Bluechip Development Corporation (Gladstone) Pty Ltd v Sunstruct Pty Ltd

[2013] FCCA 141

FEDERAL CIRCUIT COURT OF AUSTRALIA

BLUECHIP DEVELOPMENT CORPORATION (GLADSTONE) PTY LTD v SUNSTRUCT PTY LTD & ORS [2013] FCCA 141

Catchwords:
CONSUMER LAW – Misleading or deceptive conduct – consumer protection – trade or commerce – construction management agreement – representations as to performance of various terms alleged to induce entry into agreement – finance agreement constituted by Tripartite Deed – representation as to performance of construction management agreement by entry into Tripartite Deed – claimant pursuant to Building and Construction Industry Payment Act (QLD) – alleged representation said to follow upon claim pursuant to that Act – no contravention established.
ACCESSORIAL LIABILITY OF DIRECTORS– Prima facie duty – no breach established
DAMAGES – s.82 and s.87 – damages pursuant to s.82 exceed courts monetary jurisdiction – circumstances relevant to award of damages pursuant to s.87 – global damages sought – tactical decision to claim – no basis for favourable discretion.
CONTRACT – Breach of contract – terms of construction management agreement to determine works budget, cause works to be carried out, monitor costs, have available staff to fulfil terms, perform service to requisite standard – finding of no breach.
TORT – Duty of care – breach of duty of care – evidence required to establish claim – failure to lead evidence –no breach of duty established.
FIDUCIARY DUTY – Question of vulnerability – arrangement commercial and guaranteed by contract – no conflict of duty and interest.
BUILDING LICENSE – Duty pursuant to Queensland Building Services Authority Act to have builder’s registration – nominee suffered illness through course of project – subsequent resignation of nominee as director of building company – contractual performance of oversight by nominee for corporate contractor.
GLOBAL DAMAGES – Claimed in respect of tort, contract and fiduciary claim – strict requirement for proof.
BUILDING AND CONSTRUCTION INDUSTRY ACT – Common law relief following adjudication – claim for supervision fees – favourable adjudication – basis for disposal at common law – award assessed.

Legislation:
Building and Construction Industry Payments Act 2004 (Qld)
Queensland Building Services Authority Act1991 (Qld), s.42(1)
Trade Practices Act 1974 (Cth), ss.52, 87

Cases Cited:
Astley v Austrust Ltd (1999) 197 CLR 1
Bennett v Minister of Community Welfare (1992) 176 CLR 408
Bowler v Hilda Pty Ltd (1998) 80 FCR 191
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Elna Australia Pty Ltd v International Computers (Aust) Pty LtdNo 2 (1987) 16 FCR 410
Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450
Expectation v PRD Realty (2004) 140 FCR 17
Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32
Global Sports Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
Henville v Walker (2001) 206 CLR 459
Hospital Products International Pty Ltd v United States Surgical Corporation (1984) 156 CLR 41
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109
Industrial Equity Ltd v North Broken Hill Holdings Ltd (1986) 9 FCR 385
Jobbins v Capel Court Corp Ltd (1989) 91 ALR 314
Mayne Nickless v Multigroup Distribution Services Pty Ltd (2001) 114 FCR 108
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Pritchard v Racecage Pty Ltd (1997) 72 FCR 203
Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Tobacco Institute (Aust) Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1
Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [1998] FCA 525
Voli v Inglewood Shire Council (1963) 110 CLR 74
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 11 ATPR 40-940
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515

Applicant: BLUECHIP DEVELOPMENT CORPORATION (GLADSTONE) PTY LTD

First Respondent: SUNSTRUCT PTY LTD

Second Respondent: LORENZO MARIO REGINATO

Third Respondent: ANTONY JAMES SCHOFIELD

File Number: BRG 327 of 2009

Judgment of: Judge Burnett

Hearing dates: 19 and 20 October 2009; 16, 27, 29, 30 April 2010; 4, 5, 6, 7, 10, 11, 12, 13, 14, 17, 25, 27, 28 May 2010; 1, 2, 3, 4, 5 November 2010; 24 and 25 March 2011

Date of Last Submission: 11 November 2011

Delivered at: Brisbane

Delivered on: 26 April 2013

REPRESENTATION

Counsel for the Applicant: Dr R. O'Hair and Mr P. Hackett

Solicitors for the Applicant: Hemming & Hart

Counsel for the First Respondent: Mr J. Peden

Solicitors for the First Respondent: Gadens Lawyers

Counsel for the Second Respondent: Mr J. Peden

Solicitors for the Second Respondent: Gadens Lawyers

Counsel for the Third Respondent: Mr J. Peden

Solicitors for the Third Respondent: Gadens Lawyers

ORDERS

1. That the parties submit within 21 days a minute of order giving effect to the findings set out in the reasons for judgment.

2. That in default of agreement as to an appropriate minute of order either party have liberty to apply for further listing of the application for mention.

INDEX

1.    Introduction and Executive Summary
2.    Background facts and findings
3.     Summary of Claim and Response
4.    Construction Management Agreement (CMA)

4.1    Breach of Contract

4.1.1     Failure to accurately determine the Budget
4.1.2     Failure to cause the works to be carried out
4.1.3     Failure to monitor the budget
4.1.4     Failure to cause or monitor such that the costs of the works increased
4.1.5     Failure to have available to it from February 2008 staff capable of supporting and maintaining its licence
4.1.6     Failure to supply construction management services in a proper and tradesman-like manner
4.1.7     Failure to provide construction management services to the standard of a reasonably competent construction manager and builder
4.1.8     Failure to perform the role of construction manager pursuant to and in accordance with the contract and Tripartite Deed

4.2    Summary of Findings

5.    Misrepresentation Claim

5.1    First Misrepresentation Claim – the “capable staff” representation
5.2    Second Misrepresentation Claim – the “project completed on time and on budget” representation – or it is an implied term and the contract should be varied.
5.3    Third Misrepresentation Claim – “Tripartite Deed” representation
5.4    Fourth Misrepresentation Claim – the monthly report misrepresentation

5.4.1     The nature of misrepresentation
5.4.2     The contractual duty to report
5.4.3     Representation as to a state of being
5.4.4     Representations as to future matters
5.4.5     Part of a Suite of Documents

5.4    Reliance
5.5    Fifth Misrepresentation Claim – BCIPA representation
5.6    Summary of Findings

6.    Accessorial Liability of Sunstruct’s Directors and Officers
7.    Fiduciary Duty Claim

7.1    Summary of Findings

8.    Breach of Duty of Care Claim

8.1    Duty related to construction management services
8.2    Failure of duty to ensure information was accurate and complete
8.3    Summary of Findings

9.    QBSA Claim

9.1    Summary of Findings

10.     Damages Claim

10.1    Global Damages
10.2 Assessment

10.2.1    Contract
10.2.2    Tort
10.2.3 TPA

10.3    Summary of Findings

11.     Respondent’s Counterclaim

Summary of Findings

FEDERAL CIRCUIT
COURT OF AUSTRALIA
AT BRISBANE

BRG 327 of 2009

BLUECHIP DEVELOPMENT CORPORATION (GLADSTONE) PTY LTD

Applicant

And

SUNSTRUCT PTY LTD

First Respondent

LORENZO MARIO REGINATO

Second Respondent

ANTONY JAMES SCHOFIELD

Third Respondent

REASONS FOR JUDGMENT

1. Introduction and Executive Summary

1. The applicant, Bluechip Development Corporation (Gladstone) Pty Ltd (Bluechip) was the developer of a six storey apartment building known as the Harbour Lights at 66 Oaka Lane, Gladstone the (Project). Bluechip is one of a number of companies owned and controlled by Mr Sid Knell (Mr Knell) and his wife.  The first respondent, Sunstruct Pty Ltd (Sunstruct) is and was at all material times a licensed construction manager and Mr Geoffrey Morris (Mr Morris) was a director of Sunstruct and its nominee for licensing purposes. Mr Lorenzo Reginato (Mr Reginato) and Mr Antony Schofield (Mr Schofield), the second and third respondents, were and are directors of Sunstruct.

2. Bluechip and Sunstruct entered into an arrangement in respect of the Project.  The terms and nature of that arrangement are in contest in the proceeding, but broadly they concerned Sunstruct’s involvement in the construction management of the Project.  At an early point in the Project Bluechip’s quantity surveyors, BMT, estimated the costs for the Project in the sum of $8,448,200.00.  That early estimate formed the basis for Bluechip’s budget for the Project.  The characterisation of Sunstruct’s estimate proved to be a central issue in the trial and particularly whether Sunstruct had a contractual or other obligation to bring the contract in for that sum. The arrangement between Bluechip and Sunstruct for the Project was governed by a construction management agreement dated 21 September 2007 the (CMA).  Bluechip alleges that, by the CMA, it appointed Sunstruct as its agent and construction manager and builder of the Project and that, pursuant to it, Sunstruct was required to:

   a)determine by estimate the cost of the works;

   b)cause the works to be carried out; and

   c)monitor the budget throughout the performance of the works such that if there was to be any increase in the costs of the works it was to advise Bluechip of those matters.

3. Subsequent to entering into the CMA, Bluechip as “Borrower” Sunstruct as “Builder” and the National Australia Bank (NAB) as “Bank” entered into a Tripartite Deed dated 15 April 2008 (Tripartite Deed).  The Tripartite Deed provided that Bluechip and Sunstruct would not agree to vary, or agree to any variation of the works above $50,000.00 unless approved in writing by the NAB. 

4. Ultimately, the Project was brought to completion at a cost of $10,571,166.00, a sum $2,122,966.00 in excess of the original estimate. Bluechip claims that sum as damages occasioned by either misleading or deceptive conduct on the part of Sunstruct in contravention of s.52 of the Trade Practices Act 1974 (Cth) (TPA), and/or by reason of its breach of contract and/or by negligence and/or breach of fiduciary duty as construction manager.

5. During the course of the Project, Sunstruct delivered a payment claim upon Bluechip pursuant to the provisions of the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) which was subsequently subject to process under the BCIPA and an adjudicated sum of $324,556.08 was assessed against Bluechip. That sum has not been paid and Sunstruct maintains a claim in respect of it together with the adjudicator’s costs of $8,778.33. Bluechip seeks a permanent stay of the adjudicator’s determination.

6. For reasons which are addressed below I have found that Bluechip entered into a construction management agreement with Sunstruct. The terms of the agreement were plain. In entering into the CMA Sunstruct’s principal obligation was to oversee the works associated with the Project. Understandably Bluechip had prepared a budget for its early estimates the (Budget) and, I assume, feasibility of the Project. However while these early figures were presented by Bluechip to Sunstruct it had no contractual obligation to deliver the completed Project to Bluechip for its then budgeted sum.

7. Due to matters solely within the control of Bluechip the “preliminaries” costs associated with the Project blew out significantly. These additional “preliminaries” costs totalled approximately $2 million.

8. Toward the end of the Project difficulties arose between Bluechip and Sunstruct, in particular because of Bluechip’s refusal and failure to pay Sunstruct’s construction management fees. Sunstruct ultimately delivered a notice of termination under the CMA and the contract ultimately came to an end.

9. I am not satisfied that at any time Bluechip was subject to any misleading and or deceptive conduct by Sunstruct in contravention of s.52 TPA or at all. Nor did Sunstruct breach its duty of care or any fiduciary obligation it may have owed to Bluechip.

10. Even if Bluechip had succeeded in establishing a cause of action Bluechip also faced difficulties with its claim by seeking the award of global damages. A number of intervening events gave rise to the basis for rejection of an assessment of damages on a global basis.

11. In the event Bluechip’s claim is dismissed.

12. Sunstruct counterclaimed for its construction management fees. Those claims had earlier been the subject of partially successful adjudication after assessment by a BCIPA adjudicator. Its claims have been allowed in those sums.

