4.2 Dealings with CPS
74 In early 2008 Mr Melrose was contacted by Glen Felstead, a person with whom he had had previous dealings, who at that time was working for CPS. From that time, Melrose Cranes began a business relationship with CPS.
75 On 25 February 2008 CPS provided a completed credit application to Melrose Cranes. The application included a declaration which had been signed by Mr Travers in which it was declared that CPS understood that the terms of payment to Melrose Cranes were "strictly net thirty (30) days" and that "[t]his means that payment for goods and services is due within 30 days from invoice date". The terms and conditions included in the application also relevantly provided:
20. Payment will be required thirty (30) days from the date of the invoice unless other arrangements have been quoted/arranged between the Contractor and the Client. In the event of failure of the Client to pay the invoice within the timeframe stipulated or arranged, then the Contractor reserves the right to charge interest on such sum or sums which remain outstanding beyond the time stipulated or arranged at the rate of two percent per month, and recover all costs incurred in the collection of any outstanding monies including debt collections and solicitors expenses and costs.
The credit application included a personal guarantee which had been signed by Messrs Ebeid and Travers.
76 The credit application required trade references to be provided. Two completed trade references were provided to Melrose Cranes: one given by Concrete Recyclers noting that its payment terms were 30 days, that payment was usually received in 45-50 days and that average monthly trading was between $4,000 and $15,000; and a second given by Blacktown Waste Service noting, among other things, that its payment terms were 30 days, that payment was usually received in 45-60 days and that average monthly trading was $55,000-$110,000.
77 Mr Melrose said that from 2008 some of the invoices Melrose Cranes issued to CPS provided for payment 30 days from the invoice date but that the most common arrangement between Melrose Cranes and CPS was for payment to be made by the last day of the following month and that payment up to 45 days after the end of the month in which the invoice was issued was not unusual. Mr Melrose also said that sometimes no specific agreement was made in relation to payment but that, even so, he accepted payment within those times and, on the whole, payments from Cardinal were regular and consistent. However, it was clear from the invoices themselves and from Mr Melrose's evidence in cross-examination that nearly all, not some, of the invoices issued by Melrose Cranes in the period from June 2010 to December 2011 provided for payment within 30 days from the date of invoice.
78 On 28 September 2010 Melrose Cranes suspended CPS' credit account. Mr Melrose's email to Mr Felstead dated that day recorded that Melrose Cranes "have had no satisfaction with advice regarding payment of our July Account" and that after Mr Melrose spoke with Sarah he was told that a "partial payment of $20,218 would be made only with no specific advice regarding the remainder". Accordingly Mr Melrose notified Mr Felstead that he was not left with any alternative and temporarily suspended CPS' credit account. As at 22 September 2010, prior to receipt of $20,218, CPS owed Melrose Cranes $206,962.88 with the amount owing as at 30 July 2010 being $116,248.06. In cross-examination Mr Melrose said that he suspended the account because there was a significant amount owing and he was concerned about CPS' capacity to pay its debts.
79 The Receivables Lists for March 2011, April 2011, May 2011, June 2011 and July 2011 each include CPS. In the Receivables List for:
(1) March 2011 a balance of $88,882.75 is recorded as owing by CPS. Against that Mrs Melrose recorded part payments of $20,000 and $40,000 on 27 May 2011 and 1 June 2011 respectively. Mrs Melrose also recorded that on 1 June she "spoke to and faxed urgent/processing payment March balance with Vicky [Leftakis]" and included a further note: "ring Friday. Tell GM to ring Tom". Mrs Melrose requested payment and made the latter note as a reminder to ask Mr Melrose to ring CPS to follow up payment because the invoice was not paid on time;
(2) April 2011 a carried forward amount of $13,882.75 is recorded. Mrs Melrose made notations in the date/remarks column including:
GM dealing with Vicky [Leftakis]/Tom.
$6,000 tonight = $6,651.15 Pd EFT 21/6
2 Liverpools Fri night . $7,231.60 due + April $922.90 = Total $8,154.50
$6,587.40 EFT = 24/6
$374.20 - will pay next Friday 1/7
Mrs Melrose accepted that of the amount due at the end of April 2011, $10,034.20 related to an invoice dated 20 March 2011 in relation to which a payment of $9,660 was made on 3 June 2011 leaving a balance of $374.20. She accepted that the payment was late and that the reason why she was keeping Mr Melrose up to date was because CPS had overdue invoices;
(3) May 2011 Mrs Melrose recorded amounts owing from pre-May and May. On 29 July 2011 Mrs Melrose sent a copy of a statement dated 29 July 2011 as a reminder by fax to Ms Leftakis in relation to those amounts with a message that included:
Reminder: Has this been paid today by EFT. See above old March, April & May Invoices marked * Please call me on your return from lunch to confirm you are paying April 52823 & May $2,339.70 today as previously advised And… to advise reason/request for SHORTPAID Invoice 52453. Please call today…
(4) June 2011 the initials "GM" were recorded by Mrs Melrose in the "phone number" column. That was a reference to Mr Melrose who was handling the follow up because there was a large amount outstanding. On 1 June 2011 Mrs Melrose sent a fax to Ms Leftakis at CPS chasing up monies and payment of the outstanding balance for March 2011.
