Austman Pty Ltd v Mount Gibson Mining Ltd - [2012] WASC 202

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: AUSTMAN PTY LTD -v- MOUNT GIBSON MINING LTD [2012] WASC 202

CORAM: KENNETH MARTIN J

HEARD: 14-18, 21-25 NOVEMBER 2011

DELIVERED : 22 JUNE 2012

FILE NO/S: CIV 2824 of 2008

BETWEEN: AUSTMAN PTY LTD
Plaintiff
AND
MOUNT GIBSON MINING LTD
Defendant

Catchwords:

Contract formation - Design and construct contract by tender - Project commenced - Uncertainty as to essential terms - Works suspended by Superintendent - Mutual allegations of repudiation - Purported terminations - Accrued rights - Quantum meruit claim - Allegations of misconduct and conspiracy to injure - Part of Project Works suspended - General Conditions - Dispute resolution - Claim for refund of progress payments on termination by principal - Turns on own facts

Legislation:

Nil

Result:

Plaintiff's action dismissed
Judgment for defendant on counterclaim

Category: B

Representation:

Counsel:

Plaintiff: Mr M H Whitten & Mr G M Cridland
Defendant: Mr D Ryan SC & Mr D Dragovic

Solicitors:

Plaintiff: Moores Legal
Defendant: Freehills

Case(s) referred to in judgment(s):

ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101
Attorney‑General of Botswana v Aussie Diamond Products Pty Ltd [No 3] [2010] WASC 141
Australian Coarse Grains Pool Pty Ltd v Barley Marketing Board [1989] 1 Qd R 499
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191
Bantick v Boss Properties Pty Ltd [2000] VSC 121; [2001] ANZ Conv R 471
Braidotti v Queensland City Properties Ltd (1991) 172 CLR 293
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 286 ALR 12
Foran v White (1989) 168 CLR 385
FPM Constructions Pty Ltd v The Council of the City of Blue Mountains [2005] NSWCA 340
Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14551
Graham Evans Pty Ltd v Stencraft Pty Ltd [1999] FCA 1670; (2000) 16 BCL 335
Green v Summerville (1989) 141 CLR 594
Home Building Society Ltd v Pourzand [2005] WASCA 242
JR Marine Systems Pte Ltd v Wavemaster International Pty Ltd (in liq) [2011] WASCA 16
Killarney Investments Pty Ltd v Macedonian Community of Western Australia Inc [2007] WASCA 180
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115
Lodder v Slowey [1904] AC 442
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749
McCann v Switzerland Insurance Aust Ltd [2000] HCA 65; (2000) 203 CLR 579
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255
Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
Perini Corporation v Commonwealth [1969] 2 NSWR 530
Schreiber v Dinkel (1886) 54 LT 911
Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 24 VR 510
Steele v Tardiani (1946) 72 CLR 386
Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17
The Australian Metropolitan Life Assurance Co Ltd v Ure (1923) 33 CLR 199
Uranium Equities Ltd v Fewster [2008] WASCA 33; (2008) 36 WAR 97
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

INDEX

Overview.................................................................................................................................... 6
Rival contentions...................................................................................................................... 11
Matters concerning the trial...................................................................................................... 14

Aconex.................................................................................................................................. 15
Austman's non‑documentary trial evidence......................................................................... 16
The expert evidence.............................................................................................................. 20
MGM's non‑documentary evidence at trial.......................................................................... 22
Trial documents.................................................................................................................... 25

MGM's notice of award of the design and construct contract to Austman.............................. 26
Was the NOA intended to create binding obligations?............................................................ 34
AS4902‑2000 General Conditions (as modified by MGM)..................................................... 38
Further findings........................................................................................................................ 49
Mr H Kuhn's reference to 'commitment'.................................................................................. 62
Conclusion as to contract formation on 4 March 2008............................................................ 63
Chronology: 18 March 2008 'kick-off' meeting....................................................................... 64
Contractual uncertainty arguments as to essential terms of the D&C Contract: 3 April 2008 flow sheet 64

Austman's submission of progress payment claims............................................................. 67
Austman's submission of variation claims........................................................................... 68
Post-NOA communications about a 'Formal Contract'........................................................ 70
Austman's no agreement stance............................................................................................ 73
Contractual uncertainty........................................................................................................ 79
Uncertainty by incompleteness: Some matters pleaded in pars 3 ‑ 21 of Austman's statement of claim 81

Electric motors and electric cables................................................................................... 81
Tramp Iron Magnet and Metal Detector........................................................................... 82
Free issue items, a fines stacker in singular form, several chutes and one structure associated with the free issued items............................................................................................................... 82
Increased installed power................................................................................................. 83
Increased power for the plant conveyors.......................................................................... 89
Material properties of iron ore.......................................................................................... 90

Uncertainty: Expert evidence of Mr Kendall...................................................................... 92
Essential terms and conditions: Scope of work, commercial conditions and price............. 92
General Conditions............................................................................................................... 93
Incomplete Annexure Part A to modified AS4902‑2000 General Conditions..................... 93

Legislative requirements - item 22................................................................................... 93
Liquidated damages - item 29.......................................................................................... 94
Bonus for early completion - item 30............................................................................... 94
Unfixed plant and materials for which payment could be made - item 34...................... 94

Uncertainty: Special conditions........................................................................................... 95
Name of the principal........................................................................................................... 96
Uncertainty: Alleged differences or inconsistencies between section 3 and section 4 of the NOA 96
Uncertainty: Totality of scope of works never agreed?...................................................... 97
Scope of work: Austman's position alters between July and August 2008......................... 97

MGM's conventional estoppel case.......................................................................................... 98
Binding Contract: Where to?................................................................................................... 98

Delay claims......................................................................................................................... 99
MGM's failure to provide access to site, and the Superintendent's suspension of part of Austman's works under contract..................................................................................................................... 100

Materials subpoenaed by Austman from the DMP................................................................ 105

Mr Panek and the two State environmental approvals....................................................... 108
The part suspension of Austman's WUC by Mr Panek...................................................... 110
Approvals and suspension.................................................................................................. 111
Mr Quinlivan's evidence as to suspension and the State environmental approvals........... 114

Misconduct allegations: Conclusions.................................................................................... 115
Events leading up to November 2008.................................................................................... 115
Austman's wrongful repudiation of the D&C Contract.......................................................... 125
Repercussions of MGM's lawful termination of the D&C Contract on 28 November 2008. 126
Residual issues on Austman's wrongful repudiation and termination by MGM.................... 126
Damages and quantum meruit had Austman succeeded........................................................ 128
Conclusion.............................................................................................................................. 139

KENNETH MARTIN J:

Overview

In 2007, Mount Gibson Iron Ltd (MGI) was seeking to extend its Western Australian iron ore processing and export business by a new mining operation in the locality of Mount Gibson (the company taking its name from the area, which is in the central west of Western Australia and roughly between the towns of Wubin and Perenjori). The new project was to be known as Extension Hill.
MGI already had iron ore export operations established in Western Australia, at Tallering Peak and Koolan Island. Extension Hill would be a greenfields project. MGI's expanded iron ore processing operations at Extension Hill would involve the railing of iron ore from a siding near Perenjori in wagons for shipping out of the Port of Geraldton. It was anticipated most of the ore would be exported to China.
At root a 'Masters v Cameron' contractual formation dispute arises between the plaintiff, Austman Pty Ltd (Austman), and the defendant, Mount Gibson Mining Ltd (MGM). MGM is a wholly owned subsidiary of MGI. MGM asserts and Austman disputes that in March 2008 a binding contract for the design and construction of a crushing and screening plant to be built at Extension Hill was formed between the parties (the D&C Contract).
Austman accepts that in the period between November 2007 and February 2008, it submitted five tenders to MGM, seeking an award to it of a design and construction contract for MGM's new crushing and screening plant at Extension Hill. But Austman says that, in the end, no binding contract was ever perfected.
On any view, there was extensive communication back and forth between MGM and Austman over a four month period, culminating in Austman's fifth tender of 27 February 2008 at a lump sum price of $10.914 million (exhibit 1, page 412) being accepted by MGM.
Austman was advised that MGM would accept Austman's fifth tender, under a notice of award document (the NOA) sent to Mr Hartmut Kuhn (Mr H Kuhn), the Managing Director of Austman, of 3 March 2008 (exhibit 1, page 679).
Further discussions followed between Mr Malcolm Watson of Merit Engineers on behalf of MGM and Mr H Kuhn over certain of the General Conditions sought to be incorporated by reference into the contract arrangements. That dialogue culminated in Mr H Kuhn signing the NOA sent to him by Mr Watson. Mr H Kuhn returned the signed NOA to MGM on 4 March 2008 (exhibit 1, pages 653 ‑ 654).
On 6 March 2008, Mr David Quinlivan, the Chief Operating Officer of both MGI and MGM, signed the same NOA document for MGM.
Mr H Kuhn left for China on 5 March 2008. There he caused Austman to enter contracts with two Chinese steel fabricating subcontractors to carry out design and steel fabrication works for the Extension Hill crushing and screening plant components (with Wuxi Sinoman Heavy Machinery Co Ltd on 12 March 2008, exhibit 1, page 719, and with Shanghai Sinoman Industrial Co Ltd on 10 March 2008, exhibit 1, pages 716 ‑ 717).
Between May and November 2008, Austman submitted seven progress claims to MGM seeking payments for work done. Some aspects of the claims were allowed and paid, to the extent of $842,283. But the D&C Contract's appointed Superintendent, Mr Peter Panek, disallowed the bulk of the progress claims as premature or not sufficiently substantiated. A frequent basis for disallowance was that no fabricated materials had yet been delivered or assembled at Extension Hill. A principal has no obligation to make a progress payment to a contractor for materials until those materials are affixed at site (General Condition 37.3).
Austman gave notices of dispute, on 7 and 18 July 2008 (exhibit 3, pages 1617 ‑ 1618 and 1908).
Apart from denying the existence of any binding contract with MGM, Austman advances a related, but legally distinct, contractual uncertainty argument. It submits, in the end, there was no valid or enforceable D&C Contract with MGM. This is on the basis of what it says were many essential details that still needed to be settled between the parties. Their ultimate non‑resolution, says Austman, cannot sustain an objective conclusion as to the existence of an effectual design and construct contract for a crushing and screening plant at Extension Hill, even allowing for the potential remedial impact of implied terms, or resort to considerations of reasonableness: see ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, 548E‑F (Gleeson CJ).
Contractual uncertainty arguments advanced by Austman involve engineering concepts of some technical complexity. Austman pleads that the uncertainty was particularly manifested in the areas of:
(i)scope of work;
(ii)price;
(iii)the contract period; and
(iv)payment terms, including for unfixed plant and equipment.
On Austman's case, the ultimate uncertainty renders void any otherwise ascertained D&C Contract: see Uranium Equities Ltd v Fewster [2008] WASCA 33 [127]; (2008) 36 WAR 97, 132.
On the other hand, MGM contends that there was a binding and fully enforceable D&C Contract, consummated as a result of Austman's communicated acceptance and return of MGM's last written NOA communication to Austman on 4 March 2008, or alternatively by a subsequent finalisation of some limited technical issues between the engineering representatives of Austman and MGM on 18 March or 3 April 2008.
From a founding premise of a binding and enforceable D&C Contract, MGM contends that on 12 November 2008 Austman - having by then submitted seven progress claims, plus notices of dispute and delay (see exhibit 4, pages 2096 ‑ 2097) - repudiated the D&C Contract, first by steadfastly denying that any contract existed and second, by renouncing future obligations of performance under a D&C Contract.
MGM says that it was, as it advised Austman on 7 November 2008 (exhibit 4, page 2305), itself ready, willing and able to perform all its obligations as principal under the D&C Contract, subject to the Superintendent's then subsisting notice of suspension of part of Austman's works (exhibit 4, page 2224).
MGM says that until 28 November 2008 it had been seeking to hold Austman to performing the D&C Contract's obligations. It had not before then elected to act upon Austman's repudiatory breaches of the D&C Contract. But that changed for MGM on 28 November 2008.
MGM says the 12 November 2008 communication sent on behalf of Austman by its solicitors was wrongful and was not resiled from. It was a blunt renunciation of Austman's obligations of future performance under the D&C Contract, not to mention communicating yet another refutation as to the existence of any binding agreement with MGM.
The 12 November 2008 stance by Austman was continued. It provided MGM with the lawful basis to elect on 28 November 2008, as the innocent party, to give Austman notice, thereby putting an end to all parties' future performance obligations under the D&C Contract: see McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, 476 ‑ 477 (Dixon J). MGM says that on 28 November 2008 it had elected, as then was its right, to accept Austman's wrongful repudiation of the D&C Contract.
So, in effect, both MGM and Austman assert that if a D&C Contract had come into existence, any obligations of future performance were at an end. This occurred either on 12 November 2008 (on Austman's alternative case, which assumes a binding D&C Contract had been formed), or on 28 November 2008 (on MGM's case).
It is an accepted fact that no component parts for a crushing and screening plant were ever delivered, let alone assembled or affixed at the Extension Hill site.
Before plant assembly work could begin, MGM needed to perform about a month of preparatory earthworks. Earthworks were necessary to provide a base for a crushing and screening plant. MGM had not started any earthworks as of 28 November 2008.
Two environmental approvals (from the Department of Mines and Petroleum (DMP), formerly the Department of Industry and Resources (DOIR)) were needed before the soil at Extension Hill could be turned over. It would have been unlawful to perform earthworks without the approvals. It had been MGM's responsibility to obtain the approvals. An absence of the two approvals had occasioned, so Austman was informed, the Superintendent's suspension of part of Austman's works at the Extension Hill site on 23 October 2008.
Some unassembled fabricated steel components for the crushing and screening plant which Austman had caused to be manufactured in China arrived at Fremantle. They were stored by Austman - and this is where they remain - at Kwinana, at Austman's cost. Further fabricated steel components from the crushing and screening plant remain stored in China.
Roughly half of the fabricated steel components needed for the Extension Hill crushing and screening plant were fabricated by Austman's offshore subcontractors. However, as I observed, none of these have ever reached site at Extension Hill, let alone been assembled and affixed there, to create the envisaged crushing and screening plant.
That fact is relevant to an assessment of one of Austman's claims put in the alternative. Austman says that if a D&C Contract is found to exist and to be enforceable, then MGM has breached its obligations under the contract. Austman says further that, as the innocent party, it can elect to receive either damages for breach of contract, or a quantum meruit as its remedy at any time before judgment is delivered. Austman asks me therefore to assess its claim for damages as well as its alternative claim on a quantum meruit, so it can make an election as between the two, before pronouncing judgment in Austman's favour.