2. Background facts and findings

1. In 2006, Sunstruct had been engaged by Bluechip in relation to certain building works in Cairns.  By letter of 6 November 2006 Bluechip suggested that Sunstruct might consider a “strategic alliance” in relation to other projects Bluechip intended. At that time the Gladstone project was foreshadowed but no detail was then forthcoming. In 2006 Bluechip had clearly proposed undertaking the Project and received a decision notice from the Gladstone City Council approving the development. It had engaged architects and arranged for the preparation of plans for submissions to council for development approval through the architectural firm F3. Although the principal of F3 had been a director of Sunstruct it appears that early in the course of these events F3 had separated from Sunstruct and proceeded as a separate entity. Initially Bluechip had proposed two developments. The initial design for the Project was issued on 17 August 2006. Subsequent revisions were issued on 18 September and 2 October 2006 for the purpose of the development application to council[1] with the plans being coded “DA” for that purpose.

   [1] Tender bundle - vol 5 p 1770.

2. While Sunstruct was generally aware of Bluechip’s proposal for the Project it had only passing knowledge of it. Mr Knell maintains that the matter was first discussed between Bluechip and Sunstruct at a meeting held between himself and Mr Morris in Canberra in April 2007.  Mr Morris has no express recollection of those matters although he conceded that when in Canberra in April of 2007 to discuss matters relevant to the Cairns Project matters concerning the Project could also have been discussed.[2] Mr Knell was more emphatic. He maintained that a meeting was organised in Canberra in April 2007 for the specific purpose of discussing the Project. It was submitted on behalf of Sunstruct that Mr Knell “displayed enthusiastic recollection of precisely what words were used by him.” So much is evident from Mr Knell’s affidavit, although those matters were not borne out under cross-examination.

   [2] T: 1324 ln 18-19; T: 1309 ln 26-30.

3. In his principal affidavit[3] Mr Knell deposed to a meeting on or about 22 April 2007 between himself and Mr Morris. He also deposed to his wife Allison Knell being present for some of those meetings. At that meeting he deposed Mr Morris made the following representations:  

   a)“… We (Sunstruct) know how to control a Project … We will set budgets for your approval, that can only be varied by approved variations, and only by you and your nominated representative, in the contract that is defined as the Project team … referring to the draft form on contract (- this is the best form to use, it delineates the roles of the site superintendent, defines the Project team and otherwise defines all that is necessary …).”;

   b)“… We have a reputation to uphold, and we now have been working with you for 18 months. … We understand to make sure that all deliverables are delivered, as your companies are a large slice of our business, and you already know that we have done a good job on the Cairns Stage 1 Project … (referring to another building Project) … We do have the resources and this is a large part of our strategic direction.”;

   c)“… We are happy to look at a design and construct contract or a guaranteed maximum price for the Gladstone Project. I have assembled a very good team since leaving Unistyle.  We have put in Bizpac [a contract management system] and are doing other jobs on a construction management basis.  We see this style of contract to be the future.  We can handle the design stage through our integrated business “F3 Design” and I would like you to get to know Lorenzo, our accountant/financial controller and Tony who is really good at dealing with council.  I introduced you to Greg Torpey last Christmas.  We have since employed Greg as our operations manager.  Greg’s job is to put the procedures, processes and systems in place to ensure that we can deliver the Project to you.  I am happy to provide our resume to the bank.”;

   d)“In response to a question by Mr Knell regarding whether Sunstruct had a profile document he responded “Not yet, but we are developing one and are also developing a website”; and

   e)“Ok Sid, I would like to do a complete review of the plan to ensure that the specifications are ready before finalising the plans … We don’t want to fall into the trap of having to change the specifications during construction … I will work closely with F3 (the architect) and I suggest that we engage F3 – Alan Keilor.  With Alan Keilor and F3 – I will do a full review and have a report for you in four week’s time ….”

   [3] Filed 18 November 2009

4. Aside from Mr Morris simply rejecting he made the statements attributed to him by Mr Knell it is apparent some of the statements attributed to him by Mr Knell are puzzling and I find incorrect. That is to say Mr Knell has misstated the true position.

5. At the time of this discussion no final plans were in existence.  Indeed final construction plans did not come into existence until they were delivered in late 2007. Bluechip’s failure to pay the architect’s fees was responsible for the delay in the delivery of the plans.  Notwithstanding it can be seen by reference to the date on the plans that the initial plans for development approval were prepared on 17 August 2006. The first set of construction drawings dated in handwriting “21/08/07” show a second lift well which suggests they came into existence after the “value engineering process” which occurred in June 2007.[4] When Mr Knell was cross examined on the provision of plans for Gladstone being not before May or June 2007 he disagreed.[5] Mr Knell’s specific recollection as deposed to in his affidavit is surprising given his concession that there were many meetings between he and Mr Morris to discuss plans[6].

   [4] The drawings are puzzling on this point. The actual construction drawings attached to the affidavit of Robin de Moor filed 16 NOV 09 show the date as 30/11/07. A copy of similar drawings (except for the “Perspective sheet” – Tender bundle Ex 5 p 1770) was included in the Tender bundle at pp 1771 – 1776. They were noted as last amended on ’06-07-07’ but bear a hand marked date of “21/08/07”.  

   [5] T 164 Ln 25

   [6] T 127 Ln 40

6. Further his evidence on this point lacked plausibility particularly given the Gladstone Project was still at a very early stage with only DA plans then extant and the first indicative price assessment by BMT (quantity surveyor’s) was not prepared until May 2007.[7]  Notwithstanding those matters can be objectively verified, Mr Knell used a number of opportunities in his evidence to bring those dates forward to a time which suited his allegations concerning the conversation the subject of cross-examination at the time. See for instance his question and answer in respect of the lump sum proposal.[8] Mr Knell sought to maintain Sunstruct was in receipt of plans well before the April meeting noting that Sunstruct was working hand in hand with F3 (architects). It was submitted that ‘Boris’ (a Sunstruct employee) was involved in meetings with Council before Bluechip had even lodged its Development Application in December 2006.[9]  These allegations were denied.

   [7] T 157 Ln 12

   [8] T 158 Ln 8 – 12

   [9] T 164 Ln 15 – 27

1. In support of Mr Knell, Mrs Knell in her evidence stated she recalled being introduced to Mr Morris in April 2007 and then joining him at a meeting between she and Mr Knell held over lunch at an Indonesian restaurant near their office. She said she recalled Mr Knell saying words to the effect of “Mr Morris has come to Canberra because he wants to build both Gladstone and Cairns.” She says she responded by telling Mr Morris she had hoped Hutchinson’s Builders would do the Gladstone job.  She says Mr Morris responded with words to the effect; “My company will deliver on time and on budget and we want to be your builder of choice for other Projects you have in the pipeline. You can trust me and my team completely.”

2. Mrs Knell’s recollection of the ambit of statements alleged to have been made by Mr Morris is significantly less than those alleged by Mr Knell. When asked whether she recalled what had been said her response was “Yes. Clearly, sir, yes. Yes.”[10]  This question followed drawing her attention to the fact that her first attempt at recollection of these matters was almost 2½ years after the conversation.  Later in cross-examination Mrs Knell was brought back to the subject.  During the course of that cross-examination she was invited to restate her recollection of the conversation and she remained adamant as to her recollection. 

   [10] T 945 Ln 39

3. I did not find the delivery of her evidence impressive.  Although she complained of nervousness that was not the manner of her presentation in the witness box.  Indeed her presentation illustrated a certain presence of mind suggestive of cautiousness on her part not to reveal too much to the cross examiner. As with Mr Knell I felt she also sought to divert the cross examiner to matters she was more comfortable with. For instance when asked about whether she had any “independent recollection of the meeting with Mr Morris” her response was “I don’t understand the word independent in that sentence.”[11] When subsequently asked about the manner of preparation of her affidavit she sought to distract the cross examiner from the real intent of his question, a matter I thought plain to all, to discussion on sourcing the affidavit template on Google. Likewise when she was cross examined about her complaint made to the QBSA about Mr Morris not being on site she was painfully evasive when queried about her personal knowledge. The source of her knowledge was that which others had told her. It was a simple proposition. However it required tedious cross-examination to achieve what ought to have been a simple concession.[12]  Similarly her evidence concerning her response to the QBSA complaint was in my view equally evasive.  Although she gave evidence that she had not seen the QBSA’s letter of 15 July 2009 revealing the result of its investigation concerning her complaint of lack of supervision I do not accept that she was not aware of the outcome.  For instance she appears to have received a copy of Mr Morris’ letter in response to her complaint.[13] Annexed, at ‘ACK 3’, to her affidavit was a copy of the summary of investigations conducted by her into the building licences of relevant persons, including Sunstruct.  That relevant document was created on 5 August 2009 (after the results) and noted that there had been no directions to rectify or any other BSA initiated infringement notices issued.  It also noted Mr Morris then as a director of Sunstruct. Plainly it was a dead issue so far as the BSA were concerned. However Mrs Knell stated in her evidence that she was in the process of making a further submission to the QBSA in respect of Mr Morris but she was too busy, “but I will get around [to it].”[14] Plainly the matter remained incomplete because the QBSA had made a decision and informed her of it. In those circumstances further debate with the QBSA would have been futile.

   [11] T 944 Ln 4 – 6

   [12] T 945 Ln 41 to T 948 Ln 36

   [13] Annexure ACK2 Affidavit Allison Camille Mr Knell filed 24 November 2009

   [14] T 960 Ln 40

4. Given Mr Knell’s seminal role in material events it is appropriate that I make some general comments at this point concerning my conclusions as to his overall creditability.

5. I did not find Mr Sid Knell an impressive or reliable witness. His evidence vacillated and on many occasions he made inconsistent statements. Frequently in the course of cross-examination he simply failed to address questions which were plainly capable of ready answers. He engaged in debate and on many occasions sought to use cross-examination as an opportunity to promote argument and justification for his particular point of view rather than just simply answer a plain question. 

6. For instance when he was challenged concerning difficulties with Mr Greg Campbell on the Cairns Project he denied that matter. His response was “the unsatisfactory aspect of the Cairns Project was Sunstruct.” However a short time later he recanted.[15] 

   [15] T 166 Ln 5 to Ln 39

7. Mr Knell was a person who in my view sought every opportunity possible to use his time under cross-examination as an opportunity to prosecute his agenda. Often times in cross-examination it was apparent he was anticipating where the cross examiner sought to take him by a certain line of cross-examination. For instance concerning the meeting on 4 February 2009 the issue of cost overruns was significant. Mr Knell’s claim was that he had been misled by the various progress reports that were provided to him up until then and culminated in the December 2008 report, which was provided to him in mid January 2009. He maintained that until then he had no knowledge of cost overruns. 

8. The form of report in question was the master claim sheet trade breakdown (MCSTB) report which Sunstruct maintained was forwarded electronically to Mr Knell monthly. Mr Knell denied seeing those reports. Plainly such a denial was critical to his contention that they progressively led to and culminated in the misleading report of January 2009. Against that background Mr Knell was cross examined about the MCSTB report discussed at the 4 February meeting. In his affidavit filed 23 February 2010 at paragraph 27 he stated that he received a MCSTB report at the meeting with Mr McCarthy on 4 February 2009.  He said that he asked after that meeting for an “excel version of the claim sheet” which he said was sent to him on 16 February 2009. 

9. The sheet itself is relatively self explanatory.  Under the heading ‘cost code’ it identifies the various trades commencing with preliminaries and concludes on its third page with the claim.  In the various columns it identifies the ‘budget allowance’, the ‘value of works completed’, the ‘value previously claimed’ and the sum due on the ‘current claim’.  Most particularly the MCSTB demonstrated that that part of the Project which was clearly well outside the budgetary parameters related to the “preliminaries.”  From an examination of the “balance” column the parts of the Project that were outside budget were readily discernible by reference to figures in brackets.  For instance as at 31 December 2008 preliminaries were shown as ($607,328.37) indicating an overrun on the Budget of $607,328.37.  While there were a number of other items indicating cost overruns such as ‘excavation’, ‘concrete supply’, ‘form worker’, ‘block layer’, ‘concrete pump’ and ‘consultants’, those overruns were relevantly insignificant having regard to the budgeted allowances. 

