Armour Fire Protection Pty Ltd As The Trustee of The Armour Fire Unit Trust v Salandra & Salandra
[2005] SADC 19
•14 March 2005
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
ARMOUR FIRE PROTECTION PTY LTD AS THE TRUSTEE OF THE ARMOUR FIRE UNIT TRUST v SALANDRA & SALANDRA
Judgment of His Honour Judge Anderson
14 March 2005
CONTRACTS
Building works - scope of original contract disputed - variations - dispute as to nature of payment made in relation thereto - further works done outside of original scope and to be paid on basis of a reasonable sum - further intended contract - parties not ad idem - reasonable sum fixed - reconciliation - judgment for plaintiff in sum of $74,219 inclusive of interest
Outer Suburban Property Limited v Clarke (1933) SASR 221; Cullen v Bickers (1878) 12 SALR 5; Harris v Jenkins (1922) SASR 59; Sych and Sych v Hunter (1974) 8 SASR 118; R v Karger (2001) 83 SASR 1; Carter & Harland Contract Law in Australia 4th Ed; Hudson's Building & Engineering Contracts 11th Ed, Vol 1[7.00] 1995; Cheshire & Fifoot Law of Contract 5th Australian Ed; Freckleton & Selby Expert Evidence [11.220], applied.
ARMOUR FIRE PROTECTION PTY LTD AS THE TRUSTEE OF THE ARMOUR FIRE UNIT TRUST v SALANDRA & SALANDRA
[2005] SADC 19
Armour Fire Protection Pty Ltd as the Trustee of the Armour Fire Unit Trust (“the Plaintiff”) claims from Francesco Salandra and Loredana Salandra (“the Defendants”) following the completion of contractual works and for further work done on the basis of a reasonable sum payment or a quantum meruit. The Defendants have a small counterclaim.
The Plaintiff was represented by Mr Geyer in 2004 and by Mr Lunn of counsel in 2005 subsequent to Mr Geyer becoming unavailable due to illness. The Defendants were represented by Mr Dal Cin of counsel.
Mr Carter is the single director of Armour Fire Protection Pty Ltd. This company was incorporated in 1995 and specialises in the wet aspects of fire protection. Mr Carter gave evidence of 20 years experience in the fire protection industry, beginning as an apprentice. Thereafter, he gained experience over many years as an estimator. He holds the appropriate builder’s licence and a supervisor’s licence. The plaintiff company also holds the appropriate licences. Mr Carter has 14 years experience in the design and installation of fire protection systems. Both he and his company have worked upon many large commercial projects.
The Defendants are the principals of Salandra Developments & Associates (“Salandra Developments”). That firm and the male Defendant are holders of appropriate building licences. The Defendants are the directors of Besswell Pty Ltd. That company, together with the female Defendant, is the owner of certain land upon which the Enfield Shopping Plaza is constructed. That property was purchased in about 1988.
In 1997 the Defendants determined to renovate and enlarge that shopping centre. For this purpose they had some plans drawn and then engaged Giordano & Associates as architects to prepare drawings. These drawings were completed in the third quarter of 1998 and certified by the building certifier in December 1998.
It is apparent from the evidence that the male Defendant is the decision maker and organiser. His wife, the female Defendant, by her own confession, has no knowledge of building matters. Her part in the business of Salandra Developments and other family entities is best described as secretarial. She received correspondence, provided it to her husband and, when necessary, wrote, at his dictation, letters and facsimiles. She also filed correspondence, plans, cost notes and other office memoranda both at home and in any then operating site office. That was her role in this matter and she is unable to add anything which will, in any way, go to resolve the issues between the parties. The male Defendant was therefore the principal who acted on behalf of the Defendants and their various interests.
In 1970, Mr Salandra came to Australia from Italy. He was in his early twenties. He obtained work as a tiler. After about 10 years of such work his wife, his brother and he became involved in residential construction. From 1987 he became involved in the construction of commercial buildings such as warehouses and offices.
Mr Salandra provided the Plaintiff with a copy of plans drawn for him in 1997 (exhibits P1.1 and .2) and the Giordano plan for Ground Floor Fire Services, dated September 1998 (exhibit D1) and asked him to provide a quotation on a design and construct basis for the proposed extension at the Enfield Shopping Plaza. This extension was to be over two floors. Mr Salandra, because he had a tenant contracted to occupy the first floor from very early in the planning process, had the completion of that floor as the first objective of the redevelopment. The present dispute relates only to the ground floor extension, the existing tenancies and the Foodland/Australia Post areas. The first floor work was completed without dispute and forms no part of this action.
Using the plans which had been provided to him, the Plaintiff submitted a quotation on 22 December 1998. It was not accepted. On 11 January 1999 that quotation was amended by letter. It was for a lesser sum, but was not accepted. A further quotation, dated 8 February 1999, for an even lesser sum, was sent to the Defendants. That quotation, like its predecessors, was for the “design and construct[ion] of [a] fire protection package for proposed extension at Enfield Plaza, 449 Main North Road” (emphasis added). It was in the sum of $265,000 which was $15,000 less than the offer of 11 January 1999 and $23,000 less than the December 1998 quotation.
Each quotation excluded, by para 5(f), “installing fire protection in any of the existing building and tenancies”. The offer of 8 February 1999, by para 4(e), allowed for the “installation of new fire services in the existing building up to the Foodland tenancy”.
The December 1998 quotation “allowed for the Telstra fire line connection fee”. The February 1999 quotation made allowance for “Telstra alarm line and SA Water applications”.
Accompanying the quotation of the Plaintiff’s offer of 8 February 1999 was a copy of its standard terms and conditions.
It is apparent from the evidence that Mr Carter was very experienced in producing design and construct type quotations as he had provided to the Defendants. Mr Salandra, however, was not so experienced. Notwithstanding his previous construction experience, this was the first occasion on which he had entered into a project such as this. When he received the Plaintiff’s quotation he did not have it professionally assessed. Indeed, at no time did he employ the appropriate professional to assess either this quotation or the various plans which the Plaintiff subsequently produced. Thus, at no relevant time did he appreciate the difference between the expressions “fire protection” and “fire services” as used by the Plaintiff in the 8 February 1999 quotation.
