Supreme Court New South Wales

• Medium Neutral Citation: Tagget v McLean Austquip Pty Limited [2014] NSWSC 1310
• Hearing dates: 13 September 2013
• Decision date: 17 September 2014
• Jurisdiction: Common Law
• Before: Hidden J

Decision

Appeal dismissed

• Catchwords: LOCAL COURT CIVIL CLAIM - appeal on questions of law - action for work done and materials provided - whether claim contractual or restitutionary - reasonableness of amount claimed
• Legislation Cited: Builders' Licencing Act 1971; Local Court Act 2007
• Cases Cited: Castano v Ashglow Pty Ltd [2009] NSWSC 919; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Horton v Jones [No 1] (1934) 34 SR (NSW) 359; Lumbers v W Cook Builders Pty Ltd [2008] HCA 27; Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 22
• Category: Principal judgment
• Parties: Peter Francis Tagget (appellant); McLean Austquip Pty Limited (respondent)
• Representation: Counsel: W Calokerinos (appellant); J-J Loofs (respondent); Solicitors: Grant Patrick Butterfield - Marsdens Law Group (appellant); Paul Brown - McDonald & Partners (respondent)
• File Number(s): 2013/99061

Judgment

1 HIS HONOUR: This is an appeal, pursuant to s 39 of the Local Court Act 2007, arising from proceedings in the Local Court brought by McLean Austquip Pty Limited ("McLean") against Peter Tagget. McLean was successful, and Mr Tagget has appealed to this court on questions of law. If the appeal is upheld he seeks an order pursuant to s 41(1)(c) of the Local Court Act remitting the matter to the Local Court for redetermination.

2 McLean brought the proceedings in the Local Court for the recovery of money said to be owing by Mr Tagget for work done and materials supplied. Mr Tagget was the sole director of a company, Mongrel Developments Pty Ltd ("Mongrel Developments"), which McLean joined as a second defendant in the proceedings, being unsure whether the correct defendant was that company or Mr Tagget personally. As I understand it, Mr Tagget's business was the supply of bulldozing and excavator services. In the light of evidence of the dealings between McLean and Mr Tagget, the magistrate who heard the matter determined that Mr Tagget was "the relevant defendant". The claim against Mongrel Developments was dismissed.

3 McLean's claim was for repairs it had undertaken for Mr Tagget to an excavator and a bulldozer. The only evidence before the magistrate was led in McLean's case, principally an affidavit of its sole director, Mr John McLean, to which was annexed relevant documentation, including invoices. The amount outstanding was said to be roughly $42,000. Mr Tagget led no evidence. Both parties were represented in the Local Court, but not by counsel who appeared in this court.

4 The magistrate awarded McLean the amount sought, plus interest and costs. His Honour found that the work specified in the invoices had been requested by Mr Tagget and performed by McLean, and that the amounts claimed were reasonable. He noted that there was no evidence of any complaint by Mr Tagget about those amounts, or about the quality of the work undertaken and the materials provided.

5 The statement of claim pleaded against Mr Tagget or Mongrel Developments, or both, indebtedness to McLean in the relevant amount in respect of work done and materials supplied to either or both of the defendants at the request of Mr Tagget, and the failure or refusal of the defendants to pay. The defence was a denial of that claim.

6 In giving judgment the magistrate did not specify whether the claim was being decided as a contract claim or a quantum meruit/restitutionary claim. At the outset of the hearing the solicitor for Mr Tagget, in the course of objecting to some of the evidence, argued that the claim pleaded was restitutionary, effectively alleging an unjust enrichment to Mr Tagget for a sum which must be proved to be reasonable. He contended that a claim in contract had not been pleaded. The solicitor for Mr McLean did not concede that it was not a contract claim, saying that the pleadings were "typical for a Local Court matter." The magistrate ruled that he was dealing with an oral contract for repair, which included an implied term that McLean would charge a reasonable price. It was this issue which is the subject of the appeal.

The appeal

7 The grounds of the appeal are that the magistrate erred in finding that McLean's pleaded case was one based on contract, and in finding that an implied promise to pay a debt between the parties constituted a contract. Both parties supplied written submissions, including submissions in reply for Mr Tagget, which were refined in oral argument. The thrust of the argument of Mr Calokerinos, counsel for Mr Tagget, was that the claim was essentially an indebitatus count, a restitutionary claim based on unjust enrichment and not depending on the existence of an implied contract.