If there was a binding D&C Contract, Austman claims $6,896,544.80 from MGM as its common law damages for breach of contract. Alternatively, Austman seeks a 'just sum' on the basis of the quantum meruit.
MGM refutes any liability to Austman for damages, or on a quantum meruit claim. MGM says it received, in the end, absolutely nothing from Austman from which it obtained any benefit so as to sustain restitutionary relief. Nothing, let alone a functional crushing and screening plant, was ever assembled or affixed by Austman at Extension Hill.
Therefore, MGM says it could hardly have been enriched, let alone been unjustly enriched, at Austman's expense. Accordingly, MGM says that Austman's claim for relief by way of a quantum meruit, founded on principles of unjust enrichment, is wholly misconceived, on the facts of this case.
MGM says that by reason of Austman's breaches, culminating in the events of November 2008 which ended the parties' relationship, it was ultimately forced to engage a new contractor to design and construct from scratch its crushing and screening plant at Extension Hill. MGM will have to pay the new contractor full price for a completed crushing and screening plant, without any offsets or advantages arising out of its terminated D&C Contract with Austman.
By a counterclaim in the proceedings, MGM contends that Austman, as the true party in breach, is actually liable to it for $842,283, essentially as its waste damages. MGM says that progress claim monies it had paid over to Austman during 2008 on an interim basis were wholly wasted and of no eventual benefit to MGM. On this point MGM invokes Dixon J's observations in McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, 412.

Rival contentions

Austman's case, as opened by counsel, was explained to be that even if the court ultimately held that there was, contrary to Austman's primary case, a binding and fully enforceable D&C Contract, such a conclusion would be of small moment.
Austman's written opening submissions, handed up at the commencement of trial, under the heading 'Contract or No Contract', explain:
9.A visitor to this case could be forgiven for thinking that, apart from the claim for payment, the principal issue in dispute for determination by the Court is whether or not the parties entered into a binding and legally enforceable contract. The visitor would be wrong.
10.Stripped to its barest, the Plaintiff's claim is little more than a claim for work and labour done and goods supplied.
11.As will be demonstrated below and throughout the evidence at trial, regardless of whether the Court finds there was a contract or not, the ultimate result, it is submitted, is that MGM is required to pay Austman for work performed by Austman at MGM's request and for its benefit.
(my emphasis in bold)
That stance was amplified by Austman's counsel during his opening (ts 7):
[I]t will not matter whether your Honour finds the existence of a contract or not. As a matter of proper legal analysis, at the end of the day Austman is entitled to be paid for the work it has performed.
That tactical stance by Austman struck me, at the time, as curious. It still does. More than half the trial documents and at least half the duration of the trial, as my rough assessment, were concerned with issues advanced by Austman in support of its denial of the D&C Contract's existence, or its validity. If those issues really did not matter, then why were they pressed, at expense to all concerned, for so long?
If I were ultimately to conclude that a binding and certain D&C Contract subsisted and then lawfully terminated by MGM in late November 2008 (based on the objectively assessed repudiatory conduct of Austman, as MGM contends), that outcome nevertheless would not, says Austman, undermine its entitlement to be paid for work performed, or work which it caused to be carried out. This submission was explained in Austman's written opening submissions:
25.Even if, as contended by MGM (and denied by Austman), Austman repudiated any contract, then the parties' accrued rights to the date of termination are preserved such that Austman will still be entitled to payment (or credit) for the work it has performed …
26.Accordingly, on any proper analysis, Austman is entitled to payment.
(my emphasis in bold)
Austman's assertion of 'accrued rights' at the date of termination of a D&C Contract being preserved, even if Austman were ultimately found to have wrongfully repudiated a binding D&C Contract, is an attempted invocation of the reasons of Dixon J (as he then was) in McDonald v Dennys Lascelles as to unconditionally acquired rights. There his Honour famously explained the principles governing rights unconditionally acquired prior to a contractual termination (476 ‑ 477):
When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired.
(my emphasis in bold)
In FPM Constructions Pty Ltd v The Council of the City of Blue Mountains [2005] NSWCA 340, Basten JA (with whom Beazley JA agreed), rejected arguments as to accrued rights grounded upon a contractor's progress claims submitted before termination, but subsequently certified by the superintendent, after termination of the construction contract: see [192] and [193]. In FPM, the superintendent had authorised the progress claims only after the termination. It was held that the contractor did not hold unconditionally acquired rights. Post termination it was too late for the superintendent to validly certify the progress claims.
Here, progress claim amounts that were allowed by the Superintendent to Austman have been paid over in full by MGM. Nothing else was approved by the Superintendent, before or after November 2008. MGM therefore says, following FPM, that Austman post termination does not hold any unconditional rights as regards its uncertified progress claims.
From that brief overview, five essential questions can be seen to arise:
1.Was there a perfected D&C Contract between Austman and MGM?
2.If so, was that D&C Contract, as a matter of objective analysis, so unclear, or so incomplete as to its essential terms, to be assessed as void for uncertainty?
3.Assuming an effectual and certain D&C Contract, did either party seriously breach or repudiate that agreement so as to justify the other party in terminating performance of that agreement in November 2008?
4.Is MGM entitled to damages on its counterclaim, quantified as the amount it paid to Austman on allowed aspects of Austman's submitted progress claims, in the amount of $842,283?
5.Assuming an enforceable D&C Contract, does Austman hold a valid claim, irrespective of who was in breach or who terminated, to vested (unconditionally acquired) entitlements to payments for its progress claims submitted to the Superintendent prior to termination of the D&C Contract in November 2008?
There is another core issue that should be mentioned at the outset. On the assumption that an efficacious D&C Contract was operative as between these parties, Austman directs some very serious assertions of misconduct against MGM and the Contract Superintendent, Mr Peter Panek. Austman's case is that MGM's senior personnel and Mr Panek effectively conspired to manufacture a pretext to suspend the contract works of Austman as contractor at Extension Hill, in October and November 2008.
Austman alleges the 'true' reason underlying the Superintendent's suspension of part of the works was the unexpected financial difficulties MGM and its parent MGI then faced. Difficulties had arisen, it is put, because MGI's overseas iron ore customers had reneged on supply contracts (entered before October 2008) during the 2008 global financial crisis that struck at the heart of MGI's international iron ore sales business.
The assertions of serious misconduct against MGM and Mr Panek were pressed by Austman. That was so notwithstanding that MGM by senior counsel objected during the opening of the trial to a conspiracy and misconduct case as being outside Austman's pleadings (see ts 27).
Austman's pleadings were (just) wide enough (as I will explain) to permit the misconduct case to be put.

