The decision 

Relevant to the outcome at trial was the Judge’s dim view of the PP director who supervised the work. He was found to be an unsatisfactory witness who evaded questions during examination, sought to conceal the error and deflect responsibility for it. On the evidence available, the Judge found that the PP supervisor must have identified the relevant error:

1. During February or March 2014 and then knowingly concealed it from NBS during the timeframe in which NBS might otherwise have sought to renegotiate its tender price with TfNSW (prior to entry into the relevant bus contract); and
2. Again later, after NBS’s accountant raised the potential error with him.

Additionally, during cross examination, the PP supervisor conceded he acted dishonestly by misleading and deliberately not revealing the whole truth to NBS about the error.

Against that background the Judge had no hesitation in finding that the five elements of deceit, as summarised by the High Court in Magill v Magill,⁴ were made out. Those elements being that the:

1. defendant made a false representation;
2. defendant made the representation with the knowledge that it was false, or that the defendant was reckless or careless as to whether the representation was false or not;
3. defendant made the representation with the intention that it be relied upon by the plaintiff;
4. plaintiff acted in reliance on the false representation; and
5. plaintiff suffered damage which was caused by reliance on the false representation.

The Judge also found that:

• PP did not owe any fiduciary duties to NBS;
• An award of exemplary damages was not necessary to punish the PP supervisor. The PP partnership and company entities were not themselves dishonest, although the partners were liable for the supervisor's deceit; and
• Given the findings of dishonesty and deceit, it was unnecessary to determine whether any statutory scheme applied to limit damages – in the absence of fraud, professional schemes established under the Professional Standards Act 2003 (Vic) and the Professional Standards Act 2003 (NSW) may have limited liability to $1 million.

Damages of approximately $5.5 million were awarded to NBS for PP’s deceit, including interest.

In consideration of the finding that PP had been dishonest, deceived NBS, caused NBS to incur unnecessary and significant legal expenses and admitted to the amortisation error only shortly before trial, the Judge ordered PP pay NBS’s costs on an indemnity basis noting that this was a case where such an award was 'close to irresistible'.⁵ The lump sum ordered for costs allowed 90% of NBS’s professional fees and 100% of disbursements.

Even if the Judge had not allowed indemnity costs for the reasons discussed above, his Honour confirmed he would have allowed indemnity costs⁶ because NBS obtained a better judgment at trial than the sum for which it had offered to resolve the dispute prior to commencing proceedings.⁷ The Judge considered that although NBS’s offer was made pre-litigation, pre-discovery, as an all inclusive offer and was followed by later offers not bettered at trial, PP was in a position to assess its prospects when the offer was made.

This decision is subject to an appeal, PP having filed a notice of appeal in the Federal Court on 4 February 2019.⁸

Editors note: The decision at first instance has been upheld on appeal. In dismissing PP's appeal with costs,⁹ the full court highlighted that the general proposition that a claimant has the onus to prove its damages is qualified in circumstances where a deliberate wrong has caused the position of uncertainty or difficulty of proof. With that in mind, the full court comfortably found that it was appropriate for the trial judge to resolve doubtful questions against PP.