JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
LOCATION : PERTH
CITATION : SMOOTHY RESOURCE LOGISTICS PTY LTD -v- KIMBERLEY SHAYNE McAULLAY [2016] WADC 27
CORAM : GETHING DCJ
HEARD : 15 - 18 FEBRUARY 2016
DELIVERED : 4 MARCH 2016
FILE NO/S : CIV 1269 of 2015
BETWEEN : SMOOTHY RESOURCE LOGISTICS PTY LTD
Plaintiff
AND
KIMBERLEY SHAYNE McAULLAY
First Defendant
KIVA TRANSPORT PTY LTD
Second Defendant
Catchwords:
Contract - Whether contract was with individual or corporate entity
Legislation:
Nil
Result:
Judgment for the plaintiff against the second defendant
Representation:
Counsel:
Plaintiff : Mr J C Yeldon
First Defendant : Mr L A Warnick
Second Defendant : Mr L A Warnick
Solicitors:
Plaintiff : Pacer Legal
First Defendant : Trinix Lawyers
Second Defendant : Trinix Lawyers
Case(s) referred to in judgment(s):
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95
Great City Pty Ltd v Kemayan Management Services (Australia) Pty Ltd [1999] WASC 70
Marist Brothers Community Incorporated v Shire of Harvey (1994) 14 WAR 69
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21; (2015) 47 WAR 547
1 GETHING DCJ: The plaintiff, Smoothy Resource Logistics Pty Ltd (SRL), was at all material time the owner of four prime mover and side tipper trailer combinations known in the heavy haulage industry as 'quads'. Between August and December 2014 SRL provided the four quads, with drivers, to cart sand between Carnarvon and Onslow. SRL says that it did so pursuant to a contract with the first defendant, Kimberley Shayne McAullay. Mr McAullay says that the contract was with the second defendant, Kiva Transport Pty Ltd (KTPL) as trustee for the Kiva Transport Trust. Mr McAullay is the sole director of KTPL. The sand was provided to a head contractor, Boral Resources (WA) Ltd (Boral), pursuant to a contract between Boral and KTPL. Boral in turn was a contractor on the Wheatstone LNG project being developed by Chevron, near Onslow.
2 SRL and the defendants (Mr McAullay and KTPL) are in agreement that:
(a) SRL provided the quads with drivers and carted the sand pursuant to a contract (Contract);
(b) the Contract was partly written and partly oral;
(c) insofar as the Contract was oral, it comprised conversations between Mr McAullay and Brent Ronald Smoothy, the sole director of SRL;
(d) SRL would be paid per tonne delivered;
(e) the price payable was $46.50 plus GST per tonne delivered; and
(f) fuel and accommodation costs would be deducted from the amount charged by SRL for the cartage.
3 SRL's invoices for August and September 2014 were substantially paid in accordance with the arrangements set out above.
4 SRL says that it carted 22,207.55 tonnes of sand during October, November and December 2014. It submitted invoices for these months in a total amount of $1,135,967.34. The particulars to par 8 of the statement of claim contain an error with the tonnes carried in October being recorded as 8.790 whereas the invoice is for 8,790.8 tonnes (exhibit P35). The correct tonnage for the period October to December 2014 is 22,208.55 tonnes. 22,208.55 tonnes at $46.50 per tonne plus GST equals the invoice total of $1,135,967.34. KTPL submitted invoices to SRL for these months for fuel and accommodation totalling $485,506.70, a figure which SRL does not dispute. SRL has not been paid the net amount owing for the work done in October, November and December 2014 in the amount of $650,460.64, being the amount of the invoices ($1,135,967.34) less the amount for fuel and accommodation ($485,506.70).
5 By writ filed in April 2015 SRL sued Mr McAullay. As a result of various amendments, by the conclusion of the trial Mr McAullay was sued both personally and in his capacity as trustee of the Kiva Transport Trust, and KTPL was a defendant in its capacity as trustee of the Kiva Transport Trust.
6 By the commencement of the trial, the defendants only disputed one load of sand. KTPL asserts that Boral did not pay it for this load as SRL's driver failed to submit all the required paperwork to Boral; as Boral did not pay it, KTPL says that it is not obliged to pay SRL. KTPL also says that an amount of $30,000 was paid by KTPL in reduction of its indebtedness, which needs to be brought to account. In its further re-amended defence filed 19 February 2016, KTPL accepted that it owed SRL $618,644.30, comprising $1,134,151.00 (22,173.04 tonnes x $46.5 x 1.1) less $485,506.70 (fuel and accommodation) less $30,000. I note that the difference between the tonnes claimed by SRL (22,207.75) and those accepted by the defendants (22,173.04) is 34.71 tonnes, whereas it was common ground at the trial that the disputed load was a load of 93.8 tonnes carried on 17 December 2014.
7 At the commencement of the trial, KTPL asserted a counterclaim against SRL. KTPL alleged that the Contract contained a number of obligations specified by Boral as to the manner in which SRL was required to perform its obligations under the Contract. KTPL says that these obligations were breached, with the effect that Boral exercised its discretionary right under its agreement with KTPL to allocate no further work to KTPL. KTPL claimed damages for the lost profit for this work. On the morning of the third day of the trial, counsel for KTPL advised the court he had received instructions to discontinue the counterclaim. After hearing from counsel, I made an order dismissing the counterclaim, reserving the costs.
8 The three remaining issues to be determined are:
• Who did SRL contract with?
• Is SRL entitled to be paid for the disputed load of 93.8 tonnes?
• Should the amount of $30,000 be deducted from the amount claimed by SRL?
9 SRL called two witnesses, Mr Smoothy and Judith Taylor. Ms Taylor is employed by Boral as a compliance manager, though for part of the time in question she also performed the role of authorising billings.
10 The defendants called only Mr McAullay.
11 Counsel for SRL called into question the credibility of Mr McAullay and submitted that in the event of any factual conflict between Mr McAullay's evidence and that of another witness, the evidence of the other witness should be preferred, at least in the absence of corroborating evidence.