I accept the evidence of Mr Carter that the expression “fire protection” was accepted in the industry as a reference to the provision of wet services such as sprinklers, hydrants, hoses and boosters and that the expression “fire services” referred to the capacity to sense or detect the presence of smoke or some other sign of fire. It does not relate to the capacity to fight a fire with water. Mr Sprudzans, who is an expert in the design of wet fire systems, gave similar evidence in a more general sense. Had Mr Salandra appreciated this distinction then there is no doubt that the inclusions and exclusions in paras 4(e) and 5(f) of the quotation of 8 February 1999 would have had a technical meaning to him. This lack of technical understanding underpins what is an incorrect plea in para 4.1 of the Amended Defence as to the scope of the Plaintiff’s quotation.
With the use of the plans exhibit P1.1 and .2, Mr Carter determined the area to be protected and used the subsequent Giordano plan of September 1998 (D1) to ensure that the building footprint was unchanged. That being so, he said that there was no need for him to change the methodology of calculating the later quotation even though, as the first plans, yet to be produced would show, there was a disregard of some of the design instructions contained in the Giordana plan. His cost assessment was based upon the area to be fire protected rather than any particular protection design requirement.
Mr Salandra agreed to accept the February 1999 quotation following a meeting on site on 4 March 1999 with Mr Carter. A suite of plans were provided to the Plaintiff on the following day and then forwarded to the designer, Mr Denning.
The Plaintiff’s quotation included its “standard terms and conditions”. The breadth of discussions between Mr Carter and Mr Salandra in relation to these terms and conditions is in issue.
Consideration of the conflicting evidence on this topic must have regard to the objectives of the players. Mr Carter was clearly keen for the job. He had reduced his quotation significantly over a relatively short period of time always conditioning it with the words: “This is a fixed lump sum project that will not entertain any variations unless major structural/floor changes occur .....”. It is not in issue that a “variation” in this sense is an alteration in the previously described work and materials to be provided by the contractors. It is extra work to that which was originally contracted: Hudson’s Building & Engineering Contracts, 11th Ed, Vol 1[7.00] 1995.
On the other hand, Mr Salandra was being very careful to spend as little money as was necessary to complete this project. As much became obvious when he gave his evidence. Where possible, the project was based upon fixed price - lump sum - contracts and he had foregone the sensible precaution of engaging a consultant to oversee these contracts and their scope as they came in. Similarly, there was no consultant to ensure that the design and timing of the project was properly dovetailed so as to allow it to go forward smoothly. He undertook that task himself.
It was from these different perspectives that Mr Carter and Mr Salandra discussed the Plaintiff’s terms and conditions. The original document sent to the Defendants is the exhibit D25. In examination in chief, Mr Carter said that there was no discussion with Mr Salandra about the terms and conditions of contract until a site meeting on 27 July 1999 when he raised the existence of the asbestos clause and sought its deletion, to which Mr Salandra agreed. At this point in his evidence he denied that any other items in that document were discussed between them. However, in cross examination he conceded that that may well have been so and that some other clauses may well have been the subject of discussion and changed or deleted. He was not able to be more specific.
Mr Salandra said in examination in chief that he discussed the terms and conditions with Mr Carter on the telephone. He was unable to be precise, but inferred that it was at a time proximate to the site meeting of 4 March 1999. He said that he was keen to limit any open‑ended cost liability. The exhibit D25 contains his notes of what he said he accepted and what was deleted in this discussion. On the specific topic of interest he was unable to recall the precise content of the discussion, but said that the alteration to 9% was agreed at the time of speaking with Mr Carter.
On this topic I prefer the evidence of Mr Salandra. I find that the discussion with Mr Carter occurred as Mr Salandra described. It is in furtherance of his oft stated objective to keep control of the costs of the project and to especially not allow any open‑ended conditions to exist which may disadvantage the project or the Defendants. I find that he altered the interest rate as a consequence of his discussions with Mr Carter. Mr Carter’s evidence on the topic was uncertain and qualified. I do not accept it where it is in conflict with that of Mr Salandra.
There is no doubt that once the quotation was accepted work progressed quite quickly, especially in relation to the first floor. Some complaint is made by Mr Salandra that Mr Carter was aggressive in his estimate of work done when lodging progress claims for payment. However, these were invariably paid by Mr Salandra and that issue is of no real significance.
The Plaintiff produced the first plans for the ground floor in March 1999. They were conveyed to the Defendants on 29 March 1991. A revision of those plans was sent on 15 April 1999. This revision is in evidence as the exhibits P1.5 and .6.
A site meeting was held on or about 21 April 1999 between Mr Carter and Mr Salandra. Mr Carter said that by then there was talk amongst the subcontractors on site of alterations to the ground floor layout. He said that he asked Mr Salandra about any such alterations and was told that there would not be any. Then Mr Carter gave evidence which was quite striking. He said that when Mr Salandra stated that there would not be any changes, Mr Carter asked Mr Salandra to agree to a schedule of unit rates for any alterations, that he did so and Mr Carter then generated the document, dated 22 April 1999 and entitled “Schedule of Unit Rates” (exhibit P3.22), and sent it to Mr Salandra, from whom he received no response.
In evidence Mr Salandra denied that he had ever had such a discussion with Mr Carter and said that the first time he saw the document was when it was faxed to him, amongst other documents, on 10 January 2000. The Defendants seek that an inference be drawn that this document was created in January 2000, but backdated to support the Plaintiff’s costing in relation to the ground floor variations.
I am unable to accept the evidence of Mr Carter as to the circumstances of the creation of this document. When regard is had to the Plaintiff’s own contract on the topic of variations - that they must be described and costed and accepted by both parties before they would proceed - it is difficult to see the need for the Schedule of 22 April 1999. Mr Carter was unable to satisfactorily describe why he saw the need to have an agreement about something he had specifically been told would not occur. In addition, there is my firm impression that Mr Salandra, by his nature, would not accept any type of open‑ended costing arrangement and had been assiduous in this regard from the outset.
It is of note that when variations did occur from late July 1999, not only did Mr Carter not invoke the procedure of his own contract, but when he lodged a claim for them in October 1999, it was not calculated on the rates in the schedule to which he insisted there was clear consent by Mr Salandra several months earlier. I am satisfied that this schedule was produced at a latter time and given a false date. That this occurred is relevant to the ongoing assessment of Mr Carter’s credit.
