ACN 002 804 702 (formerly Brooks Building) v McDonald - [2009] NSWSC 610

CITATION: ACN 002 804 702 (formerly Brooks Building) v McDonald [2009] NSWSC 610

HEARING DATE(S): 09-10 June 2009

JUDGMENT DATE :
3 July 2009

JURISDICTION: Equity

JUDGMENT OF: White J

DECISION: Make a declaration and order in accordance with paras 1 and 2 of the Relief Claimed in the statement of claim. Exhibits may be returned after 28 days.

CATCHWORDS: EQUITY - equitable remedies - specific performance - Application for specific enforcement of defendant’s promise to consent to the filing of a consent order for setting aside of judgment – terms of settlement required remedial building work to be carried out - whether terms of settlement have been performed by plaintiffs - CONTRACTS - building, engineering and related contracts - performance of work - whether engineer’s certificate conclusive evidence that works had been performed in accordance with settlement – construction of contract to determine what effect is to be given to a certificate - CONTRACTS - building, engineering and related contracts - performance of work - whether entire performance or substantial performance required before settlement agreement can be enforced – whether agreement an ‘entire contract’ – whether agreement substantially performed

LEGISLATION CITED: Civil Procedure Act 2005 (NSW)

CATEGORY: Principal judgment

CASES CITED: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314
National Coal Board v William Neil & Son [1985] 1 QB 300
RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1992) 11 BCL 74
Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1
Batey v Gifford (1997) 42 NSWLR 710
Dainford Ltd v Lam (1985) 3 NSWLR 255
Vella v Ayshan [2008] NSWSC 84; (2008) NSW ConvR 56-209
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689
Mondel v Steel (1841) 8 M&W 858
Tan Hung Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 178
Hoenig v Isaacs [1952] 2 All ER 176
Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2003] NSWCA 4; (2003) 56 NSWLR 576
Zamperoni Decorators Pty Ltd v Lo Presti [1983] VR 338
Simpson Steel Structures v Spencer [1964] WAR 101
Bolton v Mahadeva [1972] 1 WLR 1009

TEXTS CITED: IND Wallace, Hudson’s Building and Engineering Contracts, 11th ed, 1995
Greig & Davis, The Law of Contract (1987)

PARTIES: ACN 002 804 702 Pty Ltd (formerly Brooks Building Pty Ltd) & Anor
v
Shane McDonald

FILE NUMBER(S): SC 5878/07

COUNSEL: Plaintiffs: H Altan
Defendant: A L Hill

SOLICITORS: Plaintiffs: Cordato Partners
Defendant: Palmers Solicitors & Attorneys

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Friday, 3 July 2009

5878/07 ACN 002 804 702 Pty Ltd (formerly Brooks Building Pty Ltd) & Anor v Shane McDonald

JUDGMENT

1 HIS HONOUR: This is an application to enforce an agreement for the compromise of proceedings in the District Court. In 2004 the present defendant Mr McDonald sued the present plaintiffs, Brooks Building Pty Ltd and Mr Woodward, and an additional party, for damages. He alleged that Brooks Building breached a contract for the supply of a shed erected on his land. Those proceedings were compromised by terms of settlement signed on 16 February 2007. In accordance with those terms, judgment was entered for Mr McDonald against the present plaintiffs for $65,000. The terms provided that the judgment would be set aside if the present plaintiffs performed remedial building works described in the terms of settlement, and obtained a certificate or confirmation from the local council that certain requirements of a notice issued by the council had been complied with.

2 The plaintiffs contend that they performed the terms of settlement and are entitled to have the judgment set aside.

3 To be more precise, the plaintiffs allege that the works described in the terms of settlement were to be undertaken to enable compliance with a letter dated 12 September 2006 from the Shellharbour City Council such that an engineer would be able to certify that the remedial works had been completed to his satisfaction and that the structure met the standards set out in the development consent for the erection of the shed and Australian Standard 1170.2. The plaintiffs allege that they performed the works as required by the agreement to enable compliance with the council’s letter in that the engineer was able to certify that the remedial works had been completed to his satisfaction and the structure met the standards set out in the development consent and AS1170.2. The plaintiffs say they obtained the requisite certificate or confirmation from the local council. They seek a declaration that they are entitled, pursuant to the terms of settlement, to have the judgment entered against them in the District Court set aside. They seek an order that Mr McDonald do all things necessary to enable the filing of consent orders in the registry of the District Court to have the judgment set aside.

4 Section 73 of the Civil Procedure Act 2005 (NSW) provides:

“ 73 Power of court to determine questions about compromises and settlements

(1) In any proceedings, the court:

(a) has and may exercise jurisdiction to determine any question in dispute between the parties to the proceedings as to whether, and on what terms, the proceedings have been compromised or settled between them, and

(b) may make such orders as it considers appropriate to give effect to any such determination.

(2) This section does not limit the jurisdiction that the court may otherwise have in relation to the determination of any such question.

5 There was no dispute as to whether the proceedings had been settled, nor as to the terms of settlement. The dispute is as to whether the terms of settlement have been performed. I was told that proceedings seeking the same relief were instituted in the District Court but a judge of that court expressed the view that because a declaration was sought, the proceedings should have been instituted in this court. I mention this history only to explain why the application has been brought in this court. The comparatively small amount at stake (although doubtless significant to the parties) does not diminish the complexity of the issues in this case.

6 The principal issues are:

(a) whether the terms of settlement made the engineer’s certificate conclusive evidence that the remedial works had been performed in accordance with the terms of settlement;

(b) if so, whether the certificate was given in accordance with the contractual requirements;

(c) if the certificate is not conclusive, whether the plaintiffs performed the work required by the terms of settlement, or were in breach of any of those terms, and, if so, in what respects;

(d) whether the defendant obtained a certificate or confirmation from the council which conformed with the terms of settlement;

(e) whether, in order to be entitled to have the judgment set aside, the plaintiffs were required to perform the terms of settlement completely and exactly, or whether it was sufficient if they substantially performed the agreement, leaving it to the defendant to seek damages for any breach of the terms, or equitable compensation as a condition of specific performance, if there were defects or omissions in the work done (no such claim for damages or compensation was made by the defendant); and

7 The defendant also submits that the plaintiffs are disentitled from seeking equitable relief by reason of unclean hands. They say that the engineer’s certificate misrepresented the position to the council, and that the plaintiffs were aware of that misrepresentation.

Background

8 The background to the terms of settlement and the objective matrix of facts in which those terms are to be construed are as follows. In the District Court Mr McDonald sued the present plaintiffs, Brooks Building and Mr Woodward, for damages in respect of the erection of a shed on his land in Croom, NSW. That land is near Lake Illawarra. In the District Court Mr McDonald alleged that there was a contract for Brooks Building to supply and erect a shed, save that Mr McDonald at his own cost was to lay the concrete slab on which the shed was to be constructed. He alleged that the shed was to be constructed in accordance with a construction certificate issued by the Shellharbour City Council, was to be constructed of materials suitable for construction of sheds of that type in high wind areas, and was to be constructed in a proper and workmanlike manner. He alleged that there were numerous defects in the shed as allegedly supplied and erected by Brooks Building.

9 Mr Woodward was a director of Brooks Building. He was joined as a defendant in the District Court apparently on the basis of representations he was alleged to have made to the plaintiff concerning work and materials to be provided and their suitability for the plaintiff’s property.

10 In the District Court, Brooks Building and Mr Woodward denied that their agreement with Mr McDonald was as alleged by him. They said that the agreement was for the supply of prefabricated components of a steel shed which Mr McDonald was to erect at his own cost. They alleged that they agreed to recommend a contractor to erect the shed. They also said that Brooks Building agreed to provide its engineering drawings to Mr McDonald so that the plaintiff could use them in connection with an application to the council for development approval. They alleged that the shed was to be prefabricated to specification for sheds built in high wind areas as required by the Shellharbour City Council for a category known as Category 2 Terrain, to withstand a wind velocity of 41 metres per second. They alleged that they fulfilled their contract.

11 A shed was erected on Mr McDonald’s land in late 2002 and early 2003. It is common ground that he arranged for the construction of the slab on which the shed was erected. It is common ground that Brooks Building supplied the components for the shed. It is common ground that the components were assembled and the shed was erected by other parties. There was a dispute as to whether or not the parties who erected the shed were engaged by Mr McDonald or Brooks Building. It is unnecessary to resolve that issue to determine the parties’ respective rights and obligations under the terms of settlement. The shed was fully erected by May 2003. It is on an exposed site. It was damaged by high winds and a severe storm in August 2003.

12 Brooks Building had provided Mr McDonald with plans drawn by Adam Thomas & Brown, Consulting Engineers, for the plaintiff to provide to the Shellharbour City Council for the purposes of obtaining development approval and a construction certificate for the shed. The plans were for a design of a shed to withstand the loads described as “normal windspeed/AS1170-1989 exposure category 2”. The plans were a standard drawing for sheds. They were not prepared specifically for a shed to be situated on the site on which Mr McDonald’s shed was erected. The plans were for an open web frame and provided for the frame to be fastened using purlins and girts in a toes-down position and located on the node of the triangles of the frame which were the strong points of the frame.

13 One of the issues in the District Court proceedings was whether the building had been constructed in accordance with the designs of Adam Thomas & Brown.

14 The Shellharbour City Council approved the development application for the shed on 8 May 2002. They were conditions of the development approval that:

Full engineering details on reinforced concrete floorings, slabs and/or structural steel by a practising structural engineer complying with the relevant ordnance and SAA code requirements must be submitted to the principal certifying authority prior to any work

the structural tie-down of all framing must withstand a W41N wind classification.

