. What is demonstrated is what Mr O'Meara candidly admitted in cross-examination, namely that he reorganised his priorities because of the financial burdens caused by the plaintiff expecting the first defendant to bear 30% of the cost of the development without any financial gain in return. Added to this were the problems caused by late payment of a number of the instalments, even though these were for short periods, and also the failure of the plaintiff to pay some of the outgoings, as noted in the diary entries set out above.
According to the affidavit of Mr O'Meara (paragraph 115), the cause of the arrears of the plaintiff, the first defendant reduced its physical work on the development. What work had the first defendant done prior to that time?
By the end of April 2006, the first defendant had carried out a considerable amount of the work: (a) made enquiries of service providers and other third parties to obtain quotes (paragraph 23 of affidavit of Mr O'Meara);
(b) obtained quotes for the construction of a design plan (paragraph 24 and 32 and Exhibit 7);
(c) attended meetings and made enquiries of Council;
(d) instructed P H L to redraft the surveyor plans (Exhibit 10);
(e) removed burnt trees and cleared the development site (Exhibit 12);
(f) contacted Murrumbidgee Irrigation (Mr O'Meara's affidavit, paragraphs 40-46);
(g) instructed Aitken Rowe Testing Laboratories to test soil conditions (Mr O'Meara's affidavit, paragraph 68);
(h) arranged for service providers to connect telephone and electricity to the development site (Mr O'Meara's affidavit, paragraph 72);
(i) carried out work following the construction certificate being issued;
(j) constructed a road and water drainage pit at the development (Exhibit 32);
(l) prepared the s88B instrument or assisted in its preparation;
(m) obtained quotes for a pump and fittings for a raw water system (Mr O'Meara's affidavit, paragraph 89);
(n) updated drawings of boundaries and layouts (Mr O'Meara's affidavit, paragraph 93);
(o) arranged for Truman Hughes to undertake a traffic report (Mr O'Meara's affidavit, paragraph 99 and 101);
(p) spreaded top soil (Mr O'Meara's affidavit, paragraph 100);
(q) engaged Coombs Consulting to draw up the linen plans;
(r) laid pipes for raw water and created access tracks for the development;
The plaintiff submits (written submissions paragraph 122) that the objective evidence of the defendants as contained in the diary notes and affidavits of Mr O'Meara demonstrates that "at no time did the first defendant "down tools" and actually ceased to undertake any works". There is, however, no timeline analysis of when or in what circumstances the work was done, apart from Mr O'Meara's evidence that as more and more money was outstanding, he would pull his workers off the project to work on his own project for a while.
In practical terms, Council had to issue the construction certificate for the development before the commencement of any significant work on the property (see Mr O'Meara's affidavit, paragraph 75) and the question which is unanswered for me, on the factual material, is how much work could be done before that time that was left undone. Although the plaintiff presses upon me that the construction of the word "notwithstanding" meant that the defendants were undertaking to complete the work in the same amount of time whether or not Council were dilatory, no submission has been made that it was an expectation that the defendants will commence significant work on the property prior to the issue of a construction certificate. What I was expecting to see in the plaintiff's chronology was an analysis of delays by the plaintiff in obtaining the construction certificate, and this evidence really is not available.
Once the construction certificate was prepared, the plaintiff went ahead and carried out the tasks set out in the list above.
The plaintiff points to the apparent contradiction between Mr O'Meara stating that in about April 2006 he decided to reduce the work rate of physical work on site (paragraph 115) with his statement at paragraph 121 that despite lack of payment work continued to be carried out. However, an analysis of the work that the defendants actually did does show a slowing down. Once again, I am indebted to Senior Counsel for the defendants for setting out the following lists of tasks completed by the first defendant from April 2008 onwards, which are: (a) an intersection on the development was completed (Exhibit 51);
(c) there were continued discussions with PHL about the linen plans. These were really drawn out; they finally gave an estimate on 2 November 2009 (Exhibit 33);
(d) liaised with Murrumbidgee Irrigation concerning the detention basin;
(e) continued to assist in preparation of the s 88B instrument;
(f) solved some zoning problems to assist the plaintiff; and
On 3 May 2006, Council said it would accept completed linen plans if the bond and headwork charges were paid, according to Mr O'Meara. On 16 June 2006, the first defendant advised the plaintiff that it would cost $126,310.00, including an estimated $103,229.00 to bond future works in order to have the linen plans released (Exhibit 76).
The real problem appears to have been the reluctance of the plaintiff to pay sums towards the development. For example, in June 2006, Mr O'Meara learned that the plaintiff had not paid contribution of $95,081 owed by 30 June 2006 to the Council (Exhibit 77 and 82). By 14 September 2006, the first defendant was advising the plaintiff that it was owed $145,875 for the development and I have set out earlier in this judgment a list of the many occasions when Mr O'Meara diarised his telephone calls to the plaintiff's offices. In addition, on 14 September 2006, a letter was sent.
Mr O'Meara's affidavit, at paragraphs 178-205, describes the ongoing dispute between the parties about money. This included, for example, that on or around 21 June 2007, a request was made by Council for a security payment of approximately $80,000. Frank Romeo, acting on behalf of the plaintiff, refused to give this requested security.
When viewed step by step, what this shows is a marked slowing-down of work on the site from approximately April 2006. Mr O'Meara's diary entries confirm his concerns about money, and the correspondence shows that the reluctance of the plaintiff to pay money was not restricted to the contractual obligations to the first defendant, but included payments for Council.
The linen plans were released to Cater & Blumer Solicitors, acting for the plaintiff, on or about 8 August 2007. At that time, the plaintiff owed the first defendant, and still owes the first defendant, $70,881.04.
The submissions of the plaintiff refer on a number of occasions to the "objective evidence". I have had careful regard to these contemporaneous records, including correspondence and Mr O'Meara's diary notes, in setting out the chronology of events.
The timeline of the project shows no apparent delay causing or contributing to the delivery of the construction certificate by Council in May 2005, considerable activity up until approximately April 2006 and then a marked slowing down from that period onwards.
I should formally note my findings concerning the credit of Mr Romeo. Having regard to the circumstances in which he misled Mr O'Meara concerning the 70% financing of the property, which meant that he obtained a significant financial advantage, I am of the view that he is a witness whose evidence should not be accepted unless it is corroborated by contemporaneous documentation. There are other matters going to Mr Roy Romeo's credit, such as the conversation of 20 May 2005, but these are of considerably less weight than his conduct in renegotiating the contract on the basis of an untruthful statement.
Failure to call Frank Calabria, Frank and Joe Romeo
As I have noted elsewhere, the plaintiff did not call Mr Frank Calabria or Mr Frank Romeo. The defendant asks me to draw a Jones v Dunkel inference. I do not accept the submissions in reply, as to Mr Frank Calabria, that there is an alternate inference open to the court that Mr Calabria "did not wish to be involved in the proceedings". Mr Calabria played a vital role in the early negotiations and his role must have been significant for Mr O'Meara to note in his diary and on the quotation that it was the "Calabria" subdivision.
Nor is it correct to say that Mr Frank and Joe Romeo could not have assisted the court with respect to the contract claim or the misleading or deceptive conduct claim. Mr O'Meara's evidence, during the period that these persons where involved in the project, was due to lack of funds, is evidence about which they could have assisted the court.
Mr Joe Romeo was in court during the proceedings and Mr Wright SC drew to my attention that he was nodding and shaking his head in the direction of Ross Lentini during his cross-examination. In written submissions for the defendants, Mr Wright SC states that after Mr Joe Romeo left the courtroom, Mr Ross Lentini "became more willing to agree with what was put to him in cross-examination".
