FEDERAL COURT OF AUSTRALIA

470 St Kilda Road Pty Ltd v Robinson [2017] FCA 597

ORDERS

THE COURT ORDERS THAT:

    There be judgment for the applicant in the sum of $1,426,641.70 plus interest.

    The parties each file a short outline of submission in relation to the question of costs within 7 days.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O’CALLAGHAN J:

THE FACTS

1    In October 2010, Reed Constructions Australia Pty Ltd (Reed), as contractor, entered into a design and construct contract with the applicant, as principal, for the redevelopment of what was then an office building at 470 St Kilda Road, Melbourne (the contract). Reshape Developments Pty Ltd (Reshape) was the applicant’s representative under the contract. The applicant’s bank, which provided finance for the project, appointed Rider Levett Bucknall (RLB) as its quantity surveyor. The contract works involved converting the office building into a 14-storey residential apartment building, to be known as “The Leopold”.

2    “The Leopold” was completed in May 2012. Reed went into liquidation in July 2012. This proceeding was commenced in April 2012, but did not come on for hearing until April of this year because of protracted proceedings between the respondent, Mr Robinson, and his insurer, which had denied liability under the relevant policy of insurance and unsuccessfully litigated the point: see 470 St Kilda Road Pty Limited v Robinson (2013) 308 ALR 411; [2013] FCA 1420; and on appeal in Chubb Insurance Company of Australia Limited v Robinson (2016) 239 FCR 300; [2016] FCAFC 17.

3    The contract provided for Reed to make payment claims to be made on the 28th day of each month for “Work Under Contract” (WUC) undertaken in that month. The parties adopted a standard practice for dealing with the monthly payment claims.

(1)    Reed forwarded to Reshape each payment claim, together with consultant reports as to the due performance of work, and importantly for the purposes of this proceeding, a statutory declaration as to the due payment of subcontractors and suppliers.

(2)    RLB inspected the site and issued a valuation for the work undertaken by Reed in the claim period.

(3)    Reshape prepared a “payment schedule” that responded to the payment claim, as required by s 14 of the Building and Construction Industry Security Payment Act 2002 (Vic).

(4)    The payment schedule was given to Reed, which issued a tax invoice for the amount in the payment schedule.

(5)    The invoiced amount was then paid.

4    Construction continued uneventfully throughout most of 2011. Statutory declarations, in an agreed form, accompanied each payment claim. The statutory declarations were made by a Mr Tranter on behalf of Reed in respect of payment claims 2 to 10, and thereafter by Mr Robinson.

5    On 21 November 2011, Mr Tranter wrote to Mr Reszka at Reshape setting out a proposal for making early payment claims over the Christmas period and up to February 2012, covering payment claims no. 14 (November 2011), no. 15 (December 2011), no. 16 (January 2012) and no. 17 (February 2012).

6    Mr Tranter asked that in respect of payment claim no. 15 the applicant “submit [its] claim on Monday 12 December 2011 for works complete up to Thursday 22 December 2011.”

7    Mr Tranter also asked that “[Reshape]/RLB review and certify by Friday 16 December 2011” and that Reed would then “invoice upon receipt of certification and complete subcontractor certification process by Thursday 23 December 2011.” Mr Reszka forwarded the proposal (which amounted to a variation of the contract) to Mr Griffiths, who managed the finances of the project on behalf of the applicant, and he approved it on behalf of the applicant.

8    The applicant’s claim in this proceeding relates only to payment claim no. 15 and the statutory declaration made by Mr Robinson in respect of it, but it is necessary also to recount the events that occurred in respect of payment claims nos. 14, 16 and 17.

9    On 28 November 2011 Mr Tranter sent to Mr Reszka at Reshape a copy of payment claim no. 14, together with a statutory declaration in the usual form in support of it, in the amount of $3,003,164. Reed then sent the applicant a tax invoice and the applicant paid it.

10    On 12 December 2011, Reed sent to the applicant payment claim no. 15. In addition to various documents of a “compliance” type, the payment claim was accompanied by a statutory declaration made by Mr Robinson, who was himself a Justice of the Peace. That statutory declaration lies at the heart of this controversy.

11    The statutory declaration made was in accordance with s 107 of the Evidence (Miscellaneous Provisions) Act 1958 (Vic), which states:

    (1)    A statutory declaration must—

(a)    contain an acknowledgement that it is true and correct and is made in the belief that a person making a false declaration is liable to the penalties of perjury; and

(b)    be signed by the person making it in the presence of a person who is authorised under section 107A(1) to witness the signing of a statutory declaration.

(2)    A person who makes a declaration which the person knows to be false is liable to the penalties of perjury.