80 In about May 2011 CPS engaged Melrose Cranes for a job in Akuna Street, Canberra (Canberra Job). Mr Melrose was initially contacted by Bobby Jovanovski, who he understood was assisting Mr Felstead with the Canberra Job. Subsequently Mr Melrose contacted Mr Felstead and discussed the requirements of the Canberra Job. After providing a quote, Melrose Cranes entered into a contract dated 18 May 2011 with CPS which provided, among other things, that payment claims were to be made on the 25th day of each month valued up to the 30th day of the month and that payment of the claim as agreed or approved would be made by the 30th day of the next month after the payment claim was submitted, provided the claim was submitted by the due date.
81 On 1 June 2011 Mrs Melrose sent an invoice by facsimile to Ms Leftakis as part of what she said was her usual procedure to follow up payment. The invoice, which showed an outstanding balance for invoices rendered prior to April 2011 of $28,882.75 and a total amount due of $43,634.03, included a handwritten note in the following terms:
For your reference to chase up invoices. Thanks Vicky for your assistance. Please follow up with the relevant Site manager for urgent authorization & payment of the outstanding balance for MARCH. The last 4 Invoices were sent to you on 11/4/11. I will check up with you in a day or so. Thanks…
82 On 21 June 2011 Andrew Gray, one of the principal people working on the Canberra Job as senior project manager and heavy crane manager, and Mr Melrose received an email from Mr Jovanovski in relation to the Canberra Job in which Mr Jovanovski notified them that CPS would potentially need the crane for an additional week's hire "from 7/7/11-13/7/11 under the same hire agreement of $30,000/week". Mr Gray responded on behalf of Melrose Cranes noting that they were "happy to do the 1 week extension of time 7/7/11-13/7/11 under the same agreement but need your written Order". On 23 June 2011 Mr Jovanovski sent an email to Messrs Gray and Melrose confirming "the requirement of the 250t crane for an additional one week hire from 7/7/11-13/7/11 at $30,000/week. The existing contract still stands with the date for practical completion new (sic) extended to 13/7/11".
83 On 4 July 2011 Julie-Anne Leslie, who managed accounts for Melrose Cranes, sent an email to Ms Leftakis setting out the amounts outstanding "after your payment was applied". As at that date the total outstanding was $3,636.80.
84 On 16 July 2011, as the work was finalised, the crane left the Canberra Job. Mr Melrose had received no complaints from anyone about the job nor had any of Melrose Cranes' staff raised any issue about payment of its accounts. Melrose Cranes issued its last invoice for the Canberra Job on 16 July 2011.
85 On 29 July 2011, in accordance with her usual procedure for following up payment, Mrs Melrose sent an invoice by facsimile to Ms Leftakis which showed a total amount due of $221,633.98 of which $1,297.10 was for invoices issued prior to May 2011 and $2,339.70 was for invoices issued in May 2011.
86 Because payments for the Canberra Job were due 30 days from the date of invoice and because of the amounts involved, Mr Melrose, rather than Mrs Melrose, principally undertook the follow up with CPS for payment for that job. A handwritten note made by Mrs Melrose on 5 August recorded:
June 30 days $146.497.18 was due under Bobby's 30 day contract @ 30/7/11. Will f/up with Bobby. Note GM emailed Bobby!!
87 On 5 August 2011 Mr Melrose sent an email to Mr Jovanovski in relation to the Canberra Job in which he said:
Under the terms of your contract 1924312 you owe me $146,497.18 which was due and payable on 30 July 2011. Your accounts department (Vicki [Leftakis]) has no knowledge of this payment and I can't afford to wait for her to find out. During the course of the project, which we were appreciative to get, you often drove the contract details back to me with regard to credits etc. We did the job cheap. We did the job well. I'd like to be paid on Monday. Please ring me, not email me, to tell me what time I can pick up a cheque on Monday.
A further $71,500 will be due and payable on 30 August 2011. Please confirm that payment will be ready on that day.
88 Mr Melrose said that, despite his email dated 5 August 2011, he had no concern about payment. He simply wanted to put pressure on CPS to pay as soon as possible. Mr Melrose said that it was not unusual for Melrose Cranes to undertake large contracts; that he liked to monitor payment of significant amounts quite closely; and that, given the amount due was over $100,000, he kept an eye on it as he would with any client that owed that amount. Mr Melrose also said that the style and tone of the email he sent to Mr Jovanovski was not unusual for him but was a way of "getting attention" and was very similar to emails he has sent to any number of other clients in similar circumstances becoming "something like a standard style email". But this evidence does not sit comfortably with Mr Melrose's evidence (at [69(1)] above) that the most common arrangement between Melrose Cranes and CPS was for payment to be made by the last day of the month following issue of the invoice and that payment up to 45 days after the end of the month in which the invoice was issued was not unusual. I do not accept Mr Melrose's evidence that he was not concerned about payment. The evidence set out below reinforces that view.