While I would not be prepared to draw a Jones v Dunkel inference concerning the failure to call Frank and Joe Romeo, I do so in relation to Frank Calabria, by reason of the references to his name (and not that of Mr Roy Romeo) in Mr O'Meara's diary and on the quotation and the acknowledgement of Mr Roy Romeo that Frank Calabria (who had a financial interest in the project) was present at relevant meetings.
Having set out the factual background in detail, I now set out my conclusions as to what I accept as the facts, drawn from the conflicting description of events between March 2004 and June 2005.
The relevant documentary evidence is as follows: (a) 15/16 or 26/27 March 2004 - According to his American Express receipts, Mr Romeo was not in Griffith on these dates; he was in Casula. However, Mr Romeo had relatives in Griffith and visited there often for purposes such as family birthdays. He certainly was in Griffith on 26 and 27 March 2004, as there are hotel receipts for this (Exhibit C). The evidence about the birthday party could similarly be a few days out. By itself, this evidence of a mistake of date by a few days or weeks would be of little importance.
(b) Requests for quotations from Lewis - There is no doubt Mr Romeo contacted Lewis of Turners Excavations, faxed him a DA approval and asked for a quote for a turnkey handover, indicating "time is of the essence". The difficulty is that this fax asking for a "quote for subdivision" was sent on 17 June 2004, three months after the date given for the meetings with Mr O'Meara.
(c) Lack of corroborative entries in Mr O'Meara's diary referring to Mr Romeo - Mr O'Meara kept a diary which chronicled everything he did. There is no entry to corroborate any March meetings, no note of receiving documents, no information about what these asserted estimates were based on and no information such as contact telephone numbers for Mr Romeo or Midstate, and no details of the address. These were extensive meetings over two days. Mr O'Meara's first entry is dated 6 April 2004, and it is an approach by Mr Frank Calabria; he provided Mr Calabria on 13 April 2004 with an estimate for subdivision of the land, not based on engineering plans or a "turnkey" development, of $22,059, a considerably lower figure than the $30,000 Mr Romeo quotes.
(d) Inconsistency between the $30,000 missing quote of 16 March and the $22,059 quote of 13 April 2004 - This quote is not only materially different as to amount and document source (it states "Note - Estimate only & not based on eng. Plans (Not available as Yet)") and excludes items such as electricity, light poles and sewerage. However, most importantly, this "quote" is not addressed to Mr Romeo, or any company associated with him. The document of 13 April 2004 is headed "CALABRIA SUBDIVISION. BRAYNE ROAD. Frank Calabria 0427 278 957" (Exhibit A, p. 1).
The handwriting on this document to change Mr O'Meara's figures refers to allowing an additional 20% and $3,000. In cross-examination Mr Romeo said he did not know who had made these alterations.
If Mr O'Meara had had a meeting with Mr Romeo in March, and was preparing a revised quotation, it seems surprising that he should address it to Mr Calabria and that the total (and the absence of reference to a turnkey arrangement) should substantially differ. In addition, this was clearly not a final quotation, as the note at the bottom makes clear. Mr Calabria was not called by the plaintiff.
(e) Other contemporaneous documentation - On 5 May 2004 Smith Monti Legal wrote to Mr Romeo confirming his instructions that he intended to carry on a farming business on the development (Exhibit 1). The defendants submit that if this were not true, it would be an indication of Mr Romeo being prepared to lie in order to obtain a financial advantage. However, when read in light of the faxes to Lewis of 16 June 2004 and the date of incorporation of the plaintiff (27 May 2004), what this demonstrates, in my view, was that Mr. Romeo and Mr. Calabria were considering and discarding a series of proposals for this block of land.
Taking all of the above into account, and noting Mr Romeo's concessions that he was "making mistakes five years later" (T-96; see also T-197). I am of the view that I should prefer the accuracy of the document trail to Mr Romeo's recollection. The first contact was when Frank Calabria contacted Mr O'Meara 6 April 2004 to seek a cost estimate for carrying out construction work on the development (Exhibit 1, Exhibit 7(a)). He made a note in his diary for 10 April that this quote was not ready, and the quote is dated 13 April 2004. Mr. Romeo's evidence that Mr. O'Meara telephoned him on 6 April to advise that the costings for the work were complete and could be collected (affidavit of Mr. Romeo, paragraph 17) is also wrong.
There is objective evidence that Mr Romeo was indeed in Griffith on 27 and 28 April 2004, in the form of American Express and Kidman Wayside Inn invoices. In addition, in the helpful chronology supplied by the plaintiff, there is reliance upon: (a) the costings of 13 April 2004. However, these costings have Frank Calabria's name and telephone number, not Mr Romeo's. Nevertheless, it is likely that the provision of these costings would have been followed up by a meeting;
(b) Mr O'Meara's diary note of 9 June 2004 referring to a turnkey deal struck with Mr Romeo, which Mr O'Meara spoke to his solicitor about. The plaintiff's submissions are that this diary note does not reflect a first meeting. Its contents are:
"Met up with Roy Romeo re turnkey deal for [illegible] 15 lots dev. Brayne Rd. Will need to enter into a contract and spoke to Andrew [illegible] about it. Will drop off AS design and contract."
This diary note does appear to be consistent with the 9 June meeting not being a first meeting. It is not in dispute that Mr O'Meara had already provided some costings on 13 April 2004. Curiously, there is a fax note on the bottom of the page of this document, dated 15 April 2004, from Ross Lentini's business (named "TIL'N'4U"). Mr. Romeo must have come to Griffith during this time to inspect the Brayne Road property.
(c) The plaintiff also points to Mr. O'Meara's diary note of 23 June recording his meeting with Council and discussion of the works as being consistent with his promise to Mr. Romeo on 28 April to commence work on the lodging of the CC "straight away" and get a "head start".
Mr O'Meara denies that this meeting took place. Mr O'Meara's diary for April contains no reference to this 28 April meeting or any reference to any further contact with Mr Romeo (or anyone on his behalf, including Ross Lentini and Frank Calabria). According to his diary, on 28 April 2004 he was in Hay, not in Griffith.
The defendants draw to my attention the letter of Smith Monti Legal dated 5 May 2004, confirming Mr Romeo's instructions that he intended to carry on a farming business on the development, and to the fact that Cazazure Pty Ltd was not incorporated until 28 May 2004. The plaintiff notes Mr Romeo's evidence that he had bought an orchard as a going concern because it had oranges and that these instructions to his solicitor were accurate at the time of purchase. However, this letter does not say that Mr. Romeo (or the company he has yet to incorporate) is going to pick the oranges and then get on with the development; it notes his instructions to carry on a farming business.
The evidence concerning whether or not this meeting occurred is equivocal. There is no doubt that Mr Romeo was in Griffith and could have attended a meeting on 28 April, but there is also no doubt that Mr O'Meara was in Hay on that day. The plaintiff submits (on page 3 of the chronology) that Mr. O'Meara could still have travelled to Hay after this meeting.
Mr. Wright SC cross-examined Mr. Romeo on this: "Q. Now, I want you to assume, Mr Romeo, that Mr O'Meara's diary indicates that on 28 May he was in Hay and driving to and from that town all day, rather than in Griffith. Would that cause you to think that you may have misdated the conversation alleged in paragraph 22 of your affidavit? A. Not unless Hay is in Western--
Q. I'm sorry, did I say "May"? I meant April? A. Not unless Hay is in Western Australia and it's only an hour and a half away, so it's only three hours return trip, so I don't agree with what you're saying."
