Geocast Constructions v Coates Hire

Grounds of appeal 10The grounds of appeal on error of law are firstly, that the Magistrate made an error of law in the determination of the terms of the agreement between Coates and Geocast; secondly, the Magistrate should have held that, on a proper construction of the agreement, the exclusion clauses in Coates's conditions of sale and hire were not terms of the agreement or were not enforceable; thirdly, the Magistrate should have held that, on a proper construction of the agreement, the terms of the agreement were as contended by Geocast in the cross claim; fourthly, the Magistrate made an error of law by failing to give appropriate weight or proper weight to the evidence of the expert witness, Mr Alan Gray; fifthly, the Magistrate made an error of law, by allowing extraneous or irrelevant matters to guide her Honour's judgment, in finding that Geocast would have considered all aspects of the contract at the tender stage and tendered on the basis that of the site had to occur; and finally, the Magistrate made an error of mixed law and fact in that her Honour dismissed Geocast's cross claim in its entirety when Coates failed to challenge the extent of the cross claim and one of Coates's witnesses conceded under cross examination that Coates's conduct caused delay to Geocast.

The pleading framework in the Local Court 11There was an agreement between the parties that Coates supply and install dewatering equipment to a construction site known as the Soul Apartments project at the Esplanade, Surfers Paradise, Queensland ("the site") where, Geocast was required to construct in-situ shoring for a three level basement. The works were to commence on 3 December 2007 and to be completed by 21 December 2007. Coates provided Geocast with a quotation and contended it was accepted without any variation. In December 2007 and January 2008, Coates supplied the equipment specified in the quotation and issued tax invoices in the amount of $49,225.13. It is common ground that those tax invoices remain unpaid. 12Geocast admitted that there was a contract, a credit agreement and a guarantee in existence and that the dewatering equipment that was specified in the quote was supplied to the site. However, Geocast contended that Coates was contracted to install and design the dewatering system and therefore had an obligation to ensure that the system and supporting hire equipment it provided was "fit for the purpose". Geocast contended that the equipment supplied was not fit to dewater Geocast's site and caused delays on the site which, in turn, caused associated problems that led to the termination of Geocast's business with the head contractor, Mainland. Geocast in its amended cross claim sought the sum of $44,000. 13Coates admitted that it had contracted to install the specified equipment but denied it had an obligation in relation to the design of the system. It submitted that it never warranted that the equipment was going to be suitable or fit for their purpose. It further submitted that it did not provide any technical advice on what equipment to hire and the decisions on the choice and installation of the equipment was the domain of the hirer, namely Geocast. Coates admitted that there were significant delays and problems with the site but say that they were caused by Geocast's mismanagement of the site, including its failure to prepare the site prior to the dewatering equipment being brought to the site. Finally, Coates contended that there was no evidence to support Geocast's claim that it suffered damages in the sum of $44,000. 14The written documents between the parties consist of Coates's quote that incorporates the standard terms and conditions of sale and hire; Geocast's purchase order; and, finally, the document relating to general pump hire and dewatering terms and conditions.

The written documents 15The written quote by Coates to Geocast dated 27 November 2007 relevantly reads: Issue Date 27/11/2007 15:30 Sat Y Sun N P/Hols N Shifts 1 Expiry Date 27/12/2007 Quoted Hire 1.0 Days

QTY PRODUCT RATE VALUE 1 150MM SILENCED PISTON PUMP BBA 180.00 PER DAY 180 SILENCED PISTON - CANOPY 150MM 1 150MM SILENCED PISTON PUMP BBA 180.00 PER DAY 180 SILENCED PISTON - CANOPY 150MM 50 150MM CONTRACTORS LAYFLAT HOSE 1.00 PER DAY 50 (QTY IS IN METRES) 2 DEWATERING WELLPOINT 150.00 PER DAY 300 INSTALLATION CHARGE 2700.00 G/L CHARGE 2700 CARTAGE IN PICK UP FROM SITE 165 165 CARTAGE OUT DELIVERY TO SITE 165 165 *DAMAGE WAIVER 88.75 GST TAXABLE AMOUNT 3828.75 GST @10% 382.88 TOTAL QUOTED 4211.63

