DCL Developments Pty Ltd v Range Harvester Australia Pty Ltd

Supreme Court of NSW|2013-07-30|Before: Beech-Jones J, Keifel JJ, Mason CJ

Judgment 1The plaintiff in this Court, DCL Developments Pty Limited ("DCL"), was sued in the Local Court by the defendant in this Court, Range Harvester Australia Pty Limited ("Range Harvester"). DCL cross claimed against Range Harvester. The presiding magistrate upheld Range Harvester's claim and ordered DCL to pay Range Harvester a sum together with interest and costs. His Honour dismissed the cross claim. 2DCL now appeals to this Court on a question of law pursuant to s 39(1) of the Local Court Act 2007. It also seeks leave to appeal on a question of mixed fact and law pursuant to s 40(1). I discussed the operation of those provisions in Sayed v Deng [2012] NSWSC 851 at [27] to [34]. To that discussion I would add two further propositions. First, if, as his Honour appears to have found, the relevant contract between the parties was wholly in writing, then the proper construction of that contract is a question of law (see Jennings v Credit Corporation Australia Pty Limited [2000] NSWSC 210; 48 NSWLR 709 at [11].) 3Second, the question of whether or not a particular document passed between the parties during the course of their negotiations leading to the formation of a contract is ultimately a question of fact. As the jurisdiction of the Local Court to hear and determine matters before it was not dependent upon a finding of fact on such a matter (s 30 of the Local Court Act), it follows that a finding on that topic can only be reviewed pursuant to an appeal on a question of law if there was no evidence to support it (see Kostas v HIA Insurance Services Pty Limited [2010] HCA 32; 241 CLR 390 at [90] per Hayne, Heydon, Crennan and Keifel JJ; Australian Broadcasting Tribunal v Bond [1990] HCA 33; 170 CLR 321 at 356 per Mason CJ).

BACKGROUND 4The following facts are either taken from the Local Court judgment or are common ground between the parties. 5DCL has been conducting a business of egg production at a chicken farm at Kootingal since August 2010. At the relevant times its two directors were Stuart Howe and Michael Kendon. 6Some time around July 2010 DCL began negotiations with Cackleberry Enterprises Pty Limited for the installation of an automated nesting and egg collection system at the chicken farm. As part of those negotiations DCL entered into discussions with Range Harvester for it to install concrete and marine ply footpads in the sheds at which the testing and egg collection system would be installed. At the relevant times Colin Smith was the director of Range Harvester and the person who conducted negotiations on its behalf. 7Although there is some dispute, it seems that the communications which arguably led to the entry of the agreement were as follows. 8On or about 16 August 2010 either Mr Smith or his son sent to Mr Kendon some drawings of the area to be concreted which included a specification of the dimensions of the concrete footings. It seems to be common ground that the dimensions of the concrete footings envisaged by that document were 400 by 100 millimetres. 9On 10 September 2010 Mr Kendon sent Mr Smith a lengthy email. It seems that only two pages of that email were tendered before his Honour. On the subject of concreting Mr Kendon's email included the following statements: "As mentioned a number of times before while we are fine with putting the concreting in place for outside the sheds, we are not willing to bare [sic] the responsibility of putting the concrete footings in the right place to support your equipment inside the sheds. ... As discussed with Brad and yourself over the last month or so, we will not be touching any works inside the shed to support the [Range Harvester] system apart from ensuring the shed carcass is cleared and in good order for you. It is up to you to do all works necessary to install the [Range Harvester] system and this includes coordinating the installation of the strip footing necessary to support both the [Range Harvester] and the slat flooring. We do acknowledge that the addition[al] cost of this work will change the final cost of the system being installed and will approve the increase once you have provided [the] exact value." (emphasis added) 10The next part of the email referred Mr Smith to a concreter that Mr Kendon had apparently used, namely Mr Jim Stair. 11According to Mr Howe, on 14 September 2010 Mr Smith rang him. In his affidavit read in the Local Court Mr Howe recalled a conversation in the following terms. Mr Howe said that he said to Mr Smith: "Col, unless the concrete footings and the concrete strips are laser levelled, as those you have already seen in Sheds 1, 5, 6 and 7, you can forget about the System, DCL will not go ahead with it." 12Mr Howe said that Mr Smith replied: "Okay. I will send drawings of the concreting the way you want it to Jim and get a quote from him and go from there." 