Mr Wright SC also checked whether it was possible the meeting occurred on March 27: "Q. Right. Now, is this correct, that in the time of this conversation here and you didn't actually speak to Mr O'Meara on the twenty-seventh, did you? It was only on the twenty-eighth that you spoke to him, according to your paragraph 22? A. Oh, I believe it was one - it was the day I travelled, I travelled on that day and he wasn't in, he wasn't available and I had to wait for him the next day. If that's the--
Q. Yeah? A. If that's the conversation, it was one of those conversations, yeah. Again yeah, that was when he was addressing his--
Q. Yes, that's one of them? A. His crop or his--
Q. And you had, on 28 April, it was only exhibit 5 that you had as the costings, wasn't it? Still? A. You go back to that, yes.
Q. So, you talked to him about the costings, you say, "The costings you've given me look good"? A. Considering I allowed $40,000 aside for my own homework(?) and so on, yeah.
Q. So, you didn't rely on his costings? A. No, no, I did. It looked great.
Q. Because they were so low? A. No, actually, we're well within the range, when we're talking about $3000 for electricity and light poles. We're looking at adding another 20 per cent, so we're still well under the $40,000 mark.
Q. And it's the case, isn't it, that as we noted on that document, Mr O'Meara's original bids did not have everything taken into account, did they? A. I missed - sorry, I missed what you said. Which - we going back to this same thing?
Q. Mr O'Meara's original document, exhibit 5, without taking into account the bits written down the bottom? A. But I don't know if that's - that's how I got it, so I don't know what you're talking about. That's the original I've got, photocopied. Sorry, I don't mean - that's the only copy I've got, with the print on the bottom and everything, so that's what I based it on." (T 147 - 8)
Mr. O'Meara was not asked whether after he had had the meeting he had made this three hour round trip. His evidence was that he was driving to and around Hay all day.
The plaintiff draws my attention to Mr. O'Meara actually commencing work for the Construction Certificate ("CC") to get a "head start" as being corroborative of the fact that he must have said this at this meeting, but this did not occur in April or even May 2004.
Of more assistance is the note that there are changes to the handwriting of Mr O'Meara's quotation, which include handwritten alterations and notes by an unknown party but also, alterations by Mr O'Meara (plaintiff's chronology, p. 3). The chronology does not give a transcript reference for this (just the note "xx" appears in the chronology) so I have checked the transcript. I cannot find that it was put to Mr. O'Meara that he made these changes at this meeting, or that some of them are his handwriting.
Given the way Mr O'Meara carefully noted all other meetings (including the next meeting on 9 June, which he does not dispute), and given my findings concerning the paper trail and objective evidence for other meetings, I am of the view that in April 2004 Mr Romeo was still undecided about buying the property (he did not incorporate Cazazure Pty Ltd or exchange contracts until late May, and there is no explanation for this not being done earlier) and, in particular, about the use to which he intended to put it. He was telling his solicitors as late as 5 May that he intended to carry on a farming business there.
Taking all of the above into account, I am not satisfied the plaintiff has discharged the burden of proof of establishing that the meeting of 9 June 2004 was not the first meeting between Mr Romeo and Mr O'Meara. All of the documentation points to Frank Calabria having contacted Mr O'Meara, provided his own phone number and requested the quotation. That quotation was later sent to Mr Romeo but, I find, by Mr Lentini, not by Mr O'Meara.
What happened when the heads of agreement were drawn up and signed
I pause to note that the plaintiff at paragraph 9 of the Amended Statement of Claim says that the contract of 19 August 2004 consists of three documents, the first of which is the "heads of agreement" of 19 August 2004. This is a very simple document. The following should be noted: (a) it starts with the word "this is an interim agreement";
(b) the defendant agreed to undertake "all necessary works" from the start of the design phase to the registration of the linen plan and certificate of title to the 15 lots, including all approvals and payments of fees necessary, in "a timely manner not withstanding delays beyond its control including but not limited to approval times and the effects of weather";
(c) the basis of the contract, which the parties proposed to enter into later, was to be "as per Australian Standards - Design and Construct, a copy of which will be included in the main contract";
(d) the contract price is stated as being $562,500 plus GST.
This brings me to the second group of documents which is asserted to be contractually binding, namely the 6 January 2005 documents.
While there is no term in the heads of agreement that the subdivision would be completed in anything other than a "timely manner not withstanding delays beyond [the first defendant's] control including but not limited to approval times and the effects of weather", the letter of 6 January does contain the representation that "the project should be finished in April". This is of course subject to Council approving the construction certificate in January 2005, which is another qualification.
When considering how to interpret this document, I should take into account that I have accepted the evidence of Mr O'Meara concerning the conversation which led to the creation of this letter. Accordingly, the document was created for the purpose of being provided to the bank, which was considering whether to fund the project for the plaintiff (as to which see paragraph 48 of Mr Romeo's affidavit). Accordingly, I accept Mr O'Meara's explanation as to his reasons for giving the April 2005 completion date.
I accept the submissions of the plaintiff that the AS contract (Exhibit D) contains a definition of a program which is deemed to be a contract document (clause 32, page 27) which would make it a contractual document if it was created to satisfy the requirements of the AS contract document referred to in the heads of agreement.
The plaintiff never in fact received a copy of the AS contract (see the affidavit of Mr Romeo at paragraph 35), nor was the AS contract ever actually incorporated into a main or final contract between the plaintiff and the first defendant. In addition, clause 32 provides for a superintendent to provide the information material and documents set out and referred to in item 27 of the AS contract. However, the principal reason why this document is not a program falling within the terms of clause 32 of the AS contract (Exhibit D) is that contrary to the requirements of clause 32, the payment schedule does not state when the works "are" to be carried out or completed and states merely that the work "should" be finished in April "subject to" Council approval of the construction certificate happening at a specific time.
In addition, this reference to "should" in relation to the complete date does not occur in the program, but in the covering letter, a document which sets out a profile of Murrumbidgee Estate Development Pty Ltd, namely that it was formed in 1994, that it has carried out a number of large projects, that the total value of work undertaken by it in the past 10 years is $12 million, and more material of the kind that would be completely irrelevant to a program of works. This is a document intended for other purposes, namely, to persuade the National Australia Bank to provide the monies sought.
In the event that I have erred and these documents do form part of the contractual documentation evidencing the agreement between the parties, they do not impose contractual obligations on the first defendant for the following reasons: (a) the language is not contractual but of an "invitation to treat" nature. The work is not described as a program but a "projection" and the project is described as one which "should" be finished in April. This is not a promise to complete by April 2005, particularly in circumstances where it is subject to Council approving the construction certificate.
(b) Neither of the parties suggested the agreement was varied when Mr O'Meara was told by Mr Roy Romeo that he would only be paid 70% of the payment claims. The plaintiff submits (written submissions paragraph 127) that it is "irrelevant" whether there was any agreement reached between the parties.
I have dealt in more detail below with the submissions concerning the manner in which I should interpret the word "notwithstanding".
Whether advertising the property with an April 2005 date was corroborative of statements made by the defendants
The plaintiff extensively advertised the property and offered to sell lots "off the plan" with a completion date of April 2005.
The plaintiff would have been well aware that the April 2005 date in the 6 January 2005 letter was subject to Council approval and that the April 2005 date was a "should" date, not a date set in concrete.
Having regard to: (a) the way in which Mr Romeo misled Mr O'Meara as to the bank only advancing 70%;
(b) his request to Mr O'Meara in May 2005 to invoice for work not yet done; and
(c) the circumstances in which representations were made to the bank concerning the April 2005 date;
I consider the representations made in these advertisements were puffery. Mr. Romeo hoped to attract buyers by promising the April 2005 date in the same way that he hoped to attract bank financing.
Applications of these factual findings to the issues in this case
Having made these findings of fact, I now come to a consideration of the issues which it is necessary to determine in relation to each of the questions that I must answer in accordance with the agreed questions drawn up by the parties.
I shall first generally note that while it is not in dispute that the heads of agreement were entered into on 19 August 2004 it is disputed that the documents dated 6 January 2005 constitute a part of the contract and that the proper construction of the terms of the contract is a matter of extensive argument.
