BMD Major Projects Pty Ltd v Victorian Urban Development Authority
[2009] VSCA 221
•7 October 2009
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 6453 of 2004
| BMD MAJOR PROJECTS PTY LTD (ACN 052 965 394) | Appellant |
| and | |
| VICTORIAN URBAN DEVELOPMENT AUTHORITY | Respondent |
| And Between | |
| No 3732 of 2008 | |
| VICTORIAN URBAN DEVELOPMENT AUTHORITY | Cross-Appellant |
| and | |
| BMD MAJOR PROJECTS PTY LTD (ACN 052 965 394) | Cross-Respondent |
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| JUDGES | BUCHANAN, NETTLE and WEINBERG JJA | |
| WHERE HELD | MELBOURNE | |
| DATE OF HEARING | 20 March 2009 | |
| DATE OF JUDGMENT | 7 October 2009 | |
| MEDIUM NEUTRAL CITATION | [2009] VSCA 221 | First revision 13 October 2009. Amended orders pursuant to Rule 36.07 of the Supreme Court Rules. |
| JUDGMENT APPEALED FROM | [2008] VSC 566 (Pagone J) | |
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CONTRACT – Excavation, filling and rehabilitation of a quarry – Lump sum contract – Contractor entitled to recover extra payment for work to deal with latent conditions different from those which the contractor should reasonably have contemplated – Documents prepared by the operators of the quarry should not have caused the contractor to anticipate levels of excavation differing from those shown in tender documents – Objective test – Notification of latent conditions – Notices complied with the terms of contract – Notice given ‘forthwith’- Need to excavate a greater volume of material capable of being a latent condition – Notice of delay to be given within 28 days after the delay occurs – Notices compliant with the contract – Calculation of additional costs – Costs recoverable only if the costs could not reasonably have been anticipated – Whether additional costs were caused by latent conditions – Reasonable rates or prices – Criteria for the calculation of additional costs – Claim for extra costs caused by delay – Contract required claim to be made when delay first occurred – Instruction by superintendent to contractor relaxed the requirements of the contract and did not entitle the contractor to recover extra costs – Instruction by superintendent was for the convenience of the contractor – Claims for extension of time – Effect of amendment of date for practical completion on calculation of costs occasioned by delay – Costs attributable to delay caused by latent conditions were recoverable – Adjustment of amount allowed for additional excavation
ESTOPPEL – Whether estoppel pleaded or argued – Principal estopped by representation that strict observance of the terms of the contract was not required.
S 52 of the Trade Practices Act 1974 (Cth) – Claim for damages pursuant to s 52 of the Act -Contractor not misled or deceived – No reliance upon any representations by principal – Disclaimers – Effect of qualifications and reservations in the supply of information – Calculation of damages – Contractor failed to establish that it suffered a loss by entering into contract.
INTEREST – Supreme Court Act 1985 – Interest recoverable in respect of damages, not a debt or sum certain.
COSTS – Calderbank letter – Amount recovered exceeded sum stated in letter.
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| Appearances: | Counsel | Solicitors |
| For Appellant/Cross-Respondent | Dr C L Pannam QC with Mr G H Golvan QC and Mr M I Borsky | Rigby Cook, Lawyers as agents for Carter Newell, Lawyers |
| For Respondent/Cross-Appellant | Mr H Foxcroft SC with Ms G F Gray | Corrs Chambers Westgarth |
BUCHANAN JA
NETTLE JA
WEINBERG JA:
Introduction
This appeal arises from a contract in writing dated 22 March 2002 whereby the respondent (‘the Authority’) engaged the appellant (‘BMD’) to excavate, fill and rehabilitate a quarry at Niddrie so that a residential development could be built on the reclaimed land.
The site was a disused basalt rock quarry covering an area of a little more than 48 hectares. The quarry operated from the 1920s until 1976. The quarry became overgrown with weeds, small trees and shrubs. There were a number of unstable cliff faces. At the bottom of the quarry was a lake some 11 metres deep. A creek ran through part of the site.
Approximately 12 million cubic metres of rock were excavated from the quarry. The overlying material removed to get at the basalt was piled on site. Some of the stockpiles were placed on natural, unquarried ground; others were placed on the quarry floor.
Essentially, the contract required BMD to sort and blend the overburden and place it in the quarry pit. The site was surrounded by houses and schools. It was thought that materials should not be removed from or carried to the site by heavy vehicles. Accordingly, the contract provided that the source of the material to fill the quarry was to be the overburden stockpiles. BMD was required to excavate the overburden stockpiles to the floor of the quarry or the unquarried natural ground, process the overburden and place it in the quarry as compacted fill.
The contract differentiated between different types of fill material. Type A was the first capping layer and was required to be comprised of particles with a dimension of no more than 100 millimetres. Type B, the bulk of the fill material, was to be placed between the exposed excavation surface and the underside of the Type A capping layer and was to comprise material up to a maximum dimension of 600 millimetres. Type C was to consist of particles to a maximum dimension of 200 millimetres and highly reactive clay soils. The material was to be placed where medium and high density buildings were to be constructed, with piers down to the natural ground to negate the swelling and shrinking characteristics of the highly reactive material. Type D material was to be large rocks and materials deemed unsuitable for use as engineered fill and was to be deposited in the proposed lake of the project. Type E, another fill which was not engineered, was to be placed in the proposed wetlands area. Finally, Types F and G were small volumes of non-engineered fill required for use in retaining walls and a retention pond clay liner.