15 There was an issue concerning the evenness of the slab. It appears to have been constructed in about September or October 2002. An engineer’s report dated 8 December 2003 reported on site inspections between October 2002 and March 2003 as being due to “faulty concreting, i.e. uneven levels and improper concrete topping”. Mr McDonald says that as a result of an overlay being provided towards the end of 2002 the slab was made level. But no final engineer’s certificate to that effect has been obtained, notwithstanding that the council on 25 May 2007 required that an engineer’s certificate for the slab be submitted.

16 On 5 February 2004 a building surveyor from the council inspected the shed. This was a final inspection. The surveyor reported that the shed was defective. The notice is No. 38970 and is referred to in the terms of settlement. It stated:

“ Not built in accordance with engineer’s details provided.

Damage also noted to columns and roller door guides

Note: also windows do not appear to be scaled correctly.

Rust appears to be present, bolts missing

Rectification work required and engineer’s certificate on finished shed will be required before re-booking council for a final inspection.

17 For the purposes of the District Court proceedings, Brooks Building’s solicitors, Cordato Partners, retained an engineer, Mr Rickard of Rickard Hales Moretti to prepare a report in relation to the damage to the shed. His report was not admitted as evidence of the truth of the facts about which opinions were expressed. But it forms part of the background facts against which the terms of settlement were entered into. As well as expressing opinions as to who was responsible for the shed not being strong enough to withstand the storm, Mr Rickard gave his opinion as to what work was required to strengthen the shed so that it was suitable for the wind loads to which it was exposed. Mr Rickard reported:

“ The ends of the building have suffered virtually no distortion. This is due to the extra stiffness provided by the wall frames across each end. However, on grid lines 2 and 3, the building has suffered a sway from west to east which could be approximated at 50mm. This overall sway of the building has not caused much consequential damage due to the inherent flexibility of these types of building. Remedial work is required to the columns at 2B and 3B. We recommend that the columns are also removed at 2A and 3A, thereafter the building can be re-plumbed with the use of a mobile winch. We would not anticipate much consequential damage as a result of the use of a winch. Sheet junctions etc will have to be thoroughly checked. Once the four columns are re-erected in their correct position and the whole structure bolted off, we would anticipate the structure would be returned to a condition prior to the storm.

... However, the problem remains that the building is inappropriately designed for this site and steps will have to be taken to strengthen the building to suit this site. Furthermore, a check will need to be undertaken of the foundations to ensure that the fixings to the slab are appropriate, once the correct steel frame is in position above. This will require strengthening of the frames on gridlines 2 and 3. This will require extra cross bracing in grid line 4. This will probably require extra cross bracing along grid lines A and B. It will require strengthening of the frame on grid line 1 because of the interference of the two roller doors.

...

The following steps are required to enable an engineer to certify that this building is designed and erected in accordance with all relevant Australian Standards and good building practice.

1 Engineer to check adequacy of foundations and hold-down bolts for this site.

2 Remove columns A2 and A3, B2 and B3, re-plumb the building and re-erect the columns, strengthened to suit this site location. This may well involve localised strengthening of the haunch to the two internal frames grid lines 2 and 3. It may be cheaper to build two entirely new columns rather than strengthen the old.

3 Install extra cross bracing on grid line A, B and 4. Design check grid line 1.

4 Check all windows and doors to ensure that flashings are in accordance with good building practice and repair damage to operation that has resulted as a result of the overall building sway. The same comment applies to the roller doors.

5 Check all roof and wall sheeting. Repair damage to translucent sheeting.

6 Replace damaged gutter.

18 Mr Rickard’s report was accompanied by a sketch which was later used by the parties in drawing terms of settlement.

19 Whilst this report was not admissible as evidence before me that the original design for the shed was not suitable for its location, the expert evidence before me was to the same effect.

20 On 28 August 2006 Cordato Partners wrote to the council seeking the council’s comments on work which they said Brooks Building proposed to carry out upon the building. Cordato Partners said that the council’s comments might be of considerable assistance in resolving the proceedings. Cordato Partners referred to the council’s notice no. 38970 of 5 February 2004 and sought from the council:

1. Confirmation that the Notice requires that the work to be carried out to the frames is to meet the design conditions first approved at the time the consent was granted to the Development Application, as distinct from design conditions that might now be appropriate given the wind storm event which occurred in September 2003, and caused the damage noted in the Notice.

2. Comments upon the suitability of the following works which Brooks Building proposes to carry out upon the building, to comply with the Notice as follows:

I. Column replacement:

(i) Remove the columns A2, A3, B2, B3.

(ii) Resupply AS and A3, note columns B2 & B3 have already been supplied to the site.

(iii) Install A2, A3, B2, B3.

(iv) Install extra bracing on grid line A, B and 4 re plumb the building.

(v) Install bracing above roller doors at grid line 1.

II. Additional work:

(i) Weld and brace the roof truss according to (the first defendant’s) engineers certification.

(ii) Supply and install new guttering to the western wall.

III. The works specified in I(i) & (ii) are to be carried out to Council’s requirements pursuant to the original DA, so as to comply with Council notice dated 5 February 2004 – No. 38970 (save as to DA condition 20).

IV. Upon completion of those works, an arrangement be made with Council to reinspect the building, and to advise what, if any further works are required for Council’s notice to be complied with and for completion of the building in accordance with the approved plans and specifications.

...

5. Confirmation that if the Notice is complied with the satisfaction of the Council, then that part of the Development Application as specifies that the building must be erected in conformity with the approved plan and specification will have been satisfied.

21 On 12 September 2006 the council replied as follows:

In response to your letter of 28 August 2006 concerning the above matter, please be advised that:

1. Any works proposed to be carried out as required by Notice No. 38970 are to meet the design conditions as approved at the date of Development Consent No. 599/2001.

2. Council will rely upon the submission of an Engineer’s Certificate by the Owner’s engineer or the shed Fabricator’s engineer, that certifies that remedial works to the existing structure as detailed in 2(I)(i) – (v) and (II)(i) – (ii) of your letter have been completed to the satisfaction of the engineer and that the structure meets the standards set out in the development consent. See further paragraph 6.

3. Following completion of the remedial works an inspection of the structure may be arranged by contacting our Customer Services Section on 4221 6111.

...

6. If the requirements of Notice No. 38970 are complied with, then that part of the development consent as specifies that the building must be erected in conformity with the approved plans and specifications will have been satisfied.

7. In order to obtain an Occupation Certificate, all conditions of the consent must be satisfied.

22 Brooks Building also retained a consulting engineer, Mr Sherson of Formmen Pty Ltd, to provide it with reports for use in the District Court proceedings. One such report was given on 30 January 2007 and is referred to in the terms of settlement. Mr Sherson’s report included the following:

In my opinion the concerns raised by David Thomas can be addressed by ‘replacing the main internal frames within the building, with frames fabricated from 200x100x6.3 RHS similar to the attached sketch, designed for the exposure at the top of the hill, and to be designed and certified by us. Bracing of 16mm dia rod would be provided to all wall and roof bays. Some repair at the ridge joint would be undertaken at end frames. This would provide a frame for the building to resist wind loadings to AS 1170.2 including topographic factors.

23 On 2 February 2007 Mr Sherson reported that:

Following representations made in the above matter, I wish to advise that I can design and certify replacement framing for grid lines 2 and 3 in the above project, and repairs to frames on grid lines 1 and 4, and additional bracing throughout. This will be designed to meet the exposure on the site including topographic factors. I can inspect and certify the completed replacement building works on completion.

Preliminary design indicates a replacement frame of 200x100 RHS would be adequate, subject to a final design check.

24 There were lengthy negotiations between the parties’ solicitors in relation to the proposal for the carrying out of remedial works to the shed. That material might show what each party hoped to achieve by the compromise of the District Court proceedings. But evidence of what the parties hoped or expected to achieve by the terms of settlement is inadmissible to construe the terms (Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352).

The Terms of Settlement

25 On 16 February 2007 the parties entered into terms of settlement which included the terms set out below. In those terms a reference to the plaintiff is to Mr McDonald, the present defendant, and the reference to the first and second defendants is to Brooks Building and Mr Woodward, the present plaintiffs. The settlement was made without admissions. The terms included:

Verdict

1. Verdict for the Plaintiff against the First and Second Defendant in the sum of $65,000.

Interest

2. In the event of the verdict or judgment being set aside (as outlined below) interest is not to run on the verdict amount. Otherwise interest will run from date hereof.

...

Judgment

6. Upon an order of the court being made as to costs (as outlined above) Judgment will be entered in favour of the Plaintiff in the sum of $65,000 plus whatever order the Court makes in regard to costs.

Stay of Judgment

7. Judgment is stayed upon condition that the Defendants shall perform the works outlined below within four months or within such reasonable extension as the parties may in all the circumstances agree in writing.

Setting Aside Judgment

8. In the event that:-

a. the Defendants perform the works (as outlined below), and

b. the Defendants obtain the certificate or confirmation from the council (as outlined below), and

c. Judgment has been entered in favour of Plaintiff with an order (if any) as to costs,

then the Defendants shall be entitled to set aside the Judgment for the verdict amount exclusive of costs pursuant to Rule 36.15(2) of the UCPR in accordance with the form of agreed Consent Orders signed for and on behalf of the plaintiff a copy of which is attached hereto.

9. The Defendants shall give 7 days’ notice of the intention to file the Consent Orders for the setting aside of judgment.

...

The Works

11. Remedial works to the plaintiff’s shed the subject of these proceedings.

(i) Remove the columns A2, A3, B2, B3.

(ii) Re-supply A2 and A3, and such other columns as may be necessary to comply with these terms.

(iii) Install A2, A3, B2, B3.

(iv) Install extra bracing on grid line A, B and 4

(v) replumb the building

(vi) Install bracing above roller doors at grid line 1.

12. Additional remedial work

(i) Weld and brace the roof trusses according to the nominated engineer’s certification.

(ii) Supply and install new guttering to the western wall, or otherwise as the nominated engineer deems necessary.

