Denmeade v Stingray Boats

REASONS FOR JUDGMENT THE COURT: 1 This appeal concerns the liability of the appellant, Mr Denmeade, with respect to certain costs of the construction of a boat for him by the respondent, Stingray Boats and in particular whether he agreed with Mr McCourt, for Stingray Boats, that he would pay the sum claimed in respect of those costs. 2 On 15 March 2002 Mr and Mrs McCourt, trading as Stingray Boats, and Mr Denmeade entered into a contract for the construction of a boat. The 'CONTRACT INCLUSIONS' were said to be: 'The construction of one twelve metre tube boat as designed by Stevens and Gravlev. The computer cut kit will be supplied by the Owner and construction will begin immediately upon receiving the said kit. The boat will be constructed to meet 1C Survey requirements.' 3 The contract price was to be $72,000 plus goods and services tax, a total of $79,200. After payment of a deposit, further instalments were to be paid upon completion of the welding of the hull and upon completion of all superstructure fabrication. The final payment was to be made after installation of engines and jets and all 'hot work'. It was to include the goods and services tax component. It was provided that, in addition to the contract sum, the cost for the dual engine and jet installation was to be paid by the owner, namely Mr Denmeade. The owner was also to bear all folding and metal rolling costs and the 'surveyor and all survey costs'. 4 It does not appear to have been disputed that the builder had not seen the plans at the time the contract was entered into. Mr McCourt had however had lengthy discussions with the boat designers. 5 The computer cut kit was provided and in about April 2002 construction of the boat commenced. It appears to be accepted by the parties that by September 2002 Mr Denmeade had paid $73,000 of the total sum of which had increased to $79,200, which sum included the goods and services tax. The instalments were not made and smaller amounts were paid from time to time. Nothing would appear to turn on this. If the works under the original contract were completed by this date the balance then due would have been $6,200. 6 Mr Denmeade had been anxious to attend to painting the boat. He and the painter had travelled three times to Brisbane before 9 September 2002 but on each occasion the boat was not ready. On 9 September 2002 Mr Denmeade again attended at Stingray Boats' premises. He advised Mr McCourt that he wanted to take the boat away for painting. Mr Denmeade had with him a crane, two escort vehicles, a wide load truck and the painting contractor for this purpose. Their accounts differed somewhat as to how an invoice totalling $22,300 came to be produced by them. It specified, incorrectly it would seem, 'GST owing on original payment' at $8,000 and the 'Balance Owing on extras' at $13,000 together with $1,300 for GST. Mr McCourt said that he was not expecting Mr Denmeade that day. When Mr Denmeade announced that he wanted to take the boat away, Mr McCourt asked for the money owed for the work on the boat and the extras. He said that he could not let the boat go because he did not want to have to chase Mr Denmeade for the money. Mr Denmeade agreed to pay him the following day if he released the boat immediately. The boat was released after the invoice was signed. 7 Mr Denmeade puts a somewhat different complexion upon the conversation. He says that he queried what extra work had been undertaken and Mr McCourt indicated items such as the front door, the toilet and the bilge pumping. Mr Denmeade remonstrated that these features ordinarily form part of a boat and, implicitly, that they were included in the contract. Mr McCourt however would not allow the boat to leave the shed unless he was to be paid an extra $13,000. Mr Denmeade says that he had no choice but to accede to this demand. 8 On 10 September 2002 Mr McCourt went to the place where the boat lay and undertook some further welding works. In his evidence at the hearing he identified this work as some minor welding work on some of the extras items, including the bow rail and the bollards. After he had completed this work he asked Mr Denmeade for the money. Mr Denmeade said there had been a 'hold up' and that payment would be made in 10 days. Further conversations took place in late September. Payment was not forthcoming. 9 In their letter of 25 September 2002 Stingray Boats' lawyers referred to the acknowledgement of liability in the invoice document. Curiously, when its statement of claim issued, it did not plead the sum due as under a compromise agreement, although the amount claimed was the same. The issue was raised by Mr Denmeade in his defence, where he alleged that he had been subjected to economic duress on 9 September 2002 and forced to accept the additional liability. And at trial it was Mr Denmeade's lawyers who tendered the invoice into evidence. By its Reply and Answer Stingray Boats attempted to amend its claim to add a substantial further sum for extras. 