Maksim (NSW) Pty Limited v Jantune Pty Limited

Supreme Court of NSW|2013-11-11|Before: Gleeson CJ

Background 15Most of the conversations between the parties that give rise to the dispute occurred between Mr Glew of Jantune and Mr Nott. Towards the end of the relationship, conversations occurred between Mr Glew and Mr Di Francesco on behalf of Maksim. At the hearing in the Local Court, all of these witnesses gave evidence and were cross examined. 16Jantune had over several prior years carried out work for Mr Nott and his companies. It was in 2005 that Jantune was introduced to the building site involved in this dispute known as the "Tenterden Road site". 17Mr Glew's evidence is that from 2005 to 2008 a number of meetings occurred, in which Mr Nott said, "You will be doing the building work" and "There will be stairs and a lift serving three floors. You will be working on the lift core" (J T5.20). 18In about 2008, construction plans prepared by CCS Design were lodged for development approval with Botany Council in relation to the site. These plans were ultimately approved by Council. 19In December 2008, Mr Nott told Mr Glew "I want you to start on site. Send the invoices as you go" (J T4.20). 20In about December 2008, Jantune began building work on the site. Three buildings on the site were being worked upon. From December 2008 to July 2010, Jantune performed work on buildings other than the lift core. From August to late 2010, Jantune was off the site. 21In late 2009, Mr Nott told Mr Glew that as soon as the DA approval was received, Jantune should "start building the lift core" (J T5.39). In October 2010, approval was given (J T6.22). Mr Glew then commenced organising staff and equipment for work on the lift core. This dispute is in relation to the building of the lift core. 22Between December 2010 and March 2011, Jantune worked on the construction of a lift core at the Tenterden Road property. Allform Constructions Pty Ltd ("Allform") also worked on this construction, supplying the concrete that was poured into the concrete blocks. 23The resulting structure is basically an upright three storey rectangular prism, whose surface, excepting cavities for doors and windows, is composed of ascending rows of concrete H blocks which are bound together by internal steel and concrete that was poured by Allform. The top of the structure is capped by a roof. The internal space is partitioned by stairs, floors and a lift shaft. 24From 4 February 2009 to 21 March 2011, Jantune rendered eight invoices relating to its work on the site. These comprised of: (a) Five invoices dated 4 February 2009, 12 May 2009, 10 November 2009, 16 February 2010 and 1 July 2010, relating to works other than the lift core. These were paid. (b) One invoice, the sixth on site but the first relating to the lift core, dated 20 December 2010 related to work on the lift core in the sum of $37,911.96. This invoice was paid without admissions. (c) Two invoices, the seventh and eighth on site, dated 10 February 2011, in the sum of $43,536.89 and dated 21 March 2011 in the sum of $47,998.78 were not paid (the two unpaid invoices total $91,535.67).