12 Counsel for SRL placed great emphasis in cross-examination on the changes made in the defendants' pleadings, in particular those for which they were granted leave on 5 February 2016. Mr McAullay's response was to the effect that he was not happy with the way in which his former lawyers had been conducting the case, and so changed lawyers. I do not consider that the manner in which the defendants conducted their case reflects adversely on the credibility of Mr McAullay as a witness. Importantly, he took steps to ensure that the case ultimately being presented at trial reflected his instructions.
13 However, there are two reasons why I have concerns about the credibility and reliability of Mr McAullay's evidence. The first is that he emphatically denied receiving the invoices from SRL for October, November and December 2014 (ts 392 - 393). However, it is clear from the evidence that these invoices were sent to Mr McAullay under cover of emails dated 5 November 2014 (exhibit P12), 8 December 2014 (exhibit P13) and 8 January 2015 (exhibit P14). The second is that Mr McAullay told Ms Taylor that the drivers being used for the work for Boral were employees of KTPL, when in fact they were employees of SRL. This is evident in the Boral Agreements (exhibit P7). It is also particularly evident in an email exchange with Ms Taylor on 6 November 2014 (exhibit P25). Ms Taylor's evidence was that she had suspicions from other work she was doing in the north-west that the drivers were not employees of KTPL. She asked in the email: 'Can I also confirm once again that all your designated drivers are in fact employees of Kiva Transport'. Mr McAullay responded: 'Yes i can confirm all drivers are Kiva Transport employees' [sic]. Mr McAullay conceded that this position was a lie (ts 351).
14 By contrast, no reliability or credibility issues emerged from the cross-examination of Mr Smoothy. Accordingly, on the few occasions on which there is a factual conflict between the evidence of Mr McAullay and that of Mr Smoothy, I prefer the evidence of Mr Smoothy to that of Mr McAullay.
Who did SRL Contract with?
Overview
15 It is necessary to begin the analysis by considering the legal status of the business name 'Kiva Transport' and of the Kiva Transport Trust, and the public records filed by the defendants.
16 The vast majority of the facts are not contested, so it is convenient to set out the facts in chronological order and deal with the few factual disputes in that context. I find each of the facts set out below established on the balance of probabilities. For the purpose of analysis, the facts need to be divided into those which occurred prior to the formation of the Contract, and those which occurred after. The latest date which it is asserted that the Contract was formed is mid-August 2014, being around the time which SRL carried the first load under the Contract. Having set the context, the issue of who SRL contracted with can be determined, an issue which also requires me to determine when the Contract was entered into. Accordingly, this part of the decision is divided into the following sections:
• Defendant entities
• Facts – prior mid-August 2014
• Facts – post mid-August 2014
• Relevant law
• Determination
Defendants' entities
17 The business name 'Kiva Transport' is registered to Mr McAullay personally, with a start date of 17 October 2006 (exhibit P3).
18 The trust deed for the Kiva Transport Trust is in evidence (exhibit D21). As settled in 2008, the trustee of the Kiva Transport Trust was KTPL. Mr McAullay's evidence, which I accept, is that this continues to be the case.
19 The ABN 14 200 228 421 is that of the trustee for the Kiva Transport Trust, which is described in the 'ABN Lookup' portal as a discretionary trading trust (exhibits P4, P5). There is a reference in a 'Vedacheck' portal printout to 'KIVA TRANSPORT Business' under a heading 'Veda Information' (exhibit P5). The significance of this information is not apparent to me, and I have mentioned it lest it be thought that I did not give it consideration.
20 I find that:
(a) the business name 'Kiva Transport' is registered to Mr McAullay personally;
(b) the trustee of the Kiva Transport Trust is KTPL; and
(c) the ABN 14 200 228 421 is that of the trustee for the Kiva Transport Trust.
Facts – prior to mid-August 2014
21 At some stage in early 2014 Mr Smoothy advertised his four quads for sale. Mr McAullay telephoned Mr Smoothy in response to this advertisement. Their initial conversation was about the characteristics of the quads and the price being offered by Mr Smoothy. There were a couple of other initial telephone conversations along similar lines. In one of the later telephone conversations in this series, Mr McAullay asked Mr Smoothy whether he would be willing to sell the quads on some form of payment plan. Mr Smoothy was open to this idea. Mr McAullay asked Mr Smoothy to send him some photographs of the trucks. Mr Smoothy did so by text messages sent on 18 April 2014. On the bottom of one of the pictures, Mr Smoothy included a comment that the purchase price for each quad was $800,000 plus GST (exhibit D4).
22 Later the same day, Mr McAullay sent the following text message to Mr Smoothy (exhibit D4):
Ripper.
I'll give you a bell Tuesday and work out what we can do also see if we can get a position for ya it's about 6 – 7 months work.
23 Mr Smoothy replied the same day (exhibit D4):
Roger.
Certainly interested in jumpin on board.
And would. Be happy to do deal on those trailers over six months say.
Rent to buy.
24 In a subsequent telephone conversation, Mr McAullay told Mr Smoothy that he was having trouble obtaining finance to buy the quads. Mr Smoothy told Mr McAullay that his 'finance guy' may be able to help. On 22 April 2014, by text message at 4.00 pm, Mr Smoothy sent Mr McAullay the contact details of his 'finance guy'.
25 Mr McAullay spoke to his accountant about how he might acquire the quads on some form of payment plan. His accountant prepared a document entitled 'Memorandum of Understanding'. By email dated 28 April 2014, Mr McAullay sent Mr Smoothy the Memorandum of Understanding (exhibit D3). On the first page of the Memorandum of Understanding, the parties are identified as 'Kiva Transport Pty Ltd (ACN 129 378 909) ATF Kiva Transport Trust of Level 2, Unit 53 15 Labouchere Road SOUTH PERTH (Kiva Transport)' and 'Smoothy Resources Logistics Pty Ltd (ACN 159 206 078)'. Although there was no evidence specifically led on this point, the inference is clearly open, and I find, that at some stage prior to 18 April 2014 Mr Smoothy had informed Mr McAullay that the vendor of the trucks was SRL.