The claim in negligence, which was pressed only faintly during the trial, appears to assert that the existence of a contract gives rise to a duty of care, and as Mr Wright SC notes, in his helpful submissions, the question in this regard, is whether such a duty arises as a matter of law and, if it does, what its content is.
As to the question of misleading or deceptive conduct by the defendants, I note in relation to the conversations on 15 and 16 March, 6 April, 13 April, 15 April and 28 April, that the plaintiff had not been incorporated. These statements, if made at all, were made to Mr Romeo and Mr Calabria at the time when the plaintiff did not exist. The submissions have not dealt with the circumstances in which representations to a person prior to the incorporation of the corporation may take place. This would mean that everything depends upon the representations of 6 June 2004. As I have found that, consistent with the documentary evidence, Mr Romeo did not even meet Mr O'Meara until 9 June 2004, my finding of fact is that these conversations alleged by the plaintiff did not take place.
I now turn to a detailed consideration of the causes of action for contract, negligence and misleading and deceptive conduct.
In the plaintiff's written submissions, it is submitted that the plaintiff was concerned with two things, namely "how much?" and "how long?".
In my view it would be fair to say that both parties were concerned with these matters. The note upon which the parties agreed did not have any component for the withholding of 30% under the heads of agreement and it is curious that a variation of this vital part of the contract term is not relied upon by the plaintiff as forming part of the contract.
As to the question "how long?" this is dealt with in the contract by the reference to the work being carried out in a timely manner, "notwithstanding" delays caused by weather and by meeting Council requirements.
At paragraph 24 of the plaintiff's written submissions, the rhetorical question is put that "it is an extraordinary proposition to suggest that, in these circumstances, Mr Romeo would not have pressed Mr O'Meara to nominate a completion date". However, even on the plaintiff's own case, that completion could be one of a series of dates, ranging from December 2004 to August 2005.
The heads of agreement was an interim agreement which the parties clearly intended to revise. In practical terms, that is what they did. The question is, what were those subsequent agreements between the parties.
The first question, however, is the construction of the sentence "in a timely manner notwithstanding" in the heads of agreement.
The plaintiff refers me to the dictionary definition of "notwithstanding" namely "despite", "in spite of", "regardless of", and "nevertheless".
The word "despite" was considered by Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 754 at [12]-[13] as follows: " [12] The defendant's argument turns wholly on the meaning and effect of the "Despite" specification in the opening words of s 94(1A). In Attorney General of the Commonwealth v Oates (1999) 198 CLR 162, Gleeson CJ, McHugh J, Gummow J, Kirby J and Hayne J observed that, in modern legislative drafting, "despite" has the same meaning as "notwithstanding". The court regarded as applicable, in construing a provision introduced by the words "Despite anything in any other law", decisions and commentary on analogous earlier legislative provisions beginning "Notwithstanding anything in any other law" or "Notwithstanding anything in any Act". In the present instance, regard may thus be had to cases which have considered qualifications introduced by the word "notwithstanding".
[13] The process of analysis to be followed in such cases was described by Irvine CJ, Cussen J and McArthur J in In re Bland Bros and the Council of the Borough of Inglewood (No 2) [1920] VLR 522:
As to the introductory words, the section should first be construed without them, and then, if there is anything in the other provisions of the Act inconsistent with the interpretation so arrived at, these other provisions must yield.
This, it was said, was the effect of what had been decided by all the justices of England in Sir Thomas Cecil's Case (1597) 7 Rep 18b; 77 ER 440. It was there observed by the Exchequer Chamber that the effect of such a "notwithstanding" provision is to make the subject matter to which it refers "no impediment" to the substantive enactment introduced by the "notwithstanding" provision."
The principles relating to the construction of terms in contractual documents have been set out in the series of decisions of the New South Wales Court of Appeal and High Court. The plaintiff has drawn my attention to discussion of these principles in those decisions, but the parts of these judgments which I consider are more applicable to the facts of this case are not the same as those to which I have been taken by the plaintiff. The relevant extracts are: (a) In Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; (2007) Aust Contract R 90-254; [2007] NSWCA 65 at [106], the Court of Appeal cited with approval the decision of Lord Hoffman, with whom Lord Goff of Chieveley, Lord Hope of Craighead and Lord Clyde agreed, in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912-913. The plaintiff referred me to [5] but the whole of the passage paints a clear picture:
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax. (see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd .)
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in The Antaios Compania Naviera S.A. v Salen Rederierna A.B. 19851 AC 191 at 201:
… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."
(b) The plaintiff referred me to the opening words of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109-110. However, I consider that his Honour's subsequent explanation of the relevant legal principles goes to the heart of the issues here:
"It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate" , to use the words from earlier authority cited in Locke v. Dunlop (1888) 39 Ch D 387, at p 393, which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case (1880) 16 Ch D 681, at p 686. Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd. [1932] UKHL 2; (1932) 147 LT 503, at p 514, that the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. [1968] HCA 8; (1968) 118 CLR 429, at p 437)." [emphasis added]
(c) The plaintiff and I also part company as to the relevant extract in Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd (2004) 12 BPR 22,879; [2004] NSWCA 114. At [69], McColl JA explained:
"[69] If the words used (in a written contract) are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate": Australian Broadcasting Commission v Australasian Performing Right Assn Ltd (1973) 129 CLR 99 at 109 per Gibbs J (as he then was). However, in construing written contracts it should be presumed that the parties did not intend their terms to operate unreasonably. The more unreasonable the result a party's construction would produce, the more unlikely it is that the parties would have intended it. If the parties did intend an unreasonable result, it is essential that that intention be made "abundantly clear": L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 251 per Lord Reid. " [emphasis added]
(d) In addition, the explanation of ambiguity in Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 by Santow JA at [24]-[25] noted the importance of the text itself when considering issues of interpretation:
" [24] But resort to extrinsic evidence, here documentary, must not detract from the axiomatic proposition that the starting point when considering a point of interpretation must be the text itself. As Lord Steyn observes "The mandated point of departure must be the text itself. The primacy of the text is the first rule of legal interpretation for the judge considering a point of interpretation. Extrinsic materials are therefore subordinate to the text itself". Mason J reminds us in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352-3 that the starting point is to identify ambiguity in that text:
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.
[25] Thus far no Australian authority has gone so far as to allow unambiguous language to be contradicted by context. In B & B Constructions (Australia) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 Kirby P pulled back from the proposition that context can be so used, only going so far as to suggest that there can be cases where "ambiguity would not be perceived without reference to that extrinsic evidence" (at 234). He nonetheless concludes:
At least if on the face of the written agreement, the words appear ambiguous, the parties may call evidence to clear up the ambiguity. They may provide their own dictionary as to the meaning to be assigned to a particular word or phrase. This approach was accepted as the rule of the common law by the House of Lords in Prenn v Simmonds [1971] 1 WLR 1381 at 1388 ; [1971] 3 All ER 237 at 243. It was accepted as part of the common law of this country in Codelfa (at 352): see also Horsfall v Braye (1908) 7 CLR 629 at 638 and Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 606;" [emphasis added]
This document is a commercial agreement. The High Court has consistently held that in the search for the intention of the parties, no narrow or pedantic approach is warranted (Upper Hunter County DC v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 437) and that to understand an construe the document the court should have regard to the genesis of the transaction, the background, the context and the market in which the parties were operating (Zhu v Treasurer of New South Wales (2004) 218 CLR 429 at 437).
Having set out the relevant principles of law, I now consider the way in which the relevant terms of the heads of agreement should be interpreted. The principle issue is how to interpret the word "notwithstanding".