Matters concerning the trial

Austman is a family business. Its Managing Director is Mr H Kuhn, a civil engineer. Mr H Kuhn is 67 years of age and longstanding patriarch of the family business. Other participants in the Austman business are Mr Kuhn's two sons, Martin (Mr M Kuhn) and Stevan (Mr S Kuhn). Mr M Kuhn is a project engineer. Mr S Kuhn is a manager. He was the intended construction manager for the Extension Hill project. Mr Kuhn's daughter Katrina also assists in the family business. She is referred to in some of the email correspondence passing between the parties.
In its second further amended statement of claim (statement of claim), Austman describes itself as a corporation 'carrying on business in the design and construction of bulk materials handling and equipment, processes and facilities'. That self‑description is accepted by MGM.
The trial proceeded by the extensive use of witness statements. Exhibits 8, 9, 10 and 11 were Mr H Kuhn's four witness statements, all tendered in Austman's case.
It is trite that an objective approach is now used in Australian courts in their daily task of interpreting contracts. The objective approach, applying a standard of reasonableness, is also used in ascertaining the existence or otherwise of a binding agreement between negotiating parties. What the parties themselves subjectively think about such legal issues is immaterial.
There were a large number of written communications (usually emails) passing between Austman and MGM personnel in the period between 31 October 2007 and March 2008. The communications are all uncontroversially in evidence. Accordingly, there is, particularly in this case, no basis for individual witnesses to express subjective views about the existence or otherwise of a binding agreement between themselves. A court looks at admissible materials and makes an objective assessment based on how reasonable persons, similarly placed to the parties, would have viewed the contractual position.
Numerous comments found within the witness statements crossed the line of admissibility, by expressing subjective beliefs, or conclusions upon the parties' respective legal positions. I have ignored all such comments. The contemporaneous documentation passing between the parties is a more reliable repository of evidence, particularly on the issue of contract formation.
Before trial a number of disputes arose over objections to the witness statements. The parties eventually resolved these disputes on the agreed basis that:
(a)passages in witness statements tendered for MGM going to the existence of a contract or its terms or to 'contractual documentation' would not be accepted as evidence as to the existence of a contract. Rather, they would be treated essentially as submissions towards an alleged contract; and
(b)passages in witness statements tendered on behalf of Austman (particularly the three members of the Kuhn family who gave evidence at trial) as to a legal conclusion that there was no contract, similarly, would be treated only as submission, not evidence in support of such a legal conclusion.
The parties also agreed, following what proved to be an extensive pre‑trial exchange of witness statements on each side, including the filing of reply witness statements, that no party would press against the other a 'Browne v Dunn' submission. Accordingly, no complaint would be raised over an asserted failure at trial to cross‑examine, or to expressly join issue by questions challenging an assertion buried somewhere in the long and frequently technical witness statements exchanged before trial.

Aconex

I should mention at an early point MGM's internal electronic communication system, which is akin to a private email exchange, known as Aconex. Austman personnel were given access to Aconex and used this mode of electronic communication at an early stage in the tender process it engaged in with MGM.
The Aconex system is explained in Mr Panek's witness statement (exhibit 18) in these uncontroversial terms (pars 166 ‑ 176):
166MGM uses the Aconex Document Management System for the Extension Hill project.
167It also requires all of its contractors to use the Aconex system. Hartmut and Martin Kuhn were both given training on the Aconex system and used the Aconex system to send almost all of the documents relating to the Extension Hill crushing and screening contract.
168The Aconex document management system is provided to MGM by an external service provider. MGM pays for this service.
169All documents sent and received by a party via Aconex remain on Aconex. That is one of its key advantages. It provides a secure archive of project documentation. Documents on Aconex cannot be deleted from Aconex without all parties consent.
170When a party is sent a communication via Aconex, the receiving party becomes aware of the new communication within Aconex the next time that it logs onto Aconex.
171When a user logs onto Aconex, any new communication or document that has been sent via Aconex will be marked as unread in that user's 'tasks' window. This task window is effectively like an inbox in your email account which shows all unread documentation.
172The default setting for new users of Aconex is such that Aconex sends an email to the receiving party's external email address notifying them that they have been sent an Aconex communication, and in all cases includes a link that allows the document to be viewed …
173I don't know whether Hartmut and Martin had their Aconex accounts changed such that email notifications were no longer sent to them.
174When my Aconex account was set up, the default setting was that I got these notifications. I ended up changing this as I didn't want the notifications.
175…
176MGM uses the Aconex system for its Extension Hill Project. It does this so as to keep an accurate record of all communications and documents relating to that project.

Austman's non‑documentary trial evidence

I turn to summarise some of the more important non‑documentary evidence adduced at the trial, commencing with the evidence adduced by Austman.
For Austman, Mr H Kuhn, across four witness statements, canvassed many areas, including the extensive, ongoing discussions and negotiations with MGM's representatives from October 2007 onwards.
Mr H Kuhn refers to the multiple versions of proposed contracts that passed back and forth with MGM, particularly some asserted inconsistencies as between descriptions of the scope of work (in section 3, as compared to section 4 of MGM's March 2008 NOA to Austman). He relates his attendances at various dispute meetings between the parties during July and August 2008. In most of these areas it seemed to me overall that the contemporaneous documentation passing between Austman and MGM by email through Aconex is a more reliable source of evidence as to what occurred between Austman and MGM. I generally prefer the documentary evidence to recollections and reconstructions, particularly by Mr H Kuhn. He, through Austman, clearly holds a vested interest in the outcome of these proceedings. Perhaps understandably, he presented to me as holding very partisan views, on my assessment, towards the many asserted issues of contractual uncertainty said to surround the D&C Contract. Unfortunately, Mr H Kuhn's argumentative disposition (see ts 304) undermined his objectivity, and hence, for me, his general reliability as to facts, in contentious areas.
One key issue of disputed fact arises concerning what Mr H Kuhn contended to be an oral agreement later reached between himself and Mr Quinlivan (MGI and MGM's Chief Operating Officer) after the parties' representatives had aired their grievances at a dispute meeting held on 31 July 2008. It is asserted, as one of Austman's arguments in the alternative, that a binding variation to the D&C Contract was made at this meeting, conferring upon Austman an entitlement to receive progress payments. This, it is put, was so, notwithstanding the D&C Contract's incorporated modified AS4902‑2000 General Conditions, which stipulate that affixation of materials at site was a prerequisite to the contractor's entitlement to receiving progress payments from MGM.
Mr H Kuhn says that at his meeting with Mr Quinlivan it was agreed Austman would be paid, upon it showing MGM bills of lading to prove that Austman's subcontractors in China had consigned by sea the steel components fabricated for the Extension Hill plant.
MGM disputes that any 'bill of lading agreement' was ever made. It accepts that there were negotiations that raised the prospect of such an arrangement as a possibility. But MGM says the option was never ultimately pursued further by Austman and so, never perfected as a variation of the D&C Contract. In this discrete area, divergent evidence from Mr H Kuhn and Mr Quinlivan needs to be evaluated and resolved.
At an earlier dispute resolution meeting, on 16 July 2008, Mr H Kuhn showed Mr Quinlivan (and thereby waived Austman's privilege in) a letter of legal advice Austman had received that day from its legal advisers, Pilley McKellar Pty Ltd (Pilley McKellar). The letter told Austman there was no valid contract between MGM and Austman. Even so, the letter advised Austman it had an entitlement to payment from MGM for work carried out, on a 'quantum meruit' (exhibit 3, pages 1877_01 to 1877_02).
According to MGM, from about this point, in mid‑July 2008, Austman now repeatedly told MGM in passing communications that there was no binding agreement between them, notwithstanding the extent of the tender communications.
Negotiations continued as part of a sustained effort by Austman to secure a higher lump sum price than the $10.914 million set by MGM's 4 March 2008 NOA to Austman.
Mr H Kuhn related circumstances leading to Austman's 12 November 2008 declaration through its solicitors as to a cessation of work and termination (in the alternative) of any contract that may have been in existence with MGM. This was on the basis of MGM's alleged breach and repudiation of the D&C Contract by a failure to give Austman access to site, failure to obtain the necessary environmental approvals to facilitate site access, and the October 2008 Superintendent's suspension of part of Austman's works at site.
Mr H Kuhn deals with Austman's costs incurred for the Extension Hill project, including its present unmet liabilities to its Chinese steel fabricators.
Mr H Kuhn's witness statement (exhibit 8, pages 58 and following) seeks to explain Austman's delay claims against MGM. Early objection was pressed by MGM against this part of Mr H Kuhn's witness statement. Ultimately the objection was resolved on the basis that this part of Mr H Kuhn's statement would also be treated as being in the nature of submission, rather than as factual or expert opinion evidence (see ts 109 ‑ 113).
As a witness Mr H Kuhn, in cross‑examination, was frequently an advocate for Austman's case, rather than an objective witness as to facts. This was understandable, albeit unhelpful, given his obviously deeply felt grievances against MGM, which underlies the litigation. Unfortunately, Mr H Kuhn's heavily slanted perspective towards events weighs against me accepting his unsupported evidence in areas of controversy. At times in cross‑examination it was obvious Mr H Kuhn paused for unduly longish periods before answering questions put to him. At other times he was argumentative and non‑responsive (for instance, see ts 305 ‑ 306, regarding the possibly inflated costs claim by Austman for a rigger, Stephen Webster).

At times I observed Mr H Kuhn reading ahead in his witness statements before answering the questions posed to him. It seemed to me he was trying to anticipate the line of questioning, or trying to remind himself what he had previously written across four longish statements, so he would not be caught out. This exacerbated the unfavourable impression overall I reached as to the reliability of his evidence in disputed areas.
Mr M Kuhn, also an engineer, gave evidence for Austman. His witness statement became exhibit 13. Mr M Kuhn had assisted his father in the Extension Hill project liaison with MGM during the tender stages, in negotiations and meetings with MGM and when design work began in earnest after the NOA of 4 March 2008.
Sometimes accompanying his father, Mr M Kuhn also attended the 'kick‑off meetings' with MGM's representatives. Much of Mr M Kuhn's evidence covers territory canvassed by contemporaneously exchanged emails which are uncontroversial and found within the trial bundle.
The course of his cross‑examination displayed, when he was not taken to specific documents, that Mr M Kuhn's knowledge concerning most issues he was questioned about had faded (see, for instance, ts 314). This is somewhat understandable, given the effluxion of time that has ensued. But again it points to the contemporaneous passing documents as being a more reliable source of evidence.
Mr S Kuhn also gave evidence, providing a short witness statement which became exhibit 14. He was minimally cross‑examined, mainly over one issue relating to an aspect of Austman's first delay claim in respect of the same rigger, Mr Stephen Webster, being idle at a cost of $90 per hour (exhibit 4, page 2116). Documents (exhibit 6, pages 107 ‑ 109) established Mr Webster had been engaged by Austman at the rate of only $30 per hour (see ts 328). Bearing in mind the conclusions I ultimately reach, little turns on this. Mr S Kuhn also attended some dispute meetings between Austman and MGM's representatives throughout 2008.
Otherwise I assessed most of Mr S Kuhn's evidence to be uncontentious. It appears he made a trip to the Extension Hill site at some point in 2008. At that time he made the observation that MGM's earthworks, which needed to be completed to provide a level site so Austman could assemble and erect the crushing and screening plant, had not even begun. So much is uncontroversial fact. That remained the case throughout November 2008, in the absence of two required environmental approvals.
The Extension Hill project as a whole came to be suspended by MGI, as it explained in an announcement to the Australian Stock Exchange (ASX) on 3 November 2008. That was in the wake of the global financial crisis of October 2008. But, conceptually, MGI's suspension of the project is in law a different matter to MGM suspending works under contracts made with parties involved in the Extension Hill project. Mr Quinlivan of MGM and MGI drew attention to the significance of this conceptual distinction in his evidence, to which I will refer.
The Extension Hill project was revived by MGI in 2010. Unfortunately the revival by then was without Austman's participation as designer or constructor of the crushing and screening plant. A new contractor, Metso, had now been engaged by MGM for a crushing and screening plant that is still to be built at Extension Hill.
Austman adduced evidence through two expert engineering witnesses, Mr John Hallion, whose report became exhibit 28, and Mr John Stone, whose report became exhibit 29.
Austman also called an expert quantity surveyor, Mr Jonathon Brown of Aquenta Consulting. His report, bearing upon damages and quantum meruit issues, became exhibit 31.

