Contracts - Building, engineering and related contracts - Remuneration - Oral agreement to pay a reasonable sum for electric wiring in a boat - Statement of claim did not aver that the invoiced sum was the reasonable cost of the work

Damages - General principles - Failure to prove that sums invoiced represented a reasonable price for work done and materials to be supplied - Inferences to be drawn from invoices containing inadequate detail

Evidence - Burden of proof, presumptions, and weight and sufficiency of evidence - Failure to prove that sums claimed constituted a reasonable price for work done and materials supplied

1 MALCOLM CJ: This appeal was heard on 18 May 1999. At the conclusion of the argument the Court ordered that:

(1) the appeal be allowed and the judgment of the learned Judge in the District Court set aside, and in lieu thereof there be judgment that the respondent's claim against the appellant be dismissed;

(2) the respondent pay the appellant's costs of this appeal and of the trial in the District Court to be taxed.

It was then indicated that the reasons for judgment would be published later. The reasons to be published by Ipp J, with which I am in entire agreement, adequately state my reasons for joining in the making of those orders.

2 IPP J: At the conclusion of argument on this appeal the Court unanimously decided that the appeal be allowed and the judgment of the learned District Court Judge be set aside. It was ordered that in lieu thereof there be judgment that the respondent's claim against the appellant be dismissed and that the respondent pay the appellant's costs of the appeal and of the trial in the District Court, to be taxed. The Court indicated that it would give reasons for this decision at a later date. I set out below my reasons for joining in this decision.

3 In the District Court action the respondent claimed $32,069.77 from the appellant. The statement of claim averred that the respondent and the appellant had entered into an oral agreement whereby the respondent undertook to install electric wiring to a certain standard in a ferry vessel owned by the appellant. It was alleged that, by the agreement, the appellant undertook to pay the respondent the reasonable cost of carrying out this work. The statement of claim went on to allege that the respondent carried out the work in question and rendered invoices to the appellant totalling $75,569.77 for the work. Of this sum the appellant had paid $43,500.00, leaving a balance of $32,069.77. Hence the respondent's claim.

4 Significantly, the statement of claim did not allege that the invoiced sum of $75,569.77 was a reasonable amount or represented the reasonable cost of the work. This omission to focus on what was an essential element of the respondent's cause of action persisted throughout the proceedings.

5 In its defence the appellant admitted that it had agreed with the respondent that the respondent would install the electric wiring in the ferry to the required standard and that the appellant would pay the reasonable cost of the work, but the appellant alleged that it was a term of the agreement that the cost of the work would not exceed $50,000.00. As the respondent had omitted in its statement of claim to make any allegation as to the reasonableness of the invoiced sum which it claimed to be owing, the appellant was not called upon in its defence to admit or deny this allegation. Nevertheless, apart from denying that it owed the respondent "any amount in excess of $50,000.00", the appellant denied that the sum of $32,069.77 was outstanding under the agreement. On the pleadings, therefore, there were two principal issues to be determined at the trial. Firstly, did the parties agree that the reasonable cost of the wiring would not exceed $50,000.00. Secondly, did the amount of $75,569.77 (being the aggregate of the sums reflected in the various invoices sent by the respondent to the appellant) represent the reasonable cost of the work.

6 The learned trial Judge found that the parties had not agreed that the appellant's liability under the agreement would be limited to $50,000.00. This disposed of the first issue. The appellant did not challenge this finding. The two grounds raised by the appellant in its notice of appeal concerned the quantum of the respondent's claim. The first ground alleged that the learned trial Judge wrongly found "that the respondent had proved that it had carried out work to the value of $75,569.77 or any other amount". The second ground alleged that the learned trial Judge wrongly found "that the production of invoices by the respondent in that amount was sufficient proof that the hours worked and goods provided by the respondent to the appellant had been proved".

7 It is convenient to deal, at the outset, with the second ground. The invoices totalling $75,569.77 were admitted in evidence at the trial. Nothing was said as to the basis on which the invoices were admitted. The trial Judge noted in his reasons that "the invoices were admitted in evidence without qualification". I shall assume in favour of the appellant that the invoices were admitted as truth of their contents. The invoices, however, even when assumed to have been admitted on this basis, do not establish the reasonableness of the amount claimed by the respondent. That is because, as counsel for the respondent correctly conceded, the invoices contained insufficient information as to the nature and detail of the work done for the amount claimed in each particular invoice, the time spent by the respondent in carrying out the work, the rates charged by the respondent for particular items of work, the materials used and the cost of the materials. While some of the invoices did contain some particulars as to these matters, the detail was quite inadequate to prove the respondent's claim. Thus, even if everything written in the invoices were taken to be true, that did not establish the reasonableness of the amount charged by the respondent for the work carried out by it.

8 It is not entirely clear to what extent the learned trial Judge placed reliance on the invoices. After referring to the fact that they were admitted in evidence without qualification, and noting that some were paid, his Honour said:

"Given the lack of reference to any dispute about the reasonableness of the charges and the fact that $43,500.00 was paid on the invoices by the [respondent] and having regard to all of the circumstances I accept that the amounts charged are reasonable. I emphasise this trial has not been about whether the charges were reasonable. It has been about what was agreed would be paid by the defendant for the re-wiring of the vessel."

