DISTRICT COURT OF QUEENSLAND
CITATION:
Sentinel Springwood Retail Pty Ltd & Ors v Tomlinson & Ors [2021] QDC 159
PARTIES:
SENTINEL SPRINGWOOD RETAIL PTY LTD ACN 168 114 814 AS TRUSTEE FOR THE SENTINEL SPRINGWOOD RETAIL TRUST
(First Plaintiff)
AND
BCC MACKAY INVESTMENT PTY LTD ACN 143 488 966 AS TRUSTEE FOR THE MACKAY RETAIL TRUST
(Second Plaintiff)
AND
SENTINEL COUNTRYWIDE RETAIL LIMITED ACN 601 712 707 AS TRUSTEE FOR THE SENTINEL COUNTRYWIDE RETAIL TRUST
(Fourth Plaintiff)
AND
SENTINEL REGIONAL OFFICE PTY LTD ACN 614 553 883 AS TRUSTEE FOR THE SENTINEL REGIONAL OFFICE TRUST
(Fifth Plaintiff)
AND
SHIELD PROPERTY SERVICES PTY LTD ACN 149 144 016
(Eighth Plaintiff)v
NEIL DANE TOMLINSON
(First Defendant)
AND
ARETE PARK PTY LTD ACN 626 064 453 IN ITS OWN RIGHT AND IN ITS CAPACITY AS TRUSTEE OF THE ARETE PARK TRUST
(Second Defendant)
AND
CLAIRE LOUISE TOMLINSON
(Third Defendant)
AND
VERUS CONSTRUCTION PTY LTD ACN 619 673 737
(Fifth Defendant)FILE NO:
2456/19
DIVISION:
Civil
PROCEEDING:
Trial
ORIGINATING COURT:
District Court at Brisbane
DELIVERED ON:
5 August 2021
DELIVERED AT:
Brisbane
HEARING DATE:
3, 4, 5 February, 19 March, 16 April 2021
JUDGE:
Porter QC DCJ
ORDER:
1. Judgment should be entered against the first and fifth defendants in favour of the fourth plaintiff for $41,838;
2. Judgment should be entered against first defendant in favour of the fifth plaintiff for $40,613;
3. The claims of the plaintiffs are otherwise dismissed;
4. The counterclaims of the fifth defendant are dismissed; and
5. The Court will hear the parties on interest and costs and any residual matters not covered by the above orders.
CATCHWORDS:
TORTS - MISCELLANEOUS TORTS - DECEIT - where plaintiffs claim damages in deceit against first defendant based on fabricated quotations which induced plaintiffs to enter into building contracts at inflated prices - where first defendant admits the conduct but asserts scope of works was varied to sustain inflated quotation of successful contractor - where first defendant asserts the conduct was engaged in to avoid breaches by his employer of the prohibitions in Queensland Building and Construction Commission Act 1991 (Qld), s. 42 - where first defendant asserts that no loss was suffered for those contracts where the damages claimed by the plaintiffs had been recovered already from the contractors involved – whether the plaintiffs can established a continuing loss based on the unilateral application of settlement sums obtained from the contractors to costs incurred in the proceedings against those contractors
BREACH OF FIDUCIARY DUTY - PROSCRIPTIVE DUTY - where plaintiffs claim damages against first defendant for breaches of fiduciary duty - where first defendant obtained a secret benefit for himself and a third party – whether first defendant’s breaches were fraudulent
BREACH OF FIDUCIARY DUTY - ACCESSORIAL LIABILITY - where plaintiffs allege that fifth defendant had actual knowledge of first defendant’s fraudulent breach of his fiduciary obligations to the plaintiff - whether fifth defendant assisted first defendant in breaching those obligations - where claim against fifth defendant for accessory liability was established
TORTS - MISCELLANEOUS TORTS - CONSPIRING TO INJURE BY UNLAWFUL MEANS - GENERAL PRINCIPLES - where plaintiff alleged conspiracy to injure by unlawful means - where the means were unlawful because the conduct comprised a fraudulent breach of fiduciary duty in which fifth defendant was a knowing participant - where plaintiff established an agreement to engage in unlawful conduct which was carried into effect - whether a purpose to injure the plaintiff is established where the primary purpose of the conspiracy to obtain a financial benefit but the conspirators knew that that benefit inevitably had to come at the expense of the plaintiff
LEGISLATION:
Corporations Act 2001 (Cth), s. 471B(a)
Criminal Code 1899 (Qld), s. 408C
Queensland Building and Construction Commission Act 1991 (Qld), s. 42
Uniform Civil Procedure Rules 1999 (Qld), Rule 687
CASES:
Barnes v Addy (1874) LR 9 Ch App 244
Briginshaw v Briginshaw (1938) 60 CLR 336
Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25
Coad v Wellness Pursuit Pty Ltd (2009) 71 ACSR
Derry v Peek (1889) LR 14 App Cas 337
Fatimi Pty Ltd v Bryant [2004] NSWCA 140
Harstedt Pty Ltd v Tomanek (2018) 55 VR 158
IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (2009) 69 ACSR 507
Lee v Abedian [2017] 1 Qd R 549
Magill v Magill (2006) 231 ALR 277
McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409
Metal Manufacturers Limited v GMJ Electrical Projects Pty Ltd & Ors [2019] QDC 62
Richardson v Aileen Pty Ltd [2007] VSC 104
Shirlaw v Taylor (1991) 102 ALR 551
Warman International Ltd v Dwyer (1995) 182 CLR 544
COUNSEL:
C. Johnstone for the Plaintiff
M. Baroni for the Fifth Defendant
SOLICITORS:
Russells for the Plaintiff
N. Tomlinson, the First Defendant, appeared in person
Valorum Law Group for the Fifth Defendant
SUMMARY
FACTUAL BACKGROUND
The plaintiffs
Mr Tomlinson
Introduction to the pleaded projects
The Bodel projects
Bodel
Townsville Property: The F45 Fitout Works (January 2018)Uncontentious facts
Disputed factsSpringwood Property: Lifeline Make Good Works (January 2018)
Disputed facts
Mackay Property: ‘The Hub’ Fitout Works (February 2018)
Uncontentious facts
Disputed factsCreek Street Property Tenancy Works (February 2018)
Uncontentious facts
Disputed factsSpringwood Property Air Conditioning Works (March 2018)
Uncontentious facts
Disputed factsObservations about the Bodel projects
The Growth Australia projects
Uncontentious facts
Disputed facts
Mr Tomlinson and Growth Australia
Verus and the Dubbo Works
Genesis of the Dubbo Works
Uncontentious factsThe drawings
The Original Quote from Verus
The first Revised Quote from Verus
Mr Tomlinson’s dealings with Sentinel
Events post-contractDisputed issues
MR TOMLINSON
Introductory comments on the claims against Mr Tomlinson
Deceit
Breach of fiduciary duty
Conspiracy and breach of contract
Mr Tomlinson as a witness
The QBCC Licensing issue
Relevance
Mr Tomlinson’s version
Analysis of Mr Tomlinson’s versionExpression of concerns about licensing to Sentinel officers?
Mr Tomlinson’s QBCC “risk strategy”
Mr Tomlinson’s “market price” calculations
Place of QBCC issue in Mr Tomlinson’s conduct
FINDINGS ON THE BODEL PROJECTS
The F45 Fitout Works
The Lifeline Make Good Works
The Hub Fitout Works
Creek Street Property Tenancy Works
Springwood Property Air Conditioning Works
Breach of fiduciary duty and the Bodel projects
FINDINGS ON THE GROWTH AUSTRALIA PROJECTS
FINDINGS ON THE DUBBO PROJECT
Mr Tomlinson’s evidence
Mr Johnson’s evidence
The claims to be resolved
The plaintiffs’ case on Mr Johnson’s dealings with Mr Tomlinson
Conclusion
Deceit and fiduciary duty: Mr Tomlinson
Verus’ accessory liability for breach of fiduciary duty
Tort of conspiracy
Relevant principles
Analysis
REMEDIES
Growth Australia Projects
The Bodel Projects
The Dubbo Works
The counterclaims
The alleged compromise
THE CLAIMS BY SHIELD
WINDING UP
CONCLUSION
SUMMARY
The Sentinel group of companies (the Sentinel Group) carries on the business of building, owning, and operating commercial premises in Queensland, NSW and the Northern Territory. Each of the plaintiffs is part of the Sentinel Group.