(1) Was the wrong methodology adopted? 25Maksim's first reframed ground of appeal [Ground 3 (a)] is: That the Magistrate failed to undertake the fact finding exercise entrusted to her in that she made the finding that Jantune's charges were fair and reasonable, not by a process of evaluating, engaging, grappling or wrestling with the evidence but rather by making the finding by comparing it with an irrelevant yardstick; namely, the evidence of Mr Haslam, a quantity surveyor who gave evidence for Jantune, whose evidence was based on facts, assumptions and a methodology (a quantum meruit approach) which were inconsistent with and/or irrelevant to the terms of the contract as found by the Magistrate. 26Senior Counsel for Maksim identified the alleged error of her Honour's judgment as occurring in [J T20] (the critical paragraph) where she stated: "In addition, I have examined in detail the evidence of the quantity surveyors, and particularly the areas of disagreement between the two, I have formed the view that were the matter dealt with by way of quantum meruit that the assessment of the reasonable value of the works performed by the plaintiff is an amount of $123,902.47, which is within $6,000 of the total amount invoiced by the plaintiff for the construction. On this basis also I am satisfied that the charges were reasonably and properly incurred. I am therefore satisfied that the plaintiff's invoices should be paid in full. It is not necessary to further consider the plaintiff's claim in quantum meruit." [Maksim's counsel's emphasis] 27Senior counsel for Maksim submitted that a Court is entitled to examine the sufficiency of reasons by reference, or the lack of reference, to material evidence. He referred to Mitchell v Cullingral Pty Ltd [2010] NSWCA 389. At [116] to [117] Campbell JA (with whom Allsop P and McColl JA agreed) stated: "Requirements for Proper Reasons for Judgment [116] A trial judge has a duty to refer to material evidence and make findings about material issues in the case: Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 79 ALJR 1816 at [130] (Hayne J). The absence of such findings and the absence of reference to such evidence can properly be taken as showing that the trial judge has erroneously overlooked or discarded it: ibid; Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430 at 443-444 (Meagher JA); Whalan v Kogarah Municipal Council [2007] NSWCA 5 at [40] (Mason P, Ipp JA and Tobias JA); Najdovski v Crnojlovic [2008] NSWCA 175 ; (2008) 72 NSWLR 728 at [21] (Basten JA, Allsop P agreeing); Sangha v Baxter [2007] NSWCA 264 at [22] (Ipp JA, Campbell JA agreeing); Nominal Defendant v Kostic [2007] NSWCA 14 at [59] (Ipp JA, Hodgson JA and Campbell JA agreeing). Another way in which this has been put is that the judge must engage with, or grapple or wrestle with, the cases presented by each party: Whalan at [40]; Kostic at [2]. This is not adequately done by setting out the evidence adduced by one side, setting out the evidence on the other side, and saying that the judge prefers one body of evidence to another: Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187; (2006) 66 NSWLR 186 at [28] (Ipp JA, Mason P and Tobias JA agreeing); Kostic at [58]. [117] The reasoning process in the judgment is seriously deficient." 28Senior counsel for Maksim contended specifically that her Honour failed to "engage with, or grapple or wrestle with, the cases presented by each party". 29It also should be taken into account this Court "should not read the reasons of the decision maker with an eye finely tuned for error": McGinn v Ashfield Council [2012] NSWCA 238 per McColl JA at [17] (Sackville AJA and Gzell J agreeing); Walsh v Parramatta City Council [2007] NSWLEC 255; (2007) 161 LGERA 118 (at [67]) per Preston CJ citing Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 (at 291).

Mr Glew's evidence 30The starting point to determine whether or not the Magistrate adopted the wrong methodology is to briefly examine the evidence of Mr Glew and that of the expert quantity surveyors, Mr Haslam and Mr Bryce Long. 31Before I canvass Mr Glew's evidence, it is convenient that I record that the Magistrate made findings of credit in relation to Mr Glew, Mr Nott and Mr Di Francesco. At [J T12.43] of her judgment, her Honour stated: By contrast to the evidence of Mr Nott and Mr Di Francesco the evidence of Mr Glew was definite and consistent. His evidence that he offered to Mr Di Francesco before the blocks were laid to return them and replace them with charcoal blocks is corroborated by his letter of 11 March 2011. I accept Mr Glew's evidence wherever it deviates from that of Mr Nott and Mr Di Francesco. 32Mr Glew's evidence is that all of Jantune's previous work at other sites for Mr Nott or his companies had been charged on a "cost plus basis" or a "do and charge" basis. He had not given Mr Nott an estimate or quote for the work on the lift core nor had Mr Nott asked for one. Mr Glew prepared the two disputed invoices on a "do and charge" basis (Aff, 26/06/2012 at [66] to [67]. 33Mr Glew explained (Aff, 26/06/2012) at [68] to [73]: "68 All of Jantune's previous work at other sites for Mr Nott or his companies had been calculated on a "cost-plus basis" or a "do and charge" basis: a) In "costs plus" all expenditures on materials and equipment and labour (including my labour at a nominated rate) are added up, and a nominated percentage is added to the total, to give the invoiced amount (before GST). b) In "do and charge" there is no builders' percentage, but all expenditures on materials and equipment are added up, and hourly charge for all labour, including my labour, is added on to give the invoiced amount (before GST). c) Both forms of invoice then add GST of 10% . 69. Jantune's invoices at Tenterden Road were not charged "cost-plus". Jantune Pty Ltd did not mark up the cost of materials and equipment. Jantune Pty Ltd never specified a mark up rate and we never charged such a rate. In its invoices Jantune Pty Ltd included the prices, including trade discount prices, that Jantune paid its trade suppliers for materials and equipment. 70. The hourly rates that Jantune Pty Ltd charged for the labour by myself and all tradesmen and labourers were the same in all eight invoices. The suppliers of labour are named, and the rates and total hours charged for, are set out in the invoices. For example on the sixth invoice "D Cook" was a tradesman charged at $58/hour, and "T Heighington" was a labourer charged at $48/hour. My hours were charged at $60/hour. 71. A breakdown of my own hours, described as "Kelly's hours" was attached to the seventh and eighth invoices. 72. Each of the eight invoices had attached to it primary records of the charges that Jantune had incurred on the invoiced work, including documents such as invoices from suppliers of materials and equipment. ... 73. The sixth, seventh, and eighth invoices dated 20 December 2010, 10 February 2011, and 21 March 2011 also contain accommodation costs, for example where they list "Sir Joseph Banks Hotel/Accom" or "Captain Cook Hotel". The previous five invoices did not charge for accommodation, but Mr Nott provided accommodation to Jantune's workers at the Sovereign Motor Inn at North Sydney." 34Mr Glew's affidavit attached the supporting documentation, including copies of individual invoices and receipts that formed the basis of the two disputed invoices rendered by Jantune to Maksim, which totalled $91,535.67. 35In the Local Court hearing, it was common ground between the parties that the contract was a "do and charge" contract. In a "do and charge" contract, there is no builder's percentage, all expenditure on materials and equipment is calculated and charged, plus an hourly charge for all labour is charged. The Magistrate accepted that the costs of a "do and charge" contract must be reasonable and properly and necessarily expended (J T8.35). 36So far as expert evidence is concerned on this topic, Jantune relied upon the report of Mr Haslam dated 20 August 2012. Maksim relied upon the reports of Mr Long dated 29 May 2012 and 10 August 2012 (Exs 13 and 14). In the Local Court, Mr Haslam and Mr Long gave evidence and were cross examined. Mr Haslam and Mr Long produced a joint report as the result of a conclave held on 21 and 27 August 2012 (Ex 18). 37At the conclave, Mr Long and Mr Haslam identified items where they agreed and those where they disagreed. A document reflecting their views was prepared and tendered in evidence. I shall briefly examine the experts' reports including their conclave reports and the evidence they gave in the Local Court.