12    The statutory declaration stated:

PROGRESS PAYMENT NO:     15, 12 December 2011

CONTRACTOR:            Reed Constructions Australia Pty Ltd

PROJECT:    Leopold, 470 St Kilda Road, Melbourne, VIC, 3000

PRINCIPAL:                470 St Kilda Road

STATUTORY DECLARATION

I Glenn Robinson, Chief Operating Officer, of Reed Constructions Australia Pty/Ltd do solemnly and sincerely declare as follows:

I am the contractor or authorized employee of the contractor entitled to make the claim for progress payment as detailed above. That to the best of my knowledge and belief having made all reasonable enquiries, at this date –

all workmen who are or at any time have been engaged on the work under the Contract have [sic] paid in full amounts which have become due to them by virtue of their employment on the work under the Contract as wages and allowances of every kind required to be paid by or under any statute, ordinance of subordinate legislation, or by any relevant award, determination, judgment or order of any competent court, board, commission or other industrial tribunal or by any relevant industrial agreement that is enforced in the State in which the word under the Contract has been carried out and to the latest date at which such wages and allowances are payable.

all sub-contractors or suppliers of materials who are or at any time have been engaged on the work under the Contract have been paid in full all monies which have become payable to the sub-contractor under terms of the sub-contract or to the supplier of materials under the terms of agreement for supply.

no disputes exist with workmen, sub-contractors or suppliers.

all insurances required under the Contract are current and all premiums have been paid.

I ACKNOWLEDGE that this declaration is true and correct and I make if in the belief that a person making a false declaration is liable to the penalties of perjury.

DECLARED at North Sydney

in the state of NSW this 12th day of December 2011…

13    The usual process described above was followed. Reed issued a tax invoice dated 22 December 2011 in the sum of $1,426,641.70 and the applicant paid it on 11 January 2011.

14    By no later than Australia Day 2012 it was clear to everyone that all was not well at the site. Subcontractors, or many of them, had by then packed up their tools and left.

15    On 31 January 2012, Reed served payment claim no. 16, supported by another statutory declaration in the usual form made by Mr Robinson. It was headed “Progress Payment No: 16, 28 January 2012” and was dated 31 January 2012.

16    By early February 2012, all the subcontractors had abandoned the site. No doubt in recognition of the need for some explanation, Mr Bufè on behalf of Reed then emailed to Mr Reszka a copy of Reed’s “Creditor List” as at 1 February 2012. It showed $175,242.61 in payments of Leopold subcontractors or suppliers overdue from October 2011 and $2,585,512.60 overdue from November 2011.

17    On 6 February 2012, the applicant issued a contractual notice to show cause, citing Mr Robinson’s statutory declaration dated 31 January 2012 given with payment claim no. 16 as grounds for terminating the contract (under cl 39.2(e)). The notice to show cause stated that Reed had “committed a substantial breach of the contract” because it “knowingly provided a Statutory Declaration containing an untrue statement”, namely that “all sub-contractors or suppliers of materials who are or at any time have been engaged on the work under the Contract have been paid in full all monies which have become payable [to them]”. The notice relied on the Reed Creditor List as evidence of the falseness of that declaration.

18    On 13 February 2016, the applicant served a payment schedule indicating that it proposed to pay nothing in respect of claim no. 16.

19    Reed sought a two week extension of time to comply with the show cause notice, writing that Reed “has been working hard to resolve our financial position with our creditors on the Leopold project” and that “[u]pon completion of payments to outstanding creditors and/or credit terms re-negotiated to a date beyond 5 March 2012, Reed will re-execute the Statutory Declaration for progress claim 16…”

20    The applicant replied by letter dated 27 February 2012, saying, among other things, that it would only agree to an extension if Reed opened their books with respect to all subcontractor agreements.

21    On 29 February 2012, Reed forwarded to the applicant a revised Creditor List. On the assumption (adopted at trial by the parties) that subcontractors, or the vast majority of them, were to be paid within 45 days of the end of the month in which the invoices were received, a total of $2,292,936.42 was overdue and a further $1,811.814.84 would become overdue within 2 weeks. In the events that occurred, Reed failed to pay the subcontractors and suppliers any of the amounts recorded in that list.

22    On 1 March 2012 the applicant terminated the contract on the same grounds contained in the show cause notice. Reed did not contest the termination.

23    Reed issued payment claim no. 17 on 29 February 2012 in the amount of $929,388.76. Unsurprisingly in light of the financial position disclosed in the Creditor Lists, the payment claim did not come with any statutory declaration.

24    On 14 March 2012 the applicant served its payment schedule in response to payment claim no. 17.

25    On 20 March 2012, Reed sought adjudication of payment claim no. 16 pursuant to the procedures provided for in the Building and Construction Industry Security of Payment Act 2002 (Vic). The applicant responded and the adjudicator shortly thereafter delivered a determination favourable to Reed, namely that the applicant should pay the full amount of the claim ($760, 698.84). The applicant provided security by way of bank guarantee for that sum.

26    On 16 April 2012, the applicant issued proceedings in the Supreme Court of Victoria claiming damages against Reed arising out of the termination of the contract in the sum of approximately $5.63m.

27    On 17 April 2012 the applicant sought judicial review of the determination in respect of payment claim no. 16: see 470 St Kilda Road Pty Ltd v Reed Constructions Australia Pty Ltd [2012] VSC 235. The proceeding was heard on 30 April 2012 and, on 3 June 2012, dismissed by Vickery J.

28    Reed subsequently sought adjudication of payment claim no. 17. On 27 April 2012 the applicant served its adjudication response and, on 18 May 2012, the adjudicator delivered his determination favourable to Reed, namely that the applicant should pay to Reed a total adjudicated amount of $661,127.50.