10. Sunstruct’s case was that the significant overrun in preliminaries was occasioned by Bluechip’s conduct, in particular Bluechip’s failure to finalise the drawings and building approval and other variations through the project which delayed progress. 

11. Notwithstanding this MCSTB format being a regular format, when Mr Knell was taken to the document and asked whether the trade contracts were listed out by category he embarked upon a turgid explanation. The explanation was directed to whether or not it was apparent to him whether there was a direct correlation between those headings and a trade contract.[16]  When he was taken again to whether he understood the list to be “of the cost item in accordance with the trade contracts” he answered:

    No, I – that is – whether I understood or not, I meant, it was not brought to my attention.  The very first time I even realised that they wanted to bring this to my attention was 18 February.  So it wasn’t understood. …

    [16] T 3210 Ln 25.

12. When pressed further in cross-examination he then sought to distract to various trades such as electrical finishers and fire services.  Again none of his answers were relevant to the point being pursued in cross-examination.[17]

    [17] T 321 Ln 42 to T 323 Ln 4

13. Furthermore when taken to the detail of the MCSTB report I was concerned that Mr Knell was not entirely truthful in his responses.  Some statements contained plainly half truths or failed to disclose the full truth.  For instance when asked about whether he understood the MCSTB report to be a list of the cost items in accordance with trade contracts as I have earlier noted, rather than answering the question he contended that the matter had not been brought to his attention.  However later in cross-examination when being questioned about whether the sheet was discussed at the meeting of 4 February he contended it was not.[18]  He stated he had no recollection of that claim sheet stating it was the same format for the Cairns project.  He subsequently recanted on that evidence a short time later when it was put to him that it was quite a different form from that used in the Cairns project.  When that was put to him he stated that he did not know.[19] 

    [18] T 323 Ln 21

    [19] T 323 Ln 26.

14. All this has to be considered against his letter of 11 March 2009 where he stated at page 4, that in response to the issue of who was the contractual representative for Bluechip that “it has always been crystal clear who our delegate has been.  It has been me.”  He continued to note “you are fully aware that I am the only person with the authority to approve variations and payment.  The master claim sheets were an integral part of the payment process as they were forwarded as part of the progress claim.”[20]  Accordingly I have concluded that it was quite disingenuous on the part of Mr Knell to feign ignorance in relation to the trade breakdown of the MCSTB report when not only was its form forwarded as part of the progress claim process and its trade breakdown reflected in BMT’s certification process but it was also forwarded to him and subject to his oversight as Bluechip’s representative.

    [20] Refer authority

15. Likewise I do not accept his denials that there was no discussion between he and Mr McCarthy on 4 February about the items under “preliminaries”. The matter of “preliminaries” had raised itself in the context of a claim by Sunstruct in respect of costs incurred by it and which were in excess of the budgeted allowances. Given the purpose of the meeting and Mr Knell’s self confessed control over financial matters I do not accept his assertions that the matter was not discussed as he swore under cross-examination.[21] Mr Knell contends that while there was discussion about the costs to complete the project these were done without any assistance from the MCSTB. Given the complexity of the Project that seems inherently improbable. 

    [21] T 323 Ln 40.

16. Other instances of Mr Knell’s evasiveness which left me uncomfortable about the overall veracity of his evidence concerned simple matters such as his argumentative approach to issues which ought to have been plain on their face.  For instance there was an argument in cross-examination about the format of the MCSTB and whether it was in excel spreadsheet form.  These were all simple points which ought not to have generated any controversy.  This conduct left me with the general impression that Mr Knell was a witness who was seeking to distract the cross examiner and the Court from descending into an examination of the real issues in the case.[22]  Likewise when examining preliminaries, rather than addressing the questions which were put to him, Mr Knell sought to argue his own case.  Plainly he anticipated Sunstruct’s case, namely that it had not misstated (negligently or otherwise) the costings of the project in progress reports. In particular its case was the matter of preliminaries was not misstated because although there was an early budget estimate provided the budget for that item was not fixed in the same sense that a trade subcontractor’s budget could be settled.  With that in mind Mr Knell when questioned about “preliminaries” sought to embark upon discussion concerning whether or not cranage and scaffolding was the subject of a trade contract although the matter had never been addressed to him in the course of cross-examination.[23]

    [22] See generally the cross-examination regarding the excel format from T 325 Ln 6 to T 327 Ln 3.

    [23] T 327 Ln 27 to Ln 40.

17. For those reasons I do not accept Mr Knell as being a reliable witness on these matters or generally and I have rejected him as a witness of truth except in respect of matters which were not controversial or in respect of which I could find objective corroborating evidence. 

18. Notwithstanding those observations I am mindful that there has been some delay in delivering these reasons and there may be ground for concern and criticism, particularly Mr and Mrs Knell.

19. The trial was a lengthy trial. It was initially listed for 5 days following the assessment of the parties. In the result it took approximately 26 listed days spread over a number of different sittings. The trial was difficult, complex and the proceeding bitterly contested. Mr Knell attended every day of the hearing. Mrs Knell regularly attended, particularly in the early stages. They both left and indelible impression on my memory, especially Mr Knell. Through the course of the trial I made detailed notes concerning the impressions I formed at the time witnesses gave evidence which I was later able to relate back to the transcript. With those matters in mind I have sought wherever possible to relate matters to the objective material to justify my conclusions.[24]

    [24] Expectation v PRD Realty (2004) 140 FCR 17 at 32-35

20. Returning then to the Canberra meeting. When considered against the background of the Cairns Project which was then on foot, I consider it more likely than not that Mr Morris attended Canberra at Bluechip’s invitation to discuss difficulties which were then being experienced on the site with Bluechip’s construction manager for the Cairns Project, Mr Greg Campbell.  There were concerns at that time about cost overruns on the Cairns Project which occasioned concern for both Bluechip and Sunstruct.  Bluechip was concerned about delays and Sunstruct was concerned for its own interests about the imposition of penalties following Mr Campbell’s alleged breaches.  Sunstruct was concerned because of the prior work history of Mr Campbell and Mr Knell. 

21. Likewise, I prefer the evidence of Mr Morris to that of Mrs Knell on the subject of the conversation allegedly had at a lunchtime meeting, which all agree occurred.  As noted above, I find that the real purpose of the visit was to discuss the Cairns Project.  I accept Mr Morris’ evidence that the Gladstone Project may only have been touched upon. I do not accept Mrs Knell’s evidence concerning statements that she alleges he made during the course of their lunch.  I prefer the evidence of Mr Morris to that of Mrs Knell for reasons I earlier addressed when considering her evidence.

22. To assist with the project, Bluechip had engaged a firm of quantity surveyors, BMT & Associates (BMT) which prepared a preliminary costing, subsequently described as “an indicative elemental estimate.”  It was dated 3 May 2007.  Importantly, in the letter of 3 May 2007 addressed to Mr Knell, BMT noted:

    We stress that the estimated costs produced in this report are an opinion of costs only and cannot be guaranteed.  We note that as structural and services design constraints have not been fully advised we would base this cost estimate on composite rates based on our opinion of likely requirements.  We therefore recommend that this estimate be used only for broad order feasibilities and suggest that further estimates be prepared at a later date to incorporate future design details.[25]

    [25] Exhibit 4 page 813

23. BMT’s letter also noted that a list of exclusions were appended which materially excluded authority fees, consultant fees, design contingency rise and fall, ground allowances and cost increases beyond May 2007 to name but a few of them.  The “Schedule of Information” noted that only limited drawings were available at the time of the provision of that estimate. Significantly, the architectural drawings were the first version, being architectural drawings one to ten REV P-01 dated 19 April 2007 as prepared by F3 Design and Architecture. Other drawings included structural, hydraulic and slab set out drawings. In addition, there was a pavement layout plan dated January 2006 prepared by Empire Engineering Pty Ltd. Over the following months, Sunstruct was provided with more detailed drawings but it was never invited to review the original estimate in light of the latter drawings which all parties accept contained significant variations to the originals.

24. Mr Morris initially suggested to Bluechip that it undertake the construction Project for a lump sum price.  He initially believed that Mr Knell only wanted one man as a construction manager as this was the structure of the arrangement that Sunstruct had with Bluechip for the Cairns Project. On this basis, Sunstruct prepared a tender for the Project in May/June 2007.  At that time, Mr Morris understood that Mr Knell was going to get Ivor Thomas, one of his employees, to prepare a schedule of finishes. However, before that could happen Mr Thomas resigned.  Mr Morris says that, accordingly, the first tender went out without a schedule of finishes from Bluechip and the building was put out to tender with Sunstruct’s own general specification.  At that point, Sunstruct’s preference remained to build the Gladstone Project under a lump sum contract. Sunstruct came back with a quote of $8.35 million for a lump sum construction based on its own schedule of finishes and there was scope for the building to be constructed at that price if Sunstruct was able to commence in July 2007 using their own builder’s range of finishes.  The margin provided for in their quote was 7-8% , however Mr Knell did not want to enter into a contract on a lump sum basis because he considered the margin too high.  Mr Knell stated that he wanted to have a construction management contract.  As is discussed below, there are significant differences between lump sum contracts and construction management contracts in terms of contractual terms and arrangements, including risk factors.

25. These matters appear to have drifted into June/July 2007, by which time Mr Knell informed Mr Morris that he had made a decision to change the Project from the one that was tendered for by Sunstruct in June 2007 to a revised building design.  In part this was driven by a “value engineering process” which was led and coordinated by Alan Keilor of Bluechip.  Mr Knell says that this occurred in May 2007.  Mr Morris denies this, saying that it occurred in June 2007 and, most significantly, after Sunstruct had prepared its tender in June 2007.  I accept Mr Morris’ evidence on this matter as Mr Morris’ evidence accords with its job costing of 10 August 2007, where it allowed for one hydraulic passenger lift based upon a quote for $124,000 from Kone Elevators, a figure that approximated with the BMT estimate dated May 2007. The design changes were significant as they included, inter alia, another lift. Had they been considered, it would be expected the quantity allowed to would have been 2 not 1 as was allowed for. Mr Keilor was not called and no evidence was produced by him to the contrary.  Furthermore, Mr Knell’s evidence on this point is illogical.  As Mr Morris stated, the object of the “value engineering process” was to develop design changes that saved money, not increase the cost. In this case the design changes did in fact vary and increase the scope of works significantly and, in turn, the costs.  For instance, in Mr Keilor’s letter of 2 August 2007, his proposed changes included:

    a)Providing an additional lift and stair at the rear of the building;

    b)Increasing the floor to floor height;

    c)Providing communal facilities for guests’ use;

    d)Relocating the garbage chute;

    e)Rearranging the linen area;

    f)Providing a waiting area at reception; and

    g)Providing an additional corporate lounge on the top floor.

    There were no significant consequential reductions in the scope of works.

1. As Mr Morris noted in his correspondence, all of those matters affected the then current design which had development approval and required further approval from the Gladstone City Council.  He also noted the delay which was occasioned by those design changes including further approval delays.

2. Finally I must note this is a matter which could have been readily resolved by Bluechip simply placing into evidence the various revisions that occurred from the original drawings issued on ’06-05-07’ until ’06-07-07’. If the two lifts had been part of the original design they would have been evident in the first set of drawings.  

