Abigroup Contractors v Sydney Catchment Authority - [2007] NSWSC 220

No judgment structure available for this case.

CITATION: Abigroup Contractors v Sydney Catchment Authority [2007] NSWSC 220

HEARING DATE(S): 1 March 2007

JUDGMENT DATE :
16 March 2007

JUDGMENT OF: McDougall J at [1]

DECISION: See paras [67] to [69] of judgment

CATCHWORDS: DAMAGES - where tender and contract induced by misleading or deceptive conduct - measure of damages - no question of principle

LEGISLATION CITED: Civil Procedure Act 2005
Fair Trading Act 1987
Trade Practices Act 1974

PARTIES: Abigroup Contractors Pty Limited (Plaintiff)
Sydney Catchment Authority (Defendant)

FILE NUMBER(S): SC 55045/01

COUNSEL: S A Kerr / B A Arste (Plaintiff)
M Dempsey SC/ J A Steele (Defendant)

SOLICITORS: Clayton Utz (Plaintiff)
Phillips Fox (Defendant)

Abigroup Contractors v Sydney Catchment Authority [2007] NSWSC 220

INDEX TO JUDGMENT

Para

Procedural History 2

Factual Background 6

The three scenarios 14

The issues 21

First issue: what did the Court of Appeal remit? 25

Second issue: the appropriate measure of loss 32

The applicable principles 32

The competing approaches 33

The “what if” question 37

The evidence 39

Conclusion on the “what if” question 54

Proof of rates 57

Relief 61

Conclusion and order 67

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY AND CONSTRUCTION LIST

McDOUGALL J

Friday 16 March 2007

55045/01 ABIGROUP CONTRACTORS PTY LIMITED v
SYDNEY CATCHMENT AUTHORITY

JUDGMENT

1 HIS HONOUR: The plaintiff (Abigroup) contracted with the Sydney Water Corporation (Sydney Water) to construct an auxiliary spillway for the Warragamba Dam. The contract was a lump sum contract under which Abigroup bore the risk that more work than allowed for in its tender might be required, including by reason of latent conditions. In one critical respect – excavating to solid rock in a particular area and refilling with cement stabilised fill – the quantities were substantially greater than expected. Abigroup said that it had been induced to enter into the contract by misleading or deceptive conduct on the part of Sydney Water. It sued to recover what it said was its loss. The proceedings were referred to a referee for enquiry and report. The referee found, in substance, that there had been no misleading or deceptive conduct; that Abigroup had not shown that it relied on what it said was the misleading or deceptive conduct; that Abigroup had not shown that it had sustained loss; and that, in any event, Abigroup was estopped from pursuing this claim. Following the various hearings to which I refer in the next section of these reasons, the referee’s findings have been overturned and Abigroup has been held to be entitled to damages to be assessed. These reasons deal with the assessment of those damages.

Procedural history

2 The defendant (the Authority) is the statutory successor to Sydney Water. It sought an order that the relevant findings in the report be adopted. Abigroup sought orders that those findings be rejected, and that alternative findings, in its favour, be made in their place. Nicholas J heard the competing notices of motion in February 2003. He gave judgment on 23 July 2003, ordering that the report be adopted: [2003] NSWSC 634.

3 Abigroup appealed. The Court of Appeal (speaking through Beazley JA, with Ipp and Tobias JJA agreeing) allowed the appeal, and set aside the orders made by Nicholas J. They remitted the notices of motion for rehearing: [2004] NSWCA 270; see also [2004] NSWCA 459, where their Honours varied the orders initially made.

4 I heard the remitted notices of motion from 23 to 26 May 2005, and gave judgment on 11 July 2005 ([2005] NSWSC 662). I concluded in substance that Sydney Water had engaged in misleading or deceptive conduct in circumstances to which it will be necessary to return; that Abigroup had relied on that misleading or deceptive conduct in submitting its tender and entering into the contract; and that Abigroup was not estopped from pursuing a claim in respect of that misleading or deceptive conduct. Each of those conclusions were inconsistent with findings by the referee, which findings I rejected accordingly. I concluded further that Abigroup had not proved that it suffered any loss, and on that basis ordered that the report otherwise be adopted.