The plaintiff submits the meaning of "notwithstanding" is "unambiguous" in the sense referred to by McColl JA and ought to be construed according to its general meaning. This is submitted to be consistent with the plaintiff's evidence that the subdivision was to be completed with an "absolute" (to quote the plaintiff's submissions at paragraph 57) deadline of April 2005, without any qualifications relating to delays by Council and weather. The evidence of Mr O'Meara that he intended this document to be promissory only, and to be used for the purposes of obtaining a loan from the bank rather than as a contractual agreement between the parties, should be ignored by reason of the contra proferentem rule.
At paragraph 60 of the plaintiff's written submissions it is submitted that the evidence of the plaintiff should be preferred over the evidence of the defendants' as it is "strongly supported by the objective documentary evidence referred to above".
An analysis of the documents referred to in paragraph 59 of the plaintiff's written submissions, when added to my finding that I prefer the evidence of Mr O'Meara on disputed issues to that of Mr Romeo, shows that this is not the case. I will go through each of the items in the plaintiff's list in paragraph 59 in detail: (a) The plaintiff's evidence that "time is of the essence" (Tender Bundle 6).
This document was never sent to Mr O'Meara or to the first defendant. The phrase "time is of the essence" appears in a request for a quotation from a rival developer. The defendants never saw this contractual document and were not a party, for obvious reasons, to these negotiations between the plaintiff and the rival from whom the plaintiff was seeking a quotation. In addition, given the circumstances in which a quotation was sought urgently, in my view "time is of the essence" related to the urgency of obtaining the quotation. This document is of no assistance to the plaintiff.
(b) An asserted admission by the defendants at paragraph 17A of the Defence that the defendants understood that with such projects, time was important.
However, this is what the defendants meant, in my view, by the reference to "in a timely manner".
(c) The circumstances in which Mr O'Meara met with Council and sought to obtain engineering plans prior to the contract being signed.
The meeting with Council appears to have been a brief informal meeting. The information that Mr O'Meara was obtaining was of a preliminary nature.
(d) Mr O'Meara's omission that typically the development should take 12 months.
The fact that developments typically take 12 months, unless problems arise, and a statement to that effect, is not evidence of a contractually binding promise to do so unless that contractually binding promise is included in the contract. Time estimates are commonly given for typical matters, such as the length of time to build a house or to conduct a court case.
(e) The reference in paragraph 53 of Mr O'Meara's affidavit that the April finish date "is the absolute earliest finish possible".
Mr O'Meara gave evidence in the witness box and was cross-examined. I found his natural words coming in a spontaneous fashion in answers to questions of more assistance in working out what really happened than the contents of his affidavits.
There is an additional matter that I wish to deal with in terms of ambiguity. I do not accept the submissions of the plaintiff that the word "notwithstanding" is unambiguous. The contract being constructed by Barrett J was a carefully drafted legal document; in the present case Mr O'Meara drafted this document himself and it is comparatively informal in nature. Mr O'Meara's understanding of legal issues need to be seen in this light.
The word "notwithstanding", when read in context, means "not taking into account", which I note the defendants at paragraph 67 of their written submissions called "the common language meaning". What was clearly intended was that the work would be carried out in a timely manner, but that matters that were beyond the first defendant's control, which was "including but not limited to approval times and the effect of weather" were not to be held against the first defendant. Obviously, if it was raining, the first defendant could not be expected to be out there working, and if Council did not grant approval, the first defendant could not be expected to go on performing the works illegally.
The key in my view is the use of the word "timely manner", a clear and frequently used term. Whether works were completed in a timely manner will depend on the particular circumstances of the case. I agree with the defendants' submission that the particular circumstances and explanations for specific delays have not been explored in the evidence to any sufficient extent so as to allow me to come to a definitive finding that the works were not completed in a "timely manner". Mr O'Meara's evidence as to the completion of work in the timely manner refer essentially to two problems, namely problems in obtaining Council approvals, and problems caused by lack of money.
Had the plaintiff provided a timeline of tasks which should have been performed and over what period, preferably supported by expert evidence, this would have enabled this issue to be the subject of evidence and submissions.
Where parties have agreed to the performance of work in a "timely manner" with a proviso that matters that are "beyond [the first defendant's] control" are not to be counted, the dictionary definition of the word "notwithstanding" should not be employed to defeat the obvious common sense meaning of the provision. Matters "beyond [the first defendant's] control" arguably also include getting the plaintiff to pay what was agreed to in the contract in full and on time.
This brings me to the consideration of the documents of 6 January 2005.
I should address three issues: (a) Why were the documents created?
(b) Are the terms of the documents promissory or contractual in nature?
(c) Even if the documents were contractual, how is the contract as a whole to be construed?
Both parties agree that one purpose of the 6 January 2005 letter and schedule was to provide a copy to the National Bank, which was considering whether to provide funds for the plaintiff. The plaintiff needed a detailed timetable for completion in order to obtain the loan it was seeking. These documents did not satisfy any requirements of the "Australian Standards - Design and Construct" contract referred to in the heads of agreement, nor was it created for that purpose. As Senior Counsel for the defendants points out in paragraph 46 of the submissions, this document was never incorporated into a main or final contract between the parties and the plaintiff was never sent a copy of the AS Contract, according to the evidence of both parties. The purpose of this letter was to assist the bank, not to define the contractual obligations of the parties and I agree with the submissions for the defendants that this document could not have been included to be amongst the documents referred to in clause 32 of those Standards.
The second issue is whether or not this document is in fact accurate. I have set out in my description of Mr Romeo's evidence that I have accepted Mr O'Meara's evidence that Mr Romeo attempted to pressure him into providing a schedule of works that was inaccurate so that Mr Romeo's company could obtain funds from the bank to which it was not entitled. The purpose of this document was not to reflect accurately the position or progress of the works; it was to assist the plaintiff to obtain funding.
As such, this document cannot be a "program" falling within clause 32 of the Australian Standards - Design & Construct (Exhibit D). I also note the following additional reasons referred to by the defendants in paragraph 48 of the written submissions: (a) The payment schedule does not state when the works "are" to be carried out but are presented as a "projection" with the reference to the work as something that "should" be finished in April and are "subject to" council requirements. This language is designed to cloak the fact that what is expressed is a hope rather than a reality.
(b) No superintendent was ever nominated or appointed to receive the information, materials and documents, referred to in item 27 of the "Australian Standards - Design & Construct" contract.
(c) As indicated above, neither Mr Romeo nor any officer of the plaintiff was ever given a copy of the "Australian Standards - Design and Construct" contract.
(d) The request for a schedule was not made in contemplation of clause 32 and was intended for a purpose completely alien to that contract, namely the obtaining of finance. This is why the schedule of payments is effectively a projection rather than a proper schedule of payments.
(e) Furthermore, as I have indicated above, the intention of the parties was not to be contractually bound by its contents. Mr Romeo wanted money from the bank, and when he needed more money from the bank, he asked for another payment schedule containing information that was incorrect.
Accordingly, I find that the documents were not contractual in nature. The language of the documents (notably the words "projection", "should", and "subject to") are words indicating promises and conditions. Secondly, and most importantly, the documents were prepared to present to the bank. I note the submission for the defendants that no other banking documents were produced indicating an April 2005 completion date. If the plaintiff had been telling the bank that there was a contractual completion date of Christmas 2004, or April 2005, those contemporaneous documents, and the bank's response to them, would have been of assistance in determining this factual issue. Thirdly, the format of the documentation is not that of a schedule of works but a sequence and schedule of times and events, including payment claims, of the kind designed to be read by a person providing finance, rather than other party to a contract. Finally, there is the qualification "subject to Council approving construction certificate". If this document is contractual, then, given that Council did not grant the certificate in question until May 2005, this document is inconsistent with an April 2005 completion date and it would follow that all other items from January onwards would be delayed accordingly.