89 Shortly after sending his email dated 5 August 2011 to Mr Jovanovski, Mr Melrose had a conversation with him to the following effect:
Mr Melrose: Can you find out what's going on with my money mate? Obviously you haven't paid, unless there is an issue with us being paid. Is there? There is a fair bit owing and I need to know when payment will be made.
Mr Jovanovski: Yeah I'll check it out and get back to you.
90 Mr Melrose does not recall the response he subsequently received from Mr Jovanovski but he does recall that, after hearing back from him, he called Mr Felstead with whom he had more of a relationship and from whom he felt he would "get an upfront response". Mr Melrose had a conversation with Mr Felstead to the following effect:
Mr Melrose: Mate, I have spoken with Bobby and I didn't get much of an answer out of him. What is happening with payment for Canberra?
Mr Felstead: I'm not quite sure. I know that we were having some issues with Canberra and were working through them. As I understand it, our estimators might have underquoted the job, but don't quote me on that. I have been given assurances that everything is under control. There are no issues with Melrose Cranes at all...
Mr Melrose Thanks for that Glen. I need to know what is happening so can you get someone to call me back and let me know what they are going to do about it.
Mr Felstead: Sure. No worries.
91 On 9 August 2011, only 9 days after the invoice was due, Mr Melrose sent an email to Mr Felstead in relation to the Canberra Job attaching a letter of the same date. The letter, a copy of which was provided to, among others, John O'Shannassy of O'Shannassy Lawyers and Tom Simonds of Chase Building Group Pty Ltd, included:
Under the terms of the contract between Melrose Cranes & Rigging Pty Limited (MCR) and Cardinal Project Services (CPS) at Clause #18 notice is officially given of a major dispute regarding the non-payment of our outstanding account of $149,855.13 which is predominantly in relation to the Akuna Street Canberra Job. Your contract terms are quite specific and payment should have been made on 30 July 2011. Under your terms a meeting is required to resolve the issue within five (5) days of this notice. Under my terms (also signed) interest is compounding at the rate of 1.2% daily until paid in full.
MCR reserves the right to utilise the Building and Construction Industry Security of Payment Act 1999 to obtain payment if the meeting does not resolve this issue. The Head Contractor in Canberra, Chase, has been informed of the situation. At the same meeting it is imperative that the outstanding amount of $71,500 which is due and payable on the 30 August 2011 also be discussed.
This situation is not of my doing or choice. As a Director I have many responsibilities and putting MCR at risk for $221,355.13 (plus interest) has to be managed. As you know CPS had a budget and MCR had a crane. We assisted each other for mutual benefit. The contract was verbally quoted to me more than once during demolition by Bobby and we complied as required. All I am asking is that CPS does the same.
Unfortunately your credit account is now frozen pending an agreeable outcome.
(underlining in original)
(emphasis added)
In cross-examination Mr Melrose conceded that at the time of sending this letter he was concerned about payment.
92 As notified in Mr Melrose's letter, on 9 August 2011 Melrose Cranes froze CPS' credit account. Mr Melrose said that he does this regularly with clients in circumstances where no satisfactory explanation is given for payment delays. He often finds that, if clients have been too busy to call him back, when they receive notice that their account is frozen it focuses their mind and they then pay their account. Mr Melrose said that, in his experience, it was not uncommon for people in this industry to overlook payments because there are so many things going on at the same time. However, in the case of CPS, its credit account remained frozen until the appointment of the administrators.
93 On 9 August 2011 at 12.05 pm Mr Felstead sent an email to Mr Ebeid copied to Mr Travers and Mr Colm Burke attaching Melrose Cranes' letter of the same date in which, among other things, Mr Felstead said:
I need to respond today as Melrose Cranes have contacted our Client (Chase Developments PTY Ltd) directly as you will see from the attached covering letter.
I will not be using Melrose cranes again following the situation, I am V pissed off that they have contacted our client directly after I spoke to him yesterday and informed him that I would have some answers for him today.
94 On 9 August 2011 at 4.42 pm Mr Felstead sent a further email to Mr Ebeid copied to Messrs Travers and Burke with the subject line "Melrose-T Fabrications-M Wheelan Haulage" in which he said:
Sam,
I will call you in 30 mins.
Have spoken to Gregg Melrose, he is ok being paid at end the end (sic) of the month but wants commitment in writing signed by directors.
T Fabrications, he is ok being paid at end the end of the month (sic) but wants commitment in writing signed by directors.
M Whelan Haulage- Slightly confused. Vicki [Leftakis] said 1/2 there (sic) account would be paid on Friday and 1/2 this week. Overall account is $14,000.
They didn't receive anything last week. He is threatening to block the Canberra site with his trucks.
Please advise if ok to offer the commitment as I need to call them both back by COB today.
At 4.46 pm Mr Ebeid responded to Mr Felstead in the following terms:
Both will have to be the end of the month at the earliest.
I don't have a choice glen
95 Following the letter sent by Mr Melrose on 9 August 2011, a meeting was arranged but subsequently cancelled.
96 Between 9 and 12 August 2011, Mr Melrose had a number of conversations with people at CPS but mainly with Mr Felstead. Those conversations were to the following effect:
Mr Melrose: Mate what's the story. What's going on with us getting paid?