The price set in the contract was a lump sum, not cost plus. In order to enable tenderers to accurately assess the conditions they would encounter in excavating the quarry and treating the stockpiles, the firm of engineers, who designed the works, supplied the tenderers with reports of geotechnical investigations and bore logs prepared by Golder Associates, a firm of prominent geotechnical engineers, an existing surface contour plan, which showed the existing surface contours of the site, including the stockpiles, a finished surface contours plan, which showed the proposed finish to surface levels of the completed works, a plan of maximum extended excavation, a survey plan which identified the natural ground levels underneath the stockpiles and a bulk earthworks plan, which identified the location of stockpiles and showed the height difference between the two surfaces appearing in the existing surface contours plan and the plan of maximum extended excavation.
After the completion of the works, BMD brought proceedings against the Authority to recover amounts in addition to the lump sum price.
BMD’s principal claims were made pursuant to a term of contract, called a Latent Conditions clause, which entitled it to recover extra payment for the work required to deal with physical conditions on the site which differed materially from those which BMD should reasonably have anticipated when it tendered for the contract.
BMD alleged that the natural surface levels which it encountered in excavating the stockpiles were lower than the levels described in the drawings provided to it, such as the plan of maximum extent of excavation and the bulk earthworks plan. As a consequence, BMD alleged that it was required to excavate, process and place 329,082 cubic metres of material more than it should reasonably have anticipated. BMD also claimed that at least 105,000 cubic metres of additional material was excavated after the Type B material had been completed, surveyed and approved, and thus the material could only be processed and placed as Type A material, requiring crushing to make the material suitable as Type A material. BMD had originally estimated, on the basis of the Golder Associates’ reports, that 70 per cent of the material in the stockpiles was less than 100 millimetres in size and could be placed as Type A material. BMD alleged that on excavation it found that 51 per cent of the material was larger than 100 millimetres and claimed that it was required to crush it in order to reduce its size, for there was only room for Type A material.
BMD claimed additional amounts for variations of contract, interest on late payment of progress payment claims and repayment of the amount deducted by the Authority from progress payments for liquidated damages. BMD also brought a claim against the Authority pursuant to the provisions of s 52 of the Trade Practices Act 1974 (Cth), alleging that the Authority was liable in respect of its silence about known inaccuracies in the information provided to BMD and a failure to provide all relevant information to BMD.
At the conclusion of the trial, the trial judge accepted some of the claims made by BMD. He gave judgment for BMD in an amount of $1,935,986.20 and ordered repayment of a sum of $672,000 which the Authority had deducted as liquidated damages. His Honour awarded additional amounts by way of interest and GST and ordered the delivery up of a bank guarantee. After hearing argument about a Calderbank letter and the consequences of BMD advancing claims which failed, the judge ordered that the Authority pay 80 per centum of BMD’s costs of the proceeding.
Both parties have appealed against the judgment and orders of the trial judge.
In its appeal BMD challenged many of the judge’s findings which led to the rejection or reduction of its claims for extra payments.
The Authority’s cross-appeal for the most part comprised three major complaints. The first was that the information contained in a file of documents of the operators of the quarry, called ‘the Boral file’, should have prevented BMD from recovering any additional amount for excavating material below the levels shown on documents supplied by the Authority to the tenderers, for the Boral file revealed the conditions it should reasonably have anticipated. The second was that BMD had failed to give notice ‘forthwith’ pursuant to cl 12.2 of the contract of certain Latent Conditions and had failed to comply with other contractual requirements as to notice. The third was that the Calderbank offer made by the Authority exceeded the amount recovered by BMD and should have been reflected in an order for costs in favour of the Authority.
At the outset we turn to the first two major complaints raised by the cross-appeal. We will then deal with BMD’s claims for extra payments, which were disallowed by the judge, and finally, the costs of the trial.
Cross appeal grounds 1 and 2: The Boral file
Under cover of grounds 1 and 2 of the cross-appeal, the Authority contended that the judge had erred in the interpretation of cl 12.1 of the contract and thus or in any event in finding that it was not established that BMD ought reasonably to have anticipated the existence of the additional quantities of overburden which it encountered.
Clause 12.1(a) of the contract defined ‘Latent Conditions’ in terms, inter alia, of :
physical conditions on the Site or its surroundings, including artificial things but excluding weather conditions, which differ materially from the physical conditions which should reasonably have been anticipated by [BMD] at the time of [BMD’s] tender …
The judge construed the clause as follows:
The conditions upon which clause 12.1 operates are to be determined objectively; that is, that what should reasonably have been anticipated by the contractor at the time of tender is to be determined by an objective assessment of the facts rather than by what the particular contractor may have done or not have done: see Glenorchy City Council v Tacon Civil Construction.[1] The enquiry occasioned by clause 12.1 requires a determination of questions of fact: namely, what conditions had been encountered, whether they were physical conditions, whether they differed materially from those ascertainable, and what could have reasonably been anticipated: see Atlantic Civil Pty Ltd v Water Administration Ministerial Corporation;[2] Hawker Noyes Pty Ltd v New South Wales Egg Corporation.[3] It is not surprising that the parties would make the operation of a latent condition depend upon objective circumstances rather than the actual or particular knowledge or lack of knowledge of the contractor. The effect of the latent condition clause is to shift to the principal the economic burden of a risk which had been contractually assumed by the contractor. It is fundamental to the shifting of that risk that the occasion for the shift be, as much as possible, beyond the control or fault of the parties but be determined by, and be dependant upon, objective criteria and measures. In that way the parties agree to change which of them will bear the economic burden of a risk, and agree to make that change by reference to a neutral standard or measure which depends upon independently verifiable factors beyond the reasonable diligence or control of the party that will otherwise be relieved of the burden.[4]
[1][2000] TASSC 51 (Unreported, 26 May 2000), [8].