3. Plainly, these changes were significant.  In an email dated 16 August 2007, Mr Morris wrote to Mr Knell as the proposed construction manager for the Project to observe that it then had been over four weeks since Sunstruct had completed the tender process and achieved the savings to the Budget to make the Project viable.  He noted that, among other things, the design had not been finalised, but in any event had introduced the second lift.  He noted the potential difficulty arising with the development approval and the overall impact that matter would have upon the progress of the construction.  Plainly those changes had a cost impact, for he observed:

   If the decision can be made to go in this direction (with the original drawings) then Sunstruct can probably retrieve a failing position with the tenderers.  Currently we are unable to give the tenderers any information as to what is happening with the Project and they are referring to another project that hasn’t gone ahead in Gladstone.  (Meaning Bluechip’s project).  It would also give you time to achieve your finance for the Project as you would not have to revisit your sales contracts as they would not be affected by the minimum changes to the design.

4. He noted concerning Sunstruct’s position that in view of the uncertainty he would be:

   preparing the invoice for the works we have performed to date for the tendering works and will await your advice as to how you intend to proceed when Gladstone becomes an actual project.[26]

   [26] Affidavit Geoffrey John Morris Annexure page 5

5. In his evidence, Mr Morris noted that the June 2007 lump sum tender process had identified good potential contractors in what was then a volatile market in Gladstone. He observed that if Mr Knell had given them a go ahead at that point it was likely that the building could have been completed for the cost initially estimated (bearing in mind that the estimates were effected upon an earlier set of drawings and a number of assumptions including as to fit out) but that if they waited until later in the year or until early 2008 then it was almost inevitable that the Project would cost more due to the volatility of the market.  Mr Morris noted that Sunstruct wanted to get a construction management contract in place because it knew that Mr Knell wanted Sunstruct to act as Bluechip’s agent. Understandably, Mr Morris wanted some comfort because to that point matters were quite fluid.  Furthermore, as a matter of good commercial practice, Mr Morris did not want to negotiate on Bluechip’s behalf with trade contractors without having something in writing to show Sunstruct’s authority as Bluechip’s agent. As prospective construction managers, they negotiated on behalf of Bluechip and accordingly were concerned about their warranty of authority.

6. Subsequently, a form of construction management contract was prepared by Sunstruct’s contracts administrator, Darcy Ringland.  It was prepared in anticipation of Bluechip having funding in place and that it would not alter the drawings other than as had already been discussed. On 21 September 2007, the parties met for the purpose of executing a construction management agreement (CMA), which they did. Considerable controversy surrounded the extent of Sunstruct’s obligations under that agreement. For reasons addressed below in the section entitled ‘Construction Management Agreement’[27] I have found that Sunstruct’s obligations were quite limited and it fulfilled its contractual obligations.

   [27] See Part 10.2.1

7. As at September 2007, when the CMA was signed, Bluechip had not obtained finance approval for the Project.  It had hoped to get finance by December 2007 but nonetheless had some funds available to commence preparatory works which were commenced prior to Christmas.  At that stage building approval had only been obtained for the preparatory civil works but not for the building itself.  As Mr Morris put it, “we were really stretching the bounds there, but there were retaining walls in the ground … and once you’ve done the excavation you really need to shore them up.”[28]  Sunstruct, through Mr Morris, was aware that Bluechip did not have the finance approval in place and accordingly was reluctant to engage trade contractors in the knowledge that there was no funding available for them to be paid.  This caused Mr Morris considerable concern as Sunstruct attempted to keep trade contractors ready to start but was not able to give them a start date.  Nor was he able to inform them that the reason for not being able to commit to a start date was the lack of funding for fear of having the trade contractors leave site.  As Mr Morris deposed in his evidence, between October 2007 and April 2008, when Bluechip received funding from the NAB, the job virtually stopped twice.  First was a shutdown in early December 2007 and then a slow down in March 2008.  Both times were occasioned by a lack of funds from Bluechip rendering it unable to pay the trade contractors.  Sunstruct was acutely aware of these difficulties because they bore the brunt of some of the trade contractors’ unhappiness and informed Bluechip of such.[29]

   [28] T1363 Lines 15 – 19

   [29] See for instance email from Mr Morris to Mr Knell of 12 December 2007 – Affidavit of Geoffrey Morris filed 16 March 2010, GJM5.

8. The construction drawings were released by the architect on 24 December 2007. They had been completed earlier but were withheld by the architect until payment for them was made by Bluechip. The building approval came through at the end of February 2008 and work could then commence in accordance with that approval once funding was in place. A detailed construction program had been prepared by an independent programmer who had envisaged the works being completed by end October 2008.  However that was based on the building works commencing in September 2007.

9. Given the delays in obtaining building approval and finance it was obvious that the end date for the Project necessarily would be prolonged.  Finance however was not approved by the NAB until April 2008, and on 10 April 2008 a Tripartite Deed was entered into between Bluechip, Sunstruct and the NAB.  The relevant provisions of the tripartite agreement included that the Bank would be liable in relation to costs for the construction to the extent that they were actually and properly incurred under the building contract and certified by the appointed quantity surveyor, BMT & Associates: clause 3.4; and Sunstruct would submit with each claim for payment a statutory declaration in the form agreed in support of each such claim: clause 8.3.

10. Construction commenced in earnest once the Tripartite Deed was executed and progressed through 2008 with monthly construction management reports (CMRs) being prepared by Sunstruct and provided to Bluechip. In addition to the monthly CMRs there were also regular meetings between Bluechip representatives and Sunstruct representatives. Furthermore, MCSTB reports were generated monthly by Sunstruct and provided to Bluechip. While there was some controversy during the trial about whether Mr Knell in fact received those documents, I am satisfied that they were in fact received by Mr Knell and that he was fully aware of their contents or reasonably ought to have been.  I do not accept Mr Knell’s evidence that he was unaware of them. Furthermore, I accept that these documents were discussed between representatives of both Bluechip and Sunstruct.

11. Bluechip was a special purpose vehicle set up for the purpose of developing the Project. It was a company within a large group of companies described by Mr Knell as “the Prime Group of companies.” Mr Knell had various tertiary qualifications and was actively engaged in the business of property development, financing, insurance and investment services.  From my observations he was a particularly “hands on” operator and, on my assessment of him, not the kind of individual inclined to unreservedly delegate detail to his subordinates, and largely he did not.[30]  Mr Knell carefully monitored the progress of the Project and in my finding was fully aware of the difficulties which were becoming manifest by reason of the delays occasioned in the early stages of the Project.  He was aware of those difficulties from the outset.  I am satisfied that he fully appreciated that no substantial works could be commenced before he received the building approval from Council and put funding in place. Likewise, he knew that he could not achieve that approval without the relevant design drawings which were withheld by the architect because they had not been paid for.  In my view, his claim that the commencement of the Project was 21 September 2007 was entirely disingenuous given that Bluechip had not provided drawings at this date, building approval on those drawings had not been granted and finance was not in place. While some work had taken place from that date, they were limited to the extent that they could proceed in the absence of building approval.

    [30] Exhibit 4 page 1685 letter – Bluechip to Sunstruct 11 Mar 09 at page 4 of 5 (1688) – paragraph [4]

12. I am also satisfied that he had a full appreciation of the difficulties occasioned by the design changes which he called for.  For reasons which are explored later I am satisfied that he simply sought to impose upon Sunstruct a view of the contract which he held but which was entirely misconceived.  He sought to enforce the misconceived nature of the agreement, that is, that it was a fixed sum contract, and enforce against Sunstruct claims for cost overruns which were occasioned entirely by Bluechip’s own conduct.

13. By reason of the variety of reporting methods used by Sunstruct to report to Bluechip, including the MCSTB reports and more informal exchanges between the executives of the respective organisations by email, the ongoing progress and costing of the project was reported to Bluechip. By early August 2008, Sunstruct was reporting that the Project would not be completed until at least January 2009. Those assessments were incorporated in each monthly CMR under the heading “1.2 Work in progress” which in each monthly CMR provided an estimate of the anticipated completion date “based on current status.”

14. CMR number 2, dated 5 November 2007 noted the contract start date as “2^nd week Nov 07” and duration of 48 weeks.  The report noted at that time the Project was proceeding on “preliminary architectural drawings that were issued on 20 October by F3: Drawings expected to be finalised in next three (3) weeks for construction.”  It was also noted that “B.A. is still on track for mid-November lodgement and approval mid Dec/Early Jan.”[31]

    [31] Volume 1, page 196

15. The CMR dated February 2008 noted a contract start date of 12 November 2007 with an anticipated date of completion of 30 September 2008.  It can be seen by reference to the subsequent monthly CMR’s that as the Project progressed this date crept out.  By May 2008 the anticipated completion date had extended to 30 October 2008; by September 2008 it was 29 November 2008; by October 2008 it was 19 December 2008; and by November 2008 it was 31 January 2009.  The CMA was terminated in mid-March 2009 with the works achieving practical completion in May 2009.

16. The necessarily increased costs of that prolongation were noted by the quantity surveyor in its reports to the NAB and copied to Bluechip.  BMT’s monthly reports from 8 July 2008 in the “Project overview” section indicated the potential for cost overruns.  For instance, in its report of 8 July 2008 BMT observed that it believed that:

    There is currently a growing potential for cost overruns on the project due to the project currently experiencing delays of 34 days beyond the original anticipated completion date. These potential overruns are associated with increased preliminaries and site supervision. as a result of these delays necessitating the site remain open for additional time.[32]

    [32] Exhibit 4 page 1028.  At the time of the BMT reports the additional preliminaries were yet to be incurred and accordingly no claims had been made.

17. As works progressed these delays were extended.  The source of this continued delay and the cost implications were the subject of some controversy. In the last CMR issued by Sunstruct dated December 2008 the projected completion date was 31 Jan 2009, with 105 days extension having been allowed.

18. In this case the delay and cost overruns were closely related.  At a meeting on 25 July 2008 the topic of cost overruns, particularly in relation to over costs in preliminaries, was discussed.  It had been raised by Sunstruct with William McCarthy, Sunstruct’s Contract Administrator, having noted in minutes of a meeting held at Bluechip’s office that the matter of overruns was to be taken up by Mr de Moor, Bluechip’s client representative[33] with Mr Knell. 

    [33] Robin De Moor was the nominated client representative in Schedule 2(a) CMA.

19. Initially Mr de Moor denied any knowledge of overruns at this time. However I have concerns about Mr de Moor’s general reliability.  While he had specific knowledge of some matters such as his recollection concerning the Cairns contract, his recollection concerning detail of the Project was less certain.  For instance, when he was cross examined about the first occasion when the matter of cost overruns on “preliminaries” came to his attention he stated that it was in February 2009.[34] However subsequent cross-examination revealed this was patently not the case.  Although Mr de Moor continued to state that he had no recollection of these matters he ultimately capitulated on that point when a document entitled “Review of Preliminaries budgets and forecast overruns as at 22 August 2008” was put to him.  In the course of cross-examination he conceded that the document, Exhibit 27 being that review, was placed before him. He conceded that he had made hand markings on the document.  When it was put to him that his earlier evidence in relation to those matters first coming to his attention in February 2009 was not correct the best he could do was respond that he “didn’t remember focussing on that particular word [overruns] at the time.”[35] Ultimately he was forced to concede by reason of the documents and his markings upon them, together with the circumstances of the meeting of 22 August 2008 that the purpose of the document’s preparation and tabling at the meeting was with a view to achieving completion of the project by the end of October. He ultimately accepted that it was following Sunstruct having raised the issue as a concern in the July meeting that gave rise to his further enquiry about the preliminaries budget and his request for Sunstruct to produce a breakdown.[36] Plainly this cross-examination was embarrassing for Mr de Moor as it demonstrated at its best his unreliability as a witness of fact or at its worst his dishonesty. When it was suggested to him that he had in turn discussed that document with Mr Knell he stated he had no recollection.  Given his general unreliability I have serious concerns as to whether this absence of recollection constitutes a false denial. I have rejected his evidence where it is contradicted by that of Mr Morris or Mr McCarthy.

