Wigginton Holdings Pty Ltd v RM and JA Consultants Pty Ltd
[2005] QDC 365
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- Unreported Judgment
- Wigginton Holdings Pty Ltd v RM and JA Consultants Pty Ltd[2005] QDC 365
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Wigginton Holdings Pty Ltd v RM and JA Consultants Pty Ltd[2005] QDC 365
Wigginton Holdings Pty Ltd v RM and JA Consultants Pty Ltd[2005] QDC 365
DISTRICT COURT OF QUEENSLAND
CITATION: | Wigginton Holdings Pty Ltd & Anor v. RM and JA Consultants Pty Ltd & Anor [2005] QDC 365 |
PARTIES: | WIGGINTON HOLDINGS PTY LTD ACN 103 161 486 and KONSCHEL PTY LTD ACN 103 161 753 Plaintiffs AND R.M. and J.A. CONSULTANTS PTY LTD First Defendant AND RODNEY MERVYN PORTER Second Defendant AND R.M. and J.A. CONSULTANTS PTY LTD Plaintiff by Counterclaim AND WIGGINTON HOLDINGS PTY LTD ACN 103 161 486 First Defendant by Counterclaim AND KONSCHEL PTY LTD ACN 103 161 753 Second Defendant by Counterclaim AND MIKE WIGGINTON Third Defendant by Counterclaim AND STUART KONSCHEL Fourth Defendant by Counterclaim |
FILE NO/S: | D1918 of 2003 |
DIVISION: | Civil |
PROCEEDING: |
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ORIGINATING COURT: | District Court, Brisbane |
DELIVERED ON: | 21 October 2005 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 16, 17 and 18 February 2005 |
JUDGE: | Nase DCJ |
ORDER: | Judgment on the claim:
Judgment on the Counterclaim:
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CATCHWORDS: |
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COUNSEL: | Mr A Collins for the plaintiffs Mr J Sweeney for the first and second defendants |
SOLICITORS: | Craig Ray & Associates for the plaintiffs Paul Everingham & Co for the first and second defendants |
Introduction
- [1]After arriving from England in July 2002, Mr Mike Wigginton began looking for a business to purchase. On 28 November 2002, he made a written offer to purchase the Brisbane Mirror Company (“BMC”). The offer was accepted by Mr Rodney Porter and his wife Mrs Judith Porter. The contract was subject to due diligence investigations by Wigginton and by entry into a business contract approved by the parties. The proposed date of settlement was 1 February 2003.
- [2]Wigginton subsequently agreed with a boyhood friend, a Mr Stuart Konschel, that they would jointly acquire and operate BMC. Wigginton spent about three days at the business in December 2002 undertaking due diligence under the guidance of his accountant. The business contract was ultimately signed on 16 December 2002. The Plaintiff companies had by then been brought into existence to acquire the business.
- [3]A number of terms of the business contract are relevant to the events which followed. Firstly, the date of settlement was 31 January 2003. Secondly, although the business was sold as an ongoing concern, it was not sold on a “walk in, walk out” basis[1]. Thirdly, the contract provided for a period of 40 days vendor’s tuition after settlement. This was a necessary term for the purchasers, as neither Wigginton nor Konschel had knowledge of the glass and aluminium fabrication business.
- [4]Some months after settlement a dispute arose over a contract the old business[2] had entered with Forrester Kurts Construction Pty Ltd (“FKP”) to provide glass windows and doors at the Macarthur Chambers development[3]. Because the purchase of BMC was not on a “walk in, walk out” basis, the Macarthur Chambers contract did not pass to the new business at settlement. In the dispute which subsequently arose between the purchasers and the vendor, the purchasers claimed they had been induced to complete the Macarthur Chambers contract on a misrepresentation that funds in the order of $150,000 remained available to be claimed for completion of the Macarthur Chambers contract.
- [5]Wigginton and Konschel claim that on 12 May 2003, the dispute was compromised by an agreement that the First Defendant (the Defendant company) and Porter would pay compensation of $50,000, and the Defendant company would forgive debts owed to it amounting to $22,148 in exchange for the Plaintiff companies abandoning recourse to legal action over the claimed misrepresentation.
- [6]Porter denies any relevant misrepresentation as to the funds available for the completion of the Macarthur Chambers contract, and he denies a compromise was reached on 12 May 2003. Moreover, the Defendant company counterclaims for the $22,148 which, in the absence of the compromise is owed to it, and for certain other payments it says it is owed by the Plaintiff companies. At the heart of the action, therefore, is an issue of credit between Wigginton and Konschel on one side and Porter on the other.
The main issues
- [7]The main issues are largely factual:
- (i)was there a misrepresentation as to the funds left in the Macarthur Chambers contract;
- (ii)was there an offer by Porter to compensate the new owners by $72,000;
- (iii)if made, was the offer accepted;
- (iv)if there was offer and acceptance, is the compromise enforceable in law;
- (v)is Porter a party to the compromise?
The protagonists
- [8]The two Plaintiff companies are Wigginton Holdings Pty Ltd and Konschel Pty Ltd. The Plaintiff companies were formed by Mr Wigginton and Mr Konschel respectively, as vehicles to jointly purchase and conduct a business from the Defendant company, RM and JA Consultants Pty Ltd. The Second Defendant is Mr Porter. He is a director and owner of the Defendant company. The business purchased was BMC. When owned by the Defendant company I will call it “the old business”, and after purchase by the Plaintiff companies I will call it “the new business”. The contract between the Defendant company and FKP for work on the Macarthur Chambers building will be called the MC Contract. Mr Wigginton, Mr Konschel and Mr Porter will be referred to by their surname.