Mr Haslam's report 38Mr Haslam inspected the site on 22 June 2012 in the company of Mr Glew. Using invoices and calendar documents supplied by Jantune's solicitors, he established that the construction period for Jantune to complete the block work, carpentry, framing, roofing and roof plumbing was approximately 12.6 weeks. He calculated the project preliminary costs as being 11.66% of the estimated construction costs and included a profit and overheads allowance of 12.5%. 39Where possible, Mr Haslam priced the estimated trade costs using Cordell's New South Wales Commercial building cost internet price lists 2011 and labour costs, material and plant items using Rawlinsons Australian Construction Handbook, 29th Edition (2011). 40Importantly, at [4] of his report Mr Haslam's report deals with "contractual assessment". He says at 4.1.1 that "It is my view that the verbal contractual agreement between Jantune Pty Ltd and Maksim Pty Ltd closely resembles a "costs plus" or "do and charge" contractual agreement." 41Through the use of a quantum meruit methodology Mr Haslam estimated the total cost of Jantune's work as $118,010.00 excluding GST and $129,811.00 including GST. 42In cross-examination, Mr Haslam clarified that the 'cost plus' agreement was one in which there would be no margin and would comply with the definition of "do and charge".

Mr Long's report 43Mr Long is a quantity surveyor and was asked by Maksim's solicitors to provide an expert opinion on Mr Haslam's report and to review the invoices Jantune had rendered to Maksim and estimate the cost of the works. On 29 May 2012, Mr Long calculated the costs of work at $55,460 (incl. GST). 44On 10 August 2012, Mr Long prepared a supplementary report where he undertook a review of the tax invoices rendered by Jantune. In his latter report at [5.3] Mr Long clarified this earlier report was made on the basis of a quantum meruit type assessment. In order to prepare this supplementary report he made an assumption that the labour and plant constants, wage and scaffolding rates used for the assessment of estimated cost and time of Jantune were in line with the latest edition of Rawlinsons Australian Construction Handbook 2001 (Edition 29). Mr Long assessed the work done in two parts, the first being for non-time related sections (material supply costs etc.) and the second being for the assessment of the time related items (labour and scaffolding etc.). 45This estimate was undertaken using actual material supply invoices amounts and time based assessment of labour utilising published labour and plant constants. 46Mr Long concluded at [9.0], that the fair and reasonable costs for the works carried out by Jantune was $58,048.63 (incl. GST). Element Estimated Costs (Incl GST) (Excl GST) Estimated costs for block works $41,339.02 $37,580.93 Estimated costs for framing & roofing $16,709.61 $15,190.55 Total Estimated Costs of Jantune Scope $58,048.63 $52,771.48

47Mr Long stated that in comparison his last report dated 29 May 2012, valued the works carried out by Jantune as $55,460 (incl. GST), this amount did not include accommodation allowances. Accommodation expenses in now estimated as $4,080 (incl. GST). Therefore a direct comparison was $55,460 + $4,080 = $59,540 (incl. GST). The difference between his two estimates using different methodologies is $1,491.37 (incl GST).