When Mr Salandra received the plans sent to him on 29 March 1999 and 15 April 1999 he paid no attention to them. His reason for not so doing was because he was still trying to obtain a tenant for the ground floor and, as a consequence, its layout may change. Consequently, he did not notice that the water supply to the building was not where it was described in the Giordano plan and that there was no inclusion of the existing tenancies nor was there any feed for the supply of water to them as there was for the toilets (the detail of which was not included in the plan P1.6).
At no time had Mr Salandra told Mr Carter that there was no urgency about the ground floor layout as he was still seeking a tenant and may make changes to suit it. I accept that this process was occurring, thus providing another reason to reject the evidence of Mr Carter concerning the background to the creation of the Schedule of Rates document.
On 31 March 1999 the Plaintiff sent to Mr Salandra “Progress Claim No 1” in the sum of $13,250 based upon 5% completion of the $265,000 contract price. This sum became the retention sum by agreement between them.
A second claim was made on 5 July 1999 based upon the project being 35% complete. That claim was in the sum of $79,500 and showed the initial claim of $13,250 as “Retention Held”.
Each of the Defendants said in evidence that it was their usual practice for the male Defendant to dictate and the female Defendant to write in a pre‑printed “Contract” book a description of the terms of any contract entered into and to have it signed by the subcontractor.
This occurred in relation to the Plaintiff when contract No 0106 was written in July 1999. This contract included the words “Fire service installation to ..... mall through the existing shops and mall excluding Foodland .....”. There is no doubt that Mr Salandra intended the words ‘fire service” to refer to wet fire protection.
It is common ground that Mr Carter and Mr Salandra discussed this contract on site on 27 July 1999. Mr Carter made an amendment to the retention sum to reflect the original contract and to the period for which it was to be held. In addition, he wrote what he thought was the original contract number on the Salandra Developments’ document, initialled the alteration and signed and dated it 27 July 1999. He did not correct or otherwise comment upon the use of the words “fire service”.
The following day he wrote to Salandra Developments to correct the contract number he had endorsed on the 0106 document. In that letter he referred to “our contract 0106” and to the fact that “this quote forms part of our terms and conditions of contract as agreed ..... on site on March 4, 1999”.
The inescapable conclusion from what occurred on 27 July 1999 is that Mr Carter read, amended and signed the Defendants’ contract 0106 and then, on the following day, acknowledged the document as forming part of the whole contract between the parties. If this is so, then there is a complete reversal of the original para 5(f) which excluded “fire protection” in the existing building as contract 0106 specifically included that work.
This variation to the original contract requires offer and acceptance, which has occurred, and consideration flowing from the Defendants to the Plaintiff to be efficacious as this document was not under seal. There was no such consideration between the parties. The cheque for $79,500 which Mr Salandra paid to Mr Carter after contract 0106 was signed by him related to work done prior to this document coming into existence. It can in no way support the execution of this contract where the variation was exclusively for the benefit of the Defendants: (Contract Law in Australia, Carter & Harland, 4th Ed para 389). Nothing passed between them in return for this variation of a term of the original contract whereby the Plaintiff seems to have agreed to do more for less. Thus, this variation to the original contract is without force or effect and is of no consequence. It could not change the original scope of works which by then was partially executed in accordance with acceptance of the quotation of 8 February 1999.
Mr Carter said in evidence that he originally went to the site to collect a cheque for $79,500 claimed on 5 July 1999. In the terms of the original contract it was a few days short of being due. He said that Mr Salandra would not give him the cheque until he signed the contract 0106, which he did, having made the alterations I have described. He had a contemporaneous note made in the Plaintiff’s office diary on his return to record Mr Salandra’s insistence on this basis of payment.
Because of his usual practice and his care with his funds, I accept that Mr Salandra made this requirement of Mr Carter before he would pay what had been claimed on 5 July 1999, but that Mr Carter was happy to sign as indicated by the tenor of his letter of 28 July 1999. He seems only to have become concerned about the Plaintiff over‑claiming, and/or seeking early payment, at trial.
This document, as written, confirms Mr Salandra’s lack of familiarity with the terms “fire service” and “fire protection”. Clearly, it is describing a fire protection contract and was so understood by Mr Carter and Mr Salandra on this day. On 27 July 1999 there was no discussion about it in any way varying the original contract. At no time, either on or prior to this day, had Mr Salandra suggested to Mr Carter that the scope of works of the original contract be altered.
Upon Mr Carter signing the contract 0106, Mr Salandra paid a cheque in the sum of $79,500. The Plaintiff’s ledger shows that payment as being credited on 28 July 1999.
At this time the plans of 14 April 1999 had not been approved, for reasons which I have mentioned. Those plans indicated that they had been prepared without reference to any mechanical services plans. There is no doubt from the evidence of both Mr Carter and Mr Salandra, and of Mr Ellis of Meinhardt Constructions, and of the experts Mr Sprudzans and Mr Boere, that final layout plans could not be drawn until the air conditioning duct (mechanical services) layout was known. The wet protection system of pipes and sprinklers must fit within the ceiling around the air conditioning ducts. Thus, as at 27 July 1999 there had been no further progress in relation to the ground floor since the 14 April 1999 plans were presented to Mr Salandra.
On 31 March 1999 the Plaintiff had filed an “Application for Water Connection” with SA Water. This sought approval to enlarge an existing 100m fire service to a 200m fire service. The Giordana plan had required that the existing fire service be upgraded to 150m. The quotation of 8 February 1999 made reference to this requirement as part of the scope of works.
The exhibit D25 shows, in Mr Salandra’s hand, an alteration to the figure “150” to “200”. That, thereafter, the Plaintiff made such an application goes someway to support Mr Salandra’s version of the settlement of the terms and conditions as between them. In addition, it is one of the obligations set forth in para 4(d) of that quotation.
The evidence shows that the SA Water reply was received by the Plaintiff and sent to Salandra Developments on 29 July 1999 under cover of a letter which indicated that payment was needed to expedite the work and that it was no part of the Plaintiff’s original scope of work. There was no demur from Mr Salandra and payment of the $12,157 fee was made by the Defendants.