Mr Felstead: I have spoken with the boss and the boss says that there are apparently some problems with the Canberra job and we haven't been paid.
97 After a number of calls, Mr Melrose said to Mr Felstead: "[c]an you get one of your bosses to call me. I want to speak with them direct and find out what's going on…" Mr Melrose then had a conversation with one of the directors, he thinks Mr Travers, which he recollects as follows:
Mr Melrose: I need to know what's going on with payment. You guys have always been good payers.
Mr Travers: I know I am sorry about that. We have had all sorts of issues with the Canberra Job and although we have not done anything wrong, we are not being paid. We are trying to get everything sorted out and we are meeting with our bankers to see if we can get some cash to tide us over until the dispute on the Canberra job is resolved. I assure you it is all only temporary and Melrose will get paid. There is nothing for you to be concerned about.
Mr Melrose: That's all well and good but payment is already late so I need to know when it is going to get sorted?
Mr Travers: Look we are meeting with the bank again in the next day or two so once I know something further from them, I'll get back to you.
Mr Melrose: I need this sorted out now.
Mr Travers: It will be, I promise.
98 On 10 August 2011 Melrose Cranes received a payment of $1,297.10 for invoice 52453 dated 20 March 2011 for $10,034.20 and invoice 52823 dated 4 April 2011 for $9,222.90. According to Mr Melrose, CPS had raised a query in relation to those invoices and the reduced payment was acceptable to Melrose Cranes.
99 Mr Melrose said that it was not unusual for him to request assurances from clients and sometimes even personal guarantees in relation to the payment of an invoice. His experience was that such a request made the client, especially one that was simply slow or tardy with its accounts, address payment. Mr Melrose decided that making such a request of CPS might have the same effect. At around this time Mr Melrose had a conversation with Mr Felstead to the following effect:
Mr Melrose: Come on Glen we have been working together for a long time now, you can tell me straight what's going on? When am I going to get paid?
Mr Felstead: I know the directors have been meeting with the bankers to put an overdraft in place to deal with the fallout from the Canberra Job. Apparently they are trying to do that so that our contractors get paid while they deal with suing the head contractor. It should all be sorted out shortly. They haven't been around much at the moment that's what I have been told.
Mr Melrose: If this doesn't get resolved real quick, I am going to need some sort of assurance that I will get paid once the overdraft comes through. Some sort of firm agreement to pay.
Mr Felstead: Okay. I'll have another talk with them.
100 On 12 August 2011 Mr Felstead sent Mr Melrose an email attaching a draft letter from Mr Ebeid which provided:
Over the past two years we have worked together with a mutually beneficial outcome for both parties. Our payment history to date has been good and we have ensured that we have only used your services on our projects often at times when an alternative supplier could have been sourced.
In response to your letter dated 9-8-11 and the subsequent conversations over the past few days, we ask for understanding in the additional time it will take to settle your account and we hereby give assurances on behalf of Cardinal Project Services Pty Ltd that monies due to settle your account will be paid.
With your understanding we will be able to work through this difficult period and going forward maintain our successful working relationship.
101 In cross-examination Mr Melrose accepted that, as at 12 August 2011 when it provided the letter referred to in the preceding paragraph, CPS was trying to buy time and that it was using Melrose Cranes as its bank because it could not pay the amount due at that time.
102 By letter dated 15 August 2011 Mr Melrose responded to the letter attached to Mr Felstead's email of 12 August 2011 in the following terms:
The letter from Mr S Ebeid (attached) is not what I require.
1) It is not dated.
2) It does not give reference to the outstanding amount/s and due date/s.
3) It does not give me guaranteed payment dates.
4) It does not refer to the interest payment accruals.
5) It is not signed by way of Personal Guarantee by both directors including their full names, addresses etc with witness signatures.
A copy of your statement and our Aged Receivables printouts are also attached.
Please have this rectified today.
(emphasisi in original)
The statement attached to the letter indicated that CPS owed Melrose Cranes a total of $221,602.43 as at 15 August 2011 for invoices dated between 30 May 2011 to 29 July 2011, with the majority of the invoices by number and value having been rendered in June 2011.
103 Mr Melrose said that at the time he sent his letter dated 15 August 2011 he was unhappy that neither of the directors could be bothered contacting him directly, which was reflected in the tone of his letter. Mr Melrose thought as the directors did not have an answer from the bank yet, they did not have anything to tell him and so found it easier to avoid his call. Because CPS was a good customer, Mr Melrose wanted it to put something in writing about the arrangements that it was going to put in place so that he could consider the next step. Mr Melrose said he thought that the draft letter dated 12 August 2011 from Mr Ebeid, where he indicated that they "give assurances", meant that they were offering to guarantee the payment and were trying to reassure him that Melrose Cranes would be paid. Mr Melrose believed that whatever CPS was experiencing related to the Canberra Job and was going to be temporary. Notwithstanding his explanation for sending the letter, I find Mr Melrose's evidence to be disingenuous given the tone and content of his letter dated 15 August 2011.