Was there a misrepresentation as to the funds left in the MC Contract?
- [9]
- [10]At the time of Wigginton’s initial inquiries about the business, he was informed of the MC Contract in the sense that the company was represented as one with the capacity to carry out larger commercial projects. When he signed the agreement on 28 November 2002, he was informed the MC Contract would be completed before settlement (1 February 2003).
- [11]Wigginton said that when he performed due diligence in December 2002, he was told the MC Contract may over run and not be completed until after settlement[7]. He said that in January, when he was at the business before settlement, he was told the job was nearly finished[8]. In the few days before settlement he was told by Porter there was more work than he (Porter) had expected to complete the job[9]. The comment at this point may be made that there was no reason for Wigginton to undertake a due diligence investigation of the MC Contract in December 2002 if he was told it would be completed before settlement. In any event, as Wigginton pointed out during his cross-examination, the Plaintiff companies were purchasing the business, not the contracts[10].
- [12]Konschel similarly had no experience in the glass fabrication industry. Konschel and Wigginton had known each other as children when they lived in Zimbabwe. Konschel regarded his area of expertise as being on the factory floor. Accordingly, he left the details of any take over of the MC Contract to Wigginton[11]. He said he spent about 10 days before settlement at the factory observing its operation. He was of course aware of the MC Contract held by the old business. He said he was initially told (about two weeks before settlement) that the MC Contract should be completed by the end of January 2003[12]. Konschel said he asked Porter a number of times about the contract before settlement. On one occasion he said Porter told him the contract was reaching its final stages and there was not much left to do apart from trimming[13]. He said Porter told him the job should be wrapped up two weeks after settlement[14]. Konschel’s evidence is generally consistent with Wigginton’s. The only significant difference is that Wigginton said he was told by Porter in the days before settlement that there was more work than he Porter had anticipated left to be completed.
- [13]For his part, Porter said that when he signed the business contract (16 December 2002) he believed the MC Contract would be completed before settlement[15]. By late December 2002, however, he said he realised the MC Contract would not be complete before settlement[16]. Interestingly, he commenced work in January 2003 immediately after the New Year break. One can speculate he did so in an effort to complete as much as possible of the MC Contract before settlement. He said that by late December he believed the MC Contract would be completed by the end of March[17]. That seems to have been his view throughout January. He said elsewhere in evidence that in mid-January he thought only “tail ends” remained to be completed, maybe taking a couple of weeks except for the first and second floors. Presumably he expected the combination of the “tail ends” and the work to be done on the first and second floors to take up February and March[18]. He said he took Wigginton out to the Macarthur Chambers building to meet the FKP contracts manager (Steptoe) and site manager (Murdoch). Wigginton denied this visit. Shortly after settlement, Porter prepared a “factory control sheet” which provided for the continued manufacture of windows et cetera for the MC Contract until 19 February 2003[19]. This document is generally consistent with the picture presented by the evidence of Wigginton, Konschel and Porter.
- [14]Settlement proceeded without complication on the agreed day. The MC Contract was, at least potentially, a problem for the Defendant company as after settlement the old business ceased to exist and the Defendant company therefore lacked the capacity itself to complete the contract. In addition, under its terms, the MC Contract could not be assigned without the written consent of FKP. Under the contract, therefore, liability for completion lay with the Defendant company despite the sale of the business.
- [15]At settlement, the total adjusted contract sum for the MC Contract was $510,628[20]. Of that sum, the old business had claimed $431,631 for work undertaken (including the claim for work undertaken during January 2003). This left at settlement $78,997 available on the contract to be claimed for completion of the contract. This sum was an inadequate payment for the work necessary to complete the contract. In this fact lay the seed of the dispute which occurred.
- [16]In the period leading up to settlement, neither Wigginton nor Konschel had carried out any independent investigation into the feasibility of completing the MC Contract after settlement. Porter had said to Wigginton in conversation that the new business “will have to take over – you know, to finish off some of the work down there”[21]. Wigginton explained in evidence that he had an interest to assist in finishing the contract, but had not turned his mind to the terms on which it would be appropriate to complete the contract[22]. The issue of completing the MC Contract, he believed, could be left until after settlement. I accept Wigginton’s evidence on this point. At that stage, he had the impression the project would not take very long to complete[23], and he had not turned his mind to what was involved in completion of the contract. Wigginton struck me as a reasonably intelligent man. He has relevant commercial experience. I think it unlikely that he would commit the new business to the MC Contract without satisfying himself it was in the interests of the new business to undertake the work.
- [17]After settlement, Wigginton and Konschel accompanied Porter to the Macarthur Chambers building. Porter said his only objective on this visit was to prepare a claim for the old business for work done in January[24]. The work on floors 10 to 3 was said to be substantially complete. Work had not yet commenced on floors 1 or 2. The men on site on this visit were still working on the third floor.
