Alstom Ltd v Yokogawa Australia Pty Ltd (No 7)
[2012] SASC 49
•2 April 2012
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ALSTOM LTD v YOKOGAWA AUSTRALIA PTY LTD & ANOR (No 7)
[2012] SASC 49
Judgment of The Honourable Justice Bleby
2 April 2012
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Contract between power station owner and head contractor for refurbishment and automation of power station – consideration of terms of contract – whether head contract a turnkey or performance-based contract – consideration of nature and effect of turnkey contract.
Subcontract between head contractor and Electrical Control and Instrumentation subcontractor for refurbishment and automation of power station – consideration of terms of subcontract – consideration of relevant principles of interpretation – entire contract clause – relevant surrounding circumstances – ascertainment of objective intention of parties – use of recitals in pre-contract – whether subcontract a turnkey or performance-based contract – effect of provisions relating to meeting of performance dates and performance guarantees – whether primary obligation to meet performance dates and guarantees.
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - MATTERS NOT GIVING RISE TO BINDING CONTRACT - VAGUENESS AND UNCERTAINTY
Construction of subcontract – Article 3.3.1 a variation of provisions of head contract – whether void for uncertainty – whether gives rise to an obligation to comply with performance guarantees.
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - PENALTIES AND LIQUIDATED DAMAGES
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS
Whether substitution of certain expressions in head contract directed to be made by subcontract should not be made – whether Liquidated Damages provisions should be construed to reflect an accurate pre-estimate of contractor’s loss – whether provisions in subcontract relating to Liquidated Damages and Performance Guarantee Payments are exclusive remedies – effect and construction of overriding provision excluding liability for “any direct, economic or consequential loss whatsoever” – consideration of what constitutes “indirect … or consequential loss” – consideration of what constitutes “economic … loss” – whether in context a contract definition of Economic Loss applies – ordinary meaning of “economic loss”.
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Whether provisions of subcontract exclude concurrent common law duty of care – relationship created solely by subcontract – whether subcontract sets out completely and exclusively the legal rights and obligations of the parties.
EQUITY - GENERAL PRINCIPLES - MISTAKE - EQUITABLE REMEDIES - RECTIFICATION
Claim for rectification of subcontract – contract price defined as meaning “the fixed lump sum for the [EC&I works] of $33,877,559.50 …” – whether should be rectified to read “… $37,265,315.45 …” being the definition figure plus 10% GST – consideration of principles of rectification – whether evidence sufficient to justify rectification order.
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS - TERMS ESSENTIAL TO ENABLE PERFORMANCE
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - IMPOSSIBILITY OF PERFORMANCE
Consideration of nature and purpose of a works program – adequacy of contractor's works program – whether express terms of subcontract required contractor to supply subcontractor with updated works program – whether subcontractor’s works program a “stand alone” program – implied terms – whether contractor subject to implied obligations to co-operate, not to prevent or hinder subcontractor’s performance of the subcontract and to act in good faith – whether implied terms qualified by express terms of subcontract and by contractor’s role as Superintendent – whether implied terms required contractor to provide a regularly updated and accurate works program with logic links to subcontractor’s activities – whether obligation also implied from express terms of subcontract – whether conduct of contractor prevented subcontractor from complying with its contractual obligations.
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK
Whether contractor had discharged its burden of proving the cause of the failure to achieve Stage 1 Provisional Acceptance by due date and Stage 2 Acceptance at all – consideration of contractor’s expert witness on combustion – concessions made in evidence – relevance of other evidence – consideration of evidence as to cause of delays to commissioning and inefficiency in combustion – installation of RoBTAS burners – whether problems caused by use of overfire air or poor control system – whether delays to commissioning of turbines caused by mechanical or control problems.
EVIDENCE - ADMISSIBILITY AND RELEVANCY - OPINION EVIDENCE - EXPERT OPINION
Expert witness – employee of a party – need for independence – consideration of duties and responsibilities of an expert witness – effect of material omissions from report – effect of putting obligations to client ahead of obligation to the Court – contamination of evidence by contribution of others – contamination of evidence by instructions of employer – effect of biased advocacy – whether professional independence compromised.
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - TIME
Execution of subcontract – delays – responsibility for delays – conflicting evidence of programming experts – consideration of methodologies of delay analysis – whether recognised by the engineering profession – whether suitable for and applicable to available program material – reference to commonly accepted Delay and Disruption Protocol – whether Liquidated Damages lawfully deducted.
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - TIME
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - IMPOSSIBILITY OF PERFORMANCE
Claims for extensions of time – where compliance with contractual requirements impossible because of other party's breach – breach of implied duty not to prevent or hinder performance of contract – breach of duty to act in good faith – breach of duty to cooperate – failure properly to consider EOT claims – failure properly to exercise Certifying Functions in accordance with contractual requirements.
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - RECOVERY
Whether subcontractor incurred loss by way of prolongation, disruption and acceleration costs consequent upon other party's breaches of contract – whether subcontractor had previously agreed to forego some such earlier claims.
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS - VARIATIONS
ESTOPPEL
Contract provision for variations for Contractor-directed Changes – whether prescribed procedure required to be followed – whether orally agreed procedure sufficient – effect of “entire agreement” clause – whether claims prevented by earlier settlement agreement – principles of estoppel – whether contractor estopped from denying payment for variations – whether contractor estopped from denying variation work outside subcontractor's scope of works – whether particular works amounted to Contractor-directed Change – consideration of circumstances when Change Order Request required to be made – whether particular variations clearly Contractor-directed Changes for which a Change Order Request was not necessary – whether some previously disputed variations the subject of agreement.
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - AMENDMENT
Application to amend pleadings at trial – whether amendments introduced new cause of action out of time – application of r 53.05 Supreme Court Rules 1987 – whether amendment barred by earlier settlement agreement – whether plaintiff prejudiced by amendments – whether amendments would cause disruption to hearing or to the administration of justice.
Sale of Goods Act 1895 (SA) s 14; Trade Practices Act 1974 (Cth) ss 82 and 87; Supreme Court Act 1935 (SA) s 30B; Supreme Court Rules 1987 r 53.01 r 75.02; Law Reform (Miscellaneous Provisions) Act 1934 (UK) s 3; Restatement (Second) of Contract (1981) US; Limitations of Actions Act 1936 (SA) s 48, referred to.
Landsal Pty Ltd (in liq) v REI Building Society (1993) 41 FCR 421; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2005) 218 CLR 471; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; Inglis v John Buttery & Co (1877-78) LR 3 App Cas 552; Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190; Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; (2008) 19 VR 358; Astley v Austrust Ltd (1999) 197 CLR 1; Henderson v Merrett Syndicates Ltd [1995] 2 AC 145; Frederick W Nielsen (Canberra) Pty Ltd v PDC Constructions (ACT) Pty Ltd (1987) 71 ACTR 1; Pukallus v Cameron (1982) 180 CLR 447; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; Byrne v Australian Airlines Ltd (1995) 185 CLR 410; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Mackay v Dick (1881) 6 App Cas 251; Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288; Marshall v The Colonial Bank of Australasia Ltd (1904) 1 CLR 632; London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235; Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No 2) [2007] BLR 195; Holme v Guppy (1838) 3 M&W 387; Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 12; Foran v Wight (1989) 168 CLR 385; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558; JF Keir Pty Ltd v Priority Management Systems Pty Ltd (administrators appointed) [2007] NSWSC 789; United Group Rail Services Ltd v Rail Corporation of New South Wales (2009) 74 NSWLR 618; Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 530; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; Jones v Dunkel (1959) 101 CLR 298; Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Karasaridis v Kastoria Fur Products (1984) 37 SASR 345; Weldon v Neal (1887) 19 QBD 394; Vaccarella v McNicol (1986) 131 LSJS 128; Preston v Dowell (1987) 45 SASR 111; Brickfield Properties Ltd v Newton; Rosebell Holdings Ltd v Newton [1971] 1 WLR 862; Channel Seven Adelaide Pty Ltd v Manock [2010] SASCFC 59, applied.
Millar’s Machinery Co Ltd v David Way & Sons (1935) 40 Com Cas 204; Croudace Construction Ltd v Cawoods Concrete Products Ltd [1978] 2 Lloyd’s Rep 55; British Sugar Plc v NEI Power Projects Ltd (1997) 87 BLR 42; Deepak Fertilisers and Petrochemicals Ltd v Davy McKee (London) Ltd [1999] 1 Lloyd’s Rep 387; Hotel Services Ltd v Hilton International Hotels (UK) Ltd [2000] BLR 235; Watford Electronics Ltd v Sanderson CFL Ltd [2001] BLR 143; Saint Line Limited v Richardson Westgarth & Co Ltd [1940] 2 KB 99; Caledonia North Sea Ltd v British Telecommunications Plc (2001) Lloyd’s Rep 553, not followed.
Cable (1956) Ltd v Hutcherson Bros Ltd (1969) 123 CLR 143; Fawcett Properties Ltd v Buckingham County Council [1961] AC 636; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135; Robophone Facilities Ltd v Blank [1966] 1 WLR 1428; Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689; Hadley v Baxendale (1854) 9 Exch 341; Hungerfords v Walker (1989) 171 CLR 125; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515; Turner Corporation Ltd (Receiver & Manager Appointed) v Austotel Pty Ltd (1994) 13 BCL 378; Alstom Power Ltd v Yokogawa Australia Ltd (No 6) [2011] SASC 71; Thackwray v Winter (1880) 6 VLR(L) 128; Liebe v Molloy (1906) 4 CLR 347, discussed.