Additional Conditions For This Quote: EQUIPMENT DELIVERY - BASED ON AN HOURLY RATE EQUIPMENT PICKUP - BASED ON AN HOURLY RATE 16The conditions of sale and hire included the following relevant provisions: "8.0 CUSTOMERS HIRING OBLIGATIONS 8.1 The Customer shall: (a) Prior to the use of the Plant determine the condition and suitability of the Plant hired for the purpose required. The Customer accepts that the Owner gives no warranty that the Plant is suitable for the Customer's purpose. ... (d) At its own expense service, clean, fuel, lubricate and maintain the Plaint in good substantial repair and condition, except for prearranged major servicing which will be carried out by the Owner during normal working hours. 12.0 EXCLUSION OF CONDITIONS, WARRANTIES AND LIABILITY ... The Owner and the Customer agree that in the event of the Customer suffering any loss (including economic loss), damage, cost, expense or claim howsoever arising as a result of hiring or purchasing the Plant, including without limitation in respect of delay or inconvenience arising out of any breakdown, failure or defect in the Plant, the liability of the Owner is limited to the repair or replacement of the Plant. The Owner shall not be liable under any circumstances for any direct, indirect, economic, special or consequential loss or damage of any nature whatsoever. 13.0 EXCLUSION OF LIABILITY REGARDING DE-WATERING PLANT If installation of de-watering Plant cannot be effected within a particular time or at all due to ground conditions or if such Plant fails for any reason, the Customer shall have no other rights or claims against the Owner of any kind whatsoever." 17On 4 December 2007, Geocast issued a purchase order to Coates that relevantly reads: "Please proceed with quote to install dewatering at Soul Apartment site. As per Coates quote #532634 Geocast will provide direction on locations for installation of spears, header pipe, pump etc. Price is a schedule of rates supplied with quote." 18A copy of the document relating to the pump hire and dewatering terms and conditions was before the Local Court. It now cannot be located so it is not before this Court. However, it was noted at paragraph 91 of the Magistrate's decision that condition 13 of the General Pump Hire and Wellpoint Dewatering Terms and Conditions provided, in unequivocal terms, that the service and hire offered by Coates are for hire only and at all times personnel supplied by Coates were operating under the direction and instruction of Geocast or its representatives.

Grounds (1) and (3) - Whether the Magistrate made an error of law in the determination of the terms of the agreement between Coates and Geocast 19Geocast submitted that the Magistrate erred in the construction of the contract by finding that, "Coates provided the equipment that it was contracted to provide" (at [135]). As previously stated, Coates agreed that under the agreement it was to supply and install the dewatering system but says that it was not responsible for the design of the dewatering system. 20The construction of a contract is a question of law. The rights and liabilities of the parties are to be determined objectively. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction - see Codelfa Construction Pty Limited v State Rail (1982) 149 CLR 337 at 350; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 at [40]; (2004) 218 CLR 451 at 462; Toll (FGCT) Pty Limited v Alphapharm Pty Limited & Ors (2004) 219 CLR 165 at 179. 21The Magistrate considered the surrounding circumstances known to the parties objectively. Her Honour also considered all the written documents between the parties and concluded that none of them referred to the design of the dewatering system. Her Honour considered the surrounding circumstances in order to decide whether the agreement, or variation to the agreement, included a term that Coates was responsible for designing the dewatering system.