- [18]Wigginton said that after he returned to the office with Porter, the two men sat down at an office computer, and Porter explained to him how the monthly claim on the MC Contract was prepared. Wigginton said that during the course of that discussion with Porter, he satisfied himself that the funds remaining to be claimed were sufficient to cover the work remaining on the MC Contract. It was during this discussion that Wigginton said he agreed to complete the MC Contract for the funds remaining to be claimed on the contract.
- [19]Wigginton said he committed the new business to completing the MC Contract in reliance on Porter’s oral and written statements that the old business had been paid $300,961.10 by FKP, from which fact he inferred there was approximately $151,000[25] available to be claimed on the contract. Wigginton also said he believed FKP was unlikely to have paid the old business more than its assessment of what in fact had been completed[26]. He was also at pains to say he trusted Porter. I assume by this latter statement he trusted Porter not to take advantage of his relative lack of knowledge of the business. Wigginton believed (after clarifying, as he thought, the amount of money left in the contract) that there were sufficient funds to complete [27]. In fact, the amount paid by FKP was $372,989, not $300,961.10; and $78,997, not $151,024.90 was available to be claimed on the MC Contract. Wigginton said in evidence that at the completion of progress claim 10 (the claim for January), he indicated to Porter he was satisfied the money remaining in the contract was suitable to complete the contract[28]. Wigginton said that when he questioned Porter about the figure of $300,961.10 (total payments to end of January 2003), Porter told him the figure had been confirmed by Steptoe (the contracts manager at FKP). He claimed Porter said he, Porter, had written the figure on a piece of paper and he asked Porter for a copy of the note[29]. He was never given the note.
- [20]Porter in evidence said that the $300,961.10 figure was supplied to him by Steptoe[30], so in that respect, there is a correspondence in their evidence. Porter also accepted the true figure was $372,989 (not $300,961.10)[31]. Apart from these correspondences, their evidence differed considerably. Porter disputed that there had been a discussion between himself and Wigginton during which Wigginton agreed to complete the MC Contract for the funds remaining to be claimed on the contract[32]. On the contrary, Porter asserted a belief the new business would automatically “take over the MC Contract”[33]. Porter’s asserted state of mind on this aspect emerges in the following exchanges with counsel:
“What was the arrangement then in respect of the Macarthur Chambers project? I’m just trying to get to the bottom of this. Like, who was going to complete it?-- The new owners were going to complete it.
Now, why? Can you tell me what was your rationale as to why the new owners were going to complete it?-- Because they put their hands out for it. They jumped at it.
Okay. Can you elaborate on that for me? Physically what did they do or say?-- Well they certainly didn’t object.
Someone must have said something about this project, you or them? You didn’t all sit in silence and then only they went with it?-- Pretty much so.
Is that the case, is it?-- I think that when the sales went over by then the communication between myself and Mr Wigginton was such that he – he moved into the contract.
Right?-- I mean, with arms open.” (T264)
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“In January then, leading up to settlement, what was your belief as to whether or not the Wigginton and Konschel companies were obliged to perform the Macarthur Chambers project after settlement?-- Well, I mean, they’d bought the business.
I’m asking you what was your belief?-- Well, I believed that they would automatically take that contract over as part of – if there had have been other work in progress, they would have taken that over as well. In my opinion, they bought the company lock stock and barrel.
Okay. But you appreciated, did you not, that it was not a walk in, walk out contract. It specifically says that. You appreciated that, didn’t you?-- Yes, I did.
And you had solicitors acting for you and advising you in the sale, Carter Newell?-- Yes, we did.
So, just tell me the rationale then as to why you believed they were obliged to take over the contract?-- Well, only because Mr Wigginton was very much aware. Prior to the 31st, we had quite a number of discussions in relation to the contract in terms of how it was going, I suppose, almost daily you’d talk about it because it was certainly – would take up a certain amount of my time every day and I mean, he was with me most of the time.”
“Because it was the case, wasn’t it, that you understood and believed that they weren’t obliged to carry out this job?-- No.
Isn’t that the case?-- No, that’s not the case.” (T273, 274)
- [21]Looking at the probabilities, I believe Wigginton’s account of the circumstances in which the new business concluded the MC Contract is relatively more credible than Porter’s account. This conclusion flows primarily from the improbability Wigginton would commit the new business to completion of the MC Contract without any process of investigation and agreement with Porter[34]. The entry in progress claim 10 setting out the money paid to the old business as at the end of January is wrong. I am satisfied Wigginton was misled by the false entry into believing that approximately $150,000 was available to be claimed on the MC Contract.
- [22]One other aspect militates against acceptance of Porter’s account. In evidence Porter said that when he was given the figure of $300,961.10 by Steptoe, he assumed the December claim (progress claim 9) had not been paid. However, the December claim (progress claim 9) was for $23,108 and was not paid late[35]. The November claim (progress claim 8) was for $14,551 and again was not paid late, being paid on 16 December. Progress claim 7 for $43,684 was paid on 11 November. FKP did not make any late payments. Furthermore, the corresponding “paid to date” figure in the December progress claim (progress claim 9) is also wrong. The amount set out in the progress claim is $275,542.30 when the correct figure was $349,881. While in progress claim 8 (November) the figure for “total work completed to date” is $294,653 and the figure for “paid to date” is $227,489.90, when FKP’s records show the correct figures for progress claim 8 are $349,881 and $335,330 respectively[36]. Although it is conceivable that in preparing a monthly progress claim Porter might ask Steptoe for the total amount paid under the contract to date[37] and that Steptoe might supply an incorrect figure, it is inconceivable the same or similar errors would be repeated for progress claims 9 and 8.