8 He relied on the decision of the High Court in Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221. In that case the appellant, a building company, had undertaken renovation work for the respondent, which had been completed but not paid for. The work was carried out pursuant to an oral contract, the effect of which was that the work would be done for a reasonable remuneration, calculated by reference to prevailing rates of payment in the building industry. However, the contract was unenforceable because it did not meet a provision in the Builders' Licencing Act 1971 that it be in writing. Nevertheless, it was held that the builder could pursue an action on a quantum meruit because the remedy arose not from contract but from a claim "to restitution or one based on unjust enrichment, arising from the respondent's acceptance of the benefits accruing to the respondent from the appellant's performance of the unenforceable oral contract": per Mason and Wilson JJ at 227.

9 It is not necessary to go to the examination of this issue, by reference to the relevant history, in the judgment of Deane J. It is sufficient to refer to a passage from his Honour's judgment at 250-1 in which he referred to the judgment of Jordan CJ in Horton v Jones [No 1] (1934) 34 SR (NSW) 359 at 367-368, setting out the "basic propositions" to be extracted from that passage. That was a case involving the Statue of Frauds. Deane J said:

"I take the liberty of stating those propositions, with which I respectfully agree, in a different order and in varied words. Omitting all but one of the references cited by Jordan C.J., they are:

1. The 'mere fact that the consideration is executed is not sufficient' to make the Statute of Frauds inapplicable.

2. If, however, a person does acts for the benefit of another in the performance of a contract (upon which an action cannot be brought by reason of the Statute of Frauds), and the other so accepts the benefit of those acts, or otherwise behaves in relation to them, that, in the absence of the ... contract, the former could maintain an action ... upon the common money counts, he may sue in indebitatus to obtain reasonable remuneration for the executed consideration: ... 41 Law Quarterly Review, 79 .

3. The existence of the unenforceable contract prevents a new contract, in respect of which special assumpsit could be maintained, from being implied from the acts performed ... ; and the unenforceable contract may be referred to as evidence, but as evidence only, on the question of amount

4. The appropriate action to obtain such reasonable remuneration is 'an action of debt'. 'In such a case the action is in indebitatus only.'

It is clear from the above propositions that the obligation to pay 'reasonable remuneration for the executed consideration' was seen by Jordan C.J. as arising independently of any genuine agreement or promise upon which a special count could be framed. The 'existence of the unenforceable contract' prevented any such genuine agreement from being implied. The reference to the 'unenforceable contract' being relevant 'as evidence, but as evidence only, on the question of amount' emphasized the perception that the obligation to pay reasonable remuneration was quite different from liability to make the payments under the 'unenforceable contract'. Plainly enough, his Honour saw that obligation as a liability in debt arising by operation of law upon the circumstances: the 'obligation is imposed by law, and does not depend on an inference of an implied promise' (per Jordan C.J., Halse Rogers and Owen JJ., Horton v Jones [No. 2] ((1939) 39 SR (NSW) 305, at p 320)."

10 Mason and Wilson JJ expressed their agreement with Deane J, adding (at 227-8):

"Once the true basis of the action on a quantum meruit is established, namely execution of work for which the unenforceable contract provided, and its acceptance by the defendant, it is difficult to regard the action as one by which the plaintiff seeks to enforce the oral contract. True it is that proof of the oral contract may be an indispensable element in the plaintiff's success but that is in order to show that (a) the benefits were not intended as a gift, and (b) that the defendant has not rendered the promised exchange value ... . The purpose of proving the contract is not to enforce it but to make out another cause of action having a different foundation in law.

If the effect of bringing an action on a quantum meruit was simply to enforce the oral contract in some circumstances only, though not in all the circumstances in which an action on the contract would succeed, it might be persuasively contended that the action on a quantum meruit was an indirect means of enforcing the oral contract. So, if all the plaintiff had to prove was that he had fully executed the contract on his part and that he had not been paid the contract price, there would be some force in the suggestion that the proceeding amounted to an indirect enforcement of the contractual cause of action. However, when success in a quantum meruit depends, not only on the plaintiff proving that he did the work, but also on the defendant's acceptance of the work without paying the agreed remuneration, it is evident that the court is enforcing against the defendant an obligation that differs in character from the contractual obligation had it been enforceable."