The Magistrate's findings 22The Magistrate considered evidence and made findings in relation to the disputed facts. Her Honour considered the written documents reproduced earlier in this judgment. It was common ground that Geocast had previously contracted with Coates for Coates to install dewatering systems to lower the underground watertable on construction sites in New South Wales. Geocast approached Coates to provide a quotation to install a dewatering system to lower the underground watertable on a construction site on the Gold Coast in Queensland; 23The Magistrate made a finding that Scott Claxton, the principal witness for Geocast, was aware that the initial approach to Jayson Brown of Queensland Coates was made by Mr Carpenter who requested a quotation for the supply and installation of dewatering equipment for the project. The Magistrate noted that there was no reference in Mr Claxton's affidavit to a requirement that Coates design a system albeit that Mr Carpenter was alleged to have stipulated vacuum prime diesel pumps to Jayson Brown. 24Mr Claxton agreed that, despite having considerable qualifications and experience relating to pumps and pump theory gained during his employment with two previous employers, and despite the fact that he knew Jayson Brown to be merely a sales representative of Coates, he relied on him to install an appropriate dewatering system thinking that he would have the same level of knowledge as his New South Wales counterparts with whom he had previous dealings. (at [110] - [111]). 25Mr Claxton gave evidence of a conversation between himself and Jayson Brown in which he advised Jayson Brown that he was not familiar with the pumps in the quote pointing out that Geocast normally used vacuum prime pumps. Mr Claxton recalled that Jayson Brown offered to change the pumps prompting him to advise Mr Brown that he wanted the quote changed to reflect the use of vacuum prime pumps. (at [117]). 26Mr Claxton gave further evidence that he attended the site every day during the relevant period. He stated that despite Geocast specifying vacuum prime pumps, when he arrived on site on 1 December 2007, he discovered that BBA pumps had been installed. He could not explain why, when he realised that the wrong pumps were being used, he still issued the purchase order on 4 December 2007, accepting the original quote without variation. Mr Claxton thought that he must have had the dates wrong on his affidavit and they probably did not attend the site until Monday 7 December 2007. (at [118]). Thus the purchase order was prepared by Scott Claxton (who was then the project manager of Geocast), and at a time when Mr Claxton had already visited the worksite and was aware that BBA pumps had been had been installed. The Magistrate made a finding that Jayson Brown's evidence was of little assistance. (at [124]). However, Mr Carpenter, the then director of Geocast, and Adam Hemsworth, the project manager of Geocast, testified that the quote was obtained from Coates for the "supply and installation" of the dewatering equipment, and Mr Hemsworth agreed in cross examination that the installation of the dewatering equipment (including locating the pumps, spears and header pipe) by Coates was under Geocast's direction. 27The Magistrate did not accept that Geocast had no knowledge of the local conditions and that it relied upon the representations of Coates, and in particular account manager. (at [125]). 28The Magistrate made findings that the evidence clearly indicated that the quotation faxed by Coates on 27 November 2009 was formally accepted, without variation, when Scott Claxton issued a purchase order dated 4 December 2007. Her Honour found that Coates supplied the dewatering system confirmed in the purchase order that Geocast issued, dated 4 December 2007, and noted that the written documents did not make any reference to the design of the dewatering system nor assign any responsibility for the design of the dewatering system. (at [129]). 29The Magistrate considered the surrounding circumstances known objectively by the parties and the written documents. Her Honour made a finding that there was no variation to the agreement as set out in the written documentation. 30In my view the wording contained in the quote is clear and unambiguous. The written quote specified particular pumps and hoses. A charge for installation was included in that quote. Coates was to supply that particular equipment and install it. This interpretation accords with Coates's submission that it was responsible for the supply and installation of the dewatering system. 31Geocast accepted Coates's offer by way of the purchase order. Geocast accepted the supply of certain equipment specified in the quote. The purchase order completed by Geocast specifically states that Geocast will provide direction on locations for installation of spears, header pipe, pump etc. It is clear from those words that it was Geocast's responsibility to provide directions on locations for the installation of the equipment. 32So far as the terms and conditions are concerned the Magistrate stated that the credit agreement was subject to Coates "Conditions of Sale and Hire" which included exclusion clauses and provisions specifying that Coates provided no warranty that the plant would be suitable for the customers' purpose. Her Honour concluded that she was not convinced that Coates was contracted to "design" a dewatering system for the project in question. (at [127]). Her Honour stated that if Coates were required to design a system, it surely would not have required Geocast to provide direction on locations for the installation of the various components of the system as stipulated in the purchase order. (at [128]). The Magistrate applied the correct tests. There is no error of law.