The dispute
- [23]The new business in fact completed the MC Contract, although there does not appear to have been an assignment[38] to the new business. Mr Sweeney, who appeared for the Defendants, suggested the MC Contract was assigned by implication in light of the conduct of all the parties. Mr Collins, who appeared for the Plaintiffs, suggested the correct analysis is that the Plaintiff companies (the owners of the new business) contracted with the Defendant company (the owner of the old business) to complete the contract on its behalf for the funds left in the MC Contract. On balance I prefer Mr Collins’ analysis.
- [24]Both Wigginton and Konschel said they gradually realised substantial work remained to complete floors 10 to 3. The remaining work was labour intensive, but did not support claims under the MC Contract commensurate with the costs involved in the work. This situation Wigginton claimed led to a cash flow problem for the new business. On reviewing the MC Contract, Wigginton discovered the false entry in progress claim 10 understating the amount paid under the MC Contract by $72,027.90. This in turn led to the meeting on 12 May at which Wigginton and Konschel claimed, but Porter denied, that the offer to pay compensation of $72,000 was made to them. Whether or not Porter offered to pay compensation of $72,000 is the key factual issue in the trial.
Was there an offer to compromise the dispute?
- [25]The Plaintiff companies’ claim is that the Defendant company and Porter represented to them that only $300,961.10 had been paid to the Defendant company out of the adjusted contract sum of $510,628 when in fact $372,989 had been paid. Wigginton said that he was induced to commit the new business to completion of the MC Contract for the funds remaining to be claimed on the contract in the belief that approximately $150,000[39] was available to be claimed for completion of the contract[40]. The claim is that this representation was made both in progress claim 10 and orally by Porter.
- [26]Porter in substance challenged Wigginton’s evidence he was misled by pointing to an entry on progress claim 10 for “total work completed to date” in the sum of $443,985. He said this sum represented the total amount claimed against the contract (including the current claim). The amount left in the MC Contract was therefore $78,997 (the difference between the adjusted contract sum and the total work completed to date)[41].
- [27]The relevant parts of progress claim 10 are set out below:
| Contract Details | ||
| Original Contact Sum | (EXCL GST) | $445,167.00 |
| Approved Variations | (EXCL GST) | $65,461.00 |
| Claims Details | ||
| % complete | ||
| Contract work Completed to Date | (EXCL GST) | $397,956.00 |
| Authorised Variations Work Completed to Date | (EXCL GST) | $33,675.00 |
| Total Work Completed to Date | (EXCL GST) | $443,985.00 |
| Less paid to Date (including retention) | (EXCL GST) | $300,961.10 |
| Amount Due This Claim | (EXCL GST) | $58,642.00 |
| Add GST | $5,864.20 | |
| TOTAL AMOUNT DUE THIS CLAIM | (EXCL GST) | $64,506.20 |
- [28]The following features should be noted:
- (a)The form is split into two sections. The top section sets out the basic contract details. The lower section sets out the claim details.
- (b)The three entries in the top section (contract details) purport to be statements of fact. The entry “current adjusted contract sum” is the addition of the first and second entries (“original contract sum” and “approved variations”).
- (c)The three entries in the claim section setting out the work completed to date are each calculated as a percentage of the contract work completed converted to a money value[42]. The entry “total work completed to date” is the addition of the entries “contract work completed to date” and “authorised variation work completed to date”.
- (d)The monthly claim (in this case for the month of January) should be the difference between the “total work completed to date” less the “paid to date (including retentions)”.
- (e)The layout of the form therefore implies that the monthly claim is the percentage of the contract sum completed during the month converted to a money value.
- (f)The layout of the form also implies that the entry “total work completed to date” equals the addition of each of the monthly claims (including the current monthly claim).
- [29]The progress claim contains errors of transcription[43], and addition[44] apart from the false entry ($300,961.10) for the amount paid to date. The false entry had the further consequence of invalidating the relationship between the entries for “total work completed to date”, “less paid to date (including retentions)” and “amount due this claim[45].
- [30]Porter in evidence said there were two methods of calculating a progress claim. One method he said was to add up the cost of materials and labour for the month, together with his margin. The second method was to base the claim on the percentage of the contract work completed during the month[46]. From his statements, however, in practice he based the monthly claim on the costs of materials and labour for the month with his margin[47]. As I have noted (para 28 above), the progress claim form contemplates the monthly claim is based on the percentage of the contract completed in the month. It is obvious that if monthly claims are based on the costs of materials and labour, with a super added margin, the claims may result in an over claim or an under claim.
- [31]Wigginton said that when he was sitting with Porter preparing progress claim 10, he asked Porter how he, Porter, assessed the entry for “total work completed to date” ($443,985):
“Did you have any discussion with him about that entry?-- I asked him how he’d assess the 443 figure and would - what would FKP – would FKP agree with that and he said, ‘Well, there is’ – he gave me some indication of a formula that he used to assess the progress, basically based on percentages and floors completed and the amount of work on each floor. It wasn’t written down. It was – it was a verbal thing explained to me and he clearly had some level – some system with which he’d analysed his progress on the site-----
Right?-- -----based on the number of windows on the contract and the number of floors. I don’t recall the exact mechanics of that, but it was only verbal at the time.”
