Anderson Formrite Pty Ltd v Baulderstone Pty Ltd (No 7) [2010] FCA 921

FEDERAL COURT OF AUSTRALIA

Citation:		Anderson Formrite Pty Ltd v Baulderstone Pty Ltd (No 7) [2010] FCA 921

Parties:		ANDERSON FORMRITE PTY LTD (ACN 097 507 652) v BAULDERSTONE PTY LTD (ACN 002 625 130)

File number(s):		NSD 1272 of 2007

Judge:		GRAHAM J

Date of judgment:		25 August 2010

Catchwords:		TRADE PRACTICES – whether representations said to have been made were made – whether applicant induced thereby to enter into a formwork subcontract on 11 October 2001 CONTRACTS – termination of formwork subcontract for respondent’s sole convenience – terms and conditions surviving termination – intention of the parties – implied terms where formwork in use at time of termination whilst concrete curing – rights of subcontractor to strip and remove formwork from the site CONVERSION – whether locking formwork subcontractor out of access to building site and/or continued use of formwork equipment thereafter constituted conversion – when did conversion occur – distinction between equipment that was owned, under a contract to purchase, and hired DAMAGES – breach of contract – conversion- where there is difficulty in calculation

Legislation:		Trade Practices Act 1974 (Cth)ss 51A, 52 and 82(1) Federal Court of Australia Act 1976 (Cth) s 51A

Cases cited:		Henjo Investments Pty Limited v Collins Marrickville Pty Limited (No 1) (1988) 39 FCR 546 Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 Ratcliffe v Evans [1892] 2 QB 524 Allan v Loadsman (1975) 2 NSWLR 789 Tramways Advertising Pty Ltd v Luna Park (N.S.W.) Ltd [1938] 38 SR (NSW) 632 Luna Park (N.S.W.) Limited v Tramways Advertising Proprietary Limited (1938) 61 CLR 286 Butt v M’Donald [1896] 7 Q.L.J. 68 at 70-71 Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 Fitzgerald v F.J. Leonhardt Pty Limited (1997) 189 CLR 215 Australis Media Holdings Pty Limited v Telstra Corporation Limited (1998) 43 NSWLR 104 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Carlton & United Breweries Ltd v Tooth & Co Ltd unreported, Supreme Court of New South Wales, 11 June 1985 B.P. Refinery (Westernport) Pty. Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 Penfolds Wines Proprietary Limited v Elliott (1946) 74 CLR 204 Hill v Reglon Pty Limited [2007] NSWCA 295 Coleman v Harvey [1989] 1 NZLR 723 Rapid Metal Developments (Aust) Pty Ltd v Rildean Pty Ltd [2009] NSWSC 571 Chep Australia Ltd v Bunnings Group Ltd [2010] NSWSC 301 Bis Cleanaway (Trading As Chep) v Tatale [2007] NSWSC 378 Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1993) 32 NSWLR 175 Butler v The Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 Livingstone v Rawyards Coal Co [1880] 5 App. Cas. 25

Dates of hearing:	14, 15, 16, 17, 20, 21, 22, 23, 24, 27, 28, 29, 30 and 31 July, 3 and 4 August and 21, 22, 23, 24, 25 and 28 September 2009

Date of last submissions:	28 September 2009

Place:	Sydney

Division:	GENERAL DIVISION

Category:	Catchwords

Number of paragraphs:	347

Counsel for the Applicant:	B A J Coles QC and A W Smith on 14, 15, 16 and 17 July 2009; B A J Coles QC on 20 July 2009; B A J Coles QC and A W Smith on 21, 22, 23 and 24 July 2009; A W Smith on 27, 28, 29, 30 and 31 July and 3 and 4 August 2009

Solicitor for the Applicant:	John de Mestre & Co: B J Maher of John de Mestre & Co appeared for the applicant on 21, 22, 23, 24, 25 and 28 September 2009

Counsel for the Respondent:	B D Hodgkinson SC and A C Harding

Solicitor for the Respondent:	Clayton Utz

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1272 of 2007

BETWEEN:

ANDERSON FORMRITE PTY LTD (ACN 097 507 652)

Applicant

AND:

BAULDERSTONE PTY LTD (ACN 002 625 130)

Respondent

JUDGE:	GRAHAM J
DATE OF ORDER:	25 AUGUST 2010
WHERE MADE:	SYDNEY

THE COURT:

1. Orders that there be judgment for the applicant in the sum of $4,611,317.09, inclusive of a lump sum of $1,965,000.76 in lieu of interest up to judgment.

2. Orders that the determination of appropriate orders as to costs be reserved.

3. Directs that each of the parties lodge with the Court and serve on the other party a document of no greater length than three typed pages, at or before 2.15 pm on Friday 27 August 2010, recording the form of orders as to costs which that party proposes and the submissions of that party thereon, expressed in dot point form.

4. Order that the proceedings be stood over to Tuesday 31 August 2010 at 9.30am for consideration of the appropriate orders as to costs and argument thereon.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1272 of 2007

BETWEEN:

ANDERSON FORMRITE PTY LTD (ACN 097 507 652)

Applicant

AND:

BAULDERSTONE PTY LTD (ACN 002 625 130)

Respondent

JUDGE:	GRAHAM J
DATE:	25 AUGUST 2010
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Index to Marginal Headings

Background...................................................................................................................	[1]
Formrite Pty Limited......................................................................................................	[4]
WorkForce ONE..........................................................................................................	[18]
Anderson Formrite Pty Limited......................................................................................	[30]
A period of transition for Formrite..................................................................................	[37]
Formrite’s successful tender for the Woodside Building project.......................................	[40]
Commencement of work and Union disruption................................................................	[43]
A Sale of Business agreement between Formrite and the applicant..................................	[46]
The applicant’s pursuit of a formwork subcontract with the respondent............................	[64]
Tender Interview Checklist And Record.........................................................................	[75]
The applicant as a successor to Formrite in relation to the Woodside Building project......	[84]
The witnesses who were called to give evidence.............................................................	[96]
A contract between the applicant and the respondent......................................................	[98]
Termination for convenience...........................................................................................	[103]
The use of the applicant’s plant and equipment after 17 May 2002..................................	[112]
Industrial Relations considerations..................................................................................	[117]
Progress Claim No. 18 of 3 May 2002..........................................................................	[128]
A loan agreement between the applicant and the respondent...........................................	[131]
The respondent’s assessment of Progress Claim No. 18.................................................	[138]
Progress Claim No. 19 of 10 May 2002........................................................................	[143]
Progress Claim No. 20 of 17 May 2002........................................................................	[144]
The respondent declines to assess Progress Claim No. 20..............................................	[145]
The respondent’s position in relation to use of the applicant’s equipment after 17 May 2002.............................................................................................................................	[147]
Claims of wrongful conversion commence on 31 July 2002.............................................	[168]
A demand by the applicant for $10,409,551.80..............................................................	[171]
A solicitor’s letter of demand..........................................................................................	[172]
The respondent’s response to the applicant’s demands...................................................	[173]
Potential legal claims by the applicant..............................................................................	[177]
Disputation between the parties pre-17 May 2002..........................................................	[179]
Pre-termination litigation involving the applicant...............................................................	[185]
Observations and findings...............................................................................................	[198]
The applicant’s awareness pre-11 October 2001 of the inadequacy of the men made available by WorkForce ONE to Formrite.....................................................................	[199]
World War III...............................................................................................................	[200]
The current proceedings.................................................................................................	[208]
The Trade Practices claim..............................................................................................	[212]
The contract claim..........................................................................................................	[232]
The applicant’s claim under clause 39.13(a)(i)................................................................	[242]
The applicant’s claim under clause 39.13(a)(ii)................................................................	[279]
Reasonable removal costs..............................................................................................	[284]
Conclusion in respect of contract claims..........................................................................	[285]
The conversion claim......................................................................................................	[286]
Findings.........................................................................................................................	[312]
The essence of conversion..............................................................................................	[313]
Conclusion in respect of the conversion claim..................................................................	[325]
Interest up to judgment...................................................................................................	[339]
Costs.............................................................................................................................	[346]

Background

1 These proceedings have had a chequered history. The Application was filed on 5 July 2007 even though the issues in the proceedings relate back to events that occurred primarily in mid 2001 – mid 2002. The Application was accompanied by a Statement of Claim. An Amended Statement of Claim was filed on 23 August 2007. The original Defence to that Amended Statement of Claim was filed on 15 November 2007 and an Amended Defence was filed in Court on 14 July 2009, the first day of the trial in the proceedings. A Further Amended Statement of Claim was filed on 21 July 2009 and a Defence to Further Amended Statement of Claim was filed on 28 July 2009. A Second Further Amended Statement of Claim was filed in Court on 23 September 2009. By virtue of Order 13 rule 4(4) of the Federal Court Rules, the Defence to Further Amended Statement of Claim stands as a defence to the Second Further Amended Statement of Claim.

2 The dispute relates to a formwork subcontract referable to a building site at 240 St Georges Terrace, Perth on which a significant 25 plus storey, high-rise commercial building was constructed that is now known as the ‘Woodside Building’. The respondent, then known as Baulderstone Hornibrook Pty Limited, was the Head Contractor, referred to as the ‘Main Contractor’, retained to construct the Woodside Building.

3 An early programme for the formwork contract ‘(B1 suspended deck – Level 26 LMR)’ was ‘45 weeks from 10 September 2001’. The formwork required for the below ground works (stick formwork) differed from that generally required for the above ground works where there were typical floors and, with the use of hoists, table forms and self-climbing screens, a higher level of productivity was possible. The stick formwork required the forms to be built piece by piece.

Formrite Pty Limited

4 A company based to the south of Brisbane at Beenleigh in the State of Queensland, which is approximately halfway between Brisbane and the Gold Coast, known as Formrite Pty Limited ACN 064 059 981 (‘Formrite’), was an experienced formwork contracting company with a long history of working with the respondent on building projects in Queensland.

5 By a letter dated 19 January 2001 to the North Sydney, New South Wales office of the respondent, Formrite, under the hand of George McFarland as ‘Director’, advised the respondent of its interest in providing a formwork subcontract price for the:

‘WOODSIDE PETROLEUM TOWER PROJECT

PERTH – WESTERN AUSTRALIA’

The letter included:

‘We have had preliminary discussions with the appropriate unions in Perth through our Western Australia representative and indications are that our company would be well accepted provided we meet their standard conditions of employment.

Should you require confirmation of our work experience, we would ask that you contact any of your senior Queensland staff in order to evaluate any aspect of our company performance.’

6 Mr McFarland lived at Noosa on the Sunshine Coast to the north of Brisbane.

7 A further letter dated 24 July 2001 under the hand of Mr McFarland as ‘Director’ was sent by Formrite to the respondent by facsimile on that day requesting an opportunity to quote on the formwork for the ‘WOODSIDE PETROLEUM TOWER PROJECT, PERTH’. On this occasion the request was directed to the respondent in Perth, Western Australia ‘Attention: Tony Fletcher’. The letter included:

‘Further to my discussion with Mr. Mark Lamond in Sydney early last week, I would be most appreciative if you would allow our company the opportunity to quote on the formwork to the above project.

As discussed with Mark, we are your preferred formwork contractor in the Queensland area and have successfully completed many large formwork projects on your behalf. …

Should you allow us the opportunity of providing you with a competitive formwork price on this project, we will be able to undertake an estimate immediately.

…’

8 On 24 July 2001 an officer of the respondent, Stephen Surjan, signed a letter for Tony Fletcher, the ‘Project Director’ of the 240 St George’s Terrace Project, addressed to Formrite at Beenleigh in Queensland ‘Attention: Mr George McFarland’ under the heading;

‘RE: 240 St George’s Terrace, Perth

Formwork Tender

The letter, which was presumably forwarded to Formrite by facsimile on 24 July 2001, included:

‘As discussed with you on Friday 20^th July, we were unable to provide you the opportunity to quote on the formwork for the above project as we were required to make a final decision on Monday 23^rd July.

Following your discussion with Joh Van Engelen, Joh has provided you with the opportunity to quote the project in 2 days.

The documents shall be forwarded to yourself and a completely complying quotation would be required by close of business on Wednesday 25^th July.

Should you have any queries please contact Paul Young or Stephen Surjan on (08) 9324 3544.’

9 A price for the supply, erection, stripping and removal of all formwork for the 240 St Georges Terrace, Perth project of $13,376,200 (exclusive of GST) was submitted by Formrite to the Perth Office of the respondent by letter dated 25 July 2001. Formrite’s letter, signed by Mr McFarland as ‘Director’, included:

‘Our price has been based on the tender documentation supplied by facsimile of 24^th instant and the following variations to the Scope of Works.

…

10 On 30 August 2001 Formrite submitted a revised offer, by facsimile to the respondent’s Perth office, to carry out the work the subject of the proposed formwork subcontract. That letter, signed by G McFarland as ‘Director’ and marked ‘Attention: Mr Tony Fletcher’, included the following:

‘Re: 240 ST GEORGE TERRACE PERTH

FORMWORK CONTRACT

Further to your recent communication with us and for the purpose of clarification, we hereby submit our revised offer of $12490000 exclusive of GST for the supply erection stripping and removal of all formwork on the above project.

Our revised offer has been based on the tender documentation supplied and use of the new motorised self climbing screens your people recently viewed at the MAB Docklands site. We believe use of this particular screen system is essential if we are to achieve your construction programme.

…

We previously referred to your company offering us a performance incentive bonus for the early completion of your prescribed formwork programme for this contract. Our company and experienced staff enjoy a challenge and so suggest that an appropriate figure should be in the order of $200,000 per week.

Our revised price assumes your assistance with mobilisation costs as has been the practice on other projects between our companies.

We trust these arrangements are acceptable and look forward to being able to assist you on this project.’

11 On 31 August 2001 the respondent sent a letter to Formrite ‘Attn: Mr George McFarland’ under the heading:

‘RE: 240 St Georges Terrace

Formwork Package (the Works)’

The letter emanated from the respondent’s Perth Office at Level 4, 220 St Georges Terrace, Perth. It was signed for the respondent by Tony Fletcher as ‘PROJECT DIRECTOR’ of the 240 St Georges Terrace Project. It provided as follows:

‘With reference to a prospective subcontract with your company we hereby confirm the following:

1. The agreed subcontract sum shall be $ 12,345,000.00.

2. The subcontract sum allows for all works included in the Scope of Works issued with the tender package dated 24 July 2001.

3. Payment terms shall be 14 day claims with 14 day payment terms.

4. 2 off Bank Guarantees, each in the sum of $ 308,625.00, shall be issued in lieu of cash retentions.

5. The current price allows for motorised self climbing screens as described in Formrite letter dated 30 August, 2001.

6. The programme for the works (B1 suspended deck – Level 26, LMR) is 45 weeks from 10 September 2001.

It is both parties current intention to move quickly to execute the formal Subcontract Agreement (an executable copy of which has been forwarded to yourselves under separate cover).

For the purpose of expediting the implementation of the Works, Baulderstone Hornibrook Pty Ltd wishes Formrite Pty Ltd to commence immediate mobilisation of resources to carry out the Works, as detailed in our Scope of Work and in accordance with our programme requirement of a 10 September 2001 start date on site.

This arrangement does not constitute a contract for the entire Works and is limited to the mobilisation only of the resources necessary to carry out the Works.

Baulderstone Hornibrook Pty Ltd confirms that it will reimburse Formrite Pty Ltd for all reasonable costs associated with such mobilisation should either party not execute the Subcontract Agreement.

The following terms and conditions apply to this agreement.

a) Formrite is responsible for the care of its resources mobilised under this agreement.

b) Before commencing mobilisation, Formrite must effect and maintain adequate public insurance, and insurance against such liability that may arise in connection with the mobilisation.

c) Formrite must indemnify BHPL against all liabilities arising out of or in connection with the mobilisation in respect of personal injury of any person or damage to property.

d) The mobilisation shall form part of the Subcontract Works once the Subcontract Agreement has been executed, and any payment received shall form part of the Subcontract Sum.

e) The Subcontract Agreement is executed by 6 September 2001.

Please indicate Formrite Pty Ltd acceptance of the above by signing, dating and returning a copy of this letter.

…’

12 A Formrite document in relation to the ‘240 St George’s Terrace’ project entitled:

‘FORMRITE

SUMMARY

JOB COSTING REPORT – START DATE: 13.09.01’

recorded an anticipated income of $12,345,000.00 and anticipated expenditure of $10,295,000.00 with an anticipated profit of 16.61% of the anticipated income i.e. $2,050,000.00. The job costing report recorded ‘BUDGET HOURS’ at 160,000.

The budgeted expense of $10,295,000.00 was broken down into 14 categories as follows:

Total wage related $6,560,000.00

Total materials $575,000.00

Total incidentals/cons $460,000.00

Total hire costs $190,000.00

Total transport $150,000.00

Design work $80,000.00

Metal work $170,000.00

Safety $220,000.00

Frames $150,000.00

Tables $160,000.00

Screens $1,000,000.00

Hoists $300,000.00

Miscellaneous $100,000.00

Travel/Accommodation $180,000.00

Total Expenditure $10,295,000.00

13 The evidence is not clear as to what constituted the ‘Scope of Works’ issued by the respondent with the ‘tender package’ dated 24 July 2001, nor is it clear as to what documents comprised the ‘tender package’ or the ‘tender documentation supplied by facsimile of 24^th’ July 2001.

One document that does appear to have been transmitted by facsimile from the respondent to facsimile number 07 5526 7811 on 24 July 2001 was a 14 page Bill of Quantities which allowed for a tenderer to insert rates and amounts by way of pricing. Under the description ‘FORMWORK-TOWER’ a number of items were recorded under a variety of subheadings. The first relevant subheading was ‘Below basement level B2 (RL8.50)’. Each of the quantities under that subheading was deleted from the form. The next subheading was ‘Basement levels B1 & B2 (RL 8.50 – RL 16.50)’. Under that heading the quantity recorded in the form against the item ‘D Formwork to retaining walls at ground slab level changes’ was deleted from the form.

14 The succeeding subheadings were then as follows:

‘Ground to Level 1 (RL 16.50 – RL 26.50)’

‘Level 1 to Level 8 (RL 26.5 – RL 53.80)’

‘Level 8 to Level 9 (RL 53.80 – RL 61.60)’

‘Level 9 to Level 16 (RL 61.60 – RL 88.90)’

‘Level 16 to Roof (RL 88.90 – RL 132.95)’

The Bill of Quantities then proceeded to include a number of items under the headings ‘COLUMNS’, ‘STAIRS’, ‘MISCELLANEOUS ALLOWANCES’, ‘SUNDRIES’ and ‘FORMWORK SUNDRIES’.

15 The 8th, 9th, 10th and 11th pages of the Bill of Quantities were headed ‘FORMWORK – HOTEL SUBSTRATUM’ and had similar subheadings for the various items making up the works. The 12th and 13th pages of the Bill of Quantities dealt with ‘FORMWORK – WESTERN BUILDING’.

16 Page 14 of the Bill of Quantities was a summary page which allowed for amounts to be brought forward from the earlier pages for ‘FORMWORK – TOWER’, ‘FORMWORK –HOTEL SUBSTRATUM’ and ‘FORMWORK – WESTERN BUILDING’. The Bill of Quantities then concluded with the words ‘TOTAL AMOUNT TO FORM OF TENDER’.

17 It may be observed that there were three distinct components making up the project – the ‘Tower’, the ‘Hotel Substratum’ and the ‘Western building’.

WorkForce ONE

18 The role of WorkForce ONE is of some importance in this case. WorkForce ONE was the business name under which Headlink Pty Limited traded. Headlink Pty Limited was registered on 22 December 1999. At all material times its principal place of business was located in the Robina Town Centre on the Gold Coast in Queensland. It was placed in administration on 2 August 2002 and dissolved on 20 November 2003.

It would appear that its sole director in the period 21 December 1999 to 4 February 2002 was Gregory James Lynch of Broadbeach in Queensland. He was apparently succeeded as the sole director by Kevin John McHugh on 4 February 2002 although the evidence suggests that Headlink Pty Limited was under the direction of Mr McHugh back in 2001.

Senior counsel for the respondent suggested that Mr McHugh was a ‘militant BLF [Builders Labourers Federation] man’. It was said that Mr McFarland, who had a lot of experience in the building industry in Queensland, may have so described him. Mr McFarland certainly did not like Mr McHugh.

19 On 10 January 2001 Mr Paul Watson, a senior executive of the respondent in Sydney whose title would appear to have been a director of new business, recorded a message for the respondent’s Damien Newton-Brown which read:

‘To commence work on Site

after 15/1/01 you need

to employ

Roy McIllrane (sic) – delegate

- Peter Delaney – Safety

on books of Work Force One

for 3 month trial period.

As previously agreed.

Regards

Paul’

20 On 18 July 2001 an officer of the respondent, Len Hall, sent an email communication to Paul Watson, with a copy to Mr Tony Fletcher, ‘Project Director’ for the 240 St Georges Terrace Perth project, under the heading:

‘Subject: 240 St Georges Terrace, Perth

Workforce One Rates’

The email provided:

‘The new rates proposed by Workforce One (ref your memo dated 11 July 01) improve our position by $120 per man per week (based on a 65 hr wk) which is a 25% improvement on our previous position.

The extra over cost to employ a man through Workforce One (based on a 65 hr wk) is approx $700.00

Workforce One are entitled to a profit

($210.00)

Workforce One premium on rates

$490.00

The improvement with the revised rates

($120.00)

Revised Workforce One premium

$370.00 or a 25% improvement

We should consider accepting this as any reduction in rates is better than nothing at all, although they are still making more than they should out of their supply of labour.’

Presumably, the respondent intended to use workers sourced from WorkForce One.

21 On 1 August 2001 Mr Damien Newton-Brown, an officer of the respondent sent an email to ‘creynolds@wf1.com.au’ under the heading ‘Transfer of McIlwaine, Delaney & Cochrane’. A copy of the email was sent to Mr McHugh at WorkForce ONE and also to ‘Paul Watson/SYD/BAULD/AU@BAULD’, ‘Tony Fletcher/PTH/BAULD/AU@BAULD’ and Ian Glover/PTH/BAULD/AU@BAULD’. The email read:

‘As per agreed arrangements with Workforce One, Baulderstone Hornibrook will be engaging Roy McIlwaine, Peter Delaney and Jason Cochrane directly onto our books as of 1 August 2001.

We thank you for your assistance in their employment to date on the 240 St Georges Terrace Project.’

22 The email would appear to have been addressed to Mr Clint Reynolds, an employee of WorkForce ONE, who happened to be the son of Mr Kevin Reynolds, the Secretary of the Construction Forestry Mining and Energy Union (‘CFMEU’) in Western Australia.

The evidence establishes that the CFMEU in Western Australia was and was known to be a militant building industry union.

23 It is common ground that the tender documentation for the formwork subcontract did not include a requirement that the successful formwork tenderer would be required to use contract labour provided by Headlink Pty Limited or any other company trading as ‘WorkForce ONE’, ‘WorkForce 1’, ‘Workforce One’ or ‘Workforce 1’.

24 Volume 7 of Exhibit B contains, amongst other things, a number of tax invoices issued by Headlink Pty Ltd T/A WorkForce ONE and directed to ‘Formrite’. The invoices bear a variety of dates commencing with 27 September 2001 and ending with 11 October 2001. These invoices are then followed in Volume 8 of Exhibit B by a number of others directed to the applicant. The invoices directed to the applicant bear dates commencing with 18 October 2001.

25 It would appear that the invoices dated 27 September 2001 to 25 October 2001 were processed by the applicant on 31 October 2001.

The invoices dated 27 September 2001 relate to carpenters and labourers identified as ‘carp’, ‘Lab 2’ and ‘Lab 3’ and relate to work performed in the period commencing Tuesday 18 September 2001 and ending on Tuesday 25 September 2001.

26 Each of the invoices dated 27 – 28 September 2001 is supported by a WorkForce ONE timesheet. Those timesheets describe WorkForce ONE as ‘Staffing Solutions for Business’. They show the relevant client name as ‘Anderson Formrite’ rather than ‘Formrite’. For reasons which will become apparent it is appropriate to record the invoice and timesheet numbers in respect of the individual employees made available by WorkForce ONE to work on the Woodside Building project in the period mentioned.

Invoice No.	Date of Invoice	Timesheet No.	Name of employee	Employee position	Dates worked
0458	27 September 2001	H1477	Sean Croke	Lab 2	19-25/9/01
0479	27 September 2001	H1477	Sean Croke	Lab 2	18/9/01
0488	28 September 2001	H1468	Sean Croke	Lab 2	18/9/01
0459	27 September 2001	H1471	Peter O’Flannigan	Lab 2	19-25/9/01
0480	27 September 2001	H1471	Peter O’Flannigan	Lab 2	18/9/01
0489	28 September 2001	H1462	Peter O’Flannigan	Lab 1	17-18/9/01
0460	27 September 2001	H1475	Frank McMahon	Lab 2	19-25/9/01
0481	27 September 2001	H1475	Frank McMahon	Lab 2	18/9/01
0490	28 September 2001	H1469	Frank McMahon	Lab 2	18/9/01
0461	27 September 2001	H1474	John McCracken	Lab 2	19-25/9/01
0482	27 September 2001	H1474	John McCracken	Lab 2	18/9/01
0491	28 September 2001	H1461	John McCracken	Lab 1	17-18/9/01
0462	27 September 2001	H1470	Ian Walker	Carp	19-25/9/01
0483	27 September 2001	H1470	Ian Walker	Carp	18/9/01
0492	28 September 2001	H1465	Ian Walker	Carp	17-18/9/01
0463	27 September 2001	H1476	Noel Moore	Carp	19-25/9/01
0484	27 September 2001	H1476	Noel Moore	Carp	18/9/01
0493	28 September 2001	H1466	Noel Moore	Carp	18/9/01
0464	27 September 2001	H1478	Mick McElroy	Carp	19-25/9/01
0485	27 September 2001	H1478	Mick McElroy	Carp	18/9/01
0494	28 September 2001	H1467	Mick McElroy	Carp	18/9/01
0465	27 September 2001	H1473	John Osorio	Carp	19-25/9/01
0486	27 September 2001	H1473	John Osorio	Carp	18/19/01
0495	28 September 2001	H1464	John Osorio	Carp	17-18/9/01
0466	27 September 2001	H1472	Vlado Strafela	Carp	19-25/9/01
0487	27 September 2001	H1472	Vlado Strafela	Carp	18/9/01
0496	28 September 2001	H1463	Vlado Strafela	Carp	17-18/9/01
0467	27 September 2001	H0862	Tom Connolly	Carp	24-25/9/01
0468	27 September 2001	H1480	Scott Cowels	Lab 3	20-25/9/01
0469	27 September 2001	H0864	Mick Evans	Lab 2	24-25/9/01
0470	27 September 2001	H0866	Brent Horan	Lab 3	24-25/9/01
0471	27 September 2001	H0868	Denis Mitchell	Carp	25/9/01
0472	27 September 2001	H0869	Chris Moore	Carp	25/9/01
0473	27 September 2001	H0861	Steve O’Sullivan	Carp	24-25/9/01
0474	27 September 2001	H0863	Paul Rodgers	Lab 3	24-25/9/01
0475	27 September 2001	H0867	Raymond Wright	Lab 3	25/9/01
0476	27 September 2001	H1479	Sam Muchella	Carp	20-25/9/01
0477	27 September 2001	H0865	John Templeman	Lab 3	24-25/9/01

27 In respect of those employees for whom there are two invoices referable to 18 September 2001 the explanation appears to lie in the fact that the timesheets for the succeeding seven day period bear an endorsement under the comments column which read ‘owed 1 hour from Tues 18 Sept’. The smaller amounts referable to 18 September appear to relate to the relevant ‘1 hour’. The third invoice referable to people who worked on 17 and/or 18 September 2001 relate to the relevant hours apparently worked before the extra 1 hour was taken into account.

28 Importantly, all of the timesheets appear to be contemporaneous and appear to bear the signature of Chris Hemphill, to whom reference will be made shortly, under the column headed ‘CLIENT’S SIGNATURE’.

29 The evidence before the Court does not include a copy of the respondent’s letter of 31 August 2001 that may have been signed in the space provided, by a representative of Formrite, nor does it include any Subcontract Agreement between the respondent and Formrite ‘executed by 6 September 2001’.

Anderson Formrite Pty Limited

30 However, there is a copy of the respondent’s letter of 31 August 2001 to Formrite in evidence which appears to have been endorsed at the foot of the second page thereof beneath the space provided for Formrite’s acceptance, with a manuscript note reading:

‘It should be noted that a new entity has been formed to undertake all formwork in Western Australia. That entity is Anderson Formrite Pty Ltd ACN 097 507 652. The terms set out herein are accepted by Anderson Formrite Pty Ltd.’

The manuscript addition to the copy of the respondent's letter then contains words of attestation and a signature as follows:

‘Anderson Formrite Pty Ltd

by its director

[signature] George Mylonas 31/08/01.’

There is no evidence to indicate that the copy of the 31 August 2001 letter bearing this endorsement was ever sent to the respondent.

31 The applicant, Anderson Formrite Pty Ltd ACN 097 507 652, was registered in Queenslandon 16 July 2001 by Mr Mylonas a Solicitor of 1 Fraser Terrace, Highgate Hill QLD 4101. The original director and secretary was Mr Mylonas whose address became the registered office of the company.

32 On 19 September 2001 Warren Perry Anderson became a director and secretary of the applicant and on the following day, namely 20 September 2001, Mr Mylonas ceased to be a director and secretary of the applicant. On 11 October 2001 the registered office of the applicant became that of Hyland Lawyers, Level 19, 141 Queen Street, Brisbane QLD 4000 and on 19 December 2002 it became 1147 Mulgoa Road, Mulgoa NSW 2745, being, so it would seem, a residential address, in New South Wales, of Mr Anderson.

33 The principal place of business of the applicant was Lawton House, 18 Colin Street, West Perth WA 6005 from 27 September 2001 to 21 November 2002. On 22 November 2002 the principal place of business became 1147 Mulgoa Road, Mulgoa NSW 2745. However, there are documents in evidence which show the applicant’s address as that of Formrite, 81 Distillery Road, Beenleigh, Queensland as at 8 October 2001 and as that of Mr Passione, to whom reference will be made shortly, 9 Montgomery Way, Malaga, Western Australia from late October 2001 through October 2002.

34 Prior to 1970 Mr Anderson resided north of Perth in Western Australia where he carried on business as a farmer and bulldozing contractor. He also owned a ‘roadhouse’ at which one might assume that food and fuel could be acquired. In 1970 he moved to Perth and started building shopping centres for G J Coles and Kmart in Western Australia. In 1978 he moved to Sydney where he built more shopping centres for G J Coles and Kmart. Altogether he was involved in the development of some 60 or 70 shopping centres. He then proceeded to become involved in the development of office towers and his final development related to the construction of the Parliament House and Law Courts buildings in Darwin. Mr Anderson also developed a wildlife sanctuary at Tipperary Station in the Northern Territory to breed rare and endangered animals that were extinct in the wild.

35 Mr Anderson may have had extensive experience in the building and construction industry, but he says, and I accept, that he is a developer rather than a builder. He could be described as a ‘big picture’ man rather than one concerned with the ‘nitty gritty’.

36 Prior to 2001 Mr Anderson had come to know Mr George McFarland, a South African gentleman, who had expressed an interest in becoming involved with Mr Anderson in his development of the wildlife sanctuary at Tipperary Station. By or in early 2001 Mr Anderson came to understand that Mr McFarland worked for Formrite.

A period of transition for Formrite

37 In conversation with Mr McFarland in early 2001, Mr Anderson learnt that Formrite was for sale. Mr McFarland informed Mr Anderson that Mr Norm Pask, who was the ‘principal’ of Formrite, had left his wife, that there was a family dispute and that the ownership of Formrite was in the hands of Mr Mylonas, as a trustee, who was wanting to sell the company on behalf of Mr Pask’s wife and children.

38 In cross-examination Mr Anderson was asked about the possibility of ‘purchasing Formrite’. Mr Anderson said that there were discussions with Mr Mylonas about the matter in late 2000 or early 2001. Mr Anderson said that the proposal was that he would, through a corporate entity, purchase ‘the shares in and business of’ Formrite. He went on to explain that the proposal was that the shares of Formrite be acquired and as a consequence he would take over the business.

39 There is no evidence that a share sale agreement was ever entered into between the applicant and the owners of Formrite under which the applicant agreed to purchase the whole of the issued capital of that company.

Formrite’s successful tender for the Woodside Building project

40 By a letter dated 6 September 2001 Mr McFarland writing as ‘Director’ of Formrite replied to the respondent’s letter of 31 August 2001 as follows:

‘240 ST GEORGE’S TERRACE FORMWORK CONTRACT

We refer to your letter of 31 August 2001 regarding your acceptance of our tender for the Formwork Contract and reply as follows.

1. We have allowed to use Kingflor as shown on the drawings you sent to us and also as measured in your Bills of Quantities.

2. Our Project Team has assessed the amount of areas available to us on site to commence work. This we believe is substantially less than what we need for full and urgent mobilisation of our men and materials than anticipated. We shall therefore commence as discussed with your Steve Surjan on Monday week. We would therefore, expect the programme start date also to be the 17 September 2001.

3. Clause E of your conditions to have the contract executed by 6 September 2001 cannot be fulfilled as we still have not received the contract documents. Although you refer in your letter that you are forwarding under separate cover, we still have not received these documents.

Would you kindly forward a copy of:

a) The technical Scope of Works as amended this morning

b) Specification

c) Drawing List

d) Tender interview minutes

On receipt of these, we shall forward them to our lawyers and will be in a position to address your instructions as soon as possible.’

41 On 12 September 2001 Mr Tony Fletcher as Project Director of the respondent wrote from the Perth office of the respondent to Formrite at Beenleigh in Queensland as follows:

‘RE: 240 St George’s Terrace, Perth

Subcontract Agreement

Please find enclosed one copy of the Subcontract Agreement for your execution and return.

Please date and sign the Instrument of Agreement, and initial every page. Once returned, a copy executed by all Parties will be forwarded back to you.

For your reference the “blue” tags represent changes to the initial draft contract whilst the “yellow” tag identifies the section for execution.

In respect of the Tender Interview Minutes (Part M), this is to be conducted by telephone conference on 13 September 2001, marked up by yourselves and incorporated within the subcontract document.’

42 It would appear that on or about 12 September 2001 a formal Instrument of Agreement forwarded under cover of Mr Fletcher’s letter of 12 September 2001 from the Perth office of the respondent to Formrite at Beenleigh in Queensland, was executed by Mr George Mylonas on behalf of Formrite, his signature being witnessed by a Mr Owen G. Walker. The instrument so executed purports to have been made at Perth, WA on 12 September 2001, the numerals and word ‘12 September’ having been written into the printed document. I must say that I have difficulty in comprehending how a document apparently forwarded by post from Western Australia to Queensland on 12 September 2001 could have been executed in Queensland on the same day, especially given that the agreement was to include as ‘Part M’ Tender Interview Minutes which were to be the product of a telephone conference on 13 September 2001. It may be observed that the formal Instrument of Agreement between the respondent as the Main Contractor and Formrite as the subcontractor contained no Part M.