The expert evidence

Messrs Stone and Hallion gave their evidence at trial concurrently, together with MGM's expert engineering witness, Mr William Kendall. Mr Kendall is a consultant engineer with the engineering design and consulting firm Mintrex. His report became exhibit 25.
For the purpose of trial Messrs Kendall and Hallion each signed off on a joint memorandum of 21 September 2011, prepared and submitted after their conferral before trial. It became exhibit 30. The joint memorandum, setting out the experts' respective positions as to each specific paragraph of their opposing expert's report, was, for me, a very useful document. It narrowed the areas of true controversy as between the experts very considerably. In the end, the core area of disagreement could be distilled down to one issue, over plant design. That distilled controversy concerned the amount of power needed to rectify a situation where a conveyor, loaded with iron ore, stopped or stalled. Messrs Kendall and Hallion differ over the amount of power required as a matter of design to restart a 'flooded conveyor', with Mr Kendall specifying a higher level of power.
As to this core issue, see the experts' joint memorandum at pars 44, 46 and 49. The same core issue was manifested in Mr Kendall's comments about Mr Hallion's report, dealt with as items 13, 14 and 15 in the joint memorandum.
I assessed there to be a legitimate clash of expert perspectives as between Mr Hallion and Mr Kendall on the issue. Mr Kendall was of the view that a greater power allowance was demanded by occupational health and safety considerations. Mr Hallion thought a manual restart of a fully‑loaded, stalled conveyor, if necessary, was not outside industry practice. In the end, I prefer Mr Kendall's more conservative approach upon that one disputed core issue of design, if it matters.
An issue of wider legal significance in the trial, as has now been mentioned, concerns Austman's layered assertions as to contractual uncertainty (assuming a contract was reached). I will deal with this issue at more length separately, in due course. But, whilst mentioning the expert engineering evidence at this point, I will observe that Mr Kendall's report assessed very comprehensively, from an engineering perspective, the question of whether or not there was enough basic information exchanged as between Austman and MGM, in the period leading up to the NOA of 4 March 2008, to enable Austman to design and construct a crushing and screening plant at Extension Hill.
Mr Kendall's assessment was undertaken by reference to information in MGM's NOA to Austman, including documents, drawings and details incorporated in the NOA. Bearing in mind the extensive, and at times very technical, engineering arguments pressed upon me as to uncertainty during this trial by Austman, concerning an asserted lack of basic essential engineering detail provided by MGM, this engineering opinion evidence from Mr Kendall was admissible. It provides some assistance in my task towards assessing Austman's contractual uncertainty arguments. In ABC v XIVth Commonwealth Games, Gleeson CJ said, as to the admissibility of such expert opinion evidence (548):
In some cases, such as transactions involving the sale and purchase of land, or leases, courts may properly feel well equipped to form a view on such matters without the need for much evidence. In many cases, however, of which the present is a good example, there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties.
(my emphasis in bold)
Mr Kendall expressed his view that MGM's invitation to tender (ITT) and the subsequent March 2008 NOA were both clear and complete as to essential subject areas. There was enough information, in Mr Kendall's view, to enable a competent engineering contractor, with experience in constructing plants, to design and construct MGM's crushing and screening plant at Extension Hill (see Mr Kendall's responses to questions 1 ‑ 13, 15 ‑ 18 in exhibit 25 and as summarised in exhibit 30). In this area of his report Mr Kendall stood uncontradicted by Austman's independent engineering experts, Mr Hallion and Mr Stone. Their reports did not seek to enter this area of controversy. Austman, of course, particularly by Mr H Kuhn, strongly advocates an opposite position.
But Mr H Kuhn has a vested interest. Mr Kendall's opinions upon the issue of contractual certainty stand essentially uncontradicted by any unbiased engineering expert.

MGM's non‑documentary evidence at trial

For MGM, its first non‑expert trial witness was Mr Quinlivan, whose witness statement became exhibit 17. As I mentioned, Mr Quinlivan was the Chief Operating Officer at relevant times in 2007 and 2008 of both MGI and MGM.
Within the MGI/MGM hierarchy, Mr Quinlivan was immediately superior to Mr Panek, who was the Extension Hill Project Manager. Mr Panek was an outside engineer contracted from Merit Engineering Pty Ltd (Merit) and part of MGM's overall management structure for the Extension Hill project.
Mr Panek, whilst he was MGM's Project Manager for the Extension Hill project, was also the Contract Superintendent, appointed under the General Conditions of the D&C Contract (again, making an assumption that such a contract was in existence). Mr Panek was MGM's second witness at the trial. He is a civil engineer with over 30 years' engineering experience.
In his capacity as Superintendent, Mr Panek had responsibility for evaluating and certifying Austman's progress and variation claims as well as its extension of time and delay allowance claims.
Mr Lucas Cree was MGM's fourth witness. His statement became exhibit 22. Mr Cree holds a Bachelor of Engineering from the University of South Australia, graduating with Honours in 1993. Mr Cree was employed as a senior mechanical engineer by MGM between 2007 and 2010. Between January 2008 and December 2008, he worked on the Extension Hill project as a project engineer, and under Mr Panek, as Project Manager and Superintendent's Representative. Mr Cree's first role was to manage technical aspects of the project to ensure that Austman was complying with its scope of work. As Superintendent's Representative he also had an independent role to perform, in assisting the Superintendent.
Messrs Quinlivan, Panek and Cree were all cross‑examined. Each gave an unequivocal refutation to Austman's misconduct and conspiracy allegations raised against MGM and Mr Panek. Austman says that MGM, particularly around September and October 2008, effectively 'went slow' in obtaining two State environmental approvals. The approvals were needed in order to lawfully commence earthworks at Extension Hill to provide a base for the crushing and screening plant. It was put, in effect, that MGM used the absence of the environmental approvals from the DMP as a pretext, to alleviate its (or rather, its listed corporate parent, MGI's) unexpectedly strained financial position at that time. It was suggested by Austman that MGI unexpectedly sustained severe financial setbacks as a result of the October 2008 global financial crisis. Some of MGI's Chinese iron ore customers at the time had defaulted in taking up the iron ore shipments they were contracted to receive. Others demanded softer financial terms, including lower ore prices from MGI. It is said that these events adversely impacted against MGI's 'bottom line'. The unwelcome events are said to have caused MGI to request a halt in the trading of its shares from the ASX on 23 October 2008.
Austman argues this sudden and unfavourable turn in world events, particularly by MGI's overseas iron ore purchasers defaulting on their ore supply contracts, was the true reason why, in October and November 2008, MGI and MGM no longer wished to pursue the expansion in their existing iron ore export operations, let alone outlay funds on a new iron ore processing project at Extension Hill.
And so, Austman alleges that MGM 'went slow' in pursuing the two environmental approvals. Then, as a pretext, MGM or Mr Panek used the convenient absence of the two approvals to interrupt the performance of its D&C Contract (assuming, again, that there was a contract) with Austman.
The magnitude of such serious assertions by Austman, raising what must be viewed as charges of conspiracy or deliberate misconduct, is self‑evident. Yet, Messrs Quinlivan, Panek and Cree were all steadfast in refuting whilst under cross‑examination all assertions of misconduct. I find it both noteworthy and concerning (see Western Australian Barristers' Rules r 60 and Legal Profession Conduct Rules 2010 (WA) r 36(3)) that ultimately, no tangible, admissible evidence supporting the serious allegations was put to these three witnesses during cross‑examination, so as to undermine or conflict with their firm denials. I will return to these matters in more detail later in the reasons. But I flag an early concern now over what transpired as regards serious allegations supported ultimately, it seems, only by asserted inferences.
Mr Quinlivan, under cross‑examination, revealed that MGM had reached satisfactory arrangements concerning the Extension Hill project's deferment with its contractors, save only for Austman (see ts 348, 360, 362 and 369).
For MGM, non‑expert evidence was also adduced from Mr Malcolm Watson, a structural engineer. Mr Watson holds a degree in civil engineering obtained in 1976 from the Teesside University in the UK. He has over 30 years of engineering experience in the UK and Australia. Mr Watson's witness statement became exhibit 21. His services were engaged by MGM, once again via Merit.
Mr Watson worked on a consultancy basis. He had responsibility for managing the 2007 tender process for the Extension Hill project, out of which MGM contends it ultimately engaged Austman under the D&C Contract in March 2008.
It was Mr Watson who issued, on behalf of MGM, the first ITT to Austman on 31 October 2007. Subsequently, he oversaw the tender communications with Austman for a design and construct contract for MGM's crushing and screening plant at Extension Hill. These tender communications, chiefly between Mr Watson for MGM and Mr H Kuhn for Austman, ran until MGM signed off on the last NOA document exchanged with Austman on 6 March 2008.
Evidence was also received for MGM from another engineer, Mr Peter Erlynne. His statement became exhibit 24. Mr Erlynne is a crushing and screening plant consultant. He holds over 25 years of experience in design, application and optimisation of crushing equipment in mining and aggregate industries internationally, including experience with plants in Singapore, South Africa and Australia. Mr Erlynne was also engaged as a consultant for MGM for the Extension Hill project in 2007, as well as in various periods thereafter.
Last for MGM was Mr Kendall's expert report, to which I have referred.

