Reed Constructions Australia Limited v MidCoast County Council trading as MidCoast Water

Reed Constructions Australia Limited v MidCoast County Council trading as MidCoast Water - [2010] NSWSC 1250 - NSWSC 2010 case summary — Zoe

[21]

30 While characterised as one of misconduct by silence, the complaint is, in substance, a complaint of misconduct by half-truth. The half-truth concept is illustrated by the decision of the United States Court of Appeals in P Lorrilard Co v Federal Trade Commission 186 F 2d 52 (1950), a tobacco advertising case in which a cigarette manufacturer had claimed that its "Old Gold" product would not harm the throat, quoting a Reader's Digest article comparing various brands of cigarette. The court said: "The fault with this advertising was not that it did not print all that the Reader's Digest article said, but that it printed a small part thereof in such a way as to create an entirely false and misleading impression, not only as to what was said in the article, but also as to the quality of the company's cigarettes. Almost anyone reading the advertisements or listening to the radio broadcasts would have gained the very definite impression that Old Gold cigarettes were less irritating to the throat and less harmful than other leading brands of cigarettes because they contained substantially less nicotine, tars and resins, and that the Reader's Digest had established this fact in impartial laboratory tests; and few would have troubled to look up the Reader's Digest to see what it really had said. The truth was exactly the opposite. There was no substantial difference in Old Gold cigarettes and the other leading brands with respect to their content of nicotine, tars and resins and this was what the Reader's Digest article plainly said." 31 The same thinking caused the Full Federal Court to observe in Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 that, where information is provided, it must constitute a "full and fair disclosure of all relevant facts." In other words, it is not enough that what is said, considered in isolation, is literally true if there is another part of the overall story that should be disclosed and, if disclosed, would cause the total message to be different. … 34 In a situation of arm's length commercial negotiations, however, there is no generally prevailing legal requirement that one party not take advantage of superior knowledge; much less is there a requirement to surrender the advantages that superior knowledge entail. In Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458, Gleeson CJ said at 475: "Where parties are dealing at arms' length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice." 35 Case law about s 52 of the Trade Practices Act 1974 (Cth) and its State equivalents such as s 42 of the Fair Trading Act makes it clear that the factor that may give rise to a requirement to break silence - in the sense that failure to do so will be misleading or deceptive - will be found in the whole of the circumstances in which silence is maintained. The most often quoted statement of the relevant principles is probably that of the Full Federal Court in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. The matter was summarised thus by Handley JA (with whom Hodgson JA and Gzell J agreed) in Metalcorp Recyclers Pty Ltd v Metal Manufactures Ltd [2003] NSWCA 213; (2004) Aust Contract R 90-186: "A finding of misleading or deceptive conduct is open where that conduct, by word or deed, conveyed a misrepresentation ( Wardley Australia Ltd v Western Australia (1992) 175 CLR 514). In this case the misrepresentation is said to have been conveyed by silence, but that is an inadequate and incomplete description. The relevant principles were felicitously summarised by Black CJ in Demagogue Pty Limited v Ramensky (1992) 39 FCR 31 , 32: 'Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive … to speak of "mere silence" or a duty of disclosure can divert attention from that primary question. Although "mere silence" is a convenient way of describing some fact situations, there is in truth no such thing as "mere silence" because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.'

[34]

[21] To invoke the existence of a reasonable expectation that if a fact exists it will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations held by one person of another which exceed the requirements of the general law and the prohibition imposed by the statute. In that connection, Robson AJA in the Court of Appeal spoke of s 52 as making parties "strictly responsible to ensure they did not mislead or deceive their customer or trading partners".41 Such language, while no doubt intended to distinguish the necessary elements of misleading or deceptive conduct from those of torts such as deceit, negligence and passing off, may take on a life of its own. It may lead to the imposition of a requirement to volunteer information which travels beyond the statutory duty "to act in a way which does not mislead or deceive".42 Cicero, in his famous essay On Duties, seems to have contemplated such a standard when he wrote:43 Holding things back does not always amount to concealment; but it does when you want people, for your own profit, to be kept in the dark about something which you know and would be useful for them to know. It would no doubt be regarded as an unrealistic expectation, inconsistent with the protection of that "superior smartness in dealing" of which Barton J wrote in W Scott Fell & Co Ltd v Lloyd ,44 that people who hold things back for their own profit are to be regarded as engaging in misleading or deceptive conduct. As Burchett J observed in Poseidon Ltd v Adelaide Petroleum NL,45 s 52 does not strike at the traditional secretiveness and obliquity of the bargaining process. But his Honour went on to remark that the bargaining process is not to be seen as a licence to deceive, and gave the example of a bargainer who had no intention of contracting on the terms discussed and whose silence was to achieve some undisclosed and ulterior purpose harmful to a competitor.