29    On 22 June 2012, the applicant filed a judicial review application in respect of the adjudicator’s determination for payment claim no. 17.

30    On 9 July 2012 a liquidator was appointed to Reed. Upon that happening, Reed’s rights under the Building and Construction Industry Security of Payment Act 2002 (Vic) were at an end: see Façade Treatment Engineering Pty (in liq) v Brookfield Multiplex Constructions Pty Ltd (2016) 337 ALR 452; [2016] VSCA 247 at [76]-[90].

31    Eventually, the liquidator reported that Reed had unsecured creditors totalling $132m, none of whom (including the applicant) recovered anything. The liquidator also reported that Reed was insolvent at least by 31 January 2012 – which, coincidentally, was the same date on which Mr Robinson had made his statutory declaration in respect of payment claim no. 16.

32    On 12 October 2012, the applicant sought and was granted leave to appeal to the Court of Appeal from the decision of Vickery J. Leave was granted on two questions.

(1)    First, whether good faith is a prerequisite to the making of a valid payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic).

(2)    Secondly, whether the adjudicator was required to consider the truthfulness of the statutory declaration in support of the payment claim, and whether falsity of the statutory declaration vitiated any obligation to make a payment under the contract.

33    Nothing further came of those legal proceedings. In March 2013, the applicant settled with the liquidator by making a payment of $100,000 and recovered in full its bank guarantees.

34    By February 2012 the contract works were a little over 90% complete. Because the subcontractors had abandoned the site and suppliers had refused to make further supplies, the applicant had to make so-called “restart” payments to get them back to finish the works totalling about $2.8m. No claim is now made in respect of those payments.

35    When Reed left the Leopold site in early 2012, it left behind a number of documents entitled “Cheques Drawn (Cheques printed but not released)”, referred to by the parties as Cheques Drawn Lists (CDLs). They bore dates between 26 September 2011 and 16 January 2012. The applicant had not previously seen or been provided with them.

36    Reed also left behind a computer, from which, with the co-operation of Mr Robinson’s solicitors, were extracted a number of “Monthly Progress Reports” that bore dates between 15 September 2011 and 23 January 2012. The applicant had also not seen those documents before.

37    By the end of the hearing of this proceeding, Mr. Robinson, by his counsel, agreed that as at 12 December 2011, subcontractors or suppliers of materials who had been engaged on work under the contract had not in fact been paid in full all monies which as at that date had become payable to them, and that the outstanding value of those overdue accounts as at 12 December 2011 was $162,064.72. He also agreed that as at 22 December 2011 (the date up to which Reed asked the applicant to include WUC in payment claim no. 15) the outstanding value of those accounts was $609,324.72, or roughly half of the total amount the subject of the payment claim. The applicant says that those concessions do not go far enough and the true figures are $624,340.87 and $ 1,171,837.46 respectively.

38    The question of the precise total amount that was overdue as at 12 December 2011 and 22 December 2011 was the subject of considerable dispute and evidence, including in two detailed annexures (which were marked MFI-A1 and MFI-A2), and in written and oral submissions. In light of the respondent’s ultimate position, however, it is not necessary, even assuming it were possible, for the Court to carry out a line by line analysis of each invoice recorded in those annexures to arrive at a precise accounting.

39    I say that because in light of the respondent’s agreement that the outstanding value of the overdue accounts was $162,064.72 as at 12 December 2011 and $609,324.72 as at 22 December 2011 it is readily apparent that Mr Robinson’s declaration was materially untrue as at either date. As discussed below, despite the fact that Reed asked in respect of payment claim no. 15 that Reed be allowed to “submit [its] claim on Monday 12 December 2011 for works complete up to Thursday 22 December 2011”, it submits in this proceeding that the statutory declaration duly made must be read as at the date that it bears (12 December 2011). For reasons that I explain below, I reject that contention.

THE APPLICANT’S CASE UNDER THE CONSUMER LAW

40    The applicant’s principal pleaded case is made pursuant to s 18 of the Australian Consumer Law (ACL), which is contained in Sch 2 to the Competition and Consumer Act 2010 (Cth) and applied under Sub-Div A of Div 2 of Pt XI of that Act. Section 18 provides: “A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” Section 236 provides that damages may be recovered for a contravention of s 18.

41    By the time the trial finished there was no dispute between the parties that Mr Robinson made the statutory declaration in trade or commerce for the purpose of procuring the payment by the applicant to Reed of the invoice issued in respect of payment claim no. 15 and that Mr Robinson knew and intended that the applicant would rely on the statutory declaration in making that payment.

42    Mr Robinson admitted the trade and commerce point in his defence and agreed in his evidence that when he made the statutory declaration on 12 December 2011 he understood and expected that the applicant would rely on it in support of payment claim no. 15.

43    In order to describe the matters that remained in dispute in respect of the claim under the ACL, it is necessary to summarise the rest of the applicant’s case.