The first, second, fourth and fifth plaintiffs are corporate trustees of several trusts by which each of those plaintiffs owns and operates commercial properties in various locations in Queensland, NSW and the Northern Territory as trustee (the Sentinel plaintiffs). The eighth plaintiff (Shield) provides services to the Sentinel Group for the ongoing maintenance and management of the properties owned by the companies in the Group.
On about 31 October 2017, Shield employed the first defendant (Mr Tomlinson) as its senior project manager. Mr Tomlinson was the senior employee of Shield, responsible, inter alia, for obtaining quotations for building work commissioned by particular Sentinel Group companies, negotiating agreements for such work and overseeing the completion of works pursuant to such agreements. Where capital expenditure over $5000 was contemplated, the Sentinel Group’s financial management practices required Shield to obtain three quotes for the work and submit those together with a recommendation as to which contractor to retain. Mr Tomlinson’s duties at Shield included managing that process. He did so with no supervision, consistent with his senior position with Shield.
Mr Tomlinson was dismissed on 15 June 2018, some eight months after he commenced work with Shield. It is uncontentious that prior to his dismissal, Mr Tomlinson had fabricated two, and sometimes three, quotations and submitted those to the relevant Sentinel plaintiff as if they were genuine quotations intending that that plaintiff would adopt the lowest fabricated quotation. He ensured that the quote given by his preferred builder was the lowest and would be accepted. These proceedings involve eight contracts for work done for various of the Sentinel plaintiffs where Mr Tomlinson gave effect to that practice:
(a)Five contracts were entered into with Bodel Projects Pty Ltd (Bodel);
(b)Two contracts were entered into with Growth Australia Pty Ltd (Growth Australia); and
(c)One contract was entered into with Verus Construction Pty Ltd (Verus).
The relevant Sentinel plaintiff and Shield primarily initially alleged[1] in each case that the provision of the fabricated quotations gave rise to the tort of deceit and a fraudulent breach of fiduciary duty by Mr Tomlinson. They also initially alleged that in each case:
(a)Mr Tomlinson and Bodel, Growth Australia and Verus respectively had committed the tort of conspiracy to injure by unlawful means by conspiring to inflate the price of the work under each contract to their mutual benefit; and/or
(b)Each of Bodel, Growth Australia and Verus was an accessory to a fraudulent breach of fiduciary duty by Mr Tomlinson by, in effect, participating in, and giving effect to, that conspiracy.
[1] There are other causes of action which do not need to be considered at this stage.
Each Sentinel plaintiff alleged that, but for Mr Tomlinson’s conduct, it would not have entered into any of the building contracts, and claimed as damages the difference between the inflated price submitted by Mr Tomlinson and the price which would have been paid for the work without Mr Tomlinson’s conduct (usually the lowest unaltered and genuine quote given for the work). That measure of loss ultimately was the same for each of the causes of action seeking a compensatory remedy advanced by the plaintiffs against each of the defendants. That is, the same loss was claimed in conspiracy and knowing assistance against the builders, and in conspiracy, breach of fiduciary duty and deceit against Mr Tomlinson.
Prior to trial, settlements were reached with Bodel and Growth Australia, and the conspiracy claims and the accessory claims against those parties were not pressed at trial. The amounts paid by way of settlement were sufficient to meet the damages claimed for the causes of action advanced in respect of those specific contracts. However, the plaintiffs have apportioned those payments between the amount of the damages claimed in each case and the costs of the proceedings relevant to those claims up to the date of settlement. Accordingly, they allege they still have a loss arising out of entry into those contracts and maintain their claims against Mr Tomlinson for deceit and/or breach of fiduciary duty for the balance.
No settlement was reached with Verus, and the conspiracy and accessory claims are maintained in relation to the Verus contract. The damages claimed for the Verus contract are the difference between the initial quotation given by Verus and the price ultimately included in the contract, and further relief is sought arising out Verus’ counterclaims based on the Verus contract.
Mr Tomlinson admits that on at least two occasions, he received a personal benefit from builders who had been successful on contracts arising from the scheme by which he deceived Shield and the Sentinel plaintiffs:
(a)He admits Growth Australia paid for about $40,000 worth of work comprised in the construction of stables at his home. Sentinel Countrywide also seeks to recover the amount of this payment, which it characterises as a secret profit; and
(b)He admits receiving a payment of $22,000 via the second defendant (Arete Park), a company controlled by Mr Tomlinson’s wife, Claire Tomlinson (the third defendant), made by Verus. Arete Park has already repaid that sum to the relevant Sentinel plaintiff, and the proceedings against Arete Park and Mrs Tomlinson have also been resolved. Mr Tomlinson maintains that those funds were not procured by him dishonestly, but rather in respect of work required to be done as part of the work under the contract with Verus.
Further, Mr Tomlinson defends the several claims against him on the following grounds:
(a)First, he claims that the successful quotation in each case represented the “true” cost of the work under each contract. He alleges that each change made by him to genuine quotations was explicable by a change in scope of work from the initial scope quoted on and/or by the need to ensure that the builder did not under-price the work;
(b)Second, he explains his conduct in increasing the genuine quotes and fabricating competing quotations as being carried out to prevent Shield from committing an offence under s. 42(1) Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act). He contends that the work which Shield was retained to do by each Sentinel plaintiff was building work because it comprised, in broad terms, project management services which are building work services under the QBCC Act and required a relevant licence. He rightly states that Shield did not have a building licence for project management services during his employment. He relies on these propositions to contend that his actions were never to defraud or deceive the Sentinel plaintiffs or Shield, but to represent him as doing his best to carry out his role consistent with the law; and
(c)Third, he contends that the payments received by way of settlement from the builders other than Verus provide full indemnity for the loss asserted by the plaintiffs in respect of those claims.
As already noted, Verus is the only builder/defendant which has not settled the claim against it. Verus carried out certain work on a ramp servicing a loading bay for a supermarket in a shopping centre owned by the fourth plaintiff (Sentinel Countrywide) in Dubbo (the Dubbo Works). Verus does not dispute the plaintiffs’ contentions that Mr Tomlinson inflated a Verus quotation for that work from $140,000 to some $155,000, nor that he fabricated other quotes for the Dubbo Works and submitted them to Sentinel Countrywide. Verus also admits that its initial quote was for some $76,000 provided on 15 May but increased on 16 May to $140,000, and that it paid some $22,000 to Arete Park. However, it defends the claims against it on the bases that:
(a)The first increase in the quotation (from some $76,000 to some $140,000) was based on a telephone conversation in which Mr Tomlinson outlined additional work and onerous contract conditions that Mr Johnson of Verus had not considered in the first quote; and
(b)The payment made to Arete Park was made by Mr Johnson in the bona fide belief that it was payment for work required to be carried out as part of the Dubbo Works on certain expansion joints.
Based on these matters, Verus contends that it is not responsible for any wrongdoing by Mr Tomlinson, and in fact is entitled to the balance of the contract price for the Dubbo Works and to recover some scaffolding.
For the reasons set out below, I have concluded that:
(a)The Sentinel plaintiffs have made out their claims in deceit (subject to proof of damage) and breach of fiduciary duty against Mr Tomlinson in respect of each project;
(b)The Sentinel plaintiffs have failed to establish that, at the time of trial, they had any damage arising from the Bodel and Growth Australia projects, though Sentinel Regional is entitled to recover the value of the secret profit obtained by Mr Tomlinson from Growth Australia; and
(c)Sentinel Countrywide has made out its claims in deceit, conspiracy and breach of fiduciary duty against Mr Tomlinson in respect of the Dubbo Works, and its claim against Verus for conspiracy and accessory liability for Mr Tomlinson’s breach of fiduciary duty.
Accordingly, there shall be judgment:
(a)In favour of Sentinel Regional against Mr Tomlinson by way of account in the amount of $40,613; and
(b)In favour of Sentinel Countrywide against Mr Tomlinson and Verus for damages for $41,838.
The remaining claims and counterclaims are dismissed.