10 Despite some confusion in the pleadings it would appear that the proceedings were conducted on the basis that a possible basis for Mr Denmeade's liability was the compromise agreement. This appeal was also conducted on that basis. 11 In its statement of claim Stingray Boats claimed $20,500 made up by the extras and the correct figures for the goods and services tax. The extras, totalling $13,000, were said to comprise a bilge system, the supply and fitting of the front and rear doors, of the aft toilet house and storeroom, console, canopy frame, rails, rear engine pod, dive ladders, bollards, front and rear anchor lockers, and fuel venting system. Mr Denmeade counterclaimed for damages. Included in this claim was the sum of $5369 which was said to be the costs associated with completion of the boat after Stingray Boats stopped work. He did not specify what it was but one infers that he was contending, to the contrary of Mr McCourt, that the works were part of the original contract works. The only invoice produced in evidence refers to the work as for an 'interior fit out' which would seem to lend support to Mr McCourt's claims. 12 His Honour, the primary Judge, largely accepted the evidence of Mr Denmeade about what was said on 9 September 2002. Save for the reference to Mr Denmeade having arrived 'unexpectedly' his Honour also accepted Mr McCourt's account, including the promise to pay if the boat was released that day. Whilst observing that there was a dispute about what might be 'extras' his Honour determined the claim on the basis that the parties had reached an agreement on 9 September 2002. Mr Denmeade promised to pay the sum for extras in order to have the boat removed. It follows that his Honour did not accept the argument that Mr Denmeade had been subjected to pressure such as might vitiate the agreement. His Honour gave judgment for Stingray Boats in the sum of $21,500. In doing so, his Honour appears to have assumed that the correct figure for the goods and services tax was $7,200. On the other hand his Honour also rejected an attempt, on the part of Stingray Boats, to increase the figure for the extras substantially beyond the $13,000 which had been agreed. In any event no cross-appeal is brought with respect to the additional sums. 13 On the appeal, Mr Denmeade submitted that the sum of $13,000 had never been properly itemised and explained. In any event he maintained his position that they were not extras for which he could be made liable. Mr Denmeade's case was that he had had no choice when the matter of the extras was raised for the first time on 9 September 2002 and his consent obtained to pay for them, as the notation on the invoice discloses. We infer that the lack of choice arises from the expenses he had incurred in having the heavy machinery and workmen available on the day so that the painting could be undertaken. 14 People often lack some freedom of choice in commercial situations. Economic duress however requires a different assessment. The judgment of McHugh JA in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 45-46, on the question of what constitutes 'economic duress', has had wide support: see the cases and articles referred to in Meagher, Gummow & Lehane's Equity Doctrines and Remedies 4th ed, Butterworths, Australia, 2002 at [12-065]. His Honour rejected the theory that a person's will must effectively be overborne. The proper approach, his Honour considered, was to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law countenances as legitimate. Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. Lawful threats may also be sufficient for the Courts to vitiate the consent obtained: Westpac Banking Corporation v Cockerill (1998) 152 ALR 267 at 289. 15 Mr Denmeade was put in a position where he was required to make a decision quickly and he undoubtedly felt pressure for the reasons referred to. The pressure applied by Mr McCourt cannot however be categorised as amounting to duress of the kind discussed. As McHugh JA observed in Crescendo (at 46) even overwhelming pressure may not necessarily constitute economic duress. Much more is required than the demand by Mr McCourt of a promise to pay for what was alleged to be extra work in return for release of the boat, even if that promise also had the effect of negating Mr Denmeade's rights to dispute the alleged extras. 16 In any event, Mr McCourt seems to have done nothing more than assert some sort of possessory lien over the boat. The contract does not specify the time at which title was to pass from the respondent to the appellant. One suspects that it would have been upon payment of all outstanding moneys. However, whether property had passed or not, it seems probable that the respondent was entitled to such a lien, either as an unpaid vendor or as a workman who had performed work on a chattel. See E Sykes & S Walker, The Law of Securities, 5th ed, Law Book Company, Sydney, 1993 at 739-741. It is too late in the day to suggest that to retain possession of a chattel against payment of the purchase price or for work done on it at the request of the owner constitutes economic duress. 