DISTRICT COURT OF QUEENSLAND
CITATION:
Ideal Group Aust Pty Ltd v Southern Stainless Pty Ltd [2018] QDC 4
PARTIES:
IDEAL GROUP AUST PTY LTD
ACN 101 932 058
(plaintiff)v
SOUTHERN STAINLESS PTY LTD
ACN 073 737 612
(defendant)FILE NO/S:
4333/15
DIVISION:
PROCEEDING:
Civil trial
ORIGINATING COURT:
District Court of Queensland
DELIVERED ON:
30 January 2018
DELIVERED AT:
Brisbane
HEARING DATE:
22, 23 and 24 February, 13 April 2017
JUDGE:
Andrews SC DCJ
ORDER:
The plaintiff’s claim is dismissed
CATCHWORDS:
CONTRACT – where oral agreement to pay fee of 10 % – whether agreement for 10% of all claims paid or for 10 % of all claims for prolongation and disruption paid
COUNSEL:
M Horvath for the plaintiff
R Schulte for the defendant
SOLICITORS:
McCarthy Durie Lawyers for the plaintiff
McKays for the defendant
Background
The defendant (“Stainless”) subcontracted to supply and install stainless steel balustrades for the reconstruction of the New Farm Riverwalk, which had been destroyed by flood in 2011. Construction of the walkway was interrupted and delayed through no fault of Stainless. Consequently, Stainless was behind schedule.
The plaintiff was in the business of providing consultancy services to parties involved in building disputes. The plaintiff’s director (“Mr Burgess”) had a chance conversation with his friends in the management of Stainless and learned that:
1. Stainless’s date for completion was imminent;
2. Stainless could not finish by the date for completion;
3. Stainless had not requested an extension of its date for completion.
Mr Burgess offered some services to Stainless on a fee condition: if Stainless received certain future payments from the head contractor, Stainless would pay 10% to Mr Burgess’s company. The agreement was oral. There is no contemporaneous written record. The parties disagree about the services Mr Burgess offered and disagree about which future payments would attract the 10% fee obligation. More than $500,000 in fees remain at stake.
The Issue
The services the plaintiff offered were pleaded differently by each party. The competing allegations are that the services offered were either:
1. to “negotiate with John Holland regarding outstanding payments under the subcontract and assist (Stainless) to complete the subcontract and get paid for it”[1]; or
2. to “provide assistance to (Stainless) in preparing and submitting a claim to John Holland… in respect of prolongation and disruption costs for the Riverwalk project”.[2]
[1]ASOC par 8.
[2]FAD par 5.2(a) and (b).
The scope of the services offered is a subsidiary issue. On either pleaded alternative, the plaintiff subsequently performed those services. Proof of which service was offered is only significant as it may have a bearing on the fee agreed.
The issue is not whether the plaintiff performed the agreed services, but what fee was orally agreed. Was the oral agreement to pay the plaintiff 10% of:
1. “any amounts recovered from” John Holland, as the plaintiff pleaded;[3]or of
2. “the amount that John Holland … paid in respect of the claim for prolongation and disruption costs (if any)”, as Stainless pleaded.[4]
[3]ASOC par 9.
[4]FAD par 6.
The fee agreement contended for by the plaintiff leads to a fee of about $540,000 exclusive of GST and about $594,000 including GST. The fee agreement contended for by Stainless leads to a fee of $82,000 exclusive of GST and $90,200 inclusive of GST.
Stainless has paid the plaintiff $88,000. The plaintiff claims another $505,905.69. In submissions the plaintiff essentially submitted that if the fee issue was determined against it, the plaintiff remains underpaid to the extent of $2,000 for fees and $200 for GST.
Facts
The plaintiff, Ideal Group Aust Pty Ltd, was a company owned and operated by Mr Burgess to provide consultancy services in building disputes. Mr Burgess was involved in his first building dispute as a nineteen year old and by the time of trial had been involved in no less than 20. I estimate Mr Burgess’s age at about 60 years.
Mr Burgess was a plasterer from the age of 15. He stopped doing manual work in 1983 but continued to maintain a plasterboard business. The plaintiff’s business was one of two businesses operated by Mr Burgess. The plaintiff’s consultancy was essentially directed to helping clients in building disputes to maximise payments they would receive.
Stainless is a family run company that is in the business of manufacturing and installing stainless steel products. Its controlling minds at material times were Mr Phil Brown, the sole director and shareholder, and his son Matt Brown, the General Manager. By 2014, Mr Phil Brown was more concerned with “hands on” tasks while Matt was in charge of co-ordinating production.
Mr Burgess was closer in age to Mr Phil Brown. Mr Burgess has been acquainted with Mr Phil Brown and the much younger Mr Matt Brown for many years. Mr Burgess operated from a factory in the 1980’s which was directly opposite a factory operated by Stainless. Mr Burgess had some professional interaction with Mr Phil Brown in the 1980’s.
In the decade prior to 2014, Mr Burgess and Mr Phil Brown sometimes socialised together and even spent a weekend together with their domestic partners. Mr Burgess had less interaction with Mr Matt Brown, though there was some significant interaction.
Mr Burgess is a confident person with firm opinions about business efficiency. He was willing to share those opinions with his friends, Messrs Phil and Matt Brown. Mr Burgess had provided advice to Matt Brown on a number of occasions from 2012 for which he made no charge.
In about 2012, at Matt Brown’s invitation, Mr Burgess dropped into the Stainless yard at Labrador on the Gold Coast to discuss business and cash flow with the Browns. The meeting progressed from there to Mr Burgess’ office at Southport during which Mr Burgess offered his opinions on cash flows, overheads, profit margins and manpower. Mr Matt Brown was thankful and promised to call back in a week, presumably after considering the advice. Mr Matt Brown did call back to explain that Mr Phil Brown thought the advice was “bullshit”. Matt Brown had more respect than his father for Mr Burgess’s business acumen.
In about 2012, Mr Burgess advised Mr Matt Brown about the benefits of a “site instruction book” for the factory for recording instructions received for extras. Mr Burgess also perused Stainless’s terms and conditions on its quotations and advised on amendments. Mr Burgess instructed Matt Brown on the need to have an estimating package, a budget for turnover and for overheads to be able to properly quote on a job.
When Matt Brown had an issue about underpayment by a company “Mayneline”, Mr Burgess discussed it with Matt Brown at Mr Burgess’s office and introduced Matt to a person from JHL Lawyers that Stainless subsequently retained to pursue that debt.
By July 2013 John Holland Queensland Pty Ltd (“John Holland”) entered into a written contract with the State of Queensland for the New Farm Riverwalk Replacement Project (“the head contract”).
On about 4 July 2013 Stainless as subcontractor and John Holland as head contractor entered into a written subcontract (“the subcontract”) for, among other things, Stainless’s “supply of all equipment, material, personnel, plant and services for the management, manufacture…delivery to and installation at the site associated with the stainless steel balustrading and other stainless steel work...”.