Trial documents

At commencement of trial, the court received from the parties five lever arch files of agreed documents, admitted into evidence as exhibits 1 through 5 respectively. In all, these volumes comprise 2,805 pages of documentary materials which the parties submitted as relevant. Significant amounts of the materials were not referred to during trial, other than perhaps by an incorporated reference via a witness statement or in closing written submissions. Much of the documentary material is of a technical nature.
As the trial unfolded, two further lever arch volumes of agreed documents were tendered. These became exhibits 6 and 7. Exhibit 6 comprises 526 pages of material. Those documents had at a point been objected to by MGM. Following clarifications at the commencement of trial, they were accepted. Likewise, exhibit 7, a level arch file of more documents emanating from MGM, comprising another 532 pages, had at one point been opposed by Austman. With the benefit of clarifications at trial, these documents also became uncontentious and were admitted.
Accordingly, there ultimately emerged seven lever arch files of documents which comprise a core trial bundle, spanning exhibits 1 through 7, amounting in total to 3,863 pages of documentation. To that is to be added the witness statements of eight non‑expert witnesses and the four expert reports I have identified. Apart from that, there were additional documents tendered on an ad hoc basis as the trial progressed.
Exhibits 15 and 16 comprise lever arch files of selected documents extracted by Austman from numerous subpoenaed documents that were produced in answer at trial by Dr Phillip Gorey, Executive Director of the DMP (ts 334).
Subsequently, MGM extracted out of the same subpoenaed materials four extra documents. These were admitted to constitute what became exhibit 27.
Tendering of this documentary material from the DMP files, by consent, ultimately proceeded without a need for any substantive questioning at trial of Dr Gorey (ts 336). Nor, in the end, did Austman call on its witness subpoena for the attendance at trial of a DMP officer, Ms Rosemary De Bari (see ts 309, 321 and 336 ‑ 338). She is mentioned in some of the DMP's documents concerning liaison over the two environmental approvals that were required for the Extension Hill project in the last quarter of 2008.
That comprised the main evidentiary and documentary evidence adduced at the trial. With the underlying trial materials identified, I can turn back to the main issues.
It is convenient to begin with documents contended by MGM to constitute a binding D&C Contract with Austman, pursuant to MGM's 3 March 2008 NOA sent to Mr H Kuhn, in response to Austman's fifth and final tender of 27 February 2008.
First, I propose to catalogue the constituent NOA documents. I will then look back to a period of roughly four months which preceded the NOA of 3 March 2008. It is necessary to adopt that approach since assembling all relevant, disparate documents which emerged over time is no straightforward task.

MGM's notice of award of the design and construct contract to Austman

On 3 March 2008, MGM, by Mr Watson, sent Mr H Kuhn a four page communication headed:
Extension Hill Hematite Project
Crushing and Screening Plant
Contract No MGM-EHH-C5007
Notice of Award
This communication, referred to as the NOA, was sent to Austman either electronically or by facsimile (possibly both). It commenced:
This letter constitutes the Notice of Award of Contract by Mount Gibson Mining Limited (the Principal) to Austman Pty Ltd (the Contractor) for the Design and Construction of the Crushing and Screening Plant (the Works) at the Extension Hill minesite (Location).
A Formal Contract document evidencing the whole of the Agreement between the parties will be issued in due course to be signed by both parties.
The Agreement shall be based on the following …
Sections follow in the NOA communication, individually numbered 1 through 10. I set out only extracts from each, although the whole of the NOA document is obviously important, particularly as regards Austman's contract formation and uncertainty contentions.
1.0Invitation to Tender
Invitation to Tender issued to the Contractor by email on 31 October 2007.
2.0Tender Submission
•The Contractor's original quotation ref PO‑278‑001 Rev A submitted by email on 9 November 2007.
•Agreed changes to the original submission resulting from correspondence, meetings and negotiations subsequent to the original submission, as detailed in Section 3.0 of this Notice of Award.
3.0Correspondence
Correspondence that will form part of the Agreement is the agreed and applicable correspondence or parts of correspondence detailed below.
There follows, in section 3 of the NOA, a list of 15 communications passing between MGM and Austman, ranging across a period 31 October 2007 to 27 February 2008. The 15 documents are arranged in the NOA underneath two columns, divided by whether they issued from Merit (for MGM) to Austman, or vice versa. All these communications may be found within exhibit 1 at various places. However, they were conveniently extracted, copied and arranged together in chronological order in a lever arch file handed up by senior counsel for MGM during closing. That file contains all these documents, including the NOA, the ITT and the incorporated Special and General Conditions.

The convenience of having otherwise widely scattered key documentary materials assembled at one place is such that I resolved, after the trial, with the parties' consent, to admit the whole file into evidence as exhibit 33.
I return to MGM's NOA communication of 3 March 2008 to Austman:
4.0Scope of Work
The work included in the Contractor's Scope of Work shall be generally as described in this clause, as detailed in the drawings and other information provided to the Contractor to develop its proposal, and in accordance with all other requirements of the Contract, and shall include for the provision of all things necessary for the completeness of the Works, whether specifically mentioned or not.
The Contractor shall design, construct and commission a crushing and screening plant generally in accordance with the design brief (ref document Mine Process and Infrastructure Design Services, Extension Hill crushing and Screening Plant, Rev 1.2 Issued for Tender).
The Contractor shall include for the design of all supporting structures and connecting services to all free issue equipment supplied by the Principal.
The Contractor shall design the ROM retaining wall utilising earth‑filled sea containers with restraining tie‑backs. Construction of the ROM wall will be by OTHERS.
The Principal shall provide a compacted level site for the Contractor with minimum bearing capacity of 200KPA. The Contractor shall design and construct all foundations for the plant including detailed excavation.
The design and construction of all Infrastructure and Facilities as detailed in Part B of the design brief shall be by OTHERS.
The supply of power and water to within 50m of the plant shall be by the Principal. Design and construction of the distribution of power and water in the plant will be by the Contractor.
The Contractor shall use the client's document management system (Aconex) for all correspondence, transmittal of drawings and any other document transmittal.
(my emphasis in bold)
Section 4 refers to some drawings. These are found in the ITT document of 31 October 2007. One of them is what is called a 'flow sheet'. Its implications form a part of the wider controversy over whether the D&C Contract, if it exists, is nevertheless void in law for uncertainty.
Ensuing provisions of the NOA deal with the price, date of the award of contract, documents which the contract would comprise and the manner in which Austman was to acknowledge receipt of the NOA:
5.0Pricing Details
The Contractor shall perform the Works for the FIXED LUMP SUM price of $10,914,000 (Ten Million nine hundred and fourteen thousand dollars).
6.0Programme Dates
Contract award: 4 March 2008 or the date of acceptance of this letter of award by the Contractor.
Contract completion: 12 months from date of award.
7.0The Agreement
The Agreement shall comprise the following:
1)This Notice of Award
2)The Form of Agreement
3)Special Conditions of Contract
4)General Conditions of Contract (AS4902‑2000 as modified and agreed between the parties)
5)The Scope of Work
6)Specifications
7)Drawings
8)Price Schedules and Information Provided by the Contractor
This Notice of Award will be incorporated into the relevant sections of the Contract document, and will not appear in the Contract document as a stand alone section.
8.0Evidence of Insurance
…
9.0Contact Personnel
All matters relating to the Contract shall be directed to Mr Peter Panek of Mount Gibson Mining Ltd at [email protected]
10.0Acknowledgement
The Contractor shall acknowledge receipt of this Notice of Award of Contract by signing where indicated and returning a copy to Mount Gibson Iron Ltd either by facsimile 9423 0801 marked for the attention of Peter Panek or by scanned attachment via Aconex to [email protected].
Notice of Award issued by:  Notice accepted by:
Signature  Signature
Print name  Print name
On behalf of Mount Gibson Mining Ltd     On behalf of Austman Pty Ltd
Yours sincerely
MOUNT GIBSON MINING LTD
The NOA is found within exhibit 1 at pages 679 ‑ 682. It can also be found in exhibit 33 at tab 1.
When the NOA of 3 March 2008 was sent out to Austman by Mr Watson for MGM, it had not been signed by anyone on behalf of MGM. But there is no suggestion that the NOA was sent without proper authorisation. The NOA had been preceded by more than four months of tender negotiations. There was, in that period, a total of five tenders submitted by Austman to MGM for a design and construct contract.
The NOA communication of 3 March 2008 was received by Mr H Kuhn for Austman. He signed it at the section headed 'Notice accepted by'. Underneath his signature, Mr H Kuhn printed his name. Underneath the NOA's endorsed words 'On behalf of Austman Pty Ltd', he wrote the date '4/3/08'. That is all uncontroversial fact. However, Mr Kuhn says that by his signature and his return of the signed NOA back to MGM, he was merely acknowledging receipt of the document, rather than signifying Austman's acceptance of the NOA's terms.
For contract formation, the assessment is objective, not subjective. I reject Austman's 'acknowledgement of receipt only' position as an after the event rationalisation by Mr H Kuhn. I find there was clear acceptance by Austman of the NOA document on 4 March 2008, subject only to a resolution of two minor points of detail which, as I will explain, were later resolved.
The NOA document bearing Mr H Kuhn's signature was returned to MGM on 4 March 2008. Mr H Kuhn had made a longhand annotation that day on his copy of the NOA before he signed and returned the NOA to MGM. As has been seen, section 7 of the NOA specifies documents which the contract was to comprise. Item 4 of section 7 contained the typed words 'General Conditions of Contract (AS4902‑2000 as modified and agreed between the parties)'. Mr H Kuhn inserted his longhand words 'to be' into item 4, so that it then read 'General Conditions of Contract (AS4902‑2000 as modified and to be agreed between the parties)'. He initialled the change.
From this, there arises another disputed issue of fact for determination. The disputed issue concerns Austman's acceptance or otherwise of MGM's modified General Conditions based on AS4902‑2000.
On 6 March 2008 Mr David Quinlivan applied his signature for MGM on the NOA document that had been returned to MGM by Austman. Mr Quinlivan's signature is apparent, as is his handwritten insertion of the date, '6.03.08' (see exhibit 1, page 682).
So, as of 6 March 2008, the signatures of the senior representatives of both Austman and MGM had been applied to the NOA. Mr Quinlivan's signature was not strictly necessary, I find, to bind MGM: the NOA's content had been authorised for despatch when sent out to Austman on 3 March 2008 by Mr Watson.
An orthodox analysis of contract formation, which involves identifying an offer that is unconditionally accepted, need not be slavishly applied in every situation: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 [71] ‑ [80] (Heydon JA). However, orthodox analysis can, I find, be comfortably applied in the present case. Having done so, my conclusion is that the despatch of the NOA of 3 March 2008 was MGM's offer to Austman. The offer was then conditionally accepted by Mr H Kuhn for Austman on 4 March 2008, by his signed acceptance of the NOA document that was then returned to MGM.
By signing and returning the NOA on 4 March 2008 through Mr H Kuhn, with the words 'to be' inserted in section 7, Austman was making a counter‑offer to MGM. From that analysis, MGM accepted the counter‑offer the day it was made, when, in a telephone conversation later that day between Mr H Kuhn for Austman and Mr Malcolm Watson for MGM, the two residual issues arising by reason of Mr H Kuhn's longhand annotation on the NOA were finally resolved over the telephone.
Thus the NOA was completed with Austman by MGM's acceptance of the counteroffer as of 4 March 2008.
The 15 items of Austman/MGM correspondence identified in section 3 of the NOA are assembled between tabs 3 and 18 in exhibit 33. Austman documents are found at tabs 4, 11, 16 and 18. They comprise four (of five) tenders that were submitted by Austman to MGM between 9 November 2007 and 27 February 2008. During this period, Austman was clearly seeking the award from MGM of a design and construct contract for the crushing and screening plant to be built at Extension Hill.
Two other points arise. First, it is uncontroversial that an earlier draft of the proposed NOA had been sent by Mr Watson to Mr H Kuhn prior to 3 March 2008. So the eventual 3 March 2008 NOA document received by Mr H Kuhn had been the subject of prior communications and ensuing discussions as an earlier draft. Some alterations had been made to the draft as a result of negotiations.
Second, in relation to the issue over incorporated General Conditions still to be agreed, Mr Watson sent an email to Mr H Kuhn on 5 March 2008 at 11:45:13 am (WST). His email said:
Hartmut,
This is to confirm our telephone conversation yesterday [4 March 2008] where you advised that your initial objections to the modified general conditions would be withdrawn with the exception of two major issues, namely:
1.Intellectual property rights to remain with the contractor.
2.Contract works insurance to be provided by the Principal.
Both of these clauses are acceptable to the Principal. All other clauses will be as drafted.
Regards
Malcolm Watson
Mr H Kuhn's early witness statements suggest he did not receive Mr Watson's email because, at the time it was sent, he was already en route to China and then at his destination did not have access to the internet. Austman's early position seemed to be that Mr H Kuhn never actually accepted MGM's modified General Conditions, even after MGM gave ground to Austman on the two residual issues identified in Mr Watson's email.
However, it seems that Mr H Kuhn subsequently resiled from his earlier stance that he had not received Mr Watson's email of 5 March 2008. In any event, I find he did see the email on or about 5 March 2008. Moreover, I find there was the telephone conversation on 4 March 2008 between Mr Watson and Mr H Kuhn over the two General Conditions to which Mr Watson's email refers. This was some time in the latter part of 4 March 2008, after Mr H Kuhn had sent back the NOA to MGM, signed and annotated with his words 'to be' inserted into cl 7(3). The telephone conversation was initiated by Mr Watson to resolve the two residual issues that very day.
I find that Mr Watson's email of 5 March 2008 is an accurate summary of the content of the telephone conversation which occurred between the men the previous day, in the course of which Mr Watson made the two concessions required concerning MGM's modified AS4902‑2000 General Conditions.
Accordingly, I find that Mr H Kuhn inserted his longhand words 'to be', applicable as regards the modified General Conditions of Contract AS4902‑2000, on 4 March 2008 of the NOA, prior to his telephone conversation with Mr Watson. The subsequent telephone conversation resolved Mr H Kuhn's two remaining reservations over the modified MGM General Conditions. Mr Watson's email of the next day simply confirmed and recorded that settled position as a measure of prudence.
I find that MGM's modified General Conditions for AS4902‑2000 had earlier been sent out by Mr Watson to Mr H Kuhn, on Thursday 28 February 2008 (see exhibit 1, pages 567 ‑ 643. The modified General Conditions commence at page 593).
In the same 28 February 2008 transmission there was also included a skeletal contract document, the contents of which included:
Part A - Conditions of Tendering
Part B - Form of Tender
Part 1 - Form of Agreement
Part 2 - Scope of Work
Part 3 - Price Schedules and Information Schedules
Part 4 - General Conditions of Contract
Part 5 - Special Conditions of Contract
The General Conditions of Contract, at Part 4, were largely derived by MGM from the Australian Standard document AS4902‑2000 for design and construct contracts, but with some modifications by MGM.
I will make some further observations concerning these General Conditions, which form a central part of the controversy, shortly.
At this point, however, it is important I reiterate some key findings thus far. On 3 March 2008, MGM sent Austman the NOA. Austman had previously seen the NOA in draft. On 4 March 2008, Mr H Kuhn signed the NOA. In addition, Mr H Kuhn inserted the words 'to be' into section 7 of the NOA, so that the relevant part of that section read: '(AS4902‑2000 as modified and to be agreed between the parties)'. Those words were inserted because Mr H Kuhn had two outstanding objections to the modified General Conditions. First, he wanted intellectual property rights in the plant's design to remain with Austman. Second, he wanted MGM to provide contract works insurance. MGM, through Mr Watson, conceded both these points to Mr H Kuhn in a telephone conversation late on 4 March 2008. Mr Watson's email to Mr H Kuhn of 5 March 2008 confirmed the two concessions. I find that Mr H Kuhn read that email on or about 5 March. MGM's two concessions were reflected in the final form of General Conditions 10 and 16A.

