Case: Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568 ; (2004) 62 IPR 274
Outcome: related
On 7 May 2004 I delivered reasons for judgment which dealt with all outstanding claims by the Council against Goldspar and Douglas Rawson-Harris (Rawson-Harris), the second respondent ( Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568 , (2004) 62 IPR 274). That decision led to orders being made on 18 June 2004. 4 This hearing relates to a cross-claim by Goldspar against the Council arising out of the termination of the contract. These reasons for judgment are to be read with the previous reasons for judgment and assume knowledge of those reasons and the orders that have been made. This, in effect, is a continuation of the previous hearings. The previous history of the proceeding is a necessary backdrop to this segment of the matter. However, a body of evidence has been led that relates to the cross-claim alone and involves a different focus from that in the previous hearings. The evidence needs to be evaluated with that in mind. 5 The contract documents were identified by an expert determination agreed to by the parties (Expert Determination). I rejected a claim by the Council for rectification of the contract. It will be necessary to go to the contractual documents in some detail, but, in order to sketch the issues in the case, it suffices to say that the contract provided the framework within which Goldspar would provide poles and accessories to the Council over a period of years. Part of the backdrop was an intention to beautify some of Sydney's streets prior to the Olympic Games to be held in the latter half of 2000. In respect of each of the three years ended 30 June 1999, 30 June 2000 and 30 June 2001, the contract provided that the Council would take and Goldspar would supply a minimum of 300 poles and accessories. The contract was formally entered into on 29 May 1998, although the manufacture of poles had commenced earlier. A number of poles were supplied in the year ended 30 June 1999, although there is a dispute as to whether the number fell short of 300. No poles were ever supplied in relation to the year ended 30 June 2000. On 10 March 2000 the Council forwarded a notice of termination of contract to Goldspar. By notice of 22 March 2000 Goldspar, in turn, gave notice of termination of contract to the Council, relying upon the Council's alleged wrongful repudiation of the contract by virtue of the purported termination by it. On any view, the contract had by then come to an end. Goldspar's cross-claim to be determined is for damages for repudiation of the contract by the Council and for certain associated claims. The Council contends that its termination was effective and not a repudiation of contract. It asserts that, even if this is incorrect, Goldspar was not in a position to itself terminate the contract and sue for damages because it was not then ready, willing and able to complete the contract. 180 Another important aspect of the matter is the role of Streetscape. Something of the background appears in an earlier judgment ( Council of the City of Sydney v Goldspar Pty Limited [2004] FCA 568 , (2004) 62 IPR 274 at [97] [98] and [112]). 'On 13 May 1998 Matchett introduced Rawson-Harris to Paul Obeid and Moses Obeid and on 15 May 1998 the Obeids made Rawson-Harris an offer effectively to purchase the benefit of the Council contract, which was refused. In July 1998 Streetscape Pty Ltd (Streetscape) was formed with the directors being Matchett and Peter Harrison from KWA and Moses Obeid. Matchett was the Managing Director. From then on Streetscape sought to obtain pole business from the Council. It supplied some pole accessories in late 1998. ... In December 2000 Project Architecture Pty Ltd was formed by Tsakalos and Proctor. Proctor left the employ of the Council at that time. Tsakalos resigned from the employ of the Council in June 2001. In the second half of 2001 Project Architecture was engaged by Streetscape to assist in negotiations with Adelaide City Council for the supply of poles. Tsakalos attended presentations with Matchett and Obeid. Goldspar was a competitor for the Adelaide Council business.' 181 It is also to be noted that Newman had worked with Matchett at KWA previously. This background was fleshed out in evidence given by Rawson-Harris when being cross-examined as to allegations that he made, after receiving the 'order' of 19 October 1999, of collusion between Mr Obeid (by then a Minster in the New South Wales Government) and the City of Sydney to the disadvantage of Goldspar. That evidence was as follows: 'MR ELLICOTT: ... How did Mr O'Bede [sic] get into the act, did he have some relationship with Streetscape or KJW, is that right?