Conclave Expert Reports 48At the hearing, the quantity surveyors, Mr Haslam and Mr Long produced two joint reports, one prepared on a "do and charge" basis, the other on a quantum meruit basis. There were areas of dispute identified in both joint reports. 49So far as quantum meruit is concerned, the experts summarised the costs as follows: Summary of Costs Description

Agreed Costs $52,961.26 Agreed Conditionally $9,545.70 Disagreed $41,145.175 (sic)

50The broad areas where the experts disagreed ($41,145.18) included preliminary costs, the quantity of scaffolding and the length of time it was used and the rate to be applied for the laying of concrete (T 5/12/12 at 75-77). The Magistrate resolved these factual disputes in favour of Jantune. The experts agreed using the quantum meruit approach, there had to be added a profit component of 12.5% plus GST. 51The experts also prepared a schedule in relation to "do and charge" costing method. It is: DO & CHARGE SUMMARY OF COST Description BL BH Reasons for Difference Material Supply $19,971.30 $22,356.00 BL deducted costs for materials he believes were not included in works Assessment of labour for blockwork and roof works (agreed scope items) $23,373.88 25,181.50 Assessment of labour for blockwork and roof works (agreed conditionally - refer to annexure) $8,272.98 Assessment of labour for blockwork and roof works $7,668.00 $47,552.58 Non-agreed $39,314.86 Preliminaries $9,678.49 $24,640.00 BL based his scaffold estimate on 6 weeks hire & planking undertaken by labour on site. Scaffold BL acknowledges that Jantune may have provided trades but unable to determine duration Costs BL feels that $1,541.25 + GST would be fair weekly rate for ongoing hire. BL has not included internal scaffold. BL has allowed 8 weeks hire and internal scaffold. Hoist $1,436.60 $3,401.20 BL allowed 4 weeks of hire. BH allowed as per subcontractor tax invoices Accommodation $5,400.00 $5,700.00 BL allowed 6 weeks/30 nights accommodation for 3 persons Supervision $0.00 $ BL notes that supervision already incl. in labour Other general preliminaries $0.00 BL believes other items in BH's report are overheads not site specific job costs Profit and overhead $0.00 BL notes that P/O included in labour costs TOTAL (ex) $75,801.25 [$81,278.70]

52Under the "do and charge" basis of calculation, no amounts were allowed for supervision, general preliminaries and profit and overhead and this is position reflected in the chart above.

Submissions in the Local Court 53In the Local Court Maksim stated, in its written submissions, under the heading "Reasonable cost or do-and-charge?" at [13] - [14] stated that: "13. The parties are both quite clear as to the terms of the engagement. The terms of which were established over a working relationship over some twenty-five (25) years. ... Mr Glew in his affidavit sets out the terms of payment, importantly, that it was not on a "costs plus" basis. 14. There was no mark up of a the cost of materials and equipment. ... Further, Mr Glew states that Jantune did not charge administration, overhead or percentage markup ...Taking this into consideration and the incorrect premise upon which Mr Haslam (the plaintiff's quantity surveyor) bases his "market assessment", the amount referred to by Mr Haslam should, as a starting point, be reduced by the following sums: General preliminaries $10,695.72 Profit & Overhead 13,113.00 $23,809.72

As a initial observation, noting the similarity between the plaintiff's claim and Mr Haslam's "market assessment", the removal of the general preliminaries and profit and overhead components of $23,809.72 is somewhat indicative that the sum claimed by the plaintiff is unreasonable and contains costs which were unnecessarily and/or improperly incurred. 15. The "final total" as set out on page 299 of the Plaintiff's Court bundle must, it is submitted, accordingly be reduced to $94,200.28 plus GST, totalling $103,620.30. The defendant do not accept this sum as being the value of the works carried out by the plaintiff. An analysis of Mr Haslam's "market assessment" and the deductions to be made is provided below in greater detail." 54Detailed items of work where Maksim submitted should not be allowed were then identified. Reasons were given as to why these specific items should not be allowed at [45] to [46]. 45. The only analysis of the actual cost of works and whether or not those costs are reasonably properly and necessarily incurred is to be found in the 2nd report of Mr Long .... 46. His methodology is to divide the costs into time-related costs and non-time related costs. There is no challenge to his identification of costs as time-related and non-time-related costs. 55Maksim's submissions at [62] also included a table that was an adjustment of Mr Long's and Mr Haslam's "Do and Charge Summary of Cost". The table is reproduced below. Item Agreed Agreed conditionally Not agreed Material Supply $19,971.30 Assessment of labour for blockwork and roof works $23,373.88 Assessment of labour for blockwork and roof works $8,272.98 Assessment of labour for blockwork and roof works not agreed $7,668.00 Preliminaries $9,678.49 Scaffold Hoist $1,436.60 Accommodation $5,400.00 Supervision $0.00 NIL Other general preliminaries $0.00 NIL Profit and overhead $0.00 NIL