26 Mr Smoothy only read far enough into the Memorandum of Understanding to find out the proposed price, which was $800,000 inclusive of GST for each truck (as opposed to the purchase price which he proposed of $800,000 plus GST). He considered that the proposed agreement was unacceptable and disregarded it.
27 On 2 May 2014 at 7.13 pm Mr McAullay sent Mr Smoothy another text message (exhibits P6, D4, D9):
Hi smoothly I've your interested we may have a job u can put all your quads on carting sand between Carnarvon and Onslow if ya can put a price as we have to submit by tomorrow [sic].
28 On 2 May 2013 at 7.21 pm Mr Smoothy sent a text message to Mr McAullay: '$46.50 plus gst' (exhibits P6, D4, D9).
29 There is then a divergence in the evidence.
30 Mr Smoothy's evidence is that in between the text message in [27] and the text message in [28] he had a telephone conversation with Mr McAullay. During the conversation, Mr Smoothy asked a number of questions of Mr McAullay in order to find out information to allow him to provide a price on carting sand between Carnarvon and Onslow. The topics discussed included where the drivers would stay, the cost of the accommodation and what would happen in relation to fuel. In relation to accommodation, Mr Smoothy says Mr McAullay told him that there was accommodation available at a work camp owned by 'WA Limestone'. Accommodation would be payable at the rate of $235 per night. In relation to fuel, Mr McAullay told him that fuel would be deducted from the invoice at the end of the month. Mr McAullay was reluctant to say who the contract was for but did say it was in relation to the Wheatstone project. Mr McAullay also said that the invoices would be paid within 30 days of the end of the month. There was also a discussion as to how long the job would take. Mr McAullay advised Mr Smoothy that it would take a couple of months and, if things were going well, that they may pick up more work.
31 Mr McAullay did not give evidence of this telephone conversation. He did say that around this time he told Mr Smoothy that the contractor for the Carnarvon – Onslow work was WA Limestone.
32 For the reasons set out above, I prefer Mr Smoothy's evidence, and find in accordance with it. Further, Mr Smoothy's evidence is inherently plausible as he would need to know the information which he says was discussed in order to calculate the price at which he would be prepared to cart the sand. In particular, I find Mr McAullay did not disclose to Mr Smoothy the identity of the contractor (though he did disclose that it was for the Wheatstone project).
33 Mr McAullay responded to Mr Smoothy by text message at 8.21 pm the same day: 'Cheers smoothly I'll let ya know how we go' (exhibits P6, D4 and D9).
34 Mr McAullay gave evidence that the contractor for this work was WA Limestone Pty Ltd. He says that he submitted a quotation for work for WA Limestone to cart sand between Carnarvon and Onslow based on the price given by Mr Smoothy but did not receive a contract for this work from WA Limestone. WA Limestone did, however, offer Mr McAullay some other work. In response, on 3 May 2014 at 2.01 pm, Mr McAullay sent the following text message to Mr Smoothy (exhibits P6, D4 and D9):
35 It is common ground between Mr Smoothy and Mr McAullay that this text related to work carting aggregate from the Mount Minnie quarry (which is closer to Onslow) to the Wheatstone project (ts 210, 294, 318 - 319). This work involved four or five loads per day, hence the price of $10 per tonne. During a telephone conversation around this time, Mr McAullay told Mr Smoothy that there may be short jobs which he could provide to hold Mr Smoothy over pending the larger job of carting sand between Carnarvon and Onslow.
36 On 4 May 2014 at 12.42 pm Mr McAullay sent Mr Smoothy another text (exhibits P6, D4 and D9):
All good to get going also need the dimension for ya truck and trailers to get sticker magnets the camp and pit is about 3 km in from the Onslow turn off [sic].
37 It is again common ground that this related to the work carting aggregate from the Mount Minnie quarry.
38 Around this time there was a telephone discussion between Mr McAullay and Mr Smoothy in which Mr McAullay advised Mr Smoothy that the job was 'good to go' (ts 211). There was a discussion about the logistics including who the drivers were to report to and the yard in which they would be parked. Mr Smoothy then sent one of his quads and a driver to Onslow to undertake the work being discussed.
39 There were a few further texts between Mr Smoothy and Mr McAullay between 8 May 2014 and 10 May 2014 that do not appear to be of any consequence to the issues in dispute (exhibit D4).
40 On 9 May 2014, Mr McAullay sent an email to Mr Smoothy inquiring whether Mr Smoothy could undertake work carting 20 mm stone from the Holcim Quarry to the Roy Hill mine site (exhibit D10).
41 There is then a series of text messages between Mr Smoothy and Mr McAullay on 10 May 2014 relating to work for 'Hansons' (exhibit D11).
42 On 13 May 2014 at 4.51 pm, Mr McAullay sent Mr Smoothy a text message stating: 'We can take a 2nd quad at Onslow' (exhibit D11). At some stage it appears that Mr Smoothy sent a second quad to Onslow.
43 On 14 May 2014 at 4.23 pm, Mr McAullay sent Mr Smoothy a text stating: 'We've picked up a couple months on the sand also give me a bell when ya free' (exhibit D11).
44 On 19 May 2014, Omar El Komy, a Boral employee with the title 'Project Supervisor Wheatstone', sent Mr McAullay an email enclosing the paperwork which Mr McAullay needed to complete in order to 'set Kiva up in the Boral system' (exhibit D12). Earlier in the email train behind this email there is an internal Boral email which contains a comment that Mr El Komy would like to set up Kiva Transport as a Boral vendor to cart sand from Gascoyne (Carnarvon) to Wheatstone in order to keep up with the then current demand for sand.