44    The applicant pleaded that by making the statutory declaration Mr Robinson represented to the applicant a number of matters that were untrue, namely:

(1)    the Statutory Declaration was made to the best of Mr Robinson’s knowledge and belief having made all reasonable enquiries;

(2)    all subcontractors who were, or had at any time, been engaged on work by Reed under the contract had been paid in full all moneys which had become payable to the subcontractors under terms of the relevant subcontracts;

(3)    all suppliers of materials to Reed under the contract had been paid in full all moneys which had become payable to the supplier of materials under the terms of agreement for supply;

(4)    the statutory declaration constituted documentary evidence required by the applicant under cl 38.1 of the contract and was to be read as at 22 December 2011; and

(5)    that Mr Robinson had a reasonable basis for each of the matters stated in sub-paragraphs (1) to (5) above.

45    The applicant described its pleaded case, as explained in the evidence upon which it relied, as a ‘counter factual’ case. The pleaded case is to be found at paragraph 3(d)H of the applicant’s reply to the respondent’s further amended defence dated 21 November 2016. The affidavit evidence upon which the applicant relied at the trial is contained in affidavits of two directors of the applicant, one of Mr Beck sworn 4 November 2016 (at [19]-[25]), and the other of Mr Griffiths sworn 4 November 2016 (at [34]-[37] and [52]-[83]). It also relied on an affidavit of Mr Reszka sworn 2 November 2016 (at [38]-[51]).

46    That counter factual case alleges that the pleaded representations contained in the statutory declaration were untrue and that had the applicant known the true position about the overdue accounts (whether the statutory declaration is to be read as at 12 or 22 December 2011), it would have withheld payment of Reed’s claim, served a show cause notice under the contract, and terminated the contract, which is precisely what it did one month later in respect of payment claim no. 16.

47    Because Reed went into liquidation, and returned nil to unsecured creditors, including the applicant, the loss it seeks to recover by way of damages is the full amount of the amount paid pursuant to payment claim no. 15 (namely, $1,426,641.70).

48    Although counsel for Mr Robinson complained in written closing submissions about the applicant’s “shifting case”, during the course of his final address senior counsel agreed in response to a question from the Court that the respondent had understood the nature of the “counter factual” case that it had to meet and did not seek to make anything of those complaints.

Issues in dispute

49    By the end of the trial, there remained in dispute between the parties the following issues that are necessary to decide in respect of the applicant’s case under the ACL:

(1)    What is the effective date of the statutory declaration – 12 December 2011 or 22 December 2011?

(2)    Was Mr Robinson’s representation that he had made all reasonable enquiries misleading or deceptive?

(3)    Did the applicant rely on the representations contained in the statutory declaration?

(4)    Whether, assuming Mr Robinson was liable as alleged, any part of that liability should be apportioned to Reed?

50    I will take each issue in turn.

The effective date of Mr Robinson’s statutory declaration

51    The first issue necessary to decide is whether the “effective date” of the declaration that Mr Robinson made – that to the best of his knowledge and belief having made all reasonable enquiries all workmen, subcontractors and suppliers who were or at any time had been engaged on the work under the contract had been paid in full amounts which had become due to them by virtue of their employment on the work under the contract – was the date of the making of the declaration (12 December 2011) or the date ending the period for WUC covered by payment claim no. 15 (22 December 2011).

52    Mr Robinson submitted that it is the former. He submitted that the statutory declaration is to be read on its face and that when Mr Robinson says that he made the declaration “at this date”, that can only mean the date that the declaration bears. He further submitted that a statement made in a statutory declaration is not like any other contractual document and that “reference to matters of context and commercial common-sense cannot displace the plain and clear words of the statement itself”.

53    The applicant submitted that, given the commercial purpose and context of the statutory declaration, it must be read as at 22 December 2011, being the period for WUC covered by payment claim no. 15, and that no “special” principles of construction apply.

54    Part of the relevant context includes cl 38.1 of the contract, which provided:

38.1 WORKERS AND SUBCONTRACTORS

If requested by the Principal or the Principal’s Representative, the Contractor shall give in respect of a payment claim, documentary evidence of the payment of moneys due and payable to:

(a)    workers of the Contractor and the subcontractors; and

(b)    subcontractors

In respect of WUC the subject of that payment claim.

If the Contractor is unable to give such documentary evidence, the Contractor shall give other documentary evidence of the moneys so due and payable to workers and subcontractors.

Documentary evidence, except where the Contract otherwise provides, shall be to the Principal’s Representative’s satisfaction.

The Contractor will indemnify and keep the Principal indemnified in relation to any claim made by workers of the Contractor or workers employed by subcontractors of the Contractor engaged on the WUC for any amounts due and payable to them in respect of their employment.

55    The “documentary evidence” referred to in cl 38.1 included the statutory declarations that the parties agreed would accompany each payment claim in the course of the administration of the contract. The applicant contends that the sole function and commercial purpose of the statutory declaration was to provide evidence of due payment for the work, and therefore covering the same time period to which payment claim no. 15 relates, and that that comprises a critical part of the context and purpose of the critical parts of the statutory declaration (citing Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[51] and Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 767-768 per Lord Steyn).

56    Mr Robinson’s proposition that special principles apply to the construction of statutory declarations, when used in furtherance of the administration of a building contract, need only to be stated to be rejected. No authority was cited for it.

57    I accept the applicant’s submission that the sole function and commercial purpose of the statutory declaration was to provide evidence of due payment for the work, and that it therefore covered the same time period to which payment claim no. 15 relates.