FACTUAL BACKGROUND
The plaintiffs
Each of the Sentinel plaintiffs is the registered proprietor of commercial property in Queensland and NSW. Each operates as trustee of a distinct trust. Each of the Sentinel plaintiffs belongs to the Sentinel Group. The Sentinel plaintiffs do not have their own staff and are managed by a central administration which supports all companies in the Sentinel Group. The principal witness for the plaintiffs was Ms Jones, chief executive officer of the Sentinel Group, who gave evidence on behalf of all the plaintiffs. Her father, Mr Warren Ebert, is also a senior officer of the Sentinel Group. He gave brief evidence on the issue of QBCC licensing.[2]
[2] The precise basis upon which the various plaintiffs are related to each other was not explored in evidence, but there was no challenge to the authority of Ms Jones nor Mr Ebert to give evidence on behalf of the plaintiffs, and there was no contentious issue in the proceedings about the operation of the plaintiffs as a group.
Shield is also a part of the Sentinel Group. It is a service entity for other companies in the group, including the Sentinel plaintiffs. It provides accounting, and property and project management services to other companies in the group. Amongst the services provided by Shield were building services. Shield effectively acted as agent for the other plaintiffs in obtaining quotations for building work required by the other plaintiffs and managing the subsequent works on their behalf. The kinds of building work required were consistent with the role of the other plaintiffs as owners and operators of commercial premises: maintenance and repair works, fitout and make good works, and the like.
Shield provided those services pursuant to consultancy agreements with the other Sentinel companies. Ordinarily, consultancy agreements are in writing,[3] but on occasion, they are not. There is no written consultancy agreement with the fourth plaintiff (Sentinel Countrywide) in respect of the contract the subject of these proceedings.[4] However, Ms Jones gave evidence that the relationship between Shield and Sentinel Countrywide was conducted on the basis of the terms of the consultancy agreements with other Sentinel companies and there was no challenge to this at trial. The only term of the consultancy agreements which was relevant in this proceeding was that, by those agreements, Shield agreed to indemnify each other Sentinel plaintiff for liabilities of that plaintiff arising out of any negligence, fraud or dishonesty in relation to the services provided by Shield. That liability is relied upon as providing the basis for Shield’s claims in respect of each of the pleaded contracts.
[3] See the agreement between Shield and the eighth plaintiff, Shield Property, from page 508 of the Trial Bundle (Exhibit 2).
[4] See paragraph 16 of the Fifth Amended Statement of Claim filed 3 February 2021 (Statement of Claim).
Mr Tomlinson
Mr Tomlinson has had a career in the construction industry. He completed a trade qualification, then completed tertiary study in construction management. From at least 2002, he worked in construction and project management. His CV, prepared in about October 2017, states that he held at that time an Open Builders Supervisor Licence issued by the QBCC. Although he appears to have been born and lived in the UK, he worked in Queensland from at least 2013, working in all aspects of construction management.[5] In the course of his career in Queensland, he had worked with Mr Russell, Mr Gilmour, Mr Taylor and Mr Williams of Growth Australia, and Mr Johnson of Verus. He was also a work colleague of Mr McIntyre of Bodel.
[5] See Exhibit 6.
Mr Tomlinson commenced working for Shield in late October 2017. He was appointed on a full-time basis as senior project manager. He was the senior officer of that company, responsible for its construction management activities. He was responsible for overseeing construction projects undertaken by the Sentinel companies and project management for such projects. Part of that role also required him to obtain quotations from builders for work to be carried out, to assess those quotations and to make recommendations to the Sentinel company intending to carry out the work as to which quotation to accept.
Importantly for this case, when seeking approval for capital expenditure to carry out building work by one of the Sentinel companies, Mr Tomlinson was required, as part of his duties as senior project manager, to submit a “Capex Request Form” to the relevant Sentinel company. If anticipating expenditure over $5000, Mr Tomlinson was required by the Sentinel Group policy to obtain and include, with the Capex Request Form, at least three quotes for the work. He was also required to make a recommendation as to which builder should be selected.
Mr Tomlinson occupied a position of considerable autonomy and influence. He was the senior construction manager within the Sentinel Group, and there does not appear to have been any day to day supervision of his work or his recommendations. His position allowed him to influence the affairs of Shield and the Sentinel companies in relation to large capital expenditure decisions and to act with considerable discretion in doing so. His position with Shield gave rise to a relationship of special trust and confidence with both his employer and the Sentinel plaintiffs he was advising through Shield.
It is not every employee whose position attracts fiduciary obligations. However, the circumstances articulated in paragraphs [20] to [22] compel the conclusion that Mr Tomlinson was in a fiduciary relationship with his employer and each of the Sentinel plaintiffs for whom he was acting from time to time in seeking quotations and recommending preferred builders.[6] Mr Tomlinson did not contend otherwise.
[6] See the cases analysed in Metal Manufacturers Limited v GMJ Electrical Projects Pty Ltd & Ors [2019] QDC 62 at paragraphs [212] to [220].
Mr Tomlinson owed the well-known proscriptive duties[7] which bind fiduciaries, being that he owed a duty:
(a)Not to obtain for himself or any third party a benefit from his employment without the fully informed consent of the relevant plaintiffs; and
(b)Not to put himself in a position of conflict between his own interests or those of a third party with whom he was dealing, and his duty to the Sentinel plaintiffs and Shield.
[7] Dal Pont, Equity and Trusts in Australia (7th ed, 2018, Thomson Reuters) at [4.15].
Mr Tomlinson also owed express and implied duties to Shield as an employee. Clause 2.2 of his employment contract imposed duties on Mr Tomlinson to:[8]
(a)Serve Shield Property faithfully and diligently exercising all due care and skill;
(b)Act at all times in Shield Property’s best interests;
(c)Refrain from acting, or being seen to act, in conflict with Shield Property’s best interests;
(d)Use his best endeavours to protect and promote Shield Property’s reputation;
(e)Use his best abilities and knowledge to perform the duties assigned from time to time;
(f)At all times, display a thorough and professional manner, upholding and maintaining Shield Property’s reputation, goodwill and its customer relationships; and
(g)Display the highest ethical and professional standards of service delivery and confidentiality towards Shield Property and its clients.
[8] See paragraph 14(a) to (g) of the Statement of Claim.
Of course, these duties were owed only to Shield, not the Sentinel plaintiffs.
Introduction to the pleaded projects
As I have explained, these proceedings are concerned with eight projects which resulted in contracts with three builders: Bodel, Growth Australia and Verus. In each case, Mr Tomlinson purported to obtain three quotations and recommended the identified builder to be selected. In each case, Mr Tomlinson put forward three quotations, including the quotation given by the successful contractor, as he was required to do. In each case, he admits one or more of the quotations were fabricated or inflated in a way which made the quotation of the successful builder the lowest quotation. The obvious purpose, and his clear intention of doing so in each case, was to secure approval for the successful contractor to carry out the work at the price specified for that contractor in the submission prepared by Mr Tomlinson.
The effect of Mr Tomlinson’s admissions in each case is that he put fabricated quotations to the relevant Sentinel plaintiff, intending to induce, and actually inducing, that plaintiff to enter into the quotation given by the successful builder for a contract price which was not the result of a competitive tender process. These admitted facts give rise to a compelling case that Mr Tomlinson is liable to the relevant plaintiffs for deceit. Further, the admitted facts in relation to the settled claims provide a context against which Mr Tomlinson’s explanations for his conduct can be considered. It is therefore convenient to start by setting out the admitted factual context for each contract challenged in these proceedings and to identify the issues which are in dispute in that regard.
The Verus claim will be considered last, given that it is the only one where there remains a dispute with the builder involved in the project. All the facts recited in this section of the judgment are admitted or were uncontentious at trial, unless I note to the contrary.
The Bodel projects
Bodel
Bodel was a construction company incorporated in January 2017. Mr McIntyre was an employee of Bodel or a related company at the relevant time and was the seventh defendant in the proceedings. The plaintiffs advanced five claims against Bodel and Mr McIntyre arising out of five completed contracts for building work carried out between November 2017 and February 2018. The plaintiffs claimed a total of some $89,000 in damages or equitable compensation from Bodel and Mr McIntyre plus costs. This sum reflected the difference between the contract sum in each case which was put forward by Mr Tomlinson to the relevant plaintiff in his Capex Request Form, and the lowest genuine quotation obtained for the work by Mr Tomlinson. The relevant plaintiff’s claims were settled against each of Bodel and Mr McIntyre. Bodel settled the claims against it for $97,000 and Mr McIntyre settled the claims against him for $18,000. It is useful to present the Bodel claims in chronological order, rather than the order in the pleading. Chronological order assists in understanding Mr Tomlinson’s conduct.