45 SRL sent an invoice to KTPL dated 31 May 2014 recording work done described as '20 mm Hanson' comprising 14 loads between 12 and 22 May 2014 (exhibit P35). The amount of the invoice is $16,615.17 (including GST). Although there is no specific evidence that this invoice was sent by SRL, it and all the SRL invoices comprising exhibit P35 appear in the summary of accounts between SRL and the defendants prepared by counsel for SRL, which forms the basis of the schedule in the annexure to these reasons. Given this reliance, I am satisfied that it is appropriate to infer, and so find, that the invoices comprising exhibit P35 were sent on or shortly after the dates appearing on their face.
46 SRL sent KTPL a second invoice dated 31 May 2014 for seven loads between 12 and 23 May 2014 described as 'Sand Turner River Hanson' (exhibit P35). This invoice was for $37,260.43 (including GST). There was a third invoice dated 31 May 2015, also addressed to KTPL, for one load, on a date not specified, described as 'Blair Hindmarsh Tonns Onslow quarry Month of May' (exhibit P35). This invoice was for $61,882.37 (including GST).
47 By email dated 24 June 2014, Mr McAullay was sent a copy of the registration papers for SRL's four quads (exhibit D14). The email was sent from an email address of 'Rachel Burn' copied to 'Brent Smoothy'. Ms Burn is Mr Smoothy's wife.
48 SRL sent KTPL two invoices dated 30 June 2014 (exhibit P35):
• $55,129.14 (including GST) for 'Blair Hindmarsh June'.
• $47,532.65 (including GST) for 'Mike Kingi June' (Mr Kingi being a driver contracted by SRL).
49 On 19 July 2014 Gavin Main, a Boral employee with the title 'Site Superintendent', sent Mr McAullay an email, among other things, asking Mr McAullay to 'confirm the rate of $54.00 per tonne for cartage of sand from Gascoyne River, Carnarvon, to Wheatstone' (exhibit D16). Mr McAullay replied by email confirming the rate and stating that he had '4 quads available at present on site but can assign more if the work is ongoing' (exhibit D17). In cross-examination, Mr McAullay stated that these were not all SRL's quads and that he had other contractors (ts 383). Mr Main sent Mr McAullay an email dated 21 July 2014 inquiring after a number of outstanding requirements which he had to provide in order to be set up as a contractor which Boral could engage (exhibit D18). It is evident from the email chain behind this email that as early as 11 June 2014 the internal Boral processes were in train for 'Kiva' to be able to do work directly for Boral.
50 Ms Taylor gave evidence that KTPL was engaged to assist the primary contractor on the Wheatstone project, a company by the name of MH Carr Contracting Pty Ltd. MH Carr had some 45 nominated drivers to the knowledge of Ms Taylor. Boral's work for the Wheatstone project initially contemplated that the sand and aggregate would be able to be sourced from a location close to Onslow. However, the appropriate type of sand could not be sourced close to Onslow and had to be obtained from Carnarvon. MH Carr was not able to keep up with the requisite volume of sand required, hence an additional contractor had to be engaged. This contractor was KTPL.
51 Ms Taylor, in her evidence, described Boral's practice of ensuring that a contractor's vehicles and drivers were compliant with the relevant regulatory and insurance requirements and then engaging the contractor on a general contract. The contractor would then be available to be used by the various business units of Boral. Prior to doing so, Boral required a significant amount of information in order to satisfy itself that the trucks and drivers to be provided by KTPL were compliant with the relevant regulatory and insurance requirements (e.g. WA Worksafe and Main Roads Department).
52 On 29 July 2014 Ms Taylor sent a detailed email to Mr McAullay itemising a large number of outstanding pieces of information which Mr McAullay needed to provide prior to Boral entering into a contract (exhibit P16).
53 Part of the information provided by Mr McAullay to Boral were extra mass permits from the Main Roads Department (exhibit P15). In these documents, the owner of SRL's four quads is stated to be 'Kiva Transport Pty Ltd'. Mr McAullay explained that this occurred as the drop down box on the online application system only provided for the owner, and not for a hirer (ts 366).
54 SRL sent KTPL an invoice dated 31 July 2014 in the amount of $49,391.98 (including GST) for bulk haulage comprising amounts for 'Truck ID 219', 'Truck ID 223' and 'Truck ID 233' (exhibit P35).
55 On 8 August 2014, Mr McAullay sent a text to Mr Smoothy stating (exhibit D13):
56 Mr Smoothy's response at 6.06 am was: 'Yep how did audit go' (exhibit D13). From this text it is apparent that Mr Smoothy knew that KTPL/Kiva Transport was being audited by Boral as a precursor to being able to do work for Boral (ts 334 – 335).
57 Mr McAullay's reply was: 'Passed so see what they offer today' (exhibit D13).
58 Boral and KTPL entered into two agreements, each with a start date of 11 August 2014 (exhibit P7) (which I will refer to as the Boral Agreements). The first is entitled 'Contractor Agreement'. It identifies the nominated prime movers and trailers, and nominated drivers, to be provided by KTPL. It identifies five nominated drivers, four of whom are individuals contracted to SRL and provided by it under the Contract. The Contractor Agreement also identifies SRL's four quads, and states they are under dry hire from SRL (though the trailers are stated to be under dry hire from Rachlan Holdings Pty Ltd, another company associated with Mr Smoothy). The second is entitled 'Cartage Agreement'. It contains conditions about the trucks and drivers to be provided by KTPL. Neither of the Boral Agreements contain an obligation or commitment to provide a certain amount of work to KTPL.
59 Ms Taylor drafted the Boral Agreements. She was advised by Mr McAullay that the trucks were to be provided by SRL on a 'dry hire' basis, a position reflected in the Contractor Agreement. By a dry hire, she meant that KTPL would be hiring the equipment only and not the driver. Ms Taylor was also advised by Mr McAullay that the listed nominated drivers set out in the Boral Agreements were all employees or subcontractors of KTPL. This was an important fact for her because if the drivers were being provided on a contract basis by another entity, then Boral would have required that contractor to have provided compliance information, including as to worker's compensation insurance and public liability insurance.