Yokogawa Australia Pty Ltd v Alstom Power Ltd [2009] SASC 377; Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095; High Mark (M) Sdn Bdh v Patco Malaysia Sdn Bdh (1984) 28 BLR 129; Fagents v A-G Sheds (1998) 19 SR (WA) 186; OneSteel Manufacturing Pty Ltd v United KG Pty Ltd (2006) 94 SASR 376; Franklins v Metcash Trading Ltd (2009) 76 NSWLR 603; Hart v McDonald (1910) 10 CLR 417; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15; Watson v Phipps (1985) 63 ALR 321; Hawkins v Clayton (1988) 164 CLR 539; Breen v Williams (1996) 186 CLR 71; Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351; Fitzgerald v Masters (1956) 95 CLR 420; Parland Pty Ltd v Mariposa Pty Ltd (1995) 5 Tas R 121; Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 114; Baese Pty Ltd v RA Bracken Building Pty Ltd (1990) 6 BCL 137; Stocznia Gdanska v Latvian Shipping Co [1998] 1 WLR 574; Concut Pty Ltd v Warrell [2000] HCA 64; (2000) 75 ALJR 312; (2000) 176 ALR 693; Mancorp Pty Ltd v Baulderstone Pty Ltd (1992) 60 SASR 120; Décor Ceilings Pty Ltd v Cox Constructions Pty Ltd (No 2) [2005] SASC 483; London, Chatham and Dover Railway Co v South Eastern Railway Company [1893] AC 429; Trans Trust SPRL v Danubian Trading Co Ltd [1952] 2 QB 297; Wadsworth v Lydall [1981] 1 WLR 598; President of India v La Pintada Compania Navigacion SA [1985] AC 104; Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976-1977) 136 CLR 529; Rail Corporation v Fluor Australia Pty Ltd [2009] NSWCA 344; Dutton v Bognor Regis Urban District Court [1972] 1 QB 373; Anns v Merton London Borough Council [1978] AC 728; Sutherland Shire Council v Heyman (1985) 157 CLR 424; Bryan v Maloney (1995) 182 CLR 609; Murphy v Brentwood District Council [1991] 1 AC 398; BI (Contracting) Pty Ltd v AW Baulderstone Holdings Pty Ltd [2008] Aust Contract R 90-267; Brooks Robinson Pty Ltd v Rothfield [1951] VLR 405; Central Trust Co v Rafuse [1986] 2 SCR 147; Chatlos Systems Inc v National Cash Register Corp (1979) 479 F Supp 738; Clements Auto Co v The Service Bureau Corp 444 F 2d 169 (1971; Computer Service Centres Inc v Beacon Manufacturing Co (1970) 328 F Supp 653; Greater Nottingham Co-operative Society Ltd v Cementation Piling & Foundations Ltd [1989] QB 71; Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; Hughes v St Barbara Mines Ltd (No 4) [2010] WASC 160; Johnson Tiles Pty Ltd v Esso Petroleum Ltd (2003) Aust Tort Rep 81-692; Marc Rich & Co AG v Bishop Rock Marine Co Ltd [1996] AC 211; North American Leisure Corp v A & B Duplicators (1972) 468 F 2d 695; Perre v Apand Pty Ltd (1999) 198 CLR 180; Public Utilities Commission for the City of Waterloo v Burroughs Business Machines Ltd (1973) 34 DLR (3d) 320; Public Utilities Commission of Waterloo City v Burroughs Business Machines Ltd (1974) 6 OR (2d) 257; RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1992) 11 BCL 74; Simms Jones Ltd v Protochem Trading NZ Ltd [1993] 3 NZLR 369; Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80; Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48; Triangle Underwriters Inc v Honeywell Inc (1978) 457 F Supp 765; Triangle Underwriters Inc v Honeywell Inc (1979) 604 F 2d 737; William Hill Organisation Ltd v Bernard Sunley & Sons (1983) 22 BLR 1; Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467; Australian Consolidated Investments Ltd v England (1995) 183 LSJS 408; Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; Bush v National Australia Bank Ltd (1982) 35 NSWLR 390; Fowler v Fowler (1859) 4 De G & J 250; MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226; Butt v McDonald (1896) 7 QLJ 68; Urusoglu v MSU Management Pty Ltd [2011] NSWSC 54; Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180; Thompson v ASDA-MFI Group Plc [1988] Ch 241; Castlemaine Tooheys Pty Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468; Devefi Pty Ltd v Mattefy Pearl Nagy Pty Ltd (1993) 113 ALR 225; Ryder v Foley (1906) 4 CLR 422; Fletcher v Nott (1938) 60 CLR 55; Kaye v Attorney-General (Tas) (1956) 94 CLR 193; Marks v The Commonwealth (1964) 111 CLR 549; Director-General of Education v Suttling (1987) 162 CLR 427; Kodeeswaran v Attorney-General (Ceylon) [1970] AC 1111; Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth (1977) 139 CLR 54; Hotham v East India Co (1787) 1 TR 638; Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91; Saxby Bridge Mortgages Pty Ltd v Saxby Bridge Pty Ltd [2000] NSWSC 433; Far Horizons Pty Ltd v McDonald’s Australia Ltd [2000] VSC 310; Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29; Fuji Xerox v CSG Ltd [2010] NSWSC 1258; Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 240 CLR 45; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228; Australian Securities and Investment Commission v Rich [2005] NSWCA 152; Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; Kane Constructions Pty Ltd v Sopov [2005] VSC 237; Commonwealth Bank of Australia v Spira [2002] NSWSC 905; Young v Ballarat and Ballarat East Water Commissioners (1987) 5 VLR(L) 503 ; Creamoata Ltd v The Rice Equalization Association Ltd (1953) 89 CLR 286; Copper Industries Pty Ltd (in liq) v Hill (1975) 12 SASR 292; Commonwealth of Australia v Crothall Hospital Services (Aust) Ltd (1981) 36 ALR 567; Commonwealth v Verwayen (1990) 170 CLR 394; Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582; EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172; Sheldon v McBeath (Unreported, NSW Court of Appeal, 12 March 1993); Henry Boot Construction Ltd v Alstom Combined Cycles [2005] 1 WLR 3850; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, considered.
WORDS AND PHRASES CONSIDERED/DEFINED
"turnkey contract", "performance based contract", "design and build contract", "best endeavours", "indirect ... and consequential loss", "economic ... loss", "indirect, economic and consequential loss whatsoever"
ALSTOM LTD v YOKOGAWA AUSTRALIA PTY LTD & ANOR (No 7)
[2012] SASC 49Table of Contents
BACKGROUND
1 Introduction
1.1 The Playford B Power Station
1.2 The turnkey refurbishment contract and subsequent settlement agreements
1.3 The EC&I joint venture
1.4 These proceedings and the 2007 settlement
1.5 The nature of the dispute – Alstom’s claims against YDRML
1.6 The nature of the dispute – YDRML’s claims
1.7 The principal issue – delay
1.8 A trial on liability only
2 The Head Contract
2.1 Time for performance under the head contract
2.2 Extensions of Time
2.3 Liquidated Damages for Delay Under the Head Contract
2.4 Performance Guarantees and Performance Guarantee Payments
2.5 Role of the Superintendent and Independent Engineer under the head contract
2.6 The Head Contract is a Turnkey Contract
3 The EC&I contract
3.1 The pre-contract
3.2 Agreement on the EC&I contract
3.3 A drafting disaster
3.4 The structure of the EC&I contract
3.5 Time for performance under the EC&I contract
3.6 Extensions of time
3.7 Liquidated Damages for delay under the EC&I contract
3.8 Performance Guarantees and Performance Guarantee Payments
3.9 The role of the Superintendent and Independent Engineer under the EC&I contract
3.10 The nature of the EC&I contract
INTERPRETATION OF THE CONTRACT
4 Interpretation of the EC&I contract: General Principles
5 The nature of the EC&I contract
5.1 Alstom’s submission
5.2 YDRML’s submission
5.3 Some preliminary matters relating to interpretation
5.4 Article 3.1.1 and its imported requirements
5.5 Performance Guarantees – Article 3.3.1
5.6 Performance Guarantees – Articles 11 and 12
5.7 Relevant Scheduled Dates
5.8 Other matters relied on by Alstom
5.9 Conclusion
6 Liquidated Damages and Performance Guarantee Payments: Exclusive remedies?
6.1 The relevant provisions of Articles 12 and 13
6.2 Alstom’s arguments as to the operation of Article 12
6.3 Article 12 is an exclusive remedy
6.4 An overriding provision
6.5 “indirect … or consequential loss”
6.6 “economic … loss”