Some relevant terms of the subcontract were that:
1. The amount payable to Stainless was $ 5,243,796 plus GST[5].
[5]Exhibit 3 schedule G page 85
2. To claim an extension of time, Stainless was required to submit a written claim for an extension to the date for completion within 5 days of when Stainless became aware, or ought reasonably to have become aware of the delay;[6]
[6]Exhibit 3 clause 10.6
3. Agreed Damages for an Extension Event as defined in the subcontract or for an extension of time were provided for[7] and limited Stainless to a claim for $1 per day and expressly provided that Stainless “shall have no other claim against John Holland arising out of or in connection with the extension of time, or delay, or disruption.”;
[7]Exhibit 3 clause 10.13
4. Payment of any monies by John Holland to Stainless was not evidence of the value of work or that the work had been satisfactorily carried out or an admission of liability or approval of Stainless’s performance but was only to be taken as payment on account;[8]
5. John Holland had a right against Stainless to liquidated damages if Stainless did not complete the works by the date for completion and the right was to damages of $1000 per day for the first 5 days and $5,000 per day thereafter;[9] and
6. The subcontract provided for a completion date of 20 March 2014.
[8]Exhibit 3 clause 12.9
[9]Exhibit 3 clause 13.6 and schedule G page 83
Though the subcontract amount was by far the biggest amount that Stainless had ever contracted for, Mr Phil Brown had advised his son against paying to have the contract considered by a lawyer and so, none was retained. Mr Phil Brown left the consideration of the contract to Matt Brown. Matt Brown gave evidence that he read the contract twice. It is about 110 pages. Mr Matt Brown is not a lawyer. He did not appreciate the importance or effect of the provisions requiring Stainless to request an extension to the completion date or the implications of the liquidated damages clause if an extension to the completion date was not obtained. He did not appreciate the significance of any of the terms summarised above, save for the price. The management of Stainless entered into the subcontract unaware of the financial risk to Stainless from a failure to complete on time. I refer to the risk of liability to pay John Holland liquidated damages of $5,000 per day from five days after the completion date.
The contract was, in essence, to supply and install stainless steel balustrades and hand railings to the Brisbane Riverwalk. At the start of the contract, Stainless had estimated that there would be about a 13 per cent profit margin in the job. The project required a specific material which Stainless had ordered from overseas through its local stainless steel supplier. The material was delivered to Stainless’s supplier in around November 2013, and was to the value of about $2 million. As the job progressed, John Holland agreed to variations which increased Stainless’s profit margin.
Stainless employed an average of about 12 employees at its factory. It would put more employees on when required. In the busy periods arising from Stainless’s performance of this subcontract, Stainless employed up to 35 people at the factory.
By November 2013 the project was behind schedule, through no fault of Stainless. Delays then and later were due to difficulties installing piles into the river bed and difficulties pouring concrete girders. These matters were not the responsibility of Stainless. Some delays were caused because John Holland was not approving drawings quickly enough because of issues with concrete.
At about Christmas 2013 Matt Brown telephoned Mr Burgess to wish him a merry Christmas. The John Holland job was mentioned. Mr Burgess asked if Stainless was getting paid and Matt Brown replied that it was. That was the only conversation either of the Browns had with Mr Burgess about the subcontract until about 28 February or early March 2014.
In January 2014 Stainless had some material, not balustrades, which it stored at its factory because of delays in the project. Stainless was fortunate that it did not need to store fabricated balustrades at its factory pending installation. Stainless could leave the raw materials with its supplier until they were required for fabrication and it could have the fabricated balustrades delivered to the Riverwalk site.
By about February 2014 Stainless had trouble collecting an alleged $10,000 debt from Taringa Steel. A former employee of Stainless, Tim Parkin, advised, in effect, that Mr Burgess could be helpful with advice about collecting money. One of the Browns contacted Mr Burgess and invited him to come to the factory to talk about the Taringa Steel problem.
Mr Burgess attended at Stainless’s factory and Phil Brown told him that Stainless had a problem getting paid by Taringa Steel and that Tim Parkin had recommended getting help from Mr Burgess. The date of this visit was, according to Mr Burgess, 7 March 2014. According to each of the Browns, it was about a week earlier than that. I am satisfied that the Browns are correct. The visit was on about 28 February 2014.
During the conversation Mr Burgess learned that $10,000 was in issue with the Taringa Steel job. The conversation turned to the John Holland job. Mr Brown was given details of the subcontract’s price, variations, date for completion, amounts paid by John Holland to date and the date for completion. Eventually, either to Phil Brown or to Phil and Matt Brown, Mr Burgess recommended that it was too hard and too costly to pursue Taringa Steel and that they should concentrate on the John Holland job.
By early March 2014 the Riverwalk project was months behind schedule through no fault of Stainless. There is no evidence that replacing Stainless with another contractor was threatened or feasible. There is no evidence that John Holland was insisting that Stainless complete by the date for completion on 20 March 2014. I accept Matt Brown’s evidence that Stainless had a good relationship with John Holland. There was no evidence that Stainless had any issue then with John Holland or any difficulty negotiating with John Holland.
By 7 March 2014 John Holland had paid Stainless $1,808,753.53, inclusive of GST for materials construction, assembly and installation of materials on site. There is an issue on the pleadings as to whether that amount included $339,935.74 for variations or whether it was entirely in reduction of the original contract price. On 7 March 2014, in spite of the fact that the subcontract’s date for completion was imminent, John Holland had no obligation to pay the balance subcontract price of $3,959,422.07 inclusive of GST, to Stainless because Stainless had not carried out that part of the subcontract works which would have entitled it to that payment.[10] There is an issue as to whether the balance of the original contract price on 7 March 2014 was $3,959,422.07 inclusive of GST or $4,299,357.81. The balance of the original contract price may have been the greater sum if an earlier payment by John Holland to Stainless had included an amount for variations.[11] I need not resolve this dispute as the quantum of the plaintiff’s claim, if completely successful, is not in issue.
[10]ASOC Par 7 (b) and FAD Par 4.2 (a)
[11]FAD par 4.2 (b)
If the subcontract had progressed according to schedule, Stainless should have received about $4.6 million by 7 March 2014, not just $1.8 million. There was no evidence that Stainless was insolvent in March or at any time and the plaintiff did not suggest to witnesses or in submissions that it was. Matt Brown gave evidence that the financial situation of Stainless was “tough” but that it was not trading insolvent. I infer that he was speaking of early March 2014. I accept that evidence. At the date of the fee agreement, Stainless:
1. Had paid its stainless steel supplier about $1 millon;
2. Was preparing monthly financial accounts to confirm it was up to date with payments;
3. Was up to date with tax payments;
4. Had a good relationship with its bank;
5. Had an excellent relationship with its suppliers;
6. Had not received any supplier’s demands for payment of outstanding sums;
7. Had about 16 people working at its factory, 10 of whom were concerned with the subcontract and about 5 or 6 of whom were concerned with other stainless steel manufacturing jobs.