58    Further, it was Reed who had sought an indulgence from the applicant so that its subcontractors could be paid earlier than would otherwise be the case when Mr Tranter asked that in respect of payment claim no. 15 the applicant “submit [its] claim on Monday 12 December 2011 for works complete up to Thursday 22 December 2011”. That too is a critical part of the context and purpose of the payment claim, and it would be passing strange to read the statutory declaration given in support of the payment claim that was produced in accordance with that agreement as if it only spoke to “works complete up to…12 December 2011”.

59    The statutory declaration must therefore have been intended to speak to the position that was anticipated by the declarant to be so as at 22 December 2011.

Whether Mr Robinson made reasonable enquiries

60    Mr Robinson’s statutory declaration commenced with these words:

I Glenn Robinson, Chief Operating Officer, of Reed Constructions Australia Pty/Ltd do solemnly and sincerely declare as follows:

I am the contractor or authorized employee of the contractor entitled to make the claim for progress payment as detailed above. That to the best of my knowledge and belief having made all reasonable enquiries, at this date… (emphasis added).

61    The issue that arises is whether Mr Robinson engaged in misleading or deceptive conduct (negligence was also pleaded) by predicating his declarations about due payment in full of any amounts owing to subcontractors and others by those emphasised words.

62    In order to assess the question of what reasonable enquiries anyone in Mr Robinson’s position ought to have made, it is necessary to go to some of the evidence, largely uncontested, about the financial predicament that Reed was in from about August 2011, what Mr Robinson knew about that predicament, and what he knew or ought to have known about whether all subcontractors and suppliers had been paid in full all amounts which had become payable to them.

63    One of Mr Robinson’s responsibilities as Chief Operating Officer was to manage Reed’s cash flow. He accepted that although he did not have direct access to a software program known as “Timberline” he could and sometimes did seek information from Reed’s accounts department obtained from Timberline which could tell him, among other things, when invoices from subcontractors or suppliers fell due and whether they were at any given point overdue.

64    Mr Robinson regularly received CDLs for every project being undertaken by Reed throughout the country. In 2011 Reed was conducting major works apart from the Leopold project in Queensland, New South Wales and Victoria, so the CDLs contained many hundreds of cheques.

65    In cross-examination Mr Robinson agreed that he knew that Reed had begun to experience severe cash flow problems across all of its projects in around August 2011, including problems in relation to the non-payment of many critical path subcontractors. He also accepted that he knew by mid-September 2011 that numerous supplier accounts had been blocked in relation to the Leopold project and that resolution of the non-payment issues was required so as not to affect the timing of completion of the project.

66    Mr Robinson also accepted that the CDLs from August 2011 onwards showed an increasing lag in payment of subcontractors for the Leopold project. He also agreed that by mid-August Reed faced a “cash flow challenge” and that by October 2011 there was a “looming financial crisis” at Reed.

67    It is also clear from the evidence that despite having access to Timberline and the information recorded in it about the payment terms of the subcontractors and suppliers at the Leopold site, Mr Robinson did not check that information prior to making the statutory declaration on 12 December 2011. If he had, then, on his own case, he would have discovered at a minimum that there were unpaid sums then payable to subcontractors and suppliers totalling $161,401. Nor, he agreed in cross-examination, did he ever look at, as he could readily have done, any individual invoices to verify whether any given amount had been paid, or at Reed’s Monthly Project Progress Reports, which would have provided him with important information about the status of payments to subcontractors and suppliers.

68    There is no doubt that Mr Robinson had a lot on his mind in December 2011. By way of example, Reed’s financial position had become so difficult that it decided to make redundant 150 of its 450 person workforce, a program that he was deputed to administer and implement. He also knew on about 9 December 2011 that Westpac had rejected Reed’s request for temporary funding for the Leopold project.

69    Mr Robinson agreed that the entirety of the reasonable enquiries that he made prior to making the statutory declaration were the enquiries he deposed to in his 6 July 2012 affidavit. The relevant paragraphs read:

The process I adopted in respect of the statutory declaration

33    On or about 12 December 2011, I was requested by Aaron Tranter…to execute a statutory declaration (the statutory declaration) to be submitted to [Reshape]…

34    I do not now specifically recall the steps and process I adopted to satisfy myself that the statutory declaration was correct. In my role as [Reed’s] COO I was frequently called by [Reed] staff to execute similar statutory declarations and I had a general practise which I adopted to satisfy those requests. That practise was as follows and to the best of my recollection I followed it in relation to the statutory declaration the subject of these proceedings.

35    Firstly my practise was to speak to the Project Manager. However in relation to the statutory declaration the subject of these proceedings I recall that I spoke to the State Manager, Nick Bufè, and also the CEO of the [Reed], Garth Graydon, because I was aware that they had been closely monitoring the cash flow in respect of the Leopold Project and had negotiated extended payment terms with the major subcontractors and suppliers to the Project and had advised management of the Applicant.

36    I recall having a conversation on or about the 12 December 2011 in connection with the statutory declaration with Nick Bufè in words to the following effect:

    Robinson:     “Nick do we have any issues with September payments?”

    Bufè:        “No its all clear. They have been sorted.”

37    I asked him about September because the inquiries were being made prior to 15 December 2011 (being 45 days from the end of October 2011) and therefore to my mind invoices issued by subcontractors and suppliers in October were not due and payable until 15 December 2011 at earliest.