17 Indeed what took place on 9 September 2002 was a compromise of their respective claims. There seems to be no reason to doubt that Mr McCourt considered that he was entitled to claim the amounts for work not included in the original contract works. When put to him, Mr Denmeade disputed his liability to pay for them. Mr Denmeade in effect gave up his defence of the claim in order to obtain possession of the boat. In that regard it should be recalled that time was not of the essence of the contract. 18 Mr Denmeade submits that no consideration was provided by Stingray Boats. The doctrine of consideration however requires only that some value be given for it: see J Chitty, Chitty on Contracts, 28th ed Sweet & Maxwell, London 1999 at [3-014] and Alexander v Rayson [1936] 1 KB 169. Generally speaking and excepting cases such as unconscionability where the bargain itself is scrutinised, the courts are not concerned with the adequacy of the consideration. Acts or omissions may suffice. Here Stingray Boats provided consideration by releasing the boat. A compromise having been effected, it cannot be avoided by Mr Denmeade claiming that he was not liable or the extras not properly substantiated. 19 In argument on the appeal Mr Denmeade pursued one of his counterclaims, namely that sum which he says he paid to complete what he described as the work under the original contract and for which he had paid. It is difficult to identify the work within the ambit of the original contract which was not performed. A perusal of the affidavits and cross-examination reveals a reference to the installation of seating. This matter was also referred to in Mr McCourt's affidavit filed on 9 December 2002 at par 61. It is reasonable to infer that this was, at least arguably, within such ambit. Whilst it is true that some work was apparently performed after the boat was delivered, it seems that such work did not relate to the installation of seating. We assume for present purposes that such installation was within the ambit of the original contract. There appears to have been no evidence as to the cost of completing this item. 20 By the acknowledgement signed by Mr Denmeade on 9 September 2002, he agreed that an amount payable pursuant to the original agreement was immediately payable. It seems to be common ground that this was the balance of amounts due under that agreement. It may be arguable that this did not excuse the respondent from performing outstanding work, but it is a little difficult to accept that the parties intended that outcome. The boat was to be handed over, and there was no discussion as to the respondent performing further work. The better view would seem to be that all outstanding obligations between the parties were to be subsumed in the agreement reached on that day. We say this notwithstanding the fact that the respondent apparently performed some work thereafter. 21 If, contrary to this view, the respondent was obliged to install the seating notwithstanding the events of 9 September, then the consequences of his failure to do so would depend upon the proper characterisation of the agreement reached on that day. That agreement either constituted a separate agreement relating to delivery of the boat and not otherwise affecting the original agreement, or it was a variation of the original agreement. In the former case Mr Denmeade's subsequent repudiation by non-payment would have entitled the respondent to determine the agreement of 9 September, but not the original agreement. In that case, the respondent may have remained liable to finish the work which was the subject of the original agreement. Alternatively, if the agreement of 9 September varied the original agreement, then such repudiation would have entitled the respondent to terminate the amended agreement, and so he would have had no ongoing obligation to complete the work. 22 In any event, the worst outcome for the respondent would be that he was obliged to allow some abatement of the contract price to represent uncompleted work. He would have been entitled to an allowance for lost profit in the event that his failure to perform that work was attributable to default on the part of the appellant. Whatever approach is taken to this rather subtle question, there seems to be no evidence as to the precise nature of the work under the original agreement which was not performed, nor as to the cost of completing it. In those circumstances it is understandable that his Honour did not deal with the question. It seems not to have been ventilated before him. We do not consider that it is necessary or possible to take the matter any further. The appellant must fail on this aspect of the case. 23 Apart from varying the judgment to reflect the correct amount owing on the original contract, a difference of some $1,000, there is no basis for interfering with it. The appeal should be dismissed with costs. I certify that the preceding twenty-three (23) numbered paragraphs is a true copy of the Reasons for Judgment herein of the Honourable Justices Whitlam, Kiefel and Dowsett.