The plaintiff submitted that when the fee agreement was reached about $2,000,000 worth of material had been paid for by Stainless and was at the defendant’s factory. The bases for that submission seem to be four. One basis may have been the $2,000,000 worth of material delivered to Australia in November 2013. A second basis is the incorrect evidence of Mr Burgess that at a meeting with Matt Brown on 7 March 2014, Matt told him that there was about $2,000,000 worth of stock downstairs. The third basis was a misinterpretation of Stainless’s pleadings.[12]A fourth basis may have been the misleading evidence of Mr Phil Brown that “we had to start storing balustrading as there was delays on site from John Holland which affected Southern Stainless”.
[12]ASOC, par 7B(b) and FAD, par 4B.
On 7 March 2014 there were stockpiled components valued at about $1,983,276.55. I do not accept the evidence of Mr Burgess that Matt Brown told him that there was about $2 million worth of material stored downstairs. I accept the evidence of Matt Brown that Stainless was on flexible terms with its stainless steel supplier, that the supplier did not invoice for the approximately $2 million amount of material which the supplier had received, but invoiced only for those amounts of material which it would deliver as Stainless requested, that the supplier’s terms for payment were 90 days from invoice, that Stainless did not store the delivered stainless steel at its factory, that when Stainless required a delivery, the material would be delivered to the construction site and remain on site pending installation and that John Holland would pay Stainless each time there was a delivery of material to the construction site.
Evidence of the oral agreement for a 10% fee
The critical issue of the fee agreement depends primarily on the evidence of the memories of three men of a conversation between Mr Burgess and Mr Matt Brown three years earlier. There were no contemporaneous notes.
The relevant conversation or conversations occurred on about 28 February 2014 and about a week later on or about 7 March 2014. Mr Burgess believed the topic of the John Holland work:
1. was raised in one meeting;
2. that the meeting occurred on the day he first attended Stainless’s factory to be asked for advice on the Taringa Steel debt recovery issue;
3. that it was on 7 March 2014; and
4. that the fee agreement was struck at that meeting.
Emails dated 4 and 6 March 2014 from Matt Brown to Mr Burgess concerning the John Holland matter demonstrate that Mr Burgess is mistaken about his evidence that there was no meeting before 7 March. The Browns recalled two relevant meetings in about early March. I accept that there were two meetings. Mr Burgess’s error about the date and the number of meetings is not significant.
It was months before either side created a written version of the material facts of the conversation. Inconsistencies between honest recollections are common. A party to a conversation is more likely to remember a conversation’s content than its date. The fallibility of memory makes contemporaneous written records valuable. Generally speaking, as more time passes, witnesses’ memories become more susceptible to becoming reconstructions of a conversation.
The earliest written record in evidence of the fee agreement was created on the instructions of Mr Burgess. It is a statement of claim[13] filed on 7 November 2014 in a different proceeding in which Mr Burgess mistakenly claimed on his own behalf rather than on behalf of the plaintiff. That proceeding was struck out on an application by Stainless. Mr Burgess agreed in evidence that that statement of claim contained his version of events as he recalled them as at 7 November 2014.[14] It is significant to note that it was not until this date that it was alleged in writing that Stainless was to pay 10% of “all further money paid by Holland to the Defendant, including variations, prolongations and disruption claims”, as opposed to 10% of only the money paid for disruption and prolongation claims.
[13]Exhibit 44
[14]T3-15, l 6
By that statement of claim it was pleaded on behalf of Mr Burgess:
“3.On or about 7th March 2014, the Plaintiff attended a meeting at the Defendant’s factory… to discuss the Riverwalk Works (“Meeting”).
a.The meeting was attended by the Plaintiff and Phil Brown (“Phil”) and Matthew Brown (“Matthew”), employees/representatives of the Defendant;
b.During the Meeting Phil and Matt said to the Plaintiff words to the following effect:
i. A dispute has evolved between the Defendant and Holland about specification on the current job; and
ii. The Defendant is having issues discussing the project with Holland.
c.During the meeting, it was verbally agreed between Phil, Matt and the Plaintiff that the Plaintiff would receive 10% of all further money paid by Holland to the Defendant, including variations, prolongations and disruption claims, due to the provision of the Consultancy Services by the Plaintiff.”
That paragraph, since superseded, is relevant for alleging:
1. “prolongations and disruption claims” by name;
2. Clarifying that all further money includes three claims not arising under the subcontract, namely “all further money … including variations, prolongations and disruption claims”.
In this present proceeding, the plaintiff filed its statement of claim dated 5 November 2015. It was filed almost precisely a year after the statement of claim in the earlier proceeding. So far as the oral agreement was concerned, the statement of claim in this proceeding changed by omitting the earlier pleading’s:
1. reference to variations, prolongations and disruption claims;
2. allegation that Stainless and John Holland were in dispute about a specification;
3. allegation that Stainless had issues discussing the project with John Holland.
There was no evidence that Stainless and John Holland were either in dispute about a specification on 7 March 2014 or that there were issues negotiating with John Holland. There was evidence that a specification issue arose with John Holland in April 2014 though not a dispute.
The statement of claim dated 5 November 2015 alleged:
“8. On or about 7th March 2014, the plaintiff through its director Denis Burgess and the defendant through its directors, agents or employees Phil and Mat Brown orally agreed for the defendant to engage the plaintiff to negotiate with John Holland (‘the consultancy agreement’) regarding the outstanding payments under the subcontract.
9.It was a term of the consultancy agreement that the plaintiff be paid 10% of any amounts recovered from John Holland.”
By an amended statement of claim dated 11 March 2016, the plaintiff added some material words to the oral agreement in para 8 of its original statement of claim dated 5 November 2015. The amended version provides:
“8. On or about 7 March 2014, the plaintiff through its director Denis Burgess and the defendant through its directors, agents or employees Phil and Mat Brown orally agreed for the defendant to engage the plaintiff to negotiate with John Holland (‘the consultancy agreement’) regarding the outstanding payments under the subcontract and assist the defendant to complete the subcontract and get paid for it.”