Was the NOA intended to create binding obligations?

The NOA makes mention of further contractual documentation, by a 'Formal Contract document'. The formal document envisaged is one 'evidencing the whole of the Agreement between the parties'. The word 'evidencing' is significant, in my view. Its use tends to suggest, objectively evaluated, that the parties' agreement existed independently of a formal document's execution, and that a subsequent formal document would merely constitute an evidentiary record of the agreement.
But Austman contends, by reference to the classic tripartite classification in Masters v Cameron, that the NOA did not constitute a binding agreement. Austman says that the parties' intention, assessed objectively, was that a formal contract document would be required to create a binding agreement between the parties. In other words, Austman argues that the NOA falls into the third category identified in Masters v Cameron. Although the parties discussed the matter after 4 March 2008, they ultimately never executed a formal contract document and so, Austman says, they never reached a binding agreement.
On the other hand, MGM argues that a first (or fourth, as I will explain) Masters v Cameron category applies, on the basis the parties did intend to become contractually bound as a result of Austman's acceptance of the NOA on 4 March 2008. MGM says the mere fact that the parties envisaged further formal documentation will not necessarily preclude a recognition that a binding agreement already exists.
It is instructive to recall some observations of the Court of Appeal in Uranium Equities Ltd v Fewster, particularly between [127] ‑ [134]. The court said [128] ‑ [129]:
Traditionally, courts have applied the three categories identified in Masters v Cameron (360) (Dixon CJ, McTiernan and Kitto JJ) as follows:
(a)the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect;
(b)the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document; and
(c)the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
A fourth category has since been added by McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 628, relying on Sinclair, Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310, 317. This is a variation of the first category. We have earlier mentioned that it is one in which the parties intend to be bound immediately by the terms which they have agreed upon, while expecting to make a further contract in substitution for the first contract containing, by consent, additional terms.
The legal principles governing contract formation were also summarised by Kirby P in Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14551, 14569 ‑ 14570. Some are referred to and applied by the Court of Appeal in Uranium Equities [133].
No special form of words need be used by the parties. The content of communications passing between parties should be considered in light of the surrounding context in which the parties' written words are used. The value of the subject matter and the complexity of the 'deal' under negotiation are relevant factors to be weighed. I do so, in assessing whether these two parties can be assessed as having intended to reach a binding agreement, by less formal means, prior to them executing a more formal contract document.
Parties' use of terms such as 'agreement' will not be conclusive. The court renders its own assessment. Likewise, the fact parties only refer to a 'proposed' agreement will not be conclusive the other way.
The court can also take into account parties' conduct subsequent to the event argued to mark the creation of a binding contract: ABC v XIVth Commonwealth Games. There, Gleeson CJ said (550):
Furthermore, as was noted earlier, it is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated.
(my emphasis in bold)
In Geebung Investments Kirby P said, on the same issue (14569):
In order to determine in what areas the parties were, and were not, in agreement, and what matters they considered necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct.
On 14 March 2008 at 2.09 pm Mr H Kuhn sent Mr Patrick Spalding - a representative of PEAK Industrial Electrical (PEAK), which did subcontracting work for Austman - this email (exhibit 1, page 724):
Subject: Mt Gibson
Pat,
This is to confirm we have been awarded the contract.
We will now need two weeks to establish the layout after which we will discuss the lectrical [sic] portion with PEAK.
Regards
Hartmut
But that email was not an inter partes communication as between Austman and MGM. It falls into a category subsequently discussed by Gleeson CJ in ABC v XIVth Commonwealth Games as a communication to a third party, in respect of which the position is 'by no means clear' (550). I refer to his Honour's observations concerning the relevance of such statements, on the basis they may constitute an admission against interest by the party making the statement (550 ‑ 551):
[T]here may be cases in which the issue is such that the fact of the subjective state of mind of one or other of the parties is relevant. Normally, however, what is in issue is not their subjective state of mind but their 'intention as expressed' and caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant.
(citation omitted)
Here, I will afford no weight to the email sent to Mr Spalding. What Mr H Kuhn himself then thought of the contractual situation with MGM is legally irrelevant.
The asserted condition of contractual uncertainty in the D&C Contract, as articulated by Austman, requires, in my view, an early recognition of three underlying considerations which all bear upon the evaluation of Austman's arguments:
•First, this case is about a design and construct agreement, not merely a construction contract. The task of design inherently carries with it the required injection of Austman's creative and conceptual inputs to set founding parameters for the ensuing construction work. Where a party is charged to create something that does not yet exist, it is only reasonable to expect that a design brief may be in relatively broad conceptual terms, especially in contrast to a stand alone construction assignment.
•Second, in the present scenario of a complex design and construction engineering task, the court can be assisted (not conclusively, of course) by expert engineering evidence. This was envisaged by Gleeson CJ in ABC v XIVth Commonwealth Games, in the passage at page 548D to which I have referred. I have already mentioned Mr Kendall's evidence for MGM to the effect that Austman was provided with sufficient information by MGM to enable Austman to viably design and construct the required Extension Hill crushing and screening plant.
•Third, it will be remembered that on one of its alternative cases, Austman seeks from MGM accrued entitlements or damages in the order of over $5 million, upon a premise that there was a valid D&C Contract with MGM. Alternatively, Austman seeks (by reference to the Brown quantity survey report) approximately $4.5 million on a quantum meruit basis, for works performed. So, on one of its alternative cases Austman seeks a just allowance for work done which it says has unjustly enriched MGM. Yet that restitutionary claim for a not insignificant sum of money is difficult for me to conceptually and coherently reconcile with Austman's argument that so many essential aspects of the scope of work under the D&C Contract were uncertain, that its task of designing and constructing the plant could not be carried out. If so, how then was Austman able to commission so much work? Plainly, much work of value to MGM, on Austman's case, was able to be performed or caused to be carried out by Austman, in spite of the many asserted uncertainties it also raises under its efforts to have the D&C Contract vitiated in law.