6.7 Conclusion and a minor qualification
7 The consequences for Alstom’s claims for damages
7.1 Liquidated Damages
7.2 Performance Guarantee Payments
7.3 General damages for breach of contract
7.4 Sale of Goods Act
7.5 Common law duty of care
7.6 Hungerfords v Walker
8 YDRML’s claim for rectification
8.1 The terms of the contract and the application
8.2 The principles applicable to rectification
8.3 The material facts
8.4 Conclusion
9 Works Programs – their nature, development and contractual obligations
9.1 Introduction
9.2 The nature and purpose of a Works Program
9.3 Some essential definitions
9.4 Alstom’s contractual obligations to FPP
9.5 The development of Alstom’s program and its weaknesses
9.6 YDRML’s contractual obligations
9.7 The development of YDRML’s program
9.8 Alstom’s case
9.9 YDRML Program not a stand alone program
10 Implied terms
10.1 YDRML’s pleading
10.2 The implied duty to co-operate
10.3 The implied obligation not to prevent or hinder YDRML’s performance of the EC&I contract
10.4 The obligation to act in good faith
10.5 Whether the implied terms were qualified by the terms of the EC&I contract
11 An implied term to provide Alstom’s updated programs in a form that could be integrated with YDRML’s program
11.1 The nature of the project
11.2 The express terms of the EC&I contract
11.3 Alstom’s arguments
11.4 Alstom’s breach
PERFORMANCE OF THE CONTRACT
12 Management by Alstom
12.1 Alstom’s internal reporting
12.2 Alstom’s own assessment of its management
12.3 Mr Bruderlin
12.4 Other witnesses
12.5 Other management problems
13 Management by YDRML
13.1 YDRML’s Key Personnel
13.2 Some management weaknesses
13.3 Unjustified criticisms
13.4 Some weaknesses in communication
13.5 Other evidence of management weaknesses
13.6 An unsuccessful attack on YDRML’s motives
13.7 Mr Everett’s reliability
14 RoBTAS Burners
14.1 Their nature and method of operation
14.2 The personnel involved
14.3 Observations of the experts
15 Combustion and turbine problems
15.1 Introduction
15.2 The combustion problem
15.2.1 Mechanical Completion Stage 1
15.2.2 Provisional Acceptance Stage 1
15.2.3 Acceptance Stage 1
15.2.4 Mechanical Completion Stage 2
15.2.5 Provisional Acceptance Stage 2
15.2.6 Acceptance Stage 2
15.3 Alstom’s burden of proof
15.4 Alstom’s original position, the FPP proceedings and Alstom’s “epiphany”
15.5 Mr Hodge’s evidence
15.6 Mr Hodge’s role as an expert
15.7 Other relevant Alstom witnesses
15.7.1 Mr Orr
15.7.2 Mr Christie
15.8 Alstom’s case on combustion as presented
15.9 Mr Ironside as an expert witness
15.10 The YDRML case
15.10.1 The case in outline
15.10.2 The measurement of flue gas
15.10.3 Mr Ironside’s evidence
15.10.4 Mr Ironside’s involvement in 2005
15.10.5 Tramp air
15.10.6 Exhibit P21 – The “three scenarios” document.
15.10.7 Other factors supporting Mr Ironside’s evidence
15.10.8 The Magowan Report
15.10.9 Stage 1 Acceptance tests
15.10.10 The Ganesh Report
15.10.11 The relevance of Mr Ironside’s work to the Stage 1 commissioning problems
15.10.12 Suggested combustion problems after to 2005
15.11 Alstom’s complaints of YDRML’s performance
15.11.1 Oxygen measurement
15.11.2 Burner slagging and PF pipe fires
15.11.3 Annubars and multi-hole orifice plates
15.11.4 Calorific value correctors
15.11.5 Temperature compensation
15.11.6 The software bug
15.11.7 Cross-limiting and cross-coupling
15.11.8 Nuisance alarms
15.11.9 Stage 2 turbine governors
15.11.10 Turbine vibration measurement
15.11.11 Other issues arising post 2003
15.11.11.1 Measurement of flue gas
15.11.11.2 Loop oscillation
15.11.11.3 Coordinated control system
15.11.11.4 Run-back logic
15.12 Delays alleged by YDRML
15.13 Conclusion
16 Responsibility for delays – the programming evidence
16.1 Introduction
16.2 The expert witnesses
16.3 Methods of delay analysis
16.3.1 Time Impacted/Windows Analysis
16.3.2 As-planned v As-built
16.3.3 Resource Analysis
16.4 Resource Analysis (Mechanical Completion)
16.5 Windows Analysis (Provisional Acceptance and Acceptance)
16.6 As-built v As-planned Analysis
16.7 Conclusion
17 Alstom’s Liquidated Damages Claim
18 Specific heads of damage claimed by Alstom
18.1 Introduction
18.2 Claims which must fail
18.3 Remaining claims
18.3.1 Coal spills cleanup
18.3.2 Forced draft fan motor
18.3.3 Wet rack phosphate analysers
18.3.4 Turbine protection system
18.3.5 Filter fabric ash hopper probes
18.3.6 Valve actuators
18.3.7 Electro-hydraulic governors
19 YDRML’s EOT claims
20 YDRML’s consequential claims
20.1 The EC&I contract provisions
20.2 The nature of YDRML’s claims for consequential loss
20.3 Whether YDRML agreed to forego any claims
21 YDRML’s Variation Claims
21.1 The relevant contract provisions
21.2 The claims of the parties
21.3 A late pleading amendment
21.4 The B1 variations
21.5 The B2 variations
21.6 The B3 variations
21.7 B3 variations – alternative pleas
21.8 The 2007 Claims
21.8.1 Airflow subsystem
21.8.2 Vibration probe remediation
21.8.3 Phosphate analyser clean and repair
21.9 Alstom’s claim based on incorrectly issued purchase orders and Change Orders
CONCLUSION
22 Conclusion
22.1 Orders to be made
22.2 Postscript
SCHEDULE 1
SCHEDULE 2
SCHEDULE 3
SCHEDULE 4
ALSTOM LTD v YOKOGAWA AUSTRALIA PTY LTD & ANOR
(NO.7)Civil
BLEBY J.
BACKGROUND
1 Introduction
1.1 The Playford B Power Station
The Playford B Power Station (“Playford”) is a coal fired steam turbine power station at Port Augusta. Its fuel is lignite coal mined at Leigh Creek in northern South Australia and transported to Port Augusta by rail. Playford is not to be confused with its larger and more modern Northern Power Station neighbour, which is also fired by Leigh Creek coal.
Playford comprises four steam turbines coupled together in pairs. Each pair of turbines is provided with steam generated jointly by three boilers. There are therefore six boilers in all. Each boiler houses six wall-mounted burners. Each burner is fed with pulverised coal conveyed in fan-forced primary air from one end of a double-ended coal mill. There are therefore three coal mills per boiler. In addition there are, of course, coal feeder equipment and bunkers, secondary air flow systems, ash collection systems, cooling water systems and a host of ancillary equipment.
Playford was built in the 1950s and required significant manual input in its operation and control. This action arises out of a contract to refurbish Playford and to permit its operation by remote control from the Northern Power Station with limited onsite personnel. While the operation and monitoring of the control systems was to be done electronically, there was to be no significant structural or mechanical change to the boilers or turbines, to the steam cycle or to the natural efficiency of the turbines and generators. The contract did, however, provide for the replacement of the burners in each of the boilers with new burners designed and built by a related company of the plaintiff.
1.2 The turnkey refurbishment contract and subsequent settlement agreements
The then owners of Playford were members of a partnership comprising NRGenerating Holdings (No.2) GmbH (“NRG”), Flinders Labuan (No.1) Ltd and Flinders Labuan (No.2) Ltd. The partnership traded under the name of Flinders Power Partnership (“FPP”).
On 12 March 2002 FPP entered in to what was described as a “Turnkey Refurbishment Contract for Refurbishment of the Playford B Power Station” (“the head contract”) with the plaintiff, then known as Alstom Power Limited (“Alstom”). The contract price was $148,500,000, subject to adjustment as provided in the contract. The document setting forth the contract is comprehensive and substantial. Together with its 24 schedules it comprises some 476 pages.
The head contract contained clear time, performance and reliability requirements. To the extent that Alstom failed to achieve any of those requirements, liquidated damages and performance guarantee payments could be levied by FPP.
During the course of the project Alstom became involved in a series of disputes with FPP resulting in a number of settlement agreements between them. During the course of 2002 a dispute arose as to the scope of work to be conducted by Alstom. On or about 15 November 2002 Alstom and FPP agreed in writing to vary the terms of the head contract and to amend the contract price to a fixed lump sum of $158,745,437.07, in return for which Alstom would perform certain additional work (“the November 2002 settlement”).
In July 2002 NRG’s parent company in the United States, NRG Energy Inc, entered into Chapter 11 Bankruptcy.[1] It emerged from that state in December 2003, but it seems likely that that process affected the availability of funds for the Playford project. By May 2003 it was also apparent that relations between FPP’s site manager, Mr Doutty, and Alstom’s project manager, Mr Bruderlin and its then General Manager of Operations for Customer Services Division of Alstom, had broken down.
[1] Exhibit D216, Baden Review 24 November 2004, p 12.
Delays were occurring in the performance of the contract and it was apparent that certain Milestone Dates specified in the head contract would not be met. Alstom’s claims for extension of time were refused. On 16 September 2003 Alstom entered into a further agreement with FPP in relation to a number of issues, including an extension of time for the scheduled completion of Provisional Acceptance and Acceptance of what was known as Stage 1 of the works, a provision that FPP would not apply Liquidated Damages against Alstom for delay up to the agreed extension of time, and that Alstom would not seek delay costs if those dates were met (“the September 2003 settlement”).
Further disputes occurred in relation to the application of Liquidated Damages, claims for delays and the conduct and performance of the Superintendent and Independent Engineer. Alstom had commenced proceedings in this Court on 22 December 2003 against FPP alleging, among other things, defective coal mills which had affected Alstom’s ability to perform the contract, any refurbishment of the coal mills having been excluded from Alstom’s Scope of Works. By further settlement agreement (“the February 2005 settlement”), executed on 1 March 2005, those proceedings were discontinued, and it was agreed, among other things, that FPP would receive from Alstom the sum of $20.5 million comprising an amount of $13,643,734 which had previously been withheld from Alstom on account of a claim for Liquidated Damages, and that Alstom would pay to FPP the additional sum of $6,856,266 on account of damages. Certain other releases were given. The deed does not reveal the basis of the settlement sum of $20.5 million or what that figure comprised. Alstom has successfully maintained confidentiality of all documents associated with the settlement.[2]
[2] See Yokogawa Australia Pty Ltd v Alstom Power Ltd [2009] SASC 377.
1.3 The EC&I joint venture
The defendants Yokogawa Australia Pty Ltd (“Yokogawa”) and Downer EDI Engineering Pty Ltd (previously known as Downer EDI Engineering Power Pty Ltd and, before that, Downer RML Pty Ltd) (“Downer”) formed a joint venture, known in these proceedings as “YDRML”, to tender for the electrical, control and instrumentation works (“the EC&I works”) associated with the refurbishment project. After a number of pre-contract arrangements between YDRML and Alstom under which a certain amount of preliminary work was conducted up to a sum of $3 million, a contract was entered into between Alstom and YDRML (“the EC&I contract”). The date of the EC&I contract is uncertain.[3] The contract price for the EC&I works, including the pre-contract works, was $33,877,559.50, subject to adjustment as provided for in the contract.
[3] It is discussed in more detail in Part 3 of these reasons.
1.4 These proceedings and the 2007 settlement
Alstom, having entered into the 2005 settlement with FPP and in the circumstances later to be described, then commenced these proceedings against YDRML. It sought to recover the $20.5 million it had paid to FPP, and more. Because Acceptance of Stage 2 of the refurbishment had not been and would not be certified, and in an attempt to resolve their dispute, Alstom and YDRML entered into a settlement agreement on 26 April 2007 (“the 2007 settlement agreement”).
The 2007 settlement agreement provided for a process of mediation outside the terms of the EC&I contract. That process subsequently failed. The agreement also provided for a number of variations to the EC&I contract including:
·An agreement to proceed to the submission by YDRML and processing by Alstom of a Final Payment Statement under Article 5.4 of the EC&I contract notwithstanding alleged non-compliance with other relevant provisions of the EC&I contract;
·Agreement that Acceptance Date for Stage 2 of the refurbishment would be the date of the agreement for the purposes of Final Payment;
·Agreement on a number of consequential matters and a timetable for carrying out consequential events and as to the conduct of these proceedings;
·Agreement in the following terms:
The dispute resolution procedure under article 14 of the subcontract will not be followed. No party will be required to give any notice of dispute, nor will any existing dispute proceed to mediation, expert determination or arbitration in the manner required by article 14. Neither party may rely upon article 14 to stay the litigation.
1.5 The nature of the dispute – Alstom’s claims against YDRML
Alstom’s claims against YDRML may be summarised as follows:
1Liquidated damages: Both the head contract and the EC&I contract provided for the payment of liquidated damages for delay in achieving Provisional Acceptance of Stages 1 and 2. Alstom claims that most of its delay in its achieving those milestones was attributable to YDRML. As a result of these delays FPP withheld from Alstom the sum of $13,643,734 on account of liquidated damages calculated in accordance with the provisions of the head contract. Alstom claims that it was entitled to payment of liquidated damages by YDRML under the terms of the EC&I contract in the sum of $5,247,641.53, of which it withheld from YDRML the sum of $2,831,304.54. In respect of liquidated damages Alstom claims against YDRML an amount made up as follows:
Liquidated Damages withheld by FPP $13,643,734.00 Less withheld from YDRML $ 2,831,304.54 Balance $10,812,429.46
In the alternative it claims the balance of the Liquidated Damages to which it claims to be entitled against YDRML and not withheld, namely:
Claim for Liquidated Damages against YDRML $5,247,641.53 Less withheld by Alstom $2,831,304.54 Balance $2,416,336.99
2Delay costs: As a result of the delays allegedly caused by YDRML, Alstom alleges that it was required to remain on site performing work and incurring overheads for the additional periods concerned. In that respect it claims the sum of $5,601,333.63.
3Additional amounts paid to FPP: Alstom also alleges numerous breaches of contract and breaches of duty of care on the part of YDRML, apart from delays, which caused Alstom to incur a further liability to FPP. As a result of the February 2005 settlement with FPP it agreed to settle FPP’s claims for a total sum of $20.5 million which included the amount retained by FPP on account of liquidated damages ($13,643,734), resulting in the payment by Alstom to FPP of an additional sum of $6,856,266 in satisfaction of FPP’s other asserted entitlements to damages. As a result of the February 2005 settlement, Alstom claims from YDRML the sum of $20.5 million or, alternatively, the additional amount paid, namely $6,856,266.