13. Additional remedial work as detailed in Mr Sherson’s report of 30 January 2007.

(i) replace the main internal frames within the building, with frames fabricated from 200x100x6.3 RHS similar to the sketch provided in the report, designed for the exposure at the top of the hill, and to be designed and certified by the nominated engineer.

(ii) Bracing of 16mm diameter rod is to be provided to the wall and roof bays.

(iii) Repair at the ridge joint to be undertaken at end frames.

(iv) The remedial work to be conducted to enable the building to resist wind loadings to AS1170.2 including topographic factors.

14. Additional remedial work as required by the Plaintiff.

(i) Screwing down of sheets

(ii) Re-sheet to nominated engineer’s (defined below) requirements where necessary.

(iii) replacement of damaged alsynite panels on roof.

(iv) Rectify tracks on roller door (note damage to door arising from break-in/vandalism not to be rectified)

(v) Removal of columns which have already been supplied to the site (B2 and B3) as are no longer necessary.

15. All works that are required to be performed are to comply with Australian Standard AS1170.2 and the requirements of the council.

Performance of the Works

16. The parties agree that the time for completing the rectification works above mentioned shall be extended by one day for everyday on which it is not possible for the Defendants to work on the Plaintiff’s shed in consequence of inclement weather and/or high winds and the certificate signed by the nominated engineer (defined below) given in good faith shall be conclusive evidence on this issue.

17. The plaintiff is to give the first and second defendants full and free access to the site at all reasonable times.

Engineers Certification of the Works

18. For the purpose of certification of the above works an engineer is to be appointed by the defendants with written approval of the plaintiff (the ‘nominated engineer’).

19. It is noted that Mr Ross Sherson has been nominated as the engineer and is approved by the Plaintiff.

20. In the event of there being an alternate nominated engineer and there is no agreement between the parties of that engineer then an engineer is to be appointed by the President for the time being of the Institution of Engineers.

21. The defendants will be responsible for the nominated engineer’s costs.

Council Approval

22. The works are to be undertaken to enable compliance with Shellharbour City Council’s (‘the council’) letter of 12 September 2006 such that the engineer is able to certify that the remedial works to the existing structure have been completed to the satisfaction of the engineer and that the structure meets the standards set out in development consent 599/2001 and AS1170.2.

23. After the works have been completed the nominated engineer’s certificate is to be provided to council to enable the council to issue a certificate or written confirmation that the requirements of its Notice No. 38970 have been complied with in respect of that part of the development consent that specifies that the building has been satisfactorily erected in conformity with the approved plans and specifications.

Demolition of the Shed

24. In the event the council does not issue the certificate or confirmation referred to in clause 23 above after a period of 4 months from the date hereof, the Defendants shall be entitled to demolish the shed and remove their materials from the site within a period of 1 month following payment by the First and/or Second Defendants to the Plaintiff, of the judgment debt (if any), together with interest accrued thereon (if any), and the cost (if any) ordered by the court.

25. Nothing shall oblige the Defendants so to do and the Plaintiff shall have no recourse to require the Defendants to undertake such demolition or removal at their costs or otherwise.

26. In the event of the shed not being removed by the Defendants within 1 month of the Defendant’s entitlement to so remove the shed, then the ownership of the shed will revert to the Plaintiff.

26 The parties could not agree on costs. They agreed that the District Court should determine all issues of costs. The District Court held that there should be no order as to costs of the District Court proceedings.

27 Clause 11 refers to the removal and installation of columns A2, A3, B2 and B3. The site of these columns is shown on the sketch plan of Mr Rickard. In addition to those columns, end columns had been constructed. The terms of settlement did not expressly provide for work to be done in relation to the end columns unless, as the present defendant contends, such work was required by the requirement to replumb the building or otherwise to carry out works to meet the standards set out in the development consent 599/2001, or to comply with the requirements of the notice 38970.

28 Clause 13(i) provided for the replacement of the main internal frames with frames fabricated from 200x100x6.3 RHS (rectangular hollow section). That is a different design from the original open web design shown in the engineer’s details submitted to the council in connection with the development application. Mr Thomas agreed that an RHS frame of 200x100x6.3 was not comparable to an open web frame, although he would not be drawn into agreeing that the RHS frame would necessarily be able to withstand stronger wind loads.

29 In fact, the internal frame constructed in 2007 (after the terms of settlement were agreed) did not use 200x100x6.3 RHS. After the terms of settlement were signed, Mr Sherson prepared a design for a replacement frame to make the frame section bigger and give it more strength. He prepared a drawing No. 03113 for the replacement frame using 250x150x5 RHS. He advised Mr Woodward of Brooks Building that he had made the frame section bigger to give it more strength and to allow the original bracing to be utilised. The original bracing was strap bracing rather than rod bracing as referred to in clause 13(ii). Mr McDonald was not consulted on these changes.

30 Brooks Building fabricated the replacement frames in accordance with Mr Sherson’s drawing No. 03113. A company, Evermill Pty Ltd, was retained to remove the old frames and install the new frames and bracings. Another contractor, Spackman & Kentwell Roofing, was engaged to replace the sheeting. Mr Sherson was nominated as the engineer for the purpose of certifying the works. No other person was nominated by Mr McDonald. On 17 May 2007 Mr Sherson provided the following certificate:

“ From inspections made during reconstruction and on 15 May 2007, I confirm that the framework for the building has been reconstructed to requirements as shown on Formmen Drawing 031113 of February 2007, designed for Category 2 wind exposure 41m/s wind with a topographic multiplier factor of 1.36 (M) which relates to the hilltop exposure of this site.

In relation to the Terms of Settlement, works under clauses 11, 12, 13, and 14 have been satisfactorily completed. A heavier frame was specified than mentioned in Clause 13 (i), allowing the satisfactory use of strap bracing, in a manner which reduced loads on end wall frame ridge joints. The works have been completed to enable the building to resist wind loadings to AS 1170.2 including topographic factors.

The works have been completed to comply with the standards set out in Development Consent 599/2001 and AS 1170.2, in compliance with Shellharbour Council Notice No 38970.

31 On 28 May 2007 the Shellharbour City Council issued a further notice following an inspection of the framework on 24 May 2007. The notice did not indicate that the inspection was satisfactory. However, it did specify as follows:

“ 1) Structural engineer’s certification has been received by council and satisfies the requirements of inspection sheet No. 38970 in respect of certifying the structural adequacy of the shed’s framework and to suitability for wind terrain.

2) Roller door is operational.

32 The remaining paragraphs included aspects in which the inspection was not satisfactory:

3) Sealing of windows could not be determined, but at time of inspection no evidence of water leakage apparent.

4) Stormwater disposal to be completed in accordance with AS3500. Certification required. (per Condition 5).

5) Engineers certificate for piers & slab to be submitted.

6) Location of door on north-west side of building not per the approved plan. Door on south-east side deleted without approval. Comply with stamped approved plans.

7) Identification survey, level & height ... survey & remain outstanding as required per condition ...

8) Comply with condition 20 of the ...-landscaping requirement.

33 The plans referred to in para 6 were the plans referred to in the council construction certificate 599/2001. Those plans contained an internal contradiction in respect of the doors for the shed. Sheet 1 showed that there were to be two doors: one under an awning to the south (although I was told by counsel that the direction is to the north, but the evidence is to the contrary) and the other on the eastern wall (if the awning is to the south). Sheet 2 shows a sketch of those two doors. Sheet 4 shows a further door to be located on the western wall, but no such door is shown on the plan which is sheet 1.

34 The building as originally constructed had only two doors and no new door was installed in the course of the remedial works. No such work was described in clauses 11, 12, 13, or 14. There was no allegation in the District Court proceedings that Brooks Building had breached its contract by not installing a third door.

35 Mr McDonald also complains that one of the doors was not located in the correct position as shown on the plan. That was not a matter specifically addressed in the terms of settlement, but in the District Court proceedings it was a particular of the alleged breach of contract that the door to the shed had been constructed in the wrong place.

36 On 19 June 2007 the council wrote to Mr Sherson advising that the outstanding work comprised:

1. Complete installation of stormwater drainage in accordance with AS 3500. Submit a report from a licensed trades person certifying this work has been completed in accordance with AS 3500 as required by Condition No. 5 of the development consent.

2. Install doors to the north west and south east walls of the building per the approved development plans.

3. Submit a survey from a registered surveyor confirming the siting of the building is a minimum of 4.5m from the front boundary per Condition No. 18 of the development consent.

4. Plant trees and shrubs to the north west, north east and south west sides of the building as required by Condition No. 20 of the development consent.”

37 On 25 February 2008 an officer of the council, Ms Conny Gissel, met with Mr McDonald and Mr David Thomas at the property to carry out an inspection of the shed. She reported on the results of that inspection in a letter of 29 February 2008 as follows:

On 25 February 2008, Council officers held discussions with yourself and David Thomas from ATB Engineers at the above property in relation to the erection of a farming shed approved under Development Application No. 599/2001.

During our meeting, both yourself and Mr Thomas raised various

workmanship

issues relating to the shed construction and repairs to this structure. Specific issues raised and observed by Council officers include:

a. bolts not present in top half of guide rail brackets of south-eastern side of roller door with brackets tack welded

b. internal water penetrating through window surrounds when tested using watering can

c. missing nuts, missing bolts, and loose nut fittings in various locations

d. the screws used in lieu of bolts near top of door frame on hinge side of north-western door

e. vertical alignment of shed not parallel with plumb line erected near vertical member on south-western side of building

f. loose cross bracing on north-western wall of building

g. no cross bracing on wall above roller door

h. deformed wall bracing units and adequacy of method of fixing to framework

i. deformed vertical supports and method of installation of these supports installed at north-eastern corner of building

j. deformed external sheet cladding and insufficient tightening of screws

k. rust forming on various parts of structure including tack welds on brackets of guide rail for roller door.