The right of a builder to elect a quantum meruit, in lieu of damages for breach of contract, is grounded upon longstanding case authority: see Lodder v Slowey [1904] AC 442, 453. In Sopov v Kane Constructions Pty Ltd (No 2) the Victorian Court of Appeal reviewed that long line of authority at [5] ‑ [18]. It observed [12]:
The right of a builder to sue on a quantum meruit following a repudiation of the contract has been part of the common law of Australia for more than a century. It is supported by decisions of intermediate courts of appeal in three States, all of which postdate McDonald and two of which postdate Pavey & Matthews. If that remedy is now to be declared to be unavailable as a matter of law, that is a step which the High Court alone can take.
In Sopov (No 2) the Victorian Court of Appeal also observed Lodder v Slowey had been the subject of criticism to the effect that a builder's right to elect a quantum meruit was founded on the 'heretical' notion that an innocent party's acceptance of another party's repudiation results in the rescission of a contract ab initio, a proposition standing in conflict with the accepted common law position in Australia stated by Dixon J in McDonald v Dennys Lascelles. At [11], the Court of Appeal described these criticisms as 'very powerful'.
Accepting this line of authority as applicable until the High Court decides otherwise, there is still nothing that I detect in the Lodder v Slowey line of cases to support a proposition that a builder may elect a quantum meruit in its favour, if that builder has been found to be in breach, or to have repudiated. An application for special leave to appeal against the Victorian Court of Appeal's decision in Sopov (No 2) was refused on 11 December 2009: Sopov v Kane Constructions Pty Ltd [2009] HCATrans 338.
Third, in relation to quantum meruit as to services (and I assume as well for a quantum valebat for goods), it will be remembered that since Pavey & Matthews v Paul, the foundational principle identified as underlying that remedy in Australia is the concept of unjust enrichment. More precisely stated, the principle is the unjust enrichment of a defendant, taken at the expense of a plaintiff.
As regards quantum meruit relief, for the present litigation there are two quite different scenarios in which a restitutionary remedy would need to be evaluated. First is where a binding contractual relationship is established, followed by a termination of that contract, where the innocent breach party, in lieu of damages, elects instead, in the realm of a construction contract, to receive a quantum meruit. In that unique (some suggest antiquated) situation, if the principal is the party in breach and the contractor elects a quantum meruit in lieu of damages, it would present as conceptually a lot harder for the principal to contend it has not been unjustly enriched at the innocent builder's expense. The principal, as breach party, is likely to have interrupted a performance of the construction contract. The principal can hardly be heard to credibly assert in that situation it has received no benefit and so has not been enriched, if a performance of the construction contract for its benefit has been otherwise interrupted by its very own breach conduct.
But that scenario of contract, principal's breach and builder's election to terminate, is to be distinguished conceptually from a quite distinct situation. This is where there has been a failed attempt by the parties to reach agreement, or their contract is assessed as ineffective for some reason, such as contractual uncertainty. In that situation, breach is not a factor on either side of the ineffective contract. Absent breach, there is more scope for application of the general rule that 'if a man spends money on the property before there is a binding contract with regard to it, he cannot recover it from the expected vendor if negotiations go off': see Schreiber v Dinkel (1886) 54 LT 911, 912 (Cotton LJ). That rule is in harmony with the underlying notion for restitutionary relief that the enrichment must be unjust: Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 286 ALR 12 [30].
Here, had an ineffective contract platform been established by Austman, it would nevertheless have remained very much exposed, in my view, to an application of the principle that Austman had at its own risk outlaid funds and incurred liabilities, effectively gambling that a contract would later be reached with MGM. This is particularly so here, in circumstances where, from the middle of 2008, Austman repeatedly told MGM there was, as it viewed matters, no binding contract. Nevertheless, Austman was clearly causing steel fabricating work to be performed in China. Austman then declared that it was ceasing all work by its solicitors' letter of 12 November 2008.
Had there been an ineffective contract scenario here, an assessment would be required, as to whether it was reasonable for Austman from mid‑2008 onwards to still be commissioning ongoing offshore fabricating work in China and incurring liabilities in anticipation, presumably, of eventually perfecting a contract with MGM, as it saw things. Next would follow a need for an assessment as to whether, in circumstances where there ultimately was no perfected contract (on Austman's case), with nothing ever delivered, assembled or affixed by Austman at Extension Hill (leaving MGM to essentially pay full price to a new contractor to get a functional crushing and screening plant in 2011), Austman could be assessed, for the purposes of the quantum meruit or quantum valebat remedy, to have conferred upon MGM an ascertainable benefit, from which MGM could then be assessed as being unjustly enriched at Austman's expense.
Fourth, the D&C Contract required Austman to design and construct an operative crushing and screening plant at Extension Hill for a lump sum price of $10.914 million. That was so, notwithstanding Austman's entitlement under the D&C Contract to submit and obtain progress claim payments, effectively on an interim basis, prior to it achieving practical completion. Clearly, practical completion was never achieved here. Work at the Extension Hill site never even commenced. No fabricated steel components ever reached Extension Hill. Austman contends approximately half of a crushing and screening plant had been fabricated by its Chinese subcontractors. But the fabricated components sit unassembled in storage, either in China or Kwinana. Storage costs for these unassembled components have been and continue to be incurred by Austman. The unassembled components should have a value greater than scrap. But what their resale value may amount to is unclear from the evidence.
Fifth, these stored plant components, lying unassembled in China and Kwinana, are now of no obvious benefit to MGM. For a recommenced Extension Hill project, MGM, as I mentioned, has had to engage a new contractor, Metso, to build its crushing and screening plant. MGM will pay Metso the full cost of that plant, with no set‑offs or benefits from its prior dealings with Austman.
Sixth, had Austman been found to hold a common law entitlement to damages for loss of bargain, by reference to a repudiatory breach of the D&C Contract by MGM, damages would be assessed on the basis of an award of monetary compensation, seeking to put Austman in the position it would have been in had the D&C Contract been performed to completion. That damages hypothesis would see Austman, prima facie, receive from MGM as damages Austman's lost profit margin (which I assess at approximately 10% of the lump sum purchase price under the D&C Contract), roughly $1.0914 million. Additionally, Austman, as a part of its damages, would also be entitled to be reimbursed its expenditures under the D&C Contract, and indemnified against its incurred liabilities up to the time of termination of the D&C Contract by Austman (assumed on this hypothesis to be 12 November 2008).
Austman would hold a damages entitlement for a lost profit margin that should be assessed as accruing to it from the likely time (say, April 2009) Austman would have completed the plant at Extension Hill and, as a result, finally received the lump sum under the D&C Contract.
Seventh, the sixth conclusion, as to the assumed composition of Austman's loss of bargain damages, needs to be qualified by the required recognition that, on the evidence in the present case, if Austman had fully met its performance obligations under this D&C Contract to completion, it would, at the end, have found itself in a loss‑making situation vis‑à‑vis its inadequate lump sum price of $10.914 million. Rather than realising a net profit of approximately $1.1 million, clear of all expenditures and all liabilities, here Austman is overwhelmingly likely, on my assessment, to have been out of pocket at completion of this project on that price. Events leading up to November 2008 demand a conclusion that Austman's lump sum tender price of $10.914 million was far too low to ever turn a profit.
Ongoing, sustained efforts by Austman throughout 2008 to obtain from the Superintendent by contractual variations, approved increases to that lump sum price, all failed. Those claims rightly failed on their demerits. Austman's likely cost 'blowouts', assessed by reference to disallowed claims for variations, would have eroded all Austman's profit margin, had it achieved completion on the D&C Contract at the lump sum of $10.914 million.
That is not to say Austman might not conceptually have pursued a claim against MGM for loss of bargain damages, constructed by reference to a loss‑making project outcome and an unhappy 'wash‑up' of its overall expenditures or exposures. But a loss‑making expenditure recovery damages calculation would be a distinctly different exercise: see Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 84. That exercise was not attempted.
Eighth, on the hypothetical scenario of an Austman quantum meruit, the underlying facts present here as wholly unique and therefore rather challenging conceptually, as to some matters of principle. Quantum meruit as a quasi‑contractual remedy in Australia, since Pavey & Matthews v Paul, redresses the unpalatable outcome of a party being unjustly enriched at the expense of another. Almost inevitably, fact scenarios in the cases concerning claims to quantum meruit relief by builders, and in construction cases generally, involve a partially commenced, but ultimately unfinished building or structure, that is usually left affixed to land. In the more routine fact situations, on a breach and termination scenario, it is easier to accept how a landowner, held to be in the wrong contractually, but who is an ultimate beneficiary of a partly completed structure left affixed to their land, has received a benefit. Furthermore, it is plain that the landowner's end benefit is received at the builder's expense. It is easier then to accept that the landowner could thereby be assessed to have been unjustly enriched at the builder's expense, if the owner does not render some fair monetary compensation to the builder for what it has received as a discernible tangible benefit.
But the more routine fact scenario of (interrupted) partial completion of a physical structure or object, with the demonstrable benefit, arising from the holding of a part finished structure by an owner, is far removed from the facts here. No fabricated steel components of a crushing and screening plant reached Extension Hill. None were assembled or affixed there. Moreover, MGM has had to engage another contractor to construct from scratch its Extension Hill crushing and screening plant.
Had MGM been held (hypothetically) to have been in breach of the D&C Contract, then its ultimate lack of any end benefit from Austman might not have mattered that much conceptually. The result (i.e. no benefit to MGM) would essentially follow causatively from MGM's own breach conduct. Fault would rightly lie at its door, not Austman's.
But in a no fault situation, such as where there is assessed to be either no contract at all, or an ineffective contract, the identification of any end benefit said to have been received by MGM needs to be identified in a more tangible way. Here the task would be very difficult. This is particularly so if Austman had commissioned works and incurred liabilities to others, only anticipating an eventual consummation of a contract with MGM in future, yet knowing it did not then hold a binding contract with a putative principal.
Ninth, in the present case, Mr Jonathon Brown, Austman's quantity surveyor, has completed an expert report (exhibit 31). The report provides, as Mr Brown was instructed, a quantity surveyor's orthodox 'fair allowances' assessment for work done or caused to be performed by Austman in respect of the Extension Hill project. But significantly, Mr Brown was not asked in his report to deal with, and so has not addressed, issues as to the quality or suitability of the fabricated components (exhibit 31, page 5, par 9).
Tenth, were Austman hypothesised as an innocent party on a scenario of its accepted termination of the D&C Contract, it follows that MGM would stand exposed, at Austman's further election (on the present state of Australian law) to a quantum meruit (and, I assume also, a quantum valebat) claim. On Mr Brown's analysis, I would assess that to be a maximum restitutionary exposure of $4,141,779 less $947,322 (see exhibit 31, par 25(d)), because as I explain under the eleventh conclusion, there are difficulties in attributing a value to the unassembled fabricated plant components.
Eleventh, in the present case, a body of documentary evidence at trial points to serious deficiencies in some steel components fabricated for Austman by its Chinese subcontractors. Some documents forwarded by Austman to its Chinese subcontractors are revealing in their very damning assessments of the quality of the offshore fabrication work.
At trial, Austman sought to explain away some bluntly expressed and highly critical emails that its own personnel had sent to its Chinese subcontractors complaining about the poor standard of fabrication work carried out. Austman then said, in essence, that deploying such a highly critical tone in its communications was simply the way business was done in China. Mr M Kuhn said that critical communications of this sort were not uncommon dealing with the Chinese, but would not be sent by Austman to an Australian subcontractor (ts 315 and following). I reject this attempted gloss on what I consider to be strong evidence that Austman itself had raised serious complaints about the workmanship of components fabricated by the Chinese subcontractors. Many communications concerning poor workmanship by the Chinese subcontractors raise, for me, strong doubts over the quality of the workmanship of the components. Mr Brown I reiterate was specifically not asked to address the issue of the quality of the components.
Austman's position seemed to be that it must receive just compensation from MGM on a quantum meruit, even for defective or deficient components. But conceptually Austman must, I think, first meet a threshold requirement of showing that MGM received a benefit, and to have thereby been enriched. I was not so satisfied as regards the Chinese fabricated plant components.
A concerning body of documentary evidence frames doubts about adequacy of the design and subsequent fabrication work carried out for Austman by its Chinese subcontractors. That is particularly so in circumstances where the end plant contracted for was never delivered, completed, assembled or affixed at Extension Hill. Hence the components have not been tested. This cannot be a fact situation where there has been some acceptance by MGM of an end result or end product, let alone a free acceptance: see Steele v Tardiani (1946) 72 CLR 386, 402 ‑ 404.
To assess whether MGM has been unjustly enriched by a benefit received, the so‑called benefit must first be evaluated. If a plant ultimately constructed by Austman would have manifested design, construction or performance deficiencies, ultimately needing correction at Austman's expense, proper account must be taken of a likely repair cost in computing Austman's fair allowances. The following documentary evidence concerning potential design deficiencies is relevant:
(a)Vlad Czajka's comments of 17 October 2008 concerning a design problem with the ROM bin splicing system and at the same reference Mr M Kuhn's earlier email to Mr Czajka regarding design of connections on the first level of the secondary structure that 'brought tears to [his] eyes' (exhibit 4, page 2211);
(b)Mr H Kuhn's communication of 20 October 2008 to Stuart Stone regarding 'belated structural design' (exhibit 4, page 2214);
(c)Mr Czajka's email of 27 October 2008 to Mr M Kuhn regarding the stair drawing of tower 3 not complying with the Chinese designer's drawing (exhibit 4, page 2230).
Regarding potential defective workmanship, I mention:
(a)Mr H Kuhn's email to JG Chen of Shanghai Sinoman Industrial Ltd of 2 October 2008 as to spots of inferior quality and a failure to pre‑assemble (exhibit 4, page 2167_01);
(b)Mr Sean O'Donnell's email on 16 October 2008 to Mr M Kuhn in relation to the trial assembly of the three stackers and the marked difference in overall quality of the last stacker, with the first two stackers being 'pretty poor' (exhibit 4, page 2211_01);
(c)Mr M Kuhn's email of 26 October 2008 to Eric Riquelme concerning incorrect connections in the secondary structure and the observation that '[n]ot one connection has been fabricated correctly and will need a lot of rework' (exhibit 4, page 2229_01);
(d)Wayne Tripplett's email to Mr M Kuhn of 3 November 2008 concerning a poor standard of corrosion control as regards paint and the subcontractor's continued disregard of Austman's input on this issue (exhibit 4, page 2248);
(e)Mr M Kuhn's email of 29 November 2008 to Julia Chen of Sinoman including adverse comments on towers 1, 2 and 3 commenting as regards the third tower that it is 'preassembled but only 80% complete, is considered irreparable, no progress has been made on the remedial work on this structure in 6 weeks'. As regards the first tower, the comment was '80% material has been purchased and cut, all connections are wrong' (exhibit 12);
(f)Mr S Kuhn's email of 2 December 2008 to Aileen of Yitai concerning deficient trial assembly of trusses before galvanising (exhibit 4, page 2320_03);
(g)Mr H Kuhn's email of 10 December 2008 to Julia Chen concerning galvanisers observing, 'Yitai intentionally did not take Wayne [Tripplett] to the galvanisers. The trusses show clear sign of being painted over with Christmas paint or any other paint. These goods, goods of package [sic] number 2, have not been accepted and will not be accepted. They can now be dumped into the Yellow River. Goods of package 2 accepted by Wayne will be paid at 50%' (exhibit 4, page 2324_20);
(h)Mr S Kuhn to Aileen of Yitai on 10 December 2008 observing, 'I am sick and tired of having to fight you and then our client here in Australia to get paid because of the bad quality of Chinese fabrication. Please show [Wayne Tripplett] the containers which are ready for shipping with the correct marking list and packing plan. If this does not occur today, then we will take this to be an admission that the quality is not good enough to reach the standards required in the agreement and I will cancel shipment and as new agreement states, we will throw it into the Yellow Sea. I am fed up with being treated with dishonesty after we have treated you with honesty throughout' (exhibit 4, page 2324_22).
Bearing upon a likely sub‑optimal performance of conveyors in the crushing and screening plant and the design of the conveyors to meet 'flooded conditions', is exhibit 25, the expert report of Mr Kendall, pars 2.4.4 and 3.5.1.14 (ts 551 and following).