38    I also had regard to what I had been told at an earlier stage by Garth Graydon with respect to two of the major subcontractors to the Project, Waco Kwikform (a scaffolding supplier) and GVP Fabrications Pty Limited.

39    To the best of my recollection Mr Graydon had been to Melbourne to meet with representatives of those firms and I recall that he said to me on his return words to the following effect:

Graydon:     “I’ve been able to get the major contractors for Leopold to agree to 56 days payment terms.”

40    I understood him to mean 56 days from the end of the month in which an invoice was issued.

70    In my view, given Mr Robinson’s knowledge of Reed’s dire cash flow problems, the fact that it had recently failed to pay all subcontractors and suppliers in full, that critical path subcontractors had recently threatened to block or cease supply to the project, his failure to make any up to date enquiries of anyone who had direct access to the Timberline software (which had he called for and examined would have revealed that all subcontractors and suppliers had not been timely paid), his failure to look at any actual invoices or any relevant recent monthly reports, and his failure to make any enquiries of the actual trading terms of all relevant subcontractors and suppliers, meant that the limited enquiries Mr Robinson did make could on no view be regarded as sufficient to be said to be “reasonable” for the purposes of his statutory declaration.

71    Mr Robinson also submitted that his declaration – that to the best of his knowledge and belief having made all reasonable enquiries all workmen, subcontractors and suppliers who were or at any time had been engaged on the work under the contract had been paid in full amounts which had become due to them by virtue of their employment on the work under the contract – was:

(1)    a statement “as to the [his] state of mind and one as to the enquiries that had been made to inform that state of mind”;

(2)    “not an absolute statement to the effect that all subcontractors and suppliers had been paid in full all moneys which had become payable”; and

(3)    “not misleading or deceptive simply because it can be shown that there were unpaid sums due and payable to subcontractors and suppliers as at December 2011”.

72    I do not accept those submissions.

73    As to the first submission, it is quite wrong to imply that a statutory declaration is merely a “statement of the declarant’s state of mind”. It is a solemn promise, containing, as the legislation requires, an acknowledgement that it is true and correct and is made in the belief that making a false declaration will render the maker liable to the penalties of perjury. The legislation in Australia governing statutory declarations is not identical: see Oaths Act 1867 (Qld), s 14; Oaths Act 1900 (NSW), s 24; Evidence (Miscellaneous Provisions) Act 1958 (Vic), s 107; Statutory Declarations Act 1959 (Cth), s 8 and Statutory Declarations Regulations 1993 (Cth), Sch 1; Oaths, Affidavits and Statutory Declarations Act 2005 (WA), s 12; Oaths Act 1936 (SA), s 25; Oaths Act 2001 (Tas), s 14; Oaths, Affidavits and Declarations Act 2010 (NT), ss 18-20. The statutory declaration in this case adopted the Victorian requirements. As to the origins of the statutory declaration, see: “Solemn Declarations and Affirmations Substituted for Oaths”, 21 Law Mag. Quart. Rev. Juris 116 (1854); and the Report from the Select Committee of the House of Lords Appointed to Inquire into the Expediency of Substituting Declarations in lieu of Oaths in certain Cases (1837) especially at pages 77-79, available at the House of Commons Parliamentary Papers Online).

74    The second submission is also incorrect. The declaration is an absolute statement to the effect that, to the knowledge of the declarant, all subcontractors and suppliers had been paid in full all moneys which had become payable. And it was materially untrue regardless of the date at which it is to be read. The third submission must be rejected for the same reasons.

75    It follows that Mr Robinson’s statement, that to the best of his knowledge and belief he had made all reasonable enquiries before making the statutory declaration, was misleading or deceptive or likely to mislead and deceive.

76    The applicant expressly disavowed any suggestion that Mr Robinson was dishonest in making the statutory declaration or that he deliberately made a false declaration. Although in a case such as this the reason for how the situation came about is not necessary to decide, Mr Robinson did accept when cross-examined that it was a “fair statement” that as at mid-December 2011 he was trying to manage the payment to subcontractors and suppliers across many projects in Victoria, New South Wales and Queensland, involving thousands of different contractors and suppliers in any one month and that he was simply not able to keep on top of the contractor and supplier payments for every project. That seems to me to be the most likely reason for him not to have done those things which he ought to have done before making the statutory declaration in the form in which it was made.

Reliance and causation

77    The applicant has thus established that Mr Robinson has engaged in misleading or deceptive conduct, because his declaration – that to the best of his knowledge and belief having made all reasonable enquiries all workmen, subcontractors and suppliers who were or at any time had been engaged on the work under the contract had been paid in full amounts which had become due to them by virtue of their employment on the work under the contract – was materially untrue.

78    The next issue is whether the applicant has suffered loss and damage by that conduct: see Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at [34], [38] and [95].