Thus, event if I have erred and the 6 January 2005 documents was a part of the contract between the plaintiff and the defendants, the document would need to be construed strictly and the "subject to Council approving construction certificate" provision would operate against the argument put by the plaintiff. On either scenario, the document created on 6 January 2005 cannot resolve the fundamental issue, namely the absence of a contractual term that the works will be finished by December 2004 and/or April 2005 and the absence of a contractual term to the contrary, namely that the works would be completed in a timely manner notwithstanding delays beyond the first defendant's control, including but not limited to approval times and the effect of weather.
The defendants point out in written submissions that the plaintiff does not plead in its Amended Statement of Claim that it was a term of the contract that the works would be completed in a timely manner, nor does it allege that such a term was breached. It is submitted that therefore no relief should be granted on this basis for this reason alone.
This case was fought on the narrow factual basis that I would accept and prefer the evidence of Mr Romeo to that of Mr O'Meara. I have not done so. I have not accepted the evidence of Mr Romeo that there were agreed time estimates of Christmas 2004 and/or April 2005. The plaintiff should not be permitted to bring a new case at the submissions stage for the reasons enunciated by the High Court of Australia in AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; (2009) 83 ALJR 951; [2009] HCA 27.
In the event that I have erred in making this finding, I observe that even if I were to grant leave to the plaintiff to amend the pleading to make such a claim, it would fail for the reasons so helpfully explained by the defendants in their written submissions at paragraph 63 t o74.
I have set out my findings elsewhere in this judgment concerning the plaintiff's claim for negligence and misleading or deceptive conduct. I shall briefly note the basis upon which the defendants' claim in contract should succeed as a result of the failure of the plaintiff's claim in contract, as well as these other bases.
The defendants' claim is based on the term in the contract for payment for $562,500 exclusive of GST in progressive payments.
It is not in dispute that the first defendant invoices for $482,241 have not been paid in full. The Defence to the Cross-Claim admits that the plaintiff has paid $411,459.96, leaving a balance of $70,881.04.
Accordingly, I formally note that the plaintiff / cross-defendant must pay the first defendant / cross-claimant the sum of $70,881.04 being the balance owed.
The claim in contract brought by the plaintiff has failed, and I have answered questions (a)-(c) accordingly at the end of this judgment. The claim for the cross-claimant has succeeded.
Before considering these submissions set out by the plaintiff at paragraph 74 of the written submissions, it is necessary to formulate what the particulars of duty and breach would be. If what is proposed is some form of restatement of the contractual duty, then there cannot be a breach of duty for the reasons by Perre v Apand Pty Limited at [124]-[125] and [129]. If the duty of care is different from the obligations under the contract, those duties need to be identified with some precision, not only to determine what they are, but to see whether they are more extension than the contractual duties.
Even if a duty of care could be identified with precision, the imposition of such a duty of care would impose indeterminate liability on the defendants and impose an unreasonable burden on the first defendant.
The argument that the plaintiff had no expertise in developments of this nature and relied on the defendants' expertise is similar to claims of unconscionable conduct brought in relation to the Contracts Review Act 1980 (NSW). Concepts of vulnerability in a business context such as a building subdivision between two companies where on both sides the relevant parties are experienced businessmen, able to speak English and under no intellectual or other disability sit uneasily with the concept of vulnerability as discussed in Perre v Apand Pty Limited. On any analysis, the behaviour of Mr Roy Romeo throughout the contract, including his dealings with Mr O'Meara, are not those of a vulnerable person.
Exceptions to this arise where one party to a contract is vulnerable; and it is significant that claims put alternatively in contract or tort, occur in situations where a duty of care arises by reason of that vulnerability (such as the solicitor/client or doctor/patient relationship). That claim is made here, on the basis of the asserted vulnerability of one of its directors, Mr Roy Romeo.
In submissions in reply (paragraph 71) the plaintiff explains the basis for claiming it was vulnerable in that it was the first subdivision development entered into by the Company and by Mr Romeo, the Company Director. It is asserted that Mr Romeo's evidence establishes that he was "induced" by Mr O'Meara into entering into heads of agreement on the basis that this was an interim agreement, and he would be provided with the main contract, which never happened. It is further submitted that if the program and letter of 6 January 2005 should be rejected as forming part of that contract, it would be open to the Court to impose a concurrent duty of care.
However, as Senior Counsel for the defendant points out in his helpful written submissions, Courts have found no concurrent duty of care for pure economic loss in cases relating to commercial building contracts. In Frederick W. Nielsen (Canberra) Pty Ltd v PDC Constructions (ACT) Pty Ltd (1987) ACTR 1 at 9, the Supreme Court of the Australian Capital Territory held that where parties to a building contract enter into a detailed written agreement, intended to regulate the contract, a party cannot be heard to say that breaches are breaches of duty of care to ensure the plaintiff suffers no economic loss.
Mr Romeo actively sought a series of quotations from developers for the subdivision and participated in an active way in negotiations. As a real estate agent he had a degree of business understanding and could not fall within the definition of a vulnerable plaintiff as referred to by the High Court in Perre at paragraph 120. Recent decisions of the High Court of Australia concerning the doctrine of coherence reinforce the approach taken by McHugh J in Perre at 120, where his Honour notes that where another body of law can effectively deal with economic loss a Court should be slow to use negligence law to impose a duty of care on a defendant.
If I have erred in holding that no liability in tort has been made out, I should note that the question of what amounts to a reasonable time is an issue of fact for which evidence (for example, evidence of delay) needs to be established. Senior Counsel for the defendants directs my attention, in written submissions at paragraph 89, to statements to this effect in Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 at 576B.
As I have indicated above, the question of what amounted to a reasonable time for this project would depend upon a consideration of all relevant external events, when and in what circumstances events did or did not occur, and whether the conduct of the first defendant was responsible for each of the relevant shortcomings which led to the Works not being completed within a reasonable time. Mr O'Meara said in cross-examination that the problems of obtaining approvals, delays in response from other bodies such as Murrumbidgee Irrigation, financial difficulties caused by the late payment and the weather were factors.
Mr O'Meara did say in his evidence that usually such projects take about twelve months. However, as I understood his evidence, that was predicated on a number of matters, one of which was payment of the agreed contractual instalments in accordance with the contract.
There is no other evidence on the issue, and it is not open to me to speculate as to whether or not the Works were completed within a reasonable time.
The claim for negligence fails, and I have answered questions (d)-(f) accordingly in the relevant section at the end of this judgment.
The breaches of s 52 Trade Practices Act and s 42 Fair Trading Act are set out in paragraph 21 of the Statement of Claim and summarised in paragraph 4 of this judgment, together with the representations, which are set out in paragraph 5 of this judgment. As noted in paragraph 6 of this judgment, it is asserted in paragraph 22 and 23 of the Statement of Claim that it was against this background that the defendants made the representations which are the subject of this portion of the claim.
Mr Roy Romeo gave evidence of certain of the representations at paragraph 10-11, 18-19, 22 and 32 of his affidavit.
The plaintiff submits (written submissions, paragraph 76ff) that the letter and program dated 6 January 2005 "categorically demonstrate that the defendants represented that the subdivision would be completed by April 2005", and that this is consistent with the oral representations that the plaintiff alleges Mr O'Meara made to Mr Romeo. The plaintiff relies in addition on the signage placed on the property by the plaintiff, which Mr O'Meara never questioned.
All of these matters are relied upon as presenting a consistent picture of representations by the defendants that work on the subdivision would be completed by April 2005, which makes the likelihood of statements to this effect being made at or about the time of signing the contract, which were then relied upon to the detriment of the plaintiff, to have been made.