104 After sending his letter Mr Melrose waited a day or two then called Mr Felstead and had a conversation with him to the following effect:
Mr Melrose: The email that I sent the other day, I haven't heard anything back. Do you think you could get 'S Ebeid' to call me?
Mr Felstead: Yeah mate, I'll talk to him and get him to call.
105 Shortly after that conversation, Mr Melrose received a call from Mr Ebeid. Mr Melrose said this was the first time that he had spoken with Mr Ebeid about the matter and that he had a conversation with him to the following effect:
Mr Ebeid: Hi Gregg it's Sam Ebeid here. I'm sorry I have been difficult to catch. We have had a lot going on.
Mr Melrose: I just want to know what (sic) going on with my account. I have spoken to Glen maybe 15 times and he assures me that everything is OK but I want to know from you what's happenin?g
Mr Ebeid: Look I'm sorry about the situation. I assure you it is only temporary. What happened was that we ended up underestimating in our quote for Canberra and then there were a few hiccups with it and we are dealing with that. It's nothing that is insurmountable. I am certain that we will be back on track with everything soon.
We have also taken over a waste bin service that has probably thrown complications in at the wrong time. That company was apparently trading poorly for different reasons and we are trying to get it all up and going which I'm really confident we will do and won't take long. The combination of the under estimation on Canberra and the bin business means that we had ended up needing a bit more cash temporarily but things are looking fine.
Generally we are trading very well in Sydney so we will work towards getting this sorted out for you.
I can assure you that we have further meetings in place this week with our bankers. We're just trying to square away an overdraft or whatever is needed to rectify the situation. I can't thank you enough for your patience. It will all be over soon I promise.
106 Mr Melrose took this conversation to mean that CPS was only experiencing difficulties with the Canberra Job and that all other jobs would be business as usual. Mr Ebeid's confirmation to him that they were meeting with their bank made Mr Melrose feel confident that there would be a resolution about payment very shortly. Mr Melrose also recalled that he thought at the time that there had never been any difficulties with any other job that Melrose Cranes had undertaken for CPS so there was no reason for him to believe that this was anything other than an isolated incident. In the context of Mr Melrose's persistent follow up for payment and his clear dissatisfaction with CPS' attitude and the responses it provided, I do not accept this evidence.
107 Mr Melrose made a few further attempts to call Mr Ebeid who did not return his calls. Accordingly, Mr Melrose called Mr Travers leaving messages for him to return his call. On about 24 August 2011 Mr Melrose had a conversation with Mr Travers to the following effect:
Mr Travers: Sorry that Sam hasn't got back to you yet. We have been in meetings and negotiations about the issues which are going on at the moment.
Mr Melrose: I've been told what's going on with Canberra but I have also been told that you have been paid. I need to know what you are doing about it for the amounts owing to Melrose.
Mr Travers: I promise you that this is a short-term problem. We will get things sorted out with this other division and work our way through it. We will have the loans paid shortly and everyone will get paid what is owing to them.
Mr Melrose: You are overdue now. I need to know the results of the meetings with the banks and what can be done and when it can be done.
Mr Travers: We are doing everything that we can to make arrangements to ensure that we pay all of our faithful subcontractors. We have other good contracts coming up so things (sic) still going strong and will all get sorted out soon.
108 Mr Melrose recalled thinking that Mr Travers had effectively said the same things as Mr Ebeid and that both stories gelled. For that reason he felt confident that it was a temporary predicament and that payment would not be far away. Again, I am unable to accept this evidence in light of the surrounding circumstances and the evident concern Mr Melrose had about receiving payment from CPS.
109 On 25 August 2011 Mr Melrose left another message for Mr Travers. On or about 26 August 2011 Mr Melrose had a further conversation with Mr Travers to the following effect:
Mr Travers: Sorry we haven't been able to get back to you. I promise that we will have more open lines of communication from hear in. We assure you that everything is being sorted out and Melrose will get paid.
Mr Melrose: Thanks for the effort but that really means nothing to me without payment or paper guarantees.
Mr Travers: We are going to get this sorted out.
Mr Melrose: OK, you have until close of business on Monday and if I don't get something concrete from you in writing I will have to get my lawyers onto it.
Mr Travers: I will get it sorted.
110 In the meantime, in late August to early September 2011, Mr Melrose had discussions with Mr Felstead in relation to a job that CPS was to undertake at Randwick racecourse (Randwick Job) for the Australian Turf Club (ATC). Mr Melrose said that during the course of those conversations he may have mentioned payment for the Canberra Job. Mr Melrose delegated the task of preparing the quote for the Randwick Job to Michael Melrose, the project manager at Melrose Cranes.
111 On about 29 August 2011 Mr Melrose had a further conversation with Mr Travers to the following effect:
Mr Travers: We have made arrangements for funds to come in so we want to put something in place for payment.
Mr Melrose: If you want to put something in place, show me something that is reasonable and I will work with you. I just want to get this sorted so we can move on with other jobs.
Mr Travers: So do we. We'll get something to you.