13Mr Smith denied this conversation. He denied that at any time there was a stipulation that the concrete strips should be "laser levelled". 14According to Mr Smith, he spoke to Mr Stair around this time about the concreting work. Some time around 15 September 2010 Mr Stair prepared a written quotation for undertaking the concreting work. The quotation was addressed to "Range Harvester/DCL Developments". It referred to undertaking 526 lineal metres of "300m x 300m" concrete footings with such footings to be "laser levelled". 15At the hearing in the Local Court there was a significant evidentiary dispute as to whether Mr Smith received that quote in September 2010. He annexed the quote to the first affidavit he swore. On one view, the terms of that affidavit convey that he received that quote around the time that it was made. Mr Smith swore a further affidavit which appeared to implicitly deny receiving it around that time. At least on one view, Mr Smith's oral evidence was contradictory as to whether he received it or not. He ultimately denied having received it in September 2010. 16Mr Stair gave evidence. He was asked about whether he sent the quote to Mr Smith. The relevant answer he gave was as follows: "I sent it to or didn't have Col's email address and all that sort of stuff, so I sent it to - to Michael [Kendon] because I [not transcribable] with him after speaking to Stuart and he said look, we need to have the - a copy of the quote too - and - and Michael will email it on because he obviously had Range Harvester's details." 17Mr Kendon did not give evidence. There was not tendered any email suggesting that the quote was forwarded to Mr Smith. 18On 15 September 2010 Mr Smith sent Mr Kendon an email. The email stated, inter alia: "Hi Michael, After a phone discussion with Stewart last night, it is apparent that he requires concrete footings under the nest system and is okay with marine ply footings under the slats. I have spoken with Jim, your concreter, who quoted $31,500 to do the job. Additional will be around $2,000 for the marine ply for the slat legs. Stuart suggested that we could keep this account separate to the [indistinct] programme and repay over 12 monthly payments with interest. The concrete footings will follow the contours of the shed floor to keep it all at dirt level or below, and the nest system can be levelled on its own adjustable legs. Will this suit you?" (emphasis in original) 19Two matters should be noted about that email. First, the email does not contain any suggestion that, to at least that time, Mr Smith had received any written quote from Mr Stair. Second, the proposal that Mr Smith put to Mr Kendon is inconsistent with any suggestion that the footings would be "laser levelled". 20The email trail subsequent to this email is something of a mystery. It does not appear that either party tendered the entirety of the relevant email chain at the hearing in the Local Court. In any event, on 20 September 2010 at 12.24 pm Mr Smith emailed Mr Kendon and stated, inter alia: "Michael, Below is the basis for an agreement related to the supply, installation of the concrete footpads and marine ply footpads as discussed. Cost to supply concrete footpads for Range Harvester nest system as quoted by Jim, your concreter, on site, $31,500; Cost for marine ply footpads for slats, $1,930; Total $33,430 plus our interest at 10%, $3,343; TOTAL $36,773. Monthly repayment (12 months), $3,064.40. Please consider and respond ASAP to enable our planning. Thanks, Col." (emphasis added) 21Mr Kendon replied in an email the same day that stated: "Thanks Col. We agree to the terms below. Please proceed with the arrangements with Jim and add the amount to the first year['s] monthly repayments for the completed system. I understand that he needs to lock his time down fairly soon to enable him to continue on from the tail end of our work and to avoid running into other work he has scheduled with other clients. Also, thank you for the drawings of the flooring system you propose. As discussed on the phone, I'd like you to reassess the number of leg supports and see if we can limit the legs to one row down the middle of each side of the shed. It looks from Brad's diagram that you should be able to achieve this by support[ing] the nesting box end of the flooring off the side of the [Range Harvester] legs to avoid having to double up on the number of legs we have to remove and install each cycle. Kind regards." 