Commencement of work and Union disruption

43 The respondent’s project diary – daily report for Saturday 15 September 2001 records under the heading ‘Job Progress’:

‘□ All Sub Contractors on site (other than Tom’s Crane and Plant Hire) all off Site by 1200 …

□ Tom’s Crane and Plant Hire. Erection did not commence until approx. 0930 … Work was stopped by CFMEU Secretary Kevin Reynolds at approximately 1735, reason being that that (sic) the men had worked too long already that day. Truth was that the work for the day had stopped and Tom’s were packing up ready to go home. Reynolds subsequently withdrew CFMEU permission to work on Sunday to complete the erection. Demands for payment concerning the cancelled Sunday work were made to BH.

…

□ Formrite. Material delivered for lobby B1.’

44 The respondents’ project diary daily report for Sunday 16 September 2001 recorded that the site was closed and that no work was done on that day following the intervention of Mr Reynolds on Saturday 15 September 2001.

45 The respondent’s project diary daily report for Wednesday 19 September 2001 included under the heading ‘Job Progress’:

‘□ Formrite. Continued Basement 1 lobby formwork. Commenced platform framing adjacent RW12 for capping beam construction. 4 additional column form boxes delivered).’

A Sale of Business agreement between Formrite and the applicant

46 On 12 September 2001 Mr Mylonas submitted a proposed business sale contract to the applicant or its solicitors which proposed a purchase price for the business of $2,132,000.

47 It would appear that on 19 September 2001 a business sale contract was entered into, incorporating the Standard Conditions of Sale – Business Sale (First Edition) adopted by the Real Estate Institute of Queensland Limited (for conveyance of leasehold businesses only), between Formrite as vendor and the applicant as purchaser under which Formrite agreed to sell its formwork contracting business to the applicant. The solicitor for the vendor was identified as Mylonas & Associates and the solicitor for the purchaser as SJ Gurnsey & Co of Brisbane.

48 The purchase price payable under the revised business sale contract was $1,377,000. The contract provided for completion at Brisbane on 21 September 2001 i.e. two days after the date of the contract. It also provided for the payment of a deposit of $1.

The purchase price was apportioned as to $10,000 for ‘Leasehold Premises’, $250,000 for ‘Plant’, $1,032,000 for ‘Timber’ and $85,000 for ‘Goodwill’.

The Plant was described in a fixed asset register as ‘CLIMBTRAC’ which was apparently purchased by Formrite for $250,000 on 30 June 2001 and, as one might imagine, had a book value of $250,000 as at that date.

49 The Business Sale contract would appear to have been executed by Mr Mylonas for the ‘Vendor’ and by Mr Warren Perry Anderson for the ‘Purchaser’ on 19 September 2001.

50 The Business Sale contract contained a number of special conditions. Seven of the special conditions were recorded in the Business Sale contract in typed form (one of which was deleted) and two were added in manuscript form, the last addition being in two different hands. The special conditions included:

‘1. The Purchaser shall acquire the Vendors interest in and to the following formwork subcontracts (the Projects) as and from 31 August 2001 –

(a) Grande Hotel – Sunland

(b) Aria Apartments – Sunland

(c) Republic Apartments – Mutliplex (sic)

(d) CSIRO – Baulderstone

2. The Vendor shall at the cost of the Purchaser continue to diligently perform the Projects until the date of settlement and the Vendor will be responsible for payment of all expenses appearing in the job costing report for each project up to and including 31 August 2001 and the Vendor shall receive all claims made to 31 August 2001. All other expenses and claims shall be paid and received by the Purchaser.

3. The Purchaser may at its option require the formal assignment of the Projects contracts at its cost OR elect to retain the Projects contracts in the name of the Vendor whereupon the Vendor willaccount to the Purchaser for all moneys received and the Purchasers share of cash retentions immediately upon receipt of such retention by the Vendor.

4. It is acknowledged that in tendering for the formwork package of the project known as “240 St George (sic) Terrace” in Perth (the WA Project) the Vendor acted as agent for the Purchaser. The Vendor shall execute a Deed of Novation in favour of the Purchaser in respect of the WA Project at the cost of the Purchaser and the Vendor shall be re-imbursed for its costs and expenses in so acting as agent for the Purchaser.

5. ~~The Purchaser hereby notifies the Vendor in accordance with clause 20.4 of the Standard Conditions that it shall retain all of the Vendors employees.~~

6. The parties acknowledge that the lease of the premises shall not be formally assigned to the Purchaser but from the date of completion Columbo Plant Pty Ltd shall hold the lease in trust for the Purchaser which shall fully indemnify the Vendor in respect thereof.

7. …

8. …

9. THIS CONTRACT IS CONDITIONAL UPON DUE DILIGENCE BEING CONDUCTED BY LLOYD CAREY IN RESPECT OF THE JOB COSTINGS BEING $568 099 AND APPORTIONED OVERHEADS BEING $622126. DUE DILIGENCE TO BE COMPLETED BY 24 SEPTEMBER 2001. THESE numbers ARE TO be verified by LLOYD CAREY.’

Presumably when due diligence ‘by 24 September 2001’ was agreed and inserted, the proposed completion date of 21 September 2001 was impliedly postponed to a date after 24 September.

Whatever may have been said in the Business Sale contract between Formrite and the applicant it is quite clear that Formrite’s dealings with the respondent had not been as the applicant’s agent. Formrite’s letters to the respondent of 19 January 2001 (six months before the applicant was registered) and 24 July 2001 make this abundantly clear. Formrite was treating with the respondent as a formwork contractor with a longstanding relationship with the respondent in Queensland.

51 The form of formwork subcontract between the respondent and Formrite included a ‘Part G – Secondary Subcontractor Deed’. Part G in fact contained a form of Deed Poll and a form of ‘Deed of Novation’.

52 At some stage a copy of the form of Deed of Novation was apparently signed by Mr McFarland as ‘Director’ of Formrite, referred to therein as ‘Original Subcontractor’, his signature being witnessed by Mr Mylonas, and by Mr Warren Perry Anderson as a director of the applicant, referred to therein as ‘Substitute Subcontractor’, Mr Anderson’s signature also being witnessed by Mr Mylonas. There is no evidence that the form of Deed of Novation was ever brought to the attention of or executed by the respondent as the Main Contractor. The form also made provision for the identification of a ‘Secondary Subcontractor’, but no such party was identified.

The form of Deed of Novation as executed was undated. It included the following:

‘RECITALS:

A. By agreement dated [ ] (the “Subcontract”) between Baulderstone Hornibrook Pty Ltd (ABN 56 002 625 130) (“Main Contractor”) and Original Subcontractor [Formrite], the Main Contractor engaged the Original Subcontractor to undertake the Subcontract Works (as defined in the Subcontract).

B. The Original Subcontractor has entered into an agreement (“Secondary Subcontract”) with the Secondary Subcontractor [N.B. no name inserted for “Secondary Subcontractor” at the commencement of the agreement] for the execution and completion of the [ ] (“Secondary Subcontract Works”) as part of the Subcontract Works.

C. The Main Contractor has terminated the Subcontract and has engaged Substitute Subcontractor [the applicant] to complete the Subcontract Works.

D. Substitute Subcontractor wishes to effect a novation of the Secondary Subcontract.

THIS DEED WITNESSES that in consideration, among other things, of the mutual promises contained in this deed, the parties agree:

1. Substitute Subcontractor must perform all of the obligations of the Original Subcontractor under the Secondary Subcontract which are not performed at the date of this deed. Substitute Subcontractor is bound by the Secondary Subcontract as if it had originally been named in the Secondary Subcontract in place of Original Subcontractor.

2. The Secondary Subcontractor [N.B. no name inserted at the commencement of the agreement] must perform its obligations under, and be bound by, the Secondary Subcontractor (sic) as if Substitute Subcontractor was originally named in the Secondary Subcontract in place of Original Subcontractor.

3. …’

53 The form of Deed of Novation contemplated that the ‘Secondary Subcontractor’ would be a third party retained to perform part of the works the subject of the formwork subcontract to be entered into between Baulderstone Hornibrook Pty Limited and Formrite and that there would be a novation of the Secondary Subcontract whereby the applicant, as ‘Substitute Subcontractor’, would perform all of the obligations of Formrite under the Secondary Subcontract with the third party which had not been performed at the date of the deed.

The ‘Deed of Novation’ is really rather nonsensical. It did not purport to release Formrite from its obligations under the subcontract between the respondent and Formrite in exchange for a promise made by the applicant to the respondent to perform the obligations of Formrite under the subcontract. Recital C in the form of Deed of Novation contemplated that any formwork subcontract, that may have been entered into between the respondent and Formrite, had previously been terminated and that the respondent had already engaged the applicant to complete the works the subject of the terminated subcontract.

54 At its highest, the form of ‘Deed of Novation’ as executed by Formrite and the applicant in the manner indicated above demonstrated an acquiescence by Formrite in the applicant’s engagement to complete the works the subject of a subcontract between the respondent and Formrite.

55 As previously observed there is no evidence that the form of ‘Deed of Novation’ was ever executed by the respondent. It is undated, there is no evidence as to the date upon which the signatures of Mr McFarland on behalf of Formrite and Mr Anderson on behalf of the applicant were applied to the document, and there is no evidence as to whether it was ever in the contemplation of Formrite and the applicant that it would be executed by the respondent. Furthermore, the lack of a date in Recital A in respect of the making of a subcontract between the respondent and Formrite, leaves open the question as to whether there ever was any such subcontract, although the respondent’s letter to Formrite of 31 August 2001 referred to above appeared to offer Formrite a subcontract limited to ‘mobilisation only of the resources necessary to carry out the Works’ which may well have been accepted by performance. Clearly, Mr Hemphill from Formrite was in Perth by early September 2001 and men sourced from WorkForce One were engaged in carrying out formwork activities from Monday 17 September 2001.

56 What became of the Business Sale contract between Formrite and Anderson Formrite Pty Limited is not entirely clear. Mr Anderson gave evidence that by 17 September 2001 ‘we’d severed our relationship and he’d [Mr Mylonas] transferred the shares in Anderson Formrite and the directorship to me.’

It will be recalled that Mr Anderson only became a director of Anderson Formrite Pty Limited on 19 September 2001 and that Mr Mylonas ceased to be a director on the following day, namely 20 September 2001. One might infer that the relationship which had been severed was that under which Mr Mylonas served as Anderson Formrite Pty Limited’s solicitor, sole director and secretary, rather than the relationship between Formrite and the applicant which only became the subject of an executed agreement on Wednesday 19 September 2001.

57 The respondent’s project diary daily report for 20 September 2001 included under the heading ‘Job Progress’:

‘● Formrite, Formed and poured Columns C16,14,18 and 19 and C17. Formwork to capping beam RW12.’

58 It would appear that at the time of receipt of the form of subcontract forwarded to Formrite under cover of the respondent’s letter of 12 September 2001 inviting execution and return of the subcontract by Formrite, the foreshadowed sale of business arrangement between the applicant and Formrite was still progressing.

Indeed, by letter dated 21 September 2001 from Mr McFarland as Director of Formrite to the respondent marked ‘Attention: Mr Tony Fletcher’, which was apparently sent by facsimile on that day, Mr McFarland said:

‘Re: 240 St George Terrace Perth

Formwork contract

I refer to our conversation of this morning in terms of the abovementioned contract and comment as follows:

1. Novation

Anderson Formrite Pty Ltd has a contract to acquire the business known as Formrite Pty Ltd which includes all Formwork plant and equipment and all existing contracts in hand.

The contract for the Perth project has been novated to Anderson Formrite Pty Ltd by Formrite Pty Ltd and all expenses, all employees including the project manager Mr Chris Hemphill and materials are being supplied and paid for by Anderson Formrite Pty Ltd.

As you know it is critical to the project’s success that the company (Anderson Formrite Pty Ltd) is seen to be West Australian owned and controlled by Mr Warren Anderson, a prominent West Australian businessman.

Formrite Pty Ltd has always acted on behalf of Anderson Formrite Pty Ltd in all the negotiations with the Perth contract to ensure West Australian involvement.

We would therefore appreciate your acceptance of this contract structure and approval of the novation of the contract.

2. Contract Finishing Date

I refer to our meeting in Perth between you and your representatives and myself, Mr Anderson , Mr Radoydcic, Mr Hemphill, Mr McKenzie and our discussions as to possession of the site.

At the meeting it was agreed that your company was not ready to accept Formrite on site. This was because various works on the site were incomplete and our presence would have been a useless exercise. Mr Surgen (sic) agreed with Mr Hemphill on site that the following Monday week (17 September 2001) would be the preferred date and as such we have complied with this date. We have therefore extended the completion date to the date written in the contract.

We hope the above meets with your approval and your positive recommendations to head office so that we may expedite the progress on site.’

59 It is apparent from the terms of Mr McFarland’s letter that he understood the meeting in Perth to which reference was made as one that had taken place on some day in the week commencing 3 September 2001 for which ‘Monday week’ was 17 September 2001.

60 The reference in Mr McFarland’s letter of 21 September 2001 to the contract for the Perth project having been novated by Formrite to the applicant would tend to suggest that the undated form of Deed of Novation referred to above had been executed by Mr McFarland for Formrite as the Original Subcontractor and by Mr Anderson for the applicant as Substitute Subcontractor shortly before 21 September 2001.

Whilst the respondent may have ended up entering into a subcontract for the formwork at the 240 St Georges Terrace site with the applicant on 11 October 2001 (see Exhibit 4) it is not apparent that the respondent ever agreed to a novation of any contract between Formrite and the respondent.

61 Even though Mr Anderson’s presence at a meeting in Perth in the week commencing 3 September 2001 may have led to an introduction of the applicant to the Woodside Building project, the first formal notification of its possible interest in entering into the formwork subcontract would appear to have flowed from Mr McFarland’s letter written on behalf of Formrite to the respondent on 21 September 2001.

62 When cross-examined about the relationship between the applicant and Formrite Mr Anderson gave the following evidence:

Counsel: ‘Mr Anderson, … you looked at this yesterday [a form of subcontract for formwork between the respondent as main contractor and Formrite as subcontractor] in the giving of your evidence … you looked at page 204 and 205 [referring to Exhibit B Volume 1], you’ll see it’s dated 12 September 2001 [at that stage no contract had been received by Formrite] and it is in the name of this – it’s been signed by Mr Mylonas?’

Anderson: ‘Mylonas, I think.’

Counsel: ‘… Mr Mylonas on behalf of Formrite, that’s right?’

Anderson: ‘Correct, and Mr Walker, yes.’

Counsel: ‘Now, up until the time that Formrite had actually received a contract your negotiations had continued and you expected to purchase as you’ve earlier described Formrite Proprietary Limited?’

Anderson: ‘Yes.’

Counsel: ‘When Mr Mylonas got the contract though he suddenly and significantly increased the price that he now was demanding for the purchase of Formrite, didn’t he?’

Anderson: ‘Yes.’

Counsel: ‘You didn’t agree with that increase in price?’

Anderson: ‘No, I did not.’

Counsel: ‘It was at that point, I think you’ve described it as a heated discussion between you and Mr Mylonas?’

Anderson: ‘Yes, because he went back on his word.’

Counsel: ‘… indeed I think there might have even been a grabbing for the contractual document?’

Anderson: ‘Well, I don’t know about that but I demanded, not the contract, I demanded the shares in Anderson Formrite and a resignation as a director.’

Counsel: ‘You demanded the contract that had been received by Formrite from Baulderstone?’

Anderson: ‘It may have been. I mean, I don’t know why I’d demand because I couldn’t do anything with it.’

Counsel: ‘… what you wanted to do was you wanted to thereafter, because of this breakdown in negotiations go back to Baulderstone and tell them that now you were no longer going to buy Formrite, didn’t you?’

Anderson: ‘That’s right. Yes, of course I did.’

Counsel: ‘You wanted to tell Baulderstone after this had happened that your plans had changed and you wanted to see whether you could take over this proposed contract at that stage … for work that was to start in a week or so’s time in Perth?’

Anderson: ‘No, I told them that I wanted the contract in Anderson Formrite’s name.’

Counsel: ‘… You wanted to take over the contract and put it into Anderson Formrite’s name?’

Anderson: ‘Yes, yes.’

Counsel: ‘But until … this breakdown had happened because the price had been increased for Formrite Proprietary Limited, you had expected to take over Formrite, buy its shares, etcetera?

Anderson: ‘Before that, yes.’

Counsel: ‘… and up until that time you had always told people that was your plan?’

Anderson: ‘Yes.’

63 The evidence is unclear as to what increase in price was demanded by Mr Mylonas and, as previously mentioned, what happened to the Business Sale contract between Formrite and the applicant. There is no evidence of the existence of any draft share sale agreement under which the applicant would buy the issued shares in Formrite.

The applicant’s pursuit of a formwork subcontract with the respondent

64 Mr Anderson gave evidence that to achieve a formwork contract in respect of the 240 St Georges Terrace Perth site in the name of the applicant he would have to ‘go to see Paul Watson in North Sydney to finalise that’. The evidence is not entirely clear as to when the meeting between Mr Anderson and Mr Paul Watson took place at the respondent’s North Sydney offices. Mr Anderson gave evidence that the meeting took place ‘late in September’ and that it took place after the 17th.

65 In relation to the Woodside Building project the respondent’s original project director was Mr Tony Fletcher, who did not give evidence. He was succeeded by a Mr David Walkenhorst on about 9 April 2002. Mr Walkenhorst did give evidence. He said that as project director for the Woodside Building project he reported to Mr Mike Frost a construction manager with the respondent who in turn reported to Mr Paul Watson.

66 The respondent’s administration manager in respect of the Woodside Building project was Mr Ian Glover who did give evidence. He held that position throughout the duration of the project. As administration manager he looked after the tendering process, cost controls and financial reporting for the project. Mr Glover reported to the project director, originally Mr Tony Fletcher and later Mr David Walkenhorst.

67 No officers of the respondent gave evidence other than Mr Glover and Mr Walkenhorst.

The only other witness called by the respondent was a Mr Benson who could best be described as an intermediary between Mr Anderson and Mr Paul Watson. Mr Benson had known Mr Anderson socially and in business for about 40 years. He had also been involved in business with Baulderstone Hornibrook Pty Limited in relation to the Aldoga Aluminium Smelter project at Gladstone in Queensland. In relation to that project he dealt with Mr Dempsey, the then Chief Executive Officer, and others involved in the senior management of Baulderstone Hornibrook Pty Limited including Brad Smith, Paul Watson and Mark Lamond.

68 Extracts from a statutory declaration made by Mr Paul Watson on 25 July 2002 (paragraphs 4, 31, 33, 35, 38 and 39) were admitted into evidence as Exhibit 15 and two paragraphs of a file note of a meeting between Mr Watson and the solicitor for the respondent of 3 December 2007 (paragraphs 5 and 10) were admitted into evidence as Exhibit 16. Mr Watson resides in Dubai and did not respond favourably to requests that he return to Australia to give evidence in these proceedings.

Mr Watson’s services with the respondent appear to have been terminated on or about 29 April 2002. The respondent’s view of Mr Watson was conveniently encapsulated in a file note which included:

‘We have no confidence in your [Mr Watson’s] ability to discharge your duties consistent with the organisation values’

69 The solicitor for the respondent, Mr Nicholas Mavrakis, gave brief evidence relevant to the admissibility of the evidence contained in Exhibit 16.

70 In relation to his meeting with Mr Paul Watson at the respondent’s North Sydney office that he attributed to a date after 17 September 2001, Mr Anderson gave the following evidence:

Senior counsel for the applicant:

‘When you went to see Mr Watson in his office did you tell him, in effect, that … you wished to carry out the Perth job in the name of Anderson Formrite?’

Anderson: ‘Yes.’

Counsel: ‘… Did he ask you why?’

Anderson: ‘Yes, he did. I told him that the negotiation had fallen over on Formrite and that I couldn’t proceed along those lines and that Anderson Formrite would be doing the job.’

Later in his examination in chief Mr Anderson repeated this evidence and said ‘we need a new contract in the name of Anderson Formrite.’

71 Mr Paul Watson’s statutory declaration of 25 July 2002 included:

‘31. I met Warren Anderson when a mutual associate John Benson introduced us. John and I had been working on another project at the time. He suggested that if BHPL were going to go to Perth that we should meet Warren Anderson because he knew everybody in Perth and had lived there all his life. John arranged for Warren Anderson, himself and me to have a cup of coffee. That meeting lasted about fifteen minutes …

…

38. I met Warren Anderson again late in 2001 in Sydney to the best of my recollection. BHPL has three levels at 40 Miller Street, North Sydney. The 9th Floor holds the Building Division. The 8th Floor holds the Civil Engineering and Heavy Industry and these floors have no meeting rooms on them. The 10th Floor had the meeting rooms. The meeting either took place on the 10th Floor or if they were fully booked it would have taken place in the coffee shop downstairs. The coffee shop became the meeting room.

39. I can’t recall exactly when this meeting was or what the subject matter of the meeting was.’

72 It would appear that Mr Anderson had a chance encounter with Mr Paul Watson of the respondent in the Qantas Club Lounge at Sydney airport on Thursday 20 September 2001. The persons present in the Qantas Club Lounge were Mark Lamond and Paul Watson of the respondent who were heading in one direction and George McFarland and Mr Anderson who were heading in another. Mr Anderson understood Mr Lamond to be the respondent’s Director of Building.

According to Mr Anderson ‘he [presumably Mr Lamond or Mr Watson] asked us [referring to Mr McFarland and Mr Anderson] how we were going and we said we have a few men onsite that we got from Work Force One and we’re ready to fire.’

Apparently Mr Watson enquired as to what rates from WorkForce ONE were being used. Mr Anderson says that that hadn’t been finalised whereupon Mr Watson said ‘Well, these are the rates’ and proceeded to write them down on a Qantas Club Lounge paper napkin (Exhibit A). The numbers which Mr Watson wrote on the napkin were as follows:

‘$40.16 x ORD [the rate of pay for ordinary hours]

$45.00 x 1 ½

$55.00 x 2

+TRAVEL PRODUCTIVITY

MEAL FRAME ALLOW [allowance]

SITE ALL [allowance]’

73 It is interesting to note that the rates charged to Formrite by Headlink Pty Ltd trading as WorkForce ONE were $38.96 per hour compared to $40.16 per hour for ordinary time in respect of Sean Croke as a Labourer Group 2 in the period 19-25 September 2001, that the time and half rate charged for him was $43.60 per hour rather than $45.00 per hour and that the double time rate charged for him was $53.50 per hour as opposed to $55.00. Other charges were added to cover ‘Travel Allowance’, ‘Meal Allowance’, ‘Site Allowance’, ‘Productivity’ and ‘Structural Frame’.

74 The rates which Headlink Pty Limited trading as WorkForce ONE charged Formrite for Ian Walker, as a carpenter in relation to the period 19-25 September 2001, were higher than the rates recorded on the Qantas Club napkin. The normal rate imposed was $42.16 per hour rather than $40.16, the time and a half rate was $47.00 per hour rather than $45 per hour and the double time rate was $57.00 per hour rather than $55.00 per hour. There were also charges imposed for ‘Travel Allowance’, ‘Site Allowance’, ‘Productivity’, ‘Structural Frame’ and ‘Crib Time – carpenter’. In respect of Mr Walker no ‘Meal Allowance’ was charged in respect of that period.

Tender Interview Checklist And Record

75 One of the respondent’s standard forms would appear to have been a document entitled ‘Tender Interview Checklist And Record’. In respect of the Woodside Building project a copy of the seven page form appears to have had material inserted into it by Mr Glover. On the first page of the document Formrite’s name was inserted as the ‘Tenderer’ and three dates were inserted. The first date recorded is 31 August 2001 against the words ‘TENDER DATED’ and, adjacent to that, the amount $12,345,000 against the words ‘TENDER AMOUNT’. In point of fact no tender dated 31 August 2001 was placed in evidence but the respondent’s letter to Formrite of 31 August 2001 is consistent with such a tender having been submitted by it on that day, albeit for a price that was $145,000 less than its revised offer of 30 August 2001. The second date was 21 September 2001, i.e. four days after work commenced, and the third, preceded by an arrow, was 25 September 2001.

76 It is clear that the tender interview, which led to the completion of the form, was conducted by a telephone conference in which the persons participating were shown as Tony Fletcher and Ian Glover of Baulderstone Hornibrook Pty Limited and George McFarland, Owen Walker and Craig McKenzie of Formrite. In respect of manpower and number of hours allowed for the project Formrite indicated that it had allowed for an average of 75 men and that the anticipated total man hours were 160,000. In section D of the checklist headed ‘Contractual’ the word ‘YES’ has been inserted against item 4 which provided:

‘4. It is acknowledged that, apart from what is contained in the Subcontract Agreement, no representations have been made by BHPL [a reference to the respondent] and there are no other understandings, agreements or arrangements with BHPL’

77 In evaluating the significance of section D item 4 in the context of a claim under s 52 of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’), it is important to have regard to what was said by Lockhart J, with whose reasons for judgment Burchett and Foster JJ agreed, in Henjo Investments Pty Limited v Collins Marrickville Pty Limited (No 1) (1988) 39 FCR 546 (‘Henjo’) at 561, namely:

‘… Section 52 is a section in the consumer protection provisions of an Act concerned to protect the public from misleading or deceptive conduct and unfair trade practices which may result in contravention of the Act. It has been held that exclusion clauses … cannot operate to defeat claims under s 52. It may be, as the judgment of Sweeney J in P J Berry Estates Pty Ltd v Mangalore Homestead Pty Ltd (1984) 6 ATPR 45,626 at 45,638 suggests, that such exclusion clauses will generally be ineffective because they cannot break the nexus between the conduct in contravention of s 52 and the making of the agreement in issue. …

There are wider objections to allowing effect to such clauses. Otherwise the operation of the Act, a public policy statute, could be ousted by private agreement. Parliament passed the Act to stamp out unfair or improper conduct in trade or in commerce; it would be contrary to public policy for special conditions such as those with which this contract was concerned to deny or prohibit a statutory remedy for offending conduct under the Act. …’

Whilst the Tender Interview Checklist And Record became a part of the ultimate contract between the applicant and the respondent, the response to section D item 4 was plainly given, albeit by Messrs McFarland, Walker and McKenzie on behalf of Formrite rather than the applicant, before the ultimate contract was made on 11 October 2001.

78 In respect of section F ‘Construction’ item 3 in the Tender Interview Checklist And Record provided:

‘3. Would you be using only your own employees to perform the work’

The answer which was inserted in the box to the right of this question was ‘NO’ and adjacent to that the words ‘WORKFORCE 1’ appear.

79 Relevantly, in relation to matters of representation, Mr Paul Watson’s evidence, for what it is worth, included ‘I have never given Warren Anderson any advice in relation to using Work Force One’ (see Exhibit 15).

80 On 3 December 2007 Mr Watson also denied saying to Mr Anderson at any stage that the respondent required as a condition of the successful award of the tender that Formrite or Anderson Formrite engage Workforce One to supply labour to execute the works. He said ‘under no circumstances did he ever require Formrite or any sub-contractor to use Workforce One labour’ (see Exhibit 16).

81 It would appear that the completed Tender Interview Checklist And Record was forwarded by the respondent to Formrite in the early afternoon of 25 September 2001 to allow for its execution by Formrite and return. The fifth page of the Tender Interview Checklist And Record made provision for its signature by the Tenderer. It is apparent that the form which was completed by Mr Glover and sent by facsimile from the respondent’s office in Perth to Formrite in Queensland was signed by Mr McFarland, who signed as the Tenderer’s ‘Director’, by Mr Owen Walker, who signed as the Tenderer’s ‘GM Construction’, and by Mr Craig McKenzie, who signed as the Tenderer’s ‘GM Projects’. Mr Walker had been the person who witnessed Mr Mylonas’ signature on the form of formwork subcontract sent by the respondent to Formrite under cover of its letter dated 12 September 2001 and which had the date ‘12 September 2001’ inserted into it.

The date 25 September 2001 was added below each of the three signatures.

82 The facsimile imprints appearing on the document, as so executed, indicate that on the morning of 27 September 2009 Formrite sent a facsimile copy of it to the respondent, presumably in Perth.

83 As it transpires the Tender Interview Checklist And Record referable to a tender received from Formrite, became part of a later executed formwork subcontract between the applicant and the respondent. When asked why he included the Tender Interview Checklist And Record referable to a contract with Formrite in a contract with Anderson Formrite Pty Ltd Mr Glover said ‘it’s my belief that those parties all represented Anderson Formrite Pty Ltd at a later date’. In the subcontract made on 11 October 2001 (see Exhibit 4), the applicant’s address was shown as that of Formrite, in Beenleigh, south of Brisbane.

The applicant as a successor to Formrite in relation to the Woodside Building project

84 On 21 September 2001 Crown Hire Pty Ltd sent a quotation to the applicant ‘Attention: George McFarland’ for the hire of self-climbing safety screens to the external perimeters of the main tower on the Woodside Building project. The tender was directed to the applicant at ‘PO Box 1009 NOOSA HEADS QLD 4567’ which it might be presumed was Mr McFarland’s postal address. A copy of the Crown Hire Pty Limited quotation was signed by Mr McFarland ‘For Anderson Formrite Pty Ltd’ beneath the words ‘I agree to the above subject to Anderson Formrite signing a Contract with Baulderstone Hornibrook for this project’.

85 It is not entirely clear how Mr McFarland came to find himself on the Formrite side of the record and also on the Anderson Formrite Pty Limited side of the record. He was not called to give evidence.

86 Furthermore it is not clear how the applicant came to succeed Formrite as the original tenderer for the subcontract work which was offered both a mobilisation contract and the ultimate subcontract. Perhaps the explanation lies in the matrimonial dispute which emerged in the Pask family to which reference was made earlier.

When asked whether the catalyst for him becoming interested in Formrite was the family dispute involving Mr Pask or something to do with the business that Formrite was hoping to conduct in Perth, Mr Anderson said:

‘It was really to purchase the business and the cash-flow attached to it and the profitability attached to it. George McFarland was going to take an interest in it, Joe Passione was going to take an interest in it and I was going to take an interest in it, and it was another business. And that developed before I was told about the project in Perth. That was earlier on.’

In about mid-January 2002 Mr Norm Pask found himself in Perth providing assistance to the applicant in relation to the Woodside Building project. According to Mr Bell:

‘He came into the job to do an independent review and he made a lot of unrealistic statements and suggestions to Warren [Anderson] about how the site should be run. He came from Queensland. … They do things differently in Queensland to how they do in WA.’

87 The evidence establishes that Formrite was a competent formwork company with extensive experience in Queensland. On the other hand the applicant was a start up company which included the word ‘Formrite’ in its name, but which had no formwork experience whatsoever and no or insufficient working capital.

88 The witnesses who gave evidence for the applicant were Mr Anderson, Mr Giuseppe (Joe) Passione and Mr Gordon Bell. Mr Passione was a bricklayer by trade, a developer, a registered builder and a registered real estate agent. He had undertaken some business courses at Harvard University in its Advanced Management Programme.

Mr Passione had 20 to 25 years of experience with building works across Australia having built more than 10,000 homes and carried out in excess of $1 billion of construction work including a hospital, schools, prisons, showrooms, factory units etc. However, apart from his involvement in the Woodside Building project he had not constructed any high-rise buildings.

89 He became involved in the Woodside Building project in early October 2001 after receiving a telephone call from Mr Anderson. Mr Anderson informed Mr Passione that he had purchased a company called Formrite based in Queensland but that the deal had fallen through. He asked if Mr Passione was in a position to assist him with some contract administration and payroll duties for his new company, Anderson Formrite Pty Limited.

Mr Anderson informed Mr Passione that he had won the Woodside job in the name of Anderson Formrite Pty Limited. When they first spoke Mr Anderson informed Mr Passione that the job had already started.

90 Mr Passione agreed to go and see Mr Anderson and talk further about his proposal for assistance. He then went to see Mr Anderson who, at the time, was in the company of Mr McFarland. Mr Anderson introduced Mr McFarland to Mr Passione as ‘the man running Formrite and his partner in Anderson Formrite’. Mr Passione informed Mr Anderson and Mr McFarland that they should seek some advice. He mentioned the name of George Ferrara who ran a very successful formwork company trading as F&F Construction, a company based in Western Australia which had completed the last high-rise building to be erected in Perth, just across the road from the Woodside Building construction site. Mr Anderson indicated his agreement with Mr Passione’s proposal. Either Mr Anderson or Mr McFarland informed Mr Passione that the people then running the project were Mr Chris Hemphill, as site foreman, and Mr Alan Watson as his assistant. On 16 October 2001 Formrite (Qld) Pty Ltd invoiced the applicant for Mr Hemphill’s and Mr Alan Watson’s wages up to and including that day.

91 Mr Passione proceeded to become involved in the project himself. His recollection was that this was in the first week of October 2001. At that time he contemplated that he would be helping with the administration of the project and obtaining assistance from several people in his own office in so doing. He also had in mind engaging some very good tradespeople and labour and seeking a lot of advice and assistance from successful people in the formwork business.

92 Mr Passione had an office in the Perth suburb of Malaga where he had about a dozen employees working for his business. Mr Passione was of the opinion that to run a successful formworking job one needed to have a ratio of three to four carpenters for every labourer.

In October 2001 Mr Passione’s role in relation to the Woodside Building project evolved into that of a full-time project manager for Anderson Formrite Pty Limited.

On 26 April 2002 Mr Passione swore an affidavit in proceedings in the Supreme Court of Western Australia where he said:

‘9. My initial involvement was to provide an administrative office to handle site payroll, accounts payable, accounts receivable, secretarial support and general administrative duties for the Woodside Building project only. The [applicant’s] Western Australian office continued and still continues to be based in Lawton House, West Perth.

10. I commenced on site within a day or two of my initial meeting with Warren Anderson and George McFarland and was introduced to Chris Hemphill and Alan Watson, both site managers for Formrite Pty Ltd of Queensland. They provided me with the background to the project over the ensuing week as they were both returning to Queensland.’

93 The third witness called for the applicant was Mr Gordon Bell of Bell Constructions Pty Limited. Mr Bell was a man with over 30 years experience in the building and construction industry. He was a carpenter by trade who progressed through the industry to become a foreman, an estimator, a project manager and a territory manager. He became the State Manager Building Operations for John Holland in Western Australia and later the State Building Manager for Victoria.

Mr Bell established his own building company, Bell Constructions Pty Limited. He is now a builder and developer. In the period 1988-1990 Mr Bell worked for a company called Interstruct on the construction of the 44 storey building in Perth known as the ‘QV1 Building’ which was across the road from what later became the Woodside Building construction site.

In the course of his building industry experience at varying levels and on a number of projects, Mr Bell became acquainted with the formwork side of construction jobs.

94 In 2001 Mr Bell was based in Darwin. He had a telephone discussion with Mr McFarland in connection with the possibility of his relocating to Perth to work on the Woodside Building project. At the end of October 2001 he had a breakfast meeting with Mr McFarland and Mr Anderson at the Rydges Hotel in Perth, just along the road from the Woodside Building site. They were seeking someone to look after the scope of works on site and Mr Bell understood that to be the role that they wished him to perform.

95 He became the applicant’s ‘Construction Manager’, relocated back to Perth and started with the applicant a week later.

When he took up his position it wasn’t exactly what Mr Bell thought it would be. It was more a case of reporting to Mr Passione, who was the project manager for the applicant, and it was more of a procurement role than a construction manager’s role. At the outset his role was more of a desk job than a hands-on role.

Whilst Mr Bell was on site on a daily basis, he did the majority of his work offsite organising the types of materials that the applicant would use for the job and sourcing materials and suppliers. He was on the site several times a day and consulted with Mr Passione several times a day. He either worked from the applicant’s site office or from his Rydges Hotel room just down the road.