“All right. Can you tell me, then, based on what you’ve just told me then, there’s the 443,985, was it ever represented to you that that was a precise figure which represented the exact amount of work that had been done to date?-- No, I mean that’s always an assessment. I asked about that and he said, well, so many floors are complete, which represents about 75 per cent of the job and we’re about 50 per cent the way through the second floor and 10 per cent of the first floor and on an overall, that makes it about 85 per cent of the whole job complete and there’s a percentage that works out about that figure. It’s an – it’s an assessment thing.
Okay. Now-----?-- There’s nothing precise.”
Wigginton drew a distinction between the entries measuring the percentage of the contract work completed and the entries identifying the contract sum and the amount paid under the contract. The former entries he characterised as assessments and the latter as statements of fact[48]. Wigginton was aware of the intended relationship between the entries[49], but thought that Porter had not prepared the progress claims correctly[50]. He said he asked for confirmation of the “paid to date (including retentions)” entry because he regarded it as a statement of fact.
- [32]The conversations Wigginton deposed to between himself and Porter during the preparation of progress claim 10 concerning the entries for work completed to date were not controverted during his cross-examination[51], or by Porter during his evidence‑in‑chief; but were contradicted by Porter in the course of cross‑examination when he asserted he had told Wigginton the entry represented the addition of all previous progress claims, that is, a mathematically precise figure[52].
- [33]In all the circumstances, I accept Wigginton’s evidence of the conversation he deposed to with Porter on this aspect and I do not accept Porter’s inconsistent evidence. If Porter had told Wigginton the work completed figure was the addition of all previous progress claims, it would have alerted him to the fact that only limited funds were left in the contract to pay for its completion.
- [34]The preceding discussion provides the context for the meeting between Wigginton, Konschel and Porter on 12 May 2003 during which Wigginton and Konschel claim, but Porter denies, the offer on which the present action is based was made to them.
Did Porter offer to compromise the dispute on 12 May 2003?
- [35]Areas of agreement as to what happened at the meeting exist between the evidence of the witnesses[53]. All say that when Porter arrived, the three men went into the back office. A copy of progress claim 10 and a document from FKP setting out the actual payments to the old payments[54] were placed on a drawing table. Wigginton and Konschel pointed out the discrepancy to Porter. On Porter’s account, Wigginton said the position had been misrepresented by $72,000. Wigginton said the new business had serious cash flow problems because of the representation. Porter said he was told the new business would be unable to pay wages on Friday. Wigginton’s version is that he said the new business would have difficulties completing the job because of what was left to claim. On the evidence of both Wigginton and Konschel, the possibility was put to Porter, with varying degrees of emphasis, that the new business might be unable to complete the work on behalf of the old business. All agree Porter became heated, or aggressive, or agitated. All agree that during the discussion Porter complained the new business had mismanaged the work at Macarthur Chambers. All agree that at one stage Porter pointed to the entry of $443,985 (“total work completed to date)” and said that was the relevant figure.
- [36]The main areas of difference between Wigginton and Konschel on one hand, and Porter on the other, relate to whether Porter offered to compromise the dispute and whether Konschel was present throughout the meeting. Wigginton said at one point in the discussion Porter agreed that if the old business had claimed $443,985, then the funds left in the contract to be claimed would not be sufficient to complete it. Konschel described this as the turning point in the discussion. Konschel said that after that point the mood of the meeting changed. Porter, he said, offered to forego payments of $13,000, and $9000 owing for stock and work in progress, and to pay the new business $50,000. A total ($72,000) approximately equivalent to the discrepancy in the progress claim. Konschel said he wrote the figures down on the reverse side of the copy of progress claim number 10 in the office. There was some further discussion. Konschel said he would like to discuss the offer privately with Wigginton before agreeing to it. Wigginton and Konschel said they shook hands with Porter and soon afterwards the meeting ended. Both said there was some discussion about how the retentions should be used, but as I understand the evidence, the compromise proposed by Porter did not involve retentions. Porter left on the basis that Wigginton and Konschel would telephone him shortly to confirm the offer was acceptable.
- [37]Porter says that no agreement was reached between them and no offer was made by him. He said at one stage Konschel left the meeting. At this point he said he thought he probably was “more interested in seeing if there was a position whereby we could negotiate if, in fact, there was to be negotiation”. He said Wigginton put to him the figures of $50,000, $13,000 and $9000. Porter said that was basically the end of his conversation with Wigginton. He added that as he left, Wigginton asked him, “Why don’t you pay a cheque now”. He responded, “No, I’d like to go and talk to my accountant in regard to this”. As he left, Wigginton said, “I also need to talk to Mr Konschel about these figures and I’ll ring you back if he’s happy with them”.
- [38]Both sides agree there was a phone call to Porter shortly afterwards. Wigginton said he phoned Porter within an hour of the end of the meeting. Wigginton’s version of the phone call is as follows:
“What did you say?-- I said, ‘I had a word with Stuart. Under the circumstances’ – I – I reiterated that I believe we were going to lose far more money on the contract than – than really what he was offering to compensate but that, under the circumstances, that it was fairly clear-cut and black and white we would accept his offer.