To date, Council has not issued a satisfactory final inspection result in relation to the completion of the shed.

You are advised the occupation and use of the farming shed cannot commence until an occupation certificate is issued. An occupation certificate will not issue until Council is satisfied the shed is suitable for occupation or use in accordance with its classification under the

and conditions of the development consent are met.

Council has received a report prepared by D R Sherson and dated 17 May 2007, certifying the structural adequacy and satisfactory completion of remedial work undertaken on the shed. Matters that are outstanding from the development consent and prevent the release of the Occupation Certificate are:

1. complete installation of stormwater drainage in accordance with AS 3500. Submit a report from a licensed trades person certifying this work has been completed in accordance with AS 3500, as required by Condition No. 5 of the development consent

2. install doors to the north-west and south-east walls of the building per the approved development plans

3. submit a survey from a registered surveyor confirming the siting of the building is a minimum of 4.5 metre[s] from the front boundary, per Condition No. 18 of the development consent

4. plant trees and shrubs to the north-west, north-east and south west sides of the building, as required by Condition No. 20 of the development consent.

38 No submissions were made about the fact that in its letter of 29 February 2008 the council said that no “final inspection result” had been issued with respect to the completion of the shed. Clause 23 referred to the issue of a certificate or confirmation in respect of a particular matter. It did not require the issue of a final certificate that the shed had been completed satisfactorily.

39 None of the matters listed in paras a–k was treated by the council as a defect that needed correction to comply with the terms of the development consent or to obtain an occupation certificate. The only matter identified as outstanding from the development consent and which arguably was the responsibility of Brooks Building was item no. 2, namely the installation of doors to the north-west and south-east walls of the building as per approved development plans.

Allegations of Breach

40 Mr McDonald alleges that the remedial works did not comply with the terms of settlement. He alleges:

5 The Defendant McDonald says that, in breach of the Orders that were made pursuant to the Settlement Agreement, the Plaintiffs Brooks/Woodward failed to perform and carry into effect the Works:

PARTICULARS

a) In breach of Orders 11(ii), 11(v), 13(i) and 13 (iv) the Plaintiffs Brooks/Woodward failed to remove and replace bent and incorrectly fabricated end frames within the shed;

b) In breach of Order 11(v) the Plaintiffs Brooks/Woodward failed to replumb the shed;

c) In breach of Orders 11(ii) and 11(v) the Plaintiffs Brooks/Woodward installed new steel frames identified by the parties as A2, A3, B2 and B3, but each of such frames was out of plumb;

d) The Plaintiffs Brooks/Woodward installed structural bracing which did not comply with Orders 11(iv), 11(vi), 13(ii) and 13(iv).

e) In breach of Order 13(iv) the Plaintiffs Brooks/Woodward failed to tension the structural bracing which they installed;

f) In breach of Order number 12(ii) the Plaintiffs Brooks/Woodward attached residential guttering without downpipes to the western edge of the shed roof;

g) In breach of Order 13(ii) and 13(iv) the Plaintiffs Brooks/Woodward failed to provide bracing of 16mm diameter rod to the wall and roof bays;

h) In breach of Order 13(iii) and 13(iv) the Plaintiffs Brooks/Woodward failed to repair the ridge joints at the end frames;

i) In breach of Orders 13(iv) and 14(i) the Plaintiffs Brooks/Woodward failed to screw down the steel sheeting upon the shed;

j) In breach of Order 14(iv) the Plaintiffs Brooks/Woodward failed to rectify the tracks on the roll-a-door at the front of the shed;

k) In breach of Orders 15 and 22 the Plaintiffs Brooks/Woodward failed to locate a personnel door (now on the north west side of the shed) at the place required by the Council approved building plan;

l) In breach of Orders 15 and 22 the Plaintiffs Brooks/Woodward failed to reposition the structural purlins in the ‘toes down’ position in accordance with the council approved Building Plan;

m) In breach of Orders 13(iv), 15 and 22 the Plaintiffs Brooks/Woodward failed to reconnect purlins which had become disconnected from the structural framework; and

n) In breach of Orders 15 and 22 the Plaintiffs Brooks/Woodward failed to repair and replace ceiling insulation which was torn during the course of the remedial Works.

41 The plaintiffs’ primary case is succinctly summarised in its statement of claim as follows:

In accordance with Clause[s] 8 and 22 of the Agreement,

(a) by about 15 May 2007, the Plaintiffs had performed the works as required by the Agreement to enable compliance with the Council letter in that the Engineer was able to certify, by letter dated 17 May 2007 that the remedial works had been completed to the satisfaction of the engineer and that the structure met the standards set out in development consent 599/2001 and AS 1170.2;

(b) on or about 25 May 2007, the Plaintiffs had obtained the certificate or confirmation from the council as required by the Agreement.

Conclusiveness of Engineer’s Certificate

42 The plaintiffs submitted that Mr Sherson’s certificate set out at para [30] above is conclusive evidence that the rectification works had been satisfactorily performed. They submitted that the terms of settlement were intended to bring finality not only to the existing dispute but to possible future disputes, and that this was achieved by the engineer’s certificate being the mechanism for determining whether the rectification works had been carried out satisfactorily. Therefore, the plaintiffs say that it is irrelevant whether, as the defendant alleges, the remedial works were not carried out in compliance with the terms of settlement. The plaintiffs acknowledge that there were some departures from the terms of settlement, but say that the departures were an improvement on what had been agreed upon.

43 The defendant disputes that the engineer’s certificate is conclusive. But he says that even if this were the proper construction of the terms of settlement, the certificate could not be conclusive evidence that the works had been satisfactorily performed unless it were given in accordance with the provisions of the agreement (Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335-336).

Is the engineer’s certificate conclusive?

44 Many cases decided on different forms of building contracts have considered whether an obligation to supply materials or do work in accordance with the terms of the contract, and to the satisfaction of a third party, imposes cumulative obligations, or whether the third party’s satisfaction is determinative of the performance in accordance with the contract (see generally IND Wallace, Hudson’s Building and Engineering Contracts, 11^th ed, 1995 at [6-046]-[6-059]; and in particular National Coal Board v William Neil & Son [1985] 1 QB 300). No authority in this area was cited by either party presumably because in each case it is a question of the construction of a particular contract what effect is to be given to a certificate (see also RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1992) 11 BCL 74 at 128).

45 Two things are required for the defendants to be entitled pursuant to clause 8 to set aside the judgment. They are that the defendants performed the works as outlined in the terms of settlement, and obtained a certificate or confirmation from the council as outlined in the terms. Clause 18 provided that “the above works” were to be certified by the nominated engineer. The defendant did not dispute that the works referred to in clause 18 included at least all of the works listed in clauses 11-14. But what was to be the purpose or effect of such certification? Only one term referred to a certificate from the engineer being conclusive evidence and that is clause 16. Under clause 16 the certificate of the engineer is conclusive evidence only “on this issue” that is, the issue specified in the clause, namely, whether the defendants would be entitled to an extension of time by reason of inclement weather or high winds. The engineer’s assessment was relevant to other matters. The scope of the work to be performed in some areas would depend upon the engineer’s assessment. That is the case in relation to welding and bracing of roof trusses under clause 12(i), installing new guttering pursuant to clause 12(ii), the replacement of internal frames according to the design and certification of the engineer pursuant to clause 13(i), and re-sheeting pursuant to cl 14(ii). There is no clause that makes the engineer’s certification that the works have been carried out in accordance with the terms of settlement conclusive.

46 The purpose of obtaining the engineer’s certificate appears from clauses 22 and 23. His certificate was required so that it could be provided to the council to enable the council to issue a certificate or confirmation in accordance with clause 23. The obtaining of such a certificate or confirmation from the council was only one of two matters required to be done for the defendants to be entitled under clause 8 to have the judgment set aside. There is therefore no implication that the purpose of the engineer’s certifying the work in accordance with clause 18 was to determine conclusively whether the works had been performed as required by clause 8(a).

47 The learned author of Hudson’s Building and Engineering Contracts, 11^th ed at [6-059] observes that:

Contrary to what was submitted in the 10

^th

edition (where it was suggested that the modern tendency in construction contracts was to accord satisfaction provisions overriding force), it seems in the light of more recent cases that satisfaction, approval or certificate provisions, in the absence of an arbitration clause, will not, without the clearest wording, deprive either party of their common law rights ...

48 In other words, there is no presumption or implication from the fact that clause 18 provides for the engineer to certify the works that the certificate is to be conclusive. Given the purpose for which the certificate is required and that the terms of settlement deal expressly with an engineer’s certificate being conclusive in one instance, and one instance only, I think it clear that the certificate is not conclusive that the plaintiffs performed the works in accordance with the terms of settlement. Nor would it be sufficient if a certificate or confirmation from the council was provided which complied with clause 23 if the plaintiffs did not perform the works as required by the terms of settlement. That is because the requirements of paras a. and b. of clause 8 are cumulative.

49 It follows that the second issue identified in para [6] above does not arise.

A. Building Out-of-Plumb

50 The first alleged breach (see para [40]) is that the plaintiffs failed to remove and replace bent and incorrectly fabricated end frames within the shed. This is related to the second alleged breach that the plaintiffs failed to replumb the shed. There is no express obligation that the plaintiffs remove and replace the end frames. To the contrary, clause 11 dealt expressly with the removal of four internal columns. The omission of any obligation to remove and replace end frames implies that that work was not required unless it was necessary in order for the plaintiffs to comply with the other terms.

51 As a matter of ordinary English, to replumb the building would mean to make it vertical again. The use of the word “replumb” rather than “plumb” would indicate that the building was to be brought into the same vertical alignment as it had when originally constructed, or otherwise within generally accepted tolerable limits. Mr Sherson gave evidence that he measured the uprights with a spirit level and found that they were “within a reasonable tolerance”. He did not record the measurements. He said they were very close to the limits set down in standard AS4100 (a standard dealing with steel structures) and were within a reasonable tolerance for a farm shed.