Mr Bell’s work evolved into one where he became responsible for managing the progress of the works on site.

The witnesses who were called to give evidence

96 The impressions which I formed of the witnesses who did give evidence, firstly for the applicant, was as follows:

Warren Perry Anderson

Mr Anderson had a generally good recollection of events which occurred in 2001-2002. However, he was a ‘big picture’ man who did not concern himself with matters of detail. He was too detached from the work the subject of the subcontract.

The respondent submitted that Mr Anderson was ‘pushing a barrow’, his memory was selective and he should be viewed unfavourably by reference to evidence which he gave to the Royal Commission into the Building and Construction Industry.

Gordon Douglas Bell

Mr Bell impressed me as a highly qualified and experienced builder and developer with a good understanding of the requirements for the successful execution of a formwork contract and the means whereby such a contract should be performed. He was a ‘no nonsense’ operator who was appalled by the lack of productivity on the Woodside Building project. I considered him to be a reliable witness.

The respondent generally accepted the above assessment of Mr Bell.

Giuseppe (Joe) Passione

Mr Passione was called to give evidence on subpoena.

My impression of Mr Passione was that he was a very decent person, that he was professional, careful and reliable.

The respondent submitted that the fact that Mr Passione had been called to give evidence on subpoena should not influence the Court’s judgment, treating his evidence as that of an independent witness, on that account.

The respondent also submitted that the Court ought not to rely on everything that Mr Passione said.

97 In relation to the witnesses who were called for the respondent my impressions were as follows:

David Allan Walkenhorst

Mr Walkenhorst replaced Mr Tony Fletcher as the respondent’s project director on the site. He only arrived at the Woodside Building site in early April 2002. He made an early decision to remove the applicant from the job but at the time when he initiated the termination of the formwork subcontract, he lacked an in-depth knowledge of the job. Mr Walkenhorst’s memory of the events of April-May 2002 and thereafter, in relation to the Woodside Building project, was not reliable.

The respondent submitted that Mr Walkenhorst’s evidence should be viewed on the basis that he was a good record-keeper for the period of time when he was on the job and that one could rely upon his contemporaneous notes.

John Robert Benson

Mr Benson was a go-between for the applicant and the respondent. He was a middleman. He was decent and was not partial to either side.

The applicant submitted that Mr Benson was a man who was doing the best he could to remember something that didn’t really matter too much to him.

Ian Leslie Glover

Mr Glover was a very honest, decent and professional person.

However, the applicant submitted that he was not a particularly relevant witness to the issues in the case.

A contract between the applicant and the respondent

98 The applicant certainly had a direct relationship with the respondent as of Thursday 11 October 2001. That is the date upon which a formal Instrument of Agreement for the execution of the formwork subcontract works was entered into between the respondent as ‘Main Contractor’ and the applicant as ‘Subcontractor’. The subcontract was signed by Mr Paul Watson for the respondent, his signature being witnessed by Mr Ian Robert West, an officer of Baulderstone apparently based in Sydney. The formal Instrument of Agreement was executed by Mr Anderson for the applicant, his signature being witnessed by Mr Frederick Neville Cole who was then located in Perth.

99 On 11 October 2001 the applicant forwarded its ‘PROGRESS CLAIM NO 1’ to the respondent. It bears the respondent’s receipt stamp also dated 11 October 2001. The Progress Claim No 1 was signed by Mr S Sukumar, known as ‘Kumar’, a quantity surveyor in the employ of Mr Passione’s business. Mr Sukumar signed the document for, somewhat curiously:

‘George McFarland

CONSTRUCTION DIRECTOR’

The amount claimed was $381,161. The progress claim was expressed to be ‘for the work completed to date per attached details’. The ‘attached details’ are not readily identifiable. The evidence includes a four page ‘Progress Claim No 1’ document apparently prepared on 8 October 2001 which is without any relevant detail. It has a ‘Page 1 of 4’, a ‘Page 2 of 4’, a ‘Page 3 of 4’ and a ‘Page 4 of 4’ with some manuscript additions on the first page. There is nothing to support a calculation of $381,161. The document was clearly prepared for use by Anderson Formrite Pty Ltd rather than Formrite Pty Ltd.

100 The copy of the Progress Claim No 1 of 11 October 2001 has been endorsed with a manuscript note reading:

‘Fax sent re

Claim Structure

Pay $353436’

101 On 25 October 2001 the respondent brought into existence a ‘RECIPIENT CREATED TAX INVOICE’ directed to the applicant at 9 Montgomery Way, Malaga, WA in relation to the Woodside Building project. The adjusted contract sum as at 25 October 2001 was shown as $12,345,000.00.

The total claimed by Anderson Formrite Pty Limited as the subcontractor to 11 October 2001 was shown as $381,161.00 and the payment calculation for the period ending 11 October 2001 was shown as $353,436.00 to which GST of $35,343.60 was added. The tax invoice indicated that the resultant ‘Payment Amount’ was $388,779.60. This amount would appear to have been remitted by the respondent into the applicant’s bank account on 25 October 2001.

It is far from clear whether the applicant as opposed to Formrite undertook any work for the respondent prior to 11 October 2001. If it did, it did not do so pursuant to any contract for the execution of the work by the applicant.

102 The applicant submitted its Progress Claim No. 2 on 24 October 2001. It contended that the value of the contract work completed was $371,104.00. It sought payment of that amount plus 10% GST. By a ‘recipient created tax invoice’ issued on 1 November 2001 the respondent authorised payment in full of Progress Claim No. 2.

Termination for convenience

103 The formwork subcontract, between the applicant and the respondent contained an unusual clause permitting ‘Termination for convenience’. Clause 39.12 provided, under such heading:

‘39.12 Without prejudice to any of the Main Contractor’s other rights under the Subcontractor (sic), the Main Contractor may:

(a) at any time for its sole convenience, and for any reason, by written notice to the Subcontractor terminate the Subcontract effective from the time stated in the Main Contractor’s notice or if no such time is stated, at the time the notice is given to the Subcontractor; and

(b) thereafter, at its absolute discretion, complete the uncompleted part of the Subcontract Works either itself or by engaging other contractors (other than the Subcontractor).’

104 The inclusion of such a clause rendered it necessary for another provision to be included in the contract which ensured that there was consideration for the applicant’s various promises. Under clause 39.13(a)(iv), when taken with Item 40A of ‘Part A – Annexure to the General Conditions of Subcontract’, a payment of an amount of $1 by the respondent to the applicant was required in the circumstances for which clause 39.12 provided.

105 Clause 39.13 headed ‘Costs’ provided as follows:

‘39.13 If the Main Contractor terminates the Subcontract under subclause 39.12, the Subcontractor:

(a) will be entitled to payment of the following amounts as determined by the Main Contractor’s Representative:

(i) for Work carried out prior to the date of termination the amount of which would have been payable if the Subcontract had not been terminated and the Subcontractor submitted a progress claim for work carried out to the date of termination;

(ii) the cost of goods or materials reasonably ordered by the Subcontractor for the Subcontract Works for which the Subcontractor is legally bound to pay provided that:

A. the value of the goods or materials is not included in the amount payable under sub-paragraph (i); and

B. title in the goods and materials will vest in the Main Contractor upon payment;

(iii) the reasonable costs of removing from the Site all labour, Temporary Works and Construction Plant and other things used in WUS [work under the Subcontract]; and

(iv) the amount specified in Item 40A [$1]; and

(b) must:

(i) take all steps possible to mitigate the costs referred to in sub-paragraphs (a)(ii) and (a)(iii); and

(ii) immediately hand over to the Main Contractor all copies of;

A. documents provided by the Main Contractor; and

B. Design Documents prepared by the Subcontractor to the date of termination (whether complete or not).

The amount to which the Subcontractor is entitled under this subclause 39.13 will be a limitation upon the Main Contractor’s liability to the Subcontractor arising out of, or in any way in connection with, the termination of the Subcontract and the Subcontractor may not make any claim (including under the Subcontract or otherwise at law or in equity) against the Main Contractor arising out of, or in any way in connection with, the termination of the Subcontract other than for the amount payable under this subclause 39.13.

This clause 39.13 will survive the termination of the Subcontract by the Main Contractor under subclause 39.12.’

106 It is important that emphasis be given to the last sentence in clause 39.13, as there was no provision for the survival of any other clauses of the subcontract, in the event of its termination by the respondent ‘for convenience’ in accordance with clause 39.12. The parties’ intention in that regard was quite clear.

107 One clause upon which the respondent sought to rely in this case was clause 41 headed ‘Notification of Claims’ which provided for a time bar in relation to the making of certain claims in the absence of compliance with one or other of clauses 41.1, 41.2, 41.3 or 41.4.

In my opinion the time bar clause contained in clause 41.5 of the formwork subcontract had no application once the respondent elected to terminate the subcontract for convenience in accordance with clause 39.12. Similarly, clause 42, dealing with dispute resolution, had no application to disputes arising after the formwork subcontract was terminated for convenience by the respondent.

108 As it transpires the formwork subcontract entered into between the applicant and the respondent bearing date 11 October 2001 was terminated by the respondent in accordance with clause 39.12(a) on 17 May 2002.

109 The notice of termination was given by a facsimile bearing date 17 May 2002, apparently transmitted by the respondent at 3.23 pm on that day by Mr David A. Walkenhorst as ‘PROJECT DIRECTOR’ of the respondent. The notice was on the respondent’s letterhead brought into existence for the ‘240 St Georges Terrace Project’. It provided as follows:

‘NOTICE UNDER CLAUSE 39.12(a) OF THE

GENERAL CONDITIONS OF SUBCONTRACT

17^th May 2002

Anderson Formrite Pty Ltd

9 Montgomery Way

MALAGA WA 6090

Attn: Mr Warren Anderson

Dear Sir

RE: 240 St Georges Terrace, Perth

Termination for Convenience

Pursuant to subclause 39.12(a) of the General Conditions of Subcontract forming part of the subcontract dated 11 October 2001 (“Subcontract”) between Baulderstone Hornibrook Pty Ltd (“BHPL”) and Anderson Formrite Pty Ltd (“Anderson Formrite”), BHPL terminates the Subcontract for its sole convenience.

BHPL reserves all other rights it may have against Anderson Formrite.

Yours faithfully

BAULDERSTONE HORNIBROOK PTY LTD

[signature]

DAVID A WALKENHORST

PROJECT DIRECTOR’

110 Mr Walkenhorst had prepared some notes referable to the continued engagement of the applicant. His comments and recommendation included:

‘3. … AF [the applicant] will not be able to make a profit by any means other than litigation. …

…

12. Recommendation – I strongly recommend that we cut AF adrift as quickly as possible. …

Had AF been prepared to put cash into the project as promised and had they displayed a different attitude to BHPL [the respondent] and 240 St Georges Tce and had they competent management ability, the recommendation may have been more conventional ie. support AF through to completion.

…’

111 On and about Friday 17 May 2002 there was a flurry of activity. Following the service of the Notice of Termination, Anderson Formrite Pty Limited’s staff including Mr Passione were called upon to leave the site and were thereafter locked out and deprived of access to it.

The use of the applicant’s plant and equipment after 17 May 2002

112 After receiving the respondent’s Notice of Termination, the applicant wrote a letter to the respondent on 17 May 2002 as follows:

‘You have purported to give us today a notice of termination for convenience. We are considering this notice and at this time we reserve all our rights.

In the meantime, please note that Anderson Formrite’s plant and equipment is not to be used by Baulderstone Hornibrook or anyone else on Baulderstone Hornibrook’s authority for the works or for any other purpose.

Nothing in this letter should be taken as an acceptance of the notice.’

This letter was handed by Mr Passione to Mr Walkenhorst on the morning of 18 May 2002.

113 On 21 May 2002 the applicant forwarded a letter by facsimile to the respondent in which it said, inter alia:

‘… BHPL has ignored our letter of 18 May 2002 (sic) regarding plant and equipment at the site and has been using Anderson Formrite’s tools, ply, Trueform, Tableform System, screens, hoists and hire equipment without consent. This plant or equipment is either owned by Anderson Formrite or Anderson Formrite has the right to its possession. BHPL’s use of that plant and equipment is unlawful.

…’

114 The applicant wrote once again to the respondent on 24 May 2002 on a ‘Without Prejudice’ basis in respect of the continued use of its plant and equipment. The letter provided:

‘Further to discussions between you [Mr Walkenhorst], your Mr Len Hall and our project manager, Mr Joe Passione on Tuesday, 21 May 2002 we confirm our desire to resolve the continuing usage of hire plant and equipment associated with the subcontract.

Annexure ‘A’ details the list of hire plant and equipment currently on Site and the respective hire companies. All on-going charges as of close of business Friday 17 May 2002 are to Baulderstone Hornibrook’s (‘BH’) account. Charges for hire plant and equipment will continue to accumulate to BH’s account except for plant and equipment which is returned to the respective hire companies.

We suggest BH advise Anderson Formrite (‘AF’) what plant and equipment it wishes to retain on hire, if any. If BH wishes to retain specific plant and equipment AF will advise the hire company accordingly and will arrange for the company to deal directly with BH and transfer charges to BH as of 18 May 2002. The remaining plant and equipment not required by BH could be removed from site by AF and returned to the hire company or alternatively BH can arrange for return directly to the hire company(s). If BH prefer AF to return all or specific items of plant and equipment, we request immediate access to Site so that this can be effected without further delay.

We intend to advise the hire companies in writing on Monday 27 May 2002 that Baulderstone Hornibrook Pty Ltd has taken possession of all hire equipment. We expect that the various companies will not only contact us but will wish to contact your offices. We accordingly, offer you the opportunity to nominate someone from your organization that can be contacted by these companies. Our Mr Peter Mackiewicz will make contact with your offices in respect of this matter.’

115 Mr Passione recalled having a discussion on 21 May 2002 and believed it to have been in a telephone conversation. Nothing further was elicited in his evidence in chief or in cross-examination as to the substance of the relevant conversation. Mr Passione observed that ‘[e]ven though we were in dispute I don’t think we needed to act like animals so I just extended that courtesy.’ The courtesy referred to was to invite the respondent to pick up the leases which the applicant sought to terminate effective 17 May 2002.

When asked why it was that Mr Passione brought the document described as ‘Annexure “A”’ into existence his answer was:

‘I wanted to crystallise the liability of the hired equipment on site.’

In cross-examination Mr Passione once again spoke of his desire to crystallise the applicant’s liability as at 17 May 2002 in respect of hired equipment. He gave the following evidence in relation to that matter:

Senior counsel for the respondent:

‘Did you write to all of the companies from which Anderson Formrite was hiring equipment in similar terms?’

Passione: ‘I don’t recall if I wrote to all of them but I definitely made contact with every single one to let them know. So it could have been a combination of writing or phone call. I was trying to coordinate a – or I was extending some courtesy to Baulderstone and I gave them all of the details of all of the companies involved with the hire. If they wished to continue with them they had that information available.

… I wanted to crystallise our liability at 17 May and at the same time not frustrate Baulderstone by instructing I’m undergoing pick-up, gave them the opportunity to deal direct with them.’

Counsel: ‘… you notified everybody from whom Anderson Formrite was hiring equipment that as of the 17^th that hire arrangement was over?’

Passione: ‘Yes.’

Counsel: ‘You notified Baulderstone of that fact to give Baulderstone the opportunity to take on a hire arrangement if it wanted to?’

Passione: ‘I extended that courtesy, yes.’

…

Counsel: ‘… in any event, you had given them the courtesy of taking over the hires if they wanted to?’

Passione: ‘Yes. Probably had no authority to do so but …’

emphasis added)

116 By way of reply to the applicant’s letter of 17 May 2002 concerning the use of its plant and equipment, the respondent wrote to the applicant in the following terms on 28 May 2002:

‘RE: 240 St Georges Terrace, Perth

Equipment and Materials

We refer to the letter dated 17 May 2002.

We are currently in the process of cataloguing the exact equipment, materials and other things on site and ascertaining who owns it. The list supplied by you will greatly assist us in this task. As you can appreciate, there are a number of subcontractors who work on the site and it is incumbent on us to undertake this exercise.

Once we have completed this task, we will contact the relevant owners and arrange for delivery/collection or for any hiring, as well as notifying you.

Should the decision be to hire any of this equipment, then we are prepared to accept reasonable hiring rates from and including 18 May 2002.

Any owners of equipment wishing to speak to us should contact Baulderstone Hornibrook Commercial Manager Mr Len Hall directly on (08) 9324 3544.’

Presumably, the ‘list supplied by you’ comprised six pages recording details of plant and equipment recorded on three separate documents. The first (see the applicant’s letter of 24 May 2002) was entitled:

‘ANNEXURE A

HIRE PLANT AND EQUIPMENT

DATE: 17 MAY 2002’

The second document appeared to be a computer generated document printed shortly after 10 am on 20 May 2002 (three pages) headed:

‘BALANCE SUMMARY FOR PERTH

PAO3 - ANDERSON FORMRITE PTY LTD’

The third document, comprising two pages, was headed:

‘Construction Sales & Hire Pty Ltd Branch Construction Sales & Hire Pty Ltd Date: 23/05/2002’

This document had a major heading ‘Job Balances’ on each page and made reference to the ‘Woodside’ site in Perth.

In the course of his evidence in chief Mr Passione was asked whether he prepared or assisted in the preparation of Annexure A to which he said ‘yes’. He proceeded to indicate that Annexure A ‘tells you all the companies that hired equipment to us as at 17 May’, that the first column identified the relevant lessor under a hire arrangement, the second column identified the relevant contact person at the hire company, the third column identified the contact person’s telephone number, the fourth column gave the description of the goods provided by the hire company and the fifth column provided the approximate quantity so hired. Mr Passione’s evidence continued:

Senior counsel for the applicant:

‘… Where were these items last seen by you prior to 17 May?’

Passione: ‘On site.’

Mr Passione proceeded to identify the second document referred to above as one listing the plant and equipment on hire from Rapid Metal Developments (Australia) Pty Limited (RMD) and the third document as recording plant and equipment on hire from Construction Sales & Hire Pty Limited (Construction Sales).

Industrial Relations considerations

117 One of the respondent’s documents was a four page memorandum entitled ‘Woodside Project – Industrial Relations Considerations’. The copy of that document which is in evidence bears a date at the foot of each page ‘04/01/00’. The memorandum included:

‘Background

1. This Project will be built during a period of very low activity in the Perth Commercial Building sector. By virtue of this fact and the sheer size of the Project, it will be the subject of high expectations from CFMEU Officials and their support groups.

In addition, the involvement of a C+BUS investment vehicle in funding the Project has enhanced the image of the CFMEU Secretary, Kevin Reynolds, as having a pivotal role in the way the job is established and in the determination of employment conditions for the Project workforce.

2. Projects of this size and nature in Perth are generally the subject of a Project Agreement. This trend has survived the introduction of the Workplace Relations Act, designed to make the formation of multi-employer agreements difficult. Like Sydney and Melbourne, CBD building in Perth is dominated by the Union and attracts higher payments than other sectors and is characterised by high levels of union membership.

3. The CFMEU is the principal union in the CBD building sector. The union is an amalgamation of the FEDFA, BLF & BWIU. The Secretary, Kevin Reynolds, was the long time BLF Secretary and has been the dominant construction industry union leader for over a decade. He is also a key figure in the WA Branch of the Australian Labor Party.

Amalgamation has been used by Kevin to merge his highly organised BLF with other unions and then drive out any opposition. The recent amalgamation between the BLF and the CFMEU featured a variation to this pattern. Kevin ran a candidate for CFMEU Secretary against the incumbent (and won), so that on amalgamation the CFMEU Secretary accepted a lesser position in the new organisation with Kevin becoming overall Secretary.

…

Baulderstone relation with CFMEU

5. The context for this is the North Perth Bypass Project. The job was established well, with the starting rates in the Agreement being well in excess of the industry standards on commencement. The relationship soured however, over three issues: claims by the union for appointment of a union nominee as delegate and for the addition of income protection cover to the Agreement (after signing and certification); operations of a BCJV Bonus scheme introduced unilaterally by BCJV management; and retrenchment of the CFMEU delegate well prior to the end of the Project. Although there have been other bones of contention (such as operation of the Special Project Allowance) these were the key issues.

In each case, BCJV management was successful in obtaining their preferred outcome. The price however, is that Baulderstone’s relationship with Kevin Reynolds is very poor at a local level. We can expect him to play up the ‘hostility’ in the lead up to and during the early stages of establishing the Project Agreement.

IR Issues

6. The issues for consideration include the following:

· Project Agreement based on the ‘right’ standards

· Subcontractors signing pattern agreements

· Delegate(s)

· Union nominated employees

· Day-to-day union access to and involvement in the site.

· Recognition of Kevin Reynolds

…

Delegate

11. The BCJV delegate has been extremely effective in maintaining a relationship with the Union and proactively resolving issues raised by the workforce. I recommend that we employ him on this Project. I also suggest we ensure the principal structural subcontractors have similar calabre (sic) delegates.

…

Recognition of Kevin Reynolds

14. Ensuring that establishment of the Project Agreement, the training regime, appointment of the delegate and establishment of the site are seen as ‘wins’ for Kevin is very important. …

…

Bargaining Agenda

15. Should the Project proceed, we will need a meeting with Kevin Reynolds prior to Christmas to negotiate a Heads of Agreement (HOA) based on the above. …’

118 Mr Benson, who had enjoyed extensive business contacts with the respondent in the past, had occasion to have a discussion in the year 2000 with Mr Paul Watson, who indicated that he was moving into a construction project in Perth. During the course of the conversation Mr Benson said to Mr Watson that he would be well advised to meet somebody like Mr Roberts from Multiplex or Mr Warren Anderson whom he described as ‘established people in Western Australia’. Mr Benson said to Mr Watson words to the effect ‘if you have not been operating in Western Australia, let me introduce you to some people who are familiar with the construction industry in Western Australia.’

119 Thereafter, Mr Benson contacted Mr Anderson and asked him whether or not he would be kind enough to meet with Mr Paul Watson to assist Mr Watson in entering into the construction market in Western Australia. Mr Anderson replied with words to the effect ‘Yes, sure’ whereupon a convenient time for a meeting was appointed.

120 Mr Benson proceeded to arrange for Mr Paul Watson and Mr Anderson to ‘meet over a coffee’. The meeting would appear to have taken place at a coffee shop in Bond Street in Sydney and was attended by Mr Paul Watson, Mr Anderson and Mr Benson. The coffee shop meeting would appear to have lasted for about 15 minutes. After introducing himself to Mr Anderson, Mr Paul Watson made it known to Mr Anderson that he understood him to be well acquainted with the unions in Western Australia. He asked Mr Anderson to ‘help him with introductions to Kevin Reynolds in Perth’, because the respondent was thinking of a major job that was coming up in Perth and Mr Watson needed to be able to contact the unions and talk about an agreement. Mr Watson informed Mr Anderson that the contemplated project would be a large one but the detail was not the subject of discussion.

121 Following the coffee shop meeting, Mr Anderson attempted to contact Mr Kevin Reynolds for him.

122 On about 14 March 2000 a wage agreement was made between Global Human Resources Group Pty Ltd trading as Workforce One, the Western Australian Builders’ Labourers, Painters and Plasterers Union of Workers and the Construction Mining Energy Timberyards Sawmills and Woodworkers’ Union of Australia – WA branch and all employees of the company eligible to be members of the unions. The agreement was known as the ‘Workforce One/BLPPU and the CMETU Collective Agreement 1999’. It was expressed to apply to ‘all employees of [Workforce One] engaged on work in or in connection with construction, alteration, maintenance, repair or demolition work’ in Western Australia. Its period of operation was expressed to be from the first pay period commencing on or after November 1^st 1999 and to remain in force until the 1^st of November, 2002. The agreement would appear to have been executed for WorkForce ONE by Mr Kevin McHugh. It appears to have been executed by Mr Kevin Reynolds for the Western Australian Builders’ Labourers, Painters and Plasterers Union of Workers and by another person for the Construction Mining Energy Timberyards Sawmills and Woodworkers Union of Australia – WA Branch.

123 On 13 November 2000 an Enterprise Agreement was entered into between the CFMEU and the respondent to

‘regulate the wage rates and define the conditions of employment of all Company employees engaged full-time on site to perform construction work on the Project within the classifications set out in the relevant parent awards’

The agreement was expressed to apply to ‘all building, structural, mechanical, plumbing, electrical and instrumentation work and all associated works undertaken on the Project by the Company’s employees.’

The duration of the enterprise agreement was recorded in clause 1(e) as:

‘This Agreement will apply from the date of signing by the parties for three years or until construction of the Project is complete, whichever occurs first.’

The enterprise agreement appears to have been signed for the CFMEU by Mr Kevin Reynolds on 13 November 2000. The ‘Project’ was identified as the site at 240 St Georges Terrace, Perth. On 6 December 2000 the enterprise agreement was certified as a greenfields agreement and came into force between the respondent and the CFMEU.

124 It will be recalled that on 10 January 2001 Mr Paul Watson notified the respondent’s Mr Newton-Brown that ‘To commence work on Site after 15/1/01 you need to employ Roy McIllrane (sic)’ as delegate and Peter Delaney as the safety officer. Mr Roy McIlwaine in fact became an employee of the respondent and he became the Site Delegate. He represented the CFMEU on site. Mr McIlwaine is now deceased.

125 On 22 October 2001 a wage agreement was made between the applicant, the CFMEU and ‘all employees of the company eligible to be members of the union’. That agreement would appear to have been signed for the applicant by Mr Passione on 17 October 2001 and signed for the CFMEU by Mr Kevin Reynolds on 22 October 2001.

126 On 31 October 2001 the union applied to the Western Australian Industrial Relations Commission for registration of the wage agreement which was to be known as the ‘Anderson Formrite Pty Ltd/CFMEUW Collective Agreement 2001’. The agreement was expressed to apply to

‘all employees of the company engaged on work in or in connection with construction, alteration, maintenance, repair or demolition of buildings or other structures of any kind whatsoever, on the Woodside Project located at 240 St Georges Terrace, Perth, bound by Hay and Milligan Streets’

It was noted that the agreement was to apply in Western Australia only and that there were approximately 50 employees covered by the agreement. The period of operation of the agreement was expressed in clause 6 as follows:

‘6. This agreement shall come into force from the first pay period commencing on or after the date of signing and shall remain in force until the 1^st of November, 2003, or until completion of the Woodside Project, whichever occurs first.’

127 On 17 May 2002 Mr McIlwaine signed a communication on blank paper purporting to tender to the applicant the resignations of 40 men. His letter to the applicant was marked ‘Attention: Mr Joe Passione’. The text of the letter before the inclusion of the listed men’s names read as follows:

‘RE: 240 St Georges Terrace, Perth.

Resignation of Workforce (Carpenters & Laborers)

As the Site Delegate and therefore the duly elected representative of the workforce on the above mentioned site, on behalf of the following listed men I write to advise you that effective 4.00pm Friday 17 May 2002 the aforementioned listed men tender their resignation.’

On 20 May 2002 Mr McIlwaine sent a further letter to the applicant purporting to tender a resignation on the part of another man ‘effective 4.00pm Friday 17 May 2002’.

Even though Mr McIlwaine was an employee of the respondent he purported to tender resignations to the applicant of men over whom he had no authority.

There was no evidence to establish that he was ‘the duly elected representative of the workforce on the [Woodside Building] site’ or that he had been appointed as the agent of any men working for the applicant.

Progress Claim No. 18 of 3 May 2002

128 At some stage during the course of the works the methodology whereby progress claims were made was changed so that payment was calculated by reference to an anticipated cost to complete.

129 The applicant’s Progress Claim No. 18 of 3 May 2002 was directed to Mr Ian Glover of the respondent. It was signed by Mr Peter Mackiewicz for the applicant and gave Mr Passione’s address as that of the applicant. It called for the payment of $188,302 plus 10% GST. It was apparently accompanied by a standard four page progress claim document of the same date.

Page 4 of the accompanying document included a breakdown of the Original Contract Sum of $12,345,000 as follows:

‘Hotel Substratum $618,370

Western Building $166,910

Tower $7,750,325

Tower Columns 1,146,020

Core Slabs $680,490

Core Stairs $230,285

Tower Screen $1,000,000

Preliminaries $752,600

… $12,345,000’

To the amount of $12,345,000 an amount of $17,885 was added for ‘VARIATIONS’, followed by a total figure of $12,362,885.

130 The amount of $188,302 the subject of Progress Claim No. 18 was derived by taking the ‘Original Contract Sum’ of $12,345,000 and deducting therefrom five amounts totalling $12,156,698 being:

‘Cost to Complete $6,341,043

Cost in excess of $12,345,000 $443,350

Loan Repayments 1. $350,000

2. $350,000

Paid to Date $4,672,305

12,156,698’

A loan agreement between the applicant and the respondent

131 The ‘Loan Repayments’ included in the calculation are readily explained. On or about 17 December 2001 a loan agreement was entered into between the applicant and the respondent ‘to make a single Advance to the Borrower [the applicant] under the Facility up to an aggregate principal amount not exceeding the Facility Limit [meaning, relevantly, $1,050,000] subject to the terms of …’ the loan agreement. The purpose of the loan was to provide the applicant with working capital.

132 The loan agreement provided for a ‘Termination Date’ being the earlier of:

‘(a) 1 May 2002, or such other date as may be agreed in writing between [the respondent] and [the applicant]; and

(b) any date on which the Facility is terminated or cancelled by [the respondent] in accordance with this document.’

The loan agreement contemplated the drawdown of the Advance in three equal tranches.

As it transpires Mr Anderson as the sole director and secretary of the applicant executed the loan agreement and also signed a drawdown notice specifying 17 December 2001 as the relevant drawdown date. The drawdown notice sought payment in full of the $1,050,000 loan facility.

Mr Anderson’s recollection is that the monies sought were advanced in early to mid-January 2002. When asked what the money was used for his answer was ‘It was paid to WorkForce One’.

133 Mr Anderson’s evidence in chief included:

Senior counsel for the applicant:

‘Once the money had been paid to Work Force One, what happened?’

Anderson: ‘Sixty men were transferred from Work Force One’s books to Anderson Formrite’s books.’

Counsel: ‘And became direct employees of Anderson?’’

Anderson: ‘That’s correct, Yes.’

134 It will be necessary to return to further consider the workforce which was employed in carrying out formwork activities at the Woodside Building site, both before and after a formwork sub-contract existed between the applicant and the respondent, in due course.

135 Returning to Progress Claim No. 18, it is apparent that the two ‘Loan Repayments’ referred to in the progress claim related to two of the tranches the subject of the loan agreement of December 2001.

136 The four page document accompanying Progress Claim No. 18 placed a value on the works completed of $6,003,957. When deducted from the original contract sum this left a cost to complete of $6,341,043.

137 The ‘Cost in excess of $12,345,000’ of $443,350 was unexplained. It may be assumed that it represented an anticipated cost to complete the works over and above the contract sum.

The four page document accompanying Progress Claim No. 18 revealed that, in the estimation of the applicant, the work required for the Hotel Substratum was 90% complete up to level B1, 40% complete for levels B1 to GF and 100% complete for columns. In relation to the Tower Building the document asserted that the formwork was 100% complete up to Level B1, 100% complete for the ground floor, 96% complete for level one, 100% complete for the Lift Wall to Level 1, 100% complete for levels 2 and 3, 96% complete for Level 4, 92% complete for Level 5, 90% complete for Level 6 and 25% complete for Level 7. The claim document indicated that no work had been performed in respect of Levels 8 to 25 inclusive.

Other parts of the claim document included similar assertions as to the percentage of work that had been completed in respect of ‘Tower Columns’, ‘Tower Core Slabs’, ‘Tower Core Stairs’ and ‘Tower Screens’. In respect of ‘Tower Core Slabs’ and ‘Tower Core Stairs’ the claim document suggested that the works had reached Levels 12 and 11 respectively although none of that work on those levels was said to be complete.

The respondent’s assessment of Progress Claim No. 18

138 On 10 May 2002 Mr Ian Glover forwarded the respondent’s assessment of Progress Claim No. 18 of 3 May 2002 to the applicant.

Mr Passione was critical of the respondent’s assessment of Progress Claim No. 18. He saw it as a ‘blanket rejection’ of the progress claim suggesting that the normal discussions that one might have expected to take place between the parties, did not take place. He said ‘we never received a breakdown to say – you know, the typical assessment that we’d been used to that’s done jointly, it’s done together.’

139 The respondent’s covering document stated:

‘This assessment has been based on progress to yesterday [9 May 2002] and our discussions relating to the clarification of the Substratum / Tower boundary. The core/blade walls we discussed have been included in our assessment.

Amounts relating to the BHPL’s direct purchase of consumables, protective clothing, scaffolding, survey and liquidated damages relating to the Substratum have been deducted from this assessment.

Please note that under this assessment no amounts are owed against this claim and, in fact, there are amounts due and payable to BHPL in respect of:

a) the $ 32,795.00 balance of liquidated damages; and

b) mobilisation advance in the sum of $350,000 plus any interest accruing in accordance with the mobilisation advance agreement [the December 2001 loan agreement].’

140 Mr Glover accepted that it had been the respondent’s practice to have a dialogue with a representative of the applicant before determining an appropriate figure for a progress payment but that did not occur in relation to the last progress claim, being Progress Claim No. 18.

141 The respondent’s assertion that no monies were due under Progress Claim No. 18 is evident from a ‘PAYMENT SUMMARY’ on the respondent’s attached assessment of Progress Claim No. 18. That summary was as follows:

‘Original Contract Sum 12,345,000

Add:

Mobilisation advance 1,050,000

Approved Variations (Net of BHPL counter claims) 0 Yet to be agreed. Expected net deduction.

Less:

Cost to Complete 6,851,162

Repayment of mobilisation advance 700,000

Scaffolding contra charges 31,656 $31,858 submitted by BHPL

Survey contra charges 0 $1,270 to be submitted by BHPL

Legal Fees associated with mobilisation advance 5,000 $5,000 as per mobilisation advance agreement

Purchases by BHPL 31,672 TJF/RMO etc

Scaffold & Survey by BHPL 11,000 Blackadder/RM Surveys – estimate only

Substratum Works liquidated camages (sic) to 9 May 42,205 Refer Separable Portion 2, Item 33(a). Balance of $32,795 to carried forward to next claim

Paid to Date 5,722,305

Due this Payment 0’

142 It is apparent that a major difference between the applicant’s Progress Claim No. 18 and the respondent’s assessment of it was that the applicant propounded a ‘Cost to Complete’ of $6,341,043 and a ‘Cost in excess of $12,345,000’ of $443,350, whereas the respondent estimated that total cost to complete as at 9 May 2002 was $6,851,162. The respondent considered that the amount ‘Paid to Date’ was $5,722,305, being what the applicant considered had been ‘Paid to Date’ ($4,672,305) plus what the respondent described as ‘Mobilisation advance’ of $1,050,000 i.e. the amount of the facility under the loan agreement of December 2001. The deduction of $700,000 for ‘Repayment of mobilisation advance’ may have involved some double-counting.

Progress Claim No. 19 of 10 May 2002

143 The applicant’s Progress Claim No. 19 of 10 May 2002 was directed to Mr Ian Glover of the respondent. It was signed by Mr Peter Mackiewicz for the applicant and gave Mr Passione’s address as that of the applicant. It called for the payment of $227,744 plus 10% GST. It was apparently accompanied by a standard four page progress claim document which bore date 13 May 2002. The copy of the document which is in evidence shows a facsimile imprint of the date 13 May 2002.