22Again, two matters should be noted about this email exchange. First, to the extent that Mr Kendon appears to be discussing drawings or specifications, they appear to be those that were sent in August 2010. Second, both Mr Smith and Mr Kendon refer to the terms that were set out "below". However, as stated, the rest of the email chain that preceded this was not immediately apparent, other than what might be inferred from the emails that I have already summarised. 23There was further correspondence between Mr Smith and Mr Kendon after this which is unnecessary to describe. Range Harvester ultimately installed concrete footings at the farm but it was not paid. The dimensions of the footings as installed were neither the 300 by 300 millimetres that Mr Stair's diagrams had referred to, nor the 400 by 100 millimetres that had been referred to in the email of 16 August 2010. Instead, the dimensions were 200 by 250 millimetres. Mr Smith explained that he had adopted those dimensions having regard to the last part of Mr Kendon's reply of 20 September 2010. For the reasons I will explain, according to the presiding magistrate's findings, his actions in doing so were legally irrelevant.

THE ISSUES IN DISPUTE AND IN HIS HONOUR'S JUDGMENT 24In a statement of claim Range Harvester pleaded that on or about 20 September 2010 an agreement was concluded that was in writing as recorded in the emails between Mr Smith and Mr Kendon. At least on the face of the pleading it is not apparent whether the emails said to constitute the agreement were only those sent on that day, or incorporated ones sent at an earlier time. Range Harvester further pleaded that the contract was for the installation of the concrete and ply footings and that they were installed but no payment was forthcoming. 25In its defence DCL pleaded that the contract was constituted, inter alia, by the entirety of the email chain that I have referred to as well as by the conversation that Mr Howe said he had with Mr Smith on 14 September 2010. As I have stated, DCL also filed a cross claim. It alleged, inter alia, that the specifications set out in Mr Stair's quote formed part of the contract and that otherwise the footings as installed were in breach of an implied term that they would be fit for the purpose for which they were installed. 26However, at the hearing before the Local Court the issues in dispute narrowed considerably. Ultimately, DCL submitted that no entitlement to receive payment arose in favour of Range Harvester because the footings that they installed were not "laser" levelled and did not conform with the specifications in Mr Stair's quote. It also appears that DCL argued, in the alternative, that if the specifications in Mr Stair's quote did not form part of the contract, then the specifications in the email of 16 August 2010 did, yet the ones that were installed did not conform with those either. 27It is important to appreciate that the issues as presented at the hearing only required his Honour to determine what were the contractual terms agreed between the parties. As I will explain, that is what his Honour did. 28In his judgment his Honour set out the background to the dispute and set out parts of the emails passing between Mr Kendon and Mr Smith that I have already referred to. His Honour then addressed the factual dispute over whether Mr Smith received Mr Stair's quote dated 15 September 2010 and whether Mr Smith was told that the footings had to be laser levelled. In relation to the former, his Honour found as follows: "19. Jim Stair gave evidence that he was quoting what he would have done if he had gotten the job which he did not and that included laser levelling. The written quote was sent to DCL Developments because Jim Stair did not know the address of the Range harvester or Colin Smith and there is no evidence to support a conclusion that the written quote was forwarded on to Colin Smith." 29In relation to the latter, his Honour noted that the only evidence to support it was that given by Mr Howe concerning the conversation he said he had with Mr Smith on 14 September 2010. His Honour then noted that: "21. One would have thought that laser levelling would have been mentioned in one of the emails between the parties if it was so critical, but it wasn't." 30His Honour then referred to the terms of the emails at 10 and 15 September 2010. By reason of the emphasis that he placed on part of the latter, his Honour effectively noted that it was inconsistent with the suggestion that laser levelling was required. 31Ultimately, his Honour found: "24. ... [There was no] mention of laser levelling and I am satisfied that what [Mr Kendon] was referring to was the need to have concrete footings because of issues they had in other sheds with subsidence when Colin Smith wanted to put the system onto the dirt floor." 32When read in context, I take this part of his Honour's judgment as effectively finding that his Honour was not satisfied that Mr Smith was at any point told that laser levelling was required. 