    [34] T 919 Ln 35

    [35] T 923 Ln 9

    [36] T 923 Ln 28

20. Mr de Moor requested a preliminary breakdown following that matter.[37] It follows that by no later than August 2008 it was made clear to Bluechip by Sunstruct that the project would not be completed by the original due date of September 2008 and that there would be increased costs associated with the project.  At a meeting held on 14 August, it was reported to Bluechip that the MCSTB report had been done.[38] Following that meeting, a further meeting was held on 22 August when Sunstruct produced a detailed breakdown of the preliminaries budget and forecast overruns. 

    [37] Exhibit 24 and T 917.

    [38] Affidavit William Noel McCarthy filed 16 March 2010 Annexure WNM 1 at page 46.

21. I accept that Mr de Moor was informed by Sunstruct at a meeting on 21 August 2008 that there was a serious issue concerning cost overruns and that he had requested Mr McCarthy to prepare a detailed report.  Further I accept that Mr McCarthy prepared that detailed report and it was presented to Mr de Moor by him and discussed at a meeting between them at the meeting on 22 August 2008.  While Mr de Moor has no recollection of having provided that report to Mr Knell, Mr McCarthy states that at a meeting conducted on 31 October 2008 he, Mr Knell and Mr de Moor went through the overruns report. In particular his diary note of that meeting recorded “Sid went through claim sheet report and asked re overruns (I said design changes).” I prefer and accept Mr McCarthy’s evidence on these matters.

22. By December 2008 the Project was clearly running over time.  The CMR’s issued to that time had recorded that extension of time documents had been submitted and approved, with the December 2008 CMR identifying extension of time claims totalling 77 days with the “Revised Contract Date” being 25 February 2009 and a “Forecast Completion Date” of 31 January 2009.[39]  The matter of delay was plainly of concern to Mr Knell.  On 4 December 2008, he wrote to Sunstruct addressing those concerns, particularly regarding the delay in the project; lack of planning “at the Sunstruct level”; and changes in the completion dates, among other things.  He noted the:

    … need to work through and reconcile the prelims.  We should do this as at the end of January, early February, once we know where they stand…

    and noted as:

    …absolutely key imperative … to remove the crane from site no later than 20 December.  I will not support any plan that leaves us with the crane in situ over the Christmas period.

    He concluded by noting that with those matters in mind there was a need to “wrap things up with a comprehensive plan for completion of the project, post Christmas.”[40]

    [39] Although the revised contract date stated 25 February 2008 this was clearly a typographical error (see Exhibit 4 page 379).

    [40] Exhibit 4 Page 1537 – 1538 – Letter Bluechip Development Corporation to Sunstruct Project Management Pty Ltd 4 December 2008.

23. His reference to “prelims” is salient. The issue between the parties largely came down to overruns in “Preliminary Costs.” “Preliminaries” include items of cost which cannot be referred to any particular trade, for example, temporary buildings such as site sheds, temporary screens, hoardings, sanitary conveniences and cleaning.[41] Costs such as cranage and scaffolding fall within preliminaries and, as can be seen in this case, were subject to significant under-estimation because of the time overruns in the Project. It was the under-estimation and source of delay causing under-estimation that were central to the dispute between these parties.

    [41] Brooking on Building Contracts. 4^th Ed, D.J. Cremean, B.A. Shnookal, M.H. Whitten. Lexis Nexis Butterworths Australia 2004 at page 270 para [15.3]

24. The site closed down for the Christmas period of 2008. On 12 January 2009, Sunstruct issued its “construction manager’s report December 2008.”  This report was the subject of further detailed discussion in the section entitled “Misrepresentation.” 

25. In January and February 2009 there were a series of meetings between Bluechip and Sunstruct.  In summary, Sunstruct set out in further detail for Bluechip the costs that had been and were being incurred as a result of prolongation. On 4 February 2009, a meeting was convened between Messrs Knell, McCarthy and Whitehead to discuss the delay and cost overruns.  The details of this meeting are subject to further examination in the section entitled “Misrepresentation Claim.” 

1. Following that meeting, Bluechip proposed to Sunstruct in a letter dated 19 February 2009 that:

   We [Bluechip] have been hurt by the actions of Sunstruct and heavily penalised by the length of time and extra costs and Sunstruct will have to accept some of the hurt.

   A proposal was put that:

   … as Sunstruct had been in total control of preliminaries which are the basis of the problem … I am suggesting we put a ruler under the prelims and margins of $2 million, and that the preliminaries remain the responsibility of Sunstruct until handover.  At the same time Sunstruct needs to come up with a payment plan to return funds to BDCG.[42] 

   Sunstruct denied any mismanagement and complained about the non-payment of its construction management fee. Accordingly, by letter of 26 February 2009, Sunstruct gave notice under clause 20 of the CMA of its intention to terminate the agreement.  In its letter and aside from denying the complaints Bluechip outlined in its letter of 19 February, Sunstruct contended “… the situation that we find ourselves in as a result of your intermeddling and failure to observe the terms of the Agreement, and is untenable.”

   [42] Exhibit 4 Page 1609 – 1610.

1. According to clause 20, the contract can only be terminated 10 days after service by registered post of the notice of termination.  In its letter of 11 March 2009, Bluechip did not appear to take issue with that defect.  Nor did it appear to take issue with Sunstruct’s failure to forward a formal notice of termination.  At its highest, Bluechip appears to have waived such defects pending notice from the NAB.  In any event, Bluechip subsequently engaged another contractor, PBS, to undertake duties as a construction manager, and by that conduct manifest an election to accept the termination. That appears to have occurred some time in March 2009. 

2. For reasons which follow I accept Sunstruct acted lawfully in terminating the CMA. The works were subsequently brought to practical completion around May 2009 and it was at about that time that Sunstruct delivered its payment claim under the BCIPA which was then the subject of adjudication. The moneys awarded following that assessment remain unpaid. The details of that claim are contained in the section entitled “BCIPA representation.”

3. It is from these matters that the parties have prosecuted their respective claims.

3. Summary of Claim and Response

1. Generally, the application was a lengthy and complex application from which the following issues were distilled from the pleadings:

   a)The nature and terms of the contractual arrangement between Bluechip and Sunstruct and whether or not the conduct of either party occasioned breach and enlivened rights to termination and the exercise of those rights;

   b)Whether or not various alleged representations by Sunstruct were made, and if made, were misleading and/or deceptive in contravention of s.52 TPA, those representations being representations as to:

   i)Capacity and capability of Sunstruct’s staff;

   ii)Capacity to ensure budget control;

   iii)Variations being governed by the Tripartite Deed;

   iv)Reporting; and

   v)Entitlement to claim pursuant to the BCIPA for relief;

   c)Accessorial liability of Sunstruct’s directors and in particular Mr Morris;

   d)Whether Sunstruct breached any fiduciary duty;

   e)Whether Sunstruct’s conduct occasioned any breach of duty of care giving rise to a claim in negligence;

   f)Sunstruct’s BCIPA claim; and

   g)Entitlement to damages and their assessment, particularly as Bluechip has prosecuted its claim as a global claim.

2. The following sections are ordered to follow the above sequence of issues.

4. Construction Management Agreement (CMA)

1. Late in the evening of 21 September 2011 Mr Morris, Mr Knell, Mr de Moor, Mr Ringland, Mr Dunn and Mr Gates met at Mr Knell’s residence to complete the formal CMA.[43]  The form of the CMA was in the Master Builders of Australia form CM2006.  A significant issue in the proceeding concerned the extent of Sunstruct’s obligations under the contract and whether they were breached.  Accordingly it is appropriate to outline some of the relevant provisions governing the nature of their arrangement.

   [43] Exhibit 4 page 141 – 173

2. The recitals to the CMA provided in part:

   The Principal intends to have constructed the Works identified in Schedule 1 upon the Site described in Schedule 1 and in accordance with the Design Document which have been or will be prepared by the Consultants and for that purpose intends to retain the Construction Manager to provide construction management services.

3. By reference to the definitions and interpretation clause, clause 1 and the Schedules to the CMA the “Principal” was Bluechip; the “Construction Manager” was Sunstruct; and the “Design Documents” were those to be included in Annexure A to the CMA.  It can be seen from Annexure A that no documentation was in fact included at the time of completion of the agreement. Annexure A, a document prepared by Sunstruct, did however observe:

   We must point out that we [sic] at Sunstruct we do not hold the relevant licences [sic] for design works and are thus not building designers.  Our standard contract does not include a service for the co-ordination of design works and/or the overall project management as we believe that this is a pivotal role and is the responsibility of the client’s [sic] superintendent/nominated project manager.  We do provide a unique service, which is one of reviewing the contracted documentation during the trade contract tender process and recording and reporting either alternatives or more efficient building techniques thus ensuring that cost effective building solutions is [sic] constantly occurring and thus adding value on behalf of the developer in building works.[44]

   [44] Exhibit 4 page 172

4. The definitions section also included the definition “Consultant” meaning the person engaged by the Principal to provide consultancy services in connection with the ‘Works’ a term which was itself defined to mean “the whole of the work to be carried out and completed in accordance with the CMA which is to be handed over to the Principal.”

5. Clause 2 of the CMA provided for primary obligations to the parties.  Relevantly it provided:

   (a)    The Construction Manager must act as the agent of the Principal in providing the construction management services stated in the Contract;

   (b)    The Principal must pay the Construction Manager in accordance with the Contract.

6. The ambit of the construction management services were to be distilled from the terms of the CMA.  The CMA in clause 5 materially dealt with construction duties which included in part an agreement to:

   Organise commencement of the Works and, in consultation with the Principal, coordinate construction of the Works by Trade Contractors and use every reasonable endeavour to achieve Final Completion in accordance with terms of [the] Contract.

7. Fulfilment of clause 5 included undertaking duties to consult with and make recommendations concerning the works, such as participation in selection of trade contractors: clause 5(a); submitting to the Principal tenders and quotes received and, “when requested to do so” analysing all tenders and making recommendations as to their award: clause 5(a)(iii); entering into trade contracts as disclosed agent for Bluechip: clause 5(b); establishing a site office and engaging competent staff to coordinate and monitor the work of trade contractors: clause 5(c); furnishing upon request a project construction program prepared by an external consultant: clause 5(f); providing progress reports which identified delays and recommended adjustments: clause 5(g); and instituting a system of cost control and revising the estimated total cost of the Works to provide for changes to the Works as they occur: clause 5(a).

8. Bluechip warranted that Sunstruct would incur no liability for the failure of any trade contractor to carry out its work in accordance with its trade contract: clause 7(a); and invested in the Construction Manager the “sole right to coordinate the construction of the Works”: clause 7(b).  Bluechip as the Principal bore the direct obligation to pay each trade contractor and supplier: clause 9; although, there was a limited right for contracting by Sunstruct on behalf of Bluechip in respect of small contracts: clause 11.  In consideration for the performance of its services both before and during construction, the Construction Manager was entitled to a fee: clauses 14 and 15 as set out in Schedule 6; which included provision for payment of its fee in accordance with the progress certificates: clause 16. 

9. Concerning fees, the parties to the CMA filled out the first option only, clause 15(a) in the Schedule 6 and struck through the second and third options.  Curiously however the wording of the second option in clause 15(b) was amended by the parties with some handwritten amendments, but ultimately those amendments had no relevance because it is not in issue on the pleadings that the entitlement of Sunstruct to its construction management fee is under clause 15(a).  Under that clause, a lump sum was payable in the amount of $336,000.00 plus GST together with an uplift of 10% on the increase in the estimate of total costs of the works over time.  By clause 16, Bluechip agreed to pay for the costs of the Works including items listed in Schedule 9.  Schedule 9 includes a number of items of costs which might be colloquially called ‘preliminaries’ as they clearly encompass costs which were not trade specific and were to be incurred throughout the duration of the Project. These included scaffolding, wages of site management and legal charges.  Sunstruct was entitled to a reasonable extension of time for carrying out and completing its management services if such services were delayed by the conduct of Bluechip or its consultants, agents or separate contractors (other than those employed by Sunstruct or for any other cause of delay beyond the reasonable control of Sunstruct and subject to notice provisions: clause 18(a); provision was made for Sunstruct’s entitlement to extra fees in those circumstances: clause 18(b); and, finally, clause 20 provided for termination by either party upon notice. 