56Omitting the disagreed costs, the total here is $68,133.25. 57In the Local Court, Jantune in its submissions stated: "137. The building contract has been wholly performed on Jantune's side. Jantune has rendered invoices in terms provided by the agreement. The invoices cannot be faulted in their mathematics, and in their reliance upon principal materials (such as original invoices). Jantune's actual expenditures and the hours actually worked by labourers and tradesmen are meticulously set out in the annexed documents behind the invoices. 138. There can be no real dispute over the expenditure on hotel accommodation - Jantune provided every receipt from hotels, and Mr Nott concedes that he authorized this accommodation. Mr Long criticizes not the rates, but the number of days, which simply continues his unjustified insistences that the work should have been quicker. 139. The purchase of blocks, cement, sand, etc is recorded in Jantune's invoices. The last three invoices should be paid just as the first five were. 140. The Plaintiff submits that the invoices should be paid in their present quantum, that is, in the sum claim of $91,535-67, plus interest plus costs. 141. The Plaintiff claims quantum meruit in the alternative. Quantum meruit arises only when the contract does not contain a sufficient term as to payment. The Plaintiff submits the present contract does provides for payment of the disputed invoices." 58It appears from these submissions that Jantune was claiming the sum of $91,535.67 in relation to the "do and charge" basis, relying on Mr Glew's invoices and calculations. 59Later in Jantune's submission, under the heading "Two reports by two quantity surveyors and two joint report" it reads at [150] - [154]: "150 Annexed to these submissions is the Plaintiff's submissions in tabular form about a quantum meruit payable to Jantune, if the invoices are not paid in full. 151. This table contains further submissions about smaller areas of disagreement between Mr Nott and Mr Long. 152. These submissions concede some produce a quantum meruit claim of $125,127. 153. The sum paid on Jantune's invoice was $37,911. 154. Deducting this amount leave a balance claimed (in the alternative) by way of quantum meruit of $87,216." 60Referring to the tabular form attached to the end of Jantune's submissions that details the Jantune's quantum meruit claim, Mr Haslam's total costings are $129,811.00 and the Jantune's quantum figure (incl. GST) at $125,127.75. Jantune was claiming $87,216 on a quantum meruit basis.