Ground (2) - Whether on proper construction of the agreement, the condition of sale and hire were not terms of the agreement and not enforceable 33Coates relied upon the exclusion clauses "Conditions of Sale and Hire". Geocast submitted in the Local Court and in this Court that there was no executed agreement between the parties that would allow Coates to invoke the "Conditions of Sales and Hire". Geocast submitted that there was merely a quote and acceptance that was so radically amended that it rendered impossible for Coates to define what part, if any, of the original quote was in operation for the period in which Coates contends an agreement was on foot. 34The Magistrate, after making factual findings, found that the quotation faxed by Coates on 27 November 2009 was formally accepted, without variation, by Scott Claxton issuing a purchase order dated 4 December 2007. Her Honour found that Coates supplied the dewatering system confirmed in the purchase order issued by Geocast dated 4 December 2007. As previously stated, the written documents did not make any reference to the design of the dewatering system nor assign any responsibility for the design of the dewatering system. (at [129]). 35Clause 8.1(a) of the conditions of sale and hire state that it was the responsibility of Geocast to decide what equipment was required for the dewatering work and that it accepted that Coates gave no warranty that the plant was suitable for Geocast's purpose. Clause 5.0(e) of the conditions of sale and hire provided that no amendment or variation of the agreement is valid or binding on a party unless made in writing and executed by the parties. Clause 12.0 of the conditions of sale and hire excluded any liability of Coates arising from the hiring of plant. Clause 13.0 of the conditions of sale and hire excluded any liability of Coates in respect of dewatering plant. Condition 13 of the General Pump Hire and Wellpoint Dewatering Terms and Conditions provided that the personnel supplied by Coates would be operating under the direction and instruction of the hirer at all times. In addition, Geocast by its own document stated that it was to provide direction on the location for the installation of the spears, heading, pipe, pumps etc. Geocast says that it received a revised quote from Coates, which actually stipulated the QSSS pumps, but Coates denied its existence and Geocast was unable to produce it. Hence, her Honour did not make a finding that there was a revised quote. It was open for her to do so. 36Her Honour also made a finding that there was no written variation between the parties or prepared by Geocast after 27 November 2007, nor was there any other agreement other than that contained in the quote and purchase order. The quote and acceptance was not radically amended. The terms and conditions of sale are applicable. There is no error of law. This ground of appeal fails.

Ground (4) - Whether proper weight was given to the evidence of expert Alan Gray 37Alan Gray is an expert in pumps and dewatering systems. It was his view that the dewatering system was poorly designed and the need to install well points was the cause of the problem (at [76]). Mr Gray gave evidence that the only advantage of using VPD pumps rather than BBA pumps would be that a lesser number of units would be required to achieve the same capacity, and that it could have been an "economic decision" as to which pumps to use. His evidence only becomes relevant if the Magistrate decided that Coates was responsible for the design of the dewatering system. The Magistrate did not do so. The Magistrate afforded Mr Gray's evidence the proper weight. This ground of appeal fails.

Ground (5) - Whether the Magistrate considered extraneous or irrelevant matters 38Geocast submitted that the Magistrate made an error of law, by allowing extraneous or irrelevant matters to guide her Honour's judgment, in finding that Geocast would have considered all aspects of the contract at the tender stage and tendered on the basis that of the site had to occur. 39Geocast signed the purchase order. The issue in dispute was whether there was a terms of the agreement that Coates was responsible for the design of the dewatering system. The Magistrate made a finding that there was not. It is my view that the Magistrate did not take into account irrelevant or extraneous matters into account. This ground of appeal fails.

Ground (6) - The quantum of the cross claim 40Geocast submitted that the Magistrate made an error of mixed law and fact in that her Honour dismissed Geocast's cross claim in its entirety when Coates failed to challenge the extent of the cross claim and one of Coates's witnesses conceded under cross examination that Coates's conduct caused delay to Geocast. 41The Magistrate noted that Coates's evidence regarding the causes of delay has remained consistent and unchallenged. Geocast has conceded, that some delays on site were caused by parties other than Coates and primarily by Geocast. 42However, Scott Claxton of Geocast failed to produce any evidence to substantiate the cross claim for $44,000. The Magistrate noted that such documentation is retained as normal business practice and Geocast had had notice of the proceedings since 2008. Geocast was unable to provide any documentary evidence that Mainland had cancelled its contract and/or the reason for the cancellation. (at [138] - [139]). Hence the Magistrate concluded that there was no evidence before the court in the form of site records from Geocast identifying the extent of the delay caused by the damage to equipment, save for the sum of $1,371.25, which had already been waived by Coates. The Magistrate dismissed the entire cross claim. The Magistrate's approach was correct. This ground of appeal also fails. 43The Magistrate adopted the correct approach in construing the contract. There is no error of mixed fact and law. Nor is there an error on a question of law. The appeal is dismissed. The decision of her Honour Magistrate Tabbaa dated 26 October 2009 is affirmed. The further amended summons filed 3 February 2010 is dismissed. 44Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

The Court orders: (1) The appeal is dismissed. (2) The decision of her Honour Magistrate Tabbaa dated 26 October 2009 is affirmed. (3) The further amended summons filed 3 February 2010 is dismissed. (4) The plaintiff is to pay the defendant's costs as agreed or assessed.

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: 08 March 2011