4Additional costs incurred: Alstom further claims that additional costs were incurred in providing extra personnel and resources in performing and arranging to be performed, and sometimes to be re-performed, work which it claims was the responsibility of YDRML, including amounts allegedly overpaid to YDRML for work not performed in accordance with the EC&I contract. On this account it claims from YDRML the sum of $7,843,219.27.
5Incorrectly issued Purchase Orders: Alstom further seeks to recover from YDRML an amount paid to YDRML based on mistake of fact for allegedly incorrectly issued purchase orders in the sum of $255,257.
6Incorrectly issued Change Orders: Alstom also claims against YDRML an amount paid in respect of allegedly incorrectly issued change orders or variations in the sum of $733,579.65, also alleging mistake of fact.
7Sale of Goods Act: Alstom alleges breaches of implied conditions provided for in s 14 of the Sale of Goods Act 1895 (SA) as to fitness for purpose of goods supplied by YDRML and that the goods supplied would be of merchantable quality. These claims are unquantified but would appear to be covered largely by items 3 and 4 above.
8Common law duty of care: Alstom alleges breach by YDRML of a common law duty of care co-extensive with YDRML’s contractual duty in that YDRML was negligent in the design of the EC&I works in that the control system was not capable of performing the tasks requested of it. These claims are also unqualified and would also appear to be covered by items 3 and 4 above.
9Hungerfords v Walker: Finally, there is a claim by Alstom for Hungerfords v Walker[4] damages.
[4] (1989) 171 CLR 125.
Alstom recognises a limitation of liability contained in Article 13.11.1(a) of the EC&I contract which limits the aggregate liability of YDRML for all claims “whether based in contract, tort (including negligence), strict liability or otherwise and including Liquidated Damages and Performance Guarantee Payments” will not exceed an amount equal to the Contract Price.
1.6 The nature of the dispute – YDRML’s claims
YDRML denies any liability for Alstom’s several claims. In particular, it denies any liability for Alstom’s delay in achieving the several Milestones provided in the head contract. Those delays, it says, were caused by Alstom, its other subcontractors or FPP, not YDRML. It also alleges that at all material times the ability of YDRML to perform various of the EC&I works was contingent upon Alstom having previously performed a number of predecessor works and obligations under the head contract. It alleges breaches of implied obligations with respect to sharing information in such a complex engineering project. The information denied included that which would allow the logic relationships between tasks to be performed by Alstom and tasks to be performed by YDRML to be established. It included information as to appropriate interfaces between work groups, which Alstom allegedly failed to provide. It claims that it was prevented from creating and updating an effective project work program that would integrate with the program for the whole of refurbishment. Because of this lack of information it was unable to comply with the terms of EC&I contract in relation to making of claims for extension of time because it lacked knowledge of the true critical path affecting delays to the project. It claims that Alstom, in its capacity as Superintendent under the EC&I contract failed to act honestly, reasonably and impartially and failed or refused lawfully to consider and determine the extension of time claims submitted by YDRML. In fact not one extension of time claim was granted.
In addition, YDRML brings the following cross-claims against Alstom:
1It seeks an order for rectification of the contract to provide that the definition of “contract price” is the amount specified ($33,877,559.50) with the addition of the words “plus “GST”.
2YDRML claims declarations that it is entitled to claims for extensions of time made under the EC&I contract and other declaratory relief relating to time obligations.
3In respect of delays for which it claims it was not responsible, YDRML claims:
4 (a) Prolongation costs for Stages 1 and 2 amounting to $1,412,218.00;
5(b) Loss of productivity and disruption costs for Stages 1 and 2 amounting to $2,612,915.00;
6(c) Acceleration costs incurred by reason of Alstom’s failure to complete predecessor works and its failure to accept extension of time claims, involving the acceleration of the EC&I works and changes to scheduling at greater cost and expense to YDRML, amounting to $220,575.00;
7(d) Return of Liquidated Damages wrongly deducted by Alstom in the sum of $2,841,304.54;
8A number of claims are made by way of variations to the EC&I contract not paid for by Alstom amounting in all to $2,272,871.73.
An alternative claim of alleged breaches of the Trade Practices Act 1974 (Cth) and for relief under ss 82 and 87(2)(ba) of that Act was abandoned at the conclusion of the evidence.
1.7 The principal issue – delay
As can be seen from this summary, at the core of the dispute is the question of delay and who was responsible for it. The head contract Works were to be completed in two stages. Stage 1 involved the refurbishment of Boilers 1, 2 and 3, and Turbines 1 and 2 including the control system relating to those and associated components; Stage 2 involved the refurbishment of Boilers 4, 5 and 6, and Turbines 3 and 4, including the control system relating to those and associated components. Stage 2 also required that the components comprising Stages 1 and 2 operate as an integrated facility and satisfy an Integrated Facility Reliability Test.
The head contract also required completion by Alstom of various stages of the refurbishment by a number of specified Milestone Dates, some of which were also designated as Relevant Scheduled Dates. Failure to meet the Relevant Scheduled Dates had consequences in the requirement to pay Liquidated Damages and Performance Guarantee Payments. Milestone Dates were subject to adjustment upon the grant of extensions of time (“EOTs”) and upon the happening of certain other events in accordance with the provisions of the head contract. No EOTs were granted to Alstom by FPP.
It is not necessary to recite all the Milestone Dates. The key dates provided in the head contract,[5] the respective dates on which they were certified as having been achieved and the number of days of delay were as follows:
[5] Articles 10.1 and 2.5, definitions of “Scheduled Provisional Acceptance Date” and “Scheduled Acceptance Date”.
Contract Completion Date Certified Completion Date Calendar Days Delay Stage 1 Mechanical Completion 15.06.03 18.07.03 33 Provisional Acceptance 15.09.03* 20.02.04 158 Acceptance 14.11.03* 29.04.04 167 Stage 2 Mechanical Completion 28.02.04 19.03.04 20 Provisional Acceptance 30.04.04* 07.10.04 160 Acceptance 30.06.04* 24.02.05
(not certified)239 *Relevant Scheduled Dates
The meaning of and significance of those various Milestones is discussed below, but a few preliminary observations should be made.
The several Milestone Dates were subject to adjustment in accordance with the provisions of the head contract for EOTs and other events. In addition, the Scheduled Acceptance Dates were to be adjusted to be the earlier of:
(a)the dates being 60 days after the Provisional Acceptance Dates as adjusted; and
(b)the dates on which Alstom’s maximum liability for Liquidated Damages as specified in Article 12.1.2 was reached.[6]
[6] Head contract Article 2.5.
Both parties agree that Stage 1 was not mechanically complete at the time when it was certified. In fact it was not mechanically complete until mid November 2003. It appears that the agreement to certify Mechanical Completion was to accommodate FPP’s need to draw down funds which would not otherwise have been available to it without certification.
The Scheduled Date for Stage 1 Provisional Acceptance under the head contract was extended, not in accordance with any provision of the head contract, but as a result of the September 2003 settlement. It was extended to 31 October 2003, resulting in a net delay of 112 calendar days.
Liquidated Damages were only incurred for delay to Provisional Acceptance in each case.
Stage 2 Acceptance was never certified. By 24 February 2005 Alstom was unable to meet the requirements of Stage 2 Acceptance, and Alstom staff reasonably did not expect to be able to meet the requirements within a reasonable period of time. Alstom left the site and was released from further liability to FPP, other than in respect of certain limited warranty requirements, by the February 2005 settlement.
1.8 A trial on liability only
Towards the end of the trial it became apparent that the evidence to be called by both parties as to damages on both the claim and cross-claim would, of necessity, be somewhat speculative and dependent on many possible permutations on findings of liability. The witnesses on damages would have to proceed on many different combinations of assumptions relating to possible outcomes on liability.
The evidence to be led on damages is discrete. There are issues of credibility concerning a number of key witnesses as to liability, but their evidence does not go to damages. There is therefore no risk of having to make findings of credibility concerning witnesses on liability based also on their evidence as to damages. There is none.
After hearing the parties I decided, in the interest of efficiency of the trial process to deal only with questions of liability, to make declaratory orders as to liability on both the claim and cross-claim and to adjourn the question of damages. That will substantially shorten the time to be taken on evidence as to damages and will reduce many if not all of the presently unknown factual assumptions on which the witnesses’ evidence will necessarily be based. None of the evidence to date has related solely to the question of assessment of damages, and so the parties have not been put to additional costs by taking this course. Indeed, it will probably save substantial costs in dealing with issues of damages.
While the power to take this course may have some limitations on a strict application of s 30B of the Supreme Court Act 1935 (SA), in that it may be contingent on a finding or concession of some entitlement to recover damages, I consider that there is otherwise ample power conferred on the Court to take this course in the exercise of powers contained in r 75.02 of the Supreme Court Rules 1987,[7] or in the exercise of the Court’s inherent jurisdiction in the interest of the administration of justice.[8]
[7] The 1987 Rules apply to the hearing of this action. Rule 75.02 provides:
75.02Subject to the preceding subrules, the Court may at any time or from time to time in any proceeding, order:
Separate trials of questions of fact
(a)that different questions of fact arising therein be tried by different modes of trial;
Trial of preliminary question of fact
(b)that one or more questions of fact be tried before the others;
Points of law to be heard before a trial on the facts
(c)that any point or points of law arising on the pleadings be disposed of before proceeding to trial of the facts;
and may appoint the place or places of such trials.
[8] Landsal Pty Ltd (in liq) v REI Building Society (1993) 41 FCR 421; (1993) 113 ALR 643.
The trial proceeded with evidence-in-chief of all witnesses proceeding by way of written statements exchanged beforehand unless permission was sought and given for limited oral evidence-in-chief to be introduced. In the case of the two expert programming witnesses called,[9] their evidence-in-chief comprised expert reports which had been exchanged and their joint report of a pre-trial conference they were directed to have. Apart from cross-examination as to qualifications and expertise, they gave their evidence concurrently.
[9] Mr Lynas for Alstom and Mr King for YDRML.
2 The Head Contract
Before attempting an analysis of the EC&I contract between Alstom and YDRML, it is necessary to have some understanding of the nature and content of the head contract between FPP and Alstom. For the purposes of this judgment, an expression beginning with an upper case letter or letters, unless defined elsewhere in these reasons, is an expression defined in the head contract or the EC&I contract as the case may require.
The refurbishment work had three broad components. They were, first, the mechanical aspects, such as the coal delivery system, burners, furnaces, boilers, turbines and generators; second, the civil works, such as those associated with the cooling water system and other processes; and thirdly, the electrical aspects such as cabling, electrical systems to effect the necessary controls previously carried out manually, delivery of the generated electricity to the grid, sensors, and computer controls. The electrical aspects were generally those covered by the EC&I contract.