5 Abigroup appealed again, and the Authority cross-appealed. The Court of Appeal (constituted and speaking as before) allowed the appeal and dismissed the cross-appeal: [2006] NSWCA 282 (the third Court of Appeal decision). Their Honours concluded that there should be a judgment in favour of Abigroup “on the basis of a discrete loss in respect of portion of the contract, being the costs incurred in carrying out the additional rock excavation” (para [150]), entered verdict and judgment for Abigroup for damages to be assessed (order 4) and, in the events that have happened, remitted to this Court for determination the amount of those damages and certain other, presently irrelevant, matters (order 5).

Factual background

6 The contract required Abigroup to design and construct, in accordance with a “Concept Design”, an additional spillway at Warragamba Dam. As part of that work (and as indicated in the Concept Design), Abigroup was required to excavate to rock in a part of the site known as “Folly Creek” or “the embankment”, and refill to a specified level with cement stabilised fill. Levels inferred from the Concept Design Drawings suggested that about 24,300 cubic metres were required to be excavated and replaced in this area. In fact, because the rock level was very much lower than that inferred from the Concept Design Drawings, some 204,518 cubic metres were required to be excavated and filled: an excess, over what was allowed, of some 180,218 cubic metres.

7 I interpose to note that, in the third Court of Appeal decision, Beazley JA stated different quantities at para [19]. The parties are agreed that the correct quantities are as I have just stated them, and as they were stated in para [5] of my first judgment.

8 The material provided to Abigroup and other potential tenderers included the results of geological and technical investigations carried out for Sydney Water by the Department of Public Works and Services (Public Works). The inferred underlying level of rock in the Folly Creek area was deduced from the results of a test borehole known as Borehole 609. That borehole did not give a true indication of the depth of fill, presumably because the drill struck a rock “floater”.

9 The relevant part of Folly Creek had been filled during the original construction of the Warragamba Dam. Water was taken through an intake on the upstream side of the embankment and carried through a drainage pipe beneath the embankment to an outlet some considerable distance downstream of the embankment. All of that was disclosed in the material provided to tenderers. However, in two places where that work was referred to, the Concept Design Report stated that “no plans are available of the embankment or of the [or any] outlet pipe.”

10 In fact, Sydney Water had in its possession a plan known in these proceedings as “the 1951 cross section”. That plan purported to show the original surface of and the extent of excavation and fill on the left bank of Folly Creek, and the location of the outlet pipe. Abigroup’s case, accepted by the referee and me and not challenged in the Court of Appeal, was that a competent engineer could deduce that the “Original Surface” shown on the 1951 cross-section (over which, according to that document, fill had been placed and battered) was substantially lower than the rock level inferred from Borehole 609.

11 Even assuming the accuracy of the 1951 cross-section, the level of rock would have been somewhat lower than the “original surface” depicted, because that original surface would have been comprised of soil and other loose material. However, experience demonstrated that the actual rock level was very much lower than that which might have been inferred from the 1951 cross-section.

12 Because the contract between Abigroup and Sydney Water required Abigroup to assume all risks, Sydney Water took the stance that Abigroup was not entitled to be paid for the approximately 180,000 cubic metres of additional excavation and fill, over and above what had been assumed for the purposes of the tender based on the Concept Design Drawings. (It was not suggested that Abigroup’s assumption of 24,300 cubic metres based on those drawings was in any way underestimated.)

13 Abigroup’s case at all times has been that it would not have tendered, or entered into the contract, on the terms that it did had it been aware at material times of the existence of and information contained in (and that could be inferred from) the 1951 cross-section. Its case is that it is entitled to be paid the whole of the additional cost incurred by it, over and above that allowed in its tender, by reason of the additional excavation and fill.

The three scenarios

14 Each party retained experts, who prepared reports, conferred and gave evidence before the referee. Relevantly, Abigroup called Mr Blunden and the Authority called Mr Meredith. Before the referee, those gentlemen produced a schedule which became, and has been known as, exhibit “AK”. Mr Blunden calculated this aspect of Abigroup’s loss by assessing “the actual costs incurred by Abigroup in performing [the] additional work”. He derived a rate per square metre by quantifying the total costs incurred by Abigroup for excavation and fill, and dividing those costs by the number of additional cubic metres of excavation and fill. Mr Meredith assessed the claim “on the basis of extrapolating from Abigroup’s tender a cubic metre rate for the works claimed.” Significantly, Mr Meredith said “that if the approach to be adopted by the referee is that which [Mr] Blunden uses, then he [Mr Meredith] accepts the rate calculated by [Mr] Blunden.”