Right. And did you say anything else to him?-- He – he said, ‘Okay, that’s fine.’ And I then reiterated, ‘Could you be sure that we get the money by the end of the week’ and explained again, ‘As I said, our cash flow situation’s pretty bad.’ And he said, ‘Yes’.” (T80)
Porter’s version is of necessity different, since on his evidence he had made no offer. He said it was Wigginton who mentioned an immediate payment of $50,000 and the debts of $13,000 and $9000. Porter gave this account of the conversation:
“And I think Mr Wigginton rang me maybe about an hour later after I’d returned home. The phone call was brief. I said something like, ‘Okay, I’m going to see my solicitors.’ Sorry, ‘to see my accountant.’
What did – what was he – what was his word?-- He just basically said that him and Mr Konschel had agreed on the figures, and that was the extent of the conversation.
What did you do then?-- I went to my accountant.” (T257)
- [39]I am satisfied Wigginton’s and Konschel’s account of the meeting (12 May 2003) and phone call is the truth. I will try to explain why. Wigginton’s account of the phone call is, I believe, more consistent with the probabilities than Porter’s account. The phone call sworn to by Porter is premised on the assumption that Konschel was absent when “the figures” were put to Porter and absent at all later times during the meeting. Both Wigginton and Konschel say that Konschel was present throughout the meeting. In addition, Konschel said he wrote down “the figures” on the back of the copy of progress claim number 10 during the meeting. This document was tendered during the trial. The existence of the copy of the progress claim with Konschel’s original notations on it militates against Porter’s explanation unless the document tendered into evidence was a fabrication to rebut Porter’s explanation.
- [40]I think also there is some merit in Mr Collins’ point that it is improbable that Konschel, half way through the meeting with Porter, would absent himself from the meeting.
- [41]Porter was undoubtedly under pressure at the meeting. He was confronted with what was undeniably a false entry for which he was responsible and he must have been aware he faced the possibility the new business might elect not to complete the MC Contract. In those circumstances, responsibility for completion of the MC Contract might fall back on to him. Added to these pressures was the more mundane pressure that he was about to set off for a planned overseas holiday at the end of the week.
- [42]I am satisfied, on the evidence as a whole, that an offer was made by Porter to settle the dispute between them at the meeting and that offer was accepted by Wigginton in a telephone conversation approximately an hour after the meeting. The offer was that in return for (i) payment of $50,000 (together with GST) by the end of the week; and (ii) forgiveness of the amounts payable to the Defendant company for work in progress ($9148) and for stock ($13,000), the new business would forego any legal claim it might have flowing from the misrepresentation as to the funds left in the MC Contract.
Is the compromise agreement enforceable in law?
- [43]To be enforceable, the claim in dispute must be honestly asserted. It has been said by way of elaboration that the claim must not be vexatious or frivolous, or, as was said in another case, “so lacking in any foundation as to make its assertion incompatible with both honesty and a reasonable degree of intelligence”. From these statements, it follows logically that it is not incumbent on the Plaintiffs to show that the claim, if litigated, would have succeeded.
- [44]The claim asserted in the meeting of 12 May 2003 was that the false entry (and Porter’s oral statement confirming the correctness of the entry) constituted a misrepresentation which was causative of loss and in respect of which the Plaintiff companies were entitled to recompense. As I understand the evidence of both Wigginton and Konschel, no particular sum was asserted as the loss suffered by the new business. I do not think Mr Sweeney is correct in his written submissions to characterise as an essential element of “the claim” an assertion the loss suffered by the Plaintiffs as a result of the misrepresentation was at least $72,000[55]. I satisfied the claim was honestly asserted and was not vexatious or frivolous.
- [45]Mr Sweeney submitted that any compromise agreement should be avoided under the Trade Practices Act on the grounds of misrepresentation by Konschel and Wigginton. The representation asserted is that the loss to the new business in completing the MC Contract for the funds left to be claimed would be greater than $72,000. This representation Mr Sweeney submitted occurred during the meeting on 12 May 2003.
- [46]The evidentiary basis of the representation is not found in Porter’s evidence (he gave no evidence of such a representation) but in Wigginton’s and Konschel’s evidence. The evidence is, however, that Konschel said, in response to Porter’s offer, words to the effect that he was unsure whether the offer of approximately $72,000 was sufficient[56]. Wigginton’s evidence is to the same effect[57]. The comments reflects their concern at that point that, although substantial work remained to completion, very little money was left in the contract to claim[58]. In these circumstances, no evidentiary basis is shown to avoid the compromise.
Is Porter a party to the compromise?
- [47]The test to be applied is an objective one in which the words used should be interpreted in the light of surrounding circumstances and according to the view of a reasonable person in the position of the parties (Pico Holdings Inc v Wave Vistas Pty Ltd and Anor (2003) QCA 204).
- [48]Wigginton said he asserted the claim against both the Defendant company and Porter personally[59]. Although intention is not the test, I accept Wigginton believed he was communicating a claim against both the Defendant company and Porter.
- [49]The language used was imprecise, ultimately therefore the context must determine the meaning of the words used. The context includes the circumstance Porter represented the Defendant company in all negotiations for the sale of the business. This factor militates against the conclusion Porter was a party to the compromise. The immediate context also includes the circumstance Porter was the person who actually communicated the misrepresentation to Wigginton. If an action existed against both the Defendant company and Porter personally under the Trade Practices Act, it would be reasonable to regard the complaint as one against Porter as well as the Defendant company. Mr Collins suggested in his written submissions that one approach is to ask whether the compromise asserted would have protected Porter from personal liability under the Trade Practices Act or whether only the Defendant company would enjoy protection.