52 The reference to AS4100 is a red herring because both Mr Sherson and Mr Thomas said that the standard was not addressed to the type of building in question in the present case. The standard is applicable to much larger multi-storey buildings. Nonetheless, it was Mr Sherson who referred to the standard, and whilst he said it was not applicable to the uprights in the plaintiff’s shed, he said it was a reasonable industry standard applicable to the work.

53 Mr Sherson did not keep his measurements but said that the deflection in column A1 was about 25 millimetres from the vertical; that the deflection in column A2 was about 25-30 millimetres; that he would accept Mr Thomas’ measurement that column A3 was 27 millimetres out of vertical; and that he had no record of column A4. He said that he found the columns to be somewhere about 25 millimetres out of vertical. The height of the columns is 5.4 metres (Woodward, 27/11/08, para 26). The clause in AS4100 to which Mr Sherson referred was clause 15.3.3. It provides that:

“ The alignment and plumbing of a compression member shall be in accordance with both of the following requirements:

(a) the deviation of any point above the base of the compression member from its correct position shall not exceed height over 500 or as follows, whichever is the lesser:

(i) For a point up to 60m above the base of the member ... 25 mm;

...

54 Mr Sherson contended that because the uprights were out of alignment by about 25 millimetres, they complied with the requirements of clause 15.3.3 (a)(i). However if the clause were applicable, the maximum allowed deviation would be the height of the column divided by 500, or approximately 11 millimetres.

55 There was nothing in the terms of settlement which expressly incorporated the requirements of AS 4100. Given that both experts said that the standard was written for different types of buildings, the fact that there was non-compliance with clause 15.3.3 does not in itself establish that the building was out of plumb. However, Mr Sherson’s assertion that the building was properly plumbed does not derive any support from clause 15.3.3.

56 Mr Thomas said that the building was not replumbed and was still leaning to the east. He inspected the building on 30 June 2007, 30 July 2007 and 7 November 2007. He said that he took measurements on 7 November 2007 and found that the southeast corner of the shed was 36 millimetres out of plumb, the northeast corner was 28-30 millimetres out of plumb, and the southwest corner was 36 millimetres out of plumb. Earlier measurements taken, presumably on 30 June 2007 and recorded in a report of 12 July 2007, stated that column A1 was 36 millimetres out of plumb, A2 was 63 millimetres out of plumb, A3 was 27 millimetres out of plumb and A4 was 45 millimetres out of plumb. He expressed the view that whilst a tolerance of 10 millimetres was acceptable, those out-of-plumb dimensions were unacceptable. Mr Sherson said that he did not accept Mr Thomas’ measurements and that a photograph of Mr Thomas measuring the deflection in Column A1 showed that the bubble in the spirit level he was using was nowhere near the middle and that this exaggerated the deflection. That question was not pursued further either in cross-examination of Mr Sherson or in cross-examination of Mr Thomas.

57 Mr Sherson deposed that:

At the time of the Terms of Settlement, the shed had a lean from West to East resulting from the building having been pushed by high winds. This lean has been corrected. The present alignment of the shed is based upon the dimensions and shape of the existing concrete slab laid by the Defendant. The slab is both; out of square and out of level in a sinusoidal manner. The defendant had tried to level his own slab mistake by cementing over the frames of the existing structure after the frames had been stood; locking the frame positioning into place.

58 Mr Sherson said that prior to doing the remedial works the building was approximately 300-400 millimetres out of alignment, and the frame was pulled back to an appropriate level so far as was possible in the circumstances of the slab being uneven. He said that what was required to replumb the building had to accommodate the fact that the slab was uneven.

59 Mr McDonald disputed this. He said that when the shed was originally constructed, the erector drilled holes into the concrete slab and fixed anchor bolts into the holes using a glue-type substance called “chemset” and adjusted the nuts of each anchor bolt such that each nut was level with each other nut. The steel columns were fixed to the anchor bolts by screwing down each “top nut” so that the foot of the frame was affixed to the anchor bolt at the preset level of the “underbolt”. In this way the unevenness of the slab did not cause the steel columns for the web frame to be out of vertical alignment. The unevenness was accommodated by the method by which the anchor bolts were installed. Mr McDonald said that the new columns A2, B2, A3 and B3 (which were of course of completely different design) were affixed to the concrete slab using new anchor bolts and that “adjustor nuts” had not been placed beneath any of the feet of the columns in the same way as the builder had done in 2003.

60 Mr McDonald was not cross-examined on this evidence and there was no contrary evidence. I accept it.

61 Given that Mr Sherson did not keep a record of the measurements he made, and given also the unsatisfactory reference he made to AS4100 as supporting a 25 millimetre deflection being within a proper tolerance, I accept Mr Thomas’ evidence of the extent to which the columns in the corners of the building are out of vertical alignment. I accept Mr Thomas’ opinion that that level of deflection is not within an acceptable level of tolerance. The plaintiffs did not attempt to answer the evidence of Mr McDonald which was to the effect that unevenness in the slab could be compensated for in the way in which new columns were erected. There was no evidence from the plaintiffs that adjustments to compensate for unevenness in the slab could not have been made when anchoring the new columns to the slab in the same way as had been done when the original columns were installed. It follows that I do not accept that the content of the obligation to replumb the building was modified or affected by the unevenness of the slab. I therefore conclude that the plaintiffs were in breach of clause 11(v) by not replumbing the building.

62 The seriousness of the breach is a different matter.

63 The out-of-plumbness does not mean that the building does not comply with the requirements of AS1170.2 dealing with its ability to resist wind loads. The council does not require any work to be done because the building is out of vertical alignment. The building is intended for use as a farm shed and if it is structurally sound there is little reason to doubt that it will be fit for that purpose. My attention was not drawn to any evidence that would indicate how the building’s being out of alignment would cause any real problem to the defendant. Mr Thomas said that a result of the building not having been replumbed is that the doorframe of the personnel door near the southwest corner is some 30 millimetres out of plumb with the result that the door scrapes on the concrete when opened. He also said that there is an open joint between top flanges on the new column A2 which is caused by the building not being plumbed and that this was not acceptable. However, there was no elaboration of this. He did not say that this affected the structural integrity of the building or that it would have any particular consequence.

64 I return to the first allegation of breach, namely the failure to replace bent end frames. Mr McDonald said that the frames were bent and were leaning towards the east. I have found that the building was not replumbed as required by clause 11(v). It does not follow that to have replumbed the building the plaintiffs were required to replace the end columns. That work would be required if the removal of the end columns was necessary in order to replumb the building. However there was no such evidence. The highest the defendant’s evidence went in this respect was a comment by Mr Thomas that “however, ‘such other columns as may be necessary to comply with these terms’ have not been supplied. The incorrectly fabricated end columns and rafters (see original report 10 February 2004) have not been touched and still remain as was and bending failure at the apex of rafter joint both ends, expressed in later reporting, are still unattended to.”

65 Mr Thomas’ original report of 10 February 2004 was not in evidence and I do not understand Mr Thomas to have said that the resupply of the end columns was necessary if the building were to be brought into proper vertical alignment. Certainly he did not say that expressly. The fact that the parties did not provide expressly in the terms of settlement for the removal of the end columns would suggest that they were of the view that that work would not be required in order to replumb the building. Presumably they accepted Mr Rickard’s opinion quoted at para [17] above.

66 Mr Sherson said that the end frames had a slight deformation at the ridge in that the top and bottom cords of the truss had deflected two or three millimetres from a straight alignment because of the positioning of the bracing. He said that by the time the end walls were braced the frames did not require replacement. That level of deflection would not mean that the end frames caused the building to be out of plumb.

67 I do not accept that the first allegation of breach has been made out.

68 The third allegation of breach in particular (c) does not add to the second.

B. Bracing

69 The fourth, fifth and seventh allegations of breach were that the plaintiffs installed structural bracing which did not comply with clauses 11(iv), (vi), 13(ii) and 13(iv), failed to tension the structural bracing which was installed, and failed to provide 16 mm rod bracing to wall and roof bays. Bracing was not installed above the roller doors at grid line 1 (clause 11(vi). Diameter rod bracing was not provided. Rather, strap bracing was used (clause 13(ii)). This was because Mr Sherson advised that the use of the bigger frame than that stipulated in clause 13(i) would permit strap bracing rather than rod bracing to be used. No attention was given by any witness for either side to the significance of bracing not being installed above the roller doors. Mr McDonald agreed that he did not expect that bracing to be installed. He agreed that that work could not be done because of the replacement of the door.

70 The plaintiffs did install extra bracing on grid lines A, B and 4 (see clause 11(iv)). Mr McDonald’s allegation was not that extra bracing had not been installed but that it had not been properly installed. Mr Thomas said that it had been inadequately fixed and was flapping loose. So far as particular (d) is concerned, the plaintiffs breached clause 11(vi) by not installing bracing over the roller doors at grid line 1 and breached clause 13(ii) by not installing 16 diameter rod bracing to the wall and roof bays. They did not breach clause 11(iv) by failing to install extra bracing on grid line A, B and 4, although they may have breached the clause by failing to tension the bracing which was installed. I deal with that below. There is no evidence that the failure to install the bracing (or the failure adequately to tension the bracing) was a breach of clause 13(iv), that is, a failure to enable the building to resist wind loadings to AS1170.2 including topographic factors. Mr Thomas did not say that the failure to install bracing in accordance with the terms of settlement meant that the building was not constructed according to AS1170.2. I asked counsel for the defendant to identify the respects in which it was contended that the works failed to comply with that standard. Counsel did not identify any failure to comply with that standard.