[2](1992) 39 NSWLR 468, 483.
[3]Library No 14077 of 1988 (Unreported, 11 November 1988).
[4]Reasons, [24].
The nub of the Authority’s complaint was that, given that construction, the judge should have held that the variation in levels on the quarry floor was not a Latent Condition within the meaning of cl 12.1.
In order to deal with that contention, it is necessary to say something about the evidence. As was revealed at the trial, the Boral file contained among other things several large A1 sized contour plans of the quarry, drawn at a scale of 1 inch to 200 feet, as follows:
1)A contour plan of the quarry, entitled ‘Locality Plan, drawn October 1969[5] showing surveyed existing conditions as revealed by a ‘face survey’ carried out on 21 October 1969. It revealed that, at that time, there were two benches in the south west corner of the major quarry, one at a reduced level relative to datum (‘RL’) of RL 100 feet and the other of RL 133 feet. The plan also revealed the overburden dump faces as they were at that time and that, while the major section of the quarry was still being worked, the area of the quarry called the cul de sac area had not yet been opened.
2)A contour plan of the quarry, entitled ‘Working Plan’, drawn April 1970.[6] Like the Locality Plan of October 1969, it showed the surveyed existing conditions as revealed by the ‘face survey’ carried out on 21 October 1969 but in addition also showed estimated ‘ultimate conditions’ (scil. intended further excavation) revealing that the intention was that the main quarry area would have the two benches of RL 133 feet and RL 100 feet removed and the quarry would be excavated to its full extent against the southern boundary as far as the statutory buffer zone.
3)A contour plan of the quarry, entitled ‘Working Plan – Revision 1’, drawn 9 May 1972’[7] representing the surveyed faces updated to 5 November 1971 ‘when operations were temporarily suspended’ and also ‘Proposed excavation revised a/c permit 55611- 200ft buffer zone southern boundary’. It showed that the proposed excavation of the benches at the south western corner of the quarry was to be decreased so as to leave a 200 foot buffer zone (as opposed to the 100 foot buffer zone previously proposed) but also that a portion of the two benches in the major quarry had been excavated and thus wholly removed apart from the southwest corner.
4)A contour plan of the quarry, entitled ‘Working Plan – Revision 2’, drawn 13 September 1973,[8] representing the surveyed faces updated to 26 July 1973. It showed that, by that stage, a large proportion of the two benches at the south western corner of the quarry had been excavated down from RL 100 feet and RL 130 feet to between RL 70 feet and RL 73 feet; that most of the main quarry had been fully excavated to depths centring around RL 66 feet; that excavation work had begun on the cul de sac area; and that large dumps or stock piles of crushed stone had been dumped back onto the floor of the main quarry.
5)A contour plan of the quarry, entitled ‘Working Plan – Revision 3’, drawn 20 March 1974,[9] representing the surveyed faces updated to 5 March 1974. It showed that, by that stage, the south western corner of the quarry had been entirely excavated – meaning that the two benches at the south western corner of the quarry had been eliminated - and that the area had been refilled with stock piles of uncrushed stone.
6)A contour plan of the quarry, entitled ‘Working Plan – Revision 4’, drawn 24 July 1975,[10] representing the surveyed faces updated to 4 June 1975. It showed that the position then remained very much as it had been as at 20 March 1974, apart from some redistribution of stockpiles or dumps of overburden throughout the quarry and improved battering of overburden dump faces.
[5]AB8, C0046.
[6]AB8, C0047.
[7]AB8, C0045.
[8]AB8, C0044.
[9]AB8, C0043.
[10]AB8, C0042.
The Authority contended that it would have been plain from an examination of those documents that the two shelves shown in the Maximum Extent of Excavation Plan in the south western corner of the Southern Stockpile had been excavated and filled over and, therefore, that the true level of ground at that point was significantly below the level shown in the Maximum Extent of Excavation Plan. The Authority also called two expert witnesses, Jason Abadee Clark and Don Raisbeck, to give evidence in support of that contention and relied upon what the Authority said were concessions made by witnesses called on behalf of BMD.
Mr Clark was a chartered construction engineer, former managing director of Dillingham Australian Ltd and former general manager of Jennings Construction Ltd, who described his occupation at the time of giving evidence as being to provide services to principals, contractors, solicitors, insurers and others involved in building and civil engineering construction in project assessment, pre-tender and during performance and in project wind up. His evidence in chief on the point was as follows:
The Maximum Extent of Excavation Plan did not appear to show the additional excavation of the benches at the southwest corner of the quarry carried out subsequent to the stage of development shown on the Working Plan revised to 9 May 1972.