There is no merit in the argument that this fee was included in the original quotation. I am satisfied, in relation to both this matter and the Telstra fire line connection, that the Plaintiff’s obligation was only to apply. To suggest that such a fixed price contract was to include sums which were yet to be assessed by statutory authorities is unrealistic and contrary to commonsense. There was no complaint by the financially cautious Mr Salandra about either payment until a dispute between the parties developed in 2000. There is support for this conclusion in the different words used within the December 1998 and February 1999 quotations on this topic.
The SA Water fee, and that which was subsequently paid to Telstra, was paid by Besswell Pty Ltd. It has been submitted, albeit faintly, that the Defendants are not entitled to any offset for these payments because they themselves have not paid them. There is no doubt that payment has been made by a related entity and to the extent necessary I am prepared to infer that final accounting offsets would be made such that the payment would be that of Salandra Developments and so the Defendants. Thus, these payments should not be offset against the Plaintiff.
In July and early August 1999 there was discussion between Mr Carter and Mr Salandra about the installation of smoke spill fans on the first level. This work is referred to in para 3(e) of the 8 February 1999 quotation. Mr Diotti had been employed by the Plaintiff as a subcontractor to do this work and had commenced it when these discussions began. As a consequence of changes Mr Salandra wanted, the Plaintiff submitted a quotation for extra electrical work. It was then agreed between them that the Plaintiff would cease all such electrical work and would give the Defendants a credit from the original contract price in the sum of $11,500, which it did. Mr Diotti then ceased work.
In his evidence Mr Diotti who, incidentally, used the expression “fire protection” in the same way as Mr Carter had described his use of it in para 5(f) of the 8 February 1999 quotation, spoke of installing first fix electrical wiring for smoke spill fans. He never completed his task because of the changed arrangement between the Plaintiff and the Defendants.
Mr Diotti made application to Telstra for a private fire line to Harvey Norman. He left the job in August 1999. There is nothing in the evidence to suggest that he worked other than on the first level in the Harvey Norman tenancy. By the time he left, work had not commenced on the lower level and nothing had occurred relating to the existing tenancies. There is no connection shown on the evidence between the first level tenancy and the ground floor existing tenancies which in any way involved him.
Nikias, the certifier, wrote to the Plaintiff on 2 August 1999 seeking certain information. It is suggested that, as there was reference to the existing tenancies in the memorandum, and Mr Carter is not shown to have replied, there is an inference available that such inaction amounts to acknowledgement of an obligation in relation to the existing tenancies. I am unable to agree. Closer examination of the memorandum indicates that the writer seems to have drawn a distinction between “sprinkler protection” and the “protection method to existing tenancies”.
On 17 August 1999 the Plaintiff wrote to Salandra Developments requiring “the new tenancy layout” of the ground floor. It is apparent from this memorandum that Mr Salandra told Mr Carter at their site meeting on 27 July 1999 of the intended change. Whilst the Plaintiff refers to claiming costs for an extension of time or for “programme compression” there is no mention of the application of any agreed unit rates nor was any such claim ever made.
By a facsimile of the same day, Salandra Developments advised the Plaintiff that the “final drawing” for the ground floor layout would be forwarded by the consultants, Meinhardt. In fact, the Defendants’ memorandum of 23 August 1999 indicates that it was there enclosed. This document is the exhibit P1.4 and is dated 16 August 1999. It provides the air conditioning duct layout for the ground floor and so reveals a layout alteration to the floor plan from when the Plaintiff had reference to exhibits P1.1 and .2 and D1.
In the interim, a further progress claim was made by the Plaintiff and sent to the Defendants on 29 July 1999. In a memorandum of 23 August 1999, Salandra Developments enclosed a cheque in the sum of $26,500 paying the claim in full. It is shown on the Plaintiff’s ledger as being credited on 24 August 1999.
The Plaintiff employed Mr Sprudzans to draw the new ground floor plans. They were completed, as revision C, on 20 September 1999. They are the exhibits P1.7 and .8.
These plans reflected several changes from those of April. The ground floor area had changed to one tenancy only, thus increasing the size by about 1150m2. The driveway had become tenancy as had an area of the rear car park. To facilitate this, walls were removed and the western boundary slightly extended. Whilst these changes enlarged the tenancy area, the footprint of the ground floor, including the car park, was not altered in any significant way.
Mr Sprudzans, who drew these plans, gave evidence. I interpolate that Mr Jennings, who drew the original plans, did not and the Plaintiff was criticised for his absence. In my opinion, his absence does not enable any inference adverse to the Plaintiff to be drawn when regard is had to my finding as to the scope of works of the 8 February 1999 quotation.
In this plan effect is given to Mr Salandra’s instructions, in accord with D1, that the hydrant booster be at the Fire Information Panel (FIP) in the valve room. Thus, the 200m connection was to come along the front of the building to enter the building adjacent to this point. This was the Plaintiff’s responsibility, even though not set out in the plans of 14 April 1999. Subsequently, there was a dispute as to the supply of some ductile steel by the Defendants to complete this work. That issue was resolved at trial by agreement in favour of the Defendants. The cost of extending the pipework was included in the “Variations” claim of 31 October 1999. My finding on that topic resolves the claim for this work.
This plan again allows a water feed to the toilets and provides no such feed to the existing tenancies. When looking at this plan, as the Defendants must have after it was sent to them on 20 September 1999, no comment was forthcoming about the non‑inclusion in it of the existing tenancies and their non‑connection to a water feed or to the valve room.
Mr Salandra gave evidence that although he asked Mr Carter to visit him on site on several occasions in August 1999, Mr Carter never came. It is not in dispute that Mr Carter broke his leg on 29 August 1999 and was absent from the site for about 10 weeks. Before that, I am satisfied that he did not respond to these requests. Mr Salandra denied that Mr Carter had discussed with him in August, after the new layout was available, that this was a variation within the terms of the original quotation and that the Schedule of Unit Rates would apply. When an invoice for this work was produced on 31 October 1999 those rates were not used in calculations under the heading “Variations”. I reject the evidence of Mr Carter that such a discussion occurred.
Approval for these drawings was given by the Defendants within days of their receipt. At the end of an exchange of facsimiles the Defendants requested that the ground floor work be completed by 30 October 1999.