Page 4 of the accompanying document included a breakdown of the contract sum to which the amount of $17,885 was added for ‘VARIATIONS’. However, the basic contract sum was shown as $12,173,080 rather than $12,345,000. The differences appear to have been firstly the inclusion of $685,970 for ‘Hotel Substratum’ rather than $618,370 and secondly the inclusion of $7,510,805 for ‘Tower’ instead of $7,750,325. Nevertheless, the ‘PAYMENT SUMMARY’ proceeded on the basis that the Original Contract Sum of $12,345,000 was the appropriate figure to include in determining the progress claim amount. On this occasion the ‘Cost to Complete’ was shown as $6,301,601 rather than $6,341,043. These differences led to the derivation of $227,744 as the amount claimed. It may be observed that Progress Claim No. 18 was effectively subsumed into Progress Claim No. 19. It was not intended that the claim of $188,302 be aggregated with the later claim of $227,744.

Progress Claim No. 20 of 17 May 2002

144 By letter dated 17 May 2002 the applicant forwarded its Progress Claim No. 20 to the respondent for its ‘information and processing’. The covering letter signed by Mr Mackiewicz included:

‘With regard repayment (sic) of the final $350 000.00 we again request that you defer deducting any part of this amount until we issue our Progress Claim No. 21 on 24^th May 2002. We trust your favourable consideration on this matter.’

Progress Claim No. 20 called for payment of $425,899 plus 10% GST. It was also accompanied by a standard four page progress claim document of the same date. It asserted a Cost to Complete of $6,103,446 as opposed to the figure of $6,301,601 which was included in Progress Claim No. 19. Once again both progress claims 18 and 19 were subsumed in Progress Claim No. 20.

The respondent declines to assess Progress Claim No. 20

145 By letter dated 28 May 2002 the respondent replied to the applicant’s Progress Claim No. 20 in the following terms:

‘We refer to Anderson Formrite’s Progress Claim No. 20 dated 17 May 2002, being the date of termination of the subcontract by Baulderstone Hornibrook Pty Limited (Baulderstone).

As you know, Baulderstone terminated the subcontract on 17 May 2002 and, as such, is not obliged, and does not intend, to issue a Payment Advice under subclause 37.2 of the subcontract.

In any event, even if there is a prima facie requirement to issue a Payment Advice (notwithstanding the termination), as Anderson Formrite failed, amongst other things, to provide the security required by clause 5 of the subcontract, Baulderstone would be under no obligation to make any payment under subclause 37.2 following the issue of any Payment Advice.

If Anderson Formrite believes it is entitled to claim for work performed up to, and including, the date of the termination of the subcontract then it should make a claim as required by the subcontract.

Finally, we note your stated intention to make Progress Claim No. 21 on 24 May 2002. We fail to see any entitlement of Anderson Formrite to do so.’

146 As it transpires, the foreshadowed Progress Claim No. 21, which was to have been issued on 24 May 2002, did not eventuate.

The respondent’s position in relation to use of the applicant’s equipment after 17 May 2002

147 The respondent wrote two letters to the applicant bearing date 11 June 2002. The shorter of the two letters dealt with ‘Site Office Equipment’. It referred to 13 categories of equipment and possessions which it asserted the respondent had returned to the applicant on 11 June 2002 ‘as arranged with your Mr Peter Mackiewicz’.

The letter referred to the returned equipment as having been located in the Coates Hire shed used as the applicant’s site office. The letter asserted that it had ‘been available for your collection since 20 May 2002’. The letter concluded with:

‘We confirm all equipment and possessions belonging to Anderson Formrite that were left in your site office have now been returned.’

148 The second letter dated 11 June 2002 dealt with ‘Hire Plant & Equipment’. It referred to the applicant’s letter to the respondent of 24 May 2002 in respect to the continued usage of hire plant and equipment and provided an update in the following terms:

‘a) Bearcom – Two Way Radios

Confirming our verbal advise to your Mr Peter Mackiewicz. BHPL do not wish to take up the hire of these radios, and they have been available for your collection.

b) Castledome Pty Ltd – Formwork Hoists

We confirm that a Hire Agreement has been executed between BHPL and Castledome for the continued use of the 3 formwork hoists until completion of the structure.

c) Cockburn Hire (Coates Hire)

We confirm that an order has been raised with Coates Hire for the continued use of

Ø 2 No. Hilti Hammer Drills

Ø 1 No. Compressor

We advise that the impact wrench and sockets identified in your schedule is not in BHPL’s possession.

d) WA Fork Trucks

BHPL have confirmed to WA Fork Trucks that the following equipment is not required by BHPL and is available for collection

Ø 1 No. Electric Fork Lifts

Ø 4 No. Spare Batteries

We confirm an order has been raised with WA Fork Trucks for the continued use of

Ø 3 No. Electric Fork Lifts

Ø 1 No. Gas Powered Fork Lift

We understand that the JCB All Terrain Fork Lift identified in your schedule was off hired prior to 17 May 2002. It is not on site.

We shall notify you separately in respect to the balance of falsework and scaffolding identified in your schedule.’

149 By letter dated 20 June 2002 the applicant responded to the respondent’s letters of 11 June 2002 asserting that ‘this is your first advice to us regarding hire plant and equipment’. The letter expressed interest in receiving ‘further advice regarding the balance of hire plant and equipment’.

150 In June 2002 a series of letters passed between the parties relating to ‘Equipment & Materials’ and ‘Hire Plant & Equipment’. On 17 June 2002 the respondent wrote to the applicant and said, inter alia:

‘RMD [Rapid Metal Developments (Australia) Pty Limited] claims that it has not received payment for this Truform and it is owned by RMD.

Can you please confirm whether or not you have a competing claim for ownership of this material and, if so provide evidence of your ownership.

If we don’t hear from you within the next 7 days we will proceed on the basis that Anderson Formrite Pty Ltd is not the owner of the relevant truform.’

151 On the same day the respondent wrote to the applicant in the following terms:

Further to our letter of 11 June 2002 and in reference to your correspondence dated 24 May 2002 we give notice of the following:

‘a) Bearcom

2 way radios and accessories were returned to Anderson Formrite Pty Ltd on 11 June 2002.

b) Security Scaffolding

BHPL have returned to Security Scaffolding the following equipment

Ø 45 No. acro props No.3

Ø 2 No. stillage

c) Boral Scaffolding

BHPL have returned to Boral Scaffolding the following equipment (off hire number 4028).

Ø 100 No. acro props No. 3’

152 On 18 June 2002 the respondent wrote to the applicant in relation to a Quickstair Stairform System as follows:

‘We have received some correspondence from Partners Engineering Pty Ltd in relation to the following materials on the site;

Quickstair Stairform System

(a) Stair 10 flights for levels 13 to 19

(b) Stair 11 flights for levels 10 to 19, and

(c) Stair 12 flights for levels 5 to 15.

Partners Engineering claims that it has not received payment for these stair flights and they are owned by Partners Engineering.

Should we not receive a competing claim together with satisfactory evidence of ownership from you within the next 7 days we will proceed on the basis that Anderson Formrite Pty Ltd is not the owner of this material.’

153 On 20 June 2002 the applicant wrote to the respondent maintaining that certain items of equipment and possessions had yet to be returned which had previously been located in the site office. The letter included:

‘Yet to be returned are the following items:

1 No. Fridge

1 No. Microwave oven

2 No. Two-way radios

Please advise when you intend to return these items.’

154 On 20 June 2002 the applicant wrote a ‘Without Prejudice’ letter to the respondent advising that ‘we have no objection to you taking possession of and paying for Materials Handling Solutions and Partners Engineering equipment on site.’ The letter also asserted that ‘we have purchased all the Truform on site.’ The letter continued:

‘We also advise that on several occasions we have asked you not to use Anderson Formrite’s plant and equipment on site. It is obvious from the activity on site that you have ignored this and continue to use the plant and equipment. We therefore advise that you are now in possession and ownership of our plant and equipment of which we will be seeking payment for.’

155 In a letter dated 21 June 2002 from the respondent to the applicant the respondent said:

‘We refer to your letter dated 20 June 2002.

Materials Handling Solutions, Partners Engineering

Thank you for the confirmation that Materials Handling Solutions and Partners Engineering own the equipment on site that was used respectively by them for their work and that you have no objection to us dealing direct with them in relation to that equipment.

Truform

Please note that RMD assert that it has not been paid for, and therefore owns, the Truform. Obviously, BHPL is reluctant to be caught in the middle of a dispute between Anderson Formrite and RMD over the Truform and wishes to deliver it to its rightful owner once unincorporated from the site works. However, BHPL does not want to receive a claim from one or the other of you on the basis that we inappropriately gave it to the other.

Accordingly, we see only two solutions. Either Anderson Formrite and RMD reach agreement on how BHPL should deal with the Truform and tell us OR we ask Anderson Formrite and RMD for further evidence of ownership (eg purchase orders, evidence of payment etc), decide who has the best claim, deliver it to that person and obtain sufficient comfort from that person against claims by the other person.

Plant and Equipment

In relation to the balance of the plant and equipment claimed to be owned by Anderson Formrite please see our correspondence dated 28 May 2002.’

156 In reply to the applicant’s letter to the respondent of 20 June 2002 in relation to site office equipment which it had contended had not been returned, the respondent wrote on 1 July 2002 inter alia as follows:

‘We wish to confirm the following in respect to these items;

a) We have received a claim and proof of ownership of the fridge from Mr K McHugh.

Please advise if you have a competing claim and if so provide satisfactory evidence of your ownership.

b) We are not in possession of a microwave belonging to Anderson Formrite Pty Ltd

c) All two way radios you left in your site office were returned on 11^th June 2002.’

157 On 18 July 2002 the respondent wrote to the applicant in respect of the return of Truform material as follows:

‘We refer to our correspondence dated 28 May 2002 and 21 June 2002.

The majority of Truform has now been unincorporated from the works.

Please advise where this material can be delivered. Should we not hear from you by 26 July2002 then we will treat the Truform as uncollected goods and exercise our rights under the law with respect to such goods.’

158 When asked about the nature of formwork, Mr Passione gave the following evidence in cross-examination:

Senior counsel for the respondent:

‘… because of the nature of formwork once it is put in place and concrete is poured on it, it has to remain in place for the concrete to cure, does it not?’

Passione: ‘Yes.’

Counsel: ‘It can in fact be required to be in place in a building, depending on the type of formwork, for a number of weeks after the concrete is poured?’’

Passione: ‘Yes. I think it’s probably closer to days than weeks. I think seven days is my recollection of stripping. But it could vary again, depending on engineering spans, sizes, yes.’

Counsel: ‘There is no universal time for every kind of formwork that you use?’

Passione: ‘No.’

159 On 21 June 2002 the respondent wrote to the applicant in relation to the claimed non payment by the applicant for materials purchased from Construction Sales & Hire Pty Limited. The letter included:

‘We wish to advise that Construction Sales & Hire Pty Ltd claims that it has not received payment for materials purchased by Anderson Formrite Pty Ltd as identified in the invoices attached.

Construction Sales & Hire Pty Ltd has asked that to the extent those materials are identified on site, they are set aside until an agreement is reached as to the ownership of same.

Can you please confirm whether or not Anderson Formrite Pty Ltd have a competing claim for this material and if so please provide evidence of your ownership.’

A schedule of invoices was attached to the letter in respect of invoices bearing dates 2 November 2001 through 16 April 2002.

160 On 22 July 2002 the respondent wrote to the applicant in relation to plywood in the following terms:

‘We refer to our letter dated 21 June 2002 regarding plywood to which we have received no response.

We have received notice from Construction Sales & Hire that it is the owner of the plywood on site, as it was not paid by Anderson Formrite for that plywood.

As we are unable to store the plywood on site and have not heard from you, we propose to make arrangements to have the plywood collected by or delivered to Construction Sales & Hire.

Should Construction Sales & Hire not wish to take possession of the Plywood and we hear no further from you we will treat the plywood as uncollected goods and exercise our rights under the law in respect to such goods.’

Construction Sales & Hire Pty Ltd had supplied considerable quantities of formwork material to the applicant.

161 On 26 September 2001 Mr Anderson had signed Construction Sales & Hire Pty Ltd’s ‘TERMS OF TRADE’ which included:

‘4. The Customer hereby acknowledges that the goods supplied by the Supplier shall remain the property of the Supplier until the Supplier receives payment for same. …’

162 On 2 May 2002 Benjamin & de Lestang, Barristers and Solicitors of Perth, wrote to Mr Anderson at his address in Peppermint Grove in Perth on behalf of Construction Sales & Hire Pty Limited. The letter was expressed as follows:

‘We act for Construction Sales & Hire Pty Ltd and have had occasion to write to Anderson Formrite Pty Ltd for the payment of various outstanding accounts which now total $191,447.48.

Arrangements were initially made by the company’s Manager Mr. Joe Passione to make minimum repayments of $50,000.00 per month but those arrangements have not been maintained.

We are instructed that you have guaranteed payment of Anderson Formrite’s outstanding accounts and we thought it appropriate to give you notice that in the event of non payment by the company our client will be seeking to enforce your personal guarantee.

We may add that the writer did endeavour to telephone Mr. Passione on 1^st instant but he has not returned the writer’s call.

We would appreciate your urgent attention to this matter failing which our instructions are to issue proceedings for the recovery of the amounts outstanding without further notice.’

163 On 20 May 2002 Construction Sales & Hire Pty Ltd wrote to the respondent referring to two issues that needed to be resolved, namely:

‘1. equipment that belongs to us that is on hire, and

2. materials purchased by Anderson Formrite Pty Ltd., but not yet paid for.

164 On 22 July 2002 the respondent wrote to the applicant referring to ‘our correspondence dated 28 May 2002’ in respect of Tableforms. The letter stated:

‘We wish to advise that tableforms are currently being unincorporated from the works.

Please advise where this material can be delivered. Should we not hear from you within the next 7 days, then we will treat the tableforms as uncollected goods and exercise our right under the law within respect to such goods.’

165 On 25 July 2002 Construction Sales & Hire Pty Ltd sent a facsimile to the respondent in respect of plywood in the following terms:

‘With reference to your letter of 22 July 2002, we are advised by Mr Warren Anderson of Anderson Formrite Pty Ltd., that they will be making the arrangements to remove the plywood from the abovementioned site.

It is important that you note that the said property only reverts to us in the event of default in payment. However, as to-date, this does not apply as settlement is being arranged. We therefore request that you contact Anderson Formrite Pty Ltd., before taking further action.’

166 On 30 July 2002 the respondent provided a copy of Construction Sales & Hire Pty Ltd’s said letter of 25 July 2002 to the applicant. The respondent wrote ‘Attn: Mr Warren Anderson’:

‘We have received a letter from Construction Sales and Hire Pty Ltd dated 25 July 2002 (copy attached) wherein they advise that Anderson Formrite Pty Ltd will be making arrangements to remove the plywood from our site.

We have spoken to your Mr Joe Passione today requesting advice from Anderson Formrite Pty Ltd. He advised that he would speak to you today and following that he would advise us today as to the arrangements for removal of the plywood.

We advise that the plywood is available to be picked up by your company immediately. Please advise how you intend to take delivery.

If Anderson Formrite Pty Ltd has not commenced removal of the plywood from our site by close of business 31 July 2002, we will commence removal of the plywood to another secure location on Thursday 1 August 2002’.

The respondent’s letter of 30 July 2002 to the applicant was signed by Mr Walkenhorst. He contended that the assertion ‘we have spoken to your Mr Joe Passione today’ was correct. As it transpires Mr Passione was in Italy at the time and had no recollection of speaking with Mr Walkenhorst. Mr Walkenhorst acknowledged that he had not personally spoken to Mr Passione but that he had been advised by Mr Len Hall of the respondent that he had spoken to him.

167 On 31 July 2002 the respondent sent a further letter to the applicant in respect of plywood which was signed by Mr Walkenhorst. It stated:

‘We confirm the advice given by your Mr Joe Passione today, that Anderson Formrite Pty Ltd will not be making arrangements to remove the plywood from our Site.’

Claims of wrongful conversion commence on 31 July 2002

168 On 31 July 2002 the applicant wrote to the respondent in respect of formwork in the following terms:

‘We refer to our letter of the 17th of May 2002.

Notwithstanding that Anderson Formrite Pty Ltd expressly prohibited Baulderstone Hornibrook Pty Ltd from using its formwork, we are aware that the formwork has been in use at the site for the last 10 weeks. The formwork was used by Baulderstone Hornibrook Pty Ltd without consent and contrary to the express prohibition contained in our letter of the 17th May 2002.

We consider Baulderstone Hornibrook Pty Ltd has wrongfully converted the formwork and Anderson Formrite Pty Ltd therefore expressly reserves all its rights against Baulderstone Hornibrook Pty Ltd arising our of or in connection with the wrongful conversion of the formwork.

We are presently obtaining advice as the extent of damages recoverable against Baulderstone Hornibrook Pty Ltd and therefore request access to the site so that the formwork may be inspected.’

(emphasis added)

169 On 2 August 2002 the respondent wrote to the applicant in relation to Truform in the following terms:

‘Further to our previous correspondence, in circumstances where:

1 You have failed to establish ownership of the Truform;

2 You have failed to respond to our correspondence dated 18 July 2002;

3 RMD claim ownership of the Truform;

4 The continued presence of the Truform on our site is causing material delay and disruption to the execution of our works with corresponding cost implications,

We give you notice that RMD intends to take possession of the Truform on 5 August 2002.’

170 On 7 August 2002 the applicant wrote to the respondent in the following terms in relation to formwork:

‘We refer to your letter of 2 August 2002.

As stated in our letter of 31 July 2002, Baulderstone Hornibrook Pty Ltd has converted the formwork (including Truform) which was in the possession of Anderson Formrite Pty Ltd at the time Baulderstone Hornibrook terminated its subcontract with Anderson Formrite. We believe that our claim in damages for conversion against Baulderstone Hornibrook is not affected by the issue of ownership of the formwork.

Furthermore, if the continued presence of the Truform on the site is causing delay and disruption of the execution of the works as you claim it is the result of your wrongful conversion of the formwork and not due to any act on the part of Anderson Formrite Pty Ltd.

We note that RMD claim ownership of the Truform and that you intend to permit RMD to take possession of the Truform on 5 August 2002. We dispute that RMD is the owner of all Truform at site. Our position is stated in the letter of 31 July 2002 and we confirm we are preparing a claim for damages arising from the conversion of the formwork.

In our letter of 31 July 2002 we requested access to the site to inspect the formwork. As you have not responded to this request we seek your urgent reply.’

(emphasis added)

A demand by the applicant for $10,409,551.80

171 On or about 6 September 2002 the applicant submitted a ‘DEMAND FOR OUTSTANDING PAYMENT’ to the respondent. It asserted that $9,463,228.91 constituted an amount due by the respondent to the applicant. After adding $946,322.89 for GST the demand, expressed as a ‘TAX INVOICE’, asserted that the ‘Total due and payable’ was $10,409,551.80. The demand concluded with the words:

‘Payment due 20 September 2002.

8% pa interest will be charge for any outstanding money after the due date.

Anderson Formrite reserves all other rights it may have against Baulderstone Hornibrook.’

A solicitor’s letter of demand

172 On 9 September 2002 Grays Professional Services Group incorporating Clinton Smith & Associates, acting for the applicant, sent a facsimile to the respondent under the heading ‘RE: PURPORTED TERMINATION – SUBCONTRACT ANDERSON FORMRITE WOODSIDE BUILDING 240 ST. GEORGES TERRACE’ which included the following:

‘We refer to the above matter.

We note that your company has made no attempt to answer or rebut the very serious complaints matters raised in our letter of the 10^th May 2002 [to which reference will be made shortly].

We further note that a notice has since been received by our client purporting to terminate the subcontract pursuant to paragraph 39.12 of the subcontract.

Our client rejects your company’s claim to be entitled to terminate the subcontract in the circumstances. In particular, it is clear that it has done so in an attempt to frustrate our client’s claims under the Trade Practices Act 1974 and any purported termination has been done in bad faith to attempt to deprive our client of the benefit of the subcontract and is hence outside the ambit of that provision.

Prior to delivery of the notice to our client your client widely distributed a media release dated 14^th May 2002. The effect of its distribution was to publically (sic) announce that:

“Leading Australian construction group Baulderstone Hornibrook has terminated the subcontract of formworker Anderson Formrite on its 240 George’s Terrace site in Perth.

‘Anderson Formrite has had difficulty performing under the contract and after several unsuccessful efforts to help improve their productivity, we have been forced to take this auction’. Baulderstone Hornibrook Chief Executive Peter Dempsey said.

Baulderstone Hornibrook regrets having to take this action but we must protect the interests of our client by completing the project on time’…”

It is noted that the actions taken by BH in publically announcing its termination do not fall within to provisions of either paragraph 39.9 or paragraph 39.12 of the subcontract. This publication represented an intention on the part BH to approach its obligations under the contract entirely on its own terms and without regard to the provisions of the agreement between Formrite (sic) and BH.

It is further noted that a termination in these circumstances is self executing and did not require any acceptance of the repudiation by Formrite which was excluded from the site.

Such conduct constitutes a termination effected by a wrongful repudiation of the subcontract. Accordingly, your company is liable for damages for breach of contract. It is currently estimating its damages and it is intended that demand will be made for those damages in the near future.

Quite apart from such damages, there are now amounts owing under various heads of claim. There are also sums due on the footing of the purported termination under paragraph 39.12 of the subcontract; our client does not regard those calculations as reflecting the whole amount that your company is obliged to pay our client but such sums will be accepted on account of the total amount that may be adjudged due to our client and without prejudice to our client’s rights to claim damages.

Quite apart from the question of damages, the media release is itself willfully misleading or deceptive and/or defamatory.

…

The implication or the impression given by this release is that productivity problems with Formwork were the fault of Anderson Formrite and that these productivity problems continued despite BH’s honest and constructive efforts.

The fact of the matter is that the cause of the problem was the engagement of Workforce One at the insistence of representatives of BH in the teeth of their knowledge that Workforce One’s engagement would lead to productivity problems on the site.

The only substantive attempt made by BH to assist the resolution involved an undertaking to fund a bonus to the workers engaged by Workforce One to increase their productivity. After this was negotiated with those workers, the arrangement was willfully and wrongfully repudiated by your CEO, Mr. Dempsey a course which could only reduce the productivity of the workforce after the bonus had been promised to them. Obviously, CEO, Mr. Dempsey personally authorised this release despite his intimate knowledge of the facts of the matter and that statements made were false.

Patently, the claims and innuendos in the media release are false and malicious and were calculated to damage Anderson Formrite’s reputation.

Such conducts may well justify an award of punitive damages against BH.

Anderson Formrite requires that BH take the following steps within 7 days:

Acknowledge that the statements referred in the Media Release were false and misleading and correct the statements in the record;

Distribute a retraction to all those persons to whom the release was distributed;

Publish a retraction by an advertisement placed in the Financial Review, the Australian and the West Australian as soon as practicable.

Undertake in writing not to repeat the false statements in the released (sic).

If action is not taken in respect of (4) within that time proceedings will be commenced against Baulderstone Hornibrook without further reference to its officers.’

(emphasis added)

The respondent’s response to the applicant’s demands

173 On 18 September 2002 the respondent replied to the applicant’s demand of 6 September 2002 seeking particulars of the demand. The response also acknowledged receipt of Grays Professional Services Group’s facsimile of 9 September 2002.

174 On 18 September 2002 the respondent also replied directly to Grays Professional Services Group inviting them to direct future correspondence to the respondent’s solicitors, Messrs Clayton Utz in Sydney. The respondent’s letter included the following observations in respect of Grays Professional Services Group’s facsimile:

‘…

2 We disagree that Baulderstone Hornibrook was not entitled to terminate the Subcontract for convenience or that it did not do so in accordance with the Subcontract.

3 We deny distributing the press release prior to the delivery to your client of the notice of termination of the Subcontract for convenience, which occurred on 17 May 2002. If the release was dated 14 May 2002 then that date bears no relationship to the date of its issue.

…

6 We deny:

(a) that the exercise by Baulderstone Hornibrook of its right to terminate the Subcontract for convenience constitutes in any way repudiation of the Subcontract, assuming that is what you mean by “termination effected by a wrongful repudiation of the subcontract”; and/or

(b) as a result, Baulderstone Hornibrook is liable for damages.

7 We note that a demand for damages “will be made” although we note that prior to the date of your fax we received a demand from you client dated 6 September 2002 for payment of $10,409,551.80.

8 We deny that the media release issued by Baulderstone Hornibrook on 17 May 2002 is “wilfully misleading or deceptive and/or defamatory”.

9 We do not propose to take the steps requested by you in “(4)” or any of the unnumbered actions on the last page of your letter. In any event, we also note that your request comes approximately four months after the release.

10 Clayton Utz have instructions to accept on behalf of Baulderstone Hornibrook service of any legal process filed by Anderson Formrite in relation to the Subcontract.’

175 On 1 October 2002 the respondent wrote to the applicant in relation to ‘Truform’ in the following terms:

‘We refer to your correspondence dated 7 August 2002, to the extent it relates to the Truform.

That letter (and your letter dated 31 July 2002) omits several key facts which are set out below;

1 at the time the subcontract was terminated for convenience, the majority of Truform was incorporated as part of the temporary works;

2 by letter dated 28 May 2002, you were advised that Baulderstone Hornibrook was already engaged in a process of ascertaining what was on the site and who owned it;

3 by letter dated 17 June 2002, you were advised that RMD claimed it had not been paid for, and was the owner of, the Truform. We requested that Anderson Formrite confirm its claim of ownership as well as provide evidence of such ownership;

4 by letter dated 20 June 2002, you asserted that Anderson Formrite had purchased all Truform on site but failed to provide any evidence of such ownership;

5 by letter dated 21 June 2002, we again notified you of RMD’s conflicting claim of ownership the Truform (sic) and invited you to reach agreement with RMD as to what BHPL should do with the Truform.

6 by letter dated 18 July 2002 we informed you that the Truform had largely been unincorporated and sought delivery instructions from you – we received no response;

7 by letter dated 31 July 2002 you made allegations of conversion that you repeat in your 7 August 2002 letter;

8 by letter dated 2 August 2002 we notified you that RMD would take possession of the Truform on 5 August 2002; and

9 you chose to wait until 7 August 2002 (after the date you knew RMD would take possession) before writing again to us.

RMD has now taken possession of the Truform (with exception of approximately 12,500 linear metres) and you should deal directly with RMD in relation to any inspection.

Baulderstone Hornibrook has at all times acted properly in respect of the Truform. Any proceedings instituted by Anderson Formrite relating to the Truform will be vigorously defended.

In relation to the Truform that remains in the possession of Baulderstone Hornibrook, this material is available for immediate delivery to Anderson Formrite.

If we have not heard from you by 15 October 2002 (providing written evidence of ownership and details of where delivery may be made) then Baulderstone Hornibrook will have no alternative but to treat the Truform as abandoned by Anderson Formrite and deal with it accordingly.’

(emphasis added)

176 On 1 October 2002 the respondent sent a further letter to the applicant in relation to ‘Tables, Plywood and Small Tools’ in the following terms:

‘We refer to your correspondence dated 7 August 2002.

We note we have separately responded to that letter to the extent in relates to the Truform. This letter relates to the tables, plywood and small tools.

Tables

When Anderson Formrite’s subcontract was terminated for convenience, the majority of tableforms were incorporated into the works.

By letter dated 22 July 2002, we advised you that the tableforms were currently being unincorporated from the works and sought delivery instructions.

You chose not to take delivery of the tableforms and then in your 7 August 2002 letter you alleged Baulderstone Hornibrook had “converted” the tableforms and foreshadowed a claim. [emphasis added]

Baulderstone Hornibrook has at all times acted properly in relation to the tableforms, and any proceedings instituted by Anderson Formrite will be vigorously defended.

Baulderstone Hornibrook is still in possession of the tableforms in circumstances where Anderson Formrite has failed to provide evidence of ownership of the tableforms.

Baulderstone Hornibrook gives you final notice that if we have not heard from you by 4pm Tuesday 15 October 2002 (providing written evidence of ownership of and details of where delivery may be made), Baulderstone Hornibrook will have no alternative but to treat the tableforms as abandoned and deal with them accordingly.

Plywood

After the termination of Anderson Formrite’s subcontract for convenience on 17 May 2002, we wrote to you by letter dated 28 May 2002 letting you know we were undertaking a process to determine ownership of the goods and material on site.

We received no response to that letter.

On 21 June 2002, we again wrote to you attaching invoices received by Baulderstone Hornibrook from Construction Sales and Hire. Some of those invoices related to plywood.

Construction Sales and Hire asserted that title to the plywood was retained by it until payment had been received by it and that no such payment had been received from Anderson Formrite. We were also provided with a copy of some terms of trade signed by Warren Anderson, which included a retention of title clause in favour of Construction Sales and Hire.

As we received no response to our 21 June 2002 letter, we again wrote to you in similar terms on 22 July.

By letter dated 25 July 2002 we were advised by Construction Sales and Hire that Anderson Formrite would be making arrangements to remove the plywood. We understood that to mean that Anderson Formrite and Construction Sales & Hire had reached agreement in relation to the plywood.

We copied this letter to you by letter dated 30 July 2002.

On 31 July 2002, we were advised by Anderson Formrite that it would not be making arrangements to remove the plywood from the site and by letter of the same date we confirmed this to you in writing.

You refused to take delivery of the tableforms and in your 7 August 2002 letter you allege “conversion” of the plywood and foreshadow a claim.

You can of course appreciate that we view the allegations of conversion in your letter dated 7 August 2002 as without foundation. Baulderstone Hornibrook has at all times acted properly in relation to the plywood and any proceedings instituted by Anderson Formrite will be vigorously defended.

Small Tools

There has been numerous correspondence between us in relation to different small tools. It is not appropriate to set out all of that correspondence here.

However, to avoid any suggestion that we have improperly retained any small tools, we attach an inventory of the small tools currently in Baulderstone Hornibrook’s possession being small tools that were on site when Anderson Formrite’s subcontract was terminated for convenience.

We invite you to provide written evidence of ownership of any or all of these small tools and details of where delivery may be made by 4pm Tuesday 15 October 2002, failing which we will have no alternative but to treat the small tools as abandoned and deal with them accordingly.’

Potential legal claims by the applicant

177 It is apparent from the terms of Grays Professional Services Group’s facsimile to the respondent of 9 September 2002 that the applicant had in mind making claims upon the respondent for breach of contract and also for misleading or deceptive conduct and/or defamation in respect of the media release dated 14 May 2002 which the respondent asserted was issued after the subcontract between the applicant and the respondent had been terminated for convenience on 17 May 2002.

178 Grays Professional Services Group’s facsimile of 9 September 2002 also records the applicant’s view that the productivity problems which it experienced in carrying out the work the subject of the subcontract between the applicant and the respondent was attributable to ‘the engagement of Workforce One at the insistence of representatives of BH in the teeth of their knowledge that Workforce One’s engagement would lead to productivity problems on the site’.

Disputation between the parties pre-17 May 2002

179 On 11 April 2002 a meeting took place between Messrs van Engelen and Walkenhorst of the respondent and Messrs Anderson and Passione representing the applicant. A file note in respect of the meeting indicated that Mr van Engelen advised that the respondent could not make any further payments to the applicant unless such payments were for work completed. Mr van Engelen indicated that if performance did not improve, the respondent would be forced to issue a ‘Show Cause’ notice. The file note indicated that Mr Anderson advised that it would not be in the respondent’s interests to issue any sort of notice as that could have major ramifications for the respondent under the Trade Practices Act.

180 On 29 April 2002 the respondent gave three ‘Show Cause’ notices to the applicant which were marked for delivery ‘BY HAND’. The notices included allegations of substantial breaches of the subcontract between the applicant and the respondent as follows:

‘… [Anderson] Formrite has committed a substantial breach of the Subcontract in that it has substantially departed from a “Subcontractor’s Program” (as defined in the Subcontract) without reasonable cause or BHPL’s representative’s approval – see subclause 39.2(c) of the General Conditions of Subcontract.’

‘… [Anderson] Formrite has committed a substantial breach of the Subcontract in that for the Knoxville Works (Separable Portion 2 under the Subcontract), where there is no Subcontractor’s Program, it has failed to proceed with due expedition and without delay – see subclause 39.2(d) of the General Conditions of Subcontract.’

‘… [Anderson] Formrite has committed a substantial breach of the Subcontract in that it has failed to provide “Security”, as required by the Subcontract – see subclause 39.2(a)(ii) of the General Conditions of Subcontract. The two bank guarantees provided by [Anderson] Formrite have expiry dates of 5pm on 27 October 2002 and are not “Unconditional Bank Guarantees In the form of Annexure Part B”. …’’

181 On 10 May 2002 Grays Professional Services Group, Lawyers & Consultants, responded to the three Show Cause notices dated 29 April 2002. In the course of his evidence in chief Mr Anderson gave the following evidence in respect of the giving of instructions to Grays Professional Services Group:

Senior counsel for the applicant:

‘… Were you the person on behalf of Anderson Formrite, or was it somebody else who gave instructions to prepare and issue this letter, this response?’

Anderson: ‘Mr McFarland was in touch with Mr Clayton.’

His Honour: ‘Well, you were living in Sydney at the time, I take it?’

Anderson: ‘Yes, that’s correct.’

His Honour: ‘Did you instruct Mr McFarland to retain a firm of lawyers and consultants … called Grays Professional Services Group?’

Anderson: ‘Yes.’

…

His Honour: ‘Did you choose them or did he choose them?’

Anderson: ‘He chose them.’

His Honour: ‘… So you told him to get a lawyer and this is the lawyer he got?’

Anderson: ‘To sort this out, yes.’

Counsel: ‘Did you see the letter before it was sent to Mr Walkenhorst?’

Anderson: ‘I can’t recall.’

Counsel: ‘… Did you understand the letter was, indeed, later sent to Mr Walkenhorst?’

Anderson: ‘Yes.’

Counsel: ‘And prior to the date upon which you understand it would have been sent, presumably on or about the date it bears, did you see the letter?’

Anderson: ‘… Sorry, no, I didn’t see the letter before it went out.’

Counsel: ‘Mr McFarland looked after that?’

Anderson: ‘He was looking after that side of it, yes.’

182 Grays Professional Services Group’s letter to the respondent of 10 May 2002 included the following:

‘The notices … purport to call upon our client to show clause under the provisions of the Sub Contract. AF [the applicant] hereby shows cause why BHPL [the respondent] should not exercise any right referred to in subclause 39.4.

The issues common to the subject matter of all the notices will be dealt with first and other issues specific to individual notices will be dealt with thereafter.

Common Issues

Issue 1

Following negotiations and discussions which took place in July 2001 and following a tender by an associated company [presumably a reference to Formrite], AF was awarded a subcontract by BHPL to erect and strip the formwork for the building referred to in the notices at 240 St Georges Terrace Perth.

Prior to the subcontract documentation being signed, AF was told by representatives of BHPL that BHPL required all contract labour (outside AF staff supervision) on site had to be subcontracted exclusively by AF to Work Force One (‘WF1’). [emphasis added]

The representatives of BHPL concerned in this conduct were Mr Paul Watson, (the Northern Division Director recently dismissed by your company), Mr Mark Lamond (still apparently employed by your company. It is very likely that this requirement was made in accordance with a policy (or to use your company’s terminology, a strategy) approved by it at the highest levels of BHPL (including the CEO, Mr Dempsey, Mr Joh van Engelen and Mr Fletcher).