9 With respect to the learned Judge I think that these remarks reveal a number of errors. The statement of claim made it plain that the respondent's claim was based on an agreement that it would be paid the reasonable cost of the work. It was therefore incumbent on the respondent to prove the reasonableness of its charges. To this extent there was indeed a "reference" to a dispute about the reasonableness of the charges, and it was wrong to say that the trial was not about whether the charges were reasonable. In fact, this was well appreciated by the respondent. In opening the case for the respondent at the trial, counsel for the respondent said:

"The question still arises as to reasonable cost and, therefore, if there is any issue as to that, and I note that the defendant is not calling an expert witness but as a matter of caution, I did arrange to have the matter looked at by somebody with expertise in that area to show that the costs were in fact reasonable."

The respondent later called the witness in question. As his Honour noted, this witness "was put forward as an expert witness to assist in the assessment of the reasonableness of the costs of the work". The learned Judge rejected his testimony, however, on the ground that "no attempt was made to prove the basis upon which [the witness] had formed his opinion". Accordingly, the reasonableness of the respondent's charges was very much a live issue throughout the trial.

10 Thus, in my opinion, nothing in the way the trial was conducted strengthens any inference that could be drawn generally, or from the invoices in particular, as to whether the amounts claimed by the respondent were reasonable.

11 It appears from the passage from the learned Judge's reasons, which I have quoted above, that in finding that the respondent proved that it carried out work to the value of $75,569.77 his Honour relied on what he perceived to be the absence of "any dispute about the reasonableness of the charges", the payment of $43,500.00 made by the appellant and "all of the circumstances".

12 For the reasons I have already expressed his Honour, in my opinion, erred in concluding that there was no dispute about the reasonableness of the charges.

13 The payment of $43,500.00 does not establish that the amount claimed of $75,569.77 was reasonable: at best for the respondent it is proof that the amounts claimed for the work the subject of the invoices that totalled $43,500.00 were reasonable. This left unanswered the balance of $32,069.77, being the amount claimed by the respondent.

14 As to the other matters which could be said to fall within the category of "all of the circumstances" which bore on this issue, counsel for the respondent drew attention to the fact that his Honour held that an officer of the respondent had "promised to pay the amount in full when [it was financially able to do so]". It was submitted that this admission proved the reasonableness of the respondent's charges. It is to be noted, however, that the respondent did not plead a cause of action based on an acknowledgement of liability. No attempt was made to establish that there was any consideration for the promise made by the respondent to pay the amount in full when financially able to do so. At best, therefore, for the respondent, this admission could arguably be used as evidence to support the proposition that the charges it made were reasonable.

15 In my opinion, however, in the absence of other evidence tending to prove the hours worked, the rate charged for the work, the materials provided, the cost of the materials and the overall reasonableness of the work done, the qualified promise to pay made by the respondent falls a long way short of establishing that the amount of $75,569.77 (or even the amount of $32,069.77) represented the reasonable cost of the work. There could have been several reasons for the offer to pay unconnected with the reasonableness of the amount. In the absence of appropriate evidence, the inference to be drawn from the offer is entirely speculative.

16 At one stage counsel for the respondent asserted that the appellant had agreed with the respondent that the respondent was to charge $40.00 per hour for its work, and this was to be regarded as a reasonable rate. However, while a witness called on the respondent's behalf testified that the respondent's charges were based on an hourly rate of $40.00, no evidence was led to the effect that there was an agreement to this effect between the parties.

17 Counsel for the respondent also pointed to the fact that, prior to the parties entering into their agreement relating to the carrying out of the work, the respondent informed the appellant that it estimated that the job would cost somewhere in the region of between $80,000.00 to $90,000.00. It was suggested that, because the total claimed cost of the work was less than the estimated amount, it automatically followed that the claimed cost was reasonable. In my view there is no substance in this proposition. There was no evidence that the estimate was connected in any way with an assessment of what the reasonable cost of the work would be. There was no evidence as to how the estimate was arrived at. There was no explanation as to how the claimed amount came to be less than the estimate. In these circumstances no inference can be drawn from the difference between the estimated amount and the amount claimed.

18 Counsel for the respondent also made some attempt to argue that the respondent had been misled by the appellant's conduct of the trial into believing that the reasonableness of the costs claimed was not an issue. In my view there was no substance in this proposition. I have already referred to the pleadings, the opening remarks of counsel for the respondent and the fact that the respondent called a witness at the trial in an attempt to prove the reasonableness of its charges.

19 In Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd, unreported; FCt SCt of WA; Library No 970604; 13 November 1997 Kennedy J said:

"In Bonham-Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177 at 178 Lord Goddard CJ said:

'Plaintiffs must understand the fact that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars, and, so to speak, throw them at the head of the court saying: "This is what I have lost; I ask you to give me these damages". They have to prove it. The evidence in this case with regard to damages is extremely unsatisfactory.'

Unfortunately, the present case is, in my opinion, just such a case ... The evidence is not such as to prove the respondent's damage. There is no evidence as to any verification of invoices, as to the verification of quantities, or as to the reasonableness of the charges."

20 This is a more extreme case than Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd. Here, the respondent did not even "write down the particulars". It merely attempted to rely on the invoices which contained quite inadequate detail as to how the amounts claimed in each particular invoice were arrived at. There was no evidence as to the verification of hours worked, the rate for the work, the materials used and the cost of materials.

21 In my opinion there was no evidence on which the learned Judge could have found that the respondent's charges were reasonable. Accordingly, for the above reasons, I joined in the orders made by the Court to which I have referred above.

22 STEYTLER J: I have read the reasons for decision proposed to be published by Ipp J. I agree with them and they reflect my own reasons for arriving at the decision to allow the appeal and set aside the judgment of the learned District Court Judge. I have nothing to add.