[36]

[190] It seems to me that the qualification suggested by Merkel J in Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) 45 IPR 453 ; (1999) ATPR 41-696 ; [1999] FCA 569at [2]-[4] is correct, namely that the requirement for conduct to be deliberately engaged in only applies where "silence alone" is relied upon as constituting the misleading or deceptive conduct. That is not the situation here. What is relied upon by the plaintiffs is the combination of the full disclosure by Ms Williams of disadvantages affecting the proposed lease site of which she was aware that is lack of services and noise combined with the absence of any mention of the risk of the site being contaminated. Agreed chronology of events 16 It is convenient to commence with setting out an agreed chronology of events. 23 March 2007 17 Contract entered into for the construction of civil and associated works for the Bootawa Water Treatment Plant near Taree. 30 September 2009 18 Payment Claim 28. 1 December 2009 19 Determination of Adjudication Application Progress Claim 28. 1 April 2010 20 MCW inform RCA that Daniel Brauer would "assume the role of Superintendent's Representative" from 1 April. 7 April 2010 21 Site Meeting held (No 70). "MF- Malcolm Flew on holidays until end April. Daniel Brauer acting superintendent rep until Flew returns". 9 April 2010 22 Minutes of Site Meeting 70 emailed to Reed and MCW recipients. 21 April 2010 23 Site Meeting held (No 71). "MF- Malcolm Flew on holidays until end April. Daniel Brauer acting superintendent rep until Flew returns". 30 April 2010 24 Email from MCW to Reed attaching minutes to site meeting 71. 30 April 2010 5.22pm 25 Progress Claim issued by Reed by fax to Daniel Brauer. 3 May 2010, 8:03am 26 Amanda Whear forwards fax to Daniel Brauer by email. 3 May 2010, between 9 and 11am 27 Daniel Brauer transfers email copy of the Payment Claim fax into a folder on Outlook created for the Bootawa project unopened. 3 May 2010 28 Mal Flew and Matthew Koller discuss non-receipt of payment Claim 35 and agree to raise the issue in the meeting the next day. 4 May 2010 29 Site meeting held. Dispute as to conversation regarding claim 35. See attachment 1 "extract of evidence". 7 May 2010 30 Minutes of meeting held on 4 May 2010 circulated. 14 May 2010 31 Payment schedule in response to payment claim 35 due. None received. 17 May 2010 32 Chad Wilkinson checks email from home - still no payment schedule. 18 May 2010 33 Site meeting held, MCW still saying no payment claim 25 received. Dispute as to conversation. 19 May 2010 34 Chad Wilkinson emails fax transmission report to Mal Flew. 20 May 2010 35 Payment Schedule delivered outside of time. 17 June 2010 36 Email re Minutes of meeting 74. 18 June 2010 37 Summons filed. The evidence of the plaintiff's witnesses The evidence of Mr Wilkinson 38 Mr Wilkinson gave evidence that on 30 April 2010 (being a reference date), he prepared and sent to the defendant a payment claim pursuant to the Act by facsimile transmission as being payment claim 35. 39 In his second affidavit he deposed as follows:

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iii. He acted on the assumption in the period between Meeting No. 72 and Meeting No. 73 that Reed had not forwarded any claim. He formed this assumption based on his understanding that Mr Buchanan was to get back to me as to when a claim would be forwarded. He also expected in the circumstances that Reed would have forwarded a copy of the claim if they had made one but MCW had not received it. 70 Under cross-examination, Mr Koller testified that he expected MidCoast to receive a payment claim at the end of the month or shortly thereafter from Reed. 71 Mr Koller testified that at the 4 May meeting he had formed the expectation that Mr Buchanan would report back to him because of Mr Buchanan saying "I will need to check on that" in relation to the payment claim. 72 Mr Koller testified that he was happy that the minutes for the 4 May meeting simply recorded that MidCoast had not received the payment claim, and did not record that any action was going to be taken, because of his assumption that Reed would inform MidCoast if it had prepared a claim and forwarded it to MidCoast but it had gone astray. 73 He also conceded that he knew Mr Wilkinson himself and had his telephone number and had his e-mail and did not contact Mr Wilkinson between the date which he knew was the reference date and 19 May in relation to the payment claim. 74 He also accepted that there was nothing in his evidence of any conversation with Mr Buchanan when he had said anything such as he would report back to Mr Koller. 75 In relation to the 18 May meeting Mr Koller could not remember whether he expressed surprise about the fact that Mr Buchanan had, after the 4 May meeting, checked in relation to receipt of the payment claim. 76 Mr Koller accepted that after becoming aware, on 19 May, that the payment claim had been received on 30 April, it was apparent to him that the failure of Mr Buchanan to check may have been of extreme relevance. However, Mr Koller accepted that he did not have the minutes of the 18 May 2010 meeting altered - they were not finalised - to reflect the conversation he said he had with Mr Buchanan. Mr Koller rejected the suggestion that this failure to record Mr Buchanan's alleged promise to follow up was because the conversation on 18 May 2010 had not actually transpired as he had deposed. He rejected the version of the 18 May 2010 conversation put forward by Mr Buchanan - which did not include a promise to check. Mr Koller rejected that the 18 May conversation was left on the basis that MidCoast would follow up with Mr Wilkinson of Reed. 77 Mr Koller also rejected the suggestion that on 4 May Mr Buchanan had already told the meeting that the payment claim had been submitted, but that he would check with Mr Wilkinson. [Mr Koller's version being as stated in his affidavit, that Mr Buchanan had simply said it was Mr Wilkinson's department and he would check on it]. 78 Mr Koller conceded that that the 1 June 2010 site minutes continued to record that the April payment claim had not been received, and that he had not recorded any sort of response from Mr Buchanan. Mr Wilkinson of Reed had attended the 1 June meeting, informing the meeting that Reed was going to enforce the payment claim under s 35 of the Act. Mr Koller conceded he did not mention Mr Buchanan's role in all of this. The cross-examiner suggested this was because Mr Koller could not at that time recall Mr Buchanan having any significant role in it, and Mr Koller replied that his recollection was as set out in his affidavits. 79 Mr Koller is generally accepted as a witness of truth. However, as is made clear below I accept Mr Buchanan's version of what was said at the meetings of 4 and 18 May. The evidence of Mr Gilbert 80 Mr Gilbert, an integration coordinator with MidCoast, attended the 18 May meeting. 81 He deposes that at the 18 May meeting when the minutes of the previous meeting reached the heading "I. Claims" Mr Koller said words to the effect "We haven't received the latest claim for April, Claim 35. Is there any update in relation to it?", and Mr Buchanan said words to the following effect: "I haven't got any information I will pursue it." 82 Mr Gilbert accordingly denies the version of events deposed to by the various Reed witnesses, to the effect that Mr Buchanan had responded on 18 May that he had checked with Mr Wilkinson who had said that the payment claim had definitely been lodged. 83 Under cross-examination Mr Gilbert maintained that it was not possible that Mr Buchanan had said what the Reed witnesses claimed he had said. Mr Gilbert rejected the suggestion that the effect of the 18 May conversation was that MidCoast would chase Mr Wilkinson. Mr Gilbert repeatedly rejected the suggestion that his recollection of this part of the meeting was somehow false. 84 Mr Gilbert further deposed:

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My other method of recording the Minutes was to use scrap paper and the previous Minutes as a rough draft to write on in the course of the meeting. It was my practice when using scrap paper to dispose of the rough draft including the copy of the previous minutes once the Minutes were typed and updated. I used the existing previous Minutes as a template to update. In this way I could note the various items where action had taken place and make entries for new items that were raised. I did not keep any scrap paper noting new items or actions that had taken place in the course of updating and compiling the Minutes for the meeting No. 72 held on 4 May 2010. It was my practice to forward draft Minutes to Mr Flew and Mr Koller for their comment to ensure that comments or updates were not missed. … 10. At the completion of the meeting which lasted from about 10 a.m. until 12.45 p.m. I commenced updating the Minutes and recording the items that were raised in the course of the meeting. In accordance with my practice I immediately commenced preparation of the minutes and l used scrap paper to update the actions from the previous meeting No. 71 and to insert new items that were raised. In the course of preparing the Minutes I prepared three drafts prior to a draft of the Minutes being forwarded to Mr Flew and Mr Koller for their comment. My production of the three drafts occurred as a refinement process to arrive at my recollection of the meeting. … 11. After I had completed the third draft version of the Minutes (Exhibit DRM3) I forwarded a copy of the draft to Mr Flew on 6 May 2010. I received some comments from Mr Flew on that same date which were incorporated in the third draft. … 12. Mr Koller also made certain changes and forwarded the draft back to me which he had saved as draft version 4. … 13. When I was satisfied that I had recorded all of the events and actions and items that were raised in the course of the meeting I saved the final version of the minutes as a document title "RCA Meeting 72 Minutes V.1.00" in "PDF" format and forwarded the Minutes to those who were present at the meeting and also those who were on a distribution list to receive the Minutes on 7 May 2010.

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We say that in that context, the provision of we will check and a failure to say, it had been served where Reed obviously had knowledge that it had, be it inadvertent or otherwise, is partial provision of information or the provision of information which gave rise either to a duty to tell or alternatively led to an impression and expectation that more would be said or alternatively created a misconception and created a misrepresentation that in fact that state of affairs was in fact correct. Decision 108 In my view the issues thrown up can be resolved as follows. 109 A major evidentiary difference between the parties is how Mr Buchanan responded when the defendant stated it had not received a payment claim in the meetings of 4 May and 18 May 2010. 110 On the evidence of the MidCoast employees, Mr Buchanan had only said that he would have to check. Whereas, on the evidence of Mr Buchanan he informed MidCoast at both meetings that he understood that the payment claim had been served, having been told that by Mr Wilkinson, and also said that he would check with Mr Wilkinson. I do not place reliance on the evidence of Mr Turnbull in this area, his recollection of the conversations being significantly different to all other witnesses. 111 The defendant emphasised that it had put forward five witnesses who essentially concurred that Mr Buchanan had only said that he would check and that he had not said that he understood the payment claim had been served. However, this matter is not to be resolved by a mere weighing of the number of witnesses able to support a proposition. That would be a superficial way of treating with the exercise. The Court has examined and accepted the evidence given by Mr Buchanan. Additionally, the defendant's witnesses were not fully accepted in this area. As explained above, Mr Flew made a significant concession, that Mr Buchanan had not said that he would get back to MidCoast after enquiring of Mr Wilkinson. A concession by Mr Morse also cast some doubt over his evidence. 112 The defendant invited the Court to not to believe Mr Buchanan to the extent that he testified that he had told the relevant meetings that he understood that the payment claim had been submitted. Furthermore, in relation to Mr Buchanan's claim to have had a telephone conversation with Mr Wilkinson about correcting the minutes of the relevant meetings, the defendants submitted that Mr Buchanan had in oral evidence created an entirely new conversation not deposed to in his affidavit. The plaintiff rebutted the latter point by saying Mr Buchanan was simply referring to conversations deposed to by both Mr Buchanan and Mr Wilkinson which preceded the relevant meetings. 113 Ultimately, having heard the evidence, I do not accept the defendant's significant attack on Mr Buchanan. That is, I accept Mr Buchanan's recollection that he told the 4 and 18 May meetings that he understood, on Mr Wilkinson's advice, that the relevant payment claims had been served but he would check with Mr Wilkinson. It will be apparent that I reject the defendants' submission that the integrity of the plaintiff's evidence was called into question because of out of Court discussions between its witnesses. 114 I turn to consider the representations alleged by the defendant to have been made by the plaintiff, until 19 May 2010, on this basis:

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