AF had an unfavourable opinion of WF1 and would never have engaged it but for your company’s inflexible insistence.

As it emerges from the recent hearings of the Cole Royal Commission (in evidence by your Tony Fletcher, your Grant Beckett and Mr Watson) your company was fully aware prior to the execution of the subcontract by AF that:

1. the performance of WF1 was gravely unsatisfactory;

2. the management of WF1 was colluding with the unions to the detriment of BPHL (sic) in a manner that seriously diminished its ability to perform under the Main Contract;

3. the engagement of WF1 meant that BHPL lost control of its own workforce to the CFMEU to the grave detriment of progress under the Main Contract.

In the circumstances BHPL was under an equitable duty of confidence to have disclosed these matters to AF. Further, not to have disclosed such matters constituted misleading or deceptive conduct on BHPL’s part by reason of which AF has suffered loss and damage. [emphasis added] Labour supplied by WF1 to AF has been inadequately skilled, has worked grossly inefficiently and very slowly and has engaged in wasteful work practices. This has had the direct effect of impeding to a very substantial extent progress with the sub-contract works and of exposing AF to additional costs in the order of $8 million and loss of profit.

In the circumstances:-

a. it is inequitable for BHPL to attempt to rely on alleged breaches of contract based on delay in executing the subcontract works as bases for notices to show cause; and

b. a court in exercise of its equitable jurisdiction or the jurisdiction conferred by s.87 of the Trade Practices Act would make orders restraining BHPL from exercising any of the rights referred to in clause 39.4 in reliance upon such alleged breaches.

Issue 2

Secondly, on 29th August 2001 … Mr George McFarland of AF (sic) was told AF must use external safety screens manufactured by Crown Hire Pty Ltd of Melbourne by Messrs Watson and Lamond of BHPL. …

…

The performance of Crown Hire has been totally unsatisfactory in areas of delivery, installation and operation and their engagement has led to serious loss and damage on AF’s part causing an estimated 4 weeks delay to the Tower on the site and to areas of the substratum and consequent losses to AF.

…

Issue 3

Thirdly, as problems have emerged on the site your company agreed to provide further injections of funds an agreement it repudiated without justification.

In or about 12th March 2002, Mr Anderson of AF attended with Mr van Engelen at the Sheraton Hotel in Brisbane at which meeting Mr McFarland was also in attendance.

At the meeting the issue of productivity was raised and Mr Anderson explained to Mr Engelen that the unions had contrived to get more unsatisfactory workers on the site. Mr van Engelen said to Mr Anderson: ‘What about a bonus. I’ll give you $1M and you can pay it to the men to get your productivity back’.

Mr Anderson accepted the proposal with words to the effect: ‘That would be good. I’ll put it to Reynolds(the Western Australia CMFEU leader) and see what he has to say’.

Mr van Engelen further said that BHPL would pay this money in $500,000 lots, the first lot at the end of July 2002 and the second lot at the end of the contract in October 2002.

Mr Anderson subsequently went to Mr Reynolds and put the offer of $1M to the men onsite, structured at $50,000.00 per floor, provided that the men complete on time the 6 day floor cycle.

It was further agreed at the meeting that the time for performance of the subcontract would be extended from the 27^th July through to the 15th October 2002 and any claim for liquidated damages of $100,000.00 per day against AF were to be foregone.

BHPL (by its CEO, Mr Dempsey) has now brazenly repudiated the bonus arrangement and in doing so has further undermined the relations of AF with its existing workforce and the unions.

In the circumstances BHPL has actively prejudiced the progressive performance of the subcontract works and is thereby estopped from asserting that there has been a substantial breach of contract by delay as claimed in the notices.

Summary

There is no lawful basis on which your company might exercise any of the rights referred to in clause 39.4 arising out of the above notices. Our client requires that the notices be withdrawn in writing by 4.30 pm WST today.’

183 On 10 May 2002 two Notices of Dispute were sent by the applicant to the respondent, purportedly under clause 42 of the subcontract between the parties.

184 By a facsimile sent on 27 May 2002 the respondent replied to the two Notices of Dispute dated 10 May 2002, inter alia as follows:

‘We are proceeding on the basis that clause 42 of the Subcontract survives our termination.

We are required under the Subcontract to confer with you at least once within 14 days of 10 May 2002 to resolve the disputes the subject of your notices or to agree on methods of doing so.

As at the time of writing this letter, we have not heard further from you in relation to your notices or any such conference. We are ready and willing to meet with you as we are required to do.

…’

In my opinion, clause 42.2 of the subcontract between the applicant and the respondent did not survive the respondent’s termination of the subcontract on 17 May 2002 contrary to the premise on which the respondent proceeded to write its letter to the applicant of 27 May 2002.

Pre-termination litigation involving the applicant

185 It is apparent that the applicant became embroiled in litigation during the course of its execution of its formwork subcontract.

186 On or about 6 February 2002 it instituted proceedings against the CFMEU in the Western Australian Industrial Relations Commission (proceedings 2002 WAIRC 04772).

187 On or about 8 February 2002 the applicant filed an application in the Western Australian Industrial Relations Commission (proceedings no. 233 of 2002) for declaratory relief in respect of the interpretation of clause 14 of the Anderson Formrite Pty Limited/CFMEUW Collective Agreement 2001.

188 On or about 13 February 2002 the applicant instituted proceedings against the CFMEU in the Supreme Court of Western Australia (proceeding no. 1172 of 2002). In those proceedings the relief sought included:

‘1. Damages for:

(a) causing, inducing or procuring various of the Defendant’s members to breach their contracts of employment with the Plaintiff in that since on or about 7 February 2002 those members have failed and refused to perform work in accordance with those contracts or at all;

(b) further or alternatively, interfering with the performance of contracts and/or interfering with the economic relations between various of the Defendant’s members and the Plaintiff in that since on or about 7 February 2002 those members have failed and refused to perform work in accordance with those contracts or at all.

...

5. An interlocutory injunction … restraining the Defendant, whether by its members, officers, servants, agents or otherwise, from:

(a) Advising, encouraging, inciting, inducing or procuring any employee of the Plaintiff to refrain from working in accordance with, or otherwise breaching the terms of, his or her contract of employment with the Plaintiff; or

(b) Interfering, whether directly or indirectly, with:

(i) Any contract of employment between the Plaintiff and any employee of the Plaintiff; or

(ii) Any other contracts entered into by the Plaintiff for the construction and supply of formwork.

…’

189 On 29 October 2002 a consent order was made in the Supreme Court of Western Australia giving leave to the applicant (the plaintiff in the proceedings) to discontinue the proceedings. It was then ordered that:

‘2. The proceedings be and hereby are discontinued.

3. There be no order as to costs.’

190 On or about 8 April 2002 Rapid Metal Developments (Australia) Pty Limited served a statutory demand on the applicant calling for payment of $2,695,381.89.

191 Following its receipt of Rapid Metal Developments (Australia) Pty Limited’s demand, the applicant instituted proceedings in the Supreme Court of Western Australia to set aside that demand (COR 124 of 2002). Mr Passione swore an affidavit in those proceedings on 26 April 2002 in which he deposed to telling Mr Chris Wood, Rapid Metal Developments (Australia) Pty Limited’s Sales Manager at his second meeting with him that he had no knowledge about formwork and high-rise construction and that he was relying upon Rapid Metal Developments (Australia) Pty Limited’s knowledge experience and expertise. Mr Passione indicated that Mr Chris Wood had provided him with information about Rapid Metal Developments (Australia) Pty Limited, and had shown him the company’s yard and extensive range of hire equipment and facilities that were available to the applicant.

Mr Passione said that during the course of his involvement with the Woodside Building project, a number of real and genuine disputes arose between the applicant and Rapid Metal Developments (Australia) Pty Limited. He said:

‘14. The disputes have generally related to:

14.1 the amount of money payable under the contract in relation to:

(a) the hire of equipment; and

(b) the supply of the table form system; and

14.2 the defendant’s delay or failure to meet obligations under the contract in relation to:

(a) the provision of a work method statement; and

(b) the provision of training; and

14.3 the design faults relating to the table form system, the inability of that system to meet the [applicant’s] requirements, and [Rapid Metal Developments (Australia) Pty Limited’s] failure to certify that system.’

192 Mr Passione’s affidavit included:

‘The Contract

…

47. Under the contract, in consideration for the supply and design of the table form system, the plaintiff agreed to pay a fixed lump sum price of A$960,000. [Rapid Metal Developments (Australia) Pty Limited] disputes this amount and contends that the agreement was to pay approximately A$1,450,000, of which remains outstanding A$1,300,000. …’

193 Issues arose as to the design and utility of the table form system which Rapid Metal Developments Australia (Pty Limited) provided.

194 Mr Bell was aware of the fact that a statutory demand had been served on the applicant by Rapid Metal Developments (Australia) Pty Limited. He was unaware of the precise amount of the demand but knew it to be ‘in the millions’. He said that Rapid Metal Developments (Australia) Pty Limited was a major supplier of the framework for the stick scaffolding equipment and the table forms. Mr Bell swore an affidavit on 26 April 2002 in the proceedings in which the applicant sought to set aside Rapid Metal Developments (Australia) Pty Limited’s statutory demand. In his affidavit he deposed to delays on the part of Rapid Metal Developments (Australia) Pty Limited in effecting delivery of the table forms and design errors which required them to be modified. He swore, inter alia:

‘61. The presence of these faults and inadequacies in the table form system ... make it unlikely that [the applicant] will be able to use this system in any of its future projects.

…’

195 On or about 16 April 2002 Headlink Pty Ltd ACN 091 015 744 t/as Workforce One served a statutory demand on the applicant for $1,700,833.18 said to be ‘the total amounts of the debts described in the Schedule’. The Schedule occupied some 12 pages and detailed claims for money said to be due from 7 November 2001 through to 27 March 2002.

196 The applicant proceeded to institute proceedings in the Supreme Court of Queensland against Headlink Pty Limited. In cross-examination Mr Anderson gave evidence in relation to those proceedings which included:

Senior counsel for the respondent:

‘By May 2002, WorkForce One or Headlink were saying that you, Anderson Formrite, owed them a lot of money?’

Anderson: ‘That is correct.’

Counsel: ‘It was into the millions?’

Anderson: ‘Yes, I believe so.’

Counsel: ‘You brought an action to say that they had breached their contract with you?’

Anderson: ‘Yes.’

Counsel: ‘You sued them for damage?’

…

Anderson: ‘Yes, it was a counterclaim against Workforce One.’

197 Later in his cross-examination Mr Anderson’s attention was directed to an affidavit dated 7 May 2002 bearing his signature which was sworn by him at Surfers Paradise in Queensland. Mr Anderson acknowledged that in his affidavit he had said that by 10 October 2001 Mr Hemphill, the site manager for the applicant’s Woodside Building project, had come to him and informed him that he had tried everything to get the productivity of the men supplied by WFO (WorkForce ONE) up and he couldn’t. He deposed that Mr Hemphill had informed him:

‘The men are just not capable and with these men you will just never get this building built.’

Observations and findings

198 It will be apparent from the foregoing that:

· Formrite was an experienced formworking company in Queensland with no relevant experience in Western Australia

· Mr George McFarland, who lived at Noosa in the State of Queensland, was a director of Formrite

· Formrite secured an offer to undertake a major formwork subcontract for the respondent in Perth

· The applicant was a start-up company which had no formwork experience at all

· On 11 October 2001 the applicant decided to undertake the very substantial formwork subcontract that had previously been offered by the respondent to Formrite and proceeded to enter into a subcontract with the respondent

· The formwork subcontract between the applicant and the respondent was formally terminated for convenience in accordance with clause 39.12 thereof on 17 May 2002

· Mr McFarland, who was not called as a witness, had an unexplained foot in both camps, purporting to represent Formrite, of which he was a director, and also the applicant

· Formrite did not at any stage deal with the respondent as an agent for the applicant

· The applicant lacked working capital sufficient to enable it to perform the subcontract

· The applicant’s senior management did not include persons with extensive formwork experience in the construction of high-rise buildings

· Mr Anderson was not resident in Perth at all material times, nor was Mr McFarland

· The financial arrangements that may have existed between the applicant and Mr McFarland were not explained

· Prior to 11 October 2001 Formrite established itself on site with the presence of Mr Hemphill and Mr Alan Watson who mobilised a workforce

· A team of approximately 20 labourers and carpenters commenced work on site in the week commencing Monday 17 September 2001

· Tax invoices referable to the said labourers and carpenters were issued by Headlink Pty Limited, trading as WorkForce ONE, to Formrite from 27 September 2001 although WorkForce ONE timesheets were used suggesting that the relevant client was the applicant rather than Formrite. The timesheets showing the applicant as WorkForce ONE’s client appear to have had the name ‘Anderson Formrite’ inserted therein by Mr Hemphill of Formrite

· The sequence for the issue of the invoices and the correlation of those invoices with the timesheets are somewhat irregular, but this has not been the subject of any evidence

· The applicant experienced difficulties with the tableforms provided by Rapid Metal Developments (Australia) Pty Limited

· Progress with the execution of the works the subject of the subcontract between the applicant and the respondent was significantly affected by the provision of an inappropriate mix of labourers and carpenters, by the quality (or lack of it) of the workforce and by union domination of the process whereby the workforce was selected.

The applicant’s awareness pre-11 October 2001 of the inadequacy of the men made available by WorkForce ONE to Formrite

199 Not only did Mr Anderson swear an affidavit on 7 May 2002 deposing to the fact that by 10 October 2001 Mr Hemphill had informed him that he had tried everything to get the men’s productivity rates up, but couldn’t, that the men were ‘just not capable’ and that, with those men, you would never get the building built, he also acknowledged that by the time he signed the subcontract between the respondent and the applicant on behalf of the applicant he had been put on notice by persons who were working for or with the applicant that the productivity of the men provided by WorkForce ONE was below expectation. In cross-examination Mr Anderson gave evidence that around about the time that the contract was signed there was some understanding that the men weren’t of the quality they should be.

In my opinion Mr Anderson was aware, at the time when he signed the subcontract on behalf of the applicant, that it was taking on a commitment in the knowledge that the workforce available to it was inadequate.

World War III

200 Mr Passione gave evidence that prior to the return of Mr Hemphill and Mr Alan Watson to Queensland he had a ‘good solid 10 days’ when he met with them and spoke with them on a daily basis. At one of those meetings Mr Passione said to Mr Hemphill and Mr Alan Watson that he was planning to engage formworkers directly. He said that he had some good contacts and some very good tradespeople. Thereupon Messrs Hemphill and Alan Watson ‘pointed to an individual that was sitting in our site office’ and said to Mr Passione that he needed to talk to Mr McHugh about bringing men on. They proceeded to introduce Mr Passione to Mr Kevin McHugh. In the course of the introduction Mr Passione became aware of Mr McHugh’s apparent role. He said that Mr McHugh introduced himself as the owner of WorkForce ONE, the company that was supplying the men to the applicant. In this context Mr Passione gave the following evidence:

Senior counsel for the applicant:

‘What did you say to Mr McHugh?’

Passione: ‘I said to Mr McHugh, my intentions are to engage our own labour. I want to build our own work force that has a direct relationship with us and build our own team.’

Counsel: ‘Did Mr McHugh say anything in response to that?’

Passione: ‘He said that that won’t occur, there is an arrangement in place. I believe he said something along the lines that he helped Warren get the job. He then, while I was with him, made a phone call which I note – I know that it was to Mr McIlwaine and he had a conversation with Mr McIlwaine, in my presence.’

Counsel: ‘Did you hear what he said to Mr McIlwaine?’

Passione: ‘Yes. He said there is this young man here who wants to bring his own labour. I’m going to bring him over to you and you can talk to him.’

Counsel: ‘… What did Mr McHugh then say to you?’

Passione: ‘He requested that I walk with him and go and see Mr McIlwaine.’

Counsel: ‘Did you and he walk somewhere?’

Passione: ‘Yes, we did. We left the Anderson Formrite site office, which had an entry to Hay Street and walked around to the St Georges Terrace entry of the site.’

Counsel: ‘Whose site office is that?’

Passione: ‘Baulderstone’s site office.’

Counsel: ‘In the Baulderstone site office, were you introduced to a man identified to you as Roy McIlwaine?’

Passione: ‘Yes. Mr McHugh introduced me to Mr McIlwaine. He said he’s the Baulderstone man for this site and the shop steward.’

…

His Honour: ‘How was he dressed?’

Passione: ‘He had a Baulderstone T-shirt, I believe shorts and boots.’

Counsel: ‘Was he, in the Baulderstone site premises, was he situated at any particular place?’

Passione: ‘… at his office. There was an office set up, so he had a desk, an office facility.’

…

Counsel: ‘… When Mr McHugh introduced you to Mr McIlwaine, did he say anything to Mr McIlwaine about the reason for bringing you to Mr McIlwaine’s office in the Baulderstone premises?’

Passione: ‘Yes. Mr McHugh said to McIlwaine that I was intending to bring my own labour. He asked Mr McIlwaine if he could tell me what I can and can’t do.’

…

Counsel: ‘… did Mr McIlwaine himself say anything in response to your comment about bringing … your own labour to the site?’

Passione: ‘Yes. Mr McIlwaine said to me that he determines who comes to site. He showed me a whole bunch of … documents that appeared to be applications made by potential workers.’

…

Counsel: ‘Did the documents have any heading or caption or title?’

Passione: ‘They had the WorkForce One logo on it, that I can remember.’

…

Counsel: ‘… Was it apparent to you, looking at the documents, that they appeared to be forms of employment application?’

Passione: ‘Yes.’

…

Counsel: ‘Did Mr McIlwaine explain to you why it was he had in his office this bundle of WorkForce One employment applications?’

Passione: ‘Yes.’

Counsel: ‘What did he say?’

Passione: ‘He said that … he’s responsible for bringing and allowing the men on site and he had a system in place that they will come on date order of their application.’

Counsel: ‘… Was anything else said about the reference that had been made to your wanting to bring your own men on the site?’

Passione: ‘From my recollection, I was told that there was a special arrangement in place and that I was not authorised to bring my own labour.’

Counsel: ‘Did Mr McIlwaine tell you for how long he had himself been on the site?’

Passione: ‘Yes, he did.’

Counsel: ‘What did he say?’

Passione: ‘That he had been on the site for six months.’

Counsel: ‘Did he tell you what he had been doing in that time?’

Passione: ‘Yes, he said, “I’ve been responsible for bringing the labour onto the site.”’

…

Counsel: ‘Did he tell you on whose behalf he’d been doing that?’

Passione: ‘My recollection is that he may have said Baulderstone and WorkForce One, but I’m not certain.’

Counsel: ‘… is there anything else you can recollect was said, either by yourself, by Mr McIlwaine, or by Mr McHugh at the meeting in the Baulderstone site office with Mr McIlwaine?’

Passione: ‘I remember saying I thought it was a very strange arrangement that all labour had to be engaged through … a labour hire company. And I also remember saying that the method of employment was not reasonable, considering that skill and competency wasn’t taken into account.’

…

His Honour: ‘Do you recall you told me you did not negotiate a contract with WorkForce One. You arrived and you understood there to be an agreement, is that right, with WorkForce One and Anderson Formrite?

Did anyone, on behalf of Anderson Formrite ever show you a contract with WorkForce One, or tell you what the contract was and who told you?’

Passione: ‘No contract was ever shown to me. I had some initial advice, I believe, from George McFarland … along the lines the labour is coming from a hire company and no further details in relation to terms and conditions. Then several days prior to this meeting with McHugh and McIlwaine in a site office, Hemphill and [Alan] Watson had given me some information. I think that was the first time I heard WorkForce One from those two gentlemen.’

…

Counsel: ‘… Did you at any time, after … this first meeting you had with Mr McIlwaine-convey to Mr McHugh any observations of yours, in relation to what Mr McIlwaine had said?’

Passione: ‘On walking back I said to him that I didn’t accept what McIlwaine had said, didn’t agree with it and that I was going to continue to employ our labourers.’

Counsel: ‘And Mr McHugh said anything in response to that?’

Passione: ‘He wasn’t very happy and I think I remember him saying that he was going to get me – he said, “I will get you black banned from this job if you do that.”’

Counsel: ‘From the Woodside job?’

Passione: ‘Yes.’

Counsel: ‘Did he say anything to you in relation to any contractual arrangements that WorkForce One were asserting?’

Passione: ‘I believe prior to going to the McIlwaine meeting he said to me, “I got this job for Warren; there is an arrangement in place.” I remember his also saying, “I am very good friends with Paul Watson”. I think that’s all I can remember at the moment. He wasn’t very happy.’

…

His Honour: ‘He just related it to having helped Warren get the job and there was an arrangement in place?’

Passione: ‘Yes; he mentioned Paul Watson. I actually recall now he said something along the lines “I’m funding the job.” That’s all I can remember.’

[Mr McHugh’s reference to ‘I’m funding the job’ is consistent with an arrangement for the delayed payment of monies to WorkForce ONE, in circumstances where the applicant had insufficient working capital.]

…

Counsel: ‘… still dealing with the day or the occasion when you and Mr McHugh attended on Mr McIlwaine in his office. … after you returned from that meeting I think you’ve told his Honour that Mr McHugh did not remain for long. Is that right?’

Passione: ‘Correct.’

Counsel: ‘What happened after that?’

Passione: ‘… World War III broke out. I received a number of telephone calls in a very short period of time. The phone calls were from Joe McDonald from the union, Roy McIlwaine from Baulderstone, Tony Fletcher from Baulderstone, Grant Beckett from Baulderstone, Kevin Reynolds from the union and Brian Burke, a former Premier of Western Australia … I believe also Warren Anderson.’’

…

Counsel: ‘… Do you recollect the content of the call you received from Mr McDonald?’

Passione: ‘Yes.’

Counsel: ‘Had you met him before?’

Passione: ‘Yes.’

Counsel: ‘When you took his call, what did he say to you?’

Passione: ‘“What the fuck are you doing?” … Excuse my language, your Honour.’

…

Counsel: ‘Did he say anything to you relating to the subject matter of your discussion with Mr McIlwaine shortly before?

Passione: ‘Yes. He said, “I hear you’re bringing on scab labour.”’

Counsel: ‘Did you respond to that?’

Passione: ‘Yes. I said, “That’s not my intention. We will be bringing on qualified, experienced workers that will be all unionised.”’

Counsel: ‘After you told Mr McDonald that what did he say?’’

Passione: ‘My recollection is I think he may have said why am I interfering with the current arrangement. … It was … a heated discussion. He was angry.’

…

Counsel: ‘… I think you mentioned in the names you gave to his Honour in the series of telephone callers, one of them was Mr McIlwaine?’

Passione: ‘Yes.’

Counsel: ‘Was he the next call you received?’

Passione: ‘I believe he was the next call. My recollection was that McDonald was the first, then McIlwaine. McIlwaine asked me what I was doing. He repeated and said, “You cannot bring your own labour on. I determine who comes to this site and there is a procedure to follow.” I also could hear Mr McDonald in the background which would indicate that they were both together.’

(emphasis added)

201 In a statutory declaration made by the late Roy McIlwaine on 13 March 2003 he declared:

‘1. I was employed by [the respondent] as a site delegate at the “Woodside Tower Project” at 240 St Georges Terrace, Perth (the Project) from about January 2001 to about February 2003.

2. I obtained the position of site delegate with [the respondent] following an interview with Baulderstone representative, Damien Newton-Browne and Darryl Hale.

3. While working as site delegate for [the respondent] in respect of the Project, I was initially paid by a labour hire company known as “Workforce One”. …

…

8. As site delegate with [the respondent], I was involved in deciding who would be employed on the Project. In particular, I decided who would be employed by Workforce One in providing the labour to [the applicant] in respect of the Formwork Contract.

9. I was asked by Paul Leslie Watson and Joe Van Engelen, of [the respondent], to screen all applications for employment with Workforce One to supply formworkers to [the applicant] and to choose those formworkers. …

…

11. I also discussed my role in screening and choosing applications for employment for formworkers with Grant David Beckett, the site manager for [the respondent]. He said that he was happy that I was given the role of screening and choosing applications for employment for formworkers on the Project site.

12. Paul Watson and Joe Van Engelen also instructed me that, after screening and choosing formwork labour applicants, I was to hand the list of personnel I selected to [the applicant], as being the only personnel that were to be employed as formworkers on the Project site. That is, it was made clear to me that the decision to employ the formworkers would be mine.

13. … Usually, I would know, from talking to Joe Passione of [the applicant] or Kevin McHugh of Workforce One, how many persons to employ. … It was not until the workers were offered employment by me and filled in a taxation form, that I sent documentation off to Workforce One. I would also then provide the list of personnel to [the applicant]. I did not consult [the applicant] as to who would be employed as formworkers.

14. In deciding who would be employed to do formwork, I would keep two lists – a list of carpenters and a list of labourers. That was because, if [the applicant] wanted to retain services of a carpenter, I would select a labourer as well. That is what I understand to be the “practice” regarding the ratio of carpenters to labourers with respect to formwork on construction sites. I did not consult [the applicant] about this.

15. I was aware that the Workforce One employees who were going to be supplied to [the applicant] in respect of the Formwork Contract were eventually going to finish up with [the applicant].’

202 In viewing the role of the CFMEU in relation to the Woodside Building project and its domination of the employment practices of the respondent and the applicant, the word ‘thuggery’ readily springs to mind.

203 The next caller in the sequence was Mr Tony Fletcher, the project director for the Woodside Building project. He was known to Mr Passione. In relation to his conversation with Mr Fletcher, Mr Passione gave the following evidence:

Senior counsel for the applicant:

‘… in the call you had from Mr Fletcher shortly after the call you had from Mr McIlwaine, what did he say?’

Passione: ‘He said, “What are you doing? You’re going to stop the job. They’re going to walk off. You need to resolve this.” He said, “Why are you interfering with the current arrangements?” I think that’s what I can remember.’

Mr Passione indicated that he did not want to stop the site, he may have repeated that he wanted to employ his own men. His recollection was that in that conversation and at earlier meetings he had made known to Mr Fletcher his view that the labour force was unproductive, very slow, with inexperienced workers and that he wanted to correct the situation.

204 The next conversation was between Mr Passione and Mr Grant Beckett of the respondent. When asked his best recollection of what Mr Beckett said, Mr Passione replied:

‘I have heard – are you trying to bring your own men to site? … You are playing with the big boys now. This is not some small little project or house you’re building out in the suburbs. Don’t mess around with things that have been put in place. You’re going to stop the project. There’s talk of a walkout.’

When Mr Passione was asked whether he said anything to Mr Beckett about the reason or reasons why he introduced his own men, he replied:

‘I believe I said to him the same comments that I made to Mr Fletcher, we want to employ our own qualified carpenters, the men that we have are not suitable and I believe I also said that I’ll work through – I’ll work this thing out.’

205 Mr Passione then identified the next caller in the sequence as being Mr Kevin Reynolds from the CFMEU. In relation to this conversation Mr Passione gave the following evidence in chief:

Passione: ‘[Mr Reynolds] said … “I am at a union conference in Tasmania. I have heard how you plan to bring your own ding labour.” … I explained to him what my intentions were. I had again repeated the consistent – my consistent plan, which was to engage our own labourers. I have a lot of contacts in the Italian community, in the Irish community and we want to build our own workforce. He said, “Is that your plan?” and I said, “Yes.” He then responded saying, “You need to get an EBA” and advised me of a name and a contact number who could help me with the EBA.’

Mr Passione was then asked about his conversation with Mr Brian Burke, the former Premier of Western Australia. He gave the following evidence:

His Honour: ‘What advice did he offer?’

Passione: ‘He said, “Take McHugh out for dinner tonight and talk to him about what you’re trying to do.” He also said, “I will speak to Kevin Reynolds and tell him that a proposal will be put forth to him.”’

In relation to Mr Anderson’s telephone call to Mr Passione, Mr Passione said:

‘… he rang me. I believe he was the last phone call in relation to those calls I mentioned earlier. Mr Anderson said, “I have an arrangement in place, all labour is to come through WorkForce One. I will give you more details when I see you.”’

Later Mr Passione indicated that Mr Anderson informed him that WorkForce ONE had a three month contract to supply the labour.

206 Shortly thereafter Mr Passione had dinner with Mr McHugh at a restaurant in West Perth. In the course of that conversation he made known that he, Mr Passione, understood that WorkForce ONE had a three month contract to supply labour. He further indicated that he did not wish to interfere with that, but that he had to have the best workers possible.

207 Thereafter, the Anderson Formrite Pty Ltd/CFMEUW Collective Agreement 2001 was made on 22 October 2001 having been signed by Mr Passione on 17 October 2001 and by Mr Kevin Reynolds on 22 October 2001. Clause 14 of that Agreement under the heading ‘SENIORITY’ provided:

‘14. SENIORITY

1. The parties agree the continuity of employment is desirable wherever possible, and that where it is not possible, employees will be retrenched in order of seniority.

2. When applying the “first on last off” principle it is agreed subject to the caveat “all things being equal”, it is intended to apply on a Company basis rather than a site by site basis.

3. It is recognised that from time to time instances may arise where the employee’s individual skills may be subject to this caveat. …

4. An employee who has been retrenched by the Company shall have absolute preference and priority for re-employment/re-engagement by the Company. …’

The current proceedings

208 In the foregoing context the applicant instituted these proceedings against the respondent on 5 July 2007, some five years after the termination of the subcontract for the respondent’s sole convenience. The Application included the following:

‘The application is for damages or compensation from the respondent arising from the respondent’s:

(a) contravention of s.52 of the [Trade Practices Act 1974 (Cth)] in making misleading or deceptive representations to the applicant which induced the applicant to engage Workforce One to supply labour to the applicant;

(b) contravention of s.298K of the Workplace Relations Act[1996 (Cth)] by the respondent refusing to engage the applicant as its contractor unless the applicant employed only persons who were financial members of the Construction, Forestry & Mining and Energy Union and/or the Construction, Forestry & Mining and Energy Union of Workers;

(c) participation in a tortious conspiracy by unlawful means to cause the applicant damage;

(d) breach of contract;

(e) conversion of the applicant’s property.’

209 There has been no cross-claim.

210 The hearing commenced on 14 July 2009 and ran for a total of 22 days in the period 14 July – 28 September 2009.

211 The applicant abandoned its claim that the respondent had contravened the Workplace Relations Act 1996 (Cth) (‘the Workplace Relations Act’), on 21 September 2009. It also abandoned its claim of tortious conspiracy, on the morning of 25 September 2009. In the circumstances it is necessary to address the claimed contravention of s 52 of the Trade Practices Act, the alleged breach of contract and the alleged conversion of the applicant’s property by the respondent. In my opinion the Trade Practices claim should fail, but the contract and conversion claims should succeed.

The Trade Practices claim

212 As mentioned above, the applicant filed a Second Further Amended Statement of Claim in Court on 23 September 2009. The alleged contravention by the respondent of s 52 of the Trade Practices Act was founded upon a representation said to have been made by Mr Paul Watson to Mr Anderson in a telephone conversation in August 2001. Paragraphs 12, 19 and 31-34 of the Second Further Amended Statement of Claim were expressed as follows:

‘12. In August 2001 the Respondent represented to the Applicant and/or Anderson that Workforce One would supply labour required for the performance of the Works and that in so doing Workforce One would ensure that the best available workers were supplied, and that the Applicant could move workers on and off the site at its own discretion if not satisfied with those workers, and that the Applicant could control who worked on the site.

Particulars

The representations were made orally, in the course of the same telephone conversation between Mr Watson and Mr Anderson referred to in particular (ii) to paragraph 11.

…

19. Induced by and in reliance on the representations pleaded in paragraph 12 above, and by reason of the conditions pleaded in paragraphs 11 and 18 the Applicant agreed to engage, and did engage, Workforce One:

(a) to supply the labour required by the Applicant; and

(b) for a period of three months after the commencement of such supply, to be responsible for payment of wages to such labour after which period most of the labour would be paid directly by the Applicant.

…

CAUSE OF ACTION – MISLEADING OR DECEPTIVE CONDUCT

31. The labour supplied by Workforce One to the Applicant was inefficient and not competent. Further, the Applicant could not move workers on and off the site at its own discretion if it were not satisfied with those workers and the Applicant could not control who worked on the site.

Particulars

(i) There was no screening of potential workers by Workforce One or the Respondent with respect to the ability or experience of the potential workers.

(ii) The Applicant was required by the Respondent and Workforce One to use labour supplied by Workforce One regardless of the ability or competence of the workers. The criteria applied by Workforce One for the selection of each worker to be supplied to the Applicant was that the worker be a member of the CFMEU and/or CFMEUW irrespective of ability and experience, that his availability for work be governed by a chronological list and that a specific ratio of one labourer per carpenter be maintained;

(iii) A policy was adopted by Workforce One that for every carpenter engaged a labourer also be engaged whereas the customary ratio is 3-4 carpenters for each labourer.

(iv) The employees of Workforce One failed to meet time limits specified in the contract between the Applicant and the Respondent despite sufficient persons being employed and all necessary equipment being supplied.

(v) The employees of Workforce One supplied to the Applicant continually achieved a productivity rate substantially below the industry standard rate.

(vi) The Applicant repeats particular (iv) to paragraph 25.

(vii) Roy McIlwaine on behalf of the Respondent controlled who came on and off the site and prevented the Applicant from replacing workers that it wanted to remove.

32. At the time when it made the representation pleaded in paragraph 12 the Respondent had no reasonable basis for doing so and/or had no or no reasonable belief in the truth or accuracy of the said representation.

33. By reason of the matters pleaded in paragraphs 3, 12, 31 and 32 and s.51A of the Trade Practices Act 1974 (“TPA”) the Respondent has, in trade or commerce, engaged in conduct which is misleading or deceptive or likely to mislead or deceive in contravention of s.52 of the TPA.

34. By reason of the matters pleaded in paragraphs 13, 16, 20-22 and 31-33 the Applicant has suffered loss and damage.

Particulars

The Applicant repeats the particulars to paragraph 25.’

213 The particulars to paragraph 25 were as follows:

Particulars

(i) The labour engaged through Workforce One was inefficient, incompetent, and imposed upon the Applicant in such number given the existence of the imposed ratio of labourers to carpenters, that the Applicant was forced to pay to Workforce One fees and charges which were grossly excessive. Further, the labour, by reason of its incompetence and indifference, caused the Applicant to fail to meet time deadlines contained in the contract between the Applicant and the Respondent.

(ii) The rates charged by Workforce One were approximately 30% higher than prevailing award rates which the Applicant would otherwise have paid.

(iii) The Applicant was required to borrow $1,050,000 from the Respondent to pay the excessive charges for the workers engaged through Workforce One and incurred interest and costs relating to that loan which it otherwise would not have incurred.

(iv) By reason of the Applicant being required to utilise the unnecessary inefficient, incompetent labour, it was required to pay unnecessary redundancies when it attempted to rid itself of this labour.

(iv) The Respondent terminated the contract between it and the Applicant and has wrongfully refused to pay to the Applicant moneys payable by the Respondent to the Applicant.

(v) The Respondent terminated the contract between it and the Applicant and has wrongfully refused to pay to the Applicant moneys payable by the Respondent to the Applicant.

(vi) In performing the contract between it and the Respondent the Applicant has incurred costs of $14,762,268 and received payment of $6,294,536.