I consider that a reasonable contractor would have been alerted to possible differences in the natural surface level to those shown on the Maximum Extent of Excavation Plan if it had made enquiries of Boral and carried out an examination of all of the material in the Boral file.
…
Because of the importance of the levels of the natural surface to this Tender I consider that a reasonable contractor would have carried out a detailed review of the Boral documents in the Boral file. I do not consider that such a review would have been onerous or overly time consuming or outside the knowledge and skill of a reasonable contractor.[11]
[11]Witness statement of Clark AB7, 36055.
In cross-examination, however, his stance was in some ways different. He adhered in terms to the view that the drawings in the Boral file conveyed a picture of work done which was inconsistent with the Maximum Extent of Excavation Plan. But he said that the only specific thing which he had been able to identify from the drawings was that between 3,000 and 4,000 cubic metres of the bench in the south west corner of the quarry had been excavated beyond the extent of excavation shown in the Maximum Extent of Excavation[12] and that the only other thing of significance which he had observed in the file was a note in ‘one of the reports’ that excavation of the floor was carried out after a certain date:[13]
[12]Which is to be contrasted with the over 100,000 cubic metres of additional excavation in fact carried out but not shown as such in the drawings.
[13]AB 7 2454.27–2455.31.
And I suggest to you that the only thing that you found was that there was a bench of some 3,000 to 4,000 m³ of additional excavation that appears to have been excavated, if you have got the benefit of hindsight and looked at the Boral file that doesn’t seem to have been indicated in the maximum extent of excavation plans? - - - Benches excavated, yes.
And it is a bench of some 3,000 to 4,000 m³? - - - That could be correct, I haven’t worked that out.
You have assumed that because there is some anomaly indicating that some bench of 3,000 or 4,000 m³ has been excavated, it doesn’t appear on the maximum extent of excavation plans, that a reasonable contractor should have allowed for something in excess of 100,000 m³ of additional excavation area, that is the assumption you have made? - - - No, I didn’t make that assumption at all.
Well, the area that you have disallowed, something like 196,000 m³ of excavated material, is over 100 m of additional excavation area [sic]? - - - I didn’t make the assumption you say I made.
Do you agree that the area [sic] of additional excavation in the quarry floor is something like 100,000 m³ of additional excavation? - - - 100,000 m³?
Yes? - - - I have not worked that out, it would be of that order.
Something in that order? - - - Yes.
And what you say is that what you identified in the Boral file is the missing bench of something like 3,000 to 4,000 m³ of additional excavation? - - - It wasn’t all identified.
I suggest to you apart from that bench there is nothing else on the Boral file at all? - - - I suggest you are wrong.
What is there? - - - There was a note in one of the reports that excavation of the floor was carried out after a certain date.
Yes, that’s it? - - - Yes.
Mr Raisbeck was a geotechnical engineer whose evidence in chief on this point was that:
The Contractor (BMD) had access to both documents included in [the Boral file] and, apparently, staff from Boral with some knowledge of the quarrying operations, from about the time of interest dated 22 June 2001.
[The Boral file] contained correspondence and plans submitted to the Mines Department on an annual basis up to the close of operations in or about 1976. Within the [Boral file] are some documents of particular note, namely two letters from Albion Reid Pty Ltd to The Secretary for Mines entitled:
· ‘Application for Extractive Industry Licence No. 245, Fowler Quarry’ dated 14 June 1972, the attached table of estimates of stone reserves and the Working Plan (Rev. 1) dated 9 May 1972. (Face survey 5 November 1971, work suspended until October 1972.)
· ‘Extractive Industry Licence No. 245, Fowler Quarry’ dated 28 September 2973 and the Working Plan (Rev 2) dated 13 September 1973 (face survey 26 July 1973.)
In the first letter dated 14 June 1972 Albion Reid acknowledged that a permit had been, in principle, granted to reopen the quarry after work was suspended in November 1971. In fact the licence was not issued until 12 October 1972. The new License allowed the removal of 250,000 tons (approximately 90,000 m³) of residual basalt rock in the South West Corner of the quarry and 2.63 Million tons of basalt, salamander and overburden from a Proposed New Pit on the southern boundary of the quarry. The extent of these proposed excavations is shown on Figure 3.1, Extract of Working Plan (Rev 1). It should be noted that the floor of the pit is shown in the period November 1971 to October 1972 as 67 ft MMBW datum (RL 20 m AHD). AHD is Australian Height Datum. This reflects the contours shown on the Plan of Maximum Extent of Excavation (Figure 2.3) provided as tender information which was developed from aerial photographs.
The removal of the residual basalt in the South West Corner completed the maximum southerly extension of the quarry under the old permit which allowed a Statutory Buffer zone of 100 ft (30m) to the fence line. The Proposed New Pit to the east required a new MMBW planning permit (No 5561) with 200 ft (60m) Statutory Buffer zone to the southern fence line. The proposed new pit has been referred to on site during the Project as the Cul-de-sac area.