10. No allegations are made of any implied terms additional to the CMA nor of any collateral contract purporting to add additional terms beyond those in the formal CMA agreement except as addressed later in this section , however, that allegation is rejected.

11. It is important to broadly understand the terms of the CMA. In summary, Bluechip alleged that upon a proper construction of the contract Sunstruct was required to; determine by estimate the cost of the works (‘the Budget’); to cause the works to be carried out; and, to monitor the Budget throughout the performance of the works. This was to be such that if there was to be any variance in the costs of the works Sunstruct was to advise Bluechip of that increase and to seek its written approval to any such variation and increase in the costs before it be undertaken.[45]

    [45] TFASOC – para 7.

12. This allegation was at odds with the evidence of Mr Knell who was unambiguously of the view that Sunstruct had a contractual obligation to deliver the Project for the budgeted figure or, in other words, for a fixed price.[46] That is to say that Mr Knell believed Sunstruct’s obligation was to hold the preliminary costings and deliver the Project in accordance with them. Under cross-examination, Mr Knell stated that this process accorded with the arrangement that had been in place on the Cairns project. It followed, in his view, that a budget was set and that if the budget had to be increased or decreased a variation would be raised.[47]  Sunstruct denies that matter. It was an elementary point in the dispute between these parties.

    [47] T344, Ln 32.

13. In paragraph 8 of its TFASOC Bluechip claimed that in the alternative that if the contract properly construed did not provide as contended for in paragraph 7 then the contract ought be varied such that a term to that effect be imported into the contract and apply from its inception. It contended such writing occur pursuant to s.87 of the TPA.

14. Mr Knell, in his affidavit[48], stated that the CMA appointed Sunstruct to “manage coordinate and effect the building of” the Project then proceeded to note that the works were to be undertaken within the Budget, SK2, being the amount set out in the “first master plan breakdown schedule.”  Although this matter is the subject of further discussion, it must be observed at the outset that no budget was attached to the CMA and that the document SK2 was a master claim sheet prepared by Bluechip and was dated 30 November 2007, that being approximately two months after the CMA was entered into.

    [48] Filed 19 May 2009 - para 2

15. As was submitted on behalf of Sunstruct, there is no such term contained within the CMA of the kind alleged at paragraph 7 of the statement of claim.  Indeed, such a term is entirely inconsistent with the other express terms of the CMA.  As the recital broadly observes, the nature of the arrangement is one whereby Sunstruct was “to provide construction management services.”  Nowhere within the terms of the CMA is there any provision that invested in Sunstruct any responsibility for the overall costs. They were always the responsibility of Bluechip, it being Principal, as provided by clause 2.

16. Paragraph 7 of Bluechip’s TFASOC requires consideration of the allegations piecemeal:

    a)First, the duty to determine by estimate the cost of the Works (Budget).  Sunstruct’s preconstruction duties included a duty to “prepare budget estimates”: clause 3(d).  That duty was amplified by a further duty to:

    …review budget estimates as the development of the design of the Works proceeds and when it is completed, prepare an estimated total cost of the Works for approval by the builder.

    : clause 3(e).  So much of Bluechip’s claim is consistent with the Contract. 

    b)Secondly, it was to:

    … cause the works to be carried out and to monitor the budget throughout the performance of the Works and to advise Bluechip of the same and to seek its written approval to any such variation and increase in cost before it was undertaken. 

    Clause 3(g) imposed a duty upon Sunstruct to “monitor the estimated total cost (the Budget) of the Works and notify the Principal of any variances to same.” An issue arises as to whether the CMA required Sunstruct “to cause the Works to be carried out.”  Clause 5 of the CMA dealt with construction duties.  It required Sunstruct to:

    … organise commencement of the Works and, in consultation with [Bluechip] coordinate construction of the Works by the trade contractors with his duties being enumerated in subparagraphs (a) to (w). 

    A question arises as to what Bluechip means by “cause.”  Plainly the terms of clause 5 required Sunstruct to coordinate, direct and monitor in order to have the Works carried out and completed.  But those Works were to be completed by trade contractors engaged by Sunstruct as agent for Bluechip.  In that limited sense Sunstruct was to cause the Works to be carried out but beyond that term of the CMA Sunstruct incurred no further obligation.

17. However, the significance of the contractual arrangement is that, contrary to Mr Knell’s assertions,[49] Sunstruct was not engaged as the builder and not engaged to undertake the Works for a fixed price. The Contract referred to Bluechip as Principal as having the obligations of builder. It merely appointed Sunstruct as its agent in respect of various duties contained within the CMA which would otherwise be undertaken by a principal building contractor.  As was observed by Mr Reginato in his evidence, the structure of the Contract permitted Bluechip as the developer to also enjoy the builder’s premium.  That is, Bluechip as developer was spared the cost of paying a builder the premium that would usually attach to a formal construction contract.  It did this by engaging Sunstruct as a project manager to undertake the project management services on Bluechip’s behalf.[50] This permitted Bluechip to remain intrinsically involved in the Project as the Principal in contrast to the situation that may have prevailed if, as Principal, it had simply engaged a building contractor. This distinction has significance because the Cairns project referred to by Mr Knell as informing his view of the arrangement was a fixed price contract.

    [49] T344, Ln 21; T344, Ln 32 – 33.

    [50] See affidavit of Lorenzo Reginato filed 16 March 2010 at paragraphs 15, 46, 63.

18. Additionally, it was contended by Sunstruct that paragraph 7 of the TFASOC illustrated another element of confusion in Bluechip’s claim.  That is that the term “variations” in the CMA was conflated by Bluechip with the concept of variations to any price variation provided for in the elemental budget rather than by reference to trade contracts. The term “variations” appears in the CMA at clause 5(i) and 5(l) but in each respect relates to variations of the Works by trade contractors.  As was contended, given the structure of the Contract, it is logical and follows the natural course of the CMA that variations of a trade contract between Bluechip and a trade contractor would need to be approved by Bluechip as the contracting party.  Sunstruct was not a party in its own right to trade contracts and except in instances of the expressed conferral of power or agency to do so could not commit Bluechip to a variation of a trade contract without Bluechip’s approval.  As the Project progressed, variations were reported by Sunstruct to Bluechip in the monthly construction management reports. Annexure B of the CMA provided that it was a requirement of the contract that Sunstruct would provide monthly reports being construction management reports (CMRs) consisting of, inter alia:

    a) Site manager’s report inc:

    (i)Overview;

    (ii)Schedule/program;

    (iii)Tender/contract status;

    (iv)Onsite industrial relations;

    b)Summary sheet of:

    (i)requests for information (RFI);

    (ii)notification of delays (EOT’s);

    (iii)Variations.

    c)Safety report;

    d)Construction Manager’s Report:

    (i)current profit/loss statement

    (ii)general project reporting.

19. Paragraph 2(b)(iii) provided for a reporting of variations. As noted, variations did occur.

20. These variations to trade contracts were both negative and positive.  However, as was submitted by Sunstruct, that is an entirely different situation to the point in dispute between the parties, namely “preliminaries”. “Preliminaries” were not a trade contract. They constituted a separate part of each progress claim as provided for in CMA clause 16(b) by reference to Schedule 9 such as the items identified at Items 10 and 11 of Schedule 9 relating to costs which are employed in the performance of the Works and hire charges for machinery, plant, scaffold and equipment used in the Works and including incidental charges, all at current rates. These costs included the cost of scaffolding and the crane which were time-based contracts.  The Contract plainly contemplated that they would be claimed for within the usual monthly progress claim and even if allowed for in the Budget that allowance bore no significance for present purposes in the sense contended for by Bluechip. 

4.1   Breach of Contract

1. Bluechip alleges that Sunstruct breached the contract by failing to:

   a)accurately determine by estimate the cost of the works (the Budget);

   b)cause the works to be carried out;

   c)monitor the Budget;

   d)cause the works to be carried out and to monitor the Budget throughout the performance of the works such that if there was an increase in the costs of the works, to advise Bluechip of that matter and to seek its written approval for any such variation and increase in costs before it was undertaken;

   e)have available to it from February 2008 staff capable of supporting and maintaining its licence;

   f)supply construction management services in a proper  and tradesman like manner;

   g)provide construction management services to the standard of a reasonably competent construction manager and builder; and

   h)perform the role of construction manager pursuant to and in accordance with the contract and Tripartite Deed.

1. In Henville v Walker (Supra) the plaintiffs had been induced into purchasing land for the purpose of developing a block of units on the basis of estimations provided as to the anticipated selling prices of the units. In addition the effect of those representations, which were later found to be misleading or deceptive, were compounded by the plaintiff’s reliance upon their own experience and expertise to estimate the likely cost of development. In the result both the estimate as to the likely selling price and the estimate as to the cost of development were both wrong. Ultimately the High Court determined that the true measure of loss under s.82 was the actual loss, that being the difference between the profit reasonably budgeted for and a profit achieved.

2. This case has some parallels with Henville v Walker. Here Sunstruct can point to a number of matters solely within the control of Bluechip which plainly contributed to the loss. Contrary to Bluechip’s submissions I do not think Henville v Walker is authority for the proposition that those matters can be ignored. Henville v Walker is authority for the proposition that they might be ignored “in the absence of evidence that the cost overruns and delays were unreasonable or reasonably unforeseeable.”[123] Here there is plain evidence that the cost overruns were unreasonable. That is, they were incurred because of failings on the part of Bluechip in the performance of its obligations under the CMA and that by reason of those matters the anticipated construction time blew out significantly resulting in a significant underestimation of “preliminaries” costs. Likewise the evidence is that as at the date of the first alleged contravening misrepresentation the delay occasioned between the execution of the CMA and Bluechip’s attendance to those matters which delayed the Project were entirely and quite reasonably unforeseeable. In my view consistent with the view of the majority of Henville v Walker Sunstruct has demonstrated that Bluechip should not recover damages by reason of Sunstruct being able to disentangle the various contributing factors and in particular by demonstrating that first alleged misrepresentation had no bearing upon the loss contended for.

   [123] Citation of Damage

3. This case is not one whereby following the conduct Bluechip suffered in consequence of altering its position. Here, as in Henville v Walker[124] Sunstruct demonstrated why Bluechip ought not be awarded damages.

   [124] (2001) 206 CLR 459

4. Adopting the same reasoning I am also satisfied that were I wrong in my conclusions concerning the second, third, fourth and fifth alleged contravening conduct, Sunstruct has demonstrated that Bluechip has no entitlement to damages.

5. I do not think the parties differ materially on the principles governing the approach the Court should adopt to causation. Generally Bluechip must demonstrate causation between the conduct complained of and its damages. In Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 at 220 Branson J with whom Spender and Olney JJ concurred observed concerning s.82 and s.87(1) of the TPA the relevant principles were governed by the observations of Mason CJ in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 where at 525 the Chief Justice stated:

   The statutory cause of action arises when the plaintiff suffers loss or damage "by" contravening conduct of another person. "By" is a curious word to use. One might have expected "by means of,” "by reason of,” "in consequence of" or "as a result of.” But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s82(1) should be understood as taking up the common law practical or commonsense concept of causation recently discussed by this Court in March v Stramare (E and M H) Pty Ltd [(1991) 171 CLR 506], except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Had Parliament intended to say something else, it would have been natural and easy to have said so.