The head contract was described in its heading as a “Turnkey Refurbishment Contract” and Alstom was expressly required to “provide the Works on a turnkey basis”. The nature of such a contract is discussed below. Under the head contract, Alstom was responsible as between Alstom and FPP, for the entire refurbishment.
Under the head contract Parsons Brinckerhoff International (Australia) Pty Limited (“PBI”) or such other independent firm or individual as appointed by FPP from time to time (“the Superintendent”), was appointed to carry out certain superintendence functions.[10] PBI, or such other independent firm or individual as appointed by FPP from time to time, was also appointed to carry out certain other certification functions as an independent engineer (“the Independent Engineer”).[11]
[10] See head contract Articles 2.4.1 and 2.5, definition of “Superintendent”.
[11] Ibid Articles 10 and 2.5, definition of “Independent Engineer”.
2.1 Time for performance under the head contract
The head contract Milestone Dates and the failure of Alstom to meet them have been identified in Part 1.7 above. Key dates for each stage were Mechanical Completion, Provisional Acceptance and Acceptance.
Mechanical Completion was defined to mean a point in the head contract Works where the facility had been completed and physically constructed, other than certain minor works which did not adversely impact upon the ability of the facility to operate as intended, and had passed tests as certified by the Independent Engineer in a Certificate of Mechanical Completion.[12]
[12] Ibid Article 2.5.
Provisional Acceptance was defined to mean a point in the head contract Works when the relevant stage was operating and had passed tests as certified by the Independent Engineer in a certificate of Provisional Acceptance.[13]
[13] Ibid.
Acceptance was defined to mean a point in the head contract Works after Provisional Acceptance had occurred and the relevant stage was continuing to meet minimum performance standards and some other requirements, as certified by the Independent Engineer in a Certificate of Acceptance.[14]
[14] Ibid.
2.2 Extensions of Time
The head contract contained a mechanism for an extension of time to Milestone Dates and the Relevant Scheduled Dates.[15] Compensable delays included an Owner-caused Delay, and Owner-directed Change or Force Majeure.[16]
[15] Ibid Article 4.3.
[16] Ibid Articles 2.5 and 4.3.2.
The Superintendent was responsible for administering EOTs under the head contract.[17]
[17] Ibid Article 4.3.
FPP had a general discretion to extend the Relevant Scheduled Dates at any time by giving notice to the Superintendent and Alstom stating the period of the extension and the adjusted Relevant Scheduled Dates.[18]
[18] Ibid Article 4.3.7.
2.3 Liquidated Damages for Delay Under the Head Contract
Article 10.1 of the head contract required Alstom to proceed with the Works “continuously and with due diligence, so as to achieve” Provisional Acceptance and Acceptance by the relevant Scheduled Acceptance Date and to achieve each of the Milestones by the relevant Milestone Dates.
Article 11.1 of the head contract provided:
11.1 Relevant Scheduled Dates
Contractor guarantees to Owner that it will achieve:
(a) Provisional Acceptance on or before the Schedule [sic] Provisional Acceptance Date; and
(b) Acceptance by the Scheduled Acceptance Date.
Payment of Liquidated Damages was to apply if Provisional Acceptance did not occur on or before the Scheduled Provisional Acceptance Date.[19] Liability for Liquidated Damages was capped at 20% of the Contract Price.[20] The payment of Liquidated Damages by Alstom to FPP was the sole and exclusive liability of Alstom and the sole and exclusive remedy of FPP for Alstom’s delay in attaining Provisional Acceptance by the Scheduled Provisional Acceptance Date.[21]
[19] Ibid Article 12.1.1.
[20] Ibid Article 12.1.2.
[21] Ibid Article 12.9.1.
Amounts payable by way of Liquidated Damages represented FPP’s genuine pre-estimate of the damages suffered by FPP if the works did not reach Provisional Acceptance by the Scheduled Provisional Acceptance Date, and such sum was not to be construed as a penalty.[22]
[22] Ibid Article 12.1.5.
The head contract provided[23] that following termination of the head contract, liability for Liquidated Damages for failure to achieve Provisional Acceptance by the Provisional Acceptance Date would continue.[24]
[23] Ibid Article 9.6.
[24] Ibid Article 12.9.1.
2.4 Performance Guarantees and Performance Guarantee Payments
The head contract contained a provision whereby Alstom guaranteed to FPP that certain Performance Guarantees would be achieved for each Stage and for the whole of the Works.[25]
[25] Ibid Article 11.2.
The head contract also contained provision for Performance Guarantee Payments to apply if the prescribed Performance Guarantees were not met by Alstom.[26] The maximum liability for Performance Guarantee was capped at 20% of the Contract Price.[27] The payment of Performance Guarantee Payments by Alstom to FPP was the sole and exclusive liability of Alstom and the sole and exclusive remedy of FPP for Alstom’s failure to achieve the Performance Guarantees.[28]
[26] Ibid Articles 12.2-12.7.
[27] Ibid Article 12.8.2.
[28] Ibid Article 12.9.
The head contract provided[29] that following termination of the head contract, liability for Performance Guarantee Payments for failure to achieve the Performance Guarantees would continue.[30]
[29] Ibid Article 9.6.
[30] Ibid Article 12.8.3.
Pursuant to the head contract, the maximum liability of Alstom for Performance Guarantee Payments and Liquidated Damages in aggregate was capped at 25% of the Contract Price.[31]
[31] Ibid Article 2.5.
2.5 Role of the Superintendent and Independent Engineer under the head contract
Under the head contract the Superintendent was vested with a range of functions including the Certifying Functions.[32] While the Certifying Functions were defined to mean functions, obligations and responsibilities of the Superintendent set out in Schedule X of the head contract, Article 2.4.2 also required the Superintendent to perform the functions of Superintendent set out, and in accordance with, the head contract.[33] Those functions went beyond those described in Schedule X.
[32] Ibid Article 2.5.
[33] There are many functions of the Superintendent stated in the Head Contract which go beyond those described in Schedule X.
The Independent Engineer also performed a range of certification functions.
2.6 The Head Contract is a Turnkey Contract
As mentioned above, the head contract was described in its title as a “Turnkey Refurbishment Contract”, and Article 3.1.1 required Alstom to provide the Works on a “turnkey” basis. The expression “turnkey” was not defined in the contract.
Both parties submit that a “turnkey” contract is otherwise known as a “design-and-build” contract or a “design-and-construct” contract; that it is one where the work is designed by the contractor on the basis of a performance specification which describes the work by reference to its intended function or purpose when it is completed; that the works are to be handed over as a going concern. The contractor is obliged not only to carry out the work with care, skill and in a workmanlike manner, but is obliged to ensure that the intended function or purpose is met upon completion.
In Cable (1956) Ltd v Hutcherson Bros Ltd,[34] the Court considered the construction of a contract that was labelled a “turnkey” contract. The appellant proposed to have erected on a wharf a bulk storage and handling plant, which consisted of two large storage bins. The appellant engaged an engineer to provide a specification for the installation. However, this did not include the storage bins. The respondent submitted a tender, together with drawings and a specification for the bins, which the appellant eventually accepted. The specification described the Basis of Tender as:
Tenders shall be as a ‘turnkey’ proposition in which tenders … shall take all responsibility for supply and erection, and efficient operation of the project … .
The footing for the bins proved to be inadequate. The question was whether the respondent had agreed to do only the work described in the drawings and specification or to produce the result that the bins would receive, hold and discharge the mineral to be stored at the specified rate. Barwick CJ held that the specification contained within the contract was limited to the “works” as described and provided for in the contract.[35]
[34] (1969) 123 CLR 143.
[35] Ibid 151.
As to the expression “turnkey”, his Honour said:
Nothing can be made, in my opinion, off the use of the word “turnkey”. It is not a term of art and, even if it could be taken to mean that the works must be handed over as a going concern, I would not have thought that in the context of these articles the word or expression meant that the builder warranted the efficacy of the works he had agreed to erect.
His Honour had earlier considered the arbitrator’s comments with respect to the term “turnkey” earlier in his reasons:[36]
The arbitrator found that ‑ “neither the word ‘turnkey’ nor the phrase ‘turnkey basis’ nor the phrase ‘turnkey proposition’ or any of them had as at February 1964 acquired, nor have they or any of them yet acquired in Australia any usually accepted meaning in the building industry or in connexion with civil engineering works or in connexion with mechanical and electrical works”.
[36] Ibid 148.
Whilst that may have been the case in 1964 (the date of the contract), I am satisfied that by 2002 the expression “turnkey” had acquired an accepted meaning in the engineering and construction industry, and had the meaning as submitted by the parties in this case. Its early genesis can be seen in the English courts as “package deal” contracts. Lord Denning MR described them in 1975 as “a new kind of building contract called a package deal”.[37] According to the learned authors of Hudson’s Building and Engineering Contracts, the implementation of “turnkey” contracts has become increasingly common:[38]
Design and build contracts have become increasingly common in the last few decades, before which they were comparatively rarely used for building or traditional civil engineering projects in the UK and Commonwealth. Their earliest use was for contracts with a high mechanical content, such as industrial plant and machinery contracts. They appear to have emerged rather earlier in the construction field in the US. In the 10th edn of Hudson in 1970, they were referred to in the traditional construction context as “package deal” contracts, … The more modern UK description “design-and-build” is in fact the most useful and least misleading description, but the American oil industry description “turnkey”, originally used for industrial plant projects such as refineries, is still widely used at the present day, particularly in the international field. The expressions “turnkey” and “design-and-build” can now be said to be synonymous, while the expression “package deal” has largely disappeared. …
In these contracts the essential feature is that the Employer does not employ their own professional advisers to produce the complete or final design of the building or project which they require. Either by negotiation, or by outline specification to tendering contractors, the Employer makes known their requirements and the Contractor then produces the design, in the form of drawings, a specification and sometimes schedules of rates to cover possible variations.
[37] Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095, 1098.
[38] Dennys, Raeside & Clay (eds) Hudson’s Building and Engineering Contracts (12th ed, 2010) 494-5. The 11th edition (1995) is in precisely the same terms. See also I N Duncan Wallace, ‘Contracts for Industrial Plant Projects’ (1984) 1 International Construction Law Review 322, 324; High Mark (M) Sdn Bdh v Patco Malaysia Sdn Bdh (1984) 28 BLR 129; Fagents v A-G Sheds (1998) 19 SR (WA) 186.
I will hereafter refer to such a design-and-construct contract as a turnkey contract. However, the comments of Barwick CJ nevertheless emphasise the need to construe the actual effect of the terms of a contract, and to assess the actual scope of works. But if expressions such as “turnkey” or “turnkey basis” are used, that will now go a long way towards establishing the intention of the parties.
No-one argued that the head contract was not a turnkey contract. Indeed Alstom submitted that because it was a turnkey contract, the “back to back” nature of the EC&I contract ensured that it too was a turnkey contract. That was a key matter in dispute. For that reason it is necessary to identify what made the head contract a turnkey contract.