(vii) In addition the Applicant has incurred legal fees of in excess of $500,000 in relation to proceedings arising out of contracts between the Applicant and its contractors and suppliers in relation to the Works, further particulars of which will be provided in due course.

(viii) On termination by the Respondent of the contract to perform the Works the Respondent took equipment leased by the Applicant from Rapid Metal Developments (Australia) Pty Ltd. The Applicant has been sued by Rapid Metal Developments (Australia) Pty Ltd for value of that equipment and/or lease charges relating to that equipment on the basis of an alleged indebtedness to it in the amount of $3,183,986.60 plus interest accruing at 18% per annum from an unspecified date in 2002.

(ix) The Applicant lost the opportunity to profit from undertaking other works, or completing the Project, of $2,400,000.

214 At the end of the Second Further Amended Statement of Claim the applicant recorded its claim for relief under the Trade Practices Act as follows:

‘AND THE APPLICANT CLAIMS:-

…

C. Further or alternatively, damages pursuant to s.82 of the TPA or compensation pursuant to s.87 of the TPA in the sum of $11,367,732 plus any further amounts payable by the Applicant to Rapid Metal Developments (Australia) Pty Ltd.’

215 Section 52(1) of the Trade Practices Act provided:

‘52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.’

Section 51A of the Trade Practices Act upon which the applicant relied to make good its case for a contravention of s 52, relevantly provided as follows:

‘51A(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.’

(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

…’

In relation to the recovery of damages s 82(1) of the Trade Practices Act relevantly provided:

‘82(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part … V … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.’

(emphasis added)

216 For the purposes of addressing the alleged misleading or deceptive conduct cause of action it is sufficient to consider whether Mr Paul Watson made the alleged representation to Mr Anderson in August 2001 and whether, as a matter of causation, the applicant was induced thereby to engage WorkForce ONE to supply labour to it for use on the Woodside Building project and/or enter into the formwork subcontract made between the applicant and the respondent on 11 October 2001.

217 In his examination in chief, Mr Anderson gave the following evidence in relation to a conversation with Mr Paul Watson of the respondent in early August 2001:

Anderson: ‘… not long after that Paul Watson rang me and said to me, “Look, we use Work Force One.” He said, “you’ve got a very good chance at winning this tender if you use them.” And I said, “Well, what will they supply?” He said, “They supply the workforce; good tradesmen; assure you of productivity; you can move men on and off the site at your will if you weren’t satisfied with them, and that – generally that they’ll make your job run smoothly.” And so – and he said, “Use them and I can just about assure you that you’ll win the contract.”

…

Senior counsel for the applicant:

‘… Did Mr Watson tell you anything more in the phone conversation you had with him about Work Force One?’

Anderson: ‘It was – he mainly emphasised the fact that they used them in Queensland; that they would supply productivity; they would supply good tradesmen; we’d be able to control – or control who worked on the site and who didn’t; and that was about it.’

218 It is clear that at the time of this alleged conversation Mr Anderson had no interest in securing a formwork contract for the applicant. Rather he was at that time interested in having Formrite secure a contract, the benefit of which he would enjoy if the applicant was able to acquire Formrite.

219 Mr Anderson gave evidence that he subsequently went to see Mr Paul Watson at the respondent’s office at North Sydney. He told him that his negotiation to acquire Formrite had ‘fallen over’ and that he wished to carry out the job in the name of the applicant. Mr Anderson’s evidence was that Mr Paul Watson ‘wasn’t fussed about it’. Later in his evidence in chief Mr Anderson referred to a conversation with Mr Paul Watson and a conversation with Mr Kevin McHugh. He said ‘They guaranteed me the top men on that site’. His evidence then continued:

Senior counsel for the applicant:

‘If you had not been given those assurances, would you have engaged or started the job using the Work Force One people?’

Anderson: ‘No.’

Counsel: ‘If you had not been given those assurances, would you have signed the contract which commences at page 302 of the tender bundle [the contract between the applicant and the respondent which was made on 11 October 2001]?

Anderson: ‘No.’

Mr Anderson proceeded to say “I probably wouldn’t have got the job because they insisted on using Work Force One’.

220 Mr Anderson’s evidence given on 14 July 2009 does not sit comfortably with the Tender Interview Checklist And Record which was incorporated in the subcontract between the applicant and the respondent. Nor does it sit comfortably with his evidence given to the Royal Commission into the Building and Construction Industry presided over by Commissioner Cole, on 30 July 2002. When examined by counsel assisting the Royal Commission Mr Anderson gave the following evidence:

Counsel Assisting:

‘Going back to the early days, you received information from Mr Benson, did you, about the requirement that you use Workforce One?’

Anderson: ‘That’s correct, yes.’

Counsel: ‘Had you ever had that directed to you personally by Mr Watson?’

Anderson: ‘No.’

…

Anderson: ‘I wasn’t involved in the original negotiations with setting up of the project back in September. The first time I really intimately got involved in this was just after Christmas, when we were having the problems with the workforce and the productivity.’

Counsel: ‘So the original arrangement in relation to that component that involved three months and not being able to in effect have people removed during that three-month period was not something you had anything to do with?

Anderson: ‘No, I was told by George McFarland to use – we were using Workforce One and that they – for their services, they’d get paid quite a lot of money, extra money, but they would give us all the professional skilled men we needed, the cream of the crop, as they said over there. We could pick and choose whoever we wanted, when they came off their books on to our books. They would finance the project until it was cash flow positive and could just about assure us of no union disputes. [“they” is plainly a reference to Workforce One and not the respondent]’

…

Counsel: ‘What arrangements for labour were you in a position to make, if you hadn’t used Workforce One?’

Anderson: ‘I wasn’t involved in it at all. I think I mentioned to you a moment ago, I’m not a formworker, I’m not a contractor, and this was all done with Formrite and George McFarland in Queensland.’

…

Counsel: ‘You would have had to fund it eventually?’

Anderson: ‘Well, yes, but … the people that set it up said that it would be cash flow positive very quickly and that it would fund itself..’

Counsel: ‘By using Workforce One, you had the advantage of having Workforce One fund the labour until you made a payment. Isn’t that right?’

Anderson: ‘Yes.’

Counsel: ‘That was a considerable commercial advantage, compared to an alternative of having to fund the labour from day one yourself?’

Anderson: ‘That’s correct.’

Counsel: ‘So that of itself might have been a good reason to go to Workforce One?’

Anderson: ‘That was a decision I didn’t make.’

Counsel: ‘Did you have any alternatives in mind, any alternative plans in mind, when you were negotiating for this?’

Anderson: ‘No.’

Counsel: ‘You see, it might be said against you … ?’

Anderson: ‘I was going to buy a company in Queensland called Formrite and it had all the staff and it had all the equipment, plant, it had the know-how, expertise.’

…

Anderson: ‘I didn’t end up buying Formrite.’’

Counsel: ‘No, the deal fell through?’

Anderson: ‘Yes.’

(emphasis added)

221 Before there was any formwork activity at the Woodside Building site Mr Anderson had a meeting with Mr McFarland and Mr Kevin McHugh in Brisbane. Mr Anderson referred to the fact that Mr McFarland had come down from Noosa and that Mr McHugh had come up from the Gold Coast, where he lived, and Mr Anderson had himself flown in from Sydney. He described it as an occasion when ‘the white shoe brigade turned up’. In relation to that meeting Mr Anderson gave evidence as follows:

Senior counsel for the applicant:

‘Did Mr McHugh tell you anything about the availability of labour from Work Force One?’

Anderson: ‘Well, he gave me the roadshow, I mean, how good he was. He would supply top tradesmen who would produce the productivity we needed because formwork, you’ve got to understand, is probably about 80 per cent, 80/90 per cent labour and tradesmen and hard workers and he was to produce them and there would be a continuity of men available. He had the association with the unions, there wouldn’t be any union disturbances and that there’d be a continuity of men and we could move men on and off the site if they weren’t performing their trade.’

222 When cross-examined by Senior Counsel for the respondent in relation to the ‘roadshow’ Mr Anderson gave the following evidence:

Senior counsel for the respondent:

‘… Mr Anderson, you described the meeting that Mr McHugh put on, and I just quote these words of yours, “a roadshow”?’

Anderson: ‘Yes.’

Counsel: ‘By that, did you mean that he was obviously trying to sell you his services?’

Anderson: ‘He was trying to tell me how good he was.’

223 Mr Anderson telephoned Mr McFarland and said ‘You’ll have to use Work Force One; Kevin McHugh’, to which he replied ‘Don’t tell me I have to do that’. Mr Anderson observed that Mr McFarland was ‘very resistant to it’. Mr Anderson conceded that Mr McFarland may have expressed the view to him that Mr Kevin McHugh was a ‘militant BLF man’. He repeated that Mr McFarland was resistant to the fact that ‘we [presumably referring to Formrite] had to use Mr McHugh’.

224 Mr Anderson gave evidence that Mr McFarland said to him ‘Surely, we don’t have to use him.’ He also said that Mr McFarland didn’t like Mr McHugh. Mr McFarland apparently drew on experience of what he had seen happen in Queensland with Mr McHugh in the past.

225 When Mr Mavrakis met with Mr Paul Watson on 3 December 2007, Mr Watson denied saying to Mr Anderson at any stage that the respondent required, as a condition of the successful award of the tender, that Formrite or Anderson Formrite engage WorkForce ONE to supply labour to perform the works. He said that under no circumstances did he ever require Formrite or any subcontractor to use WorkForce ONE labour.

226 I am not satisfied on the balance of probabilities that Mr Watson made any representation to Mr Anderson in August 2001 in respect of the quality of the workforce that would be available to Formrite or the applicant, were Formrite or the applicant to retain WorkForce ONE to provide a workforce for execution of a formwork subcontract at the Woodside Building site. I am not satisfied that any representation was made by Mr Watson as to the ability of Formrite or the applicant to move men on and off the site at Formrite’s or the applicant’s will if Formrite or the applicant wasn’t satisfied with them. Furthermore, I am not satisfied that any representation was made by Mr Paul Watson that generally, WorkForce ONE would make a formwork job at the Woodside Building site in Perth run smoothly. In addition I am not satisfied that Mr Paul Watson made any representation that Formrite or the applicant could control who worked at the site.

227 At Mr Kevin McHugh’s roadshow, Mr McHugh no doubt spruiked the merits of WorkForce ONE and the advantages of using it, but that did not constitute a representation by the respondent to the applicant or to Formrite.

228 If, contrary to the conclusion which I have reached, Mr Paul Watson did make representations to Mr Anderson in relation to the merits of using labour provided by WorkForce ONE, I am not satisfied that Mr Anderson was induced by any representation made to him to cause the applicant to enter into the contract with the respondent which it did on 11 October 2001. Firstly, before any contract was entered into, Mr Anderson was seized of Mr McFarland’s opposition to the engagement of WorkForce ONE and the reasons for it and, secondly, by 11 October 2001 the applicant had firsthand experience of working with labour provided by WorkForce ONE and knew of their inadequacies.

229 In this regard, Mr Anderson’s evidence in cross-examination included:

Senior counsel for the respondent:

‘… when you signed the subcontract on behalf of Anderson Formrite with Baulderstone Hornibrook you did not rely on any assurances which you’ve said were made to you by Mr Paul Watson regarding the quality of the men that were going to be supplied by WorkForce One, did you?’

Anderson: ‘I relied on Mr Watson or Mr Watson put a condition on there that I use WorkForce One and WorkForce One had given me the reliance on the men that would be supplied.’ [presumably a reference to representations concerning the men given by Mr Kevin McHugh and not by Mr Paul Watson]

Counsel: ‘Mr Anderson, by the time that you did sign the subcontract on behalf of Anderson Formrite with Baulderstone Hornibrook you had been put on notice by persons who were working for or with Anderson Formrite that the productivity of the men provided by WorkForce One was below expectation?’

Anderson: ‘That’s correct.’

…

Counsel: ‘Mr Anderson, by the time you signed the subcontract on behalf of Anderson Formrite with Baulderstone Hornibrook, you were aware that the men that were being provided by WorkForce One to Anderson Formrite were not men whose capabilities fitted the description you’d been provided by Mr McHugh, weren’t you?’’

Anderson: ‘That’s – around about that time it was – I signed the contract was about the time that there was some understanding that the men weren’t of the quality that they should be.’

Counsel: ‘You told us earlier that Mr McHugh had told you that they were going to be of a certain quality as to their capacity to perform formwork?’

Anderson: ‘That’s correct.’

Counsel: ‘By the time you signed the contract on behalf of Anderson Formrite with Baulderstone Hornibrook for the performance of this formwork work, you were aware that the men being provided by WorkForce One to Anderson Formrite were not of the quality as to their capabilities that had been represented to you by Mr McHugh, weren’t you?’

Anderson: ‘Yes. My understanding from – I wasn’t on site, of course, but my understanding was that yes, you’re correct. There was not – the quality of men weren’t – weren’t as good as they could be.’

230 Furthermore, I am not satisfied that Mr Anderson was induced by any representation made to him by Mr Paul Watson to cause the applicant to take over whatever contractual liabilities to WorkForce ONE that Formrite may have undertaken in respect of labour made available to it between 17 September 2001 and 11 October 2001 or to cause the applicant to engage WorkForce ONE to supply labour to the applicant for use on the Woodside Building project.

231 In my opinion, the applicant’s case for relief under the Trade Practices Act must fail. This leaves for consideration the applicant’s contract claim and its claim for conversion.

The contract claim

232 In relation to the applicant’s claim for breach of contract, its cause of action was pleaded as follows:

‘CAUSE OF ACTION – CONTRACT

35. Further or alternatively, the contract between the Applicant and the Respondent for performance of the Works provided that:-

35.1 the Respondent could terminate the contract at any time and for any reason by giving written notice to the Applicant (clause 39.12);

35.2 on termination pursuant to the term pleaded in paragraph 35.1, the Applicant was entitled to payment for:-

35.1.1 all services provided and material supplied by the Applicant to the Respondent;

35.1.2 the cost of goods or materials reasonably ordered by the Applicant;

35.1.3 the cost of removing all labour and other things used in performing the contract; and

35.1.4 $1.00

(clause 39.13).

36. The Respondent has wrongfully drawn down two performance bonds provided by the Applicant in the total sum of $617,250 and has not repaid that sum to the Applicant, despite demand and despite the Applicant not being indebted to the Respondent or otherwise liable to suffer the payment of the said sum to the Respondent.

37. On 17 May 2002 the Respondent terminated the said contract pursuant to the term pleaded in paragraph 35.1 but has made no payment to the Applicant pursuant to the term pleaded in paragraph 35.2 or at all.

38. As at 17 May 2002:-

38.1 the value of the work performed by the Applicant, other than provision of materials, was $6,880,550.60;

38.2 the Respondent had paid the Applicant $6,294,536.04 in respect of that said work, leaving an unpaid entitlement to the Applicant of $586,014.56

38.3 the Applicant had supplied to the Respondent materials to the value of $2,160,582.84 plus the value of the materials supplied by Rapid Metal Developments (Australia) Pty Ltd, which the Respondent was bound to pay for but which had not been paid for by the Respondent.

39. By reason of the matters pleaded in paragraphs 36-39 the Respondent is indebted to the Applicant in the sum of $3,363,858.40 plus the amount of Rapid Metal Developments (Australia) Pty Ltd’s claim against the Applicant.’

233 At the conclusion of the Second Further Amended Statement of Claim the applicant claimed relief in respect of its cause of action in contract as follows:

‘E. Alternatively, $3,363,858 plus any further amounts payable by the Applicant to Rapid Metal Developments (Australia) Pty Ltd or such other sum as this Honourable Court shall determine.’

234 The respondent’s defence to the applicant’s contract claim is to be found in the respondent’s Defence to Further Amended Statement of Claim filed 28 July 2009. Relevantly, paragraphs 23 – 27 and 32 of that Defence provided as follows:

‘23. In answer to paragraph 35 of the Claim, the Respondent:

(a) says that clause 39.12 of the AF Subcontract relevantly provided that the Respondent may at any time for its sole convenience, and for any reason, terminate the AF Subcontract by written notice to the Applicant;

(b) says that clause 39.13 of the AF Subcontract relevantly provided that, if the Respondent terminated the AF Subcontract under clause 39.12, the Applicant will be entitled to payment of the following amounts as determined by the Respondent’s Representative:

(i) for Work carried out prior to the date of termination, the amount which would have been payable if the AF Subcontract had not been terminated and the Applicant submitted a progress claim for work carried out to the date of termination;

(ii) the cost of goods or materials reasonably ordered by the Applicant for the Subcontract Works for which the Applicant is legally bound to pay provided that:

A. the value of the goods or materials is not included in the amount payable under subparagraph (i) above; and

B. title in the goods and materials will vest in the Respondent upon payment;

(iii) the reasonable costs of removing from the Site all labour, Temporary Works and Construction Plant and other things used in WUS; and

(iv) $1.00.

(c) says that clause 39.13 of the AF Subcontract further provided that the amount which the Applicant was entitled to under clause 39.13 was a limitation upon the Respondent’s liability to the Applicant arising out of, or in any way in connection with, the termination of the AF Subcontract and the Applicant may not make any claim (including under the AF Subcontract or otherwise at law or in equity) against the Respondent arising out of, or in any way in connection with, the termination of the AF Subcontract other than for the amount payable under clause 39.13;

(d) will rely on the terms of the AF Subcontract at the hearing as if they were set out in full herein;

(e) otherwise denies the paragraph.

24. In answer to paragraph 36 of the Claim, the Respondent:

(a) admits that, at the request of the Applicant, HSBC Bank Australia Limited (HSBC) issued 2 bank guarantees, whereby HSBC undertook to pay the Respondent the total sum of $617,250 on demand (Bank Guarantees);

(b) admits that the Respondent made demands under the Bank Guarantees and that the total sum of $617,250 was paid to it on or about 13 May 2002;

(c) admits that the Respondent had not repaid the sum of $617,250 to the Applicant, but does not admit having any obligation to do so;

(d) otherwise denies the paragraphs;

(e) says that:

(i) On or about 17 December 2001, the Applicant and the Respondent entered into a loan agreement (Loan Agreement);

(ii) On or about 17 December 2001, the Respondent advanced the sum of $1,050,000 to the Applicant pursuant to the Loan Agreement;

(iii) Clause 10.2 of the Loan Agreement provided that, if any Event of Default occurs, at any time thereafter if it continues, the Respondent may, without any notice to the Applicant, make a claim or claims on the Bank Guarantees and apply the proceeds towards repaying the Obligations;

(iv) Clause 10.1 of the Loan Agreement provided that the following were each an “Event of Default”:

A. The Applicant does not pay at or before the due time on the due date and in the specified manner, any amount payable by it under any Transaction Document (including the Loan Agreement and the AF Subcontract) and such default is not cured within 5 Banking Days (clause 10.1(a));

B. The Applicant defaults in fully performing and observing any provision of any Transaction Document (including the Loan Agreement and the AF Subcontract), other than a provision requiring the payment of money as described in clause 10.1(a), and if that default is capable of remedy, it has not been remedied within 14 days of the occurrence of the default (clause 10.1(b));

(v) Clause 1.1 of the Loan Agreement defined “Obligations” to mean all the liabilities of the Applicant to the Respondent under or by reason of any Transaction Document (including the Loan Agreement and the AF Subcontract) or any other transaction or event, including any liabilities which:

A. are unliquidated;

B. are present, prospective or contingent;

C. are in existence before or come into existence after the date of the Loan Agreement;

D. relate to the payment of money or the performance or omission of any act;

E. sound in damages only; or accrue as a result of any Event of Default.

(vi) Clause 5.1(c) of the Loan Agreement provided that the Applicant will repay, inter alia, the outstanding balance of the amount advanced to the Applicant pursuant to the Loan Agreement plus interest on 1 May 2002;

(vii) As at 1 May 2002, the outstanding balance of the amount advanced to the Applicant pursuant to the Loan Agreement plus interest was $350,000 (Outstanding Loan Balance);

(viii) In breach of clause 5.1(c) of the Loan Agreement, the Applicant did not repay the Outstanding Balance on 1 May 2002, within 5 Banking Days of 1 May 2002, or at all;

(ix) Further, by clause 9(i) of the Loan Agreement the Applicant undertook to the Respondent that it would not create, permit or suffer to exist any Encumbrance (including any charge) over all or any of its assets without the Respondent’s prior written consent;

(x) On or about 3 January 2002, without the Respondent’s consent and in breach of clause 9(i) of the Loan Agreement, the Applicant created, permitted or suffered to exist a fixed and floating charge over the whole of its undertaking, property and assets both present and future, in favour of Bridgecorp Finance Ltd;

(xi) The breach of clause 9(i) of the Loan Agreement was not remedied within 14 days of the occurrence of the default or at all;

(xii) Further, clause 5.1 of the AF Subcontract provided that the Applicant must provide to the Respondent an unconditional bank guarantee in the form of Annexure B to the AF Subcontract;

(xiii) In breach of clause 5.1 of the AF Subcontract, the Applicant did not provide to the Respondent an unconditional bank guarantee in the form of Annexure B to the AF Subcontract;

Particulars

The Bank Guarantees expired at 5pm on 27 October 2002, whereas the form of bank guarantee set out in Annexure B of the AF Subcontract continued (relevantly) until notification had been received from the Respondent that the sum was no longer required.

(xiv) The breach of clause 5.1 of the AF Subcontract was not remedied within 14 days of the occurrence of the default or at all;

(xv) In the premises, the Applicant committed Events of Default for the purposes of the Loan Agreement, such that the Respondent was entitled to make a claim or claims on the Bank Guarantees without any notice to the Applicant, and to apply the proceeds towards repaying the Obligations (including the Outstanding Loan Balance);

25. In answer to paragraph 37 of the Claim, the Respondent:

(a) admits that it terminated the AF Subcontract pursuant to clause 39.12;

(b) admits that it did not make a payment to the Applicant pursuant to clause 39.13 of the AF Subcontract or at all following the termination;

(c) otherwise does not admit this it was or is obliged to make a payment to the Applicant pursuant to clause 39.13 of the AF Subcontract or at all.

26. In answer to paragraph 38 of the Claim, the Respondent:

(a) denies subparagraph 38.1;

(b) as to subparagraph 38.2, admits that the Respondent had paid the Applicant about $5,722,305 in respect of the Work carried out prior to the date of termination, plus GST of about $572,230.50, but otherwise denies the subparagraph;

(c) does not admit subparagraph 38.3.

27. The Respondent denies paragraph 39 of the Claim.

…

32. In further or alternative answer to paragraphs 23 to 39 of the Claim, the Respondent says:

(a) clause 41.2 of the AF Subcontract provided that (subject to certain presently irrelevant exceptions), the Applicant must give the Respondent’s Representative the notices required by subclause 41.3 if it wishes to make a claim against the Respondent in respect of any fact, matter or thing (including a breach of the AF Subcontract by the Respondent) under, arising out of, or in any way in connection with, the Subcontract Works or the AF Subcontract;

(b) the notices required by subclause 41.3 were:

(i) a written notice within 7 days of the first occurrence of the fact, matter or thing upon which the claim is based, expressly specifying:

A. that the Applicant proposes to make a claim; and

B. the fact, matter or thing upon which the claim is based;

(ii) a written claim within 14 days of giving the notice referred to in paragraph 32(b)(i) above, which must include:

A. detailed particulars concerning the fact, matter or thing upon which the claim is based;

B. the legal basis for the claim, whether based on a term of the AF Subcontract or otherwise, and if based on a term of the AF Subcontract, clearly identifying the specific term;

C. the facts relied upon in support of the claim in sufficient detail to permit verification; and

D. details of the amount claimed and how it is calculated;

(c) further, clause 41.4 of the AF Subcontract provided that, if the fact, matter or thing upon which the claim under subclause 41.2 is based or the consequences of that fact, matter or thing are continuing, the Applicant must continue to give the information required by subclause 41.3(b) every 21 days after the written claim under subclause 41.3(b) was submitted or given to the Respondent’s Representative, until after the fact, matter or thing on which the Claim is based has, or the consequences thereof have, ceased;

(d) the claims now made against the Respondent and pleaded in paragraphs 23 to 29 of the Claim are in respect of facts, matters or things (including an alleged breach of the AF Subcontract by the Respondent) under, arising out of, or in connection with, the Subcontract Works or the AF Subcontract;

(e) the Applicant did not give the Respondent’s Representative the notices required by subclauses 41.3 and 41.4 in respect of the claims now made against the Respondent and pleaded in paragraphs 23 to 39 of the Claim;

(f) clause 41.5 of the AF Subcontract provided that, if the Applicant fails to comply with subclause 41.2, 41.3 or 41.4:

(i) the Respondent will not be liable (insofar as it is possible to exclude such liability) upon any claim by the Applicant; and

(ii) the Respondent will be absolutely barred from making any Claim against the Respondent,

arising out of, or in any way in connection with, the relevant fact, matter or thing to which subclause 41.2 applies;

(g) in the premises:

(i) the Respondent is not liable (insofar as it is possible to exclude such liability) for the claims now made and pleaded in paragraphs 23 to 39 of the Claim; and

(ii) the Respondent is absolutely barred from making such claims against the Respondent.’

235 As indicated above, at [107], the time bar clause contained in clause 41.5 of the formwork subcontract had no application once the respondent elected to terminate it for convenience in accordance with clause 39.12.

In my opinion, none of the provisions of clause 41 limited the rights of the applicant in respect of its contract claims under clause 39.13.

236 The breach of contract upon which the applicant relied was to be found in the last part of paragraph 37 of the Second Further Amended Statement of Claim. Following the respondent’s termination of the formwork subcontract ‘for its sole convenience’ [emphasis added] on 17 May 2002, the applicant became entitled to payment by the respondent of the amounts for which clause 39.13 provided, whatever they may have been. The applicant alleged that notwithstanding the relevant termination, the respondent had ‘made no payment to the applicant pursuant to’ clause 39.13 and the respondent admitted that ‘it did not make a payment to the Applicant pursuant to clause 39.13 of the AF Subcontract or at all’ following the termination by it of the subcontract.

237 Whilst clause 39.13(a) incorporates the words ‘as determined by the Main Contractor’s Representative’ [see [105] above], it seems to me that there was no discretion relevantly conferred upon the Main Contractor’s Representative to allow or disallow the obligation to pay the amount of $1 for which clause 39.13(a)(iv) provided. The respondent’s promise to pay that amount was critical to the formation of a contract between the parties for which there was consideration.

The non payment of the amount of $1, following the termination of the subcontract for the respondent’s sole convenience, was, of itself a clear breach of contract entitling the applicant to succeed with its breach of contract claim.

238 In respect of monies admitted to have been drawn down by the respondent on or about 13 May 2002 under the two bank guarantees issued by HSBC Bank Australia Limited, totalling $617,250.00, it seems to me that the relevant issue, given the manner in which the applicant has pleaded its case in paragraphs 35-39 of its Second Further Amended Statement of Claim, is to ascertain how much, if any is due and payable by the respondent to the applicant under clause 39.13(a)(i) of the formwork subcontract, due credit being given for the net effect of all payments that were made by the respondent to the applicant.

239 The applicant’s case was that the respondent had paid the applicant $6,294,536.04 in respect of the work performed by the applicant other than for the provision of materials (see paragraph 38.2 of the Second Further Amended Statement of Claim). In this regard, the respondent admitted that it ‘had paid the Applicant about $5,722,305 in respect of the Work carried out prior to the date of termination, plus GST of about $572,230.50’. In other words the parties are not relevantly in dispute in relation to the total of the amounts paid for work carried out prior to 17 May 2002. I would view the difference of 54 cents as being ‘de minimis’, especially when the respondent’s admission was prefaced by the word ‘about’.

240 If the drawdown by the respondent under the two bank guarantees relevantly reduced the effect of the gross payments made by the respondent to the applicant for work carried out prior to termination of the formwork subcontract for the respondent’s sole convenience on 17 May 2002, then that is a matter for further consideration in determining the amounts now payable by the respondent to the applicant under clause 39.13(a)(i)-(iii).

241 In view of the failure of the Main Contractor’s Representative (relevantly Mr Walkenhorst) to make any determinations, in the face of, inter alia, the applicant’s Progress Claim No. 20 of 17 May 2002 calling for the payment of $425,899 plus 10% GST (see [144] above), the respondent’s refusal to issue a ‘Payment Advice’ in respect of that claim (see [145] above) and the applicant’s demand for payment of $9,463,228.91 plus GST on or about 6 September 2002 (see [171] above), it seems to me that the applicant is entitled to payment of such amounts as the Main Contractor’s Representative, acting reasonably, ought to have determined as payable by the respondent to the applicant under clause 39.13(a)(i)-(iii). The failure of the Main Contractor’s Representative to make any determination is not one upon which the respondent may now rely. ‘A man cannot be permitted to take advantage of his own wrong’ (see Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180 at 189; see also TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 147). In the circumstances it seems to me that the Court should now determine:

(a) what amount should have been reasonably assessed by the Main Contractor’s Representative as being payable by the respondent to the applicant under a progress claim for work carried out to 17 May 2002, if the formwork subcontract had not been terminated for the respondent’s sole convenience on that day;

(b) what was the cost of goods and materials reasonably ordered by the applicant for the subcontract works, for which it was legally bound to pay, which had not been incorporated in the works as at 17 May 2002, the title to which would pass to the respondent upon payment, there being no double-counting in respect of amounts found to be payable under (a) above;

(c) what were the reasonable costs of removing from the Woodside Building project site all labour, temporary works and construction plant and other things used in the works under the subcontract.

In respect of the determination of the appropriate amounts under paragraphs (b) and (c) above, the Court should have regard to the applicant’s duty to mitigate its damage under clause 39.13(b)(i).

As will be apparent later, the applicant does not press for a payment under (c) above because no such costs were incurred by it. However, clause 39.13(a)(iii) is not without significance when one comes to consider the applicant’s conversion claim.

The applicant’s claim under clause 39.13(a)(i)

242 In regard to paragraph (a) above, it seems to me that the task to be performed should not be addressed by reference to an ambit claim for an amount such as $9,463,228.91, without particulars, as submitted by the applicant to the respondent on or about 6 September 2002. Rather, one should seek to determine the amount that the Main Contractor’s Representative should have determined to be payable by the respondent to the applicant pursuant to Progress Claim No. 20, which was forwarded to the respondent for its information and processing under the applicant’s letter dated 17 May 2002. That progress claim called for the payment of $425,899 plus 10% GST and asserted a Cost to Complete of $6,103,446.

243 Given the importance of Progress Claim No. 20 in the determination of the applicant’s entitlement under clause 39.13(a)(i) of the formwork subcontract, it is appropriate to elaborate on the content of that progress claim to which reference was made at [144] above.

244 The applicant’s Progress Claim No. 20 of 17 May 2002 was directed to Mr Ian Glover of the respondent. It was signed for the applicant by Mr Peter Mackiewicz on letterhead for the applicant which showed its address as 9 Montgomery Way, Malaga, WA 6090 (being Mr Passione’s business address). The progress claim was in the following terms:

‘We submit our progress claim for the work completed to date per attached details:

Value of Contract Work completed $ 425,899

Variations $ -

VALUE OF THIS CLAIM $ 425,899

Plus 10 % GST

The ‘attached details’ were recorded on the standard four page progress claim document of the same date. The four page document had ten columns. The first column identified the relevant part of the works, the second bore the heading ‘Square Metres’, the third bore the heading ‘Rate’, the fourth bore the heading ‘Total Value’, the fifth and sixth columns bore the heading ‘This Valuation’ with two subheadings ‘Perc’ (which I would understand to be a reference to percentage) and ‘Value’, the seventh and eighth columns bore the heading ‘Previous Valuation’ and the subheadings ‘Perc’ and ‘Value’, the ninth column was headed ‘This Claim’ and the tenth column was headed ‘Amount Outstanding’.

245 In respect of the ‘HOTEL SUBSTRATUM’ the progress claim document indicated a ‘value’ for works completed of $457,181 against a ‘Total Value’ of $685,970.

246 In relation to the ‘WESTERN BUILDING’ the document indicated a ‘value’ of works completed of $9,009 against a ‘Total Value’ of $166,910.

247 In relation to the ‘TOWER’ the document indicated the execution of work on ‘Up to B1’, ‘Ground Floor’, ‘Ground Mezzanine’, ‘Level 1’, ‘Lift Wall to Level 1’ and Levels 2-7. The total value of works said to have been completed on the Tower was shown as $3,421,698 against a ‘Total Value’ of $7,510,805.

248 In respect of ‘TOWER COLUMNS’ the value of the works completed was shown as $588,823 against a ‘Total Value’ of $1,146,020.

249 In respect of ‘TOWER CORE SLABS’ the value of the work completed was said to be $372,231 against a ‘Total Value’ of $680,490.

250 In respect of ‘TOWER CORE STAIRS’ the document asserted a value of works completed at $102,317 against a ‘Total Value’ of $230,285.

251 In respect of ‘TOWER SCREENS’ the document asserted the value of the works completed was $527,000 against a ‘Total Value’ of $1,000,000.

252 In relation to ‘PRELIMINARIES’ the document asserted that the value of the work completed was $591,376 against a ‘Total Value’ of $752,600.

253 In respect of ‘VARIATIONS’ it was suggested that there was a Total Value of $17,885 but with a nil value in respect of works completed.

254 These figures were totalled to indicate that in respect of works having a Total Value of $12,173,080, the value of the works completed was said to be ‘$6,069,634’, leaving a cost to complete of $6,103,446.

255 The ‘PAYMENT SUMMARY’ from which the claim amount of $425,899 was derived was expressed as follows:

‘Original Contract Sum $ 12,345,000

Less:

Cost to Complete $ 6,103,446

Cost in excess of $12,345,000 $ 443,350

Loan Repayments: 1. $ 350,000

2. $ 350,000

Paid to Date $ 4,672,305

DUE THIS PAYMENT $ 425,899’

256 The question arises as to how much, if any, out of the amount of $425,899, plus 10% GST, should the Main Contractor’s Representative have reasonably assessed as being payable by the respondent to the applicant if the formwork subcontract had not been terminated for the respondent’s sole convenience on 17 May 2002.

257 Mr Passione made his own assessment of the value of the work completed as at 17 May 2002. His assessment was in the amount of $6,255,046 excluding GST.

On 18 May 2002 he prepared a document headed ‘Work completed at date of termination’. In respect of each component of the works it showed a value against which a percentage was recorded with a calculation in the final column of the percentage completed. The total value column recorded the respondent’s breakdown of the contract price. To all intents and purposes Mr Passione’s document prepared on 18 May 2002 accorded with the four page document accompanying Progress Claim No. 20 as forwarded by the applicant to the respondent under cover of Mr Mackiewicz’s letter of 17 May 2002 which was received by the respondent on that day. The difference between Mr Passione’s document and the one accompanying Progress Claim No. 20 lay in the fact that in Mr Passione’s document there was no line item for ‘Core Walls’ in relation to the ‘Hotel Substratum’ and in relation to the ‘Tower’, Mr Passione’s figures were based upon an allocation of $635,800 to the item ‘Up to B1’, whereas Progress Claim No. 20 included a figure of $520,200 for that item. Finally, in relation to the Tower, the item ‘Ground Floor’ in Mr Passione’s figures was shown as having a value of $681,560 whereas in Progress Claim No. 20 the figure was shown as $557,640. Importantly for the two Tower items the percentages said to have been completed were the same, namely 100% for ‘Up to B1’ and 91% for ‘Ground Floor’. As previously mentioned the total value figure of $12,173,080 in Progress Claim No. 20 did not reconcile with the Original Contract Sum of $12,345,000. On the other hand, Mr Passione’s total figure, broken down as he recorded it equalled the amount of the Original Contract Sum.