60 Between 11 and 18 August Mr McAullay and Mr Smoothy had a telephone conversation. By that time three of SRL's quads were in Onslow. Although there are some differences in emphasis between the recollection of Mr Smoothy (ts 213) and that of Mr McAullay (ts 337), the substance of their recollections is consistent. However, as set out above, I prefer Mr Smoothy's version. I find the following facts. Mr Smoothy said that he was sick of the ad hoc jobs and that it was not viable to continue doing small jobs. He threatened to pull the trucks and drivers from the site. Mr McAullay, says Mr Smoothy, begged him to stay and said that there was about to be a new job. Mr Smoothy said that during the period May to August there had been issues with late payments, and that Mr McAullay had provided a number of excuses as to why these payments were late. Mr McAullay said that he now had a contract with the Wheatstone project for Boral. Mr Smoothy said that he wanted a copy of the contract with Boral. Mr McAullay agreed to provide him with a copy.
61 By email dated 18 August 2014, Mr McAullay provided a copy of the Boral Agreements to Mr Smoothy (exhibit P7).
62 Mr Smoothy said that he checked the Boral Agreements to confirm that they were with Boral and the payment terms, and not much more. Mr Smoothy thought that Boral would be good payers and that the Wheatstone project was a large project.
63 When asked by his counsel as to what he would have done had Mr McAullay not told him about the involvement of Boral, Mr Smoothy said that he would have brought the trucks back to his base at Newman, and would have found them another job (ts 214).
64 Mr Smoothy said that SRL had never done any work directly for Boral but that it had done work for some of the major iron ore companies.
65 Mr Smoothy's involvement with the trucks and drivers was to receive the timesheets and the dockets from the drivers, which they sent through by post, and then to arrange to pay the drivers and to invoice KTPL. He described this as being his regular arrangement.
66 The final key fact which needs to be determined for this period is when SRL carted the first load of sand from Carnarvon (Gascoyne) to Onslow (Wheatstone) under the Boral Agreements. There are two relevant documents. The first is a document entitled 'Recipient Created Tax Invoice' (RCTI) (exhibit P18). This document is created by Boral. On its face, it records four loads being carted from Carnarvon to Onslow on 13 August 2014. Ms Taylor's evidence was that the RCTI indicates that the first load was carted from Carnarvon to Onslow for Boral on 13 August 2014 (ts 242). This is two days after the commencement of the Boral Agreements.
67 Mr McAullay's evidence is that the first load was carted on 18 August 2014 (ts 337). The defendants rely on a summary listing provided by the Carnarvon quarry owner, Tremor – The Earth's Moving Company Pty Ltd (Tremor) (exhibit P31). This document records the first load carried in August 2014 as being a load carried by truck 1EIQ685 (being one of SRL's quads) as being carried on 18 August 2014. There is also in evidence a 'Driver's Daily Worksheet' for Mike Kingi (one of SRL's drivers) for this load (exhibit D19).
68 There is thus a conflict between Boral's RCTI and Tremor's records. I prefer Tremor's records for two reasons. First, their record is more specific, identifying the registration number of one of SRL's quads. Second, the RCTI records that four loads were carried on 13 August 2014. This does not seem consistent with the remainder of the evidence. Each load requires a 10-hour round trip, so only one trip could have been done in a day (ts 108). The Tremor records indicate that the other three of SRL's quads did not carry their first loads after 1 August 2014 until 25 August (1EIQ686), 7 September (1EIQ687) and 4 September (1EIQ688).
69 I therefore find that the first load that SRL carried for Boral from Carnarvon was carried on 18 August 2014.
Facts – post mid-August 2014
70 The salient facts after mid-August 2014 can be broken into three groups: the invoices issued by SRL; the invoices issued by KTPL; and the payments received by SRL.
71 The following invoices were issued after mid-August 2014 (the invoices marked '*' are the ones the subject of the present action):
72 There are duplicates of the 31 October 2014 (exhibit P9), the 30 November 2014 (exhibit P10) and the 31 December 2014 (exhibit P11) invoices, in identical amounts, save that the billing party is identified as 'Kiva Transport' not 'Kiva Transport Pty Ltd'. There is also in evidence a series of emails from Ms Burns to Mr McAullay attaching invoices dated 10 November 2014 (exhibits P12), 8 December 2014 (exhibit P13) and 8 January 2014 (exhibit P14). These are the invoices addressed to 'Kiva Transport Pty Ltd'.
73 Mr Smoothy does not really explain why most of the invoices were prepared in the name of 'Kiva Transport Pty Ltd' when SRL claims that the Contract was with 'Kiva Transport'. There is a suggestion that perhaps Ms Burns clicked on the wrong drop down box on their accounting software when creating the invoices (ts 220, 222). I find this explanation wholly unconvincing for four reasons. First, if SRL's position is correct, there would not have been a need to have had 'Kiva Transport Pty Ltd' in its accounting software system. Second, the 'error' was repeated on most of the invoices (see also [45], [46], [48], [54]). Third, in examination-in-chief Mr Smoothy confirmed that all the invoices contained in exhibit P35 were sent to 'Kiva Transport Pty Ltd' without reference to the error (ts 284). Finally, Mr Smoothy's evidence was that the invoices were prepared by Ms Burns and that he is 'not allowed near the computer' (ts 221). Any evidence he is able to give about an error that Ms Burns may have made appears to be hearsay; SRL could have called Ms Burns to give evidence, but chose not to do so. SRL has not satisfied me that the reference to 'Kiva Transport Pty Ltd' on the invoices was an error.
74 Nor does Mr Smoothy explain why duplicate invoices were issued. Further, there is no specific evidence that the duplicate invoices addressed to 'Kiva Transport' were ever sent out, whereas there is specific contemporaneous evidence that the invoices addressed to 'Kiva Transport Pty Ltd' were sent out (see [72]).