As a consequence of receipt of the air conditioning duct drawing, Mr Sprudzans changed the sprinkler system from the original tree based design to a grid system. There was some dispute between the experts as to whether this was required. I accept the evidence of Mr Sprudzans that it was necessary to accommodate the mechanical ductwork irrespective of competing views as to hydraulic pressure. It was not made necessary by the change in the tenancy area of the ground floor per se. In his opinion, this change was not significant in terms of what was required such as to bring it within the meaning of a “variation” in the 8 February 1999 quotation. This was also the view of Mr Ellis and of Mr Boere, the Defendants’ expert. There is no satisfactory evidence that Mr Carter or any other representative of the Plaintiff advised Mr Salandra that this new layout was such a “variation” and/or that additional charges would be incurred as a consequence.
Work proceeded on the ground floor. On 29 September 1999 a further progress claim was made upon the Defendants. The Plaintiff’s ledger shows this to have been paid two days later. Thus, at the beginning of October 1999, after approval for the ground floor layout, which clearly excluded the existing tenancies, had been given, there was no dispute between the parties about what was due and for what. Having observed Mr Salandra give evidence for several days, and having regard to what was to occur in the following months on this topic, I have no reservation that had he, for one moment, thought that anything was amiss he would have spoken up and not paid up 28 days earlier than was his contractual obligation.
On 31 October 1999 a further progress claim was made. This sought a total of $61,834, of which $26,500 was on account of progress since the earlier claim of 29 September 1999 (10% of the original contract). The balance was on account of what was described on the invoice as “Variations”. Thereafter followed what I take to be a comprehensive description of work flowing from the changed ground floor tenancy layout. Prices were allocated for the redesign/relocation of sprinklers, and the change of sprinkler type due to the enclosure of some car park spaces and the driveway (which always had sprinklers in it). None of the charges for these items were similar to what was set out for such work in the April “Schedule of Unit Rates”. Mr Carter’s evidence on the composition and content of this claim was unacceptable. He deliberately avoided confronting direct questions put to him in cross examination and offered an explanation of this document which was plainly at odds with its clear inference which was that it was for a completed task. This claim brought no immediate response from the Defendants other than requests relating to the completion of work and the provision of plans to different authorities.
On 4 November 1999 Mr Salandra forwarded to the Plaintiff a memorandum from the Certifier and required for that person, inter alia, a “drawing of sprinkler system for the existing tenancies”. The Certifier’s request of Salandra Developments on this topic sought details of the “Protection Method of Existing Tenancies”.
Again, the manner in which Mr Salandra transposed this request by reference to a “sprinkler system” in his memorandum points to his lack of appreciation of the difference between wet fire protection and electronic protection to which I have earlier referred.
Mr Carter said in evidence that he responded to this enquiry by contacting Mr Ellis to speak of fire compartmentation in the building. He said he made contact with Mr Salandra to point out that such a proposal was different from the plans which showed a water curtain and therefore, by reference, a fire shutter.
Mr Salandra denied that he at any time discussed with Mr Carter the installation of a shutter in the new (and yet to be created) mall. He said that he would not have a shutter in a pedestrian shopping mall and that had always been his position. It was space consuming and visually unattractive.
Were that so then his initial inspection of both the April and September plans should have shown him not only that the Plaintiff had done nothing about planning wet fire protection in the existing tenancies, but, more importantly in this context, had drawn in a limit to the proposed sprinkler system and had it ending with a water curtain (and thus, by law, a shutter). It was apparent from the evidence of Mr Ellis that he had no instructions in relation to the fire protection installation. Mr Ellis described his involvement as nothing further than the co‑ordination of the several trades involved. His principal role related to air conditioning. Thus, as noted earlier, Salandra Developments had no expert overseeing the Plaintiff’s proposals and it was plain from the evidence that, on this topic, Mr Salandra did not correctly comprehend, in this regard, the technical meaning of the plan which he had before him.
Mr Ellis was unable to recall any such conversation with Mr Carter on this topic. He did not say there was no such discussion. He recalled only that he did not have any involvement or responsibility for the sprinkler system at that time in early November 1999. I find that this conversation occurred as Mr Carter described.
As a consequence of this enquiry by the Certifier and what followed, a meeting was held at the office of the South Australian Fire Service (“SAFS”) on 16 November 1999.
I am unable to say precisely how it was this meeting was arranged, but there is no doubt that its objective was to learn of the SAFS requirements for the whole building, including the existing tenancies, Foodland and Australia Post.
It is plain from his evidence in chief that Mr Salandra was of the understanding before this meeting that a water curtain without a shutter would be sufficient to protect Foodland. This understanding likely explains his satisfaction with the Plaintiff’s plans for a water curtain at the Foodland Mall, but it does nothing to explain his inaction about the existing tenancies not being included in the plan, unless, of course, they never were, despite what he had dictated in contract 0106. He plainly did not know that it was not permissible to have a water curtain without a shutter because of the requirements of fire compartmentation.
The minutes of the meeting of 16 November 1999, kept by Mr Ellis, seem to reflect the options discussed rather than the decision made by Mr Salandra. It became apparent to Mr Salandra that the only option then acceptable to SAFS was to install sprinklers in the existing tenancies and through Foodland.
Mr Carter said in evidence that he was so instructed by Mr Salandra after the meeting. Both Mr Ellis and Mr Salandra say it was at the meeting. In cross examination Mr Ellis became less certain as to this. Nothing turns on this difference because the outcome is not in issue. Mr Salandra realised that a water curtain without a shutter was not permissible, and a shutter was not within his contemplation for commercial reasons, and in any event, because of the nature of the building, the SAFS had a fixed view which was to prevail. Hence, he instructed Mr Carter to sprinkle these areas.
Thereafter, on 6 December 1999, Mr Carter wrote to Salandra Developments quoting a lump sum price to undertake the sprinkling of the “existing Foodland and Australia Post tenancies” (P3.51). A calculation from exhibit P1.12 shows that the area of 500m2 he mentions therein can only refer to Foodland/Australia Post.
On that day, Mr Carter and Mr Salandra also met on site and discussed, inter alia, the invoice of 31 October 1999, which included the claim for “Variations” earlier mentioned. Mr Carter said that as a consequence of that discussion Mr Salandra agreed to pay him $17,000 on account of those variations as he (Mr Salandra) had advice that the claim was excessive and was expecting a report to that effect which he would provide to Mr Carter.