79    In a case involving a failure to disclose a material matter, such as this, it is not a natural use of the notion of reliance to say that there was reliance on a failure to disclose. In such a case, causation may be found where it is established that disclosure would have caused action different from that in fact taken. As Gilmour and White JJ recently said in Addenbrooke Pty Limited v Duncan (No 2) [2017] FCAFC 76 at [499]-[502]:

Reliance is not a substitute for causation in misleading or deceptive conduct claims: Campbell v Backoffice Investments (2009) 238 CLR 304 at [143]. However, generally speaking, it is necessary for parties claiming to have suffered loss or damage “by” the conduct of another to show that they relied on that conduct by doing, or refraining from doing, something by reason of it…

Particular considerations affecting the issue of reliance arise when the misleading or deceptive conduct involves a failure by a respondent to disclose a material matter. It can be artificial to speak of reliance in determining what action or inaction could have occurred if the true position had been known: Campbell v Backoffice Investments at [143] approving the statement of Giles JA in the decision appealed from: [2008] NSWCA 95; (2008) 66 ACSR 359 at [44]. See also Smith v Noss [2006] NSWCA 37 at [25]. Further, in such cases, evidence from claimants seeking to discharge the onus of proof on causation as to what they would have done in the counterfactual circumstance had the non-disclosure not occurred is necessarily hypothetical and, because of its self-serving nature, often regarded as of little weight. Courts tend to attach more weight in circumstances of this kind to evidence of surrounding matters when making the assessment of the causal effect of the non-disclosure [citing Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 (per Beaumont, Foster and Hill JJ) at 483]…

80    Mr Beck, Mr Griffiths and Mr Reszka each gave direct evidence of reliance on behalf of the applicant.

81    Mr Beck and Mr Griffiths deposed, in substance, that if Mr Robinson had not signed the statutory declaration in respect of payment claim no. 15 or that if he had signed a statutory declaration disclosing the true position, or otherwise disclosed the true position (as at either 12 or 22 December), then that payment claim would not have been approved or paid to Reed on 11 January 2012 or at all. They both swore that, just as they did in respect of payment claim no. 16, the applicant would have: withheld the entire amount of the claim; issued a show cause notice; and then terminated the contract. Mr Reszka swore, in substance, that if he had known the true position, he (Reshape) would not have certified payment.

82    Counsel for Mr Robinson, in cross-examination, did not seriously challenge Mr Beck, Mr Griffiths or Mr Reszka in relation to that evidence. I asked senior counsel for Mr Robinson during his closing address about the significance of the fact that he had not sought to challenge the witnesses on the point. His response was that, despite not having challenged their evidence directly, it should be “treated with some caution” because there were other matters exercising their minds at the time, including completing the project and workers leaving the site and “because there is an amount of re-creation and after-the-fact reasoning”. The written closing submission contained a submission along similar lines. There it was submitted that the evidence established that at the time that the applicant made the payment in response to payment claim no. 15 “it had some knowledge about issues with the payments of subcontractors…regardless of what the statutory declaration said” and that it “made the payment in the interests of continuing the project towards completion and not because it was relying on the terms of the statutory declaration”.

83    Both Mr Beck and Mr Griffiths denied in the course of cross-examination that they were aware of any significant issues concerning non-payment of subcontractors or suppliers in 2011. And they denied that they relied not on the statutory declaration in paying claim no. 15, but on “a desire to get the project finished”. I accept those denials.

84    The respondent also relied on evidence given by Mr Graydon that he told Mr Beck and Mr Reszka as early as 2 November 2011 at a lunch that Reed was having cash flow problems and that payments to subcontractors were being affected. This was in support of a submission that the applicant thus knew by early November about Reed’s problems with paying subcontractors and that if Mr Robinson had revealed the true position on 12 December 2011, it would not have come as any surprise to the applicant and they would not have taken the steps that they in fact took a month later. Mr Beck and Mr Reszka both denied that Mr Graydon said any such thing and they swore that they did not know of such problems until early 2012. Mr Graydon sought to pinpoint the date of the conversation by reference to the fact that Mr Beck lost his driver’s licence on that date (2 November 2011). But he was wrong about that – Mr Beck lost his licence on Boxing Day 2011. It seems clear therefore that Mr Graydon was mistaken in his evidence on that point, or at least mistaken about the critical timing question, and I do not accept it.

85    The evidence given by Messrs Beck and Griffiths summarised at [81] above is, of course hypothetical, in the sense that the word is used in the cases, but I have no hesitation in accepting their evidence that had Mr Robinson disclosed the true position, either at 12 or 22 December 2011, the applicant would have triggered the show cause process in mid-January, not in February. It follows as a matter of common sense that the consequence of doing so would have been that it would not have paid the sum of $1,426,641.70, or any sum, in respect of payment claim no. 15.

86    Here the usual admonitions about regarding such evidence as of little weight do not apply. First, the evidence was not seriously challenged. And secondly, the hypothetical action on which the applicant relies is the very action that it in fact took a month later, with the resultant consequence that payment claims nos. 16 and 17 were not paid before Reed went into liquidation.

87    Senior Counsel for Mr Robinson also submitted that the applicant did not have a contractual “right” to withhold payment of the payment claim, or at least that part of that payment claim that represented amounts that had been paid to subcontractors or suppliers. He relied on cll 38.1 (set out above at [54]) and 38.2 of the contract, which provided as follows:

38.2 WITHHOLDING PAYMENT

Subject to the next paragraph and to law, the Principal’s Representative may reject in a payment schedule so much of Payment Claim that equates to the potential claims of workers of the Contractor and of the subcontractors and their respective workers the subject of clause 38.1 until the Contractor complies with clause 38.1.