Overall, this very substantial body of documentary evidence strongly indicates the existence of likely deficiencies in design, as well as in the workmanship of fabricated materials presently stored, unassembled and untested.
Quality concerns are not alleviated by a Bureau Veritas inspection report of 3 December 2008 (exhibit 4, pages 2324_52 to 2324_55). There looks to have been some negotiation over the wording of this report, as between Austman and Bureau Veritas' representative, Mr Kumar. Little was said about this document during the course of the trial. Austman's brief reference to it is by its closing written submissions and then it only mentions the report in passing (page 41, par 157). (See also Mr Kumar's communication to Austman of 13 December 2008, exhibit 4, page 2324_48 and Bureau Veritas' inspection report for 14 unit conveyors by supplier Wuxi YiTai Heavy Machinery Co Ltd of 3 December 2008, exhibit 4, pages 2324_62 to 2324_65 and the conclusion at 7, '1. Visual inspection on structure welding is acceptable. 2. Some welding defect should be repaired before delivery'.)
It will be recalled again that Mr Jonathon Brown's expert report specifically excluded any examination of the quality of the workmanship of the end product.
In the end, I have not been persuaded on the balance of probabilities that MGM would have received a benefit from unassembled fabricated components at the level of $947,322 as assessed by Mr Brown. Thus it is removed from the computation seen under the tenth conclusion stated previously.
Twelfth and last, some problematic issues arise concerning Austman's conduct from 30 June 2008 (when it was asserting that it had not yet perfected a binding contract with MGM), then again, after Austman's purported termination of an (assumed) D&C Contract on 12 November 2008.
Why did Austman at both these times (mid‑2008 and mid‑November 2008) not call a halt to the offshore fabrication work? It may be one thing if Austman could show it had been locked into completing contractual obligations under earlier subcontracts with Chinese fabricators. But Austman only signed off on a replacement contract with Yitai on 4 July 2008.
I am not prepared to draw an inference from the bare existence of offshore subcontracts governed by Chinese law that it was not open to Austman, at least from mid‑July 2008, to direct its subcontractors to cease work at these times. Given Austman's stance that no D&C Contract existed or was enforceable with MGM, Austman from mid‑July 2008, on its case, was essentially commissioning and allowing fabrication work to be performed offshore, absent (it was saying) any finalised head contract with MGM, but in anticipation that a contract with MGM may be perfected at some future time, or possibly only that it could, by the Pilley McKellar advice of 16 July 2008, still pursue a quantum meruit. From that premise, Austman, on my assessment, would have essentially proceeded at its own risk in continuing the further offshore work (unless it can show it was locked into offshore commitments it could not extricate itself from).
Austman's communication of 12 November 2008 to the effect that Austman had decided to cease all work and would take steps to mitigate its losses, suggests to me that an immediate offshore cessation of work was open to it as an option, at least from then.
Even after 12 November 2008, the evidence is that more fabricating work continued to be carried out offshore. Further, Austman was still instructing its subcontractors to carry out that further work. On this basis Austman looks to me to have been gambling that MGM would eventually 'blink' and accept the offshore materials. The gamble proved ultimately to be wrongly taken.
What transpired as to Austman not stopping the ongoing offshore fabrication work in November 2008 was never satisfactorily explained. I am also not prepared to infer, absent better evidence, that offshore fabrication after 16 July 2008 needed to continue under Austman's arrangements with Chinese subcontractors. Nor have I been persuaded that it was reasonable for those subcontractors to finish work then underway, in order to achieve best realisable value for a particular batch of fabricated steel plant components. That may have been the case. But I should not be required to speculate over it. There is the equally plausible possibility it would have been more reasonable for Austman to immediately call a halt to expenditures on any further offshore fabrication work from the end of June 2008, and most certainly after 12 November 2008, once Austman had given its notice of termination to MGM.
Again, this is not the routine case of an unfinished building site structure where every extra brick, girder or concrete pour that is left behind unfinished can be assessed as delivering a tangible end benefit to a landowner, thereby providing a basis for some fair compensation to the builder for the incomplete works.

Conclusion

In the end, Austman's claims fail. MGM also succeeds on its counterclaim to recoup its wasted expenditure, arising out of progress claim payments made to Austman, of $842,283. MGM ultimately obtained no benefit from those progress payments, in light of the D&C Contract not reaching completion, by reason of the repudiation of Austman and the ensuing termination by MGM of the D&C Contract on 28 November 2008. Austman must also pay interest on $842,283 at the rate of 6% from 29 November 2008.
As to the costs of trial, MGM, as the successful party, should prima facie receive its costs of the action and of its counterclaim, to be taxed and, given the magnitude of this trial, all scale ceilings removed for the taxation. Costs follow the event.
The parties should now confer and settle a minute of agreed final orders reflecting the outcomes of these reasons. They should submit, if possible, an agreed minute of orders within 14 days. Absent agreement MGM should submit its minute of proposed orders giving effect to these reasons within 21 days. Should any difficulties arise over the terms of final orders, I will resolve such issues on the papers, by receipt of the parties' sequential written submissions, with MGM to submit its written submissions with its minute of proposed orders and with Austman to respond no later than 14 days thereafter.