33His Honour then addressed the terms of the contract between the parties. In the earlier part of his judgment his Honour had emphasised those parts of the emails in which Mr Kendon had made it clear that in his, that is Mr Kendon's view, the dimensions of the footings was a matter for Mr Smith. His Honour noted certain answers given by Mr Howe in cross examination that confirmed that. Ultimately, his Honour found: "36. I am satisfied and I find as a fact that the agreement between Range Harvester Pty Ltd and DCL Developments Pty Ltd was for the Plaintiff to supply and install concrete footings that would support the slats and the nesting system and it was a further condition that if subsidence occurred causing that problem or problems with the nesting equipment then the plaintiff had to rectify the problem or problems. 37. There is no evidence to support a finding that the footings failed to support the nesting equipment and slats because of the way the case was run. 38. As a result, the Plaintiff has satisfied the Court that it provided the footings in accordance with the finalised agreement and, accordingly, judgment is entered in favour of the Plaintiff on the claim and on the Cross Claim."

DCL'S APPEAL 34In due course it will be necessary to address each of the alleged questions of law that DCL contends were erroneously answered by his Honour. However, at the outset it is necessary to note two matters. First, as noted, his Honour found that "there is no evidence to support a conclusion that the written quote was forwarded on to Colin Smith". In context, this is to be taken as his Honour finding that there was a lack of probative material to support the contention rather than that there was "no evidence" as used in the technical sense (see Broussard v Minister for Immigration and Ethnic Affairs (1989) 21 FCR 472 at 479 per Gummow J.) It follows that this finding was purely a finding of fact and was not one of law or even of mixed fact and law. It also follows from the early discussion that it was a finding that was clearly open on the evidence (Kostas and Bond id). The same observation applies in relation to his Honour's findings concerning whether Mr Smith was advised that laser levelling was required. 35Second, almost the entirety of DCL's complaints reduced to the single contention that his Honour was obliged, but failed, to find that the contract between the parties required the installation of footings in accordance with particular dimensions being those set out in Mr Stair's quote dated 15 September 2010 or, failing that, those set out in the email of 16 August 2010. His Honour rejected the entire premise behind that contention. His Honour, in effect, found that under the contract the dimensions of the footings were not a term of the contract but was, instead, a matter for Mr Smith and Range Harvester to determine. Instead, his Honour found that the relevant contractual term was one that required that, whatever the specifications, the footings "support the slats and the nesting system" that were to be installed. 36In submissions, counsel for DCL accepted that if that finding was correct, then the consequences spelled out in [37] and [38] of his Honour's judgment that have been set out at [33] above followed, i.e. Range Harvester succeeded. 37The reasons given by his Honour to support the construction of the contract were mainly derived from his Honour's analysis of the communications leading up to the entry into the contract of 20 September 2010. As stated, his Honour also relied on certain concessions made by Mr Howe in cross examination to the effect that neither he, nor Mr Kendon, was concerned with the specifications for the concrete footings. This latter aspect of his Honour's reasoning is doubtful (see Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; 149 CLR 337). Nevertheless, I consider that his Honour's conclusion was correct. It is notable that no aspect of the negotiations that led to the entry into the contract involved any concern being expressed on the part of anyone from DCL as to the dimensions of the footings. To the contrary, and as noted by his Honour, the emails reveal that DCL did not want to descend into that level of detail because it wanted responsibility for the concrete footings supporting the nesting system to rest with Range Harvester. I consider that his Honour was correct to construe the agreement in the manner that he did. DCL's Questions of Law 38DCL's summons identified ten questions of law that it is claimed that his Honour answered incorrectly. In substance, they were expressed in terms of errors of law that his Honour was said to have made. I will address each in turn. 39The first ground alleges that his Honour erred in finding that the agreement between the parties was for Range Harvester to supply and install concrete footings that would support the slats and the nesting system and that it was a further condition that if subsidence occurred causing a problem with the equipment, then Range Harvester had to rectify the problem or problems. It follows from what I have already stated that I find that his Honour did not err in law in so concluding. 