The evidence Mr Burgess gave at trial on the crucial issue of the oral agreement for a fee can be found in one page of transcript. The plaintiff’s counsel accepted this.[15] Omitting what appear to be Mr Burgess’s own corrections of his slips of the tongue and omitting some irrelevant matters, that evidence of Mr Burgess follows, with my highlighting to emphasise the portion immediately preceding the request for a 10% fee:[16]
MR BURGESS: I sat down at a little round table, and Matt walked in, and I said “What’s happening”. He said “I’ve got $2 million worth of stock downstairs”. And I went, “So … when’s the job supposed to be finished”. He said, “The 20th of March”. And I said, “That’s in two or three weeks”. He said, “That’s right”. I said, “Do you have any extensions of time”. He said no. With that, I then said, “Do you have any variations”. And he said, “Yes, about a million dollars’ worth”. I said, “Are they approved”. And he said yes. I said, “Do you have any credits”. And he said, “Yes, it’s booked. There’s about $800,000 in credits”. And I said, “Well, what’s the contract value worth”. He said, “Look, it’s a – about – just a little bit over $5 million”. At that stage there I said, “Did you read the contract”. He said, “Yes, twice”. I said, “Did you get a solicitor to read the contract”. He said, “No. Phil wouldn’t pay the $2000 for a solicitor to read the contract”. With that, … I turned around and said …
“How are you going with your BSA licence”. And he said, “… my accountant tells me we’re right on the limit”. Shortly after that Matt turned around and said to me, “Do we have a prolongation claim”. And I said, “No, you don’t. In the John Holland contract … you have no right to any claim against John Holland in any way, shape or form”. And then he turned around and he said, “Can you help”. And I said yes. “What do we do”. And I said, “Matt, it will cost you 10 per cent of whatever I get paid. And no win, no fee”. … I then turned around and said to him, “Look, the John Holland contract, it’s one of those cases where they’ve got the right to shoot you and then send you a bill for the bullet”. He said, “Well, what do … we do now”. And I said, “Now you send me a copy of the contract. I’ll look at it in the next two days, and then we’ll talk about it. But right now we need the extensions of time ASAP”.
MR HORVATH: You’ve mentioned … during this conversation there’s you and Matt discussing things. Now, is Phil present during this conversation?
MR BURGESS: Phil was present during the start of the conversation, but somewhere during the conversation he had something else to do, and he left the room.
MR HORVATH: So during the part of the conversation where you said, “It will cost you 10 per cent of whatever I get paid, no win, no fee,” was he there or he was not there? I don’t believe he was there.
[15]T4-100.
[16]T1-70, ll 6-43
It was not submitted that being on the limit with respect to a BSA licence was either relevant to the interpretation of the agreement or unreasonable conduct by Stainless.
The plaintiff’s case depends on Mr Burgess’s evidence:
1. Being accepted as substantially accurate; and if substantially accurate
2. Being interpreted as imposing a fee condition of 10% of all further money paid by John Holland to Stainless, not just for a prolongation claim, but for work done pursuant to the subcontract and for work done under any variations to the subcontract and for any disruption claims.
I do not accept that it is substantially accurate or that it should be interpreted as was pleaded.
I propose to consider the interpretation of the words first, on the hypothesis that Mr Burgess’s evidence is substantially accurate. “10 % of whatever I get paid” must be interpreted in the context of the words preceding it. The plaintiff’s amended statement of claim pleaded an agreement to pay 10% of “any amounts recovered from John Holland”.
While there was no reference by Mr Burgess to a fee for recovery of “disruption” costs, that omission does not harm the plaintiff’s case. Stainless alleged in its further amended defence at paragraph 5.2 (c) that it was a term of its agreement with the plaintiff that, in exchange for the plaintiff providing assistance to Stainless in preparing and submitting a claim to John Holland in respect of prolongation and disruption costs for the Riverwalk project, Stainless would pay the plaintiff “a fee equal to the value of 10% of the amount that John Holland Queensland Pty Ltd paid in respect of the claim for prolongation and disruption costs (if any) to the Defendant”.
There was no express mention in Mr Burgess’s evidence of the use of the words “variations” or “all the money payable pursuant to the subcontract” or words substantially like them. He expressly mentioned only a “prolongation claim” and attributed the use of those words to Matt Brown.
Counsel for the plaintiff submitted[17] that Mr Burgess’s evidence of the oral agreement should be understood thus:
But the answer is, “You don’t have a prolongation claim. You don’t have any claim because John Holland doesn’t allow you to do anything.” So the context of the answer is, “Forget prolongation. You can’t do that.” And then Matt says, “Can you do anything for us?” “Okay, I’ll get you something. But it’ll cost you 10 per cent. And whatever I get” – your Honour, that means whatever we recover, whatever I recover for you.
[17]T4-
In considering that submission I note that the plaintiff’s counsel substituted his own version for what Mr Burgess actually asserted in evidence. Mr Burgess gave evidence that he asserted “In the John Holland contract … you have no right to any claim against John Holland in any way, shape or form”. It is more practical to consider Mr Burgess’s evidence.
On the assumption that the conversation was substantially as Mr Burgess described it, I reject that submission. I reject the implied submission that the words Mr Burgess spoke, objectively meant that, not only did Stainless have no contractual right to claim for its prolongation costs, it also had no contractual right to make any other claim for money.
Mr Burgess’s evidence above, if accepted as substantially accurate, reveals that his demand for a fee was in the context of:
1. Matt Brown’s question about whether Stainless had a prolongation claim;
2. Mr Burgess’s answer that, in effect, Stainless had no contractual right to make one; and
3. Matt Brown’s request to Mr Burgess to help.
It seems more reasonable to interpret it as an opinion about the narrower topic Mr Matt Brown allegedly raised immediately before, namely of a “prolongation claim”.
That is how I interpret the words about which Mr Burgess gave evidence. On that interpretation, the plaintiff would fail to establish the fee agreement which appears in its amended statement of claim and it would lose.
But that analysis was unnecessary because I am not satisfied that the conversation occurred as Mr Burgess described it.
Mr Burgess’s version of what he advised is implausible. The Browns’ agreement to it would be implausible.
If Mr Burgess’s words were intended to convey that Stainless had no right to be paid for any unpaid works it had performed pursuant to the subcontract, no right to be paid for any agreed variations it had performed and no right to be paid for any future work Stainless might perform, that opinion would have been wrong in law. Mr Burgess, though not a lawyer, had experience with disputes over building contracts. He was unlikely to have made such a fundamental mistake in expressing his opinion. He is unlikely to have honestly and deliberately given that advice. Whether it was during Mr Brown’s first meeting, without having seen the subcontract, or in the second meeting, by which time Mr Brown may have read the subcontract, it is implausible that Mr Brown would have believed or honestly asserted that Stainless had no claim of any kind.
The subcontract specifically provided that there were three claims to which Stainless had no right. Save for a claim for $1 per day, the subcontract expressly provided that Stainless “shall have no other claim against John Holland arising out of or in connection with the extension of time, or delay, or disruption.”
It seems more likely that if Mr Burgess had given an opinion about what claims Stainless did not have that he would have given the accurate advice that it was in respect of prolongation or disruption.