Submissions in this Court 61Counsel for Maksim submitted that the Magistrate erred in making her finding about the reasonableness of the original "do and charge" invoice by firstly, choosing an irrelevant yardstick being the subsequent quantum meruit invoice prepared by Mr Haslam and secondly, using the irrelevant yardstick to justify the reasonableness of the invoice by virtue of its proximity to the original invoiced amount. 62Maksim submitted that the alleged irrelevancy came about because the evidence of Mr Haslam demonstrated a methodology that is inconsistent with the terms of the contract. 63Counsel for Jantune submitted that the Magistrate in her findings took account of evidence tendered by both sides as well as a joint expert report. According to Jantune, Maksim's attack upon the reference to Mr Haslam's report ignores the Magistrate's consideration of the joint report and the narrowing of issues created by joint reports following expert conclaves. Jantune says that the Magistrate did not overlook Mr Long but that she preferred Mr Haslam's evidence. Mr Haslam took into account the actual time that Jantune was on the site which her Honour found to be reasonable. 64Counsel for Jantune further submitted that Maksim did not take issue with any single item of expenditure in that Maksim did not challenge the invoices provided. Mr Glew was cross examined about his working hours and he was not challenged on the detail of the invoices. 65I have to concede, after careful readings of the evidence, transcript and submissions and in particular the reports prepared by the experts after participating in a conclave that occurred at the Local Court, it is difficult to ascertain with clarity how each party arrived at their total figures that they claim should be awarded under each method of calculation. The only evidence that is straightforward is that of Mr Glew who had calculated the amount Jantune was owed on a "do and charge" basis. This overall lack of clarity with the figures did not make the Magistrate's task an easy one. 66It is clear that in so far as Mr Long's figures are concerned, the quantum of the final figures depended upon the outcome of factual disputes that has to be resolved by the Magistrate. Those factual findings were all made in favour of Jantune. 67The Magistrate held that the contract was a "do and charge" one and under this type of contract there is no builder's percentage, all expenditure on materials and equipment is calculated and charged, plus an hourly charge for all labour is charged (I shall refer to this as the first limb of the assessment). The Magistrate also accepted that the costs of a "do and charge" contract must be reasonable and properly and necessarily expended (J T8.35) (I shall refer to this as the second limb of the assessment). The parties accept that the contract was a "do and charge" one and that the principles to be applied are those referred to by the Magistrate. 68The question that now arises is whether or not in the critical paragraph of her judgment at [J T20] did her Honour actually conduct her assessment on a quantum meruit basis and not the "do and charge" basis that she said she had applied? In the critical paragraph, her Honour commences by saying that she has examined, in detail, the evidence of the quantity surveyors, particularly the areas of disagreement. Where the Magistrate says, "I have formed the view that were the matter dealt with by way of quantum meruit that the assessment of the reasonable value of the works performed by the plaintiff is an amount of $123,902.47, which is within $6,000 of the total amount invoiced by the plaintiff for the construction", I do not think she saying that she was carrying out the assessment on a quantum meruit basis but rather her Honour is saying were she to carry out the assessment on a quantum meruit basis she would have arrived at the sum of $123,902.47. This figure reflects the sum that Mr Haslam calculated on quantum meruit basis but before the deduction of $37,911.00 that Jantune submitted should have been applied has been taken into account. Had the Magistrate applied the quantum meruit basis she would not have used the word "were". Her Honour would not have made that statement had she actually applied the quantum meruit basis of assessment. On a "do and charge" basis, Jantune in its submissions had sought the sum of $91,535.67 by relying on Mr Glew's evidence and his supporting documentation. Mr Glew had calculated the amount Jantune was owed on a "do and charge" basis at $91,535.67. The Magistrate agreed with Jantune's position and awarded in the sum of $91,535.67. 69The Magistrate continued by saying that she was also satisfied that the charges were reasonably and properly incurred and that the invoices should be paid in full. The reference to the "reasonably and properly incurred" is a necessary requirement of both bases of assessment. So far as the "do and charge" contract is concerned, that finding is necessary for what I have termed the second limb of the "do and charge" assessment. After her Honour confirmed that as she had assessed the amount owing she then spelt out that it was not necessary to consider the plaintiff's alternate claim in quantum meruit. 70In my view the Magistrate has demonstrated that she properly engaged and grappled with the issue in dispute namely the sum that should have been awarded to Jantune on the basis of "do and charge" contract. While her Honour could have expressed her reasons more succinctly, there is no error of law. This ground of appeal fails.