258 One other minor point of difference was that the component items making up ‘PRELIMINARIES’ were recorded in a different order in Mr Passione’s document from the order in which they appeared in Progress Claim No. 20, but the figures were the same.

259 It may be noted that in its assessment of Progress Claim No. 18 the respondent agreed with the applicant’s claim that in respect of the Tower the work ‘Up to B1’ was 100% complete. In relation to the Hotel Substratum the applicant had asserted that the work on the ‘Core Walls’ was 90% complete, whereas in assessing Progress Claim No. 18 the respondent had suggested that it was only about 85% complete. In the case of the ground floor of the Tower Building the applicant claimed that the work as at 17 May 2002 was 91% complete. The respondent in its assessment of Progress Claim No. 18 had suggested that is was only about 85% complete, but that was as at 9 May 2002.

260 Whilst the figure of $443,350 included in Progress Claim No. 20 as ‘Cost in excess of $12,345,000’ on the line beneath ‘Cost to Complete’ has not been explained, it seems clear to me that there was a recognition between the parties that the job was running behind schedule and that it would probably cost more to complete the works than the Original Contract Sum. Mr Passione’s weekly Project Progress Report clearly indicated that at the time when the contract was terminated about two-thirds of the hours allowed to complete the job had been utilised but the progress achieved was less than 50%. However, the more difficult work was on the lower floors.

261 In relation to Mr Passione’s assessment of the value of the work completed as at 17 May 2002 the respondent submitted:

‘63. The Applicant seems to claim that the value of the Works that it performed, as at the date of termination, was $6,255,046.00. It founds its claim in this regard on a document prepared by Passione on 18 May 2002 in which he purported to record the work the Applicant had completed up to 17 May 2002. Significantly, there is no evidence that this document was ever sent to the Respondent for its consideration or assessment (as had been the case for progress claims submitted by the Applicant prior to that time). Moreover, the document does not provide a reliable or accurate assessment of work completed by the Applicant, in that:

(a) In making the assessment, Passione ignored the Respondent’s assessment of progress claim 18 [Ex B vol 5 pp11382-1386], which related to work performed between 26 April and 3 May 2002. The consequence was that Passione included in his figures in this ‘work completed’ document progress that had been made between 26 April and 3 May 2002, but which had already been assessed and accounted for by the processing of claim 18. There is no evidence from which it is possible to determine the extent of the overlap.

(b) In preparing the document, Passione did not adopt the cost to complete methodology.

(c) Items 1-6 under the heading ‘Variations’ were variations approved and authorised by the Respondent (as Passione understood it from Mackiewicz). However, in fact this was not the case.

64. In reality, the Applicant has not shown the amount of the Works that it performed, as at the date of termination, for which it has not been paid.

65. As a result, the Applicant has not shown that the Respondent breached clause 39.13(a)(i) of the AF Subcontract.’

(footnotes omitted)

262 Apart from other considerations the respondent’s submission overlooks its termination of the formwork subcontract for its sole convenience and the submission of the applicant’s Progress Claim No. 20 to it on 17 May 2002.

There was no precedent for the submission of a document, such as that prepared by Mr Passione on 18 May 2002, to the respondent.

263 It is evident from the terms of the respondent’s facsimile to the applicant of 10 May 2002 that its assessment of the applicant’s Progress Claim No. 18 dated 3 May, 2002 was ‘based on progress to yesterday and our discussions relating to the clarification of the Substratum / Tower boundary. The core-blade walls we discussed have been included in our assessment.’ It will be recalled that the respondent’s assessment of Progress Claim No. 18 was not the product of the normal discussion between the parties in relation to the various component parts. Without addressing the reasonableness of the respondent’s assessment of the applicant’s Progress Claim No. 18, it is apparent from the respondent’s submission that the applicant’s progress of the works between 9 and 17 May 2002 required valuation. The respondent submitted that Mr Passione’s ‘Work completed at date of termination’ document did not adopt the Cost to Complete methodology. It did not need to do so. It was his own internal document.

I am satisfied that Mr Passione brought a disciplined and competent approach to the calculation of the ‘Work completed at date of termination’ document which he prepared on 18 May 2002. I find that the value of the work completed was $6,255,046.

The better yardstick for measuring the applicant’s entitlement under clause 39.13(a)(i) is by reference to Progress Claim No. 20 of 17 May 2002 to which reference has been made above and which has been reconciled with Mr Passione’s document.

The respondent’s submissions should be rejected.

264 Deducting the amount of $6,255,046 from the Original Contract Sum of $12,345,000, one derives a ‘Cost to Complete’ of $6,089,954. However, there was a clear recognition by the applicant that there would be a ‘Cost in excess of $12,345,000’ of $443,350 as at 17 May 2002 to bring the works to completion. In the circumstances the Cost to Complete as at 17 May 2002would appear to have been assessed at $6,533,304 using the methodology that had been employed in the assessment of the earlier progress claims.

265 Deducting $6,533,304 from the Original Contract Sum produces an amount payable of $5,811,696.

266 It is common ground between the parties that the total of the amounts paid by the respondent to the applicant was $4,672,305 together with the amount of $1,050,000 drawn down under the December 2001 loan agreement. Deducting the payments of $4,672,305, and the loan drawdown $1,050,000 from the amount of $5,811,696 produces a net amount payable by the respondent to the applicant of $89,391.

267 If one were to approach the matter by reference to Progress Claim No. 20,it showed a Cost to Complete of $6,103,446 to which the amount of $443,350 was added as ‘Cost in excess of $12,345,000’. This would suggest a total cost to complete of $6,546,796 which when deducted from the Original Contract Sum produces an amount payable figure of $5,798,204. Given the payment of $4,672,305 and the advance under the December loan agreement of $1,050,000, a balance due to the applicant under Progress Claim No. 20 would appear to be $75,899, rather than $89,391.

268 The evidence is far from satisfactory, on the state of progress of the works as at 17 May 2002, rendering the task of the Court in determining the proper amount payable by the respondent to the applicant under Clause 39.13(a)(i) of the formwork subcontract rather difficult.

Whilst the Court should insist on as much certainty and particularity in proof of damage as is reasonable, having regard to the circumstances and the nature of the breach that has occurred, what is ‘reasonable’ covers a great deal of territory and, where precise evidence is not obtainable, the Court must do the best it can (see per Bowen LJ in Ratcliffe v Evans [1892] 2 QB 524 at 532-533 and per Samuels JA in Allan v Loadsman (1975) 2 NSWLR 789 at 793-794).

See also Tramways Advertising Pty Ltd v Luna Park (N.S.W.) Ltd [1938] 38 SR (NSW) 632 at 658 where Jordan CJ, with whose reasons for judgment Davidson J agreed, said:

‘The assessment of damages for breach of contract must be based on evidence. If the evidence proves nothing more than that the contract has been broken, only nominal damages can be awarded: cf Twyman v Knowles (13 CB 222). If it goes beyond this and shows, by reason of the nature of the contract, the stage of performance at which the breach occurred and the nature or extent of the breach, or all or any of these matters, or otherwise, that it is more probable than not substantial damage has been occasioned, the tribunal must do the best it can with the material at its disposal to assess the amount of the damage and must not be deterred from doing so by the fact that it may be very difficult indeed to determine the approximate quantum. If, however, the evidence leaves it completely in the dark as to whether the breach has been serious or trivial; if there is no evidence from which an inference can be drawn that it is more probable than not that the breach was an important one likely to have caused substantial damage than that it was so trivial and technical that it could have caused no substantial damage at all, then nothing more than nominal damages can be awarded.’

269 In the High Court, Latham CJ said (see Luna Park (N.S.W.) Limited v Tramways Advertising Proprietary Limited (1938) 61 CLR 286 at 301:

‘It is true that there are many authorities which establish that substantial damages can be awarded where a breach of contract is established, even though the calculation of the damages is “not only difficult but incapable of being carried out with certainty or precision” (Chaplin v Hicks (1911) 2 K.B. at p791) … [after referring to other cases, the Chief Justice continued] In all these cases, however, the extent of the breach was established. There was a complete failure on one side to perform the contract.’

In the present case there has also been a complete rather than a partial failure to perform the relevant contractual provision.

270 It may be observed that in its facsimile response of 10 May 2002 to the applicant’s Progress Claim No. 18 of 3 May 2002 the respondent did not comment on the sufficiency or otherwise of the extra amount of $443,350 acknowledged by the applicant to constitute ‘Cost in excess of $12,345,000’.

Furthermore, it is clear that the works progressed between 9 May and 17 May.

271 In my opinion the amount that would have been reasonably assessed by the Main Contractor’s Representative as being payable by the respondent to the applicant under Progress Claim No. 20 of 17 May 2002, if the formwork subcontract had not been terminated for the respondent’s sole convenience on that day, would have been $75,899, i.e. the amount of Progress Claim No. 20, after allowing for the payment of $4,672,305 and the amount of $1,050,000 drawn down under the December 2001 loan agreement.

Taking an amount of $350,000 to cover the third loan repayment from the amount of $425,899 claimed in Progress Claim No. 20 produces the figure referred to, namely $75,899.

272 To the amount of $75,899 an amount should be added for GST.

273 However, the above calculations have proceeded on the premise that the total amount paid by the respondent of ‘about’ $5,722,305 plus GST should not be diminished by the drawdown of $617,250 under the bank guarantees. In my opinion, it should be diminished.

It seems to me that the drawdown constituted, in effect, a clawback of payments that had previously been made by the respondent to the applicant. The applicant’s entitlement under clause 39.13(a)(i) of the formwork subcontract should not be diminished on that account.

274 The respondent is not entitled to the benefit of any double-counting. In paragraph 24(a)-(c) of its Defence to Further Amended Statement of Claim the respondent admitted drawing down the amount of $617,250 under the two bank guarantees and failing to repay a like amount to the applicant.

275 The respondent, having drawn down $617,250 under the two bank guarantees and applied same to the repayment of monies due by the applicant to the respondent under the December 2001 loan agreement, cannot, in such circumstances, treat a like amount as having been paid by it to the applicant for work performed under the formwork subcontract.

276 In relation to the drawdown of monies under the two bank guarantees, the respondent submitted that the applicant committed various breaches of the 11 October 2001 formwork subcontract and the December 2001 loan agreement. It is presently unnecessary to consider the breaches alleged. As previously indicated there was no cross-claim before the Court. Furthermore, no certificates had been issued by the Main Contractor’s Representative prior to the termination of the formwork subcontract for the respondent’s sole convenience, which may have justified a utilisation of monies recovered under the two bank guarantees in satisfaction of any outstanding indebtedness of the applicant to the respondent. In addition, the respondent cannot rely on post termination events to diminish the amount payable by the respondent to the applicant under clause 39.13(1)(i) of the formwork subcontract.

277 With some small exceptions, I reject the submission of senior counsel for the respondent that the respondent was entitled to deduct $608,431.44 from the monies drawn down under the bank guarantees when calculating the total amount paid to the applicant for the purpose of the assessment of a notional progress claim under clause 39.13(a)(i) of the formwork subcontract. The applicant conceded, in respect of a bundle of summary documents handed up by senior counsel for the respondent on 28 September 2009 which contained a total figure of $608,431.44, that the respondent should be taken to have paid the following monies to the applicant in addition to the amount of $4,672,305 and the amount $1,050,000 drawn down under the December 2001 loan agreement, namely:

Payments to Blackadder Scaffolding (see Ex 13 tab 28) $34,820.65

Payments to TJF EBC (see Ex 13 tab 33) 20,336.73

$55,157.38

278 Accordingly, the amount payable by the respondent to the applicant under clause 39.13(a)(i) of the formwork subcontract should be $637,991.62 ($75,899 plus $617,250 minus $55,157.38) together with GST in the sum of $63,799.16.

The applicant’s claim under clause 39.13(a)(ii)

279 As at 21 September 2009 the applicant had claimed $4,901,082.37 as ‘The cost of materials reasonably ordered by the Applicant for the sub-contract Works for which the Applicant was legally bound to pay’. This amount was also then claimed by the applicant under its conversion claim and broken down as follows:

‘As at 17 May 2002, the Applicant had the possession of, or the right to immediate possession of the following Goods, comprising table and blockout forms, truform, ply, hoists, screens, stairs, tools and sundry materials that the applicant had been using to perform the Works:

(a) Goods owned by the Applicant to the value of $2,192,508.87; and

(b) Goods leased by the Applicant to the value of $2,708,573.50.

…’

In the course of argument the amount of $2,192,508.87 was reduced to $2,160,582.84.

280 In relation to the cost of goods and materials reasonably ordered by the applicant for the subcontract works for which it was legally bound to pay, which had not been incorporated in the works as at 17 May 2002 and title to which would pass to the respondent upon payment, there being no double-counting in respect of amounts found to be payable under clause 39.13(a)(i), the applicant has in its submissions in reply claimed $1,269,994, recognising that it should not be awarded the same amount twice under its different claims. The applicant’s written submissions in reply included:

‘The Court has heard evidence that the tableforms were purpose built for this specific project. According to the 2002 and 2003 combined Trial Balance [referring to p1697 of Exhibit B Vol 5], the cost of the table and blockout forms was $1,269,994. The Applicant seeks entry of a verdict in that sum under Clause 39.13(a)(ii).

281 The applicant submitted that the respondent sought to construe the phrase ‘the cost of goods or materials reasonably ordered by the Subcontractor for the Subcontract Works’ as if the words ‘inclusion in’ appeared after the words ‘Subcontract for’ and before the words ‘the Subcontract Works’. The applicant submitted that to so construe clause 39.13(a)(ii) could not be justified. It submitted that that was not what the clause said and that in the event of any ambiguity a construction should be placed upon the words ‘against the respondent’.

The applicant submitted that the cost of ‘purpose built’ table and blockout forms were recoverable under clause 39.13(a)(ii).

282 However, it seems to me that the table and blockout forms for which the applicant seeks payment under clause 39.13(a)(ii) of the formwork subcontract constituted ‘Construction Plant’ which was defined in clause 1 of the formwork subcontract to mean ‘appliances and things used in carrying out of WUS [Work Under the Subcontract] but not forming part of the Subcontract Works’. In clause 39.13(a), a clear distinction was drawn between ‘goods or materials’ on the one hand and ‘Construction Plant’ on the other.

It seems to me that it was never within the contemplation of the parties that formwork used by the applicant in carrying out the subcontract works would become the property of the respondent. The function of the formwork subcontractor was to construct and remove platforms or casings upon which or within which reinforced concrete could be placed. To the extent to which the formwork subcontractor may have been required to place or attach items to the formwork which could not naturally be removed when the formwork was stripped, following a concrete pour, then, in relation to such items, clause 39.13(a)(ii) may have had some application.

283 I would not construe purpose built table and blockout forms as ‘goods or materials’ to which clause 39.13(a)(ii) applied.

The applicant has no entitlement to recover the cost of the table and blockout forms, said to have been $1,269,994, under clause 39.13(a)(ii) of the formwork subcontract.

Reasonable removal costs

284 This leaves for consideration the applicant’s entitlement to payment for the reasonable costs of removing from the Woodside Building site all labour, temporary works and construction plant and other things used in the works under the subcontract. As previously noted, the applicant advised the Court on 22 September 2009 that it did not press its claim under clause 39.13(a)(iii) of the formwork subcontract as it did not incur any such costs. However, had the applicant had an opportunity to and chosen to strip whatever formwork was then in place, following the termination of the formwork subcontract for the respondent’s sole convenience on 17 May 2002, then the costs of stripping and removing the formwork etc. from the Woodside Building Project site would have fallen within the expression ‘costs of removing from the Site, all … Temporary Works and Construction Plant and other things used in WUS’ under clause 39.13(a)(iii).

Conclusion in respect of contract claims

285 In my opinion the applicant is entitled to recover in respect of its contract claim $637,991.62 together with GST in the sum of $63,799.16 under clause 39.13(a)(i) of the formwork subcontract. It is also entitled to interest up to judgment on the amount of $637,991.62 from 17 May 2002.

In addition, the applicant is entitled to the payment of $1 under clause 39.13(a)(iv) of the formwork subcontract and to interest up to judgment on that amount from 17 May 2002.

The conversion claim

286 Turning to the applicant’s conversion claim, I am satisfied that property of the applicant was converted by the respondent to its own use by intentionally interfering with the applicant’s right to immediate possession thereof.

287 In relation to the conversion claim it will be necessary to consider what, if any, implied right of usage was conferred by the applicant on the respondent in relation to formwork that had been put in place and utilised prior to the respondent’s termination of the formwork subcontract for its sole convenience, given the nature of the works being undertaken with that formwork in place. Presumably, a licence was conferred by the applicant on the respondent allowing the continued use by it of formwork that was in place where steelwork and concrete had been placed thereon or within it, until such time as the relevant concrete had cured sufficiently to permit the safe removal of the formwork, without prejudicing the integrity of the structure.

288 It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract (per Griffith CJ in Butt v M’Donald [1896] 7 Q.L.J. 68 at 70-71). (See also Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 at 607; Fitzgerald v F.J. Leonhardt Pty Limited (1997) 189 CLR 215 at 219 and Australis Media Holdings Pty Limited v Telstra Corporation Limited (1998) 43 NSWLR 104 at 123-125.)

289 Terms may be implied in a contract in one of four ways (per Heydon JA, as his Honour then was, in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 164 [28]). These were summarised by Hodgson J in Carlton & United Breweries Ltd v Tooth & Co Ltd (unreported, Supreme Court of New South Wales, 11 June 1985) as follows:

‘(i) Implications contained in the express words of the contract: see Marcus Clarke (Vic) Ltd v Brown (1928) 40 CLR 540 at 553-4.

(ii) Implications from the “nature of the contract itself” as expressed in the words of the contract: see Liverpool City Council v Irwin [1977] AC 239.

(iii) Implications from usage (for example, mercantile contracts).

(iv) Implications from considerations of business efficacy: see BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26 [see now (1977) 180 CLR 266]; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.’

290 In relation to the fourth mentioned type of implied term the classic test is identified in the advice of Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel in B.P. Refinery (Westernport) Pty. Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 at 283 as follows:

‘… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.’

The test promulgated by the Privy Council was approved by Mason J in Codelfa.

291 In my opinion the nature of the formwork subcontract and notions of business efficacy would lead to the implication of a term denying the applicant the right to remove construction plant and temporary work following the termination of the subcontract for the respondent’s sole convenience if the relevant formwork was then supporting recently poured reinforced concrete members. In my opinion a term is to be implied in the contract allowing the respondent the benefit of the use of such formwork following a termination of the subcontract by it for its sole convenience until sufficient time has passed to allow the concrete to cure.

In the circumstances of this case, that time would be no more than two weeks after the date of the relevant concrete pour.

292 Apart from the implication of such a term, clause 39.13(a)(iii) of the formwork subcontract clearly contemplated that, in the event of a termination forthwith for the respondent’s sole convenience, such as occurred on 17 May 2002, the applicant, as the former subcontractor, would have the right to enter upon the site and effect the desired removal of Temporary Works and Construction Plant and other things used in the Work under Subcontract, visiting the reasonable costs of that removal on the respondent. The express reference to the removal of ‘Temporary Works and Construction Plant’ from the site clearly included the stripping of existing and incomplete formwork and the removal of the relevant appliances and things used in carrying out the work under the formwork subcontract.

293 The formwork subcontract for a development such as the Woodside Building project was clearly an important one. However, unlike most subcontracts, its performance did not directly enhance the buildings under construction. It simply provided the platform for reinforced concrete members to be put in place by others. As Mr Bell explained:

‘We don’t pour. We only do the formwork. There are other trades that work in conjunction with the formwork. We only provide the formwork for the suspended slabs or for vertical elements, walls or columns. We don’t do the edge form on the ground. The ground slabs are poured by somebody else … so we do formwork for vertical elements like columns and walls or suspended formwork for the slabs, and so we provide that formwork.’

294 In the course of his evidence in chief Mr Bell was asked to describe, in practical terms, what was involved in the formwork activity. He gave the following evidence:

Senior counsel for the respondent:

‘… just describe the stages that are gone through when the workmen are doing the formwork?’

Bell: ‘I will just describe the suspended slab because that is where the most work is done. What we normally do is we have a set of scaffold frames that are assembled …’

Counsel: ‘… what is a scaffold frame?’

Bell: ‘A scaffold frame is the steel support structure that we then put timber bearers on top of, so we erect the scaffold framework in a grid that fits between the beams and then we put timber bearers on top of that scaffold. The timber bearers are then levelled to a height and then on top of the bearers … we will put some more timber across and then we put plywood on top of that.’

Counsel: ‘… what happens then?’

Bell: ‘Well, in the between time we form the beams and we finish the beams off, connect it all together and then it is ready for the reinforcers to come and put their steel beams in, the reo in.’

Counsel: ‘… does constructing formwork involve a number of different skills or specialisations?’

Bell: ‘Predominantly the way it is handled is we have scaffolders and some labourers will install the scaffold framework. Then you will have carpenters who will install the bearers assisted by some labourers and then carpenters will install the deck assisted by some labourers.’

…

His Honour: ‘So you have scaffolders, labourers and carpenters?’

Bell: ‘Labourers – correct. That is the form of the team and as we complete the job, we also had some plasterers as we are finishing, who would come and just patch up at the end.’

Counsel: ‘Do these roles change at all through the progress of the job?’

Bell: ‘The roles change with the element that you are forming. You might have a higher involvement from one trade in a different element, but generally they go through the job – for example, it would have changed – it did change when we went to table formwork because I designed a system to reduce the repetitive fabrication of scaffold. I designed a table-form system, so that whole scaffold framework we could break down into modules and it was all then just reduced in height and moved as a complete unit to the next floor, so we weren’t reassembling it every time.’

…

His Honour: ‘Did you get to use your table-form system?’

Bell: ‘Yes, we did, only … when we got into the typical floors above the ground floor.’

His Honour: ‘When you left the site, how far progressed was the building?’

Bell: ‘We were up to level 8. We had done – the typical floors were from level 3, I think it was – 3, 4, 5, 6, 7 and 8. So we had four or five typical floors that we used the table forms on.’

Counsel: ‘Are the typical floors the ones, in effect, above the ground?’

Bell: ‘Correct. The typical floors are the same, so we can use a repetitive formwork system.’

Counsel: ‘So is there some difference in the complexity and load of work depending on whether it is, in effect, aboveground or belowground?’

Bell: ‘It is because it is all built piece by piece below the ground as stick formwork. We take every piece apart and we put every piece back together, whereas when we get onto the typical floors, we use the table-form systems and we could move them in bulk.’

Counsel: ‘So it is fair to say that the harder part of the work is …

Bell: ‘In the bottom.’

Counsel: ‘… where you are using the stick formwork?’

Bell: ‘Absolutely.’

…

Counsel: ‘What do you call what you have described as the table?’

Bell: ‘… That is described as table form. It is a system where you take large components of the formwork as a whole and you move them as a whole.’

Counsel: ‘When you say “components of the formwork”, what comprises the components?’

Bell: ‘In the normal formwork system, you start off with … - you would have a jacking part of (sic) the floor, you would have a scaffold frame on top of that. You would have a brace that braces the scaffold frame, then you might have – normally for the height, you will have another scaffold frame goes on top of that and then you will have braces there and then you will have your screw heads on top which are adjustable for the height of your bearers and then you will have your timber bearers go in the top of the screw heads. That is just your formwork system and then your plywood goes on top of that.’

295 Mr Bell proceeded to describe self-climbing safety screens which were used around the perimeter of the building as the formwork progressed. The screens surrounded three floor levels at the one time providing protection to the workers engaged on a ‘working deck, a stripping deck and a completed deck’.

296 Mr Bell resigned on or about 10 May 2002. His recollection was that it was around Easter but he conceded that if in a statement he had suggested 10 May 2002, that was probably correct.

297 Mr Anderson gave the following evidence in chief:

Senior counsel for the applicant:

‘… it’s … your understanding and indeed to your knowledge, the case that there was a substantial amount of plant and equipment and chattels on the site, employed and installed … as at 17 May 2002?’

Anderson: ‘That’s correct, yes.’

Counsel: ‘Did you give any permission to anybody at Baulderstone Hornibrook, to continue to use that plant and equipment after they had purported to terminate the contract?’

Anderson: ‘No. I did not.’

Counsel: ‘Did you authorise anybody else to do so?’

Anderson: ‘No.’

Counsel: ‘To your knowledge, did Baulderstone Hornibrook, or somebody under their direction, continue to make use for their own purposes in the project of that plant and equipment?’

Anderson: ‘Yes, they did.’

Counsel: ‘Was that without your consent?’

Anderson: ‘Without my consent, yes.’’

Counsel: ‘Was the plant and equipment that was on site, as at 17 May 2002, ever returned or restored to the possession of Anderson Formrite?’

Anderson: ‘No.’

Counsel: ‘Was some of the plant and equipment, in fact plant and equipment which Anderson Formrite had, itself, hired from third parties?’

Anderson: ‘We had purchased it from a third party.’

Counsel: ‘… and you have, I think, invoices and other documents relating to those acquisitions?’

Anderson: ‘Yes.’

298 Mr Anderson gave evidence that he had not personally ever ‘put the helmet on’ and physically gone upon the site. He had however, been to the site office.

299 Whilst Mr Anderson said that he did not authorise anybody to give permission to the respondent to continue to use the applicant’s plant and equipment after 17 May 2002, and I accept that he may not have expressly authorised anybody to give any such permission to the respondent, nevertheless, in my view, he clearly cloaked Mr Passione with authority to deal with matters such as the hire arrangements in respect of plant and equipment that had been used by the applicant up to 17 May 2002 in such manner as he may have seen fit.

The applicant, through Mr Passione, invited the respondent to pick up the leases of hired equipment which the applicant sought to terminate effective 17 May 2002.

300 Mr Anderson’s evidence in chief continued with the following:

Senior counsel for the applicant:

‘… was it your understanding at the date of the letter of 21 May 2002 … that despite the letter of 17 May 2002, Baulderstone Hornibrook were continuing to use the plant equipment, the tools, the ply, the true-form and the table-form systems, the screens, hoists and hire equipment, without the consent of Anderson Formrite?’’

Anderson: ‘Yes, that is correct. They locked us out of the site..’

Counsel: ‘… Were you told something in relation to the exclusion of Anderson Formrite from the site or did you witness something yourself?’

Anderson: ‘I was told by Joe - Mr Passione that they - we attempted to go and pick up our equipment and we were locked out of the site and in fact it got quite nasty. There was security guards and Mr Passione was threatened and we just couldn’t get in there to get our equipment.’

301 In the course of his cross-examination further evidence was given by Mr Anderson in relation to the events surrounding 17 May 2002 as follows:

Senior counsel for the respondent:

‘As at … 17 May 2002, Anderson Formrite had entered into a number of agreements for the hire of equipment on the site, or to be used on site?’

Anderson: ‘Yes.’

Counsel: ‘As at that date, 17 May 2002, Anderson Formrite were in default in respect of their hire agreements related to equipment on the site?’

Anderson: ‘Yes. That’s correct.’

Counsel: ‘… from the commencement or shortly thereafter through until 17 May 2002 – Anderson Formrite had a series of problems with the supplier of its formworking equipment, RMD, didn’t it?’

Anderson: ‘Specifically, I wasn’t involved in it, but yes, I was on the understanding that there was a problem with the formwork equipment.’

302 As to what transpired on 17 May 2002, Mr Passione gave the following evidence, which I accept:

Senior counsel for the applicant:

‘… did there come to your attention a notice, dated 17 May 2002 …

that came to your attention on or about the date appearing on it, namely, 17 May 2002. Is that right?’’

Passione: ‘Yes.’

Counsel: ‘Where were you on that day?’

Passione: ‘On site.’’

…

Counsel: ‘before you became aware of the termination document, did you have occasion to speak to Mr Beckett [Mr Beckett was the respondent’s site manager], on the site?’

Passione: ‘On this day?’

Counsel: ‘On that day?’

Passione: ‘Yes.’

Counsel: ‘Was Mr Beckett accompanied by some gentlemen who appeared to be security guards?’

Passione: ‘Yes.’

Counsel: ‘They came into the site office?’

Passione: ‘Yes.’

Counsel: ‘What did Mr Beckett say to you?’

Passione: ‘He said, Your contract has been terminated. You must leave the site immediately.’

Counsel: ‘… was there a discussion about removing personal belongings and the like, from the site office?’’

Passione: ‘Yes, he gave us the opportunity to move computers and files and some personal belongings. At the same time I received a phone call from the Malaga office, advising me receipt of this notice by fax.’

Counsel: ‘… who else on behalf of Anderson Formrite was in the office premises at the time Mr Beckett told you the contract had been terminated?’

Passione: ‘Peter Mackiewicz and Gordon Bell.’

Counsel: ‘… did each of those have the opportunity to remove their computers and files and personal belongings and the like and all three of you … with those items then left the site. Is that right?’

Passione: ‘Yes.’

Counsel: ‘Did you go back the next day?’ [referring to Saturday 18 May 2002]

Passione: ‘Yes.’

Counsel: ‘Who did you see?’

Passione: ‘Mr McIlwaine.’

Counsel: ‘Did he say anything?’

Passione: ‘Yes.’

Counsel: ‘What did he say?’

Passione: ‘He said, You cannot enter the site, wait here and I will call management.’

His Honour: ‘… At this stage, had Mr Fletcher gone following his firing?’

Passione: ‘I believe so.’

His Honour: ‘… as you understood it, what was the pecking order for Baulderstone management, in relation to this project at St Georges Terrace, at the time of the notice of 17 May 2002?’

Passione: ‘I had been informed that Paul Watson was also fired. I don’t know who replaced him. So my understanding was a gentleman by the name of [Walkenhorst], was the project director.’

…

His Honour: ‘Was there anyone senior to him, from Baulderstone, working in Perth at that time?’

Passione: ‘Not working in Perth. Joe Van Engelen was still around, but I could never understand where he fitted in the pecking order, because he had one of the most strangest roles that I have come across. …. [Grant] Beckett was still on site, so he would have been answering – in my opinion answering to Walkenhorst. McIlwaine was still on site. He would have been answering to Walkenhorst also.’

His Honour: ‘… I was trying to find out who you would contact, if you needed to speak to management? Did you go to the top person every time, or was there someone within the hierarchy whom you were accustomed to deal with?’

Passione: ‘[Grant] Beckett … Tony Fletcher. … I do not recall that I ever went to Paul Watson or Joe Van Engelen. They called me. I have no recollection of me ever going to them.’

…

His Honour: ‘Did you speak to anyone in management pretty well every day?’

Passione: ‘Grant Beckett.’

His Honour: ‘… so was he your immediate point of day-to-day contact?’

Passione: ‘Yes.’’

…

Counsel: ‘… I think when you had returned to the site on the next day, after 17 May, Mr McIlwaine, when you met him, said he was going to call the site manager. … Did somebody come out to the entry to the site where you were waiting and meet you?’

Passione: ‘Yes.’

Counsel: ‘Who was it?’

Passione: ‘Mr Walkenhorst and Grant Beckett … I handed them a letter … instructing them not to use our equipment and material. I conveyed that by saying, “You are not authorised to use our equipment and material.”’

Counsel: ‘Who did you say that to?’

Passione: ‘Mr Walkenhorst.’

…

Counsel: ‘Did Mr Walkenhorst or … Mr Beckett say anything in response to your oral statement dealing with the same subject as your letter?’

Passione: ‘No. … They made no comment in relation to what I said. Prior to what I said Mr Walkenhorst said, “You are not authorised to enter the site?’

Counsel: ‘So that Mr Walkenhorst had told you that before you made the statement to him and handed over the letter …?’

Passione: ‘Yes.’

…

Counsel: ‘What happened then?’

Passione: ‘I remained on site for a short period - off - adjacent to the site on the footpath and I walked around the perimeter of the site on the road reserve.’

Counsel: ‘… What did you see?’

Passione: ‘I observed that our workforce was on site working and that all our material and equipment and plant that was on site was being used.’

…

His Honour: ‘What hour of the day was it you walked around the footpath and observed the men working on the site?’

Passione: ‘Very early in the day and my recollection is at 8 am.’

…

His Honour: ‘So about 8 am on the 18^th you handed over the letter. You walked around the site. You observed men who had previously been working for you working. At 11.27 am or thereabouts you received a facsimile from Mr McIlwaine telling you that a number of men had tendered their resignations to you with effect from 4 o’clock on the previous afternoon?’

Passione: ‘Yes.’

…

Counsel: ‘… what did you see?’’

Passione: ‘I saw our entire [t]able form system on site; the screens, our formwork, ply, Truform; all our hired equipment of Rapidshor; framework; our tools, hand tools being used.’

…

His Honour: ‘… the building is at this stage how many levels out of the ground into the tower?’

Passione: ‘Five, six.’

His Honour: ‘… I need to know where the men were working in relation to what you could see?’

Passione: ‘The table forms were at five and six, so you could clearly see the table forms. The majority of the table forms were in place, not being used but were still in place. There was work being undertaken in the north and west building on site. The screens were visible from the outside, they were on the perimeter of the building. … The tables were on the fourth to sixth floor, somewhere around there. You could observe them by walking the perimeter of the building, this site had three street frontages, so it basically was St Georges Terrace, Milligan Street, Hay Street.’

His Honour: ‘… Well, keep going with your description about where you saw this equipment being used?’

Passione: ‘The tables were in place, the screens were in place as you viewed the perimeter of the building. In the north and west building, which was on the Hay Street end and not part of the tower, you could see a lot of the formwork material being the ply, ply to framework.’

His Honour: ‘Was that stick formwork or table form?’

Passione: ‘Stick.’

His Honour: ‘Is that just the leftover from the most recent pour or do you say they were working on it, using it?’’

Passione: ‘Working on it. Using it.’

His Honour: ‘In what way?’

Passione: ‘Erecting scaffolding and preparing to erect the ply on top of the framework.’

Counsel: ‘Was there anything else you observed about the plant and equipment on the site at the time or the activities going on?’

Passione: ‘Just observed that it was all there being used.’

Counsel: ‘… Now, did you return to the site following that particular occasion, 18 March?’

Passione: ‘Yes.’

Counsel: ‘When did you next go back?’

Passione: ‘Approximately a week later. I was returning to site on a regular basis, on a weekly basis to just observe and monitor what was happening.’

Counsel: ‘Well, what did you see on the next occasion when you went to the site?’

Passione: ‘Very much the same that I saw on the Saturday; all materials still on site and men working away and continuing to use it.’

…

His Honour: ‘ you went around the site or went on site?’

Passione: ‘… after May 17, I never returned on the property side of the site. ..’

Counsel: ‘ So from what vantage point did you make these observations?’

Passione: ‘From the street verge, the road reserve and walking the perimeter of the building outside the legal boundaries of the property.’

Counsel: ‘On each occasion, did you see work was continuing to be carried on?’

Passione: ‘Yes.’

Counsel: ‘That the plant and equipment that had been left on the site and was installed on the site when the contract was terminated on 17 May, was still being deployed?’

Passione: ‘Yes.’

(emphasis added)

303 Mr Passione was cross-examined about what he could see from outside the site in the period commencing on 18 May 2002. His evidence included:

Senior Counsel for the respondent:

‘You could not see each and every one of the elements of the stick formwork that was on the site from outside of the site, could you?’