40The second alleged error is that his Honour is said to have failed to take into account the whole or any part of the evidence adduced and given by Mr Colin Smith during his cross examination. It follows from what I have already stated that this does not raise any question of law, only a question of fact. 41The third alleged error is said to be that his Honour erred in directing that the proceedings proceed on an agreed basis, namely, inter alia, that a determination would be made as to whether the footings in situ were as agreed, and then misdirected himself by making findings of fact based on purpose and fitness of the footings. Nothing in the materials reveals that the approach adopted by his Honour involved any departure from some "agreed basis" which his Honour either directed or the parties had assumed. Instead, as the hearing unfolded, DCL's case was refined so that the outcome turned upon its contention that it was an essential term of the contract that the concrete footings would be in accordance with some specified dimensions. Once his Honour rejected that contention, then DCL's defence failed. 42The fourth error of law on the part of his Honour was said to result from his Honour "misdirecting himself by making findings of fact whether the said footings were installed so as to support the nesting machine and slats". As formulated, the alleged error refers to [34] and [35] of his Honour's judgment. Those paragraphs should be read together with [33]: "33. Although a great deal of time has been spent on the dimensions of the concrete footings, they only have relevance if they are found not fit for the purpose for which they were installed. 34. The purpose for which they were installed was to support the nesting machine and slats. 35. The evidence as it stands does not support such a finding." 43In this part of the judgment his Honour was seeking to explain how, in light of his Honour's construction of the contract, the dimensions of the footings might have been relevant, namely, to a consideration of an allegation that they were not fit for purpose as alleged in cross claim. His Honour then noted that there was no evidence to support the contention that they were not fit for that purpose. These passages do not reveal any misunderstanding on the part of his Honour as to DCL's case. Instead, they reveal that once his Honour had rejected DCL's case as to how the contract was to be construed, then the relevance of any factual enquiry about the dimensions of the footings that were in fact installed fell away in circumstances when there was no overall allegation remaining that the footings were unfit for any purpose for which they might reasonably have been required. 44The fifth and sixth errors on the part of his Honour are said to be as follows, namely, that his Honour: "Erred in concluding that there was 'no evidence' to support a finding that the footings failed to support the nesting equipment and slats because of the way the case was run when there could be no evidence adduced to support a finding the footing had failed to support the nesting equipment and slats. Erred in finding that the plaintiff had 'satisfied the court that it provided footings in accordance with the finalised agreement' [para 35], when there was no evidence to support such a finding." 45These complaints all fall away for the reasons given in relation to the fourth ground and bearing in mind the concession that I noted earlier. 46The seventh error on the part of his Honour was said to be in making: "[N]o findings, either ignoring the evidence or not giving any weight or due weight to the evidence which was before the court that the footings as laid, on balance, were not installed in a workmanlike manner." 47This allegation falls away for the same reasons that I have given earlier, namely, once his Honour construed the contract in the manner that he did and bearing in mind that DCL did not maintain an allegation that the footings were not fit for the purpose that his Honour identified, then it was irrelevant to the issues whether or not the footings had been installed in a workmanlike manner. 