There are many aspects of the head contract which demonstrate that it was a turnkey contract. Significantly, the parties gave it that label and contracted that Alstom would “provide the Works on a turnkey basis”.
That the head contract was indeed a turnkey contract is reasonably clear from a number of its terms. The expression “Works” or “Scope of the Works” was defined in the head contract to mean:
… the design, construction and commissioning of the whole of the Refurbished Facility, including:
(a)the provision of the Services and Materials and Equipment and the furnishing of Construction Aids as required of Contractor in order to design, construct, procure, erect, start up, commission, test and place in operation a complete Refurbished Facility as defined in the Schedules, and as otherwise required to meet the Performance Guarantees;
(b)all items of supply and services required or that can be reasonably inferred from this Contract even though not expressly stated, to deliver to Owner a completed and fully operational Refurbished Facility in accordance with this Contract;
(c)all other things which must be done by Contractor under this Contract to achieve Final Completion; and
(d) the Warranty Obligations;
each in accordance with the terms of this Contract.
[Emphasis added]
Alstom was required to deliver a “Refurbished Facility”. The expression “Refurbished Facility” was defined to mean the Existing Facility after refurbishment on the basis described in, and as required by, the “Technical Specifications”.[39]
[39] Ibid Article 2.5.
The expression “Technical Specifications” was defined to mean the technical specifications set out in Schedule A to the head contract.[40] By Article 3.4.2(a) Alstom acknowledged that the Technical Specifications was a functionally focussed specification. It was in the following terms:
[40] Ibid.
3.4.2 Contractor acknowledges that:
(a) the Technical Specifications:
(i)is not a comprehensive or complete design; and
(ii)is a functionally focused specification, and
preparation of a detailed design for the Refurbished Facility shall form part of the Works and is the responsibility of Contractor; and
(b) the obligations of Contractor under this Contract including the warranties in sub-article 3.4.1 and Contractor’s Design Obligations shall remain unaffected notwithstanding:
(i)the Technical Specifications and any other documents or information provided by Owner to Contractor in relation to the Refurbished Facility or any error, omission, inadequacy or deficiency in such documents;
(ii)any design work incorporated in the Technical Specifications or carried out by or on behalf of Owner in relation to the Refurbished Facility;
(iii)any receipt or review of, or comment or direction on, the Design Documents or Deliverable Documents by Superintendent or Owner;
(iv)any Owner-directed Change.
As a functionally focussed specification the eight sections of Schedule A spoke of Alstom’s responsibilities to design, engineer, construct and deliver a power station with certain features and performance characteristics.
The contract did not merely require Alstom to assume responsibility to execute certain work in accordance with the scope of works. Article 3.3.1 imposed an obligation on Alstom to perform the Works in accordance with the terms and provisions of the head contract and an obligation to ensure that the Refurbished Facility achieved the Performance Guarantees. Because of their significance in comparison with the requirements of YDRML under the EC&I contract, it is necessary to recite the relevant provisions of the head contract concerning Performance Guarantees.
Article 11.1 set forth above[41] contained a guarantee to achieve the Scheduled Provisional Acceptance and Acceptance Dates. Articles 11.2 and 11.3 provided:
[41] See paragraph [45] above.
11.2 Performance Guarantees
Contractor guarantees to Owner that the following Performance Guarantees will be achieved:
(a) For each Stage, on or before the Scheduled Acceptance Date for each Stage:
(i) Net Output Guarantee;
(ii) Net Heat Rate Guarantee;
(iii) Hot Start Up Guarantee; and
(iv) Boiler Minimum Load Guarantee;
each on the basis and to the value set out in Schedule D.
(b) For the whole of the Works (the Stage 1 Works and Stage 2 Works) on or before the Scheduled Acceptance Date for the last Stage to reach Acceptance:
(i) Boiler Fuel Oil Consumption Guarantee; and
(ii) Integrated Facility Reliability Test.
(c) For each Stage, all Performance Guarantees other than those set out in sub-articles 11.2(a), 11.2(b) and 11.2(d) on or before the Scheduled Provisional Acceptance Date for each Stage.
(d) For each Stage, the Works Availability Guarantee on or before the date being 12 months after the Acceptance Date for that Stage.
11.3 Performance Tests
Contractor shall prepare and perform Performance Tests for each of Contractor’s
Performance Guarantees and the System Demonstration as outlined in Schedule D.
Schedule D to the head contract set out in great detail a performance testing protocol, including the requirement of a System Demonstration Test before the actual Performance Guarantee Test in each case and for each area of plant, together with the performance particulars and guarantees required to be met in each case. It also contained requirements for the Integrated Facility Reliability Test.
Article 12 provided for a system of Performance Guarantee Payments for failure to meet any and each of the Performance Guarantees specified in Article 11.2. In each case the contract provided:
If on before the Scheduled Acceptance Date the [relevant] Guarantee has not been met in accordance with Article 11.2, [Alstom] shall pay to [FPP] the Performance Guarantee Payments for the [relevant] Guarantee.
In respect of each Performance Guarantee Payment the relevant Article provided:
All sums payable by Contractor to Owner pursuant to [the relevant Article] represent Owner’s genuine pre-estimate of the damages likely to be suffered by Owner if there is a Performance Shortfall in respect of the [relevant] Guarantee and such sum shall not be construed as a penalty.
I mention these provisions not only because they reinforce the performance based obligation placed upon Alstom but because they must be contrasted in due course with the equivalent obligations imposed upon YDRML under the EC&I contract.
There were other provisions of the head contract and the Technical Specifications which were incorporated into it which support the conclusion that Alstom was to be responsible for the design, construction and commissioning of the whole of the Refurbished Facility, and to deliver a fully functional power station at its own risk.
The Technical Specification contained in Schedule A to the head contract contained some limitations upon the work which was expressly required to be carried out by Alstom. For example, Item 5.2.7 of Schedule A set out the scope of Alstom’s work in relation to the coal mills and pulverised fuel system. It provided that:
“Milling plant, PF pipe work and associated equipment are not included”.
However, there is no suggestion in the head contract that Alstom’s contractual obligations and its obligation to meet the Performance Guarantees would not apply without limitation in the event that works which had been excluded from the Technical Specification were either the cause or a cause of an inability to perform.
There was considerable evidence in relation to the problems associated with the coal mills, the absence of separator plates, the fineness of the grind and the claim by Alstom that the problems it encountered with running the plant, particularly at high loads, was a consequence of the mills which had been excluded from its Scope of Works.[42] Alstom sought to maintain in the proceedings brought against FPP, at least until the February 2005 settlement, that its failure to perform was attributable to these problems. However, the head contract did not limit the liability of Alstom either expressly or by necessary implication in the event that works which were excluded from the Technical Specification inhibited Alstom’s performance.[43] Alstom’s “Works” or its “Scope of Works” were functionally defined, performance based, and required Alstom to produce a particular result within a specified time. The head contract was undoubtedly a turnkey contract.
3 The EC&I contract
[42] This topic is the subject of further analysis below.
[43] There was some scope for additional work to be carried out at FPP’s expense pursuant to Article 3.3.4 and Schedule 1. However, this was limited in scope and timing.
3.1 The pre-contract
As at the date the head contract was entered into by Alstom and FPP (12 March 2002), there was no subcontract in place for the performance of the EC&I works. There had, however, been discussions between representatives of Alstom and YDRML and the submission of a tender by YDRML to Alstom.
On 4 April 2002 Alstom and YDRML entered into an interim agreement described as “Electrical and Control & Instrumentation Pre-Contract”.[44] The contract recited that Alstom had entered into the head contract with FPP, a copy of which was annexed to the pre-contract as Appendix 3. The recitals included:
WHEREAS, the Contractor desires the Subcontractor to render engineering, procurement, erection and commissioning of the electrical and control & instrumentation scope for the Project as to be agreed on in the Electrical and C&I Contract.
WHEREAS the Parties undertake to negotiate in good faith in order to attempt to reach agreement on a contract for the electrical and control & instrumentation scope of the Electrical and C&I Work (“Electrical and C&I Contract”) based on a back-to-back arrangement with the Project Contract as per Appendix 3 and the Contractor’s RFQ and the Tender.
[44] Statement of Mr Everett dated 7 November 2009, Exhibit D315, Attachment PE10.
Article 2 provided:
The purpose of this Pre-Contract is to perform the Pre-Contract Works in accordance with the scope in Appendix 1 hereto.
The Parties wish to be in a position to execute the Electrical and C&I Contract within 6 weeks from the Effective Date.
The Parties acknowledge that if the Electrical and C&I Contract is executed, then upon execution, the Pre-Contract shall immediately terminate and be replaced by the Electrical and C&I Contract and the Pre-Contract Works shall be deemed in all respect to be works carried out under the Electrical and C&I Contract and the total price for the works under the Electrical and C&I Contract will include the Pre-Contract Price hereunder.
Article 8 provided:
Subject to the terms and conditions herein, the Parties agree to co-operate with each other, and to work together in good faith and diligently in order to take, or cause to be taken, to do, or cause to be done all actions necessary for the proper implementation of this Pre-Contract.
The Parties hereby expressly agree that the Contractor’s acceptance of the Terms and Conditions is exclusively applying to this Pre Contract and hereby expressly acknowledge that the Contract may not incorporate the same terms and conditions.
YDRML was to be paid on invoices for the pre-contract works described in the contract, but the contract price was not to exceed $350,000 excluding GST. That price cap was increased by agreement on two occasions to a price cap of $600,000 excluding GST. On 15 May 2002 the parties agreed to extend the term of the pre-contract to 10 June 2002 and to increase the price cap of the pre-contract works to $1.5 million excluding GST. That was followed on 31 July 2002 by a purchase order issued by Alstom for a variation of the pre-contract works to the value of $1.5 million, thus giving effect to the agreement of 15 May 2002.
Further work was performed beyond that date with Alstom’s assent, resulting in a further purchase order dated 30 September 2002 authorising payment to a ceiling of $3 million excluding GST. There had been no formal extension of the pre-contract beyond 10 June 2002.
3.2 Agreement on the EC&I contract
Agreement on the terms of the EC&I contract was reached at negotiations which occurred on 28 August 2002 between Mr Milchem, Alstom’s Commercial Manager for the project, Mr Everett, YDRML’s Project Manager representing Yokogawa, and Mr Hood, Commercial Manager for Downer. There were some relatively minor further variations proposed by Downer and agreed verbally early in September between Mr Everett and Mr Neil, Alstom’s General Manager ‑ Operations. On 25 September 2002 Mr Everett sent a letter to Alstom enclosing a copy of the contract signed on behalf of YDRML. On 11 October 2002 Mr McGill-Morton, Alstom’s Contract Manager, wrote to Mr Everett, in response to an enquiry from Mr Everett, advising him that “senior management” was reviewing the contract and that a decision to proceed with the contract “in its present form” would be made by Tuesday 15 October.