71 Whilst the failure to install bracing in accordance with clauses 11(vi) and 13(ii) was a breach of the terms of settlement, I accept Mr Sherson’s opinion that the bracing that was installed would be adequate to provide the building with sufficient strength. At least if the bracing installed was properly tensioned, there is nothing to suggest that the defendant would be in a worse position than that in which he would have been had the bracing and frame been installed as contemplated by the contract. The fact that the bracing was loose is of more concern. Mr Woodward said that the plaintiffs did tension the structural bracing and that at the time of his inspection on 25 May 2007 the structure was as tight as possible (affidavit para 64). Mr Sherson said that on his inspection on 15 May 2007 he noted that the structure bracing had been tensioned. When Mr McDonald inspected the shed on 30 May 2007 he noted that the strap bracing which had been installed was not tensioned and he could twist and bend it with his hands. The fact that Mr McDonald was able to twist the strap bracing by hand would not of itself indicate that the strap bracing was not taut. Mr Sherson said that such bracing is naturally torsionally flexible and its being able to be twisted did not affect its tension capability.

72 The photographs taken by Mr Thomas on 30 July 2007 include examples of loose wall bracing as well as loose or inadequately tightened roof bracing. His photographs also show examples of bent strap bracing which he says rendered the bracing useless. No plausible explanation was advanced by the plaintiffs as to how the bracing, if properly tensioned in May 2007, would have become loose by 30 July 2007. Given that Mr Thomas’ observations were corroborated by photographs, and given the absence of an alternative explanation for the bracing becoming loose (it not being suggested that the building was subjected to loads that might have distorted the frame and affected the integrity of the bracing), I conclude on the balance of probabilities that the bracing when installed was not taut, but loose.

73 The defendant did not plead that the installation of loose bracing was in breach of any implied term, such as a term that the works be done in a proper and workmanlike manner. The alleged breach arising from failure to tension the structural bracing was said to be a breach of clause 13(iv), that is, that the work be conducted to enable the building to resist wind loadings to AS1170.2 including topographic factors. Whilst I am satisfied that the bracing was loose, the evidence does not establish that this was a breach of clause 13(iv). Although Mr Thomas said that the bracing had departed from the agreement and that what was installed had not been installed correctly, he did not say that this meant that the building was unable to resist the wind loadings. Accordingly, whilst I conclude that the plaintiffs failed to tension the structural bracing, I do not conclude that this was a breach of clause 13(iv). Again, it should be observed that whilst the council noted that there was loose cross-bracing on the northwest wall of the building and no cross bracing on the wall above the roller door, it has not required that work to be fixed.

74 Mr Woodward told Mr McDonald that if Mr McDonald wanted the bracing re-tightened he was happy to send someone over to do so. That offer was not accepted. I infer from this that the tightening of the bracing would not be a major exercise. Mr McDonald did not adduce evidence that it would be difficult or expensive to tighten the bracing.

75 The plaintiffs’ witnesses were cross-examined in relation to the work described in clause 12(i). It was established that the plaintiffs did not weld and brace roof trusses. The reason for that is that they were replaced with new frames. (T52-53). The defendant did not plead a breach of clause 12(i).

C. Downpipes

76 The breach alleged in particular (f) was that the plaintiffs breached clause 12(ii) by attaching residential guttering without downpipes to the western edge of the shed roof. Clause 12(ii) required the installation of guttering only as the engineer deemed necessary. It made no reference to the installation of downpipes. The reason for this was that when Brooks Building quoted for the job in 2001, it was on the basis that downpipes would not be installed, but that PVC piping would be used to take water from the gutters to tanks to be installed by Mr McDonald. There is no implication from clause 12(ii) that the obligation to construct guttering included downpipes. In Mr McDonald’s statement of claim in the District Court he made no complaint about the non-supply of downpipes. I do not conclude that there was any breach of clause 12(ii).

D. Repair of Ridge Joints

77 The breach alleged in particular (h) is that the plaintiffs breached clause 13(iii) and (iv) by failing to repair the ridge joints at the end frames. Mr Sherson said that the reason the work was not done was because the bracing of the end walls eliminated stress in this joint and welding may have damaged adjacent surfaces. The non-repair of the joint was a breach of clause 13(iii) of the terms of settlement. But I accept Mr Sherson’s evidence to the effect that the work was not necessary for the structural integrity of the building. That is to say, it is not a breach which causes any material disadvantage to the defendant.

E. Screwing Down of Steel Sheeting

78 The next breach alleged in particular (i) is that the plaintiffs failed to screw down the steel sheeting on the shed as required by clauses 13(iv) and 14(i). Clause 14 (i) required the screwing down of sheets, but there was no evidence that any failure in this respect was a breach of clause 13(iv). There is no evidence that the alleged failure to screw down sheets disabled the building from being able to resist the wind loadings to AS1170.2.

79 Almost no attention was paid during the hearing to whether or not the sheets were screwed down. Mr McDonald deposed that the iron cladding which formed the outer wall of the shed had not been screwed down and he was able to turn many of the screws which were attached to cladding to the framework with his fingers. He was not cross-examined on that evidence. Mr Thomas said that only eight sheets on the roof had been screwed down and other sheets on the roof and the walls had not been screwed down. It was his opinion that all steel sheeting needed to be screwed down properly. He said that the northwest corner trim was unfixed and was flapping. The plaintiffs relied on the fact that the sheeting had been fixed and certified by a reputable contractor. Mr Sherson said that he had no knowledge of any loose screws. No evidence was called from the contractor, Spackman & Kentwell Roofing. They simply certified that they completed the rectification works and that the materials they used had been installed to the manufacturer’s recommendations. That certification, when measured against the evidence of witnesses who had examined the screws, carries little weight. I conclude that whilst sheets had been screwed down by the contractor, they had not been properly screwed down.

80 The defendant did not plead that the work had not been done in a proper and workmanlike manner. The particular breach alleged, namely the failure to screw down the steel sheeting, has not been established. I would readily accept that it was an implied term that the sheeting be screwed down in a proper and workmanlike manner and the evidence would establish a breach of such a term. Although there was a paucity of evidence on the subject, I would infer that the breach could be remedied by having a workman attend the site and re-screw the sheeting. There was some evidence that the screw holes had been elongated, but it was not established that the elongation of the screw holes either was the result of a breach of contract on the part of the plaintiffs, or that it would prevent the defendant from readily rectifying this defect.

J. Roller Door

81 Particular (j) alleged that the plaintiffs failed to rectify the tracks on the roller door at the front of the shed in breach of clause 14(iv). Mr Thomas and Mr McDonald said that no work had been done to rectify the tracks on the roller door. They did not identify any defect in the tracks that needed rectification. Mr Sherson said that the defect that needed rectification was that the building had distorted. He said that the building had been approximately 300-400 millimetres out of alignment. The roller door would not operate. Although I have found that the shed was not replumbed within the requirements of clause 11(v), there is no doubt that its vertical deflection was substantially corrected. As a result of that correction the roller door was realigned and Mr Sherson noted that on his inspection on 15 May 2007 it ran on its tracks. The council’s report of its inspection of 24 May 2007 noted that the roller door was operational. I conclude that there was no breach of clause 14(iv).

K. Personnel Doors

82 Particular (k) alleged that the plaintiffs failed to locate a personnel door at the place required by the council approved building plan. This allegation concerns the location of the door, not that the plaintiffs failed to install a third personnel door. Although counsel for the defendant referred to the alleged failure of the plaintiffs to install a third door, that was not a breach alleged in his defence.

83 The location of the door is alleged to be a breach of clauses 15 and 22. It is not a breach of clause 15. Clause 15 identifies standards to which works, which are otherwise required to be performed, are to be carried out. In other words clause 15 does not say that the plaintiffs are required to perform all works required by the council. Rather, it provides that all of the works which are required by the terms of settlement to be performed are to be performed to the requirements of the council. Whether the plaintiffs were required to relocate the door is not determined by clause 15. It is determined by whether there is any other clause of the terms of settlement which required the plaintiffs to relocate the door. No such work was prescribed by clauses 11-14.

84 Clause 22 provides that “the works” were to be undertaken to enable compliance with respect to two matters. First, that the engineer be able to certify that the “remedial works to the existing structure” had been completed to his satisfaction, and secondly, to enable the engineer to certify that the “structure” met the “standards” set out in the development consent and in AS1170.2. Clause 22 specified criteria the remedial works to be undertaken were required to meet. It described a standard which the works earlier referred to in the terms of settlement were to satisfy. It did not expand the scope of the works earlier described. Rather, it required that those works, to the extent they were material to the shed’s compliance with the development consent and AS1170.2, should be constructed to a standard that enabled the shed to so comply. I do not consider that the terms imposed any obligation on the plaintiffs to relocate the door.

85 The location of the door was one of the particulars of breach of contract alleged by Mr McDonald in the District Court proceedings. Mr Woodward said that the door was located where Mr McDonald required it to be located as shown on the plaintiffs’ job sheet. Had it been intended that the door be relocated, one would expect that to have been specifically included amongst “the works” described under that heading in clauses 11-15. The drawings and photographs show continuous ridged walls with an installed door. It would appear from the photographs that moving the door would require remanufacture of the wall. If such work were required, it would have been specifically addressed in clauses 11-14. As it was not within “the works” described in the clauses which described “the works”, it was not something to be undertaken under clause 22 to enable compliance with the council’s letter of 12 September 2006 that the structure meet the standards set out in the development consent.

86 For these reasons I conclude there is no breach as alleged in particular (k).

H. Purlins

87 Particulars (l) and (m) concern the purlins. In the context of the manufacturer’s steel columns (as distinct from the construction of a roof) a purlin is a small girder that is used to attach the frames together.

88 The evidence about the positioning of the purlins, either toes-up or toes-down, was somewhat perfunctory. The engineering details provided to the council and prepared by Mr Thomas for a web frame showed the purlins in a toes-down position. Mr Woodward said that he discussed the positioning of the purlins with Mr McDonald and Mr McDonald asked for them to be toes-up. Mr McDonald denied this. On the original web frame the purlins were constructed in a toes-up position. The uncontradicted evidence is that the manufacturer’s specification allows the purlins to be manufactured either toes-up or toes-down.