11 Put shortly, the argument of Mr Calokerinos was that the statement of claim did not plead a contract and that there was no evidence capable of establishing one. The claim was only one for restitution. Accordingly, McLean bore the onus of establishing that it had been requested to do the work and supply the materials, and to prove what was a reasonable sum to be paid for that work and materials.

12 An essential step, he argued, in establishing the relevant request is the identification of who it was who made the request. In this case was it Mr Tagget or was it Mongrel Developments? He noted that, of the invoices relied upon by McLean, some were addressed to both Mr Tagget and Mongrel Developments and others to Mongrel Developments only. In this regard, he referred to another decision of the High Court: Lumbers v W Cook Builders Pty Ltd [2008] HCA 27. That was also a case involving a restitutionary claim by the respondent, a building company, against the appellants, but there was a real issue whether the request for the building work had been made to that company. The respondent had performed the work as sub-contractor to another company, and it was that company with which the appellants had contracted. Indeed, the appellants had been unaware of the existence of the respondent.

13 In the present case, Mr John McLean set out in his affidavit the relevant dealings with Mr Tagget, who was previously known to him. Mr Tagget approached him about repairs to the excavator in December 2010, and in relation to the bulldozer in January 2011. Mr McLean referred to earlier dealings with Mr Tagget when he had directed Mr McLean to "bill the work" to Mongrel Developments. He deposed that in December 2010 Mr Tagget did not identify who would be paying for the work on the excavator but he assumed that it would be Mongrel Developments.

14 As to the amount claimed, the invoices disclose that McLean's labour was charged at $75 per hour. As to the supply of parts, Mr McLean deposed that their price was marked up in accordance with industry practice: the parts were purchased at wholesale prices and sold to customers at retail prices. The difference between the wholesale price and retail price could be anywhere between 30% and 50%.

15 Mr Calokerinos submitted that the magistrate, wrongly characterising the claim as one in contract, had accepted these figures at face value and had not given proper consideration to the question whether they were reasonable. That, he said, should have been the subject of independent expert evidence. Here also, he argued, there was no evidence capable of establishing reasonableness.

16 In this context, he referred to another passage in the judgment of Deane J in Pavey & Matthews v Paul at 256-7. Speaking of the concept of unjust enrichment, his Honour said:

"It constitutes a unifying legal concept which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of the defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognise such an obligation in a new or developing category of case ... ."

Emphasising the words "expense of a plaintiff", he noted that some of the job cards in evidence from which invoices were prepared did not specify the number of hours worked. Nor did the evidence disclose what price McLean actually paid for parts supplied. Rather, the relevant invoices mostly referred to price lists, to which the mark-up was applied, as he put it, "arbitrarily." He argued that the relevant "expense" here was that actually incurred by McLean in providing the parts.

17 I should record that Mr Calokerinos tendered in this court certain material on this issue which had been prepared for the Local Court hearing but, in the event, was not relied upon. I rejected the tender, taking the view that it was not open to receive fresh material in an appeal restricted to questions of law arising from the matter as it had been conducted in the Local Court.

18 In response, counsel for Mr Tagget, Mr Loofs, pointed out that the pleading in the statement of claim was authorised by UCPR r 14.12, dealing with the pleading of facts in short form in certain common money counts. Relevantly, sub-rule (1)(c) provides:

"(1) Subject to this rule, if the plaintiff claims money payable by the defendant to the plaintiff for any of the following:

...

(c) work done or materials provided by the plaintiff for the defendant at the defendant's request,

...

it is sufficient to plead the facts concerned in short form (that is, by using the form of words set out in the relevant paragraph above)."

Sub-rule (2) provides that the defendant "may file a notice requiring the plaintiff to plead the facts on which he or she relies in full (that is, in accordance with the provisions of this Part other than this rule)."