No signed contract was forthcoming from Alstom despite many requests by Mr Everett, although YDRML was acting on the assumption that the terms as previously signed by it were agreed. During December Mr Everett was given informally, by Mr McGill-Morton, a copy of an unsigned letter suggesting rather different terms which Mr Everett quickly rejected and insisted on proceeding with the agreed terms. He expressed concern at not having a signed copy of the contract, which had apparently been mislaid by Alstom. At Mr Everett’s suggestion a meeting of senior representatives of the parties eventually took place on 24 February 2003 at which all parties executed the EC&I contract, YDRML for the second time.
Although there was substantial obfuscation and delay by Alstom, the orally agreed terms did not change after 25 September 2002 and the parties continued to act in accordance with them thereafter.
Alstom submits that the agreement cannot have been entered into before 30 September 2002. That is the date of the purchase order executed by Alstom in respect of the increased price cap on the pre-contract works to $3 million. However, I cannot infer that that was the date of any agreement to raise the cap of the pre-contract figure. There is no evidence as to when agreement was reached to increase the cap to $3 million. It would be unlikely to have been after 25 September when Mr Everett considered that final agreement on the EC&I contract had been reached. The purchase order of 31 July 2002 for $1.5 million reflected the earlier agreement of 15 May 2002 to increase the price cap to $1.5 million. It is likely that the purchase order of 30 September likewise reflected a much earlier agreement. I find that oral agreement had been reached on the terms of the EC&I contract by 25 September 2002 in the form which YDRML then signed, notwithstanding that it was not formally executed by Alstom and again by YDRML until 24 February 2003.
The finding as to the date on which agreement was reached has little practical consequence save in relation to Alstom’s argument against YDRML’s claim for rectification.[45]
[45] See Part 8 below.
3.3 A drafting disaster
The EC&I contract is in a deceptively simple form. Including the one Attachment and one Schedule, it covers a mere 40 pages described as “Special Conditions of Contract”. Those Special Conditions of Contract were the key to the EC&I contract. They set out the changes which were to be applied to the terms of the head contract to reflect the agreed terms of the EC&I contract. They provided for the incorporation into the EC&I contract of the whole of the head contract subject to a number of specified alterations, omissions and additions.
That is not necessarily a poor drafting technique if done competently, in appropriate circumstances and with care. However, in a contract of this complexity I began my journey into the EC&I contract with a certain sense of trepidation – “I looked on, I thought, I reflected, I admired, in a state of stupefaction not altogether unmingled with fear!”[46] My first fears were more than justified. As will be seen from the extent of these reasons necessarily devoted to the interpretation of the EC&I contract, the clumsiness, in this case, of the superimposing technique has created a drafting disaster.
[46] Jules Verne: Journey to the Centre of the Earth.
| 119 | N6 Soft Starter disc & reconnect Alstom requested that YDRML investigate a fault on conveyor N6. It was discovered that the cause of the fault was the motor soft starter. YDRML were requested to swap the starter with S6 to prove the fault. YDRML were then requested to disconnect the starter for removal by Alstom. YDRML were also requested to install the replacement soft starter.[1654] This was clearly in the nature of a Contractor-directed Change as the additional work was due to a fault with equipment supplied by others. | Yes | 2 | $979.20 |
| 123 | Stage 1 Cable repulls – Alstom Relocs During the course of the electrical installation on Stage 1 works, YDRML was requested to re-cable and in some instances re-terminate cables which were damaged by others.[1655] This was clearly in the nature of a Contractor-directed Change as the additional work was due to damage caused by others. | Yes | 2 | $4,364.00 |
| 125 | Relocate Boiler 1-6 Instruments YDRML received an instruction from Alstom to relocate a number of heater instruments which they had already installed, cabled, tested and commissioned and were placed in service for Boilers 1 to 3 prior to this instruction.[1656] This was clearly in the nature of a Contractor-directed Change as it involved re-work of instruments already installed in accordance with YDRML’s scope of works. Article 4.2.2(i) notice was given before work commenced.[1657] | Yes | 1 | $14,638.00 |
| 126 | Disc/Recon Ash Pit 2&4 Mtrs 7/12/03 Alstom requested that YDRML reconnect ash pit pump no 2 which had previously been disconnected by Alstom. YDRML were then requested to disconnect ash pit pump no 4 and after mechanical repairs, reconnect the drive. The requirement for mechanical repairs was due to ash pit flooding.[1658] This was clearly in the nature of a Contractor-directed Change as the work was due to mechanical issues. | Yes | 2 | $463.85 |
| 127 | Supply of Actuator Kit Alstom requested the supply of a replacement mounting kit for an actuator. It is not clear that this was in the nature of a Contractor-directed Change.[1659] | No | 3 | - |
| 129 | Discon/Recon T2 Oil Centrifuge Alstom requested YDRML to disconnect a power cable and a control cable to allow the removal of equipment on the Turbine 2 oil centrifuge in order to allow them access to effect mechanical repairs. This was clearly in the nature of a Contractor-directed Change as it was additional work performed in order to allow Alstom to carry out mechanical repairs.[1660] | Yes | 2 | $665.00 |
| 130 | T2 LH Stop Valve Steam Damage An actuator and cables were damaged due to a steam leak on the Turbine 2 LH stop valve. The cables and actuator had to be replaced and recommissioned. This was clearly in the nature of a Contractor-directed Change as it was additional work required due to mechanical failure.[1661] | Yes | 2 | $1,734.15 |
| 131 | Disconnect & Recon B3 Nth ID Fan Alstom requested that YDRML disconnect the Boiler 3 ID fan to allow mechanical repairs to be carried out and then re-connect the fan once the repairs had been completed. This was clearly in the nature of a Contractor-directed Change as it was additional work required due to mechanical failure.[1662] | Y | 2 | $269.25 |
| 132 | Aux Stm Main Drain Pilot Sol Damage Alstom requested that YDRML replace a pilot solenoid for the auxiliary steam main drain solenoid damaged during scaffold removal. This was clearly in the nature of a Contractor-directed Change as it was additional work required due to damage by others.[1663] | Yes | 2 | $400.00 |
| 133 | Discon & Recon Scrn Wash Pmps Alstom requested that YDRML disconnect the screen wash pumps to allow access for mechanical repairs and then re-connect the pumps once the repairs were complete. This was clearly in the nature of a Contractor-directed Change as it was additional work required due to mechanical failure.[1664] | Yes | 2 | $399.70 |
| 135 | Disc Ash Pit Mtr 1,2&3 – 20/1&6/2 Alstom requested that YDRML disconnect the ash pit motors to allow for repairs to be carried out to the ash pit pumps and motors by mechanical personnel. This was clearly in the nature of a Contractor-directed Change as it was additional work required due to mechanical failures.[1665] | Yes | 2 | $972.35 |
| 143 | Misc Commissioning reworks to 15/2 Alstom requested that YDRML re-stroke the Boiler 4 ID fans vanes damper due to a mechanical problem or adjustment. This was clearly in the nature of a Contractor-directed Change as it was additional work required due to a mechanical issue. Alstom also requested that YDRML carry out current checks on the ash hopper heaters for Boilers 1 to 3, then requested that further the heaters be disconnected and the heater elements proven defective. This was clearly in the nature of a Contractor-directed Change as the supply and installation of heaters was the responsibility of others and the equipment had been previously commissioned and in service.[1666] | Yes | 2 | $951.43 |
| 144 | Ash Pit Pmp 4 D/R & reroute 2/1/04 Alstom requested that YDRML disconnect and then reconnect ash pit pump no. 4 in order that mechanical repairs could be performed.[1667] This was clearly in the nature of a Contractor-directed Change as it was additional work due to mechanical issues. | Yes | 2 | $460.60 |
| 148 | Stge 2 Hyd Press Reducing Panels Alstom instructed YDRML to supply and install the hydrogen pressure reducing stations for Turbines 3 and 4.[1668] This was clearly in the nature of a Contractor-directed Change as the supply and installation of pressure reducing stations was not included in Attachment 1 to the Special Conditions of Contract. Article 4.2.2(i) notice was given before the work commenced.[1669] | Yes | 1 | $23,740.00 |
| 151 | Turb Stm Range Act Ladder Mods Alstom requested that YDRML repair cable ladder/conduit damaged by the mechanical removal and reinstatement of the turbine steam range valve.[1670] This was clearly in the nature of a Contractor-directed Change as it was additional work due to damage by others. | Yes | 2 | $555.25 |
| 152 | Restroke Stage 1 Turbine Actuators Alstom requested that YDRML recommission Stage 1 actuators after mechanical alterations and/or repairs were performed.[1671] This was clearly in the nature of a Contractor-directed Change as it was additional work required due to mechanical issues and after the equipment had already been commissioned and was in service. | Yes | 2 | $2,369.70 |
| 154 | Rework Brner Preformed Cable Plugs Alstom requested that YDRML investigate shorts and faults on the boiler flame scanners. It was discovered that the plug connections were damaged by the insertion and extraction and use of silicone sealer during the installation process. YDRML were then requested to re-terminate all the plug tops to prevent the faults re-occurring.[1672] This was clearly in the nature of a Contractor-directed Change as it was additional work required due to damage during installation by others. | Yes | 2 | $1,770.35 |
| 155 | Repair Conveyor W10 Equipment YDRML was requested to repair their electrical installation which had been damaged by conveyor W10 over-travelling.[1673] This was clearly in the nature of a Contractor-directed Change as it was additional work required due to damage caused by others. | Yes | 2 | $436.50 |
| 156 | Replace Conveyor N4 Contractor Alstom requested that YDRML repair the burnt out contactor on the conveyor S7 drive panel which had been supplied and installed by the coal handling plant contractor.[1674] This was clearly in the nature of a Contractor-directed Change as it was repair work of equipment supplied and installed by others. | Yes | 2 | $1,159.95 |
| 158 | T3 & T4 Actuator X-overs After YDRML had carried out the cable installation and termination to the turbine actuators as identified by the mechanical contractor’s numbering, YDRML were advised that the actuators had been incorrectly labelled. YDRML were required to disconnect, re-connect and re-number the incorrectly KKS numbered actuators.[1675] This was clearly in the nature of a Contractor-directed Change as it was additional work caused by an error of another. | Yes | 2 | $1,320.05 |
| w203 | FO Trace Htg Delete then Addition A revised drawing included the requirement for trace heating, which had previously been deleted in the previous revision. YDRML were advised that the trace heating power requirements were 548 kW, but this was in turn revised to 1.4 kW then calculated to be 3.4 kW. YDRML were also advised that four circuits were required in lieu of one circuit, leading to a requirement for additional RCD circuit breakers and field cabling.[1676] This was clearly in the nature of a Contractor-directed Change as the work represented changes to the original power requirements and circuit configurations. | Yes | 2 | $4,970.00 |