---He got into the act, his sons and Mr Matchett from KWA approached us, I think it was in May '98, to buy the contract or do a joint deal with a contract with us. And he came into it through - - - HIS HONOUR: I am not sure the witness is finished?---And then we had designed some new items for parts for the council for banner arms and those banner arms, the council came to see the last design and then a week later the O'Bede's supplied those parts to the council without asking us to supply. Now then we received parts of the bracket arms which were the brackets which were the angle brackets for holding the stop signs and the no standing signs and we hadn't made tooling for them and we hadn't been asked to supply them although I had designed them and they appeared at the council sites with Streetscape's name on them. We also received a translation of an El Telegraph article which was an interview with Mr O'Bede and it stated that the council wanted to get rid of us in that article. What was the paper - - -?---El Telegraph, which is Eddie O'Bede's own newspaper. I see?---We couldn't believe the article when we read it because - - - Don't worry, you have been asked the O'Bedes --- ?---Anyway, that's fine. Then, when we were told that the council were retendering our tender Mr Alec Osborne, who is as friend of mine, was having dealings with Dunhills at the time and their liaison with the council, their solicitor, said to Mr Osborne, not knowing he was a friend of mine, that council were going to fix Goldspar and retender the tender. My recollection may be wrong but it is implicit in what you say and I seem to recall it from the last hearing that it was your belief that the O'Bedes had an interest in Streetscape, is that the point or not?---I did. I think that's where the O'Bedes came in, if I may say so?---They were, Streetscapes was formed about two or three months after they had the meeting with us because we didn't want to deal with them. They had offered the pole contract for the Olympics. they said, if we did a deal with them they could guarantee the pole contract for the Olympics, the flagpole contract, that is.' Whilst much of this evidence is hearsay, it was prescient insofar as Goldspar's fate was concerned. 182 In late 1988 the Council was sourcing accessories for poles outside the Goldspar contract from Streetscape with the Council exploring the possibility of increasing those items. It will be seen that Rawson-Harris alleges that Streetscape was given access to and used Goldspar's designs in relation to the supply of the accessories. 183 The evidence does not give any detail about La Mer, the other successful tenderer in 9912, or as to the number of poles each tenderer was to supply. It is common ground that all of the poles required pre-Olympics (at least 600) were supplied pursuant to Tender 9912. The objective facts were that, once Streetscape came into the picture, Goldspar only received an order for seven more poles in total instead of at least another 600 and was cut out from some of the accessories in relation to the then current period in favour of Streetscape. It was hardly evidence of paranoia on the part of Rawson-Harris that he should feel that Streetscape had the inside running with the Council and that Goldspar was being excluded accordingly. 184 It can be safely concluded that by late 1998 the responsible officers of the Council probably Tsakalos and Daly had decided that Goldspar would not be permitted to carry out the contract beyond the year then current. Thereafter, Council officers conducted themselves on that basis but with the aim of being able to dispense with the services of Goldspar without being in breach of contract. The extent to which Khreich was a party to the machinations of Council officers is uncertain. A person of his experience and knowledge could hardly have failed to suspect what was afoot but he appears to have taken the position of seeking instructions from Daly, acting upon those instructions and then loyally defending them. I am particularly troubled by the role that Khreich played at the meeting on 29 September 1999 and its immediate aftermath. If he knew what was coming, then he participated in a dishonest and cynical piece of play acting. If he did not, then he must have been shocked by the instruction he received via Newman which led to the 'order' of 19 October 1999. Nonetheless, he executed the instruction, defended it and then placed two subsequent orders which were no more reasonable and proceeded to defend them, both at the time and in evidence. Giving him the benefit of the doubt, I am inclined to think that his participation in the meeting of 29 September 1999 was an endeavour to get the supply of poles from Goldspar moving but that objective was quickly and firmly countermanded by Council officers.