- [50]In all the circumstances, I believe a reasonable person in the position of the parties would be of the view that Porter was both a party to the compromise agreement and protected by it.
- [51]The conclusions I have reached mean that the Plaintiff companies are entitled to judgment on the claim, and the counterclaims of $13,000 for stock and $9148 for work in progress fail.
The counterclaims
- [52]I am satisfied the counterclaim in respect of the chattel lease payments has been established. The amount involved is $2643.
- [53]By way of explanation I should add that the business contract contemplated the assignment of the chattel leases[60]. They were not, however, assigned. In the absence of an assignment, Wigginton and Porter agreed the new business would continue to use the vehicles and photocopier and pay the Defendant company an amount equal to the lease payments[61]. The Plaintiff companies’s liability for the chattel lease payments is under the agreement reached by Wigginton and Porter.
- [54]The counterclaim in relation to A & G Fabrications Pty Ltd (A & G Fabrications) arises out of the Macarthur Chambers development. What happened is that the old business contracted with A & G Fabrications for the supply and installation of sunscreens for the penthouse at Macarthur Chambers. The contract sum was $19,558 plus GST.
- [55]The business contract settled on 31 January 2003, before A & G Fabrications completed installation of the sunscreens under its subcontract with the old business. A & G Fabrications rendered in total two invoices: one on 20 December 2003 and one on 24 April 2004 after the sunscreens had been installed. The first invoice[62] was presumably for work to 20 December 2002, and the second invoice[63] was presumably for work from 20 December 2002 to completion.
- [56]The first invoice was paid by the old business. I presume there was a dispute as to whether the old business or the new business was liable for the balance of the work performed under the A & G Fabrications subcontract. Ultimately A & G Fabrications looked to the Defendant company for payment of the work. On 19 November 2003 the Defendant company paid the second invoice.
- [57]Mr Sweeney asserted the Plaintiff companies on claimed against FKP for the work carried out by A & G Fabrications. The counterclaim, however, fixes on the payment of the second invoice by the Defendant company, not on any payment made to the Plaintiff companies by FKP on account of the sunscreens.
- [58]Mr Sweeney contends that the new business and not the old business is responsible for the payment of the second invoice. He contends the A & G Fabrications subcontract was assigned to the new business by virtue of one or both of clauses 17, and 18 of the business contract, and that liability to pay the second invoice accordingly shifted to the new business.
- [59]Clause 17 is intended to facilitate the transfer of service agreements from the old business to the new business. Clause 17.1 relevantly assigns to the new business (on the consent of the service provider) any service agreement in respect of the conduct of the business. Clause 17 has no application to the A & G Fabrications subcontract: firstly, A & G Fabrications did not consent to an assignment of the subcontract; secondly, the subcontract in any event is not a “service agreement” for the conduct of BMC’s business.
- [60]Clause 18 provides as follows:
“18. Debtors and creditors
18.1 Subject to clause 18.7 the Vendor agrees to pay, satisfy and discharge in the proper time all debts and liabilities of the business incurred before completion and agrees to indemnify, and to keep indemnified, the Purchaser with respect to all claims arising from those debts and liabilities.
18.2 The Purchaser shall be solely responsible to all creditors of the business for debts and liabilities incurred by the Purchaser on and from the date of completion and agrees to indemnify, and to keep indemnified, the Vendor against all claims in relation to those debts and liabilities.
18.3 On the date of completion the Vendor may give a notice to the Purchaser concerning the debts owned to the Vendor in respect of the business at completion (“debt notice”) which, in respect of each debt specified (“notified debt”) must set out:
- (a)the name and address of the debtor;
- (b)the amount payable; and
- (c)the date the notified debt becomes payable.”
- [61]I agree with Mr Collins that the subcontract for the supply and installation of the sunscreens existed only between A & G Fabrication and the Defendant company[64]. As there was no assignment of the contractual rights and obligations of the subcontract, the performance of the subcontract by A & G Fabrications did not give rise to any liability under clause 18 to the new business.
- [62]On its face, the new business was not entitled to claim the benefit of the subcontract for the installation of the sunscreens. The counterclaim, however, was not predicated on any payment made by FKP. If the counterclaim had been pleaded in that way, different issues may have been relevant. In the circumstances the A & G Fabrications counterclaim will be dismissed.
Orders
- [63]The following declaration and orders are made:
Judgment on the claim:
- It is declared that on 12 May 2003 the plaintiffs and the first and second defendants agreed to compromise the dispute between them, and that a term of the agreement was that the first and/or second defendant would pay $50,000 to the plaintiff by 17 May 2003, and that the first defendant would forego payment of $22,148 owed by the plaintiffs to the first defendant.
- The first and second defendants are ordered to pay the plaintiffs the sum of $50,000 together with interest at the rate of 9 per cent per annum from 17 May 2003 to judgment.
- The first and second defendants are ordered to pay the plaintiffs’ costs of and incidental to the claim to be assessed on an indemnity basis on the District Court scale.