112 On 31 August 2011 Melrose Cranes received a payment of $20,000 from CPS.
113 On 2 September 2011 Ms Leftakis and Mr Melrose exchanged emails. In her email sent at 10.30 am Ms Leftakis wrote:
Here at Cardinal we have set out a payment plan that will reduce the outstanding debt owed to you. We have put in place a payment (sic) $7500 this will be paid in weekly instalments as well as maintaining all current amounts due. This will commence on 9th September and continue until the debt has been paid.
We thank you for your patience and commitment to our ongoing operations.
114 Mr Melrose felt that the payment plan proposed by CPS was imposed on Melrose Cranes with no prior discussion. He agreed that was so because CPS did not have the ability to pay Melrose Cranes' outstanding debt when it fell due, which CPS had admitted to be the case. At 1.16 pm on the same day Mr Melrose responded in the following terms:
The $20,000 payment on 31/8/11 was a start but it only alleviated my risk slightly. Thanks for your email earlier but this is not what I expected at all. If I understand your offer correctly it will take until 9/3/12 to pay back the remaining principal debt/s accrued in June ($128,558.03) and July ($73,044.40).
Comments
1) No one consulted me prior regarding what is, or is not, acceptable to MCR.
2) They have assumed that I will just accept a short email as confirmation of Cardinal's commitment (wrong).
3) MCR is not a bank, nor do we wish to be.
4) If MCR are asked to be a bank (and if I agree) then I will expect 8.75% interest from the initial overdue date/s of 1/8/11 and 1/9/11 respectively, until paid in full. I am not going to pay for MCR's overdraft and Cardinal's as well
5) MCR will then require an officially written document signed and witnessed by both parties by C.O.B. on Monday 5/9/11
I have written to you because neither Andrew Travers or Sam Ebeid answer my calls. To be honest I am quite tired of being treated like the "poor cousin" and I will not accept it anymore.
Please pass this immediately to them as I do not even have their email addresses.
They have until C.O.B. today (5pm) and hopefully negotiate a mutual agreement to the problem. If not a STATUTORY DEMAND will be filed on Monday 5/9/11.
I have been patient for long enough.
(emphasis in original)
115 On the afternoon of 2 September 2011 Mr Melrose received a call from Mr Travers. They had a conversation to the following effect:
Mr Travers: Sorry for the lack of verbal communication, we have been dealing with the banks. Meeting after meeting. I can assure that we are committed to the terms in the email from Vicki [Leftakis] and working with (sic) on future projects. We have a lot of work in the pipeline. As you know we have won the ATC job and a few smaller projects.
Mr Melrose: Yeah, thanks. I am already talking with Glen about it.
116 Mr Melrose's diary for 5 September 2011 includes an entry in the following terms:
FILE STAT DEMAND? - CARDINAL (via deed) (if not court)
117 On 5 September 2011 Mr Melrose had a conversation with his solicitors in which he instructed them to draft a deed setting out the terms on which CPS would pay the amount outstanding to Melrose Cranes in instalments. By email dated 6 September 2011 Karen Mclean of Mclean & Associates, the solicitors for Melrose Cranes, confirmed that they were drafting a deed.
118 On 8 September 2011 Mr Melrose sent an email to Tara Baker at CPS, copied to a number of people including Mr Felstead, which attached a letter and a document titled "Deed of Acknowledgement of Debt". The letter from Melrose Cranes to Ms Baker relevantly stated:
As discussed, it is imperative that the Deed (12x pages attached) is initialled and dated at the bottom right corner of each page and then signed and witnessed by all Directors asap so we can get back to normal. Sam is aware of this.
Glen Felstead has issues at the 'AJC' and we are willing to reopen your credit account as soon as the document is signed and returned. We have a crane available.
Please email me a completed copy and return the original by Express Post. I will then countersign the document and email/post copies Cardinal. This is very important.
(emphasis in original)
The Deed of Acknowledgement of Debt provided, among other things, for payment by CPS of the amount owing on the Canberra Job plus interest in weekly instalments of $7,500, with a final payment of less than that amount as set out in the schedule to the deed; a warranty by CPS that it was "presently solvent"; a guarantee and indemnity from Cardinal and Messrs Ebeid, Travers and Burns in their capacity as directors of CPS and Cardinal; and that, if upon the insolvency of CPS, Melrose Cranes was required to pay any amount pursuant to the Act to a liquidator or administrator then the indemnity provided by Cardinal and the directors would be extended to include any such amount which Melrose was required to pay.
119 Mr Melrose accepted that providing the Deed of Acknowledgment of Debt to CPS was about more than making CPS take action and was about Melrose Cranes trying to protect itself in the event that CPS went into liquidation. CPS did not sign the deed.
120 On 9 September 2011 Melrose Cranes received a payment of $7,500 from CPS.
121 On the same day Michael Melrose sent an email to Mr Felstead attaching a quotation for the Randwick Job which provided for the supply of a crane on 11 September 2011 for a maximum of 20 consecutive days. The notes/conditions to the quotation included that "[p]ayment terms are to be agreed with Gregg Melrose only in writing prior to crane arrival on site Sunday the 11.9.11" (original emphasis).