It is for this reason that the chronology of events is of such importance. There is no reference to a completion date of April 2005, or any other completion date, in the contract. What the heads of agreement state is that the work will be performed "in a timely manner", "notwithstanding" delays beyond the control of the defendant, including but not limited to approval times and the effects of weather. Even the contract of 6 January, with the April completion date, indicates that this is subject to the construction certificate being issued by Council, which was of course not issued until late May 2005. What the plaintiff asks the Court to accept is that on its reading of the word "notwithstanding" the defendants were agreeing that they would complete the development even if there were delays by Council (whether justified delays or not).
However, the defendants submit that the letter of 6 January was not written to make a misleading representation to the plaintiff. It was written to make a representation which probably was misleading, but the person or organisation to be misled was not the plaintiff but the bank from whom the plaintiff was seeking finance. In those circumstances, Mr O'Meara's evidence in cross-examination that he never took any notice of the signage, which contained the words "Completion date April 2005" or the advertising, may be understandable.
However, there were two witnesses who gave evidence. The first of these was Mr Rendell who said, at paragraph 7 of his affidavit, that the following conversation occurred: Rendell: "Michael, you always seem to have problems with Council. The work was to be completed in April, wasn't it? We are anxious to get going".
O'Meara: Yes I know, but I am having trouble and issues with the Council before you can start any work. I realise we are running behind". 232. The plaintiff, in written submissions, says that Mr Rendell was not challenged on this evidence.
"Q. And he said, that's what we're hoping for but it's not looking too good. So what he said to you was that it was only a hope, it wasn't a contractual promise, was it, that he referred to in the conversation with you? They are his words aren't they, "That's what we're hoping for". He didn't mention anything to you about being contractually obliged in that conversation to be finished by April, did he? A. Not to my knowledge." (T-179) 236. Although not referred to by Mr Rendell in his evidence, it is my understanding that there were signs on the property at or about this time indicating a completion date of April 2005.
Q. So did you type - go to page 3 of your affidavit. A. Yep.
Q. Did you type - if you look at the top there's "affidavit" was that printed on there? A. Yes. ...
Q. Right, and did you type in "19 February 2010", that's been crossed out? A. Yes.
Q. You typed that bit in, did you? A. Which one's that? I can't see that.
Q. See under "occupation" it's got "labourer" and then "date" and then it's got - A. Oh no. Sorry.
Q. Did you type in "I say on oath"? A. No.
Q. And did you type in "1. I am ..." and so on? A. Yes.
Q. You typed that bit in, did you? A. Oh no, sorry. Sorry, no I didn't.
Q. Well can you identify in this document what bits you did type? A. None of it.
Q. But you told us before that you did type it, didn't you? A. No I didn't." (T-247) 240. Mr Lentini said (T 248) that he wrote the whole of the affidavit and he did not know who typed it. He said he must have misunderstood the question.
What this cross-examination indicated to me was that Mr Lentini was a person of limited recollection and understanding. A number of his other answers confirmed this view. He had great difficulty with dates, saying that he could not remember when he moved back to Griffith from Sydney and disagreeing with the date given in his affidavit (transcript 251). In particular, he said he was certain that Mr Romeo came up to Griffith for a meeting on 16 March 2004 because "I had my son's birthday coming up, so that's how I remember the, which was only a week away". As has been indicated elsewhere, this cannot be correct. Mr Romeo, in his evidence, tendered a receipt from a hotel to show that he was in Griffith at the end of March.
Mr Lentini's difficulties in answering simple questions continued. He told the Court he did not know what the word "acquaintance" meant, even though it was in paragraph 1 of his affidavit. He insisted he had written out his affidavit himself on a number of occasions. He did not understand what the word "involved" meant.
He agreed in his evidence that although he had called Mr Romeo an acquaintance, he in fact knew him very well, although he was unable to answer the question of whether he was a mere acquaintance because he said he didn't understand the word "amera [sic]" (transcript 253-4).
At transcript 258, he began having difficulty recollecting. At transcript 259 the attention of everyone in the Court was drawn to Joe Romeo, who was described in the defendants' written submissions as being observed vigorously nodding and shaking his head in the direction of the witness. Joe Romeo apologised to the Court and left the Courtroom. I do not say that in any critical way. Mr Lentini's inability to understand and answer questions was striking, and Joe Romeo's response from the back of the court of trying to help him was a response that was understandable.
The defendants' written submissions assert that Mr Lentini became more willing to agree with what was put to him in cross-examination after Joe Romeo left the Courtroom. He replied yes to a number of these questions on pages 260 and 261 but in my view simply did not understand a lot of the questions that he was asked.
Despite his assertions that he prepared the affidavit for himself, given Mr Lentini's problems with even quite simple English, it is clear that he was incapable of doing so. Mr Lentini was a witness who did not come up to his proof of evidence. Although the defendants note a concession that it was Mr Roy Romeo who made the assessment that the works should be finished in April 2005, and that Mr O'Meara had referred to difficulties with Council as the cause of delays (transcript 260 and 261), even the value of these concessions is eroded by the fact that Mr Lentini has only the vaguest recall of these events and his ability to remember dates is particularly unreliable, as is evidenced by his assurance of the date Mr Romeo came to Griffith by reason of his son's birthday.
The objective evidence concerning the making of representations by Mr O'Meara in the course of the pre-contractual negotiations is therefore dependent upon the evidence of Mr O'Meara and Mr Romeo. This means that I accept Mr O'Meara's explanation as to the circumstances in which he came to place the April date for completion in the letter of 6 January 2005, and I particularly note that even this date was subject to council granting a construction certificate, which did not in fact occur until late May 2005.
At paragraph 90 of the written submissions, the plaintiff submits it would be "inconceivable" that Mr Romeo would not have pressed Mr O'Meara for a deadline and that one was not given. However, if the 9 June and 19 August 2004 conversations took place as Mr O'Meara recounts in his evidence, and the conversations at the meetings asserted to have taken place in March and April never happened, then this paints a very different picture of events.
It should be noted that the plaintiff pleads three representations made by the defendants (see paragraphs 21(a), (b) and (c) of the statement of claim) as set out at the commencement of this judgment, and these are the alleged misleading or deceptive statements that the defendant has come to meet at trial. I shall deal with each of them in turn.
The representation set out in paragraph 21(a) concerns the defendants' past experience in carrying out works of a similar nature. These were representations as to experience, not to a future matter, and I accept the submissions of the defendant that s 51A Trade Practices Act would not therefore be engaged. There is, however, another and more pressing reason for not finding that this representation was misleading or deceptive, and that is that all of the evidence before the Court indicates that this representation was true. Mr O'Meara was cross-examined about his extensive experience, and his statement that the development could have, but for council problems, taken twelve months, is relied upon, in the absence of expert evidence, as being evidence of a reasonable time for the development to take place.
Mr O'Meara was not cross-examined about his prior experience as set out in paragraphs 6 to 8 of his affidavit, which included 10 years carrying out turnkey developments in the Griffith area, including a twelve month development in 2000 at Harris Road, Griffith, being the principal contractor to the Griffith City Council for the reconstruction of Railway Street, Griffith and the like.
Accordingly, representations about the defendants' prior experience are not misleading or deceptive.
The representation in subparagraph 21(b) was that the defendants represented that they understood in projects such as this, time is important in order to contain holding and other costs and to maximise profit returns. Again, it was not a representation as to a future matter. More importantly, however, the case was conducted on the basis that the defendants understood the importance of having construction work done expeditiously to minimise holding costs and as I understand the plaintiff's case, this is not asserted to be a misleading or deceptive statement.