The second letter dated 28 September 1973 refers to the excavation of the rock in the South West Corner as being completed in the required time (that is, between October 1972 and July 1973) and that it included additional rock in the base of the quarry that was not included in the original estimate (June 1972 letter & table). The extent of works at July 1973 is shown on the Working Plan (Rev 2) from which a portion has been extracted for this report as Figure 3.2, Extract of Working Plan (Rev 2). It should be noted on the drawing that the floor of the pit was being excavated down to RL 56 ft (RL 16.5m AHD) while the southern and eastern faces of the South West Corner excavation had been backfilled with stockpiled material. The extent of the basalt recovery is clearly shown in the east-west Section C-C and the north-south Section B-B presented on Figures 3.1 and 3.2.
… My best interpretation of the section derived from the quarry drawings is that excavation could have been taken down to RL 16 m over the floor in the southern stockpile area …
I am of the opinion that the reasonable contractor would have taken this Quarry file as a prized source of data with which he could reduce his risk with a small investment in time. The file is small with a number of similar Work Plans providing a visual story of progress. The two letters mentioned above confirm the critical data about the timing and extent of the excavations in the South West Corner. The quality of the plans is excellent and the fact that they are in imperial dimensions and to a MMBW (Imperial) survey datum is immaterial to an engineer who should be familiar with a wide range of conversion factors. The MMBW survey datum was used for 87 years prior to metrication to AHD in 1971 and the conversion is used regularly in Melbourne on any project requiring interpretation of archival material.
As will later be seen, however, Mr Raisbeck’s evidence in cross-examination was also different from what he said in chief.
The principal concession on which the Authority relied was made by Allan Tuttiett, who was the estimating manager with BMD and, prior to becoming an estimator with that company, had spent some 16 years in various on-site roles for a number of contractors involved in the construction of large civil projects in Australia and the United Kingdom with hands on control of earthworks operations and materials management. In his evidence in chief, Mr Tuttiett said that he was provided with the Boral file in the course of preparing BMD’s tender but that he did not gain any valuable insights from his examination of the file for tender purposes. He identified as reasons for his failure to derive anything of assistance from the file that he could not see the datum used, that the measurements on the drawings were marked in imperial units, that there was no scale, and that in effect the drawings were merely sketch drawings more in the nature of explanatory diagrams than ‘proper drawings which might typically have been used for construction purposes’.[14] But Mr Tuttiett was apparently mistaken in his recollection that the drawings were unscaled sketch drawings in the nature of explanatory diagrams. As counsel for BMD fairly conceded, one can see that the drawings were not mere sketch diagrams but rather carefully drafted, scaled engineering renderings. Furthermore, although they were scaled in imperial measurements, it may be doubted that that should have been a problem for a competent engineer. And the drawings did have a datum, as Mr Raisbeck explained.
[14]AB 2, 30,049; B 1307 [21]–[23].
The aspect of Mr Tuttiett’s evidence on which the Authority placed principal reliance, however, was a section of his cross-examination in which counsel for the Authority led him through some of the documents in the Boral file and obtained his agreement to the significance which counsel attributed to each document, as follows:
We had tendered this morning, perhaps earlier this afternoon, a copy of the so-called Boral file? - - - Yes, that’s true.
Who gave that document to you? - - - I would have to say that I cannot clearly remember who gave that document to me, It was either Paul Fogarty or Terry Lynch.
And you understood that that was a document that had been obtained from the internal resources of BMD and was not common to other tenderers? - - - That’s true, BMD’s involvement in this particular job, as I said before that Mr Tim McMahon brought this job to BMD, I believe it was because of or through BMD’s relationship with Boral, particularly in the subdivision side of our work, and that file was offered up by Boral to us to see if it was any help in our tender preparations …
Can I take you to … the letter dated 28 September 1973 [in the Boral file]? - - - Yes.
Second paragraph, did you read that paragraph at the time of tendering? - - - I don’t recall definitely reading that paragraph, no.
Well, it talks about there being removal of the last remnants of stone in the old quarry which includes that in the southwest corner which was removed within the stipulated time? - - - Yes, it does.
So it is clear that there was continuing work going on on the work faces in this quarry referred to in correspondence and as we will see in a moment shown in the drawings, is that right, disclosed by this correspondence? - - - It talks about – yes, this one talks about work that has been done, yes.
Now, I want to take you to the drawings, Mr Tuttiett. You said that you had examined the drawings during the tender period, or was it overviewed them? - - - I overviewed the drawings during the tender period.
Did you take them out of the file and open them up on your desk? - - - Yes, I did.
…
Now, this drawing [the ‘Locality Plan, drawn October 1969][15] is dated October 1969? - - - Yes, it is.
[15]AB8, C0046.
It is just simply headed, locality plan? - - - Yes, it is.
…
And the scale of the drawing is one inch in 200 feet? - - - That is correct, yes.
You are familiar with Imperial measurements, I take it? - - - I am familiar with, I haven’t used them in engineering terms, but I am familiar with them, I know what a foot is, yes.
…
And it is apparent from this drawing, is it not, that whilst the major section of the quarry is still being worked, the cul de sac area hasn’t yet been opened? - - - That’s correct, yes.
Can I take you to the [‘Working Plan’, drawn April 1970].[16] - - - Yes, I have that.
[16]AB8, C0047.