122 After despatch of the quote for the Randwick Job, Mr Melrose had a conversation with Mr Felstead to the following effect:
Mr Felstead: We would like to get a crane on site at Randwick as soon as possible.
Mr Melrose: Given what's going on at the moment, what can we arrange regarding payment terms for this job? I know that the crap only relates to the ACT but I have to think of Melrose.
Mr Felstead: I completely understand. I thank you for taking on the job. With this one, I can guarantee payment through the ATC because the ATC are paying us. It has all been approved by the board.
Mr Melrose: OK. How will it work?
Mr Felstead: I have spoken with Andrew Steventon from the ATC. You can do me an invoice in advance which will get the ball rolling for payment early. They want the job started as soon as possible. Here I'll give you his details.
Mr Melrose: That's fine. Look OK. I'll get the crane in place and I'll talk to Andrew. Is there anything else that I need to do for you?
Mr Felstead: No. That's it. Thanks for helping us out.
123 On or about 12 or 13 September 2011 Mr Melrose had a conversation with Mr Steventon from the ATC to the following effect:
Mr Melrose: Hi it's Gregg Melrose from Melrose Cranes. I am calling about the job at the turf club.
Mr Steventon: Yes, I am aware of your discussion with Glen regarding payment. If you have any issues with Cardinal on this job I can guarantee you that the ATC will meet the payments required.
Mr Melrose: Glen has asked for an invoice in advance.
Mr Steventon: Yes I know about that and I'm happy for that to happen. We are totally funded for this job. I will deal with it as soon as it comes to me and get final approval from the board as quickly as possible so payment is ready to go for you.
Mr Melrose: Thank you.
124 According to Mr Melrose invoicing in advance reduced the possibility of delay in payment and made a customer aware of the bill's amount in advance of the due date for payment so that any issues could be raised in advance. He described such an arrangement as a "cash on completion arrangement" or a funded job.
125 On 15 September 2011 Melrose Cranes issued invoice 00054162 to CPS for $88,866.80 for the supply of one crane and associated labour and equipment from 11 to 25 September 2011 for the Randwick Job (First Randwick Invoice) by email to Mr Felstead. The only reason Mr Melrose provided crane hire services to CPS for the Randwick Job was because of the assurance he received from Mr Steventon of the ATC about payment.
126 On 16 September 2011 there was an exchange of emails between Sarah Ferguson, the administration manager at CPS, Messrs Ebeid and Felstead and Jake Elliott. The first email from Ms Ferguson requested Mr Ebeid ring Mr Felstead about Mr Melrose who "will pull his cranes out of Randwick". Ms Ferguson said that Mr Felstead said "if that happens we are in big trouble". Mr Ebeid then informed Mr Felstead that Melrose Cranes was on a payment plan and "that is all we can do" and suggested that Mr Felstead "use an alternative crane supplier". In response Mr Felstead said, among other things, "I informed you in my email on Wednesday what had to happen. I don't understand you (sic) tactics with this one, you should have called Greg Melrose and Kohinor prior to now. You need to speak to them, not me". In the last email in the series Mr Ebeid said, among other things, that Melrose Cranes had already been put on a payment plan and that he had suggested "previously to use another crane company as [Mr Melrose] might blackmail us now as he is on site".
127 On 16 September 2011 Melrose Cranes received a payment of $7,500 from CPS.
128 On 19 September 2011 Mr Melrose received a call from Mr Ebeid. They had a conversation to the following effect:
Mr Ebeid: Thanks so much for your patience Gregg. All of the finances have been arranged so everything should get back on track in no time. We have just been so busy and I know I should have rung you back many times.
Mr Melrose: Yeah Sam but what can you do for me? What's going to happen from here?
Mr Ebeid: It's all coming together. I have been doing some numbers and we should be able to do better in clearing out the old debt for Canberra.
Mr Melrose: Why don't you stick it in an email to me and I will have a look at what you are proposing.
Mr Ebeid: OK.
129 On both 19 and 20 September 2011 Mr Ebeid sent an email in the same terms to Mr Melrose. In the emails Mr Ebeid said:
Following our conversation this morning I would like apologise for the way we treated you and the payment plan should have been communicated to you in a more personal way.
The payment plan from cardinal project services is $32,500 per month
I have looked at our cash position and can now look to extend our selves (sic) further for Melrose Cranes to $43,000 per month for old debt only.
Any new projects will be payed (sic) at normal payment terms.
Greg I appreciate your ongoing assistance and patience. I hope this is acceptable
130 On 19 September 2011, following a discussion on Friday, 16 September 2011, Mr Felstead provided the First Randwick Invoice to Mr Steventon at the ATC. On 20 September 2011 Mr Steventon sent an email to Mr Melrose informing him that the ATC would pay Melrose Cranes directly for the Randwick Job if CPS did not pay the First Randwick Invoice on its due date. If that process for payment of the First Randwick Invoice was implemented then any such payment was to be deducted from CPS' payment claims.