Mr Salandra disagreed. He denied that he said anything about a third party report as to the value of the variations to the new area of ground floor. He agreed that there was a discussion on the basis that the price was excessive. He denied that he had said that he was unable to pay. He said the outcome of that discussion was that Mr Carter agreed to accept $17,000 in full settlement of the variation claim of 31 October 1999 and so he provided a cheque to include that sum and the usual 10% of contract claim, namely $26,500. In total, $43,500. This sum was credited to the Plaintiff’s ledger on 7 December 1999.
I accept the evidence of Mr Salandra as to what occurred at this meeting. His evidence that he would not have made any payment had the issue not been resolved accords with the impression I formed of him as a witness and is supported by the generally parsimonious way in which he had sought to conduct this project from the outset. I reject the evidence that Mr Carter gave to the effect that the claim was only partial and that a report was to come as to a more reasonable cost. His alteration of the ledger, as shown in the exhibit D20, to amend the amount claimed in the invoice of 31 October 1999 to what was paid does not, by inference, support such a proposition. That it was subsequently recreated at the original sum in exhibit P4.15 is indicative of another purpose altogether.
There is no support for Mr Carter’s position that the Schedule of Unit Rates allegedly agreed with Mr Salandra in April 1999 applied to this work because of what Harvey Norman was charged to make alterations some time after December 1999. That work was a contract between different parties on an unknown basis and has no relevance to this matter.
In addition, there is no support for Mr Carter’s position to be found in invoice No 484, dated 22 December 1999. This is a further progress claim for $13,500 and follows invoice No 474 of 30 November 1999 in the sum of $26,500. The absence of any further claim for variations does little to support his insistence that the claim of 31 October 1999 was not final. There was no discussion about this progress claim on 6 December 1999 on site as it was not yet due.
On 7 January 2000, Mr Salandra paid $13,500 and it was credited that day.
On 10 January 2000, the Plaintiff sent a memorandum to Salandra Developments addressed to Mr Salandra. In part it was an “Account Reconciliation at this date .....”. In that reconciliation the Plaintiff allowed for the contract price reduced by the early electrical services agreed deletion and showed a reduced principal. The claim to date was shown leaving a sum described as “Remaining to Claim”.
Separately, and to one side from this reconciliation, was a note “Total Variations $17,000. Paid”. No claim for any unpaid variations was included in the reconciliation. Nor had any subsequent claim for what Mr Carter said was to be a balance due subsequent to 31 October 1999 been made by this time.
In addition, subsequently when exhibit D20 was produced on 29 February 2000 a handwritten reconciliation included variations at $17,000 as a charge and this sum was included in the “paid to date” sum. Again, no mention of any sum still due for such work.
I find that the payment of $17,000 made to Mr Carter on 7 December 1999 was on the basis described by Mr Salandra and, thereafter, there did not exist any basis to further claim in respect of variations to the new ground floor. That sum was paid and accepted in full and final settlement of that claim.
In response to the reconciliation of 10 January 2000, Mr Salandra sent two cheques each of $13,500. They were credited on 11 January 2000.
Seemingly, without further discussion after 16 November 1999, the Plaintiff eventually proceeded to sprinkler the existing tenancies. By mid‑December 1999 materials were on site. As this had occurred it was suggested by counsel for the Defendants that Mr Carter had failed to say that this work was new work and, consequently, the Defendants were entitled to rely upon their view of the original scope of work. This cannot be so in light of Mr Salandra’s behaviour and instructions at the SAFS meeting and his earlier inaction on this topic when approving the plans for the new ground floor. Mr Carter said these materials were ordered from the site and not by him. The order form, exhibit P4.235, seems to support this evidence.
On 7 January 2000, as well as forwarding a progress payment, Mr Salandra asked Mr Carter to call on him to discuss the “fire service” for Foodland. In his memorandum of 10 January 2000, the Plaintiff quoted $27,500 for Foodland and Australia Post. It was not then accepted. There is no evidence of any discussions at this time.
On 31 January 2000 Salandra Developments sent a facsimile to the Plaintiff requiring completion of all new work by 2 February 2000 and of the “small” tenancies up to Foodland by 15 February 2000. This was taken by the Plaintiff to be the Defendants’ approval to do this work even though there had been no discussion as to price.
A response on the same day sought the relevant plans for these tenancies in order to design the required layout.
Thereafter, this work was done, albeit without discussion as to whether it was within the original scope of works, as Mr Salandra now claims, or whether it was not, as I have found. It is likely that Mr Carter did not mention it because he simply expected to be paid and that Mr Salandra remained silent so as to consume his funds for the longest possible time. By now the Plaintiff had supplied a copy of his Schedule of Unit Rates, albeit dated 22 April 1999, to Mr Salandra.
On 31 January 2000 the Plaintiff served a further progress claim which included an agreed alteration on site and also claimed a progress payment on the Foodland and Australia Post tenancies based upon the quotation of 10 January 2000 even though Mr Salandra had not yet accepted that quotation.
Thereafter, exhibit D20 was issued on 29 February 2000 which brought to account in the ledger the progress claim of 31 January 2000 and set out the handwritten reconciliation to which I have earlier referred. This reconciliation included some other extra work and also brought to account half of the retention money. That this occurred is an indication of the end of the 8 February 1999 contract as the original terms and conditions provided for the retention money to be reduced to half upon practical completion. This money continues to be held by the Defendants and is to be brought to account.
Notwithstanding that some material was delivered to site in December 1999, there is no dispute that it remained there and, because the site was incomplete, work did not commence. Mr Salandra said in evidence that he used the Christmas shutdown in the industry to cut the wall through the chemist shop so as to enable the new mall to be created, leading to the existing Foodland Mall. This was the location of the agreed alteration, dated 13 January 2000, referred to in the claim of 31 January 2000.
On 31 January 2000 the Plaintiff wrote in response to a facsimile from Salandra Developments setting a completion date of 15 March 2000 for up to Foodland. Mr Carter said he took this request as approval to proceed and then sought drawings of this area in order to design and fabricate. It is apparent from the evidence that such plans did not exist and the Plaintiff had to investigate the site physically to obtain detail for a design. Seemingly, this work had been done earlier as Mr Sprudzans produced such a design on 29 January 2000. This plan also included Stage 3 which was Foodland and Australia Post. Work on the existing tenancies (Stage 2) began in February 2000.