An opinion that Stainless had no claims at all must have seemed astonishing to the Browns. It would have been a remarkable opinion to express before Mr Burgess had seen the subcontract. Mr Burgess recalled receiving the contract after the fee agreement was reached. Because I find that there was an earlier meeting on about 28 February, it is possible that Matt Brown had forwarded the subcontract to Mr Burgess before the fee agreement was struck on about 7 March 2014.
The evidence given by Mr Burgess differs in another material respect from one allegation which was made in three successive pleadings prepared on the instructions of Mr Burgess. I refer to:
1. Paragraph 3 c of the statement of claim dated 7 Nov 2014,[18] filed in the proceeding brought earlier by Mr Burgess, when he incorrectly sued in his own name;
2. Paragraph 8 of the plaintiff’s statement of claim in this proceeding; and
3. Paragraph 8 of the amended statement of claim in this proceeding.
[18]Ex 44
Mr Burgess gave evidence that the critical portion of the conversation about a fee was with Matt Brown alone.[19] That is inconsistent with the three successive versions of the agreement pleaded in the three pleadings above which each alleged an agreement with Matt Brown and Phil Brown.
[19]T1-70, T3-22 L 9
That inconsistency tends to suggest that Mr Burgess’s recollection of the critical conversation when a fee agreement was struck is a recollection which has changed with time, at least in that further material respect. Apart from showing that Mr Burgess’s recollection is fallible, his failure to give evidence of the participation of Mr Phillip Brown does not otherwise harm the plaintiff’s claim. One sees from the further amended defence of Stainless that Stainless admitted that it “(through its director Phillip Brown and its employee Matthew Brown) entered into an oral agreement with the Plaintiff …”
A prolongation claim would ordinarily mean a claim for compensation for costs incurred by Stainless arising from delays which were not caused by Stainless. It would be distinctly different from a claim to be paid for services and installation of further balustrades. One claim is for expenses caused to Stainless by delay, which is expressly excluded by the contract as a proper subject for claim. The other is the agreed price for services and installation of balustrades.
A consultant might reasonably demand a 10% success fee for obtaining compensation for prolongation costs to which the client had no contractual right “in any way shape or form”. A client might reasonably agree to that. It is harder to accept that a consultant would reasonably demand a 10% share of outstanding monies or for monies to become payable for future deliveries and installations of materials. A fee of 10% of receipts was likely to be far in excess of 10% of profits. That arrangement would amount to making the consultant a partner without making any capital contribution.
Mr Phil Brown had been so disrespectful about Mr Burgess’s advice in 2012 and had been reluctant to spend $2,000 for a solicitor to consider the subcontract. It would have been very different behaviour for Mr Phil Brown to accept such extraordinary advice in 2014 from Mr Burgess and very different behaviour for him to agree to such an expensive fee.
Mr Burgess gave evidence that at the time of the meeting at which the fee was agreed, he:
1. knew that Stainless had an amicable relationship with John Holland;
2. knew there was no mechanism under the subcontract allowing for Stainless to make a claim for prolongation or disruption;
3. knew that the subcontract made provision for more than a further $3 million in payments;
4. believed that about $2 million worth of product was stockpiled and had not been paid for but gave evidence that it never entered his mind, at the time, that he would receive 10 per cent of any payment for that stockpile; and
5. was advertising himself as someone who could assist with prolongation and disruption claims.[20]
[20]T3-28, l 3.
At the time of the fee agreement, the relationship between Stainless and John Holland was good. Matt Brown and his father were each naïve about the consequences of failing to obtain an extension of the date for completion; namely the risk of incurring liquidated damages. Neither of the Browns had reason to expect that Stainless would not be paid by John Holland the benefit of the contract price and variations for work done and for work still to be done. Neither Brown had considered making a claim for prolongation or disruption. The Browns needed to have the concepts of the two different claims explained to them.
If Stainless had agreed that the plaintiff should receive ten percent of any further monies paid to it after 7 March 2014 it would have potentially given the plaintiff more than 70 percent of the profit Stainless had anticipated when it won the subcontract. Mr Matt Brown explained that when Stainless first entered into the sub-contract he had calculated that on a contract value of $5,240,000 Stainless should make a profit of 13 percent. I calculate 13% to be about $680,000. 10% of another $3 million in anticipated payments was a significant part of the profit. After the agreed variations the profit was probably expected to be a greater percentage than 13%. Nevertheless, it is implausible that either of the Browns would have consciously agreed to a fee which amounted to a substantial proportion of Stainless’s profit, on such scant advice from Mr Burgess.
Mr Phil Brown gave evidence that:
1. he contacted Mr Burgess to seek his help to collect a debt owed to Stainless by Taringa Steel. The debt was about $10,000;
2. Mr Burgess appeared at the premises of Taringa Steel a week later and discussed the debt with Phil Brown;
3. Mr Burgess recommended forgetting that debt and concentrating on the John Holland job;
4. Mr Burgess said words to the effect that the completion date was due in March and now was a perfect time to make a prolongation claim;
5. Mr Burgess said that if Stainless goes ahead with the prolongation claim he would want 10 per cent of any money received for it;
6. Mr Burgess said that he thought there was $500,000 in the claim and if he recovered $500,000 for Stainless, Stainless would pay him $50,000 and if he received nothing he would charge nothing;
7. Mr Phil Burgess gave evidence that he and Mr Burgess shook hands on that deal; and
8. Mr Burgess said words to the effect he wanted 10 per cent of any prolongation, delays or disruption that we would receive from John Holland.[21]
[21]T3-56, l 30.
Mr Matt Brown gave evidence that:
1. Mr Burgess turned up at the Stainless office and Mr Matt Brown discussed the Taringa Steel debt with him;
2. Mr Matt Brown advised Mr Burgess about the Taringa Steel job and explained that Stainless had invested all of its manpower into the River Walk project and could not finish the Taringa Steel job because of that;
3. this prompted Mr Burgess to ask about the River Walk project;
4. Mr Matt Brown explained that the job had been delayed because John Holland was having issues putting piles into the riverbed and issues with concrete girders and that the job was meant to be finished in early March;
5. Mr Burgess recommended forgetting the Taringa Steel debt;
6. Mr Burgess said Stainless had a good “shot at a prolongation and disruption claim and that 10 per cent of $5 million is a lot of money to Stainless but not a lot of money to John Holland”;
7. Mr Burgess said he could put it together for Stainless but needed the drawing register showing when the drawings were submitted and approved and a copy of the contract;
8. Mr Burgess said “Matt, I’ll take 10 per cent”;
9. Mr Matt Brown asked him what he meant and Mr Burgess said “well, we could win $500,000, we might win $100,000. We might not win anything at all but I’ll take 10 per cent”;
10. Mr Matt Brown said that sounded fair and that he would chat to Phil Brown to confirm;
11. Matt Brown later tried to explain to Phil Brown what prolongation and disruption were and that Mr Burgess had said we could get an extra $500,000 out of the project and Mr Burgess wanted 10%;
12. Over the next few days Matt Brown put the information together with the estimator engaged by Stainless and emailed it to Mr Burgess and he also emailed to him a copy of the subcontract;
13. About a week after the meeting, Mr Burgess and Mr Phil Brown were talking in the Stainless boardroom when Mr Matt Brown joined them and he heard Mr Burgess explain to Mr Phil Brown that prolongation was for claiming Stainless’ overheads for the time the job had been delayed and prolonged and that disruption was for the costs of out-of-sequence works and disruption to the factory;
14. Mr Burgess said that he had read the contract which Mr Matt Brown had sent and that the contract only provided a dollar a day allowance for extensions of time and that the words “paid on account” were significant and it was one of the worst contracts he’d ever seen; and
15. Someone then brought up that Mr Burgess wanted 10 per cent of the claim for prolongation and disruption and they all agreed it was OK and shook hands.