And this drawing has been prepared showing the extent of the proposed new pit on the southern boundary, and the extent to which the old pit is intended to be worked, and the areas are denoted by straight dash lines coloured grey? - - - The estimated ultimate condition, and that relates to quarry face, yes.
In the main quarry area I suggest to you that would have told you upon examination of this plan that the intention was that the main quarry area would have the two benches we have referred to earlier at 100 and 133 feet above the datum removed and excavated to its full extent against the southern boundary as permitted by the statutory buffer zone? - - - Yes.
And did you note that when you examined this file in your tender period? - - - I did not examine it to that depth.
Can I take you to [the drawing entitled ‘Working Plan – Revision 1’, drawn 9 May 1972’].[17] Have you got that open? - - - Yes.
[17]AB8, C0045.
…
Do you see the cul de sac extent of excavation has been decreased so that it is now 200 feet rather than 100 feet from the southern boundary, and the extent of excavation is noted in the same grey dotted ones? - - - Yes, yes, I can see that.
And it is readily apparent, isn’t it, that a portion of the bench or the two benches in the major quarry has been removed save in respect of the southwest corner? - - - Sorry, I would have to refer back to the other – removed since the last drawing?
I believe so? - - - Sorry?
Yes? - - - The cul de sac face there is shown as the statutory buffer zone of 100 feet, on this on it is 200 [f]eet, yes, that is correct.
There are two benches shown in the major quarry areas, one at 100 feet and one at 133 feet. I am suggesting to you that that bench has been substantially – sorry, the top bench has been substantially excavated leaving one bench at 98 feet, and it has been substantially removed in the southeast corner of the major quarry leaving the southwest corner with a bench - - - ? - - - So the 98 level has been removed in the southeast corner of that main excavation.
Yes? - - - And it is still there in the southwest corner, that’s what that drawing purports to tell you.
Did you open each of these plans and place them on top of each other in chronological order so as to look at them? - - - No, I did not.
…
Can I ask you to go to [the drawing entitled ‘Working Plan – Revision 3’, drawn 20 March 1974,[18]]?
Yes? - - - Yes, I have got that.
I suggest to you that the southwest corner has now been excavated entirely, and what is in that area is fill? - - - Section CC?
Shows a large overburden dup to a height of 129, 131, 123, is that right? - - - yes, that’s what is depicted on this drawing.
I suggest you, Mr Tuttiett, that wasn’t too difficult an exercise for an engineer to divine from those drawing? - - - No, that’s quite true.[19]
[18]AB8, C0043.
[19]AB 2, T. 565.18–T. 578. 14.
Counsel for the Authority contended that Mr Tuttiett’s answers, and particularly the last answer set out above, made clear that a reasonable contractor was well able with reasonable care to have ascertained from the Boral file that the conditions in the south west corner of the quarry were not as represented, and so should have reasonably anticipated the presence at the south west corner of the Southern Stockpile of levels materially below the levels shown on the Maximum Extent of Excavation Plan.
To begin with, we were inclined to think that there was some force in that contention. If one is taken through the documents in the file in the way Mr Tuttiett was taken through them in cross-examination, it is possible to see the features which counsel identified in cross-examination and thus the probability of the conclusion that the levels at the south west corner of the Southern Stockpile may have been different to the levels shown in the Maximum Extent of Excavation Plan
On reflection, however, it appears to us that there are several factors which militate against that conclusion. First, as counsel for BMD submitted, it is necessary to read Mr Tuttiett’s answers in conjunction with a passage from his re-examination in which he explained that, although it was not difficult for him to follow the significance of the drawings in the Boral file as he was led through them by counsel for the Authority, it would have been otherwise if he had not known what to look for:
And you were asked by [counsel for the respondent] that – it was suggested to you when you went through this process of going through the drawing, that it wasn’t too difficult an exercise for an engineer to divine from those drawings that some additional excavation had been done, and your response to that was ‘No, that’s quite true.’ What did you mean by that? - - - I meant it wasn’t very difficult for me to follow what [counsel for the respondent] was showing through drawings knowing what to look for in the first place to come, if you like, the other way around from what we would be doing at the tender. If you knew something was there then you could use those drawings to show that.
What if you didn’t know something was there? - - - You wouldn’t know to look for it in the first place.[20]
[20]AB 2, T. 682, .12–25.
Secondly, although one may ordinarily be inclined to prefer the apparent effect of concessions made in cross-examination to qualifications introduced in re-examination, in this case the answers given by Mr Tuttiett in re-examination were supported by concessions made by Mr Raisbeck in the course of his cross-examination to the effect that, unless one had expertise in geotechnical engineering or hired a geotechnical engineer to look at the Boral file, one would not have been able to determine the geotechnical significance of its contents:
So your evidence is that you are not suggesting that a contractor looking at this file would have been able to find something of geotechnical significance, you are saying that a contractor who engaged a geotechnical engineer to look through the file may have found something of geotechnical significance, is that fair? - - - That’s correct.[21]
[21]T. 2564.5–.18.