75 Mr Smoothy said that he recalled receiving a bundle of invoices from Kiva Transport over the period 30 October 2014 to 31 January 2015 relating to fuel and accommodation provided by Kiva Transport. He did not dispute any of these invoices.
76 During the period 31 August 2014 to 25 January 2015, 'Kiva Transport' issued the following invoices:
77 In each case, the entity named on the invoice is 'Kiva Transport'. The ABN is '14 200 228 421', being that of the Kiva Transport Trust. The bank account nominated for payment is Bank of Queensland account BSB 124-001, account 2535636. Mr McAullay's evidence is that this is the bank account for KTPL (ts 353).
78 Mr McAullay explained the reference to 'Kiva Transport' on the invoices as being a typographical or template error (ts 353).
79 Aligned to the invoices, on 19 September 2014, Eva McAullay (whom I understand to be Mr McAullay's wife) sent Ms Burns an account statement (exhibit D6). It is in the name of 'Kiva Transport Pty Ltd'.
80 As to the payments, between 1 August 2014 and 6 March 2015, SRL received the amount of $483,282.30 (inclusive of the amount of $30,000 paid in March 2015). No amounts were received by SRL prior to this date. Mr McAullay's evidence was that each of these amounts was paid from a bank account of KTPL (ts 341). Counsel for SRL attempted to undermine this evidence in cross-examination but did not elicit any concessions. The relevant bank accounts of KTPL are not in evidence. If SRL had a genuine concern that the bank accounts from which SRL received money were not bank accounts of KTPL, it could have sought discovery of the bank account statements so that the issue could have been determined conclusively by reference to those account statements. In the absence of contrary documentary evidence, I accept Mr McAullay's evidence. Accordingly, I find that all the amounts received by SRL were paid by KTPL.
81 Throughout this entire time period Mr Smoothy and Mr McAullay did not meet face to face. In fact, they did not do so until the mediation in this action in October 2015.
Relevant law
82 The onus is on SRL to establish that a contract was made between it and either Mr McAullay (the primary contention) or KTPL (the alternate contention) in the terms alleged: Great City Pty Ltd v Kemayan Management Services (Australia) Pty Ltd [1999] WASC 70 [4] (White J). SRL's pleaded case is that the Contract was made in May 2014 with Mr McAullay personally (or as trustee for the Kiva Transport Trust). Its alternate case is that the Contract was made in May 2014 with KTPL as trustee for the Kiva Transport Trust. KTPL's case is that the Contract was made between June and August 2014 with KTPL. The pleadings set the outer boundaries of the facts in issue in the case. As will become apparent, I have concluded that the Contract was made with KTPL (SRL's alternate contention), on the terms alleged by SRL, but made within the date range alleged by the defendants. I am satisfied that this conclusion is well within the issues for decision delineated by the pleadings: EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 [124] (Buss JA, Owen & Newnes JJA). When I raised with counsel the potential for an outcome which straddled both pleaded cases, counsel agreed that this was within the scope of the pleadings.
83 As Buss JA stated recently in Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21; (2015) 47 WAR 547, '[t]here is no doubt that in Australia the objective theory of contract underpins the law relating to the formation, construction and interpretation of contracts' [97] (McLure P & Newnes JA agreeing). Buss JA referred to the following quote from the decision of the plurality in Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 [25] (Gaudron, McHugh, Hayne & Callinan JJ):
Because the search for the 'intention to create contractual relations' requires an objective assessment of the state of affairs between the parties (Masters v Cameron (1954) 91 CLR 353 at 362, per Dixon CJ, McTiernan and Kitto JJ; ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548 - 549, per Gleeson CJ) (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word 'intention' is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 348 - 353, per Mason J; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436; 186 ALR 289). It is not a search for the uncommunicated subjective motives or intentions of the parties [25].
84 His Honour then observed [99] – [102]:
So, whether a completed and binding agreement has been made is to be assessed objectively, and the search for an intention to create contractual relations is not a search for the uncommunicated subjective motives or intentions of the parties. In other words, '[i]t is not the subjective thing known as meeting of the minds, but the objective thing, manifestation of mutual assent, which is essential to the making of a contract': Williston on Contracts, 3rd ed, vol 1, par 21. Those propositions accord with the 'general test of objectivity [that] is of pervasive influence in the law of contract': Commonwealth Games (549), cited with approval in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [34] (Gleeson CJ, McHugh, Kirby, Hayne & Callinan JJ).
In Ermogenous, Gaudron, McHugh, Hayne and Callinan JJ stated in effect that the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances may be taken into account in determining whether a completed and binding agreement has been made [24] - [25]. See also South Australia v The Commonwealth [1962] HCA 10; (1962) 108 CLR 130, 154 (Windeyer J); Placer Development Ltd v The Commonwealth [1969] HCA 29; (1969) 121 CLR 353, 367 (Windeyer J).
The surrounding circumstances, for this purpose, include the dealings and communications between the parties over a period of time and the commercial circumstances, known to the parties, surrounding those dealings and communications. See Commonwealth Games (550); Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528, 531 - 532 (Stephen, Mason & Murphy JJ); Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251, 9255 (McLelland J)
…
It is well-established that a court may take into account the dealings and communications between the parties after, as well as before, the formation of an alleged concluded and binding agreement, for the purpose of determining, objectively, whether they intended to form such an agreement. See Commonwealth Games (547 - 548, 550); Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551 [14,562] - [14,563] (Kirby P); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 [25] (Heydon JA).
85 Counsel for the defendants submitted that these principles are equally applicable to the issue of whether party A contracted with party B or party C. Counsel for SRL did not suggest otherwise. I agree with the submission.