Townsville Property: The F45 Fitout Works (January 2018) [9]
[9] Pleaded from paragraph 93 of the Statement of Claim.
Uncontentious facts
In about November 2017 (being just after Mr Tomlinson began working for Shield), Mr Tomlinson was responsible for obtaining quotes for the fitout of the so-called F45 tenancy at Woodlands Village Shopping Centre in Townsville on behalf of the owner, the fourth plaintiff, Sentinel Countrywide. The work seemingly involved fitting out a gym.
The invitation to tender is not pleaded, nor can I locate it in the exhibits. However, such an invitation was issued with sufficient information to permit the builders invited to tender to produce a quotation for the works. The following quotations were provided:
(a)On 28 November 2017, KRO Panels provided its quotation for $82,360, excluding GST (all figures in this judgment will be exclusive of GST unless otherwise noted);[10]
(b)On 29 November 2017, Hurst Constructions Queensland Pty Ltd (Hurst Constructions) provided its quotation for $72,615, and expressly referred to the supplied documents which had been quoted on;[11] and
(c)On 30 November 2017, Interior Fitouts Pty Ltd (Interior Fitouts) provided its quotation for $112,000 to 120,000.[12]
[10] Exhibit 2 page 1058.
[11] Exhibit 2 page 1060.
[12] Exhibit 2 pages 1065 to 1066.
Mr Tomlinson chased up at least Interior Fitouts for their quote on 27 November 2017.[13] To that extent, he must have had some role in the first round of quotations.
[13] Exhibit 2 page 1057.
The next three quotations were provided well after 30 November, and the Alliance Retail quotation mentioned below refers to the documents as provided by email on 30 November 2017. I infer that Mr Tomlinson, for whatever reason, sought further quotations. The evidence does not disclose whether the documents provided to the second group of tenderers differed from those given to the first group of tenderers. Mr Tomlinson’s defence alleges that there was a second tranche of tenders sought because the “initial quotes…did not incorporate the full scope of the work”.[14]
[14] See paragraph 61(a) of the First, Second and Third Defendants’ Amended Defence filed on 4 April 2019 (First, Second and Third Defendants’ Defence).
The following further quotations were delivered:
(a)On 7 December 2017, Alliance Retail provided its quotation for $83,552, referring to documents which must have been supplied before the date of the quote, being 29 November 2017;[15]
(b)On 10 January 2018,[16] Verus provided a quotation for $83,505. That quotation refers in the text to a different project in this proceeding (The Hub Fitout Works, discussed below) and one might wonder, given Mr Tomlinson’s admitted practice of fabricating quotations, if this is a genuine quotation. Mr Johnson of Verus recalled quoting on this job, amongst others,[17] though it appeared from Mr Tomlinson’s evidence that this quotation was altered or fabricated[18] (however the covering email suggests the contrary). Mr Tomlinson’s admitted practice of fabricating documents makes it difficult to be sure in some cases what is authentic and what is not; and
(c)On 9 January 2018, Bodel (by Mr McIntyre) provided its quotation for $116,972.[19]
[15] Exhibit 2 page 1072.
[16] Exhibit 2 pages 1113 to 1117.
[17] TS4-73.9.
[18] TS3-58.43 to TS3-59.3.
[19] Exhibit 2 page 1086.
Mr Tomlinson admits:
(a)That on or before 9 January 2018, he altered the Interior Fitouts quotation so as to increase it to $135,480,[20] and he altered the Alliance Retail quotation so as to increase it to $131,872.34;[21]
(b)That on 9 January 2018, he submitted a Capex Request Form[22] for the works attaching the genuine Bodel quotation and the inflated quotations from Interior Fitouts and Alliance Retail;
(c)That by the Capex Request Form, he recommended the Bodel quotation be accepted by Sentinel Countrywide; and
(d)That in reliance on his recommendation, Sentinel Countrywide approved the Capex Request Form.
[20] Exhibit 2 page 1063.
[21] Exhibit 2 page 1070. The figure alleged in the statement of claim is higher but is clearly the GST inclusive figure which has been pleaded as the GST exclusive figure by mistake.
[22] Exhibit 2 page 1082.
Although not expressly pleaded, it is not disputed that Sentinel Countrywide then entered into a contract for the works with Bodel on the terms of the Bodel quotation and that the works were carried out. In that regard, it is expressly pleaded and admitted that Sentinel Countrywide paid the amount of the Bodel quotation for the works.
The plaintiffs allege that Mr Tomlinson knew that Sentinel Countrywide would rely on his recommendation in the Capex Request Form and enter into a contract with Bodel. Mr Tomlinson does not admit that, but it is absolutely plain that he would have known those matters. That was the whole purpose of the Capex Request Form process. He accepted as much in evidence on many occasions and in relation to similar situations set out below.
There was no allegation (nor any evidence at trial) that Mr Tomlinson sought or received any personal benefit in relation to this project.
Disputed facts
The plaintiffs allege that:
(a)Mr Tomlinson had no proper basis to inflate the other quotations as he did;
(b)But for his conduct, Sentinel Countrywide would have paid no more than the amount of the lowest quote (given by Hurst Constructions) plus GST (being $79,876); and
(c)Accordingly, Sentinel Countrywide suffered a loss equal to the difference between the amount paid to Bodel and the amount which would have been paid to Hurst Constructions ($48,793.58).
Mr Tomlinson disputes these parts of the case in his defence.
As to the first issue, he denies he had no proper basis to inflate the other quotes because:
(a)The “initial quotes” did not incorporate the full scope of the work required;
(b)Mr Tomlinson altered the initial quote accurately to “indicate the work required”; and
(c)He could not “tender further quotes” due to the discovery of Shield’s lack of a valid builder’s licence.
Mr Tomlinson then pleads a non-admission to the allegation that Sentinel Countrywide could have had the work done by Hurst Constructions for the price quoted by that builder. Technically, therefore, there is no denial that Hurst Constructions could have done the work for the price it quoted (the lowest quote).
The points raised in paragraph [42] above are the enduring themes of Mr Tomlinson’s case: that is, that the scope of work either changed or was misunderstood by the builders whose quotes were increased (by him), and that a proper tender process was unlawful because it comprised project management services which could not be supplied without the relevant licence.
Springwood Property: Lifeline Make Good Works (January 2018)[23]
[23] Pleaded from paragraph 127 of the Statement of Claim.
In about November 2017 (again just after Mr Tomlinson began working for Shield), Mr Tomlinson was responsible for obtaining quotes for work on a Lifeline tenancy at a commercial property in Springwood on behalf of the owner, the first plaintiff (Sentinel Springwood).
The invitation to tender is not pleaded, nor can I locate it in the exhibits. However, such an invitation was plainly issued with sufficient information to permit the builders invited to tender a quotation for the works. It is evident from the 23 November Bodel quotation (see below) that Mr Tomlinson provided the tender documents to Bodel by email, and it is likely (and I infer) that Goodview Construction also received those documents from Mr Tomlinson. The following quotations were provided:
(a)On about 19 November 2017, Goodview Construction provided its quotation for $33,150; and
(b)On about 23 November 2017, Bodel provided its quotation for $29,437.[24]
[24] Exhibit 2 pages 1019 to 1022.
At some stage thereafter, but before 11 January 2018, Mr Tomlinson admits that he:
(a)Altered the Goodview Construction quotation to increase it to $48,565;[25] and
(b)Altered the Bodel quotation to increase it to $39,437 (the increased Bodel quotation).
[25] Exhibit 2 page 1012.
The plaintiffs also allege that before 11 January 2017, Mr Tomlinson altered a quotation provided by another company (J & P Construction quotation) in respect of a different project (Queensland Dance Centre tenancy) so as to make it appear to be a quote for the Lifeline Make Good Works for $41,280.