15 By the time the matter came to me on the first occasion, Messrs Blunden and Meredith had refined their agreement. They produced a revised version of exhibit AK. In (as they called it and I shall call it) revised exhibit AK, they postulated three “scenarios”. Scenario 1 was described as one that “assumes the Abigroup quantities and rates.” Scenario 2 was described as one that “assumes the Abigroup quantities and the SCA rates”. Scenario 3 was described as one that “assumes the SCA quantities and rates.”

16 The agreed total for scenario 1 was $7,499,930. For scenario 2, it was $5,936,730. For scenario 3, it was $3,967,408.

17 The “Abigroup quantities and rates” that are the subject of scenario 1 are respectively:

(1) The actual quantities of excavation and fill, broken down by area, in the Folly Creek region; and

18 The “SCA quantities and rates” that are the subject of scenario 3 are, respectively:

(1) Quantities deduced by Mr Meredith as representing the additional excavation and fill that would be required to an assumed rock level where one would reasonably expect to find it, disregarding soil and other loose matter, immediately below the “original surface” depicted on the 1951 cross-section; and

19 At the risk of stating the obvious: scenario 2 takes Mr Blunden’s quantities and Mr Meredith’s rates.

20 Underlying Mr Meredith’s methodology, as summarised in scenario 3, is the proposition that Abigroup is only entitled to be compensated for extra excavation down to (speaking broadly) the original surface shown in the 1951 cross-section or a little lower. This proposition assumes that, had the 1951 cross-section been disclosed, Abigroup would have tendered accordingly, and taken on the risk that (as proved to be the case) the rock level was substantially, and not a little, below that original surface.

The issues

21 There remain outstanding the quantification of Abigroup’s claim for damages for misleading or deceptive conduct, and its claims for delay and acceleration costs. I am concerned only with the first of those. The second and third will be dealt with at a later time.

22 The essential issues on the quantification of Abigroup’s damages for misleading or deceptive conduct are:

(1) Whether the third Court of Appeal decision has decided, in a way that is binding on me, the scope of the remitter, so that I must apply scenario 1?

23 The Authority accepted that if issue 1 were to be answered in favour of Abigroup, then it followed that damages should be assessed in accordance with scenario 1.

24 Abigroup sought an order, pursuant to s 82 of the Civil Procedure Act 2005, for the payment of an interim amount to it once the question of quantification had been resolved. The Authority has already made an interim payment of the scenario 3 amount. It did not suggest that, if I concluded that damages should be quantified in accordance with scenario 1, there should not be a further payment ordered pursuant to s 82. The further payment would be the difference between scenario 1 and scenario 3, namely $3,532,522. (For completeness, if I were to conclude that scenario 2 is appropriate – a result for which neither party contended – the amount to be ordered to be paid pursuant to s 82 would be $1,969,322.)

First issue: what did the Court of Appeal remit?

25 At a number of places in the third Court of Appeal decision, Beazley JA noted that Abigroup contended that the proper measure of its loss was the actual cost of doing all the additional work (see, for example, para [9]). Her Honour referred to the three scenarios in paras [66] (scenario 1), [67] (scenario 3) and [68] (scenario 2). Her Honour noted in para [68] that scenario 2 was “agreed upon between the parties”. She made no similar comment in respect of scenarios 1 and 3, although the parties accepted that each was the appropriate quantification of damages for the methodology that underlay it.

26 Her Honour adverted to the three scenarios (although not by that description) in para [114] where she said:

prejudice or disadvantage

27 Her Honour’s conclusion on this question, in favour of Abigroup, is to be found in paras [116] to [118]:

“116 The authorities are clear in my opinion that in order to be able to recover damages for its loss, the appellant was not required to prove that it had suffered a loss on the whole contract. Provided it had otherwise proved its cause of action, it was entitled to recover damages on the basis of the discrete loss it sustained in undertaking the additional work at Folly Creek, subject, of course, to proper proof of such loss.

117 It is apparent from the way in which the appeal was conducted that the respondent accepted that if it did not succeed in establishing that loss on the whole contract had to be proved, then McDougall J erred in accepting the Referee’s report on the damages issue. As I have sought to explain above, subject to questions of causation, with which I have already dealt, and proof of damage and remoteness, the damages recoverable are “ the actual losses they have suffered as a result of contraventions of the Act ”: Henville v Walker per McHugh J [133]-[135] set out at [106] above. Subject to the precise quantification of damages, this is not a case that involves speculation. The loss suffered by the appellant is known. It was the cost of carrying out the additional work.