(2) Whether the Magistrate erred in not finding there was an implied term of the contract 71The Magistrate found made a finding that there was one contract which included the construction of the lift core. The second ground of appeal relates to the Magistrate's decision in not finding that it was an implied term of the contract that work performed by Jantune would match the existing work at the site; namely, that the blocks supplied by Jantune would match the existing blocks which were face blocks (the alleged implied term). 72Counsel for Maksim submitted that the alleged implied term was breached because existing blocks were grey face blocks but the lift and stair core blocks supplied by Jantune were grey retaining wall blocks. 73Senior counsel for Maksim drew this Court's attention to Dillon v Gosford City Council [2011] NSWCA 328 at [45] to [46] where Basten JA (with whom Macfarlan JA and Handley AJA agreed) stated: "[45] In an attempt to identify an issue of law in respect of what was almost entirely a factual assessment, the appellants took the court to various paragraphs in the joint expert report of 25 September 2009. These paragraphs involved, primarily, assessment of apportionment based on various models of possible flooding and the redirection of the flow of water. The appellants sought to challenge the bases of this assessment. Because they had been relied upon by the experts and were accepted by the primary judge, it was submitted that they thereby became "material considerations", whereas the appellants contended that they were "irrelevant matter" in relation to the question of the reasonableness of the disturbance claim: written submissions at para 82. [46] This argument does not identify any question of law, let alone one erroneously determined. It appears to invoke the principle that an administrative decision, at least, may be set aside if the decision-maker has taken into account "irrelevant considerations". However, that principle provides no warrant for the court to inquire into findings of fact. Rather, it is limited to the identification, by reference to the statute or other legal principles under which the decision-maker acted, of some factor as a prohibited consideration, in the sense that, as a matter of law, it must be excluded from the decision-making process: M Aronson, B Dyer and M Groves, Judicial Review of Administrative Action (4th ed, 2009), p 282. Whether the modelling was done well or badly and whether different outcomes might have been achieved, are beside the point. It is not possible to say that the statutory scheme precluded the court taking into account the results of such an exercise. The challenge is misconceived and must be rejected." 74Counsel for Maksim submitted that that the term that the work on the lift core would match existing work was a term similar to an implied term by law. The said implied term requires a contractor to use reasonable care in doing the work and to supply materials which are of "good quality" and "reasonably fit for the purpose" for which they are supplied (GH Myers & Co v Brent Cross Service Co [1934] 1 KB 46 at 55 (approved by Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454; adopted by Reg Glass Pty Ltd v Rivers Locking Systems (1968) 120 CLR 516). 75To support this proposition, counsel for Maksim drew this Court's attention to a passage in an extract from a letter of Mr Glew where he stated: "I will concede my error. I believe I have misunderstood when we discussed the possible painting of the blocks, when looking at the option of charcoal which we considered would not possibly give a uniform finish." 76According to counsel for Maksim, Mr Glew's letter was a concession that the wrong blocks were used. That statement forms part of the factual matrix but this "concession" was not in relation to the terms of the contract but rather an apology for a previous conversation. The Magistrate was correct finding that there was no oral variation of the contract after considering the alleged concession. 77Counsel for Jantune submitted that there was no error in the Magistrate's finding that there was no implied term in the contract with respect to the blocks and that the Magistrate's finding was a finding of fact. On this topic, the Magistrate identified the issue as whether the wrong blocks were laid and if so was this a breach of contract. Her Honour provided detailed reasoning on this topic including reference to conversations between Mr Glew, Mr Nott and Mr Di Francesco and documentation on this topic and her reasons for preferring Mr Glew's evidence. Her Honour's reasoning appears at pages 9 to 12 of her judgment. It is not necessary to reproduce it in detail. 78Mr Nott's evidence was that the Council approved plans for the lift core specified "concrete block walls, selected paint finish". Mr Glew ordered concrete retaining wall blocks, also called standard blocks that were coloured grey and that these blocks were consistent with the architectural plans. Jantune was not contracted to paint the blocks. 79The Magistrate (J T9-10) stated: "In late October the first delivery of block arrived on site. In November 2010 Jantune commenced block laying, however it was Glew's evidence that in August of 2010 in a meeting with Mr Nott he was handed the hand drawn specification and Nott that said: 'This is how I want the block work to look on the outside. I want charcoal blocks on the exterior of the lift core.' Glew says that he told Nott: 'Don't do that because after you clean charcoal blocks they end up faded and different colours. They are not uniform and they look bad. Charcoal blocks increase the costs of materials. You are better off with standard grey blocks from Amber and painting them and you will get a consistent colour. If you want you can paint the charcoal.' He says that Nott replied, 'I'll think about that.' In oral evidence Mr Nott agreed that it was possible that this conversation took place but denied that he said that he would think about that. He says that he said: 'The blocks should be charcoal. I don't want a painted finish due to the ongoing maintenance required' he agrees that, 'Possibly no construction certificate was approved at the time of this conversation.' Mr Glew says that after the blocks were delivered on the site that Mr Di Francesco said to him at a time prior to their being laid in November of 2010, that, 'Warwick told me the blocks were the wrong colour' he says that he replied: 'I told Warwick we should get grey blocks and paint them. Any block needs to be sealed, but I can return them and replace them with charcoal if you want' and Mr Di Francesco said, 'No, Warwick said we don't have time, just go ahead and lay those blocks. We don't want to delay the job.'" 80This version of the conversation was disputed by Mr Di Francesco. Mr Di Francesco evidence is that he said: "The blocks are the wrong colour, they should be charcoal", he says that Glew replied, "The plan shows paint finish, I discussed this with Warwick" and that he told Glew, "Don't start work, call Warwick." 