6. The Full Court’s view in Pritchard v Racecage mirrors the approach relied upon by Bluechip and expressed by Gummow J in Elna Australia Pty Ltd v International Computers (Aust) Pty LtdNo 2 (1987) 16 FCR 410 at 410 where his Honour said:

   It is clear that the conduct in contravention of a provision of Pts IV or V of the [Trade Practices] Act need not be the only cause of the “loss or damage” (within the meaning of s 82(1)) which may be recovered: Milner v Delita Pty Ltd (1985) 61 ALR 557 at 572. The presence of other operative causes thus is not necessarily fatal to the applicant's claim. However, it may be that, whilst the facts constituting the contravention of a provision of Pts IV or V of the TP Act are, with other causes, necessary preconditions of the “loss or damage,” in the circumstances of the particular case it is those other causes which are properly to be treated as the real, essential, substantial, direct, or effective cause of the loss or damage: Compare Stapley v Gypsum Mines Ltd [1953] AC 663 at 681–2, 687–8. Such a case might arise for consideration where those other causes involved acts or omissions on the part of the applicant, which were in breach of a legal, equitable or other statutory duty owed by the applicant to the respondent or to third parties. In such a case the court might treat those other causes as the essential or effective cause of the loss or damage and hold there was no right to damages under s.82. A question might then arise as to whether some more limited relief under some other provision of Pt VI was appropriate.

7. Likewise here I do not think there is a serious disagreement between the parties in respect of these principles concerning s.82 damages. The scope and objects of the enactment are critically important and bear closely upon any meaning to be given to any language relating conduct to a consequence. That is, language directed to the question of causation by use of the word “by”.

8. It follows the concept of causation required under s.82 and s.87 is far wider than usually applies at common law. In that regard I note the observations of Gaudron, Gummow and Hayne JJ in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [57] where their Honours noted:

   … the question presented by s.82 of the Act is not what was the (sole) cause of the loss or damage which has allegedly been sustained. It is enough to demonstrate that contravention of a relevant provision of the Act was a cause of the loss or damage sustained. (Original emphasis).

9. However that ignores the reality of this case. Here I do not consider the conduct complained of gave rise to any contravention. Had it done so then plainly a basis for causation could be established. In making that observation I hasten to add that not all of Bluechip’s loss can be attributed to any conduct on the part of Sunstruct. In many respects Bluechip’s own conduct occasioned loss. However I do not need to explore that matter in the context of this application. As was submitted by Sunstruct that factor is not material unless Bluechip had an entitlement to damages pursuant to s.82. In this case because of the jurisdictional issues concerning Bluechip’s claim for damages it did not pursue relief under that section.

10. In the context of a pursuit for compensation pursuant to s.87 I note the observations of the Full Court in Mayne Nickless v Multigroup Distribution Services Pty Ltd (2001) 114 FCR 108 to which I was directed by Sunstruct. In explaining the different reliefs available under s.82 and s.87(1) the Court observed:

    [57]  There are, in any event, significant differences between the relief which may be awarded under s.87(1) and that which is recoverable under s.82. The primary difference is that the relief awarded under s.87(1) is discretionary. In the exercise of that discretion, a court would be entitled to have regard to whether the subsection had been invoked merely to overcome a time problem in proceedings that could, absent that problem, have been brought under s.82. The answer to the question whether proceedings have been brought on that basis may be informed by the extent to which the primary injunctive relief would be of any utility. If the primary injunctive relief were to be refused on discretionary grounds, including lack of utility, then there would be a real issue as to whether any award for damages should be made particularly where the case is one in which a claim under s82 would have been out of time.

    [58] It is also to be noted that the relief that may be awarded under s.87(1) includes relief which compensates only in part for loss or damage suffered. Section 82 on the other hand provides a right to complete recovery of loss or damage. Section 87(1) also allows for orders to be made to reduce or prevent likely loss or damage, a remedy not available under s.82. Having regard to the range of ancillary remedies available under s.87(1) and the range of circumstances to which it may be applied there is no warrant for importing into it any selective time limitation for any class of the relief available under it.

11. For reasons addressed below in this section I would refuse to exercise any discretion in favour of any award for Bluechip because the claim made is a global claim. There are many and varied reasons which occasioned Bluechip’s loss. Even if some element of causation could be established to the alleged offending conduct I am satisfied that the global claim contended for includes a significant claim concerning which there is no causal link to the alleged conduct. Simply put, Bluechip has failed to reasonably establish the quantum of its loss occasioned by Sunstruct’s conduct. Quantification of its loss causally linked to the alleged offending conduct was not an impossible task. Bluechip’s decision to pursue a global claim was a purely tactical decision. It chose not to place before the Court evidence necessary to reasonably assess that loss which was causally linked to the alleged behaviour. In the circumstances it cannot reasonably expect a favourable exercise of the discretion to save it from its own tactical decision, particularly so when to do so would have the effect of denying Sunstruct the opportunity to examine the assessment.

10.3 Summary of Findings

1. Bluechip sought an assessment of damages upon a global basis. The claim fails because intervening factors demonstrate that the loss had other causation and quantum components. Bluechip contended that in any event it was entitled to damages pursuant to s.82 and s.87 TPA. It fails on both counts. First Sunstruct has demonstrated that irrespective of any entitlement Bluechip was the principal author of its loss. Secondly, given Bluechip’s tactical decision to run a global claim it would not be appropriate to award damages generally on a discretionary basis.

11.  Respondent’s Counterclaim

1. Sunstruct maintains a counterclaim for the payment of the outstanding construction management fees claimed by it under the CMA. They had earlier been the subject of two payment claims adjudicated upon in May 2009 and July 2007.

2. The adjudication claims were made pursuant to the BCIPA. The adjudicator’s determinations are not binding and in fact the counterclaim by Sunstruct is one which must be pursued at common law: s.100 BCIPA.

3. Given that in this case Bluechip has not made any payment to Sunstruct in accordance with the adjudicator’s awards the BCIPA adjudications have no practical relevance. The counterclaim by Sunstruct is simply its claim for that which it claims it was entitled to pursuant to the CMA. No more and no less.

4. I make this observation at the outset because Bluechip went to considerable effort in its submissions to address the findings of the adjudicator and urge upon me that I make like findings. However since that time matters have moved on. In the course of the application I have determined the rights of the parties. Bluechip’s submission largely contends for a quantum merit assessment. I have found earlier that Bluechip breached the CMA. It follows in my view that Sunstruct is entitled to damages for breach. The only issue is the quantum of those damages.

5. So far as its claim is concerned Sunstruct alleges that the contract provided:

   a)By clause 29(a) that it would act as agent for Bluechip in providing the construction management services stated in the contract;

   b)By clause 2(b) that Bluechip would pay Sunstruct in accordance with the contract;

   c)By clauses 3 and 5 that Sunstruct would perform the preconstruction and construction duties stated in the contract;

   d)By clause 14 that Bluechip would pay Sunstruct a fee for preconstruction duties in the sum of $25,000.00 plus GST;

   e)By clause 16(a) that Sunstruct would submit payment claims to Bluechip each calendar month;

   f)By clause 15(a) that Bluechip must pay Sunstruct a fee for the construction management duties which was fixed in the sum of $336,000.00;

   g)By clauses 16(b) and (c) that Bluechip would pay Sunstruct for the costs of the works listed in Schedule 9 of the contract; and

   h)By clause 16(d) that Sunstruct is entitled to interest on unpaid amounts at the rate of 2% per month calculated from the time of default in the payment.

6. Sunstruct contends it performed the duties referred to in the contract and submitted payment claims in accordance with the contract. It contends that Bluechip, in breach of its obligations under the contract failed to pay it:

   a)The $25,000.00 plus GST for pre-construction duties;

   b)It’s fee for construction management duties; and

   c)Costs of works referred to in Schedule 9 of the contract in respect of which it claims it is entitled to reimbursement.

7. Bluechip denies those allegations.

8. During the course of the works Sunstruct delivered progress claims. Before proceeding to determine the question of quantum two matters require addressing:

   a)In the application Sunstruct’s director Mr Reginato abandoned any claim for sums in excess of the BCIPA adjudicated amounts. At paragraph 20 of his affidavit he swore:

   I also recognise that the adjudicators have reviewed the first payment claim and second payment claim and made a determination in relation to how much Sunstruct should be paid, and Sunstruct does not wish to challenge the decisions made in the first adjudication decision and the second adjudication decision. For these reasons, Sunstruct’s total counterclaim is for:

   (a)    $25,000.00 excluding GST for the pre-construction fee;

   (b)    $188,170.05 including GST, being the amount that Sunstruct was awarded under the first adjudication decision which Bluechip has not paid;

   (c)     $111,870.75 including GST, being the amount that Sunstruct was awarded under the second adjudication decision which Bluechip has not paid; and

   (d)    $8,778.33 including GST, being the costs of the adjudicator’s fees for the second adjudication.

   This is a total of $333,819.13.

   b)In its reply to Sunstruct’s counterclaim Bluechip simply denied the initially pleaded counterclaim whereby Sunstruct claimed for the full quantum of the payment claims delivered.

9. In essence Sunstruct simply proceeds to counterclaim for damages limited in quantum to the sums assessed by the adjudicator.

10. Concerning the general quantum of the construction management fee Sunstruct has abandoned its claim for the higher fee provided for in cl.15(a), Schedule 6 and seeks only the lesser of the two possible Schedule 6 fees noted. Accordingly I am not required to resolve the factual dispute between the parties as to which of the two Schedule 6 sums were agreed. I am satisfied that Sunstruct has an entitlement to its construction management fee pursuant to Schedule 6 because it performed the services it was contracted to perform.

11. Bluechip’s general denial of that allegation does not direct me to any failing by Sunstruct under the contract which would gainsay its entitlement to its Schedule 6 fee of $336,000.00.

12. Argument arose concerning the application of cl.15(b). Clause 15(b) of the CMA was amended. It provided for calculation of fees as a percentage of the cost of the works “as assessed by the quantity surveyor”. The issue of the quantity surveyor’s assessment was alive from Bluechip’s perspective, particularly in its written submissions supporting the adjudicator’s awards. However for reasons which follow the point is in my view sterile.

13. Clause 15 provides for three alternative means of payment of the construction managers fee. Schedule 6 is similarly structured to set a form of fee dependent upon the option agreed upon in cl.15. Importantly, the options provided for in cl.15 are mutually exclusive. For instance, option (a), the option contended for by Sunstruct provided for a lump sum construction management fee. Option (b) provided for a variable fee representing a fee based upon the “Cost of the Works”. Option (c) provided for fees charged upon an hourly rate.

14. It is odd that option (b) was amended in the manner that it appears in the CMA given that there appears to be no serious dispute (except as to the calculation of monthly instalments) that the construction management fee was a fixed fee. That is, the parties agreed to option (a). It is possible that the amendments were made to cl.15(b) in error when really the parties intended for the amendments to be made to cl.15(a). However I do not think that likely.

15. Clause 15(a) provided that the monthly instalments were to be paid “in the same proportion to the progressive monthly payment of the Cost of Works which that Cost of Works bears to Estimated Total Cost of the Works ”. The progressive monthly payment of the Cost of Works was always subject to assessment by BMT, the NAB’s quantity surveyor. Given that fact, the proposed amendments appear otiose.

16. The evidence of the parties was that the negotiation of the CMA occurred over a couple of hours. The bargaining was hard. Many matters were the subject of negotiation. I think that this matter, namely the option in cl.15 was one of the matters being negotiated. The terms of the negotiation were later overtaken by the final agreement made to have the construction management services provided for by a fixed fee. Once a fixed sum basis for payment of the construction management fee was set upon, the other parts of the overall contractual arrangement took care of details such as the checks and balances on the quantum of Sunstruct’s monthly fee a QS report would have provided. The contract having been marked it was simply initiated in the course of the execution process.