28 Her Honour returned to the topic once more at para [150]:

29 Mr Kerr of counsel, who appeared for Abigroup, submitted that when her Honour referred to “the cost of carrying out the additional work” (para [117]) or “the costs incurred in carrying out the additional rock excavation” (para [150]), her Honour was referring to the actual costs and the actual quantities, in each case as established by Mr Blunden and (in my view, although it will be necessary to return to the topic) agreed by Mr Meredith. If that were the case, then it is a little difficult to understand why her Honour did not quantify the relevant damages in accordance with scenario 1.

30 To the contrary of Mr Kerr’s submission, it would appear from para [118] – in particular the second sentence – that her Honour did not intend, by the words that she used, to define so closely the scope of the remitter as to compel a conclusion that scenario 1 provided the appropriate measure of damages.

31 However, because I have come to the view (on the assumption that it is open to me to consider the position at large) that scenario 1 provides the appropriate measure of loss for the misleading or deceptive conduct that I have found occurred, it is not necessary to express a concluded view.

Second issue: the appropriate measure of loss

The applicable principles

32 The parties – in particular, the Authority – addressed me at some length on the relevant principles, and referred me to a number of authorities. I do not propose to traverse those submissions. Beazley JA dealt with the relevant authorities in the third Court of Appeal decision. Her Honour dealt with the authorities on causation and damages as follows:

(1) As to causation: her Honour discussed the authorities at paras [36] to [53], and set out her conclusion at paras [54] to [59].

The competing approaches

33 Abigroup submitted that the effect of the Court of Appeal’s decision was to decide the question of causation in its favour. That followed, it said, because the Court of Appeal had ordered verdict and judgment for Abigroup for damages to be assessed. That submission must be accepted. However, as Beazley JA noted at para [78], “concepts of causation and damages are closely linked” for the purposes of s 82 of the Trade Practices Act 1974 (Cth) (and, therefore, for the purposes of s 68 of the Fair Trading Act 1987 (NSW)). Thus, in what follows, it is necessary to refer to some matters that might be thought to fit more comfortably under the rubric of “causation” than of “damages”.

34 The third Court of Appeal decision makes it clear that, in conceptual terms, the loss sustained by Abigroup was “the discrete loss it sustained in undertaking the additional work at Folly Creek” (para [116]) or “the cost of carrying out the additional work” (para [117]) or “a discrete loss in respect of portion of the contract, being the costs incurred in carrying out the additional rock excavation” (para [150]). Although this last formulation refers only to “additional excavation”, it was common ground that the quantification of loss should take into account not just additional excavation but also additional cement stabilised fill. The dispute was as to the relevant quantities.

35 Abigroup’s case was simple. It submitted that the additional cost to it was the cost of the entire additional excavation and fill, over and above the 24,300 cubic metres that (the parties or their experts agreed) was a reasonable allowance for excavation and fill in accordance with the Concept Design Drawings.

36 The Authority contended that an award of damages on this basis would overcompensate Abigroup. The Authority submitted that:

(1) Its misleading or deceptive conduct was not the sole cause of the loss sustained by Abigroup.

(2) The loss sustained by Abigroup should be regarded as divisible, with each portion attributable to a separate cause.

The “what if” question

37 The different approaches taken by the parties reflected their different approaches to the “what if” question: what would have happened in the absence of the misleading or deceptive conduct?

38 The basis on which that question should be approached is defined by para [59] of the reasons of Beazley JA in the third Court of Appeal decision. Her Honour said that “[w]hat has to be done is to ascertain what would have occurred for [Sydney Water] not to have engaged in conduct which was misleading . … [t]hat would require that the existence of the [1951 cross-section] be disclosed … As there was a plan, and as it contained material information, its existence should have been disclosed to [Abigroup] … ”.

The evidence

39 Abigroup’s position, as to what it would have done had the 1951 cross-section been disclosed to it before it submitted its tender, was dealt with by two witnesses (their evidence referred to more than the 1951 cross-section, but I think it was common ground that the other documents did not add anything of present relevance to the 1951 cross-section; if this were not common ground, it is plain from the whole of the material put to me that the 1951 cross-section was the critical document).