The Authority contended below and again before us on appeal that Mr Raisbeck’s concession went only to matters of ‘geotechnical significance’ and that, in context, it should be seen that matters of ‘geotechnical significance’ were limited to volume and composition of overburden, as opposed to its depth above the natural level of the ground. But it does not seem to us that the concession was so limited. To the contrary, it was made in the course of questioning specifically directed to the utility of the Boral file plans for the purposes of determining the depth of overburden and thus the level of natural ground. The passage of Mr Raisbeck’s cross-examination which we have set out above was immediately preceded by questions directed to the opinion Mr Raisbeck had expressed in chief that a reasonable contractor would have taken the Boral file as a prized source of data:
So when you make reference to what a reasonable contractor should have ascertained from the Boral file, it is fair to say that you have done that with the benefit of hindsight, you had known at the time that you had the Boral file exactly what it is that the contractor was saying constituted the additional excavation works? - - - Yes.
Yes, can I ask you to look at volume 31. And if I could ask you to go to paragraph 341 on page 279. That constitutes part of Mr Watersons’ response to your expert report? - - - Yes.
And you have read it I take it? - - - Yes, I have.
And do you see that Mr Waterson states that both he and Mr Hawkins reviewed the file during that early stage in the project, and couldn’t find anything in it of significance? - - - Yes, that’s what he has said.
Yes. And that’s not inconsistent with your knowledge? - - - Of this paragraph?
…
If that’s the evidence of what occurred, I want you to take that as a hypothesis because you weren’t there, obviously? - - - Yes.
Then the situation would be that you had two experienced engineers with knowledge of earthworks projects, correct? - - - Yes.
And particular knowledge of this project, but without the benefit of hindsight, who couldn‘t find anything in the file, couldn’t find anything of significance in the file? - - - Are you talking about geotechnical significance?
I am talking about, yes, nothing in the Boral file that indicated anything of relevance to the way the project - - -? - - - Both of them could not fined [sic] anything of geotechnical significance in the file. There is a reason for that.
… Can I suggest to you that that’s inconsistent with your proposition that some reasonable contractor having access to the file would find something of geotechnical significance to this project? - - - If he had expertise in geotechnical engineering, or he had hired a geotechnical engineer to look at this file.[22]
[22]AB 12, T2562.17–2564.18.
Thirdly, as appears from that section of Mr Raisbeck’s cross-examination, Terrence James Waterson, who was the BMD construction manager for New South Wales and Victoria, and John Hawkins, who was the project superintendent engaged by the Authority, both looked at the Boral file after it emerged in May or June 2002 that there may be a significant discrepancy between the Maximum Extent of Excavation Plan and the conditions in fact. Even then, neither of them considered the Boral file to be of any assistance.
Mr Waterson held a Bachelor of Civil Engineering degree, was a member of the Institution of Engineers of Australia and of the Australian Institute of Quarrying and amongst other qualifications held a Current First Class Mine Managers Certificate – Open Cut and Metalliferous Mines. His evidence in chief on the point was as follows:
I showed John Hawkins the file that BMD had obtained from Boral in relation to the quarry after the Project commenced in late 2002, when there was some discussion about a possible short fall in material. We both examined the file and Hawkins stated to me that no useful information could be obtained from the Boral file to work out the levels of natural ground. I agreed. The Boral file was not referred to again throughout the Project. Certainly, Hawkins never asserted to me that the Boral file contained relevant information concerning the depths of natural ground …[23]
Mr Waterson was not cross-examined on that aspect of his evidence.
[23]AB 3, B0856, [22].
Mr Hawkins gave evidence in chief that, after the Project commenced, Mr Waterson told him that the information from the Boral file provided BMD with a further indication as to the amount of quarrying work that had been undertaken and the depths involved.[24] But when he was cross-examined on the matter, Mr Hawkins accepted that what Mr Waterson had said in his evidence about it was in substance accurate:
[24]AB 3, B0856, [22].
Look, after the works commenced on site, Terry Waterson showed you a file of plans and documents which BMD had obtained from Boral? - - - Yes.
Do you recall that?- - - Yes.
And when do you recall that occurred? - - - I recall it was in the first six months of the project.
Can you put a month on it? - - - May, June.
May, June? - - - 2002.
…
Thank you. And I suggest to you that when Mr Waterson produced that file with documents, and historic documents, both Mr Waterson, Chris Leonard from VicUrban and yourself sat down and read the file? - - - Yes, we looked at the plans in that file, yes.
And you all agreed that it was of no assistance? - - - I am not sure that’s correct, the first time as I recall we were looking at the eastern stockpile base, then there was little difference there, it was then used some time later regarding the southwest corner bench.
Well, when you looked at that file with Mr Leonard and Mr Waterson in May of 2002 you didn’t see anything in the file that was of any benefit, is that so? - - - Not at that stage.
And the three of you were all experienced in civil construction works? - - - Yes.
…
And I suggest to you that what happened then is that Mr Waterson offered you the file to take away? - - - Correct.
And you did take the file away, and kept it for a matter of weeks? - - - I don’t recall how long we kept it. Certainly days.
And did you look at the file again? - - - I don’t believe I was given it at that time, it was when we were discussing the southwest bench that I took the file and copied the pages.
But when you say you were given the file by Mr Waterson to take away, did you look at the file? - - - I looked at the file at the time.
Yes. And you gave it back to Mr Waterson? - - - Yes.