Before that was completed, Mr Carter had quoted again for Stage 3 in the sum of $21,850 on 18 April 2000. Mr Salandra replied with contract No 006 which was sent to the Plaintiff by facsimile on 24 May 2000. The Plaintiff purported to accept this offer, albeit by what Mr Carter described as a counter‑offer, on 29 May 2004. I shall return to this document.
Salandra Developments first sought a Form 2 Certificate from the Plaintiff in relation to the completed work on 25 February 2000. On 29 February 2000, the Plaintiff issued the document, exhibit D20, which has the reconciliation on it to which reference has been made. That document showed a balance due on the original contract of $24,280 and included the note “on receipt of Form 2”.
A further request for this and other required documentation was made on 27 March 2005 by Mr Salandra. His facsimile referred to a payment made contingent upon the provision of that documentation. The Plaintiff’s ledger shows that a payment totalling $16,000 was made by two cheques on 20 March 2000.
A further request for this documentation was made on 12 April 2000 and the Form 2 was provided by the Plaintiff on 18 April 2000. That was the facsimile which also included the quote for Foodland at $21,850.
Notwithstanding that it was not sent, the evidence discloses at exhibit P3.72 that the Plaintiff prepared a Form 2, dated 3 March 2000. This document refers to the whole building except Foodland Mall, Foodland and Australia Post.
The inference to be drawn from the completion of this form at this time is that the work to the existing tenancies was then complete. The employee work records in exhibit P4 show continuous work on site in February 2000 when the evidence indicates that the new floors were then already complete.
Mr Carter, who, for the life of the original contract, had been assiduous in submitting progress claims and seeking payment for other work, said that because of the way in which the work on the existing tenancies was to be done, after physical inspection and without drawings, it was not possible to quote for it. I accept that at no time from November 1999 until the work was undertaken was there ever any discussion between Mr Carter and Mr Salandra as to its cost.
No such claim was made until the Defendants had not paid promptly on receipt of exhibit D21. Because of the date on the Form 2 I take this reconciliation, dated 29 February 2000, to have been first forwarded in early March. It was soon followed by exhibit D21 which has a debt collector’s Final Notice sticker attached to it. It was upon this Notice that Mr Salandra paid $16,000 on 20 March 2002 and it is his writing which marks the payment of that sum on the original document.
Had the insertion of fire protection in the existing tenancies been within the original scope of works of the contract of 8 February 1999, or had that contract been validly varied, there would have been no need for the SAFS meeting of November 1999 to determine the way forward, as Mr Carter, Mr Salandra and Mr Ellis agreed, and there would have been insistence at that time by Mr Salandra that such work was indeed within that original scope and, no doubt, acquiescence by Mr Carter. The Plaintiff is entitled to be paid a reasonable sum for that work. I shall return to its assessment.
As I have mentioned, in the progress claim of 31 January 2000 the Plaintiff claimed in respect of its quote for Foodland/Australia Post, even though that contract had not then been let by the Defendants. That claim was included in the 29 February 2000 accounting.
However, it was not until 24 May 2000 that the Defendants offered the Plaintiff a contract for this work, on certain conditions, for the sum of $22,000. By reply facsimile of 29 May 2000 the Plaintiff sought to accept that contract as varied by it. One variation was to apply a loading of $2,000 for out of hours work. Clearly, that is what it was. As I have mentioned, Mr Carter described this as a counter‑offer. The variations were not specifically brought to the attention of the Defendants and the counter‑offer was not accepted by them. As the exhibit P6 shows, the original facsimile received from the Defendants has been significantly altered by the whiting out of words and the insertion of other and additional words. The altered document was signed by Mr Carter for the Plaintiff and faxed to the Defendants. The Defendants received the document and filed it, not noting any differences. Even a cursory perusal would have identified them, notwithstanding that they were in a like hand to the original and that the facsimile did not reveal the obvious alterations.
The work thus proceeded with each party of the view that it did so on the basis of what each had written and signed. However, it did so without the Defendants accepting the counter‑offer. The law is quite clear where a counter‑offer is not plainly and obviously brought to the attention of the other party:
“If, while purporting to accept the offer as a whole, [the offeree] introduces a new term which the offeror has not had the chance of examining he is in fact making a counter offer. The effect of this ..... is to destroy the original offer.” Cheshire & Fifoot Law of Contract, 5th Australian Ed, para 27.
Thus, the addition by the Plaintiff of the further particulars was a material alteration which avoided the offer. As it was not subsequently accepted, there was no contract concluded between them in respect of this work: Outer Suburban Property Limited v Clarke (1933) SASR 221; see also Cullen v Bickers (1878) 12 SALR 5 and Harris v Jenkins (1922) SASR 59.
It is obvious that the work was done both during and outside working hours. The time sheets for June 2000 reveal as much (P4.109 et seq). This was within the contemplation of the Defendants’ offer and for what the Plaintiff sought to impose a loading. There is no basis from the evidence upon which to assess this work as a quantum meruit. It is appropriate that the Plaintiff receive a reasonable sum for it. Doing the best I can, I allow the cost of Stage 3 at $23,000. A progress payment in the sum of $12,100 was made for this work by the Defendants. It is in the Plaintiff’s ledger on 15 June 2000. I do not allow the claim made for design by the Plaintiff before the contract was let. It was always intended to be a design and construct contract.
I turn to the assessment of the value of the work done by the Plaintiff on the existing tenancies.
The Plaintiff relied upon a report by Mr Paddick. The Defendants objected to it. To facilitate the trial it was agreed that the evidence should be heard de bene esse.
Mr Paddick gave evidence as an expert quantity surveyor of the cost of the alteration to the ground floor and of the work done in the existing tenancies. As I have found against the Plaintiff in relation to the first of these, it is not necessary to further consider his evidence in that regard. However, the objection taken by the Defendants to his giving expert opinion as to cost applies equally to the Stage 2 work.
The Defendants contend that the report, as an opinion, relies upon assumptions which, as they are unable to be proved, are hearsay. Consequently, they are not able to be used as is here sought. Reliance is placed upon Sych and Sych v Hunter (1974) 8 SASR 118 to support the proposition that an expert opinion is inadmissible if the information upon which it is based is inadmissible.
In support of Mr Paddick’s expertise the Plaintiff relied upon his particular work as a quantity surveyor.