40 Mr Havercroft was Abigroup’s group engineering manager. He had been involved in the tender process. He said that, had the 1951 cross-section been disclosed, he would have taken the following steps:

(1) He would have caused it to be reviewed by Abigroup’s consultant, Snowy Mountains Engineering Corporation, and Abigroup personnel;

(2) On the assumption (which is clearly correct) that such a review would have disclosed major discrepancies between the 1951 cross-section and the material provided to Abigroup for the purposes of the tender, he would have asked Sydney Water’s consultant, Australian Water Technologies (AWT), for clarification of the discrepancies;

41 I have said that the second assumption (relating to AWT’s response) is “likely to have been correct”. I say that because the only response that would adequately clarify the matter would be one giving comfort to Abigroup and other potential tenderers as to the likely true rock level. It was plain that there was no one in Sydney Water (or, I would think, at AWT) who had any real knowledge of the works that were described in the 1951 cross-section. Thus, there was no one at Sydney Water or AWT who could give any degree of assurance that the “original surface” depicted on that cross-section was in fact likely to indicate the approximate true rock level. It would have been necessary for additional boreholes to be sunk, or for some equivalent testing to have been undertaken. If that had been done, and if a reasonable degree of assurance had been obtained as to the true rock level, tenderers could proceed accordingly. If that had not been done, or if it did not produce a reasonable degree of assurance, it is in my view inherently likely that a reasonable tenderer would not want to assume the risk relating to excavation and fill in the Folly Creek area.

42 I said as much in para [123] of my first judgment. The Court of Appeal expressed no disapproval of what I there said. The Authority did not submit that I should review it. Reconsidering it now, I see no reason to depart from it. For convenience I repeat what I said:

43 The other witness called by Abigroup who gave evidence on this question was Mr Braybrooke. He was a principal engineering geologist, employed by and a director of Douglas Partners Pty Ltd. He gave expert evidence. Relevantly, he said that any competent engineer aware of the 1951 cross-section would have formed the view that it would have a significant effect on the assumed subsurface conditions. In Mr Braybrooke’s view, that competent engineer would then consider that further geotechnical investigations, a complete revision of the Concept Design Drawings, a reconsideration of the design, and a review of the tender documentation were all necessary steps to be taken.

44 Mr Braybrooke said further that even if Public Works or Sydney Water had simply supplemented the original tender material with the 1951 cross-section, no reasonable tenderer would regard that as providing a sound basis for a reasonably reliable tender. That was because there would be conflict within that hypothetical tender package, between the 1951 cross-section on the one hand and the other package of geological and geotechnical information provided on the other. Mr Braybrooke said that in those circumstances (that the conflict was not resolved) he would have advised the tenderer to qualify any tender (by inference, so as not to assume risk in respect of the Folly Creek embankment works).

45 The referee considered at length the evidence of Messrs Havercroft and Braybrooke. He does not appear to have formed any adverse view as to their credibility.

46 Sydney Water caused Mr Braybrooke’s evidence to be reviewed by Mr Knight of Public Works. Mr Knight agreed that, had he considered the 1951 cross-section, further geotechnical investigations may have been undertaken and there may have been some revision of the drawings insofar as they depicted rock levels and the extent of the cement stabilised fill (statement of 11 June 2002, para 14). Mr Knight did not think that it would have been appropriate simply to supplement the original tender material with the 1951 cross-section, assuming that that had been discovered at a sufficiently early stage in the process.

47 The referee considered Mr Knight’s evidence at length. Although he was critical of aspects of it, he made no general comment (adverse or otherwise) as to Mr Knight’s credibility. Indeed, at R127 the referee, without comment, set out paras 13 to 15 of Mr Knight’s statement of 11 June 2002.

48 The referee made a number of important findings based on the evidence of Mr Knight (and, in one case, Mr Knight’s colleague, Mr Neville):

“… [Sydney Water] did not wish to be receiving tenders, which built in a large amount for risk, which may never eventuate. Therefore, it was a matter of significance to [Sydney Water] that the information provided to tenderers was as accurate as possible, not only so that the tenderers could pitch their bids on that basis, but also so that [Sydney Water] could have a good idea of the appropriate tender figures.”

“ … Mr Knight said that he was trying to say that DPWS thought it should do as much investigation as it could to get better estimates of the degree of fill in Folly Creek, and:-

“We were trying to help whoever might be tenderers.”