Strangely, Mr Tomlinson denies that allegation because he says that he altered the quote to reflect the actions of Mr Ebert in directing that Lifeline, not the Queensland Dance Centre, take the tenancy. It is correct that J & P Construction quoted on a completely different scope of work for the Dance Centre. There is no suggestion that J & P Construction had anything to do with the revised quotation, and the document does not look much like the authentic Dance Centre quotation. And Mr Tomlinson concedes that he altered the quotation. I cannot understand the relevance of the reason given for the denial. I find that no quotation was ever given by J & P Construction at the price and for the work contained in the J & P Construction quotation.
Mr Tomlinson also admits:
(a)That on 11 January 2018, he submitted a Capex Request Form[26] for the works attaching the increased Bodel quotation and the two fabricated inflated quotations from J & P Construction and Goodview Construction;
(b)That by the Capex Request Form, he recommended the increased Bodel quotation for the Lifeline Make Good Works be accepted by Sentinel Springwood;
(c)That in reliance on his recommendation, Sentinel Springwood approved the Capex Request Form; and
(d)That he knew that Sentinel Springwood would rely on his recommendation.
[26] Exhibit 2 page 1032.
Although not expressly pleaded, Mr Tomlinson did not dispute that Sentinel Springwood then entered into a contract for the works with Bodel on the terms of the increased Bodel quotation and that the works were carried out for that price. Consistent with that, it is expressly admitted that Sentinel Springwood paid the amount of the increased Bodel quotation for the works.
Disputed facts
The plaintiffs allege that:
(a)Mr Tomlinson had no proper basis to increase the Bodel quotation or fabricate the others; and
(b)But for his conduct, Sentinel Springwood would have paid no more than the amount of the original Bodel lowest quote (being $29,437), and accordingly, Sentinel Springwood suffered a loss equal to the difference between that amount and the amount of the inflated Bodel quotation (being $10,000).
Mr Tomlinson disputes these parts of the case in his defence.
As to the first issue, he denies he had no proper basis to inflate the other quotes because “the lack of valid licenses held by Sentinel Springwood, required the altering of the invoices to satisfy Sentinel Springwood’s internal processes.”[27]
[27] See paragraph 88 of the First, Second and Third Defendants’ Defence.
As to the second issue, Mr Tomlinson alleges that the work could not and would not have been done for the original Bodel quote because the revised quotation was “necessary to include the full scope of the work…omitted from the initial quote”.[28] The omitted works alleged were night works and costs to obtain a certificate of occupancy.[29]
[28] See paragraphs 91(b), 93 and 96 of the First, Second and Third Defendants’ Defence.
[29] See paragraphs 95(a) and 96 of the First, Second and Third Defendants’ Defence.
These allegations articulate again, in a different way, the enduring twin themes in Mr Tomlinson’s case.
Mackay Property: ‘The Hub’ Fitout Works (February 2018) [30]
Uncontentious facts
[30] Pleaded from paragraph 114 of the Statement of Claim.
In about February 2018, Mr Tomlinson was responsible for obtaining quotations for the fitout of a dance studio in commercial premises in Mackay owned by the second plaintiff (BCC Mackay) called “The Hub”.
On 5 February 2018 at 12:49pm, Mr McIntyre of Bodel sent an email to Mr Tomlinson offering to undertake The Hub Fitout Works for $115,117.40.[31] After receiving the quotation, Mr Tomlinson immediately created a document which purported to comprise a quotation from Bodel with an increased quotation to $126,560 (the increased Bodel quotation). He then sent that document by email to Mr McIntyre at 1:23pm.[32] Fourteen minutes later, Mr McIntyre sent the increased quotation to Mr Tomlinson with a covering email saying “please see attached our offering”.[33]
[31] Exhibit 2 page 917.
[32] Exhibit 2 page 930.
[33] Exhibit 2 page 936.
At about the same time as he sent the increased quotation, he fabricated two other competing quotations for The Hub Fitout Works purportedly from Verus ($135,455) and Alliance Retail ($133,662). Metadata from Mr Tomlinson’s computer confirms the timing of the creation of these documents.[34]
[34] Exhibit 2 pages 978 to 988.
On the same day, 5 February, Mr Tomlinson submitted a Capex Request Form for The Hub Fitout Works,[35] attaching the increased Bodel quotation and the two fabricated quotations from Verus and Alliance Retail, and recommended that BCC Mackay accept the increased Bodel quotation and engage Bodel to do the works.
[35] The facts are admitted, but the Capex Request Form for this project could not be located in Exhibit 2.
BCC Mackay then entered into a contract for the works with Bodel on the terms of the increased Bodel quotation, the works were carried out and it was admitted that BCC Mackay paid the contract sum.
On this occasion, Mr Tomlinson admits that he knew that BCC Mackay would rely on his recommendation in the Capex Request Form and contract with Bodel on the terms of the increased Bodel quotation.
There was no allegation (nor any evidence at trial) that Mr Tomlinson sought or received any personal benefit in relation to this project.
Disputed facts
The plaintiffs allege that:
(a)Mr Tomlinson had no proper basis to inflate the Bodel quotation or alter the Verus and Alliance Retail quotations;
(b)But for his conduct, BCC Mackay would have either engaged Verus or Alliance Retail to do the works at “a lower price” or engaged Bodel for the amount of the first quotation; and
(c)Accordingly, Sentinel Countrywide suffered a loss equal to the difference between the amount of the increased Bodel quotation and the original quotation ($11,442.60).
Mr Tomlinson disputes these parts of the case in his defence.
As to the first issue, he denies he had no proper basis to act as he did because:
(a)It was proper to do so because “it was done to allow compliance with Section 42 of the QBCC Act concerning building standards and Queensland Fire Services”;[36] and
(b)The price from Bodel was justified as a Guaranteed Maximum Price contract.[37]
[36] See paragraphs 76(a) and 79 of the First, Second and Third Defendants’ Defence.
[37] See paragraph 78 of the First, Second and Third Defendants’ Defence.
Oddly, he then pleads a non-admission to the allegation that, but for his conduct, BCC Mackay could have carried out The Hub Fitout Works for the price of the original Bodel quotation.
Creek Street Property Tenancy Works (February 2018)[38]
[38] From paragraph 138 of the Statement of Claim.
Uncontentious facts
In about February 2018, Mr Tomlinson was responsible for obtaining quotes to split a tenancy in a commercial property at 200 Creek Street, Brisbane (the Creek Street Works) owned by the fifth plaintiff (Sentinel Regional).
On 7 February 2018, Mr Tomlinson sent an email to Bodel summarising the scope of work for the Creek Street Works and referring to a link to a drop box.[39] On 9 February 2018, Mr McIntyre of Bodel sent an email to Mr Tomlinson attaching a quote to carry out the Creek Street Works for $28,131.70.[40] By 12 February 2018, Mr Tomlinson had:
(a)Increased the Bodel quotation by $10,000 to $38,131.70;
(b)Altered a quotation by Verus in relation to The Hub Fitout Works to make it appear as if it was a quote for the Creek Street Works for $43,010[41] (this fabrication fails to make any effort to link it to the Creek Street Works, as it refers to The Hub Fitout Works. It would not have passed even minimal scrutiny); and
(c)Altered a quotation by Alliance Retail in relation to another project to make it appear as if it was a quote for the Creek Street Works for $43,552.[42]
[39] Exhibit 2 page 990.
[40] Exhibit 2 pages 991 to 995.
[41] Exhibit 2 page 1001.
[42] Exhibit 2 page 1011. The denial of this allegation at paragraph 95(c) amounts in substance to an admission of this fact.
On the same day, 12 February 2018, Mr Tomlinson submitted a Capex Request Form for the Creek Street Works, attaching the increased Bodel quotation and the two fabricated quotations from Verus and Alliance Retail, and recommended that Sentinel Regional accept the increased Bodel quotation and engage Bodel to do the works.[43]
[43] Exhibit 2 page 996.
Sentinel Regional then entered a contract for the works with Bodel on the terms of the increased Bodel quotation, the works were carried out and the contract sum paid. Mr Tomlinson admits that he knew that Sentinel Regional would rely on his recommendation.