Mr Matt Brown’s memory of concluding the first meeting with advice that he would need to speak with his father about the 10% fee request is plausible and consistent with the roles each had in the company. His recollection of trying to explain the meaning of prolongation and disruption claims to his father is entirely consistent with the general naivety about the subcontract’s terms each of the Browns displayed, particularly Phil Brown. His recollection of sending material to Mr Burgess prior to the 7 March meeting is consistent with the documentary evidence. I accept Matt Brown’s evidence that the fee agreement was struck at a meeting during Mr Burgess’s second visit.
Was there a commercial basis for Stainless to knowingly agree to the plaintiff’s receipt of 10% of all further payments from John Holland? On about 7 March 2014, at the date when Stainless agreed a fee with Mr Burgess, there is no evidence that John Holland intended to rely on a contractual remedy for Stainless’s pending failure to complete, or that Stainless knew of the risk.
There is no evidence that Mr Burgess warned the Browns about liquidated damages before the fee agreement. Mr Burgess’s evidence of the relevant conversation is set out above. Apart from his colourful suggestion that John Holland had the right to shoot its subcontractors, on Mr Burgess’s version of the conversation, Mr Burgess did not articulate to the Browns what financial risks there were.
There is no evidence that the risk of paying liquidated damages would have made the subcontract unprofitable. There is no evidence that the Browns appreciated that there was a risk of incurring liquidated damages before they entered into the fee agreement or that they considered the quantum of potential liquidated damages.
I am not satisfied that Mr Burgess’s evidence of the fee agreement is reliable. I am not satisfied that Mr Burgess asked for a fee of 10% of any amounts recovered from John Holland. I am satisfied that neither of the Browns agreed that Stainless would pay 10% of any amounts recovered from John Holland. I am satisfied that the extent of their agreement to pay a fee was the equivalent of 10% of amounts Stainless recovered for claims for prolongation and disruption.
Conduct after the fee agreement
Evidence was led of the conduct of the parties after the fee agreement and the conduct of John Holland. Presumably it was primarily relevant as circumstantial evidence of what the parties believed had been the agreement for services and the agreement about fees. It also tended to confirm that John Holland was in a good relationship with Stainless, that Matt Brown’s belief that he had a good relationship with John Holland had been correct and that Mr Burgess involved himself in many more issues than just the prolongation and disruption claims.
Mr Burgess gave evidence that he received a copy of the subcontract from Matt Brown in the three days after the fee agreement was reached. It is possible that he was incorrect and that it was received after the first meeting and before the fee agreement was reached on about 7 March. He read the document within a day and concluded that the important elements were that:
1. John Holland would accept no claims;
2. payments to Stainless were on account;
3. the fee to Stainless for extensions of time was a dollar a day;
4. the liquidated damages available to John Holland were a $1,000 a day for the first five days and $5,000 a day thereafter.
At about the same time as he received the subcontract, Mr Burgess also received from Matt Brown a spreadsheet.[22] Mr Burgess created his own version.[23] Mr Burgess went with both Matt and Phil Brown to see the accountant for Stainless to obtain overhead figures.
[22]Exhibit 4.
[23]Exhibit 5.
On 17 March 2014 Mr Burgess went with Matt Brown to the John Holland office at the jobsite at the Riverwalk. Representatives for John Holland including a solicitor attended. Mr Burgess initially took command of the meeting. He had John Holland confirm that Stainless was up-to-date, that there were no defects and that Stainless had no workplace health and safety issues. A much more important topic was raised by one of the representatives for John Holland. With no prompting from Mr Burgess, the representative from John Holland advised that there would be an extension of time for 108 days coming. The significance of that should not be overlooked. It meant that without so much as a request, John Holland was offering to forego its contractual right to $535,000 in damages for a failure by Stainless to complete. It is consistent with the evidence of Matt Brown that the relationship with John Holland was good when Mr Burgess and Stainless reached their fee agreement ten days earlier.
Mr Burgess then asked that John Holland pay $2,000,000. The solicitor for John Holland correctly replied that it was not in the contract. Mr Burgess then said the contract was to finish in a couple of days and asked for $3,000,000 instead. Again he was told it was not in the contract. Mr Burgess then asked if Stainless could store its product on-site and was advised there was no room on site to store it. Mr Burgess then suggested that John Holland inspect the material so that Stainless could get paid for it. I note that this initiative by Mr Burgess was unnecessary because the supplier to Stainless was holding material until Stainless called for it to be delivered to the Riverwalk work site and was not requiring Stainless to pay for it.
Mr Burgess gave evidence that he told the representatives from John Holland:
…We’ve got this $2million worth of product down in Brisbane. We’d like to bring it up and get it on site so we can get paid. “Well, we don’t have any room.” So I then mention that, “maybe you should come down to the factory, check out the material so we can get paid, due to the fact the job was due to be finished in 2 or 3 days.”
The assertion by Mr Burgess was literally correct but misleading. The evidence of Matt Brown, which I accept, was to the effect that the stockpiled material was at the supplier’s premises, was not paid for by Stainless until after it was supplied and can have caused no financial burden to Stainless.
The date provided for in the subcontract for Stainless’s submission of monthly claims to John Holland was the 25th of the month. Shortly before sending the invoice for 25 March 2014, Matt Brown advised Mr Burgess about an invoice he had prepared. Mr Burgess gave evidence that Mr Brown said “I’m about 60, $70,000 dollars short” and Mr Burgess recommended increasing the invoice, saying that John Holland would not argue over the extra when there was a 2 million dollar stockpile of stock. Mr Burgess gave evidence that Matt Brown increased that invoice by 60 to 80 thousand dollars and rang the next day to say it had been accepted. The invoice[24] was for $769,219.69 inclusive of GST. It follows that the increase was something of the order of 10%.
[24]Exhibit 50.