81The Magistrate noted that Mr Di Francesco did not complain with respect to the blocks in any calls or conversations with Mr Glew face to face (J T11.30). 82The Magistrate concluded (J T12-13): "... I accept Mr Glew's evidence wherever it deviates from that of Mr Nott and Mr Di Francesco. In particular, I accept that in the meeting in August of 2010 when Mr Nott expressed his preference for charcoal blocks that Mr Glew advised him, amongst other things, that: 'You are better off with standard grey blocks from Amber and painting them. You will get a consistent colour. If you want you can paint them charcoal' and that Mr Nott replied, 'I will think about that.' This is consistent with the annexure to Mr Glew's letter to Mr Nott of 11 March where Glew says, 'I will concede my error', and goes on to explain that that be believes he misunderstood Mr Nott to have rejected the idea of charcoal blocks because of the issues raised with respect to the comparative benefits of standard grey blocks from Amber. I accept the evidence of Mr Glew that after the blocks were delivered he had a conversation with Mr Di Francesco in which he said: 'I told Warwick we should get grey blocks and paint them. Any block needs to be sealed, but I can return them and replace them with charcoal if you want' and Mr Di Francesco said, 'No, Warwick said we don't have time, just go ahead and lay those blocks. We don't want to delay the job.' I accept Mr Glew's evidence that it was not until the meeting of 21 February 2011 that Mr Nott raised objections to the block work. While Mr Nott's evidence is effectively that he allowed the laying of the wrong blocks but did so in the belief that the blocks would not need painting, I accept the evidence of Mr Glew that he had raised the issue of the blocks needing to be painted with both Mr Di Francesco and Mr Nott prior to their being laid and I accept Glew's evidence that in February 20911 when the roof was approaching completion that Glew said to Mr Di Francesco, "The lift core won't be water proofed if you don't paint it" and that just prior to the scaffolding coming down that Mr Glew said to Mr Di Francesco, "Do you want to paint the core before we pull the scaffolding down?" The blocks delivered to the site were consistent with the written specifications. ... I am satisfied that the conduct of the parties and the dealing between them objectively demonstrated that the representatives of Maksim, in full knowledge of the nature of the blocks being laid, allowed them to be laid. On the evidence as I have found I do not find that there was an oral variation as to the bocks to be supplied from that in the written specifications. There was no breach of contract in this regard." 83The Magistrate preferred the evidence of Mr Glew over that of Mr Di Francesco. She gave cogent reasons as to why she did so. The Magistrate stated that Mr Di Francesco's evidence was marked by an inability to recall events and alleged conversations and that his evidence that he did not have a supervisory role with regards to Jantune unbelievable. On Mr Di Francesco's own evidence he had regular discussions with Mr Nott and was dealing with Mr Glew regarding the works on site. By contrast, the Magistrate found that Mr Glew's evidence to be definite and consistent. Mr Glew's evidence that before the blocks were laid, he offered to return and replace them with charcoal blocks was corroborated by his letter of 11 March 2011 (J T11-12). 84It is open to the Magistrate upon the evidence to come to the decision that there was no breach of the "implied term". This ground of appeal fails. 85So far as any other grounds of appeal are concerned, they raise factual issues or issues of mixed fact and law for which I would not grant leave. This is because there is in reality only a modest amount in dispute. There has already been a large amount of legal expenses incurred by both parties to date and three days of Local Court time has already been given to this dispute. The issues raised do not concern any matter of public policy. 86Even if I am wrong on the first ground of appeal, it is my view that there is no utility in remitting this matter to the Local Court to be determined according to law. The hearing has already taken three days in the Local Court. It is common ground that the contract was a "do and charge" one. In the exercise of my discretion, with the relatively modest amount in dispute and the costs already incurred by the parties, I would decline to remit the matter to the Local Court. 87The result is that the appeal is dismissed. The order of her Honour Magistrate McGlynn dated 24 April 2013 is affirmed. The amended summons filed 12 July 2013 is dismissed. 88Costs are discretionary. Costs normally follow the event. The plaintiffs are to pay the first defendant's costs on an ordinary basis as agreed or assessed.

The Court orders that: (1) The appeal is dismissed. (2) The order of her Honour Magistrate McGlynn dated 24 April 2013 is affirmed. (3) The amended summons filed 12 July 2013 is dismissed. (4) The plaintiffs are to pay the first defendant's costs on an ordinary basis 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: 11 November 2013

The appeal generally 5Section 39(1) of the Local Court Act 2007 provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law. 6Section 40(1) of the Local Court Act provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court on a ground that involves a question of mixed law and fact, but only by leave of the Supreme Court. 7Section 40(2)(c) provides that a party who is dissatisfied with an order as to costs of the Local Court may appeal to the Supreme Court, but only by leave of the Supreme Court. 8Section 41 of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 9In Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517, Gleeson CJ at [2] reiterated that in the common law system of civil justice, the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

(2007) 161 LGERA 118

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (17 paragraphs)

Parties

Cases Cited (20)

Cited By (1)