19 The pleading of a common money count in that way does not distinguish between contract claims and restitutionary claims. It was open to the defendants in the Local Court to file a notice in accordance with r 14.12(2) requiring full pleading of the facts, but that course was not adopted. As noted, the issue of the nature of the claim was raised at the outset of the hearing, but the defendants' solicitor did not seek an adjournment to cure any perceived prejudice or seek to cross-examine Mr McLean or the deponent of another affidavit in McLean's case. A tactical decision was made to put McLean to proof on the material filed and not to open a defence case.

20 Mr Loofs argued that, on the magistrate's findings, it could be concluded that a contract had been entered into as follows:

an offer, being the request by Mr Tagget to McLean to undertake the work;

an acceptance of that offer, being the undertaking of that work by McLean; and

consideration, being an implied promise by Mr Tagget to pay McLean a reasonable amount.

21 Mr Loofs noted that there was no issue that the work had been requested and undertaken. Factual findings of offer and acceptance accordingly were available. The third element, an implied promise to pay a reasonable amount, was clearly available by implication, applying the well-known test enunciated in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337. He relied on what he described as "the commercial setting in which the parties operated", Mr Tagget operating a business supplying excavators and bulldozers and McLean specialising in repairing machines of that kind. The implication of a term of reasonable remuneration was necessary to give the contract business efficacy.

22 I agree with that analysis. I also accept Mr Loofs' submission that his Honour's finding that Mr Tagget, rather than Mongrel Developments, was the contracting party was available on the evidence and, in any event, was a finding of fact which is not open to challenge in an appeal on a question of law only: cf Castano v Ashglow Pty Ltd [2009] NSWSC 919 at [10]-[12] (Simpson J). I might add that the situation in the present case is very different from that in Lumbers v W Cook Builders (supra), where the respondent company was not even known to the appellants.

23 All that said, I also agree with the observation of Mr Loofs that the real focus of this appeal is whether it was open to his Honour to make the finding that the remuneration sought by McLean was reasonable. That issue arises whether the claim be characterised as contractual or restitutionary. There was no issue that the work done and materials provided were necessary for the repairs requested by Mr Tagget, nor that the repairs were completed satisfactorily. The only issue was the amount claimed.

24 As I have said, the magistrate noted in his reasons that there was no evidence to the contrary, including "no complaint whatsoever about the standard of workmanship nor the amount that was charged ... ." However, as Mr Loofs submitted, the matter does not end there. It is apparent from Mr McLean's affidavit that both he and Mr Tagget were experienced and knowledgeable in this industrial sphere. This can be seen in the conversations about the repairs to the excavator and the bulldozer to which Mr McLean deposed. They were in highly technical terms (utterly beyond the comprehension of counsel or myself), denoting a sound mechanical knowledge on the part of both men.

25 As I have said, Mr McLean's evidence was that a markup on the wholesale price of parts was common practice in the industry. Mr McLean deposed that, when he was chasing up Mr Tagget for payment, Mr Tagget said that some of his prices were "a bit wild" and that he was going to get pricing from another company and discuss the matter with Mr McLean. That did not happen, and there was no complaint by Mr Tagget about the practice of markup generally. The fact that McLean charged $75 per hour for labour in each invoice conveys that that was its normal practice and, again, there was no complaint by Mr Tagget about that.

26 Plainly enough, the reference by Deane J in the passage from Pavey & Matthews v Paul set out at [16] above to "a benefit derived at the expense of a plaintiff" is not confined to what a party seeking restitution might have outlayed in performing the work or supplying the materials the subject of the claim. It is the detriment suffered by that party as a result of having furnished services without payment, in this case the remuneration McLean might reasonably have expected for the repairs undertaken on behalf of Mr Tagget. As Mr Loofs pointed out, what is "reasonable" does not mean the industry average or the cheapest price available. Nor does the determination of what is reasonably necessary require independent expert evidence. It can be established by the practice of a party experienced in a commercial venture such as this, particularly in the absence of complaint by the other party, also experienced in that area, who is the recipient of the services provided.

27 Accordingly, it cannot be said that there was no material upon which it was open to his Honour to have concluded that the amount claimed was reasonable.

28 No error of law has been established. Neither ground of appeal is made out. The appeal must be dismissed. If necessary, I shall hear the parties on costs.

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Decision last updated: 24 September 2014