As a quantity surveyor, and not challenged as an expert in that field, in my view Mr Paddick is entitled to rely upon the accumulated professional knowledge of those to whom he would turn in the normal course of his professional work. A witness may rely upon data, whether fact or opinion, without previous knowledge of it: R v Karger (2001) 83 SASR 1 at para 67; see also Freckleton & Selby, Expert Evidence, 11.220
Having done so the witness is then able to use that information in a way which allows him as, in this case, an expert quantity surveyor, to formulate an opinion as to the cost structure of the work in issue in this matter. That that opinion produced a median figure which far exceeded the contract price for the whole of the initial work proposed by the Plaintiff to the Defendants is not relevant on the issue of admissibility.
Having expressed his expert view of a median cost based upon his identification of the quantities involved, after adopting an acceptable method of obtaining prices from those to whom he would usually turn in his professional work, it is not correct to say that his opinion is inadmissible as based upon inadmissible evidence.
The Paddick report calculated the value of the work done by the Plaintiff in the existing tenancies at $50,721 in 2002 dollars. An adjustment of 6.1% was necessary to return that to a 1999 value. After such an adjustment, that figure is $47,627. In making his calculation, Mr Paddick accepted the sprinkler numbers used by the Plaintiff as a reasonable basis upon which to proceed. When the Plaintiff first provided the Defendants with a detailed breakdown of its current claim by Reconciliation of Debt of 18 July 2000, it allowed for 98 new below ceiling sprinklers and 48 new concealed space sprinklers installed. The total there claimed for this work in the existing tenancies was $39,960. It is the Plaintiff’s submission that this is the correct value of the work on both a quantum meruit and reasonable cost basis.
Immediately, therefore, there is need to proceed with caution in relation to the value of this work as assessed by the Plaintiff’s own expert at nearly $8,000 above this figure. The obvious conclusion is that the higher figure is quite simply unrealistic in a commercial sense and should be put to one side.
Mr Sprudzans, in his evidence, was not asked about the cost of work either in relation to the original contract variations or in relation to the existing tenancies. Thus, his evidence does not take this topic any further.
Mr Boere prepared a report and gave evidence. He, like Mr Sprudzans, has many years of experience as what he described as a “fire services designer” (T1495).
In his report he addresses the reasonable cost, overhead and profit for work done and materials supplied for Stage 2 - the existing tenancies. He assesses this sum at $26,210. In so doing he allowed for slightly more concealed space sprinklers than did the Plaintiff in its 18 July 2000 invoice. I prefer to use the Plaintiff’s numbers and Mr Boere’s values. Doing so the value of this work is:
98 below ceiling sprinklers @ $250 $ 24,500
48 concealed space sprinklers @ $30 $ 1,440
TOTAL $ 25,940I take this to be in 1999 dollars having regard to Mr Boere’s evidence as to how he obtained the reference prices. That these figures are less than the Plaintiff seems to have used to calculate the Foodland/Australia Post quotation is nothing to the point.
This assessment of the cost of installing sprinklers in the existing tenancies is a reasonable commercial estimate which I adopt. I assess the value of the Plaintiff’s work in this regard in the sum of $25,940.
Mr Paddick’s report also contains an estimate of the cost to the Plaintiff of the ground floor, being the new exterior and the existing tenancies, not being complete until early March 2000. This estimate is predicated upon the assumption that the time taken was enlarged solely by inefficiencies and changes attributable to the Defendants. I am unable to agree that the Plaintiff has come anywhere near to establishing such a proposition on the evidence.
There is no doubt that once work began Mr Carter was a rare attendee on site. There is evidence that the Plaintiff’s employees were less than diligent in their working habits and application. There is no suggestion by the Plaintiff in its progress claims, and particularly that of 31 October 1999, that there had arisen the issue of cost as the job life extended. There was no mention of it in any of the reconciliations produced by the Plaintiff in early to mid‑2000 or in the detailed account of 18 July 2000. In my opinion, there is no basis established upon which such a claim might succeed. This is particularly so when regard is had to the oft stated assertion on behalf of the Plaintiff during the trial that this was not in any way a delay claim against the Defendants.
I turn then to items of extra work.
The claim for the water main alteration has been compromised by the Plaintiff’s receipt of $17,000 as that claim is referred to in the invoice of 31 October 1999 as a variation.
I am satisfied that Mr Carter agreed to relocate the height of the verandah pipe/hydrant at no cost. Thus, the Plaintiff’s claim for $1,350 in this regard must fail.
The Plaintiff agrees that the Defendants are to have $1,256 in respect of ductile steel paid for by the Defendants.
For the reasons given earlier, the Defendants’ claim for reimbursement of the SA Water and Telstra fees fails.
The Plaintiff is to have the cost of the flue and cooking hood sprinklers and the 13 January 2000 agreed variation, being $300 + $350 + $1,280 = $1,930.
The Plaintiff’s claims in paras 12, 13, 14 and 15 of the Amended Statement of Claim were abandoned at trial. The claim in para 11 was agreed in the Defendants’ favour in the sum of $1,225.
The relocation by the Plaintiff of three Australia Post verandah sprinklers is to be at the price given by Mr Boere, namely $160 each; i.e. $480.
On 31 January 2000, excluding extras, there was due to the Plaintiff on the original contract, including variations as found and as reflected in the ledger (exhibit D20), the sum of $255,500. There had then been paid by the Defendants the sum of $242,250. The difference of $13,250 is the sum of progress claim No 403 of 31 March 1999 which was agreed to be the retention sum. It remains outstanding.
Hence, the Plaintiff is entitled to be paid as follows:
- existing tenancies $ 25,940
- Foodland/Australia Post $ 23,000
- relocate three sprinklers $ 480
- variations as in para 134 $ 1,930
$ 51,350
- add unpaid retention money $ 13,250
$ 64,600Subsequent to the original contract the Defendants are entitled to a credit from this sum in respect of:
- payment re Foodland/Australia Post $ 12,100
- ductile steel adjustment as agreed $ 1,256
- four sprinklers adjustment as agreed $ 1,225
$ 14,581
The Plaintiff is thus to be paid the sum of $50,019 in respect of works done for the Defendants.
This sum is to attract interest at 9% per annum from mid‑August 2000. I fix interest in the sum of $24,200.
There will be judgment for the Plaintiff in the sum of $74,219 inclusive of interest. I shall hear counsel on the question of costs.
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