Disputed facts
The plaintiffs allege that:
(a)Mr Tomlinson had no proper basis to inflate the Bodel quotation or alter the Verus and Alliance Retail quotations;
(b)But for his conduct, Sentinel Regional would have either engaged Verus or Alliance Retail to do the works at “a lower price” or engaged Bodel for the amount of the first quotation; and
(c)Accordingly, Sentinel Regional suffered a loss equal to the difference between the amount of the increased Bodel quotation and the original quotation ($11,442.60).
As with previous projects, Mr Tomlinson disputes these parts of the case in his defence. As to the first issue, he denies he had no proper basis to act as he did because:
(a)It was proper to increase the Bodel quotation because the original quotation “did not contain the full scope of work and required altering to ensure accuracy”;[44]
(b)It was proper to fabricate the other quotes because “the lack of valid licenses held by the plaintiff” (presumably Shield) meant that “‘fabricated’ invoices” had to be used to prevent “the plaintiffs breaching Section 42 of the QBCC Act”.[45]
[44] See paragraph 96(a) of the First, Second and Third Defendants’ Defence.
[45] See paragraph 96(b) of the First, Second and Third Defendants’ Defence.
He also disputes that Sentinel Regional could have carried out the works for the original Bodel quotation price “because the initial quote did not account for the full scope of the work required”.[46]
Springwood Property Air Conditioning Works (March 2018)[47]
[46] See paragraph 98(b) of the First, Second and Third Defendants’ Defence.
[47] From paragraph 102 of the Statement of Claim.
Uncontentious facts
In about mid-February 2018,[48] Mr Tomlinson was responsible for obtaining quotes to install air conditioning in a Lifeline tenancy located in the Springwood Property owned by Sentinel Springwood (the AC Works). This work appears to be related to the Lifeline Make Good Works above.
[48] See the dates of the documents created for this project.
On 28 February 2018, Bodel obtained a quote for the works from a separate AC contractor (E & S) and provided it to Mr Tomlinson. It quoted two prices for two separate alternatives to complete the works: $27,700 (for one large unit) and $24,400 (for three smaller units). There is no reason to question the authenticity of that quotation.[49]
[49] Exhibit 2 page 1048.
On 1 March 2018, Mr McIntyre of Bodel sent a quotation to carry out the AC Works for $31,855 and $27,600 respectively.[50]
[50] Exhibit 2 page 1049.
Also on 1 March 2018:
(a)Mr Tomlinson altered the E & S quotation to increase the amounts to $37,348 and $33,256 respectively;[51]
(b)Mr Tomlinson altered the Bodel quote for the Queensland Dance Centre so as to make it appear to be a quotation from Bodel for the AC Works, and increased Bodel’s AC quote to $36,855 and 32,600.[52]
[51] Exhibit 2 page 1041.
[52] Exhibit 2 pages 1045 to 1046.
On the same day, Mr Tomlinson submitted a Capex Request Form[53] for the works attaching the increased Bodel quotation and the altered quotation from E & S, and recommended that Sentinel Springwood accept the Bodel quotation and engage Bodel to do the works.
[53] Exhibit 2 page 1042.
Sentinel Springwood then entered into a contract for the works (at the higher optional price as recommended in the Capex Request Form) with Bodel on the terms of the increased Bodel quotation in reliance on the recommendation in the Capex Request Form, the works were carried out and the contract sum paid.
Disputed facts
The plaintiffs allege that:
(a)Mr Tomlinson had no proper basis to inflate the Bodel quotation or alter the E & S quotations;
(b)But for his conduct, Sentinel Springwood would have engaged E & S to do the works at the amount of their genuine quotation; and
(c)Accordingly, it suffered a loss equal to the difference between the amount of the increased Bodel quotation and the genuine E & S quotation ($9,155).
As with previous projects, Mr Tomlinson disputes these parts of the case in his defence. The only allegation made is that “the scope of work under the quote referred to, was insufficient for the completion of the Air Conditioning Works”.[54] The defence does not identify which of the two quotes in paragraph 106 of the statement of claim it refers to. Both original quotes are referred to in that paragraph. It seems his allegation is that neither figure was based on the correct scope.
[54] See paragraph 67 of the First, Second and Third Defendants’ Defence responding to paragraph 106 of the Statement of Claim.
Observations about the Bodel projects
The Bodel projects are of interest because they cover the period from when Mr Tomlinson first commenced work with Shield. I observe the following.
First, almost from the start of Mr Tomlinson’s work, he was fabricating and altering quotations. The first time he did so, on the evidence before the Court, was 9 January 2018.
Second, he explains his conduct in part on the basis that it was to avoid a breach of s. 42(1) QBCC Act by going to tender (which he interpreted as seeking more than one quotation for a scope of work). Although it is hard to be certain of exactly what documents he fabricated or altered, it appears likely that he did not seek more than one quote himself. The F45 Fitout Works and the Lifeline Make Good Works are an exception, but most of the quotes appear to have been sought before Mr Tomlinson was in control of the tender process for Shield. He also seems to have been a little inconsistent in the first two projects, approaching Verus on at least one occasion. But from mid-January 2018, he did not seek more than one quote.
Third, he admits all the fabrications, alterations and increases of quotations alleged against him. He also effectively admits (as I find) that each time he used those documents to present the Bodel quote as the lowest quote of three (or two in the case of the Springwood AC Works) in a Capex Request Form, that the relevant plaintiff relied upon that recommendation, entered into a contract on those terms and completed it, and that he knew that would occur.
Fourth, his pleaded defences, relating to the change of scope and the need to behave as he did to ensure no breaches of s. 42 QBCC, were not particularised or explained at all, or if they were, only the barest explanations were given.
The Growth Australia projects
Uncontentious facts
There were two related projects involving Growth Australia. They are conveniently dealt with together, as both involved replacing cladding on commercial buildings owned by Sentinel Regional. One property was located at Argyle Street, Newcastle (Argyle Street) and the other at Woods Street, Darwin (called Jacana House). Mr Tomlinson admits he was responsible for obtaining quotes for this work in April 2018. Mr Tomlinson’s statement, tendered as his evidence in chief at trial (the Statement), states:
(a)The projects began life early in Mr Tomlinson’s tenure, in about December 2017;
(b)There were three buildings which required replacement of external cladding – Argyle Street, Jacana House and another property at 153 Campbell Street, which he called Citilink, also owned by Sentinel Regional;
(c)That it was decided to tender all three buildings in one package and that “the scopes [were] sent out to four separate cladding companies in December 2017”;[55] and
(d)The only quote received was from Architectural Cladding Solutions Pty Ltd (ACLAD).
[55] Paragraph 51 of the s. 92 Statement (Exhibit 10).
There is no reason to reject this evidence. However, the Statement is ambiguous as to when the ACLAD quotation was received. The supporting documents tendered by Mr Tomlinson show that preparation work by consultant engineers was not completed for Argyle Street and Jacana House until 28 February 2018. There is no evidence of any quotation being received from ACLAD until 9 April 2018.
The other matter relating to the period before April 2018 covered in Mr Tomlinson’s evidence is more contentious. Mr Tomlinson said that the cladding works required other subcontractors to complete some work, and that accordingly, a builder with an open licence was required. He stated that he initially had discussions with Mr Neil Wright of ACLAD in January 2018 and that Mr Wright told him that ACLAD did not hold a builder’s licence at that time.
Of these matters, it seems uncontentious that an open licence was required to complete the whole of the work, and that as at January 2018, ACLAD did not hold such a licence. However, whether Mr Tomlinson was told that in January 2018 by Mr Wright and in what terms, and whether he continued to believe that, are highly contentious. Those issues are central to his defence to the plaintiffs’ case on the Growth Australia projects. I will deal with that further when discussing the disputed aspects of this matter.
On 6 April 2018, Mr Tomlinson sent an email to Mr Wright, seeking a quotation from ACLAD for all three cladding projects with a short narrative of the scope in each case and a detailed document in a drop box link.
The 6 April 2018 email:
(a)Made no mention of any other contractor being engaged to do the overall works;
(b)Made no mention of Mr Tomlinson’s view that ACLAD could not do the whole of the works because it was unlicensed; and
(c)Invited Mr Wright to provide the pricing to him by 13 April 2018.