48The eighth and ninth grounds relied on by DCL all relate to the cross claim. It follows from what I have stated that once his Honour came to the construction that his Honour did and when it became clear that there was no ultimate submission being made on behalf of DCL that the footings were not fit for their purpose, then no aspect of the cross claim remained to be determined. During the hearing it was made clear to his Honour that the quantum sought to be recovered pursuant to the cross claim was the amount necessary to remove the concrete footings. In turn, this depended upon DCL establishing that the footings that were installed were not those that it had contracted to receive. This was said to be so because they had only contracted to receive footings of particular dimensions. Of course, that premise was rejected by his Honour. Thus, the foundational step for the success of the cross claim was not established. 49The tenth ground relied on by DCL alleges that his Honour's reasons were inadequate. This ground was not developed in DCL's submissions. In my view, once his Honour's judgment is read in light of the issues that were raised at the hearing, it is clear that his Honour adequately dealt with the questions of fact and law that arose for determination. 50I should add that aspects of DCL's written submissions appear to travel beyond the questions of law set out in its summons. However, as best as I can ascertain and with one possible exception, those complaints are all addressed by the above reasons. The possible exception is the suggestion in part of those submissions that his Honour failed to address and make findings concerning what DCL described as a unilateral variation of the contract by Range Harvester. The unilateral variation was said to arise from the fact that Mr Smith ultimately installed footings that were 200 by 250 millimetres, whereas the dimensions that had been raised by the parties were 400mm by 100mm and (arguably) 300 millimetres by 300 millimetres. The short answer to all of these submissions is that, according to his Honour's finding, that action of Mr Smith was not a variation of the contract at all because the contract never required footings of any particular dimensions in the first place. Mixed questions of law and fact 51As stated, DCL also sought leave under s 40(1) of the Local Court Act to raise various questions said to be of mixed fact and law, namely: "The Magistrate:- a. Erred in directing that the proceedings proceed on an agreed basis inter alia that a determination would be made as to whether the footings in situ were as agreed and proceeded to misdirect himself by making findings of fact based on 'purpose and fitness' of the footings, and b. Further erred by misdirecting himself by making findings of fact whether the said footings were installed so as 'to support the nesting machine and slats'. (Para 34 and 35). c. Erred in making no findings, either ignoring the evidence or not giving any weight or due weight to the evidence which was before the court, that the footings as laid, on balance, were not installed in a workmanlike manner. d. Erred in concluding that there was 'no evidence' to support a finding that the footings failed to support the nesting equipment and slats because of the way the case was run' (Para 37) when there could be no evidence adduced to support a finding that the footing had failed to support the nesting equipment and slats. e. Erred in finding that the plaintiff had 'satisfied the court that it provided footings in accordance with the finalised agreement' (Para 38), when there was no evidence to support such a finding. f. Erred in failing to consider adequately or of [sic] all, the cross claim or any of the issued [sic] raised by it. g. Erred in making no findings about and either ignoring or not giving any or any due weight to the evidence before the Court relating to the cross claim. h. Erred in concluding that judgment be entered in favour of the cross defendant before there was no evidence to support such a conclusion." 52I am doubtful whether any of these matters are truly questions of mixed law and fact. In any event, I have already addressed the same complaints when characterised as questions of law. In the end, they all fall away having regard to his Honour's construction of the contract, with which I respectfully agree, his Honour's findings of fact which are not open to challenge and the manner in which the hearing was conducted in the Local Court. Leave to raise those grounds is refused.

DISPOSITION 53It follows that the appeal will be dismissed. Accordingly, the Court orders that: (1)The plaintiff's summons be dismissed. (2)The plaintiff pay the costs of the proceedings in this Court. (3)The stay ordered in the Local Court on 26 February 2013 be lifted. (4)The amount paid into court pursuant to the judgment of the Local Court entered on 19 December 2012 be paid to the plaintiff in the Local Court proceedings and the defendant in these proceedings.

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. Decision last updated: 02 August 2013

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