Representatives of John Holland came to inspect the Stainless factory. Mr Burgess was not there. The representatives offered to Matt Brown to take over payment of bills sent by Stainless’s supplier for material. When Mr Brown passed on this information to Mr Burgess, Mr Burgess recommended that Stainless reject that offer and warned that if John Holland received the material it could engage another contractor to carry out the installation. Mr Burgess recommended that Stainless ask John Holland to pay the defendant money so that the defendant could pay its own bills.
Notwithstanding that Stainless had sent an invoice on 25 March 2014 claiming more than it was then entitled to and notwithstanding that the next invoice was not due to be sent until 25 April 2014, Mr Burgess told Matt Brown to create an invoice for one million dollars plus GST for “material, outstanding retention & JH acceptance of work as per correspondence dated 18/3/14”. Stainless sent that invoice on about 1 April 2014. John Holland rejected the claim noting that it had no clarity and that it was submitted in breach of the agreement to submit claims on the 25th of the month and noted that there was no obligation upon John Holland to certify anticipated works prior to the 25th of the month.
Mr Burgess engaged a solicitor who had an office on the same level as the plaintiff. Matt Brown informed the solicitor that Mr Burgess was authorised to act as an agent for Stainless for the purpose of giving instructions to the solicitor.[25]
[25]Exhibit 50.
Mr Burgess and Matt Brown were communicating regularly by telephone. Matt Brown would consult Mr Burgess about how to respond to emails. Mr Burgess would build Matt Brown’s confidence about the way he was performing.
On 3 April 2014 Mr Burgess advised Matt Brown to prepare an invoice for a prolongation claim. Matt Brown prepared, with the approval of Mr Burgess, a claim[26] for $619,700.20 plus GST as a quotation for variation of costs associated with extension of time as per documents emailed on 18 March 2014.
[26]Exhibit 9.
On about 15 April 2014 the plaintiff issued to Stainless an invoice CNSS-001[27] for consultancy services claiming $30,000 for the claim and $3,000 for GST. The basis of the obligation to pay was not expressed in the invoice.
[27]Exhibit 13.
Matt Brown did not expect the invoice and called to ask Mr Burgess what the invoice was for. I accept Matt Brown’s evidence that Mr Burgess replied to the effect that Stainless was going to win some money, that he did not know how much it would win, but that Mr Burgess needed it. Matt Brown discussed it with Phil Brown. They were concerned that they were being invoiced before they had won anything at all.
Mr Burgess prepared a claim for disruption which Matt Brown sent on 23 April 2014 to John Holland claiming:
Variation for disruption and out of sequence works. Costs incurred for overtime labour between 1/01/2014 to 31/03/2014:
Total labour at time and a half = 2379.25hrs @ $129/hr TOTAL: $306,923.25 + GST
Total labour at double time = 508.75hrs @ $172/hr TOTAL: $87,505.00 + GST
TOTAL CLAIM: $394,428.25 + GST
The demands for this prolongation claim[28] and the disruption claim[29] sent on 3 April were rejected by John Holland on 24 April 2014.[30]
[28]Exhibit 9.
[29]Exhibit 14.
[30]Exhibit 15.
On 30 April 2014 John Holland alerted Stainless that the Superintendent had asserted that all balustrade welds had not been given grinding and polishing and that it was an issue valued at $701,157.54. Stainless had previously assured John Holland that this work had been done. If it was required to be done or redone it would require a credit in favour of John Holland for that amount of money. Mr Matt Brown consulted with Mr Burgess about this issue and took his advice.
Mr Burgess concerned himself with the preparation of a further application for extension of time on 8 May 2014. He urged Matt Brown to threaten John Holland that Stainless would leave the site because John Holland was not working effectively. Matt Brown followed the advice and Stainless left the site and received from John Holland a notice of default.
Following this, on 28 May 2014, Mr Burgess and Matt Brown attended a meeting with representatives of John Holland. A threat was made that John Holland would terminate the subcontract to get the job finished. Mr Burgess responded that if John Holland did so, it would need to find another subcontractor and the job would take forever to finish. As a result of these negotiations, John Holland offered an extra $600,000 to Stainless in the meeting. Mr Burgess said, in effect, that $600,000 would suffice for Stainless’s prolongation claim and that Stainless was losing $36,000 per week with no end to such losses in sight.
On about 29 May 2014 John Holland varied the subcontract with Stainless. John Holland:
1. Allowed a variation claim in favour of Stainless in the sum of $177,634.80 inclusive of GST;
2. Allowed a prolongation claim in favour of Stainless in the sum of $572,000 inclusive of GST;
3. Allowed a disruption claim in favour of Stainless in the sum of $330,000 inclusive of GST;
4. Agreed to pay the outstanding original balance provided for in the subcontract;
5. Increased the value of the subcontract from $5,246,196, exclusive of GST to $7,045,864 exclusive of GST. When GST is added those figures become $5,768,175.60 and $7,747,810.40 respectively, representing an increase of $1,979,634.80, inclusive of GST.
6. Agreed to a timetable for payments between 2 June and 21 July 2014.
Stainless accepted the variations. The prolongation claim and the disruption claim were made to seek compensation for increased costs incurred by Stainless in accelerating the works and for working out of sequence to mitigate the effects of delays.
On 10 June 2014 the plaintiff sent its second invoice[31] which was for $50,000 and $5,000 for GST. Bearing in mind that it had been paid $30,000 and $3,000 for GST to date, this invoice was for an additional amount. The total would have been almost ten percent of the $820,000 agreed to be paid by John Holland for prolongation and disruption.
[31]Exhibit 25.
Between 2 June and 22 July 2014 Stainless accepts that John Holland paid Stainless $3,703,884.80 on account of the original subcontract sum and variations to the subcontract.[32] The plaintiff alleges that John Holland paid more than this, being $3,959,422.07 and alleges it was on account of only the outstanding original balance.[33] I need not resolve this dispute as the quantum of the plaintiff’s claim, if completely successful, is not disputed.
[32]FAD par 10.1
[33]ASOC par 13(a)
On 20 and 30 June 2014 Stainless paid $55,000 to the plaintiff for the second invoice.
On about 8 July 2014 the plaintiff issued a third invoice CNSS-003[34] asserting a claim valued at $180,000 but demanding $100,000 and $10,000 GST. It contained no particulars of the basis of the claim. Stainless has not paid the $100,000 or the $10,000 GST.
[34]Exhibit 26.
On 10 July 2014 Matt Brown replied[35] that Stainless did not accept that the invoice was in relation to any work undertaken for its business and that it would not be entering the invoice into its accounting system. At some date after that, Mr Burgess asked for the transfer of the $100,000 to his lawyer’s trust account to assist Mr Burgess with a negotiation in some other litigation. The transfer was said to be for the purpose of allowing Mr Burgess to demonstrate that Mr Burgess’s company was sufficiently committed to the litigation to have paid $100,000 into its solicitor’s trust account. Stainless rejected the request. The money was not transferred. Matt Brown later apologized and asked whether the money would have made any difference to Mr Burgess’s negotiation.