| 211 | Remove Redundant Lanyards YDRML were requested to modify their design for conveyor N4 to match the requirements of the coal handling contractor’s equipment. The original design had been based on information from Alstom. As not all the lanyard switches were required, this resulted in revision of the design, drawings, removal of redundant cables and modification of the FCD and configuration.[1677] This was clearly in the nature of a Contractor-directed Change as this was additional modification work required due to the coal handling contractors’ equipment being different from Alstom’s advised information. | Yes | 2 | $1,921.00 |
| 212 | 275kV CB Revised Cable Locations YDRML was supplied incorrect information by Alstom in relation to the interface location for 275 kV circuit breakers. Accordingly, their initial design was rejected and had to be re-designed in accordance with new information.[1678] This was clearly in the nature of a Contractor-directed Change as the additional design work was due to incorrect information being supplied to YDRML. | Yes | 2 | $7,260.00 |
| 227 | Ash Crusher Drive Size Changes Inititally, YDRML were not advised of the ash crusher drive sizes. Correspondence from Alstom advised that the drive sizes would be 25 kW each and YDRML altered their design to reflect this. Further correspondence advised that the drive sizes would in fact be 19 kW and YDRML altered their design again.[1679] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $1,450.00 |
| 229 | Gen Excite & Protection Supplies YDRML had completed their design and delivered power supply panels and distribution boards based on information supplied during the design process. However, YDRML were then advised of additional requirements for power supplies for ABB equipment which required YDRML to rework their design and supply additional equipment to be retro-fitted on site.[1680] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $2,551.00 |
| 237 | Delete Deasher Belt Drift Switches YDRML were advised by Alstom that the belt drift switches for the de-asher conveyors had been deleted. YDRML’s design, configuration and cabling for the switches had been completed at that point in time so changes were required to the FCD, CHAZOP, software, electrical design, drawings and documents. Redundant cables also had to be removed.[1681] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $1,992.00 |
| 250 | Generator Protection & Exc Signals The DCS interface was designed by YDRML based on information supplied by ABB for the generator protection system. YDRML were later given connection details by ABB which differed from the previously advised interface. As a result, YDRML were then advised that six alarms were to be wired from the protection panels to the DCS. YDRML were then advised that there was only a requirement for five alarm signals and the other was to be made a spare. YDRML were required to carry out additional work associated with removing the spare signal from the design, configuration, documents and drawings.[1682] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $2,000.00 |
| 255 | Stn Services Air Sys Isol Vlve YDRML based their design on information from the PI&D drawings. Originally there was no compressed air system station services isolating valve, as it was not to be automated. However, in accordance with a design change request, YDRML revised their design to reflect a revision of the relevant PI&D drawing and supply an additional actuator and associated cabling.[1683] This was clearly in the nature of a Contractor-directed Change as the additional work was due to a revision in the design requested by Alstom. | Yes | 2 | $5,981.00 |
| 257 | Turb 1&2 Brg lube Oil Drains It became apparent to YDRML that Alstom would not be providing two tapping points per turbine as the lube oil drains were common. YDRML were instructed to go ahead with a common signal for each turbine. Consequently, work was done removing the spare signals from the design, configuration, documents, drawings and for the deletion of the redundant temperature devices.[1684] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $2,083.00 |
| 259 | Deletion of N4 Tripper Park brake YDRML was advised by Gulf Conveyors that the park brake bypass switch for tripper N4 was not going to be installed. As the original design included this switch, YDRML had included it in their design and had installed the cabling for the switch. Accordingly, YDRML had to make changes to their design and remove the redundant cable.[1685] This was clearly in the nature of a Contractor-directed Change as the additional work was due to a change in design caused by others. | Yes | 2 | $700.00 |
| 260 | Ash Slurry Pump Deletion This is shown as having been agreed in Mr Everett’s notes of the meeting. It did not appear in the subsequently prepared schedule. That would appear to have been an accidental omission. I find that it was the subject of agreement with Mr Pigozzo. YDRML were advised that there was no provision for motor heaters on ash plant slurry pump no. 4. YDRML’s original design included motor heaters for existing nominated drives so work was required to delete the heater and the associated cable from the design, drawings and documents to reflect this.[1686] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $450.00 |
| 269 | Deletion Gland Steam Valve YDRML were advised that a particular gland steam valve did not physically and that sizing for the actuator was incorrect. This was contrary to earlier information given to YDRML. As a consequence, YDRML was required to delete all references to this in the documentation, configuration, cabling and I/O in relation to the valve.[1687] This Change was clearly in the nature of a Contractor-directed change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $7,674.00 |
| 279 | Condenser Drains & Vents P&ID YDRML based their design for the condenser drains and vents on a third revision of one of the PI&D drawings. However, the PI&D was revised in terms of YDRML’s actuators and KKS numbering. Alstom had re-numbered the PI&D to reflect the correct layout of the plant as it had previously been incorrectly drawn. YDRML were then required to revise their design and documentation to reflect this.[1688] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $960.00 |
| 285 | Stn ACW System description Chges After the design freeze, FAT and the issuing of final documentation and software to site, Alstom and FPP changed the description of the “Bearing Cooling Pumps” to “Station ACW Pumps”. To reflect this, YDRML were required to revise the FCD; carry out modifications to graphics; revise drawings, diagrams and documentation; and change labelling on switchboards and equipment.[1689] This was clearly in the nature of a Contractor-directed Change as the additional work was due to a change made by others. | Yes | 2 | $7,237.00 |
| 315 | Turb 1&2 Gen Temp Elem Descrptrs Agreed and approved design and descriptors were modified at Alstom’s request after configuration and completion of the turbine controls design. YDRML were required to modify their work in order to reflect this, re-working their design and documentation.[1690] This was clearly in the nature of a Contractor-directed Change as the additional work was due to a change requested by Alstom. | Yes | 2 | $6,520.00 |
| 316 | Reserve Seal Oil Tank Lvl Txmtrs YDRML were informed by Alstom that the original ranges for the reserve seal oil tank level transmitters were and were advised of the new ranges. This required YDRML to re-range the transmitters in the field, update the database and revise the configuration and graphics to reflect these changes.[1691] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $1,978.00 |
| 317 | T 1&2 Lube Oil Tank Lvl Txmtrs The original range for the Turbine 1 and 2 lube oil tank level transmitters was incorrectly advised by Alstom. Once Alstom had identified this, Alstom requested that YDRML re-range to the tapping points provided by Alstom which also involved updating of the database and revision of the configuration and graphics.[1692] This was clearly in the nature of a Contractor-directed Change as the additional work was due to incorrect information being supplied to YDRML. | Yes | 2 | $1,916.00 |
| 318 | Gland Steam Trip Modification The design for the gland steam pressure valve was changed by Alstom to reflect a different process design. The partly commissioned DCS design had to be changed by YDRML to reflect this. YDRML were required to change the gland steam close limit switch, revise the FCD, update their database, revise the relevant HAZOP/CHAZOP, modify the configuration, revise documentation and supply, install, terminate and commission new limit switches and cables.[1693] This was clearly in the nature of a Contractor-directed Change as the additional work was due to a change requested by Alstom. | Yes | 2 | $4,538.00 |
| Total Plus GST TOTAL | $505,588.07 $50,558.80 $556,146.88 |
[1604] Statement of Mr Everett dated 7 November 2009, Exhibit D317, Attachment PE461.
[1605] Ibid paragraphs 223-233; Attachment PE462.
[1606] Ibid paragraphs 246, Attachment PE463.
[1607] Ibid Attachment PE464.
[1608] Ibid paragraphs 261-263, Attachment PE465.
[1609] Ibid Attachment PE466.
[1610] Ibid Attachment PE467.
[1611] Ibid Attachment PE468.
[1612] Ibid Attachment PE469.
[1613] Ibid Attachment PE470.
[1614] Ibid Attachment PE471.
[1615] Ibid Attachment PE472.
[1616] Ibid Attachment PE473.
[1617] Ibid Attachment PE474.
[1618] Ibid Attachment PE475.
[1619] Ibid Attachment PE476.
[1620] Ibid Attachment PE477.
[1621] Ibid Attachment PE478.
[1622] Ibid Attachment PE479.
[1623] Ibid Attachment PE480.
[1624] Ibid Attachment PE481.
[1625] Ibid Attachment PE482.
[1626] Ibid Attachment PE483.
[1627] Ibid Attachment PE484.
[1628] Ibid Attachment PE485.
[1629] Ibid Attachment PE486.
[1630] Ibid.
[1631] Ibid Attachment PE487.
[1632] Ibid Attachment PE488.
[1633] Ibid Attachment PE489.
[1634] Ibid Attachment PE490.
[1635] Ibid Attachment PE491.
[1636] Ibid Attachment PE492.
[1637] Ibid.
[1638] Ibid Attachment PE493.
[1639] Ibid.
[1640] Ibid Attachment PE494.
[1641]Ibid Attachment PE505. This attachment relates to Variation 123 but document ISS.046.370 comprises a Change Order which includes the supply and installation of ash crusher door limits.
[1642] Ibid Attachment PE495.
[1643] Ibid Attachment PE496.
[1644] Ibid Attachment PE497.
[1645] Ibid Attachment PE498.
[1646] Ibid Attachment PE499.
[1647] Ibid Attachment PE500.
[1648] Ibid Attachment PE501.
[1649] Ibid.
[1650] Ibid.
[1651] IbidAttachment PE502.
[1652] Ibid.
[1653] Ibid Attachment PE503.
[1654] Ibid Attachment PE504.
[1655] Ibid Attachment PE505.
[1656] Ibid Attachment PE506.
[1657] Ibid.
[1658] Ibid Attachment PE507.
[1659] Ibid Attachment PE508.
[1660] Ibid Attachment PE509.
[1661] Ibid Attachment PE510.
[1662] Ibid Attachment PE511.
[1663] Ibid Attachment PE512.
[1664] Ibid Attachment PE513.
[1665] Ibid Attachment PE514.
[1666] Ibid Attachment PE515.
[1667] Ibid Attachment PE516.
[1668] Ibid Attachment PE517.
[1669] Ibid Attachment PE518.
[1670] Ibid Attachment PE518.
[1671] Ibid Attachment PE519.
[1672] Ibid Attachment PE520.
[1673] Ibid Attachment PE521.
[1674] Ibid Attachment PE522.
[1675] Ibid Attachment PE523.
[1676] Ibid Attachment PE524.
[1677] Ibid Attachment PE525.
[1678] Ibid Attachment PE526.
[1679] Ibid Attachment PE527.
[1680] Ibid Attachment PE528.
[1681] Ibid Attachment PE529.
[1682] Ibid, Attachment PE530.
[1683] Ibid, Attachment PE531.
[1684] Ibid, Attachment PE532.
[1685] Ibid Attachment PE533.
[1686] Ibid Attachment PE534.
[1687] Ibid Attachment PE535.
[1688] Ibid Attachment PE536.
[1689] Ibid Attachment PE537.
[1690] Ibid Attachment PE538.
[1691] Ibid Attachment PE539.
[1692] Ibid Attachment PE540.
[1693] Ibid Attachment PE541.
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