He said the help was:-

“trying to get as good an estimate of the fill as we thought would be reasonable for a concept design”.

He continued:-

“Q. Trying to give them as much information as you possibly could for them to rely on it to form a view about how much they should bid for the work; correct?

A. To form a key component of what they would use in forming and in preparing a bid.””

“It seems to me that the reasonable inference to draw from the evidence of Mr Neville and Mr Knight and from the terms of the contract between [Sydney Water] and DPWS is that an attempt was being made to obtain as much information as possible to assist both the tenderers and [Sydney Water] in producing as realistic figures for the carrying out of the work as possible. This, if I may say so, is a matter of commonsense. In these circumstances, the question arises as to why no attempt was made to investigate the Additional Information. However, on the whole of the evidence I am satisfied that there was no expectation on the plaintiff’s part that this would be done and, certainly, the plaintiff led no evidence of any such expectation. … “

49 I should note that the “Additional Information” to which the referee referred was a suite of information comprising, critically, the 1951 cross-section. It is necessary to refer only to the 1951 cross-section.

50 In my view, the plain – indeed, when put in context, almost irresistible – inferences from the material to which I have referred are that:

(1) Had Sydney Water disclosed the 1951 cross-section to tenderers, it would not have left matters there; on the contrary, it would have sought such further investigations, and provided such further information, as time permitted.

51 In this context, it is necessary to bear in mind that Sydney Water wanted the spillway to be built, for reasons the referee explained at R4: that “developments in rainfall and flood estimation have shown that [Warragamba Dam] could encounter floods much larger than originally anticipated” which “could overtop it and cause it to fail”. That “would cause significant damage to natural and man made features and place many lives in the Hawkesbury Nepean Valley at risk.” The spillway was needed, and constructed “[i]n an attempt to avoid such a catastrophe”.

52 It is necessary also to bear in mind that, as the referee said at R151 (quoted above) and as I said in my first judgment at para [113], it was in Sydney Water’s interest that tenders be based on the maximum available amount of information, so that the risks, and therefore the contingency or padding built in in an attempt to cover them, were minimised.

53 Thus, I conclude that:

(1) Sydney Water would not have put out a package of tender documentation that included, relevantly, only the geological and geotechnical information in fact provided together with the 1951 cross-section (either on its own or with the “Additional Information” to which the referee referred).

(2) In any event, Abigroup would not have submitted a “conforming tender” on the basis of that limited material. It would have tendered only on the basis that effectively left the risk, as to the amounts of excavation and fill required in the Folly Creek area, with Sydney Water. It is likely that other competent, and competently advised, tenderers would have acted similarly.

Conclusion on the “what if” question

54 On that basis, I conclude that scenario 1 in principle provides the appropriate methodology for assessment of Abigroup’s loss. It either follows from or is implicit in that conclusion that there is one loss and not two (or more) separate losses. Once it is accepted that (as I have found) the most likely hypothetical outcome would have been that further information would have been provided to tenderers, enabling them to assess the true rock level, there is no justification for breaking the loss up into two components: above and below the “Original Surface” disclosed in the 1951 cross-section. Even if for some reason it were conceptually appropriate to think of the loss as having been made up of two such components, they would be nonetheless components of the one overall loss.

55 If there be one loss, and if (as on any view is the case) Sydney Water’s misleading or deceptive conduct were an effective cause of that loss then Abigroup is entitled to recover the entire amount of that loss notwithstanding that:

(1) There may have been other effective causes of the loss; or

56 Those propositions were not disputed; and there is no need to cite authority in support of them.

Proof of rates

57 However, the Authority asserted, Abigroup had not proved that the rates used to quantify its loss were appropriate. It pointed to concerns agitated by the referee at R516-517:

“516 There is also difficulty, to which Mr Donaldson refers in his written submissions under the heading “Limitations in Cost Records”, that the plaintiff’s cost records do not differentiate, or allow a differentiation to be made, between the costs that the plaintiff would have incurred in any event in performing the work; those attributable to tender under-estimates of costs and quantities; costs incurred by the plaintiff through inefficiencies, construction error, mismanagement, timing considerations, poor productivity and equipment breakdown; and the effect of changes in the construction method. The cost records were not “audited”.

517 At Tpp.953-954 Mr Blunden, the plaintiff’s expert, conceded that this could lead to errors in costing. On the other hand, the experts have agreed on a number of issues on cost.”