One matter that is relevant is that at no time is there any evidence that the defendants ever referred to "time is of the essence". The only reference to the phrase "time is of the essence" is the fax from Mr Roy Romeo to Lewis of Turners Excavations , from whom he was seeking a quotation. Mr Lewis of Turners Excavations was a rival of the defendants, and there is no evidence that Mr O'Meara ever saw this document; it was certainly not put to him. Furthermore, it is not clear to me whether the statement that time is of the essence related to the carrying out of the contract work or to the provision of the quote. Bearing in mind the time at which the quote was sought, it is my view that it is likely to have been the latter.
The third representation is that the development would be completed by Christmas 2004 or at the latest, April 2005. It was concerning this representation that these proceedings have largely been fought.
As I have indicated elsewhere, I have accepted the evidence of Mr O'Meara that he never met Mr Romeo prior to 9 June 2004. I have accepted Mr O'Meara's evidence concerning what occurred at the June 2004 and August 2004 meetings. More importantly, I regard the words in the contract as reflecting the understanding of the parties, namely that the work was to be conducted in a timely manner. I have also accepted the most likely interpretation of the phrase "notwithstanding" in relation to matters over which Mr O'Meara and the first defendant had no control as meaning "except" in that Mr O'Meara and the first defendant were not intending to be obliged to make up the time caused by delays over which they had no control caused by the weather or council delays.
Even the 6 January 2005 letter and schedule contains the words "subject to council granting a construction certificate". That certificate was not granted until May 2005.
In the event that I have erred in holding that there was no completion date of Christmas 2004 or April 2005 (as opposed to, for example, April 2005 "subject to" a construction certificate being granted) any such representations would have been opinions concerning future matters: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88; Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513.
Whether it must be established that the plaintiff has suffered loss
The defendants submit (written submissions paragraphs 120-126) that if the representations were made and were misleading, in order to establish liability for damages under s 82 Trade Practices Act or s 68 Fair Trading Act, some loss or damage must be established: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at [9]; Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222; see also s 82.
If, as I have found, Mr O'Meara did not meet Mr Roy Romeo until 9 June, then by that date the plaintiff had already purchased the property (contracts being exchanged on 31 May 2004) and no question of his not having bought the property would have arisen (I also note that the plaintiff did not exist until incorporation in May 2004, and no representation could have been made to it directly, but this is another matter).
As to the question of reliance generally, in relation to statements made prior to 13 August 2004, is problematic, because Mr Roy Romeo not only made his own assessments but was, as late as 13 August 2004, seeking quotations from other developers. The assertion that but for the representations he would have gone to other developers needs to be seen in the light that he was in fact seeing them, and what he would have done would have depended on what they said, and does not establish reliance upon what the defendants are alleged to have represented.
Further, even if the representations were made, and were relied upon by the plaintiff, there is no evidence that another developer would have done a better or quicker job.
I have taken into account, on this issue, that questions of damages were severed, by agreement, from this hearing, but even making the assumption that the plaintiff suffered the losses referred to in the written submissions (i.e. additional interest payments and loss of sales) there still needs to be evidence that shows that the development of the property by another developer would have been of greater benefit or less detriment that the course adopted as a result of the representations: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 514 per McHugh, Hayne & Callinan JJ.
The claims of misleading and deceptive conduct failed and I have answered questions (g), (h) and (i) accordingly.
The plaintiff has accordingly failed to establish any of its causes of action for breach of contract, negligence, contravention of s 52 Trade Practices Act 1974 (Cth) and s 42 Fair Trading Act 1984 (NSW).
I answer the questions posed by the parties on the issue of liability as follows: (a) What were the terms of the contract between the plaintiff and the first defendant?
Answer : As is set out above, the terms of the contract were those set out in the heads of agreement dated 19 August 2004. The terms of the contract did not include any provision that the works would be completed by Christmas 2004, April 2005, twelve months after commencement of work or any other agreed completion date. The letter and schedule of 6 January 2005 was not intended to be a contractually binding document between the parties, and was a letter provided to the plaintiff by the defendants to enable him to obtain finance.
Answer : Yes, the plaintiff breached the contract firstly by unilaterally and unjustifiably withholding 30% of the payment invoices and secondly by continuing to withhold payments in respect of invoices rendered under the contract for the sum of $70,881.04. The first defendant is accordingly entitled to payment of this sum plus interest.
Answer : No; as is set out above, the first defendant complied with the terms of the heads of agreement. As there was no term for the work to be completed by Christmas 2004, April 2005 or any other date, there has been no breach in relation to the completion date.
(d) What was a reasonable time for completion of the works?
Answer : There is no evidence as to a reasonable time for completion of these specific works, other than the explanations of Mr O'Meara concerning the time for completion of the steps.
(e) Did the defendants fail to complete the works within a reasonable time?
Answer : No; there is no evidence of the failure to complete, or of the reasonable time.
(f) Was the first defendant negligent in failing to complete the works within a reasonable time?
Answer : As is set out above, the first defendant owed no duty of care in tort to complete the works within a reasonable time, in that the relationship between the plaintiff and defendant was governed by the contract between them and the plaintiff was not a vulnerable person. In addition, there is no evidence that the first defendant failed to complete the works in a reasonable time.
(g) What, if any, representations were made by the parties to one another prior to entering into the contract?
Answer : The representations referred to in the Statement of Claim were not made to Mr Romeo (of, I have found, at all), and up until the time the plaintiff was incorporated, no representations were made upon which it could rely. No representation was made prior to entry into the contract that the works could or would be brought to completion by Christmas 2004 or April 2005.
(h) Did the first and/or second defendant engage in misleading or deceptive conduct in contravention of the Trade Practices Act and/or the Fair Trading Act ?
Answer : No. The representations were not made. If there had been representations, or if the 6 January 2005 letter amounted to representations, these were opinions about future matters and not designed to misrepresent matters to the plaintiff in any event.
Answer : I formally note this question was before me at the commencement of the trial, but no answer is required as this is no longer in issue.
I accordingly make the following orders: (1) Judgment for the defendants.
(2) Judgment for the first defendant/cross-claimant against the plaintiff/cross-defendant in the sum of $70,881.04, together with pre- and post-judgment interest at UCPR rates.
(3) The parties have liberty to bring in short minutes or order reflecting the agreed sum for pre- and post-judgment interest for entry of judgment on the cross-claim.
(4) The plaintiff/cross-defendant pay the costs of the first defendant/cross-claimant and of the second defendant.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Cazazure Pty Ltd
Murrumbidgee Estate Developments
CITATION: Cazazure Pty Ltd v Murrumbidgee Estate Developments [2010] NSWDC 142
AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; (2009) 83 ALJR 951; [2009] HCA 27 Attorney General of the Commonwealth v Oates (1999) 198 CLR 162 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 754 Frederick W. Nielsen (Canberra) Pty Ltd v PDC Constructions (ACT) Pty Ltd (1987) ACTR 1 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Jones v Dunkel (1959) 101 CLR 298 CASES CITED: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd (2004) 12 BPR 22,879; [2004] NSWCA 114 Perre v Apand Pty Limited (1999) 198 CLR 180 Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; (2007) Aust Contract R 90-254; [2007] NSWCA 65 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 Tai Hing Limited v Liu Chong Hing Bank (1986) AC 80 Upper Hunter County DC v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 Zhu v Treasurer of New South Wales (2004) 218 CLR 429
(2009) 239 CLR 175
(2009) 258 ALR 14
(2009) 83 ALJR 951
(1999) 198 CLR 162
(1973) 129 CLR 99
(1987) 14 FCR 215
(1984) 2 FCR 82
(1959) 101 CLR 298
(1998) 196 CLR 494
(1999) 198 CLR 180
(1987) 10 NSWLR 568
(2007) 69 NSWLR 603
(1998) 88 FCR 511
(1968) 118 CLR 429
(2004) 218 CLR 429
(1982) 149 CLR 337
(1994) 35 NSWLR 227
(1908) 7 CLR 629
(1979) 144 CLR 596