Judgment on the Counterclaim:
- The plaintiffs are ordered to pay the first defendant the sum of $2643.25 together with interest to judgment at the rate of 9 per cent per annum.
- The plaintiffs are ordered to pay the first defendant’s costs of and incidental to the Counterclaim for $2643.25 to be assessed on a standard basis on the District Court scale.
- Otherwise the Counterclaim is dismissed.
- The first defendant is ordered to pay the plaintiffs (the first and second defendants by Counterclaim) and the third and fourth defendants by Counterclaim costs of and incidental to those parts of the Counterclaim dismissed above to be assessed on an indemnity basis at the District Court scale.
Footnotes
[1]Contract of Sale 16.12.2003 Item J(h)
[2]BMC when it was owned and operated by the Defendant company.
[3]Macarthur Chambers is a new hotel development located in the Brisbane CBD.
[4]T39
[5]T102
[6]T102, 103 As a project planner he was engaged in the preparation of tender documents and construction programs.
[7]T45
[8]T48
[9]T50
[10]T51
[11]T229
[12]T208
[13]T208
[14]T209
[15]T265
[16]T265
[17]T273
[18]T268
[19]Exhibit 3 dated 3 February 2003
[20]Derived from progress claim 10 at P166 Exhibit 1
[21]T50
[22]T110
[23]T50
[24]Under the MC Contract, the Defendant company prepared and submitted a claim for work completed each month.
[25]If the January claim ($58,642) is added to the moneys paid to January ($300,961.10), and then subtracted from the current adjusted contract sum at January ($510,628), a total of $151,024.90 remained available to be claimed on the MC Contract.
[26]T139
[27]T60
[28]T132
[29]T57
[30]T279
[31]T282
[32]T314: “I don’t think there was any consultation at all”.
[33]T273, 274
[34]Nor does it appeal to me as reasonable for Porter to assume that the new business would automatically agree to complete the MC Contract for whatever moneys happen to be available to be claimed on the contact and whether the money remaining in the contact was sufficient to pay for the work to be done or not. If the money remaining in the contract was insufficient, why should the new business undertake an unprofitable contract?
[35]See the schedule of payments by FKP Exhibit 1 document 32 (p184), where the payment was made on 17 January by electronic transfer.
[36]All of the figures in the discussion are derived from the copies of the claim forms, and the schedule of payments by FKP in Exhibit 1.
[37]The figure would simply be the addition of all of the payments made in response to claims 1 to 9. Or more simply, the addition of the total payments (paid to date) disclosed in progress claim 9 and the payment made relative to progress claim 9.
[38]As the MC Contract could not be assigned by the Defendant company without FKP’s written consent, and as FKP had not apparently consented to an assignment
[39]He derived this sum by adding the January claim ($58,642) to the amount already paid under the contract ($300,961.10), and deducting this sum from the contract value as at end January 2003 ($510,628).
[40]T59
[41]Although the entry for “total work completed to date” is shown as $443,985 in progress claim 10, the correct figure is $431,631 not $443,985 as it is the addition of the two entries immediately above it in the progress claim.
[42]That is, if the contract work is 85% complete, the money value for the work completed is 85% of the contract sum.
[43]The entry for “approved variations” of $65,461 was transcribed incorrectly from another part of the progress claim. The correct figure is $65,272.
[44]The entry for “total work completed to date” should be $431,631 not $443,985.
[45]Because the “amount due this claim” should be the difference between “total work completed to date” and “less paid to date (including retentions)”. The difference between the entries is in fact $143,023.90.
[46]T260:
“You said you had two ways of assessing it?-- Yeah. Well, the first way was materials and labour-----
Yes?-- -----and a margin-----
Yes?-- -----and the other was to ascertain how far I would have thought the contract was to completion.
All right?-- So if I thought that it was 85 per cent then it would be 85 per cent.”
[47]T260:
“Yes?-- But the – it was always imperative to price it from the purchases for the month and the labour involved.
Sorry, what’s that?-- The purchases of material for the contract for the month-----
Right?-- -----and the labour that was involved in the manufacture and installation of products for that month.
Important for whom?—For me.”
T249:
“Can you tell me what you say happened?-- I ascertained the level of completion on the site and came up with my figure of $58,642. I based that on materials purchased through that month and on the labour that was used in that month and then I applied my margin.”
[48]T58, 59
[49]T167
[50]T167
[51]Cross-examining counsel seemed to accept these entries were imprecise assessments: T134, T135 and T138.
[52]T277
[53]Wigginton’s account is at T73-80 and T181-194; Konschel’s is at T218-221, T225-227, T234 and T237-239; and Porter’s is at T225-257, T292, T305 and T306.
[54]The progress claim 10 is found at T166 in Exhibit 1, and the FKP document at T184 in Exhibit 1.
[55]Of course, if the loss is measured by the quantum of the misrepresentation alleged, it is a loss of $75,000.
[56]T238, 220
[57]T79
[58]T192: “…very little actual money was left to claim on the contract and a great deal of work to do…we’d done an assessment of what we thought the outstanding work was…”.
[59]There is in addition an admission in the pleadings to this effect.
[60]Pursuant to clause 17.1 of the business contract.
[61]T97, 98
[62]Invoice number 2127(a) for $6500 plus GST.
[63]Invoice number 2127(b) for $13,493 plus GST.
[64]Mr Collins’ written submissions para 115.