On 9 April 2018 at 1:02am, Mr Wright of ACLAD sent an email to Mr Tomlinson attaching:[56]
(a)A quotation to carry out the Argyle Street cladding for $466,900;
(b)A quotation to carry out the Jacana House cladding for $521,700; and
(c)A quotation to carry out the Citilink cladding for $628,600.
[56] Exhibit 2 pages 1171 to 1188.
The 9 April 2018 email from Mr Wright stated:[57]
Good morning Neil,
Thank you giving Aclad the opportunity to assess you requirements for your buildings in Brisbane, Newcastle & Darwin.
Please find the submissions for each building attached as requested.
If you have any questions or you require further information, please feel free to call us on 07 3390 6299.
Neil, Aclad very much look forward to working with you and the team at Sentinel.
Have a great day & we look forward to a positive response shortly.
Kind Regards,
Neil Wright[57] Exhibit 2 page 1196.
The quotations were materially in the same form, varying only by reference to the particulars of each project. It is convenient to observe that each relevantly provided:
(a)The following relevant text:[58]
[58] See, for example, Exhibit 2 pages 1172 to 1173.
Summary: To work with Neil Tomlinson of Sentinel Portfolio Management in achieving the complete removal of all P.E (Poly Ethylene) cladding, with minimal to no disruption of tenants in the [relevant building]. Alcad has in place an Open Builders License to be able to work directly with the property owners. (One contract only)
…
Payment Terms:
· 15% deposit/site establishment fee on placement of order
· Progress claims submitted fortnightly & payable fortnightly
· M2 over the quoted amount will be charged as a variation to the contract.
Neil, once Aclad receive a letter of intent, we will begin immediately to save delays by ordering the custom replacement material…
[underlining added]
(b)It then included a detailed set of “Site Specific Allowances” which appear to cover the whole of the preparation and administration of the cladding works.[59] That list included, expressly, project management and contract administration (noting Mr Tomlinson’s case that he believed from the start of his employment that such services cannot be provided unlicensed).
[59] See, for example, Exhibit 2 page 1174.
On 9 April 2018 at 5:13pm, Mr Tomlinson sent an email to Mr Tim Russell of Growth Australia attaching each of ACLAD’s quotations for the three cladding projects. That email stated:[60]
Hey Tim
First quotes back for the cladding works, including all height access, pedestrian and traffic management sit at $1,617,200.00 + GST
What would you be looking at as a construction management fee for this?
There are also going to be around $5,000.00 of works at Jacana House to swap the lights in the awning for alternatives, apply rubber seals to the bottom edge of street facing ground floor tenancy entrances and replace the tenant directory in the lobby.
Regards
Neil Tomlinson[60] Exhibit 2 page 1195.
On 20 April 2018, Mr Gilmour sent Mr Tomlinson an email which provided:[61]
Hi Neil,
Growth Australia are delighted to submit our tender for the cladding replacement works to the Citilink Building, Newcastle Site and Jacana House (including the minor works).
We have included a program of works that allows for site measures and logistics, lead times and build program, these have been advised as worst case scenario, so we hope we can improve on these once engaged. We have programmed the works to commence with the Citilink building first, followed by the Newcastle building and finishing with Jacana House, we are flexible with this, should we need to change this sequence, each site requires a maximum 12 week build period.
We can confirm our availability to meet in person to discuss our offer, and look forward to your further consideration.
Kind regards
Ian
[61] Exhibit 2 page 1238.
The attached Growth Australia tender stated under the heading “Project Specific Overview”:[62]
[62] Exhibit 2 page 1241.
Dear Neil,
Growth Australia have great pleasure in submitting our lump sum price to manage the cladding removal and new installation of Alucobond Plus 4mm aluminium composite panels to the Citilink Building, Campbell Street, Sentinel Asset in Argyle Street Newcastle and Jacana House, Darwin.
Working closely with our preferred contractors we have programmed the sites to run sequentially commencing with the Citilink building, then Newcastle and finally Darwin, we have confirmed the same delivery team for all 3 projects ensuring consistency and competitive pricing based on the quantum of works.
If our tender is successful we would like to arrange a kick off meeting and commence our site measure, we will then require 3-4 weeks to work through the construction & access methodology. Once this has been signed off, we have confirmed a 12 week lead time for materials which will be ordered immediately from receiving a signed contract and have allowed a 12 week building program. Please note our price also includes for the minor internal works at Jacana House as requested.
Value of Growth works:
Total ex GST $2,036,640
Gst $203,664Total Inc GST $2,240,304
We thank you for the opportunity to submit a price, and can confirm our availability to meet with you to discuss our offer in person.
Kind Regards
Ian Gilmour
Growth Commercial Director
The text under the heading “Site Specific Scope & Allowances” largely copied the equivalent details from the ACLAD quotations.[63]
[63] For “Scope Allowances” and “Site Specific Allowances” cf Exhibit 2 pages 1242 to 1243 and 1172 to 1174.
The Budget Summary breakdown demonstrates that the ACLAD quotation for Citilink was increased by a relatively small amount ($20,000), but the increase for the ACLAD quotations for Argyle Street and Jacana House was 30% and 50% respectively. There is no mention of ACLAD in the Growth Australia quotation.
Even if the legal costs incurred in recovering from Bodel/Mr McIntyre had been pleaded, a further difficulty would arise: whether the costs incurred were reasonably incurred in recovering the settlement sum. The evidence did not address that question in any detail. That is not to say the amounts were not reasonable, just that they were not proved to be so.
No other basis was advanced to sustain the proposition that the plaintiffs could allocate the settlement sum under the Bodel Deed, first to costs incurred in the proceedings against Bodel and Mr McIntyre, and then to the damages claims.
It occurred to me that one way which might have been open to advance such a claim was to argue that the litigation against Bodel/Mr McIntyre produced a fund to be set against the co-incident liability of Mr Tomlinson and Bodel/Mr McIntyre for damages for the claims in deceit and conspiracy, and that the plaintiffs had a charge over the fund for the costs of creating it. The authorities recognise the equitable principle that the reasonable costs of realisation of a fund may take priority over the claims of persons with a prior interest in that fund: the so-called “salvage principle”.[191] A convenient summary of the leading cases appears in Richardson v Aileen Pty Ltd [2007] VSC 104 at paragraphs 37 to 45. More recently, the principle was considered and applied in Coad v Wellness Pursuit Pty Ltd (2009) 71 ACSR at paragraph 71 and IMF (Australia) Ltd v Meadow Springs Fairway Resort Ltd (2009) 69 ACSR 507 at paragraph 63. The principle can apply in novel situations. However, this is neither pleaded nor contended for.
[191] See Shirlaw v Taylor (1991) 102 ALR 551 at 560.3.
How then should the settlement sum be dealt with? It seems to me that it must be allocated to the damages sought against Mr Tomlinson for deceit. I reach that view because:
(a)The settlement sum was paid at least in part on account of the same loss as is claimed in the deceit causes of action against Mr Tomlinson; and
(b)That is the only loss which has been established against Mr Tomlinson in respect of the Bodel projects.
I suspect that there is much more to this subject than has been explored in this judgment. However, on the submissions put to me, I find that the plaintiffs have recovered the whole of the loss claim against Mr Tomlinson in respect of the Bodel projects, and accordingly, the claim in deceit must be dismissed. Further, I can see no basis why equitable compensation would produce a different result in these circumstances. That claim must also be dismissed.
The Dubbo Works
Sentinel Countrywide claims damages for deceit and conspiracy of $46,021.87, alleged to be the difference between the amount paid for the Dubbo Works and the amount which would have been paid but for Mr Tomlinson’s deceit. That amount seems to be calculated as follows. Sentinel Countrywide paid the deposit claim of $98,377.84 (excluding GST) referred to in paragraph [159] above. The Original Quote was $56,539.77, with no reference to GST. The assumption upon which the damages figure is calculated is that the Original Quote was GST inclusive. While that is the presumption where no reference to GST is made, it seems more probable than not that that figure was supposed to be excluding GST. That is the basis upon which all discussions appeared to be conducted at the time and I consider it very likely that would have been insisted upon by Mr Johnson before he undertook the work. On that basis, the loss suffered is $41,838.