86 An earlier Full Court decision adds an important dimension to the analysis, being the decision in Marist Brothers Community Incorporated v Shire of Harvey (1994) 14 WAR 69. In that case there was an exchange of correspondence between the parties between March and December 1987 concerning the sale of land by the appellant to the respondent. The land was initially to be used as a retirement village. During the course of the correspondence the respondent changed its intention to one of using the land for a purpose that would benefit the members of the community. The respondent sought and obtained specific performance of an agreement to sell the land. The Full Court upheld the finding.
87 The issue for the Full Court was whether there could be a concluded contract in circumstances where it was difficult to identify an offer and an acceptance with absolute precision. The members of the Full Court held that this was not required (Pidgeon J (75), Rowland J (86), Seaman J (90)). Rather, at least in a case where there has been an exchange of correspondence, it is permissible to infer a contract from the acts and conduct of the parties. On the facts, the court found that the whole of the correspondence revealed an intention to create a contract upon terms which were able to be sufficiently identified.
88 The principles relevant for present purposes may be summarised in the following terms:
(a) the issue of who SRL contracted with is to be determined objectively;
(b) this requires an assessment of what would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened;
(c) the surrounding circumstances include the dealings and communications between the parties over a period of time and the commercial circumstances, known to the parties, surrounding those dealings and communications; and
(d) the dealings and communications between the parties after the formation of the alleged concluded and binding agreement may be taken into account in determining, objectively, who the contract was between; and
(e) it is not necessary to identify an offer and acceptance with absolute precision.
Determination
89 The two plausible choices for the party with whom SRL contracted are KTPL as trustee for the Kiva Transport Trust and Mr McAullay personally as the proprietor of the business name 'Kiva Transport'.
90 The starting point in the negotiations for the Contract was the text exchange and conversation on 2 May 2014. The text from Mr Smoothy, '$46.50 plus gst', is best characterised as an offer or quote of the price at which SRL would be prepared to cart sand from Carnarvon to Onslow. The preceding text indicates that Mr McAullay was seeking the quote to submit to another party. Mr McAullay's response - 'Cheers smoothly I'll let ya know how we go' - cannot be characterised as an acceptance; the language is conditional. The language is consistent with the evidence that Mr McAullay wanted the quote for submission for a contract to a contractor I have found he did not name to Mr Smoothy (though in fact it was WA Limestone).
91 It is common ground that the 3 May 2014 texts relate to another job carting aggregate from the Mount Minnie quarry to the Wheatstone project (see [34] – [35] above).
92 The work undertaken by SRL at the direction of Mr McAullay in May, June and July 2014 followed a pattern of Mr McAullay and Mr Smoothy discussing the work and agreeing a rate. The work was done on terms that are not in issue, namely that fuel and accommodation charges would be deducted from the invoice for the work done by SRL.
93 It is significant that the six invoices sent by SRL for the work done prior to August 2014 were each sent to 'Kiva Transport Pty Ltd' (see [45], [46], [48], [54]). As I have found [73], I am not persuaded that this was an error.
94 During this time, it is clear that Boral knew that it was contracting with KTPL. However, this information cannot be taken into account in determining what an objective observer would conclude from the interactions between Mr Smoothy and Mr McAullay as these circumstances were not known to Mr Smoothy (at least until he received a copy of the Boral Agreements).
95 In my view, an objective observer would have concluded from the interactions between the parties that the contracting parties were SRL and KTPL. The objective observer would have placed great weight on the fact that SRL invoiced KTPL. Although the 'Kiva Transport' invoices are somewhat equivocal, there are two important pointers to the contracting party being KTPL. First, the ABN is that of the Kiva Transport Trust, whose trustee is KTPL. Second, the bank account details are those of KTPL.
96 In my view, the key marker as to when the Contract came into existence was when one of SRL's quads was directed by an officer or agent of KTPL to go to Carnarvon to collect a load of sand for Boral. By making this direction, KTPL must be taken to have accepted SRL's offer of $46.50 (plus GST) for this work, and on the terms otherwise agreed in the pattern of contracts prior to this date. Put slightly differently, at this point, KTPL accepted a contractual obligation to pay SRL for the cartage of the sand at the rate of $46.50 per tonne (plus GST) less accommodation and fuel charges.
97 As set out above ([66] – [69]), the first load was carted on 18 August 2014.
98 On balance, the conduct of the parties after 18 August 2014 also supports the conclusion that the contract was with KTPL. The invoices submitted by 'Kiva Transport' remain equivocal, with the same two pointers towards the contracting party being KTPL as trustee for the Kiva Transport Trust (being the ABN and the bank account details). The account statement sent on 17 October 2014 clearly records 'Kiva Transport Pty Ltd' as the contracting party (exhibit D7). The invoices submitted by SRL are a mix of 'Kiva Transport' and 'Kiva Transport Pty Ltd', though, as I have noted, Mr Smoothy did not explain why duplicate invoices were issued for October, November and December 2014. Significantly, all money received by SRL was paid by KTPL.
99 The fact that the Boral Agreements are with KTPL is relevant for two reasons. Firstly, upon its receipt by Mr Smoothy, it is information which an objective observer could take into account, and which indicates that the contracting party was KTPL; it does not make sense for KTPL to contract with Boral and then for Mr McAullay personally to subcontract with SRL. Second, if Mr Smoothy was genuinely under the mistaken belief that SRL was contracting with Mr McAullay personally, the receipt of the Boral Agreements would have prompted an immediate communication by Mr Smoothy to Mr McAullay raising the issue. There is no evidence that this occurred.
100 Accordingly, I find that the Contract was between SRL and KTPL as trustee for the Kiva Transport Trust.
Is SRL entitled to be paid for the disputed load of 93.8 tonnes?
101 There is no dispute on the evidence before me that on 17 December 2014 Mike Kingi (one of SRL's employees), carted a 93.8 tonne load of sand in one of SRL's quads from the Tremor quarry in Carnarvon to the Wheatstone site at the request of Boral (see exhibits P28, P29, P30, P31 and P32) (Disputed Load).