Passione: ‘No.’

His Honour: ‘Was any stick formwork still in place or had all that work been done?’

Passione: ‘No, no, there was still – obviously still a lot of loose stuff and stacked. But there was still a lot of stick formwork to be completed.’

His Honour: ‘So that there were areas that needed to be formed up …?’

Passione: ‘Yes.’

His Honour: ‘… which required stick formwork which hadn’t been done?’

Passione: ‘Correct.’

…

Counsel: ‘You could not see from outside the perimeter fence and buildings that made up the perimeter all of the equipment that Anderson Formrite had used on the site during any inspection on the 18^th, could you?’

Passione: ‘No.’

Counsel: ‘So you couldn’t say whether particular equipment was being used or not used on the occasion of that inspection?

Passione: ‘No, but I can say that formworkers that were our – previously employed by us were on the site, were working, were using equipment and that Baulderstone is – only Baulderstone are capable of removing any equipment from site.’

Counsel: ‘Well, Baulderstone also had equipment which men could use on the site itself, didn’t it?’

Passione: ‘Not for formwork.’

Counsel: ‘It had things like saws and the like, didn’t it?’

Passione: ‘Unlikely.’

Counsel: ‘Well, you don’t know, do you, Mr Passione, what equipment Baulderstone had on the site that could be used by men as at 18 May 2002?’

Passione: ‘No, but I can tell you what equipment was being used and that was our equipment.’

Counsel: ‘… You couldn’t see into each of the floors in respect of which work was going on as at 18 May, could you?’

Passione: ‘No.’

Counsel: ‘So you couldn’t see parts of each floor. So you wouldn’t know what was going on at that part of the floor?’

Passione: ‘No.’

Counsel: ‘Some of the equipment that when you last saw it that Anderson Formrite had taken onto the site was in situ because it had been erected by Anderson Formrite and was performing the work of formwork at the time you left. That is right?’

Passione: ‘Some, some, yes.’

Counsel: It was incorporated into the works … as formwork is intended to be incorporated for a period of time?

Passione: ‘Yes.’

…

Counsel: ‘Now, the various pieces of equipment were from time to time stored on the site, weren’t they?’

Passione: ‘Yes.’

Counsel: ‘They might be at any number of places on the site?’

Passione: ‘Yes.’

Counsel: ‘You couldn’t see on 18 May whether all of that equipment that was stored was still in its stored position or not, could you?’

Passione: ‘No, but can I put it to you that when I was – off the site I wasn’t able to, you know, put it in my briefcase or stick it under my arm and take it with me. It was on site when we left. Only Baulderstone are capable of removing that gear. No other party. You need the cranes.’

…

Counsel: ‘The plywood that had been provided to the site up to 17 May had been used for a range of purposes, hadn’t it?’

Passione: ‘Had been used for formwork purposes.’

Counsel: ‘But that encompasses a range of different parts of the formwork, doesn’t it?’

Passione: ‘Yes.’

Counsel: ‘Plywood can be used as whole sheets … for formwork?’.

Passione: ‘Yes.’

Counsel: ‘Or it can be cut into specific sizes for specific parts of the formwork?’

Passione: ‘Yes.’

Counsel: ‘Once the plywood is put in place and the concrete poured on top of it, it has to remain until it can be stripped out?’

Passione: ‘In approximately seven days, yes.’

Counsel: ‘But it has to remain a period of time?’

Passione: ‘Yes.’

Counsel: ‘It might vary, as you told us earlier in your evidence. That is right?’

Passione: ‘Yes.’.

His Honour: ‘…When you got to the typical floors which you were at as at 17 May … were you at the same time still working on stick form formwork in other places?’

Passione: ‘Yes. Yes, your Honour.’

…

His Honour: ‘When Mr Hodgkinson talked about cutting plywood and putting it in place is that referable to typical floors where tableforms were used or … around the edges or something?’

Passione: ‘Yes, to a lesser extent in the table form, you would still have needed to use a little bit of loose formwork, but to a lesser extent in cutting ply up in the table forms and you would cut, obviously, a lot more in the stick formwork.’

Counsel: ‘You have to pour columns, though, in respect of each of the typical floors and you have to have cut-outs in the floor, penetrations?’

Passione: ‘Yes.’

Counsel: ‘Each of those take some amount of formed up formwork?’

Passione: ‘Yes.’

Counsel: ‘And will involve plywood to some extent?’

Passione: ‘Yes.’

Counsel: ‘May involve cutting the plywood to match the particular shape?’

Passione: ‘Yes.’

Counsel: ‘When the plywood is stripped out, after the concrete’s cured, a percentage of it is damaged in the normal course?’

Passione: ‘It reduces its lifespan, yes. …’

Counsel: ‘… it will only last as long as it’s in sufficient condition to warrant usage, otherwise it causes problems with the curing of the concrete?’

Passione: ‘Yes, I think if you looked at, say, the tax applications that are defined by the Australian Tax Office for the advice we’re given, is that the table forms, I think, can be depreciated at 10 per cent, ply can be depreciated at 20 per cent. So that gives you an idea of how much – you know, the difference in lifespan.’

…

Counsel: ‘After the 18th, you’ve told us that you came back approximately weekly. Is that correct?’

Passione: ‘Yes.’

Counsel: ‘You don’t know what was taken off the site and put onto the site in the period that you weren’t there, quite clearly?’

Passione: ‘The first several months nothing was – no significant material was brought to the site, because I could see our equipment being used. I take what you said earlier, that some of the table forms were in place where concrete had been poured, but I saw with my own eyes that the formwork was removed and relocated to new areas and concrete was poured on it.’

…

Counsel: ‘… you don’t know how much plywood was delivered after 18 May, to the site, do you?

Passione: ‘No.’

Counsel: ‘You don’t know how many new components of Truform were delivered after 18 May?’

Passione: ‘No.’

Counsel: ‘You don’t know how many components for the stick formwork were delivered to the site after 18 May?’

Passione: ‘No.’

Counsel: ‘Of course Anderson Formrite didn’t organise the delivery of any equipment to the site, after 17 May, did it?’

Passione: ‘No.’

Counsel: ‘When you did your inspection on 18 May, you couldn’t differentiate between the hired and the equipment that wasn’t hired, could you?’

Passione: ‘Yes, I could, yes. … for example I know the hoists – formwork hoists were a hire lease type of arrangement. The screens were a lease arrangement. Truform was all purchased. Ply was all purchased. Tables were all purchased. … The Rapidshor – the framework to the tables was all purchased.’

(emphasis added)

304 Mr Passione described Truform as ‘a laminated beam that forms the main structure in creating the stick form work that the ply then is applied to it’.

305 The plywood that was used by the applicant was approximately 20mm thick. Mr Passione gave evidence that the plywood was reused many times over. When asked how he knew that the plywood that he observed on the site after 17 May 2002 was the applicant’s he said:

‘I was involved in the purchasing of it; I was familiar with the site. I was there on a daily basis for … approximately nine months. I knew the site like the back of my hand.’

(emphasis added)

306 I accept Mr Passione’s evidence in relation to the continued use by the respondent of the applicant’s formwork materials and equipment in the weeks that followed the respondent’s termination for its sole convenience of the formwork subcontract between the respondent and the applicant.

307 Mr Walkenhorst gave evidence that the respondent engaged a new formwork subcontractor on the site after 17 May 2002 – West Swan Formwork. Mr Walkenhorst could not remember the exact date when West Swan Formwork commenced work on the site but said that it was ‘Early-July’. He said that West Swan Formwork did the formwork for the typical floors pretty well up to the top level of the tower. He said ‘they got virtually to the very top and went broke’.

308 In relation to the formwork undertaken by West Swan Formwork Mr Walkenhorst gave the following evidence:

Senior counsel for the respondent:

‘What form of formwork did West Swan … utilise for the work on the tower?’’

Walkenhorst: ‘They used their own formwork system.’’

Counsel: ‘Did that formwork have a name, as you understood it?’

Walkenhorst: ‘No.’

…

His Honour: ‘You understand the difference between stick formwork and tableforms?’

Walkenhorst: ‘Yes.’

His Honour: ‘… What did they use? Stick form, tableforms or what?’

Walkenhorst: ‘For the levels where they – well, level 8 to 9 was the I think it was the right level, was the mechanical services level and they had to use stick form for that. But prior to that and up to the top level they used a table form system.’

309 Mr Walkenhorst gave evidence that he observed West Swan Formwork bringing tableforms on to the site which were used by them on the tower. When asked whether he saw West Swan formwork utilise any other tableforms than the ones they brought onto the site, Mr Walkenhorst replied in the negative. He then gave the following evidence in chief:

His Honour: ‘Were there any other table forms on the site that you observed, at the time when these people came onto the site?’

Walkenhorst: ‘I think there were still the Anderson Formrite table forms on the site.’

…

His Honour: ‘Did you lock Anderson Formrite out of the site?’

Walkenhorst: ‘Yes.’

Counsel: ‘… when their contract was terminated on 17 May, did you make, after the time of that termination, any observation as to the positioning of the table forms that they had brought onto site?’

…

Walkenhorst: ‘Yes.’

Counsel: ‘Where were they in relation to the building?’

Walkenhorst: ‘They were in the tower … They were incorporated into the works. So they were supporting the concrete and reinforcement.’

…

Counsel: ‘Now, the stick form, did it have any particular name – manufacturer name or the like?’

Walkenhorst: ‘Rapidshor.’

…

His Honour: ‘…What I think we need to know is what component items did you observe when Anderson Formrite were carrying out work, towards the end of the project, so far as they were concerned, what component items did you observe that they had on site?

Walkenhorst: ‘Okay. The table forms, which were a complete set of forms, manufactured specifically for the placement of concrete and reinforcement for the tower and then in the Knoxville area, Rapidshor with stick form with Truform and plywood.’

His Honour: ‘Now, when you say “with Truform and plywood” where did the Truform and plywood go in relation to the Rapidshor?’

Walkenhorst: ‘On top of it.’

His Honour: ‘Can you describe the components? What’s Rapidshor?’

Walkenhorst: ‘Rapidshor is the steel tubing, framing, that supports – it’s adjustable in height, supports the Truform and the plywood on top of the Truform.’

His Honour: ‘The vertical members are the Rapidshor, then there are – what are they called – beams, what’s the word?’

Walkenhorst: ‘The beams. I’d call them – they’re Truform, but they’re beams.’

His Honour: ‘Yes, that’s laminated beams, are they?’

Walkenhorst: ‘Yes. I’m not sure.’

His Honour: ‘In any event they’re the horizontal members that run across the top of the vertical supports and the plywood goes on top of that. Is that right?’

Walkenhorst: ‘That’s correct, yes.’

His Honour: ‘Right, and it says some bracing, how do they brace them?’

Walkenhorst: ‘They’re braced with the steel bracing. It’s all part of the Rapidshor.’

…

Counsel: In relation to the Knoxville area of this site, in the days immediately following the termination on 17 May did you observe any formwork?’

Walkenhorst: ‘Yes’.

…

Counsel: ‘At the time of your observation, at the immediate time, was it performing any function?’

Walkenhorst: ‘It was performing the function of formwork.’

Counsel: ‘In what …?

Walkenhorst: ‘Supporting the concrete and reinforcement.’

His Honour: In that area of the works what was the time for the concrete to cure before the formwork could be stripped?’

Walkenhorst: ‘I’m not – I can’t answer. I don’t know.’

His Honour: ‘So that you know … a little bit about formwork but not enough about … time when you can [move] on to the next floor?’

Walkenhorst: ‘It varies and it varies on the strength of the concrete.’

His Honour: ‘And the spans?’

Walkenhorst: ‘More the strength of the concrete and it is -which is related to timing and testing of concrete cylinders.’

(emphasis added)

310 In the light of the evidence I would incline to the view, as previously indicated, that all formwork supporting reinforced concrete members that were the subject of concrete pours up to and including 17 May 2002 would have been ready for stripping in the space of 1-2 weeks thereafter. Certainly by 31 May 2002 there would appear to be no reason for denying the applicant the opportunity to enter upon the Woodside Building Project site to strip all the formwork that had been put in place by it on or before 17 May 2002 so as to allow the applicant to remove from the site all Temporary Works and Construction Plant and other things used in the work under the subcontract.

In addition the respondent had no right to re-use any of the applicant’s formwork materials or equipment to further progress the building works after 17 May 2002.

311 The respondent submitted that it ‘unincorporated these goods as soon as they were able to be unincorporated from the Works’. Reference was made to, inter alia, a letter sent by the respondent to RMD Australia on 17 June 2002 which included:

‘Truform material on site and not temporarily incorporated in the works is currently being gathered and stacked ready for collection by the rightful owner of that material. This exercise should be completed by 28 June 2002.

We will then prepare a list of that material and invite you to provide satisfactory evidence of your ownership.

We have also written to Anderson Formrite Pty Ltd in respect of your claim and asked them to confirm whether or not they have a competing claim to that material.’

I do not accept that the respondent ‘unincorporated these goods as soon as they were able to be unincorporated from the Works’. In any event the respondent had no right to lock the applicant out of access to the site thereby denying it the opportunity to remove from the Woodside Building project site all Temporary Works and Construction Plant and other things used in the work under the subcontract. It was not a case of the respondent having a discretion to unincorporate goods at its convenience and advise the applicant when, if at all, they would be ready for collection by it.

Findings

312 I find that

(a) the applicant had formwork materials on site when the formwork subcontract was terminated for the respondent’s sole convenience on 17 May 2002;

(b) it also had hand tools and items of communication equipment on site;

(c) some of the formwork materials were currently utilised supporting reinforced concrete members that had been poured within the preceding two week period;

(d) on 17 May 2002 the respondent locked the applicant out of access to the Woodside Building project site thereby denying it the opportunity to remove

(i) its hand tools and items of communication equipment,

(ii) its formwork materials in the form of stick formwork (Rapidshor), Truform, tableforms and plywood which were then being used to support recently poured reinforced concrete members,

(iii) other formwork that had been put in place for future pours which had steel reinforcing placed thereon or within it, that was awaiting a concrete pour, and

(iv) those items which were not then supporting recently poured reinforced concrete members or with steel reinforcing in place awaiting a concrete pour.

(e) the applicant was continuously denied access to the Woodside Building project site thereafter thereby denying it the opportunity to remove items of formwork that had been supporting recently poured reinforced concrete members as at 17 May 2002 after the concrete had cured sufficiently to enable the formwork to be stripped and removed and all of its hand tools, items of communication equipment and other formwork equipment remaining on the Woodside Building project site;

(f) some of the items referred to were owned by the applicant, some were the subject of contracts to purchase same and in relation to which the applicant had an immediate right to possession at all material times from and including 17 May through to at least 31 May 2002 and some items of hired equipment in relation to which the applicant had an immediate right to possession at all material times from and including 17 May 2002 through to at least 31 May 2002;

(g) by its conduct in notifying ‘everybody from whom Anderson Formrite was hiring equipment that as of the 17^th [of May 2002] the hire arrangement was over’, and in notifying the respondent of that fact, the applicant deprived itself of the right to maintain an action for conversion in relation to hired equipment that may have been on the Woodside Building project site when it was denied the opportunity to return to the site after 17 May 2002.

The essence of conversion

313 The essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has the property or special property in the chattel. It may take the form of a disposal of the goods by way of sale, or pledge or other intended transfer of an interest followed by delivery, of the destruction or change of the nature or character of the thing, as for example, pouring water into wine or cutting the seals from a deed, or of an appropriation evidenced by refusal to deliver or other denial of title. An intent to do that which would deprive ‘the true owner’ of his immediate right to possession or impair it may be said to form the essential ground of the tort (per Dixon J, as his Honour then was, with whose observations Starke J agreed in Penfolds Wines Proprietary Limited v Elliott (1946) 74 CLR 204 at 229).

314 In Hill v Reglon Pty Limited [2007] NSWCA 295 (‘Hill v Reglon’) Beazley JA at [122], with whose reasons for judgment Spigelman CJ and Ipp JA agreed, accepted as correct the following statement of principle in relation to conversion as stated by Somers J, with whose judgment Richardson J agreed and with whose observations on conversion Cooke P. also agreed, in Coleman v Harvey [1989] 1 NZLR 723 at 730 namely:

‘Conversion is the wrongful act of dealing with goods in a manner inconsistent with the owner’s rights with the intention of denying the owner’s rights or asserting a right inconsistent with them. One of those rights is possession or the immediate claim to it.’

315 In Hill v Reglon Beazley JA said at [154]:

‘The correct principle, it would seem, is … that the measure of damages [for conversion], ordinarily, is the full value of the thing converted. In Palmer on Bailment at 214, the author explains the basis of damages as being, that the act of conversion is a sufficiently serious infringement of the plaintiff’s right of control over the converted goods to justify “the drastic sanction of compelling the wrongdoer to buy the plaintiff out”. …’

316 Hill v Reglon was applied by R.A. Hulme J in Rapid Metal Developments (Aust) Pty Ltd v Rildean Pty Ltd [2009] NSWSC 571 at [110] et seq.

317 An intent to do that which would deprive ‘the true owner’ of his immediate right to possession or impair it, will be established if there has been an intentional performance of an act of dominion over the goods in question inconsistent with the rights of ‘the true owner’ (per McDougall J in Chep Australia Ltd v Bunnings Group Ltd [2010] NSWSC 301 (‘Chep v Bunnings’) at [181]-[182].

318 In Chep v Bunnings McDougall J said in respect of goods that were the subject of a bailment, at [24]-[26]:

‘… where a stranger to a bailment terminable at the bailor’s will, is in possession of goods, both the bailor and the bailee could maintain conversion, because each has, as against the stranger, the right to immediate possession. In the bailee’s case, the right flows from the bailment. In the bailor’s case, it flows from the right to terminate the bailment at will: equivalent to the right to immediate possession.

It is clear … that the defence of ius tertii may be set up against an owner (or bailee) who is not in possession of the goods. … for the defence of ius tertii to succeed, the third party must have a better right to possession than the plaintiff. …

… the defendant bears the onus of identifying the third party and proving that the third party has a right to possession superior to that of the plaintiff.’

(see also Bis Cleanaway (Trading As Chep) v Tatale [2007] NSWSC 378 at [38]-[47]).

319 In Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd (1993) 32 NSWLR 175 Giles J, as his Honour then was, said, at 177-178, in respect of conversion:

‘In an action in conversion, the plaintiff claims damages for the wrong done to him by the interference with his goods. The wrong is the act of conversion, and the remedy is a personal remedy. …

The normal measure of damages in conversion is the value of the goods converted at the date of conversion (Mercer v Jones (1813) 3 Camp 477; 170 ER 1452; Henderson & Co v Williams [1895] 1 QB 521; Solloway v McLaughlin [1938] AC 247; Caxton Publishing Co Ltd v Sutherland Publishing Co [1939] AC 178; General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd[[1963] 1 WLR 644]), together with damages for any consequential loss flowing from the conversion and not too remote to be recoverable in law: Re Simms; Ex parte Trustee [1934] Ch 1; General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd.’

320 Butler v The Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 (‘Butler v The Egg Board’) was a somewhat unusual case of conversion. The appellants were producers of eggs. Under the Marketing of Primary Products Act 1958 (Vict.) the property in the eggs, when they came into existence, was divested from the appellants and vested in and became the absolute property of the Board. The rights and interests of the appellants in the eggs thereupon were converted into claims for payment in accordance with the Act. The appellants did not deliver the eggs in question to the Board. Instead they sold and delivered them to a person other than the Board and this was the act of conversion which gave rise to the action the subject of the proceedings. The question then arose as to the manner in which the Board’s entitlement to damages should be assessed. The Board contended that it was entitled to the full value of the eggs converted. The appellants, on the other hand, contended that the Board’s loss was represented by the difference between the price for which it would have sold the eggs had they been delivered to it by the appellants and the amount which in that event it would have had to pay them.

In this context Taylor and Owen JJ referred to the general principle upon which compensatory damages were assessed, that principle being that the injured party should receive compensation in a sum which, so far as money can do so, will put the injured party in the same position as he would have been in if the tort had not been committed, referring to Livingstone v Rawyards Coal Co [1880] 5 App. Cas. 25 at 39.

321 In Chep v Bunnings McDougall J referred to the general rule that damages in tort are compensatory (at [224]). His Honour then proceeded to point out that the application of the general rule requires careful consideration of all relevant facts. He pointed out that damages that might not be allowed against an innocent wrongdoer may well be allowed against one who has acted wilfully and intentionally. His Honour proceeded to point out that damages ‘should be assessed robustly against a wrongdoer where the wrong itself has made quantification difficult’ (at [225]-[226]).

The general principle upon which compensatory damages are assessed is as much applicable to actions of conversion as it is to the case of other actionable wrongs.

Taylor and Owen JJ proceeded to say, in Butler v The Egg Board, at 191:

‘In most cases of conversion it is, of course, obvious that its application will result in the injured plaintiff recovering the full value of the property converted since that will usually represent the loss that he has sustained by the defendant’s wrongful act. Hence the statement which appears so often in the books that the general rule is that the plaintiff in an action of conversion is entitled to recover the full value of the goods converted, but this statement should not be allowed to obscure the broad principle that damages are awarded by way of compensation.’

Their Honours went on to say, at 191, in relation to the peculiar circumstances in Butler v The Egg Board:

‘Th[is] case is one of compulsory acquisition. It is true that the appellants, by their wrongful act, put it out of their power to make delivery with the result that the Board came under no obligation to pay them but … it would be singular if the same act which saved the Board the price of the eggs should vest in it a right of action for their full value without deducting the price. The Board’s loss must, in our opinion, be determined by considering what sum of money would be required to place it in the same position as it would have been in if the appellants had performed their statutory obligation.’

Menzies J’s reasoning at 192, was to like effect.

322 In relation to the applicant’s claim of conversion, the relevant cause of action was pleaded in the Second Further Amended Statement of Claim as follows:-

‘CAUSE OF ACTION – CONVERSION

40. On 17 May 2002 certain goods which were the property of the Applicant and certain other goods of which the Applicant was lessee, each of which the Applicant had possession of or the right to immediate possession of, were located on the Site (the “Goods”).

Particulars

Particulars of (a) the goods owned by the Applicant and (b) the goods leased by the Applicant will be provided in a separate schedule prior to trial.

41. On or shortly after 17 May 2002 the Respondent intentionally took possession of all of the Goods and, contrary to a written direction given by the Applicant to the Respondent, the Respondent and/or by its contractors acting at the Respondent’s direction used all of or some of the Goods to further perform the Works.

42. By reason of the facts pleaded in paragraphs 40 and 41 the Respondent has converted the Goods.

43. By reason of the facts pleaded in paragraphs 40, 41 and 42 the Applicant has suffered loss and damage.

Particulars

(i) The Goods either remain in the possession of the Respondent or have been disposed of by the Respondent;

(ii) By the use of the Goods pleaded in paragraph 41 the Goods, or some of the Goods, were destroyed or damaged;

(iii) The value of the Goods which the Applicant owned was not less than $2,160,583.84;

(iv) By reason of the conversion of those of the Goods which were leased by the Applicant, the Applicant has paid to or become indebted to the lessors of those leased Goods and is alleged to owe Rapid Metal Developments (Australia) Pty Ltd $3,183,986.60 plus interest accruing at the rate of 18% per annum.

(v) The conversion of those of the Goods leased by the Applicant has directly led to litigation between the Applicant and some of the lessors of some of the leased Goods in which the Applicant has incurred legal costs of not less than $200,000.

323 The relief sought by the applicant in respect of its conversion claim was recorded at the end of the Second Further Amended Statement of Claim as follows:

‘D. Further or alternatively, damages for the tort of conversion in the sum of $2,160,584 plus any further amounts payable by the Applicant to Rapid Metal Developments (Australia) Pty Ltd.’

324 The respondent’s defence to the applicant’s conversion claim is to be found in the Defence to Further Amended Statement of Claim filed 28 July 2009 paragraphs 28-30 inclusive which provided as follows:

‘28. In answer to paragraph 40 of the Claim, the Respondent:

(a) denies that, following the termination of the AF Subcontract on 17 May 2002, the Applicant had possession of any goods that were located on the Site;

(b) admits that, on 17 May 2002, the goods listed in Schedules 1 to 3 to this Defence were located on the Site and that those goods were either owned by the Applicant, or were then or had previously been the subject of either a contract of sale or a contract of hire between the Applicant and a third party;

(c) admits that, on 17 May 2002, the Applicant had a right to immediate possession of those goods listed in Schedule 1 (AF Goods);

(d) denies that, from 20 May 2002, the Applicant had title to or had a right to immediate possession of those goods listed in Schedule 2 (RMD Goods), and says that any title or right of possession in respect of those goods which the Applicant had was terminated by Rapid Metal Developments (Australia) Limited (RMD) on or about 20 May 2002;

(e) says that the right to possession of the goods listed in schedule 3 was contested as between the Applicant and third parties (Disputed Goods);

(f) otherwise does not admit the paragraph.

29. In answer to paragraph 41 of the Claim, the Respondent:

(a) admits that, following the termination of the AF Subcontract on 17 May 2002, the goods listed in Schedules 1 to 3 to this Defence were located on the Site and came into the Respondent’s possession;

(b) says that, at the time of, but before the termination of the AF Subcontract on 17 May 2002, certain goods listed in Schedules 1 and 3 to this Defence (namely, certain items of truform and table systems) had been incorporated in the Works at the Site, and were unincorporated in or about July 2002;

(c) otherwise denies the paragraph.

30. The Respondent denies paragraphs 42 and 43 of the Claim, and further says that:

(a) so far as the AF Goods and the Disputed Goods are concerned:

(i) despite requests from the Respondent, the Applicant did not collect the AF Goods or the Disputed Goods;

(ii) pursuant to orders made under the Disposal of Unclaimed Goods Act 1970 (WA) (Disposal Act) by the Magistrates Court of Western Australia on 4 August 2003 and on 2 December 2003, the AF Goods and the Disputed Goods were disposed of at auctions held on 23 March 2004 and 21 April 2004;

(iii) on or about 19 July 2006, pursuant to s.28(1) of the Disposal Act, the Respondent:

A. paid the sum of $181,064.58 (being the balance of the proceeds of sale of the AF Goods and the Disputed Goods, after deduction of auctioneer’s commission and other costs) to the Treasurer of Western Australia;

B. furnished to the Treasurer of Western Australia a record prepared under s.25(2) of the Disposal Act, together with a Record of Goods Disposed of Pursuant to a Court Order;

(iv) by reason of s.28(2) of the Disposal Act, any rights which the Applicant had against the Respondent or another person in respect of the sum of $181,064.58 are extinguished.

(b) so far as the RMD Goods are concerned, such goods were collected by or returned to their true owner, RMD, and the Applicant has no title to sue in respect of them.’

Conclusion in respect of the conversion claim

325 In my opinion the respondent was guilty of conversion in respect of those formwork materials, hand tools and items of communication equipment owned by the applicant or the subject of contracts to purchase same and in relation to which the applicant had an immediate right to possession that were on the Woodside Building project site when the formwork subcontract between the applicant and the respondent was terminated for the respondent’s sole convenience on 17 May 2002.

326 The respondent has failed to establish that any third party had a right to possession superior to that of the applicant at the time of the conversion.

327 The acts of conversion occurred when the applicant was shut out of access to the site by the respondent and denied the opportunity to deal with its formwork materials, hand tools and items of communication equipment by removing same from the site on 18 May 2002 and, in the case of reinforced concrete members as at 17 May 2002, after the concrete had cured sufficiently to enable the formwork to be stripped and removed. The acts of conversion were committed progressively from 18 May 2002 through to 31 May 2002.

328 By locking the applicant out of access to the Woodside Building project site the respondent intentionally performed acts of dominion over the goods in question inconsistent with the rights of the applicant as ‘the true owner’.

329 To the extent to which it is necessary to make a finding on this matter I find that the respondent continued to carry out formwork activities on and after 18 May 2002 and before the engagement of West Swan Formwork using the applicant’s formwork materials, hand tools and items of communication equipment in a manner inconsistent with the applicant’s immediate right to possession.

330 For the reasons previously indicated, I do not consider that the respondent was guilty of conversion in respect of items of hired equipment. Mr Passione was cloaked with authority to deal with matters such as the hire arrangements in respect of plant and equipment that had been used by the applicant up to 17 May 2002 in such manner as he may have seen fit.

He notified all hirers of equipment that as of 17 May the hire arrangement was over and notified the respondent of that fact to give it the opportunity to take on a hire arrangement in respect of the hired equipment if it wanted to do so.

331 Whilst the applicant incurred legal costs and other expenses in relation to disputes that it had with Rapid Metal Developments (Aust) Pty Limited in relation to the tableforms which that company manufactured for the applicant, I do not consider that there should be any damages awarded to the applicant in respect thereof. Such losses did not flow from the conversion.

332 In my opinion the applicant is entitled to damages equal to the value of the goods converted at the relevant date of conversion. The applicant’s claim in respect of goods said to be owned by it was for $2,160,582.84 although this amount appears to be referred to in the Second Further Amended Statement of Claim as $2,160,583.84.

333 The amount claimed was recorded in a four page document handed up by the solicitor for the applicant at about 2.20pm on 22 September 2009. It was said to record details of the several invoices under which the applicant acquired formwork materials and equipment being the subject of the invoices which are to found in Exhibit B Volume 6 at pp1898-2040. Whilst it is tempting to say that the value of the several items of equipment equals the amounts paid or agreed to be paid for them, some allowance has to be made, in my opinion, for the depreciation in the value of the items by virtue of their use in the period through to 17 May 2002.

334 I am satisfied that the items for which claims are made were on the Woodside Building project site at the time when the applicant was locked out of access to the site and thereafter kept out of the site following the termination of the formwork subcontract by the respondent for its sole convenience on 17 May 2002. I find that such items were acquired for a total cost of $2,160,582.84. Whether there were monies owing in respect of the purchase of some of the items as at 17-31 May 2002 is not determinative of the applicant’s immediate right to possession of such items.

335 In the foregoing circumstances, a document entitled ‘ANDERSON FORMRITE PTY LTD Trial Balance as at ’ has some significance in this case. It was recorded on two pages (pp1696 and 1697 in Vol 5 of Exhibit B). The document was the product of the application of a computer software programme prepared for Mr Passione’s company, Prime Projects, and two other builders who together shared the cost of developing it, which he described as a ‘Building Construction System’, to the applicant’s Woodside Building formwork subcontract. That programme has become one used by about 6 builders across Australia for book-keeping purposes. The document recorded information in three major columns. The first column included a series of numeric codes such as 750/000. The second column listed against the several numeric codes expenditure items including expenditure on capital items. The third column recorded under the heading ‘2002 and 2003 combine Total Cost’ various monetary amounts representing total expenditure to 30 June 2003.

336 The Trial Balance document showed plant and equipment, being hand tools, hammers, drills, levels etc at a total cost of $51,724.14 with table and blockout forms obtained from Rapid Metal Developments (Aust) Pty Limited with a cost of $1,269,994, Truform with a cost of $348,464.24 and plywood with a cost of $522,326.49.

The Trial Balance showed the allowance of an amount of $137,542.30 for depreciation in respect of ‘PLANT & EQUIPMENT’.

337 As I understood Mr Passione’s evidence in relation to the ‘Trial Balance’ he was suggesting that the amount of $1,269,994 in respect of table and blockout forms was net of depreciation which had been allowed in the sum of $137,542.30. Taking the invoice cost for the supply of the table forms of $1,242,993.40 and $154,000 for the supply of blockout forms, the total of these items if $1,396,993.40. If one reduces that amount by the allowance for depreciation of $137,542.30 the net figure for table and blockout forms becomes $1,259,451.10 which is certainly not identical with the figure of $1,269,994.00 shown in the trial balance, but the difference is not significant.

338 In my opinion the amount which should be allowed by way of damages for the value of the goods converted by the respondent is 90% of the total cost of $2,160,582.84 after making an appropriate allowance of 10% for depreciation. Such an allowance would produce a figure of $1,944,524.55 as the appropriate amount to be awarded by way of damages for conversion. The applicant is entitled to an award of damages for such amount, together with interest up to judgment from 31 May 2002.

Interest up to judgment

339 Section 51A of the Federal Court of Australia Act 1976 (Cth) (the ‘Federal Court Act’) provides for the making of orders for the inclusion in the sum for which judgment is given of interest up to judgment or a lump sum amount in lieu thereof, in any proceedings for the recovery of any money, including any debt or damages or the value of goods in respect of a cause of action that arose after the commencement of the section on 22 November 1984.

340 Section 51A of the Federal Court Act confers a wide discretion on the Court. The Court may determine the rate of interest, the amount of principal on which interest up to judgment should be allowed and the period for which the interest up to judgment should be allowed. The section also confers a power on the Court to include a lump sum in lieu of a calculated amount by way of interest. A recent Practice Note suggests that interest rates will generally be determined by reference to the cash rates published from time to time by the Reserve Bank of Australia to which an additional 4% should be added and that the calculations should be made by reference to six monthly periods commencing on 1 January and 1 July.

341 Section 51A of the Federal Court Act provides for orders for interest up to judgment to be made unless good cause is shown to the contrary.

342 The Reserve Bank of Australia’s published cash rate was 4.5% as at 17 May 2002. It rose, progressively to 7.25% as at 1 July 2008, fell to 3% as at 1 July 2009 and rose to 4.5% as at 1 July 2010. The allowance of interest up to judgment should not in my opinion be seen to be a penalty but rather a proper means of compensating a successful litigant that has been held out of its money with an appropriate amount of compensation for the loss which it has sustained in that way.

343 In my opinion the applicant should, in respect of each of the amounts to which it is entitled to judgment, other than the allowance for GST, have an order that there be included in the sum for which judgment is given, interest on the whole of the component amounts from 17 May 2002 until 24 August 2010 at the applicable rates of 8.5%, 8.75%, 9.25%, 9.5%, 9.75%, 10.25%, 10.75%, 11.25%, 8.25%, 7%, 7.75% and 8.5% or a lump sum amount approximating but marginally less than a calculated amount. The lump sum alternative will reduce the likelihood of any dispute as to the proper calculations where (say) a leap year is involved.

344 Notwithstanding the merit of having a precise calculation, it seems to me that in respect of the several amounts on which interest up to judgment should be allowed, there should be included in the sum for which judgment is given a series of lump sums in lieu of a precise interest calculation. The lump sum amounts which should be included are as follows:

Judgment sum	Lump sum to be included in the sum for which judgment is given in lieu of interest
$637,991.62	$485,000.00
$1.00	$0.76
$1,944,524.55	$1,480,000.00

No interest should be awarded on the GST of $63,799.16.

345 For the foregoing reasons the applicant is entitled to judgment against the respondent in the sum of $4,611,317.09.

Costs

346 The parties have expressly asked for an opportunity to be heard on appropriate orders as to costs. In the light of the abandonment of two of the applicant’s major claims and its loss in respect of its Trade Practices claim one can well understand why the Court would be assisted by having the benefit of submissions from the parties on the question of costs. Whilst the parties did not oppose the provision in these reasons of a tentative view as to an appropriate costs order, they left me with the impression that they would not be assisted by the expression of a tentative view. They also indicated that there may be questions of offers of compromise or Calderbank letters referable to what might ultimately be the appropriate orders as to costs.

347 In the circumstances I propose to reserve the question of costs to a later date and invite the provision of succinct written submissions supplemented by oral argument thereon.

I certify that the preceding three hundred and forty-seven (347) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.

Associate:

Dated: 25 August 2010

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