The next question is one of causation. If Mr Tomlinson had not encouraged Mr Johnson to review his price, would Verus have done the work for the price in the Original Quote? In my view, it would have done so. Mr Johnson was very keen to undertake the Dubbo Works and was willing to take a risk on the project to build his standing with Mr Tomlinson and the Sentinel Group.[192] Further, the quoted price had been worked out with some care – it was not a figure plucked at random and the actual cost of the works was generally consistent with the figures assumed in the Original Quote.
[192] See paragraphs [274] to [277] above.
Sentinel Countrywide is entitled to judgment in its claim for deceit against Mr Tomlinson for $41,838, and against Verus and Mr Tomlinson in the tort of conspiracy for the same amount.
In addition, it seems to me that, in the absence of the contract with Verus being set aside in equity, Sentinel Countrywide would also be entitled to damages in the amount of any sum owed under the contract over and above the amount in the Original Quote. That was not contended for by Sentinel Countrywide and it is unnecessary to decide the matter given that the contract with Verus is to be set aside, as will be explained next.
Verus counterclaims seeking payment of the balance of the sum due under the contract between Sentinel Countrywide and Verus. However, that contract was entered into because of a fraudulent breach of trust by Mr Tomlinson which was assisted with knowledge by Verus. Such a contract is voidable in equity and has been avoided by Sentinel Countrywide, by the terms of the answer to the counterclaim if in no other way. I therefore order that the contract be set aside in equity.[193] Rescission as a remedy in an executed contract depends on the ability to give practical counter-restitution. However, that principle is given effect by Sentinel Countrywide allowing Verus a credit for the value of the work done in the amount of the Original Quote.
The counterclaims
[193] Paragraph 24.15 of the Plaintiffs’ Closing Submissions.
The effect of the setting aside of the contract between Verus and Sentinel Countrywide is that the counterclaim for sums due under that contract must be dismissed.
That leaves the claim of Verus for the value of the scaffolding. Verus contends that, on its proper construction, the contract provided for title to the scaffolding to pass to Verus. The contract arose from acceptance of the quotation by a purchase order. There is no express language which casts any light on the matter. Verus therefore must establish that the objective circumstances sustain the conclusion that the intention of the parties was that title to the scaffolding remain with it.
I do not accept that Verus has done so. Verus appeared to rely on two matters:
(a)That Verus was instructed by Mr Tomlinson to buy the scaffolding equipment rather than hire it; and
(b)That Verus in fact did so and paid for the equipment.
It is true, as Verus contended, that it is not unusual for a contractor to take away from site equipment provided for use on the site. However, if Verus was to buy and retain the scaffolding, then one would expect that it would acquire the equipment from its own funds and then charge Sentinel for its use. However, the opposite occurred: although Verus bought the scaffolding, it was paid the purchase price by Sentinel as an express component of the contract price. Verus’ argument is that it should keep the scaffolding which was, in substance, paid for by Sentinel. That is a very unlikely intention for commercial parties. The counterclaim to recover the scaffolding is rejected.
The alleged compromise
By his defence, Mr Tomlinson pleaded that Mr Ebert compromised all the plaintiffs claims at a meeting on 22 January 2019. Mr Tomlinson made no submissions about that matter in his final submissions nor did he give any evidence on the matter. It was unclear to me whether he pressed that contention. However, the onus was on Mr Tomlinson to prove his allegations of compromise and he did not attempt to do so. To the extent it matters, the alleged conversation in his defence, even if accurate, does not demonstrate a certain comprise of the plaintiffs’ claims which was objectively intended immediately to bind the plaintiffs.
THE CLAIMS BY SHIELD
Shield Property seeks damages from Mr Tomlinson for breach of his employment contract. It can scarcely be doubted that his conduct in relation to each project was a breach of that contract. The issue which arises is what consequence flows from those breaches.
Shield’s case is articulated in paragraphs 161 to 163 of the statement of claim as follows:
161Each of the losses pleaded in paragraphs 40, 43, 84(g), 87, 152 and 155 (the Sentinel Losses) arose out of the fraud or dishonesty of Shield through its employee Mr Tomlinson.
162By reason of the matters pleaded in paragraphs 16 to 18 and 161 above, Shield Property has accepted liability for the Sentinel Losses.
163By reason of the matters pleaded in paragraphs 16 to 18, 37, 82, 149, 161 and 162 above:
(a) Shield Property has incurred a loss of at least $139,382.95, to be particularised after the completion of disclosure and other interlocutory steps; and
(b) Mr Tomlinson is liable to pay damages for breach of his Employment Contract in the amount of at least $139,382.95, to be particularised after the completion of disclosure and other interlocutory steps.
Paragraphs 16 to 18 of the statement of claim plead the indemnity to which I have already referred.
The effect of the pleading is that Shield alleges it is obliged by the indemnity to indemnify the respective Sentinel plaintiffs and that, for that reason, Shield has “accepted liability for the” losses pleaded.
The first point to note is that the effect of this judgment is that the only Sentinel plaintiff which will obtain judgment for a loss is Sentinel Countrywide for $41,838. The judgment in favour of Sentinel Regional is not to make good a loss, but to strip a profit, and is not pleaded to be, and does not, fall within the scope of the indemnity.
The next point to note is that Shield does not plead any demand by Sentinel Regional, nor any other Sentinel plaintiff, made on the indemnity. Further, there is no evidence that they have sought indemnity from Shield, nor any evidence that they ever will. And it is to be doubted that such a claim could not be defended now that the Sentinel plaintiffs have permitted this matter to run to judgment without seeking to recover on the indemnity. Such a claim might credibly be now met with an Anshun defence. If one adds the fact that Sentinel Regional has obtained a judgment against Mr Tomlinson and Verus, I am not persuaded that Shield has in fact suffered loss by its indemnity, nor that it ever will.
It might have been possible to make a declaration of some kind in respect of any future liability asserted against Shield, but no such order was sought, and such relief might encounter difficulties in its formulation.
Ultimately, I am not persuaded that Shield is entitled to the relief sought in the statement of claim against Mr Tomlinson.
Finally, I should briefly mention Mr Tomlinson’s contention that his employment contract is affected by illegality. Mr Tomlinson relied on his argument that Shield was acting unlawfully in providing project management services without a licence to argue that his employment contract was void. The law of illegality, as it impacts on the validity and enforceability of contracts, is not straightforward.[194] It can be accepted that a contract by which a person undertakes to carry out construction work without a licence is unenforceable at the suit of the unlicensed person. However, that does not address the position of a contract of employment by the unlicensed person.
[194] See J.W. Carter, Contract Law in Australia (6th ed, 2013, LexisNexis Butterworths) at [25-02] and [27-01].
Mr Tomlinson’s submissions did not, unsurprisingly, contain any analysis of the specific impact of the broad issue of unlicensed work on the specific rights and obligations under his contract of employment. It is unnecessary to embark on that analysis here. However, that issue might play out if fully analysed, it provided no answer to his liability to the Sentinel plaintiffs. And it was unnecessary to deal with it in respect of Shield’s claims against him because those have been dismissed.
WINDING UP
Steven Naidenov of Aston Chace Group was appointed liquidator of Verus by order of the Supreme Court of Victoria on 9 June 2021. An originating application was filed by Sentinel Countrywide in the Supreme Court of Queensland seeking orders pursuant to s. 471B(a) of the Corporations Act 2001 (Cth). By order of Martin J on 14 July 2021, leave was granted to Sentinel Countrywide to proceed with its proceeding against the respondent, such leave being limited to permitting the applicant:
(a)to appear in Court to receive judgment when delivered;
(b)to apply for any order for costs of those proceedings;
(c)to draw up and file any judgment given or order made in favour of the applicant in those proceedings (and to ask for same to be filed);
(d)otherwise to perfect any such judgment or order; and
(e)to obtain and serve on the respondent a certified duplicate of any such judgment or order.
CONCLUSION
The result of these reasons is that:
(a)Judgment should be entered against Mr Tomlinson and Verus in favour of Sentinel Countrywide in the amount of $41,838;
(b)Judgment should be entered against Mr Tomlinson in favour of Sentinel Regional in the amount of $40,613;
(c)The claims of the plaintiffs should otherwise be dismissed; and
(d)The counterclaims of Verus should be dismissed.
I will hear the parties as to interest and costs and any residual matters not covered by the above orders.