The Principal shall not reject in a payment schedule such moneys in excess of the moneys evidenced pursuant to clause 38.1 as due and payable to workers and subcontractors.

88    Senior counsel for Mr Robinson submitted, and I understand the applicant to have accepted, that by the terms of cl 38.2, the applicant was only entitled to “reject in a payment schedule so much of a Payment Claim that equates to the potential claims of workers of the Contractor and of the subcontractors…until the Contractor complies with clause 38.1”. But that is not the point.

89    As the applicant submitted, this is an “all or nothing” case. The applicant’s case does not depend upon needing to prove that, as at 12 or 22 December 2011, the applicant could have proved a case that nil amount, or any particular or precise amount, was owing.

90    The applicant’s pleaded case is that the statutory declaration, a critical part of the “documentary evidence” referred to in cl 38.1, was materially false. As the applicant submitted, it had no obligation to pay any moneys to Reed until Reed first properly complied with its obligations under cl 38.1 and provided the required proof of payment. On the evidence, not only did Reed not properly comply with cl 38.1 in respect of WUC up to 12 or 22 December 2011, as senior counsel for the applicant put it “by December 2011 it could never properly comply with cl 38.1 and it never again did.”

91    For the foregoing reasons, the applicant has made good its case under the ACL.

Proportionate liability between Reed and Mr Robinson

92    The respondent said that 50% of the responsibility lies with Reed, on whose behalf the respondent made the statutory declaration, and that any damages awarded should be reduced accordingly.

93    Both parties made submissions in writing on this question. Both declined the opportunity to elaborate on them in oral submissions.

94    It was submitted on behalf of Mr Robinson that all of the applicant’s claims are apportionable claims. It was submitted that the misleading or deceptive conduct claim is apportionable under Pt IVA of the ACL and that the negligent misstatement claim (dealt with below) is apportionable under Pt IVAA of the Wrongs Act 1958 (Vic).

95    It was said that the basis on which the claims are apportionable is the same in both cases and that Reed and Mr Robinson are jointly liable for the making of Mr Robinson’s statutory declaration because:

(1)    it was made for and on behalf of Reed – the declaration itself refers to the respondent as “authorised employee of the contractor”;

(2)    it was made pursuant to a contractual requirement to which Reed (not Mr Robinson) was a party and which, in terms, imposed the obligation on Reed;

(3)    RLB had back in December 2010 asked for a declaration by the builder;

(4)    it was made in the course of Reed’s business;

(5)    it was made for the benefit of Reed;

(6)    he was a senior employee of Reed – Chief Operating Officer – and so was relevantly the mind and will of the company.     

96    The respondent contends that in the circumstances of the case, there is no basis for apportioning Mr Robinson’s liability any higher than 50%.

97    The applicant submitted that no part of the claim should be apportioned. I agree. I reject the respondent’s contentions, faintly pressed as they were, first because there is no evidence that remotely suggests that Reed misled Mr Robinson or caused him to make the statutory declaration and, secondly, because the declaration, on its face, makes clear that it is Mr Robinson who made the enquiries and that it was his own knowledge and belief in respect of which he made the declaration. Further, to the extent that the reasons advanced in support of the apportionment contended for rely simply on Mr Robinson’s status as an employee of Reed, that alone cannot justify apportioning liability.

THE APPLICANT’S CASE IN NEGLIGENCE

98    The applicant’s pleading also relied on a cause of action in negligent misstatement based on all of the same facts, although little was said about it during the trial. As in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357 at 386 [99], “the focus was on the statutory claim”. In that case, Heydon, Crennan and Bell JJ said (at [99]), “[t]his is unsurprising. Proof of the statutory claim will almost invariably be less onerous for a plaintiff than proof of negligence on the same facts”.

99    Here, the applicant has succeeded on its statutory claim. If I am wrong about that, it would follow that the negligence claim could not succeed either.

100    I do not therefore propose to say much about the negligence claim. It is sufficient to say that it alleges that Mr Robinson knew or should reasonably have known that the applicant would suffer loss and damage if the statutory declaration was false or inaccurate in a material respect, and that Mr Robinson therefore owed to the applicant a duty to exercise reasonable care in making each of the statements contained in the statutory declaration (relying on the statement of principles summarised in Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649 at [103] per Allsop P, as the Chief Justice then was). I accept the applicant’s submission that Mr Robinson owed such a duty, that he breached the duty and that the applicant suffered damage represented by the sum it paid in respect of payment claim no. 15, for the same reasons that I have given above with respect to the cause of action pleaded under the ACL.

CONCLUSION

101    Accordingly, the Court orders that there be judgment for the applicant in the sum of $1,426,641.70, plus interest.

102    The delay in the hearing of this proceeding is attributable principally to the decision of Mr Robinson’s insurer to deny liability under the relevant insurance policy and to litigate the issue, including before the Full Court. It was perfectly entitled to do so, but, having failed, there is no basis for displacing the ordinary rule that interest is payable from the date upon which the cause of action arose until the date of entry of judgment.

103    I shall hear the parties on the question of costs.

Associate:

Dated:    30 May 2017