89 The positioning of the purlins, whether toes-up or toes-down, was not a matter addressed in clauses 11-14 of the terms of settlement. For the same reasons as in respect of the location of the personnel doors, neither clause 15 nor clause 22 required the plaintiffs to carry out all works which were required to satisfy the requirements of the council. Rather, clauses 15 and 22 specified the standards to be met for works which other clauses of the terms of settlement required to be performed. Neither particular (n), (l) nor (m) described work required to be carried out by clauses 11-14 and therefore they were not works to which the standards prescribed by clauses 15 and 22 applied.

90 Even if this construction is wrong, it does not follow that the positioning of the purlins in a toes-down position was a breach of the terms of settlement. The purlins were not depicted in the plans which were approved for the purposes of the development consent. They were a part of the engineering details referred to in the notice no. 38970. However it is not a legitimate construction of clause 15 that the works to be carried out under the terms of settlement were to conform in all respects with the requirements of the council as specified in notice no. 38970 that the structure be built in accordance with the engineer’s details provided. That is because the work provided by the terms of settlement involved a departure from those terms. The departure involved the replacement of the web frame to which the purlins were attached by a solid rectangular steel frame. The evidence did not address the question of whether this had any implication for the positioning of the purlins.

91 There was a dispute as to whether the purlins were reconnected to the structural framework (being the breach alleged in particular (m)). Mr Woodward said that although purlins have four holes, they are only required to have two bolts at each end to secure to cleat plates and that was what was installed in the defendant’s shed. Mr McDonald did not respond to that. On the other hand, Mr Sherson conceded that bolts on the purlin connection to the east side window frame had slipped and that the slippage had been missed in his inspection. He said he gave an instruction for the correction of that work on 4 July 2007, but there was no evidence as to whether that instruction had been carried out.

92 If there were a breach in this respect, it was minor and would be fixed by the installation of the bolts.

I. Ceiling Insulation

93 Particular (n) alleged that the plaintiffs failed to repair and replace ceiling insulation which was torn during the course of the remedial works. No attention was given to this at the hearing. Mr McDonald’s evidence amounted to a bare assertion that “some of the ceiling insulation within the shed had been damaged during the remediation works and had not been repaired.” This was denied by Mr Woodward who said that no damage was caused to the ceiling insulation during the works. Mr Sherson did not address the question of whether ceiling insulation had been damaged. He said that the insulation was repositioned back into the wire mesh. That is where the matter was left. In this state of assertion and counter-assertion, I am not satisfied that the breach alleged in particular (n) is made out.

94 For these reasons I conclude that the plaintiffs were in breach of the terms of settlement in the respects identified above. I have addressed the significance of those breaches.

95 I deal below with the question whether, by reason of these breaches, the plaintiff is not entitled to have the judgment set aside.

Clauses 8(b) and 23: The Council’s Certificate

96 The next question is whether the plaintiffs obtained the certificate or confirmation from the council envisaged by clause 8(b). The defendant denied that council approval had been obtained as envisaged by clause 23. He submitted that the council had not certified or confirmed that the requirements of its notice no. 38970 had been complied with in respect of that part of the development consent that specified that the building had been satisfactorily erected in accordance with approved plans and specifications. That was so notwithstanding that the council had certified on 25 May 2007 that its requirements of notice no. 38970 in respect of certifying the structural adequacy of the shed’s framework and suitability for wind to rain were satisfied. The reason for this submission is that the notice stated the location of one door and the deletion of the other door were without approval, and that in this respect the approved plans were not complied with.

97 However, the notice no. 38970 made no mention of the position of the doors. That notice stated that the shed had not been built in accordance with “engineer’s details provided”, but it was common ground that the “engineer’s details provided” were the plans drawn by Mr Thomas showing the construction of the steel framing. Given that the relocation of the doors was not part of “the works”, it is not a reasonable construction of clause 23 that it required the plaintiffs to relocate the doors to enable the certificate to be issued. The scope of clause 23 is limited by its reference to the satisfaction of the requirements of the council’s notice no. 38970. In my view, clause 23 has been satisfied and accordingly clause 8(b) has also been satisfied.

Breach of Contract and Specific Performance

98 The question then is whether the plaintiffs are entitled to set aside the judgment where they have complied with clause 8(b), but have not fully complied with clause 8(a). There are two related, but distinct, questions. First, whether, as a matter of construction of the contract, the plaintiffs are entitled to the consideration set out in clause 8 (namely the setting aside of the judgment) only if they have fully and exactly performed their obligations under clause 8(a) and (b); or whether substantial performance of the works and obtaining the certificate entitled the plaintiffs to have the judgment set aside, with the defendant to be left to cross-claim for any damages he might have suffered by reason of the breaches of the agreement. In other words, is the contract an entire contract such that it appears “from the very nature of the obligation undertaken by one party that anything less than full and complete performance by him cannot be regarded as performance at all”? (Greig & Davis, The Law of Contract (1987) at 1224-1225).

99 If the answer to the first question is yes, it does not necessarily follow that the plaintiffs will be denied specific performance. The second question is whether, if, at law, the contract would be treated as an entire contract, will equity decree specific performance if the plaintiffs have substantially, although not exactly, performed their obligations whilst giving compensation (if sought) for the deficiency in performance? The analogy here is with contracts for the sale of land where the vendor is unable to convey the precise subject matter of the sale. The promise to convey the subject matter of the sale is a fundamental term such that any difference between the subject matter contracted to be sold and that able to be conveyed, if more than trifling, entitles the purchaser to refuse to complete and rescind the contract. The purchaser can say “this is not what I promised to pay for”. The contract means the same in equity as at law, but equity will nonetheless decree specific performance unless the deficiency is so substantial as to give the purchaser something entirely different from what he had contracted to buy, but give compensation for the deficiency. (Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 at 27-28; Batey v Gifford (1997) 42 NSWLR 710 at 716; Dainford Ltd v Lam (1985) 3 NSWLR 255 at 265-266; Vella v Ayshan [2008] NSWSC 84; (2008) NSW ConvR 56-209 at [73]-[81]).

100 Dealing with the first question, I use the expression “entire contract” in the sense of a contract where complete performance is a condition precedent to payment or counter-performance (GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 at [703]; Greig & Davis, The Law of Contracts at pp 1224-1225, 1232).

101 The discussion of entire contracts in some of the texts and authorities is not always satisfactory. In some cases an entire contract is equated to a lump sum contract. Obviously a lump sum contract need not be an entire contract in the sense described above. Sometimes the so-called doctrine of substantial performance is treated as an exception to allow a contractor to recover payment for work done under what is nonetheless classified as an entire contract. As Greig & Davis point out (at 1234 ff) if an entire contract is understood in the sense described above, it does not admit of exceptions. By definition, if a contractor is entitled to be paid where he has substantially, but not exactly, performed the work he contracted to do, the contract is not an entire contract in the sense described above.

102 The difficulties of terminology are evident from cases such as Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 where Lord Diplock said (at 717) that “a building contract is an entire contract for the sale of goods and work and labour for a lump sum price payable by instalments as the goods are delivered and the work is done.” However, that was said in the context of a discussion of the principle in Mondel v Steel (1841) 8 M&W 858 by which a defendant who is sued for the price by a plaintiff who is himself in breach of contract may set up the breach in diminution or extinction of the price. His Lordship said (at 718):

So when one is concerned with a building contract one starts with the presumption that each party is to be entitled to all those remedies for its breach as would arise by operation of law, including the remedy of setting up a breach of warranty in diminution or extinction of the price of material supplied or work executed under the contract.

103 This is the antithesis of an entire contract in the sense described above, where the contractor would not be entitled to recover the price at all if it had not fully and exactly performed the contract. This has not prevented the application of his Lordship’s dictum that building contracts are entire contracts, although the sense in which the expression “entire contract” is then used is not clear (Tan Hung Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 178 at [20], [32]).

104 In Hoenig v Isaacs [1952] 2 All ER 176, Denning LJ, in a frequently cited passage, said (at 180-181):

the first question is whether, on the true construction of the contract, entire performance was a condition precedent to payment. It was a lump sum contract, but that does not mean that entire performance was a condition precedent to payment. When a contract provides for a specific sum to be paid on completion of specified work, the courts lean against a construction of the contract which would deprive the contractor of any payment at all simply because there are some defects or omissions. The promise to complete the work is, therefore, construed as a term of the contract, but not as a condition. It is not every breach of that term which absolves the employer from his promise to pay the price, but only a breach which goes to the root of the contract, such as an abandonment of the work when it is only half done. Unless the breach does go to the root of the matter, the employer cannot resist payment of the price. He must pay it and bring a cross-claim for the defects and omissions, or, alternatively, set them up in diminution of the price. The measure is the amount which the work is worth less by reason of the defects and omissions, and is usually calculated by the cost of making them good.

It is, of course, always open to the parties by express words to make entire performance a condition precedent.

105 In Tan Hung Nguyen v Luxury Design Homes Pty Ltd, McColl JA cited Hudson’s Building & Engineering Contracts 11^th ed at pp 476-477, [4.008], saying, in effect, that in the absence of express provision to the contrary, a building contract should be construed as being entire (at [20]-[44]). I do not understand the other members of the Court of Appeal (Hodgson JA and Einstein J) to have agreed with her Honour’s reasoning. With respect, one of the difficulties with her Honour’s reliance upon Hudson is that whilst Hudson says that the vast majority of priced building contracts, whether sophisticated or simple, will be construed as being entire, the learned author treats the so-called doctrine of substantial performance as being consistent with that characterisation (at [4.019]-[4.020]).