17. In submissions Bluechip claims that Sunstruct’s fee claims were over claimed and not in accordance with cl.15(b). For reasons addressed above I consider cl.15(b) did not apply.

18. In any event, Sunstructs fees had to conform with the formula provided for in cl.15(a). It does not appear that strictly they did. As Sunstruct has not provided any workings the reason for this is unclear. However, that matter does not appear to be of moment for, as demonstrated by Sunstruct’s claims, Sunstruct appears to have under claimed. Sunstructs invoice 1553 illustrates this point.

19. In invoice 1553 Sunstruct claimed its fee as “83.1% of the $336,000.00” being the percentage of “Works completed to date” as a fraction of the gross fee.

20. Consistent with the terms of cl.15(a) the figure of 83.1% should be a factor of “the progressive monthly payment of the Cost of the Works which that Cost of the Works bares to the Estimated Total Cost of the Works”.

21. First it should be noted the 83.1% reflects a cumulative total of the value of the Works as at 30 November 2008. The Cost of Works were defined to mean the costs and expenses incurred in connection with the Works under the CMA: cl.1. They were to be paid monthly: cl.16. By operation of the Tripartite Agreement those costs were to be paid by the NAB: cl.3.3; and the costs were to be assessed by a quantity surveyor: cl.3.4.

1. Sunstruct delivered progress claim 13 in respect of the period ending 30 November 2008, the period the subject of invoice 1553.

2. The total costs of works undertaken to progress certificate 13 were valued at that time at $7,282,217.00[125]. That represented a value of works over the previous period of $1,237,452.77. That was the certified sum.

   [125] Progress Payment Certificate # 13 – Ex 4 Volume 2 p619

3. The quantity surveyor assessed the value of Works over the period at $1,163,544.66.[126] That is a difference of $73,908.11. The progress payment certificate brought forward the sum last certified. Then providing the difference as the sum certified for claim (inc. GST).

   [126] BMT & Assoc Certificate 5 Dec 08 – Ex 4 Volume 2 p495

4. Irrespective of which monthly progressive figure is adopted for the calculation of the ratio, that is, the claimed figure or the certified figure, the ratio of completed Works to Estimated Total Costs of Works was either 91% or 92%. Either way the aggregated fees due to Sunstruct at 30 November 2008 were well in excess of its demand for fees at an aggregated value of 83.1%.

5. The basis of each parties reckoning is unstated. However, despite that, the best that Bluechip can contend is that Sunstruct has waived its right to allege any breach because of any failure by Bluechip to pay Sunstruct for a sum in excess of the amount demanded by it. That is, the sum of $98,313.60. As the evidence demonstrates no such demand was made.

6. The basis of Sunstruct’s complaint was Bluechip’s failure, among other things to pay its construction management fee. This gave rise to its claim to terminate.

7. Clause 20 of the CMA dealt with termination. It provided:

   20. Termination.

   Either party has the right and power to terminate this Contract at any time by giving to the other party ten (10) days notice in writing of its intention to so terminate to be sent by registered post. After the expiry of ten (10) days a notice of termination may be sent by registered post. Upon receipt of a notice of termination this contract is at an end.

8. By operation of cl.24, days do not include Saturdays, Sundays or public holidays. Accordingly the effect of the requirement of ten days notice is fourteen calendar days, there having been no public holidays during the relevant period. Significantly, the right to terminate in terms of cl.20 is not predicated on any breach.

9. By letter dated 26 February 2006, Sunstruct wrote to Bluechip. The letter was headed:

   Re Gladstone Project

   Notice of intention to terminate construction management contract.

10. The letter listed a series of complaints by Sunstruct about Bluechip’s conduct in its performance of its obligations under the contract. For purposes of cl.20 those matters are not material. Relevantly, the letter concluded:

    We cannot allow this situation to continue and will, after the expiry of ten (10) days of this date of the letter issue a notice of termination of the Construction Management Agreement.

11. The language in the last paragraph appears somewhat contradictory to both the heading and the terms of cl.20 of the CMA. However its seems plain that Bluechip understood the import of the letter to constitute a notice of termination, particularly after the undated letter sent under cover of fax of 10 March 2009, which was addressed to both Bluechip and the NAB. The contract came to an end on that date. I note in Bluechip’s letter of 11 March 2009 it sought to invoke cl.23, the dispute resolution provision. However that was simply too late. The contract had already come to an end.

12. Although, as I have noted the contract could be terminated on notice without need to establish breach, the fact remains that the notice of termination was issued by Sunstruct because of the breaches alleged by Sunstruct against Bluechip. I have dealt with a number of the breaches earlier. However for present purposes the most obvious breach was Bluechip’s failure to pay Sunstruct its construction management fee. As at the date of the notice of termination, Bluechip owed Sunstruct a sum of $98,313.60 which was payable in respect of invoice 1553. Bluechip’s obligation was to pay that fee within 14 calendar days: cl.16(c) and schedule 8. Bluechip failed to pay Sunstruct that fee within fourteen calendar days of its delivery or otherwise and accordingly Bluechip was in breach of the CMA. Sunstruct accepted Bluechip’s breach and upon that basis determined to issue the notice of termination.

13. By reason of Bluechip’s breach of the agreement to pay Sunstruct its fees Sunstruct was denied its ability to enjoy the fruits of the contract which included the provision of construction management fees.

14. It is difficult to precisely ascertain the value of the Total Works Complete as against the Estimated Total Costs as at the date of termination because insufficient material has been provided. However progress payment certificate 15 dealing with Works up to 31 January 2009 provides the next closest point of measurement. The claim certified accords with the assessment by BMT & Associates. The progress claim assessed the Works at 98.41% complete. I adopt that figure.

15. Accordingly I assess the value of construction management services performed to the date of termination at 98.41% of the fee of $336,000.00. That is $330,657.60. I consider the better figure to adopt is the figure provided for in the progress claim which identified the value of work completed to that certificate at 98.41%. It follows that the construction management fee due to Sunstruct as at the date of termination was $330,657.60. A sum of $189,840.00 had been paid and accordingly the balance due to the date of termination was $140,817.60. When allowance is made for GST the sum due is $154,899.36.

16. Sunstruct also claims in respect of unpaid invoice 1572 issued in the sum of $56,625.73. The invoice claimed for preliminaries in respect of contractual items claimed pursuant to schedule 10.

17. Bluechip challenges Sunstruct’s calculations. In part its challenges are premised upon its speculation concerning hourly rates which have been extrapolated out from gross sums allowed for in schedule 10 and as to hours worked, for instance, in the month of January. Ultimately, the basis of the claim and its calculation have been attested to by Lorenzo Reginato, a director of Sunstruct and qualified accountant. In his affidavit he stated that each month Sunstruct would provide to Bluechip a detailed report in relation to costs which it had incurred for the month. Those costs included the costs invoiced in respect of schedule 9 expenses. Ultimately the matter is one of a contest between the deposition of Mr Reginato and Bluechip’s speculation. I accept Mr Reginato’s deposition. Accordingly I allow the unpaid invoice 1572 in the sum of $56,625.73.

18. The next invoice in contention was invoice 1578. In respect of this invoice Sunstruct also claimed for schedule 9 and schedule 10 expenses. Bluechip’s complaint also relates to the hourly rates. However while this matter was touched upon in the cross examination of Mr Reginato, the matter was left at large. It was pointed out during the course of cross examination that the level of specificity expected of Mr Reginato as a witness was a matter which had not been fairly flagged and accordingly Mr Reginato was not in a position to answer such questions.[127] Ultimately Bluechip were invited to pursue the matter in later cross examination if they considered it appropriate.[128] However they did not do so.

    [127] T150 L 15.

    [128] T1605 L 15

19. I accept Mr Reginato’s evidence concerning the quantum of invoice 1578 at $58,048.77.

20. Sunstruct also claims for preliminaries performed. Those claims total $15,000.00. In the absence of any basis to reject Mr Reginato’s evidence on this point I also accept that sum.

21. In summary the sum to which Sunstruct was entitled and which were the subject of first adjudication are:

Construction management fee (less allowance for payments made)	$154,899.36
Invoice 1572	$56,625.73
Invoice 1578	$58,048.77
Preliminaries claim	$15,000.00
Total:	$284,573.86

1. A sum of $188,170.05 was allowed on the first adjudication. Ordinarily interest ought be allowed on the unpaid monies as provided under the CMA. Interest will take the quantum further beyond the adjudicated amount of $188,170.05. Sunstruct agreed to be held to the adjudicated sum. Accordingly, I assess the quantum due on the sums which made up the first adjudicated amount at $188,170.05.

2. The second part of Sunstruct’s claim relates to the second adjudication award. Items (a) to (e) of that award include:

   a)Project accounting fees to 16 March 2009: $1,056.00;

   b)Contract administrator’s fees to 16 March 2009: $11,616.00;

   c)Performance fees to 16 March 2009: $6,578.00;

   d)Finishing performance fees to 16 March 2009: $2,873.73;

   e)Labourers fees to 16 March 2009: $2,640.00.

3. In respect of those matters Bluechip maintains the same complaint as it did in respect of the rates invoices, the subject of the first adjudication. As I have earlier determined, I accept Mr Reginato’s evidence on these matters and accept those claims.

4. For reasons provided above, I accept at cl.15(a) was the relevant clause governing the construction management fee. Consistent with that clause, the cost of Works increased by greater than 10% and accordingly Sunstruct was entitled to an increase in its construction management fee in accordance with cl.15(a). I accept cl.15(a) has a value of $62,808.27.

5. I have no basis to reject the remaining claims arising from the second adjudication. In summary I accept the sums being:

Items listed at (a) to (e)	$24,763.73
Legal fees	$6,228.53
Bunning’s invoices – two spas	$15,246.95
Consumables	$1,890.86
Travel and Accommodation:	$932.39
Increase in construction management fee (cl.15 of the contract)	$62,808.27
Total:	$118,870.73

1. In summary, I accept the second adjudicated amount in the sum of $118,870.75.

2. Sunstruct also claims for the adjudication fees incurred on account of the BCIPA adjudications. Plainly, Sunstruct was correct in making its applications pursuant to the BCIPA. It was sufficiently successful before the adjudicator to warrant the adjudicator’s favourable exercise of his discretion as to costs. He awarded costs in each instance in favour of Sunstruct. Had Bluechip not breached its contract by failing to pay Sunstruct its claim or at least something approaching the quantum of its claims then I accept it is unlikely that Sunstruct would have been compelled to invoke the BCIPA process. The costs associated with conducting the BCIPA process have a direct causal link to Bluechip’s breach of the CMA. Sunstruct should have the costs of each of the two adjudication events.

3. In summary I assess Sunstruct’s damages for Bluechip’s breach of the CMA as follows:

Preconstruction fee (inc GST)	$27,500.00
First Adjudicated Amount at ‘waived’ rate	$188,170.05
Second adjudicated amount	$118,870.75.
Adjudication costs	$8,778.33
Total:	$343,319.13

1. Sunstruct should have interest in respect of those unpaid sums. Interest should be payable from 10 March 2009 on the full sum.

Summary of Findings

1. Sunstruct counterclaims for damages for breach of the CMA. The CMA was terminated by Sunstruct. The termination itself was not necessarily required to be premised upon any breach. However, Sunstruct determined to terminate the contract early because of breaches by Bluechip. In doing so it suffered loss and damages including the loss of its costs and fees allowable under the CMA to the date of termination. I assess those sums at $343,319.13

Conclusion and Orders

1. For reasons provided as summarised in the section entitled Introduction and Executive Summary I order:

   1.   That the parties submit within 21 days a minute of order giving effect to the findings set out in the reasons for judgment.

   2.   That in default of agreement as to an appropriate minute of order either party have liberty to apply for further listing of the application for mention.

I certify that the preceding three hundred and eighty-five (385) paragraphs are a true copy of the reasons for judgment of Judge Burnett

Date: 26 April 2013