[35]Exhibit 27.
In about late July 2014 Mr Burgess made a further request for $100,000 as a loan, interest-free for a year.[36] The request was refused.
[36]T2 – 73 l 42.
Until as late as 28 August 2014 Mr Matt Brown and Mr Burgess discussed matters related to the subcontract, but unrelated to claims for prolongation and disruption.
On 3 September 2014, Stainless and John Holland signed a final account and release agreement.
Mr Burgess created promotional material for business purposes and gave a copy to Mr Phil Brown in September 2014.[37] It was prepared in a question and answer format referring to assistance which Mr Burgess had given to clients. One section related particularly to Stainless, although the name of the client was not mentioned. It states:
Well can you share with me some success stories?
Yes absolutely. There have been many, but here are a few claims that I am proud of …
2014 – Brisbane City Walk – Prolongation & Disruption Claim $820 K PAID.
Mr Burgess did not add to the promotional advertisement any suggestion that he was responsible for recovering another $5 million worth of claims in respect of that same project.
[37]Exhibit 37.
On about 7 September 2014, the plaintiff issued a fourth invoice CNSS-004[38] describing a claim of $345,745.80 “Less Paid Too Date $80,000.00” and demanding $265,745.80 and GST of $26,574.58 for a total of $292,320.38. Stainless has not paid it. It had no relevant particulars.
[38]Exhibit 45.
On 21 October 2014, the plaintiff issued a fifth invoice, CNSS-005 for $505,905.69[39] which advised Stainless:
·Value This Claim $539,914.26
·Less Paid Too Date $80,000.00
·This Invoice $459,914.26
·Add GST or Charges 10% $45,991.43
·Total Payable for November 2015 $505,905.69
[39]Exhibit 46.
On 7 December 2014, by a Statement of Claim in the proceeding instituted by Mr Burgess in his own name, there appeared the first suggestion that Mr Burgess alleged a fee agreement for ten percent of the amount payable by John Holland.
It was submitted for the plaintiff that Mr Burgess’s assistance until 28 August 2014 was because Mr Burgess understood that he had to secure the final payment for Stainless. I am not satisfied that Mr Burgess ever believed that his fee agreement was in respect of anything other than what Stainless would recover for prolongation and disruption. I am not satisfied that Mr Burgess’s assistance after John Holland paid claims for prolongation and disruption was because Mr Burgess believed it was his contractual obligation to provide that assistance.
Advice given by Mr Burgess to Matt Brown at no charge before March 2014 was consistent with their friendship, with Matt Brown’s obvious respect for Mr Burgess’s experience and with Mr Burgess’s confident and assertive personality. Continuing advice given by Mr Burgess, after winning the claims for prolongation and disruption, is explicable on the same basis.
Conclusions about the fee agreement
Mr Burgess’s recollection of the fee agreement, if accepted as an accurate recollection and substantially correct, does not support the pleaded agreement. I do not accept that Mr Burgess’s recollection of the fee agreement is substantially correct. I do accept the Browns’ versions of the fee agreement as substantially correct.
The dispute about $2,200
By its amended statement of claim the plaintiff claims $505,905.69 as a debt or as damages for breach of contract.
The plaintiff’s claim as presently pleaded should be dismissed.
With respect to the quantum of the plaintiff’s loss, an issue emerged during submissions. The plaintiff submitted[40] that even if the defendant’s version is accepted and the plaintiff fails in its claim for $505,905.69, the plaintiff “wins” as Stainless nevertheless owes the plaintiff a further $2,000 plus GST “as it only paid the plaintiff $80,000 plus gst instead of $82,000 plus gst”. In response to this submission, counsel for Stainless submitted[41] in effect:
[40]Submissions on behalf of the plaintiff par 77 and T4-94 L27.
[41]T4-95 lines 3-14.
1. The alternative claim for $2000 plus GST does not appear in the further amended statement of claim or in any earlier pleading;
2. No communication from the plaintiff, and which is in evidence, includes an allegation that there has been an underpayment of $2,000;
3. No invoice from the plaintiff seeks to address this issue.
I accept that those submissions for Stainless are correct.
I have a discretion to allow the plaintiff to raise this claim despite noncompliance with the rules.
Irrespective of whether Stainless does or does not owe a further $2,000 to the plaintiff plus GST, the plaintiff did not include in its amended statement of claim the basis on which the amount claimed had been worked out or estimated. The plaintiff was required to do so by the UCPR.[42] It deprived the defendant of the opportunity to consider it and whether to admit it or defend it. The first notice of the claim arose late in the plaintiff’s address.
[42]CSEEUCPR rule 155 (2) (c)
I infer from referring to invoices in evidence the probable basis on which the plaintiff’s counsel has calculated and submitted that there is an outstanding amount of $2,000 plus $200 for GST.
Stainless recovered $520,000 for its prolongation claim and $300,000 for its disruption claim being a total of $820,000. A fee equivalent to 10% of the amount recovered would be $82,000. The plaintiff implies that it is entitled to receive a further amount equivalent to 10% of its claim as GST. If the plaintiff was entitled to be paid GST by Stainless on the $82,000 claim the total payable by Stainless to the plaintiff would be $90,200, inclusive of GST. The amount paid by Stainless to the plaintiff, to date, is $88,000. In these premises Stainless would owe the plaintiff $2,000 and $200 for GST.
The plaintiff did not seek leave to amend so as to include particulars in its pleading. If it had done so it may have been proper to grant that application on the condition that Stainless be given leave to amend its further amended defence accordingly. That would have given Stainless the opportunity to admit the claim without either party incurring costs in respect of it, or to defend the claim.
To win even a small amount in a proceeding may justify an order for costs in favour of the winner. My preliminary view on costs is that the plaintiff’s recovery of $2,000 with or without $200 for GST would have no bearing on the proper order for costs of the parties up to the date of any such amendment. Put simply, Stainless has won the proceeding on the state of the current pleadings and would ordinarily be entitled to an order for its costs so far. The outcome of a further dispute about $2,200 does not appear to be material to a decision about which party succeeded in the proceeding to date or to the time when the claim for $2,200 was identified.
The plaintiff’s oral claim for $2,000 and GST of $200 has been raised without compliance with the Uniform Civil Procedure Rules or proper notice to Stainless. I have a discretion to allow the claim to be raised in submissions. It is a small claim. The costs which would be incurred by giving the plaintiff leave to raise it in spite of noncompliance with the UCPR and in giving the defendant liberty to consider it and respond could exceed the amount of the claim. It is unlikely that it would affect the costs of the proceeding to date. In the exercise of my discretion I do not allow the plaintiff to raise its claim for $2,000 plus $200 GST.
I do not adjudicate on that claim.