58 There are two answers to this. The first is that there was no evidence of underestimates of costs and quantities in the tender, nor of costs incurred through the various hypothetical causes referred to in para 516.

59 The second answer is that, since the reference, the experts (Messrs Blunden and Meredith) have agreed on all issues relating to costs. I have set out in para [14] above what is for present purposes the key feature of their agreement. In my view, it follows from Mr Meredith’s acceptance of the actual rates deduced by Mr Blunden that Mr Meredith was not persuaded that they were inflated by any of the possible causes referred to in R516. But if this is not so, nonetheless it remains the case that there is no evidence of inflation of costs. If this were something that could be taken into account (contrary to the general principles stated above) then it must be for the party raising the issue to satisfy the onus of proof. The Authority has not done so.

60 It follows that scenario 1 should be adopted as the appropriate quantification of Abigroup’s loss, leading to the conclusion that the amount of the loss (before interest) is $7,499,930.

Relief

61 Abigroup’s notice of motion sought by prayer 1 “[a] finding that subject to the questions of delay, acceleration and interest, the Plaintiff is entitled to compensation in the amount of $7,449,930.00.”

62 I enquired whether, by this prayer, the plaintiff was seeking a declaration. Mr Kerr responded that it was not; that it sought an order similar to those made by me pursuant to my first judgment when, among other things, I rejected certain findings of the referee and made other findings in their place. However, those orders were made pursuant to UCPR r 20.24(1).

63 The present notice of motion does not seek any relief that could be characterised as “proceedings on the report”. Thus, the powers conferred by r 20.24(1) are not available.

64 I have found in these reasons, on the question of quantification remitted by the Court of Appeal, that scenario 1 provides the appropriate quantification of Abigroup’s loss. Thus, I have found that the loss should be quantified at $7,499,930. In those circumstances, I see no utility in granting, in addition, some sort of quasi declaratory relief, the precise status of which must be open to question. The particular dispute will be resolved by the order that I will make pursuant to CPA s 82. To the extent that it is necessary to understand the findings on which that order is based, they have been set out in these reasons.

65 As I have said, because of the part payment already made, the relief now claimed is limited to the unpaid balance of the schedule 1 amount of $7,499,930; namely, $3,532,522.

66 The notice of motion claimed other relief: in particular, directions intended to prepare for the hearing of Abigroup’s claims for compensation for delay and acceleration. That has been dealt with, and appropriate directions given. The order that I will make deals, so far as in my view is necessary, with the unresolved aspect of the notice of motion. Since the notice of motion did not seek an order for costs, and since the parties did not address me on costs, I will reserve that question.

Conclusion and order

67 Damages for Sydney Water’s misleading or deceptive conduct should be assessed in accordance with scenario 1. Abigroup is entitled to the order that it seeks (as I have noted, the Authority raised no discretionary grounds in opposition).

68 I order the defendant to pay to the plaintiff, as part of the damages sought to be recovered in these proceedings, the sum of $3,532,522.

69 I will hear the parties on costs.

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Citations

Abigroup Contractors v Sydney Catchment Authority [2007] NSWSC 220

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CITATION:	Abigroup Contractors v Sydney Catchment Authority [2007] NSWSC 220
HEARING DATE(S):	1 March 2007
JUDGMENT DATE :	16 March 2007
JUDGMENT OF:	McDougall J at [1]
DECISION:	See paras [67] to [69] of judgment
CATCHWORDS:	DAMAGES - where tender and contract induced by misleading or deceptive conduct - measure of damages - no question of principle
LEGISLATION CITED:	Civil Procedure Act 2005 Fair Trading Act 1987 Trade Practices Act 1974
PARTIES:	Abigroup Contractors Pty Limited (Plaintiff) Sydney Catchment Authority (Defendant)
FILE NUMBER(S):	SC 55045/01
COUNSEL:	S A Kerr / B A Arste (Plaintiff) M Dempsey SC/ J A Steele (Defendant)
SOLICITORS:	Clayton Utz (Plaintiff) Phillips Fox (Defendant)

Procedural History	2
Factual Background	6
The three scenarios	14
The issues	21
First issue: what did the Court of Appeal remit?	25
Second issue: the appropriate measure of loss	32
The applicable principles	32
The competing approaches	33
The “what if” question	37
The evidence	39
Conclusion on the “what if” question	54
Proof of rates	57
Relief	61
Conclusion and order	67