131 Between 8 August and 19 September 2011 Mr Melrose made entries in the 2011 Diary every few days about CPS. Those entries included for example:
on 8 August 2011 "$ Cardinal (146) Bobby Glen chase";
on 10 August "Cardinal $? Sign off";
on 12 August "Cardinal $ (chase)";
on 17 August "$ Cardinal - Fri";
on 19 August "$ Cardinal - o'draft"; and
on 31 August "(McLean) Cardinal $ payment plan".
132 Mr Melrose said that by this time, that is 19 September 2011, there were arrangements in place for the Randwick Job and there were no issues with any of Melrose Cranes' other jobs in Sydney. However, it emerged during cross-examination that there were no other jobs being undertaken by Melrose Cranes in Sydney at the time. The only jobs undertaken by Melrose Cranes for CPS after completion of the Canberra Job were the Randwick Job and a small job at Casula. Mr Melrose also said that Mr Ebeid's proposal for increased payment made him confident that what he had been told was true and that CPS was back on track. Mr Melrose recalls thinking that they were over the hurdle they had faced with the Canberra Job; they could now move forward together; the old contract was "put to bed and fixed up"; and a new contract was in place for the Randwick Job and Mr Melrose was "very comfortable with the situation". I find it difficult to accept that evidence given the lengths to which Mr Melrose had gone to follow up payment for the Canberra Job, his concerns about the failure to pay and his engagement of lawyers to draft a deed by which he sought to protect Melrose Cranes in the event of CPS' liquidation. Further, despite Mr Melrose feeling "comfortable with the situation", he did not reinstate CPS' credit account.
133 Melrose Cranes received payments of $10,750 from CPS on 23 and 30 September 2011, 7, 14, 21 and 28 October 2011 and 4, 11 and 18 November 2011 and a payment of $10,000 on 1 December 2011.
134 In the meantime, on 25 September 2011 Melrose Cranes put an additional crane on site at the Randwick Job; on 27 September 2011 Melrose Cranes issued invoice 00054412 for $22,609.40 for work done on the Randwick Job from 25 to 27 September 2011 (Second Randwick Invoice); on 11 October 2011 Melrose Cranes received $88,866.80 from CPS in full payment of the First Randwick Invoice; on 28 and 31 October 2011 Melrose Cranes received payment of the Second Randwick Invoice which Mr Melrose had required be paid by 31 October 2011; and on 11 November 2011 Melrose Cranes provided services to CPS for a job at Cedar Road, Casula.
135 On 8 November 2011 Mr Melrose sent an email to Mr Felstead with the subject line "Reinstatement of Credit Account" in which he said:
As you know, your account was closed when the financial difficulties arose regarding payment for MCR's work at Chase (ACT). Your Directors have never signed any formal guarantee regarding this debt however they have been diligent in paying $10,750 each week to reduce the outstanding amount. At the moment the original $250k has been reduced to about $111k. Based on this and in good faith, I am considering re-opening the account so we can service your needs. The criteria to be met is:
1. Complete the attached credit application form.
2. Continue to pay off the 'Chase debt' at the same (or greater) rate until it is cleared.
3. Pay all new invoicing between 30 and 45 days (maximum).
Please pass this information to your Directors for consideration. I will require the completed account application forms duly signed etc together with formal recognition of the contents of this email.
136 In late November 2011 Mr Melrose had discussions with Mr Felstead about a job at White Bay expected to take place in December 2011 and January 2012 including a discussion to the following effect:
Mr Felstead: We have one job at White Bay. Can we double check the numbers? Do you remember it? It's the power station, brick and steel building structure. It's going to be a bit tricky. Probably starting later in December or early next year.
Mr Melrose: Yeah, I'll get Ryan to go back over the figures. With regard to payment, do you reckon that we can do it on the same basis as the ATC job while everything is getting sorted out with the rest of the amount?
Mr Felstead: Yes. Sure that shouldn't be a problem. I'll get the same thing in place. Just send me a letter that I can use in a meeting that I have with them.
Mr Melrose: I'll get something across. Do you need me to come to the meeting?
Mr Felstead: No it should be all fine. But if I need you at some stage later I'll let you know.
137 In December 2011 Melrose Cranes corresponded with CPS about the White Bay job. It provided a quotation which had been prepared by Ryan Melrose, a project manager at Melrose Cranes, and a letter signed by Mr Melrose in which a request was made that the job be treated "in a similar fashion to the recently completed 'AJC Grandstand' demolition at Randwick Racecourse", noting that it was "happy to be transparent by working for Cardinal Project Services Pty Ltd (CPS) but having payment/s guaranteed by Mr Duncan Stirling of Sydney Ports Corporation". Mr Melrose required this arrangement as he was not prepared to extend credit to CPS.
138 On about 14 December 2011 Mr Melrose had a conversation with Mr Felstead to the following effect:
Mr Felstead: Gregg there is a problem here at Cardinal. I don't want you to lose the job at White Bay because of us, so I'll give you the details of someone to talk to.
Mr Melrose: What's going on?
Mr Felstead: I can't really say much but I think you should contact this guy about White Bay.
Mr Melrose said this was the first time that he had concerns about being paid the balance due from the Canberra Job which at that time amounted to $80,774.23.
139 On 15 December 2011 Mr Melrose received notice that CPS had been placed into administration.