102 Mr McAullay's evidence is that KTPL has not been paid for the Disputed Load because the driver did not provide Boral with a Driver's Daily Worksheet (ts 347). Ms Taylor's evidence was that Boral's usual practice was to require KTPL to produce three documents before being paid, being the Tremor loading docket, the Boral receipt docket and the Driver's Daily Worksheets. She did say that on occasion Boral paid KTPL without the Driver's Daily Worksheet.
103 SRL did not lead any evidence to the effect that the driver for the Disputed Load did in fact submit a Driver's Daily Worksheet. Nor did SRL lead any evidence to the effect that Boral paid KTPL for the Disputed Load.
104 I accept Mr McAullay's evidence, which is consistent with that of Ms Taylor. I find that the driver did not submit a Driver's Daily Worksheet for the Disputed Load and that Boral did not pay KTPL for the Disputed Load.
105 KTPL then asserts that it was entitled to withhold payment for the Disputed Load from SRL. It makes this assertion on the basis that the Contract incorporated the Boral Contractor Agreement 2014 (being one of the documents I have previously defined as the Boral Agreements). Specifically, by this mechanism, the Contract is said to contain two relevant terms:
(a) KTPL was to pay SRL 'a rate per tonne carted of sand' (Cartage fees) to be agreed between KTPL and SRL, subject to delivery by SRL of Tremor loading dockets, Boral receipt dockets, Driver's Daily Worksheets and driver fatigue sheets (Defence and counterclaim [2], particulars paragraph (b)); and
(b) SRL would perform its obligations 'in accordance with any written direction, procedure or specifications provided by [KTPL] and Boral to [SRL]', (Defence and counterclaim [2], particulars paragraph (d)(iv)).
(Payment Terms).
106 As with the issue of formation, the general rule is that the actual terms of a contract are those that the parties objectively intend to include in it (see generally: Seddon N, Bigwood R & Ellinghaus M, Cheshire & Fifoot Law of Contract in Australia (LexisNexisButterworths 2012, 10th Aust ed [10.17]). In the words of the High Court: 'What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe': Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ).
107 There are two reasons why I do not consider that the Payment Terms were incorporated into the Contract. The first is that the Contract was entered into prior to the transmission of the Boral Agreements to Mr Smoothy. The email sending the Boral Agreements to Mr Smoothy was not sent until 11.34 am. In order for the truck to have made the 10-hour round trip from Onslow to Carnarvon and back (ts 208), it seems reasonable, and open for me, to infer that the driver would have had to have left before 11.34 am. This conclusion is confirmed by Mr Kingi's Driver's Daily Worksheet which records him starting the trip at 4.30 am (exhibit D19). I am satisfied on the balance of probabilities that the conduct which I have identified as being the marker of when the Contract was entered into (the decision of an officer or agent of KTPL to dispatch one of SRL's quads to Carnarvon) occurred prior to 11.34 am on 18 August 2014. It follows that the Contract was entered into prior to Mr Smoothy's receipt of the Boral Agreements.
108 The second is that, in the event that I am wrong in the finding in the preceding paragraph, I am still not satisfied that the terms of the Boral Agreements, in particular the Payment Terms, form part of the Contract. This is because there is nothing in the conversation between Mr Smoothy and Mr McAullay which preceded the sending of the email, nor in the text of the email (exhibit P7) which would suggest to an objective observer that the Boral Agreements were sent to Mr Smoothy with the intention that they were intended to form part of the terms of the Contract (see [60] above). It is clear from the conversation preceding the email that the Boral Agreements were sent to Mr Smoothy for the purpose of satisfying him that KTPL had a contract with Boral pursuant to which SRL in turn could expect to get paid.
109 Accordingly, I am of the view that the Payment Terms were not incorporated into the Contract, and that, accordingly, there is no contractual basis for KPTL to withhold payment for the Disputed Load.
Is KTPL entitled to deduct the $30,000 payment from the amount owed?
110 KTPL asserts that the amount of $30,000 paid by KTPL to SRL on 6 March 2015 is to be deducted from the amount claimed by SRL.
111 SRL says that its total indebtedness to the defendants was in excess of the amount claimed, $650,460.64, plus $30,000, with the effect that the $30,000 paid was on the account of other amounts due, and not the debts the subject of this action.
112 It is clear on the evidence that an amount of $30,000 was paid by KTPL to SRL on 6 March 2015.
113 Counsel for SRL produced a schedule setting out a running total of the amounts owing by KPTL to SRL. The schedule sets out all the invoices rendered by SRL to the defendants and all the invoices rendered by the defendants to SRL for the period 31 May 2014 to 31 January 2015. In the course of his closing, counsel for the defendants handed up an amended schedule with three invoices from KTPL to SRL which were not in evidence. He sought leave to re-open the case to tender the invoices as business records of KTPL. For the reasons I articulated at the time, I declined to allow the invoices to be tendered (ts 457 - 458).
114 I have edited the schedule produced by counsel for SRL to accord with my understanding of the evidence, and have annexed the schedule to these reasons. The schedule summarises the invoices in evidence before the court. On the evidence before me, on 31 January 2015, the defendants owed SRL the sum of $687,004.89. Given my conclusion that SRL contracted with KTPL, it is KTPL who owed this amount. Once the $30,000 has been deducted from this amount, it still exceeds the amount of the October, November and December invoices claimed by KTPL. Accordingly, I am not satisfied that the $30,000 paid in March 2015 should be deducted from the amount owed by KTPL to SRL as claimed in the October, November and December invoices. I note that SRL has not claimed the balance of the running account between it and KTPL, nor could it on the case pleaded.
What final orders are appropriate?
115 SRL is entitled to judgment against KTPL in the amount of $650,460.64. It is also entitled to interest on this amount pursuant to Supreme Court Act 1935 (WA), s 32.
116 SRL's claim against Mr McAullay should be dismissed.
117 I will hear from counsel as to costs.
Annexure