106 McColl JA said (at [27]):

[27] The reason building contracts are construed as being entire, even where there is no express undertaking to that effect, is plain. It is of the essence of such a contract that the consideration for the payment of the contract sum is ‘entire and indivisible’. A partially completed building is of little use to the owner of the land upon which it is to be constructed.

107 This reasoning would apply equally to preclude a building contractor from recovering the price of the works whether the contractor was required to make exact or substantial performance. A contractor who provides a partially completed building which is of little use to the owner would not have substantially performed the contract. A building which is wholly constructed, save for some minor omission, may be of great use to the owner of the land on which it is constructed. It is not clear that her Honour was intending to say that a building contract should be construed (in the absence of contrary terms) such that no consideration would be payable to a builder who had substantially performed his or her obligations. It is not clear to me that her Honour’s discussion of entire contracts was addressing this position. Einstein J, with whose reasons Hodgson JA “substantially” agreed, and McColl JA “essentially” agreed, appeared to treat the so-called doctrine of substantial performance as falling within, but qualifying, the concept of an entire contract. His Honour cited (at [69]) with apparent approval the observation of Young CJ in Eq (as his Honour then was) in Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2003] NSWCA 4; (2003) 56 NSWLR 576 (at [71]) that a building contract is “rarely considered to be an entire contract” with reference being made to Hoenig v Isaacs.

108 In my view the authorities do not require that I approach the construction of the terms of settlement with a predilection to treating them as an entire contract. One of the reasons for not so construing the terms lies in clause 24. Clause 24 would permit the plaintiffs to demolish the shed and remove their materials if the council did not issue the certificate or confirmation referred to in clause 23. But that certificate has been issued. Clause 24 does not permit the plaintiffs to demolish the shed and remove the materials if the judgment is not to be set aside by reason of the plaintiffs not having completely performed the works they were required to perform. It is not a commercially sensible construction that if there were any omission or defect in the works, however minor, the defendant should be entitled both to the enjoyment of the reconstructed shed and a judgment for a sum which substantially exceeded the price paid for the original construction.

109 In my view the better construction of clause 8 is that the plaintiffs are entitled to have the judgment set aside if they have substantially performed the works outlined in the remaining clauses, (and obtained the requisite certificate or confirmation under clause 8(b)), even if they have not completely and exactly performed those works. Given that the defendant would be entitled to damages for any breach (or equitable compensation as a condition of the plaintiffs obtaining an order for specific performance), that provides a more just resolution of the parties’ positions. In other words, it is a more sensible commercial construction when the position of all parties is taken into account. Particularly is that so given the possibility of dispute as to precisely what works would be required for the complete performance of the works. There was, for example, no specification as to the degree of vertical alignment required for the replumbing of the building. There was no specification of the nature of the bracing required by clause 11(iv) or (vi). The plaintiffs might reasonably believe that the work done was a complete performance of the contract, but if they were mistaken and the contract were an entire contract, find themselves in the position that the judgment could not be set aside. All of these reasons point to not construing the agreement as an entire contract.

Substantial Performance

110 Whether a building contract has been substantially performed is a question of fact and degree (Zamperoni Decorators Pty Ltd v Lo Presti [1983] VR 338 at 340-342 and cases there cited). It is relevant to ask what work would need to be done to bring about complete performance; what would be the cost of that work; and what would be the value of that work as a proportion of the contract price? But that is not the only enquiry. It is also relevant to ask how significant is the breach and did the owner receive substantially the whole of the benefit which the contract was intended to provide? Thus, in Simpson Steel Structures v Spencer [1964] WAR 101 it was held that there had not been substantial performance of a contract to build a farm shed where the floor was not built with the required load capacity and used sub-standard materials. In Bolton v Mahadeva [1972] 1 WLR 1009 a contract to supply and install a heating system was not substantially performed where the system failed to heat the house adequately, and emitted fumes which made living conditions unpleasant.

111 In this case, the shed’s out-of-plumbness cannot be corrected at modest or reasonable cost. Mr Sherson’s evidence was that it would be impossible to carry out any further realignment of the shed unless the entire shed were disassembled, the existing slab demolished, a new slab laid, and the entire building rebuilt. It does not follow that the plaintiffs did not substantially perform their obligations under clause 8(a). I infer that the other defects could be readily fixed at a modest cost. Mr McDonald has received substantially the whole of the benefit the contract was to provide. Although the shed is out-of-plumb this does not affect its ability to withstand the specified wind loads. Nor does the evidence suggest that this otherwise affects the shed’s structural integrity, nor its usefulness, save for a scraping door. Any loss of amenity from the scraping door would be readily compensable. The work of re-screwing the sheeting and tightening the bracing could readily be carried out. The bracing not installed and the failure to repair the ridge joint is not shown to have caused any detriment to the plaintiff.

112 In my view, the plaintiffs substantially performed the works required by clause 8(a). Moreover, as the cases referred to in para [99] demonstrate, specific performance can be given with compensation, even where strict performance is impossible.

113 For these reasons I conclude that, subject to the question of compensation and the defence of unclean hands, the plaintiffs are entitled to an order for specific enforcement of the defendant’s promise to consent to the filing of the consent order for the setting aside of the judgment.

Unclean Hands

114 The defendant has not established that Mr Sherson’s certificate contained a misrepresentation. Mr Sherson certified that the works undertaken under clauses 11-14 had been “satisfactorily completed”, not that they had been fully and exactly completed. His opinion is consistent with the conclusion I have reached. No other representation is incorrect given my conclusion as to the scope of the works the plaintiffs were required to undertake.

115 Even if the representations in the certificate were incorrect, that would not be sufficient to establish a defence of unclean hands. There was no evidence that the plaintiffs knew or believed that Mr Sherson had misrepresented the position to the council. No such suggestion was put to Mr Woodward in cross-examination.

116 Accordingly, the defence of unclean hands fails.

Should there be an inquiry as to compensation?

117 In a perfect world where all issues could be determined without incurring costs, or where any costs would be within reasonable proportion to the amount in issue, I would make a decree for specific performance and either reserve for myself or refer to an associate judge the question of what compensation should be paid by the plaintiffs to the defendant in respect of the breaches I have found, as a condition of the order for specific performance. However, the costs incurred in this dispute must be out of all proportion to the amounts in issue. As I have said, the defendant, as plaintiff in the District Court proceedings, pleaded that the cost of the shed was $40,801.63. In the hearing before me the plaintiffs contended (although there was no admissible evidence to prove this) that they had spent $24,003 in carrying out the remedial works. I expect that the costs spent by both sides in the litigation, both in this court and in the District Court, and in attempted failed mediation, would far exceed the amounts at stake. I expect that if further evidence were led to attempt to quantify the amount of compensation, the costs of the exercise would exceed the remaining amount in issue.

118 Moreover, a deliberate decision was taken by counsel for the defendant not to adduce evidence as to the nature of the work required to bring the structure into conformity with what the defendant contended to be the contractual requirements. I raised that question in the course of the hearing when both experts were present and could have given evidence on that topic.

119 In these circumstances it is not appropriate to require the parties to incur further costs in the assessment of what I would apprehend to be a modest amount of compensation.

Conclusion

120 For these reasons I conclude that the plaintiffs are entitled to file in the District Court the consent orders which were an annexure to the terms of settlement. I make a declaration and order in accordance with paras 1 and 2 of the Relief Claimed in the statement of claim.

121 The exhibits may be returned after 28 days.

the plaintiffs are entitled to their costs. I will hear any submissions the parties may have in that regard.

******

CITATION:	ACN 002 804 702 (formerly Brooks Building) v McDonald [2009] NSWSC 610
HEARING DATE(S):	09-10 June 2009
JUDGMENT DATE :	3 July 2009
JURISDICTION:	Equity
JUDGMENT OF:	White J
DECISION:	Make a declaration and order in accordance with paras 1 and 2 of the Relief Claimed in the statement of claim. Exhibits may be returned after 28 days.
CATCHWORDS:	EQUITY - equitable remedies - specific performance - Application for specific enforcement of defendant’s promise to consent to the filing of a consent order for setting aside of judgment – terms of settlement required remedial building work to be carried out - whether terms of settlement have been performed by plaintiffs - CONTRACTS - building, engineering and related contracts - performance of work - whether engineer’s certificate conclusive evidence that works had been performed in accordance with settlement – construction of contract to determine what effect is to be given to a certificate - CONTRACTS - building, engineering and related contracts - performance of work - whether entire performance or substantial performance required before settlement agreement can be enforced – whether agreement an ‘entire contract’ – whether agreement substantially performed
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW)
CATEGORY:	Principal judgment
CASES CITED:	Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 National Coal Board v William Neil & Son [1985] 1 QB 300 RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1992) 11 BCL 74 Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 Batey v Gifford (1997) 42 NSWLR 710 Dainford Ltd v Lam (1985) 3 NSWLR 255 Vella v Ayshan [2008] NSWSC 84; (2008) NSW ConvR 56-209 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 Mondel v Steel (1841) 8 M&W 858 Tan Hung Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 178 Hoenig v Isaacs [1952] 2 All ER 176 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2003] NSWCA 4; (2003) 56 NSWLR 576 Zamperoni Decorators Pty Ltd v Lo Presti [1983] VR 338 Simpson Steel Structures v Spencer [1964] WAR 101 Bolton v Mahadeva [1972] 1 WLR 1009
TEXTS CITED:	IND Wallace, Hudson’s Building and Engineering Contracts, 11th ed, 1995 Greig & Davis, The Law of Contract (1987)
PARTIES:	ACN 002 804 702 Pty Ltd (formerly Brooks Building Pty Ltd) & Anor v Shane McDonald
FILE NUMBER(S):	SC 5878/07
COUNSEL:	Plaintiffs: H Altan Defendant: A L Hill
SOLICITORS:	Plaintiffs: Cordato Partners Defendant: Palmers Solicitors & Attorneys