And you made no comment to Mr Waterson that it contained anything of any use? - - - I don‘t recall saying it had nothing of any use and I don’t recall making any comment when I gave it back to him.[25]
[25]AB 5, T1983.3–1984.19.
Fourthly, despite the fact that the Authority had the Boral file from May or June 2002, and BMD made claims for compensation for the Latent Conditions constituted by the extent to which the depths of overburden at the south west corner of the Southern Stockpile exceeded depths shown in the Maximum Extent of Excavation Plan, the Authority never suggested during the course of the contract that BMD should reasonably have anticipated from the Boral file that the conditions were as they were found to be in fact. It appears that it was only after litigation was contemplated, and Mr Clark had been engaged, that the idea first emerged that the Boral file was sufficient to alert BMD to the changed conditions. We are reminded of Gleeson CJ’s observation in Rosenberg v Percival,[26] that:
In the way in which litigation proceeds, the conduct of the parties is seen through the prism of hindsight. A foreseeable risk has eventuated, and harm has resulted. The particular risk becomes the focus of attention. But at the time of the allegedly tortious conduct, there may have been no reason to single it out from a number of adverse contingencies, or to attach to it the significance it later assumed. Recent judgments in this Court have drawn attention to the danger of failure, after the event, to take account of the context, before or at the time of the event, in which a contingency was to be evaluated.
[26](2001) 205 CLR 434, 441 [16].
Fifthly, BMD called expert evidence from Mr Garry Mostyn, a geotechnical engineer and an adjunct professor in the School of Civil Engineering, University of New South Wales. He held Bachelor of Engineering and Master of Engineering Science degrees and had considerable experience in working with contractors. He explained that it was only with the benefit of hindsight, which is to say having been briefed on the extent to which the conditions in fact diverged from the conditions depicted in the Maximum Extent of Excavation Plan, that he detected the significance of the Boral file drawings. His evidence in chief, which was not contradicted in cross-examination, was as follows:
My initial assessment, formed in approximately half an hour, was that [the Boral file] was of no real use. My reasons for forming this opinion were that:
a) The scale was too small and unknown.
b) The level datum was unknown and could be out by a few metres.
c) Many of the details appeared crudely drafted on some plans and the reliability/ purpose of the drawings was unknown.
d) It was often difficult to tell cut batters from fill batters, ie. natural ground from stockpile fill.
…
Late in preparing this report and to provide sworn evidence, I returned to [the Boral file] with a view to confirming my initial assessment at a forensic level.
To do so I completed the following tasks [including assembling the drawings in order and establishing a datum by locating several fixed points on several plans and comparing the levels with those on the Exiting Surface Contours Plan].
…
With the benefit of hindsight, I understood from Schedule 3 of the Further Amended Statement of Claim that nearly 200,000 m³ of additional fill had been excavated from the Quarry floor.
Using the above knowledge, I found that Rev 2 of the above plans, and Rev 2 alone, indicates that the bench shown at approximately RL 30m AHD in the south west corner of the Maximum Extent of Excavation Plan had been removed sometime between 5 November 1971 and 26 July 1973. The bench is shown on Rev 1 of the plans and apparently buried beneath fill on Rev 3 of the plans.
…
The level information and plan position control on the Boral documents were not accurate enough for me to be able to assess differences elsewhere.
Based on my experience and my assessment that:
a)An estimator is unlikely to have experience in quarrying or mine regulation.
b)Many engineering staff today have not worked in an imperial measurement system nor are they familiar with imperial level datum.
c)Aerial photography from 1968, 1972 and 1976 had evidently been used by [Vic Urbans’] team.
d)An initial assessment of the Boral documents was that they were unlikely to be of assistance.
e)There was already considerable reliable information on the matter provided by the [Vic Urban’s] project team.
It is my opinion that a reasonable and competent contractor tendering on this project would not have undertaken the level of investigation of the Boral documents that was necessary to establish that the Maximum Extent of Excavation Plan was incorrect in the south west corner of the Quarry.[27]
[27]AB4, 32017–18.
Sixthly, the significance which a reasonable contractor might be expected to attribute to the Boral file stands to be assessed in the context that BMD had supplied all tenderers with an extensive range of documentation to enable tenderers to assess the scope of the project and pitch their tender accordingly. The point was made by the judge as follows:[28]
The test to determine what BMD should reasonably have anticipated is to be judged by what a competent and suitably qualified contractor would expect to encounter by way of physical conditions in the execution of the works: Ryde City Council v Transfield Pty Ltd.[29] Mr Clark’s opinion was that a reasonable contractor would (after examining the Boral file) have been alerted to the possible differences in the natural surface level from those shown on the maximum extent of excavation plan. Mr Raisbeck, on the other hand, an experienced geotechnical engineer also called by VicUrban, said in cross-examination that a contractor would need to have had reasonable expertise in geotechnical engineering or to have hired a technical engineer to analyse the contents of the Boral file, to have found something of geotechnical significance. He said that a contractor looking at the Boral file would have been unable to find something of geotechnical significance but that a contractor who engaged a geotechnical engineer to look through the file may have found something of geotechnical significance. He accepted that the reason that two engineers with knowledge of earthworks projects (namely, Messrs Waterson and Hawkins) would not be expected to find anything of geotechnical significance in the file was because they were not geotechnical experts. The material in the Boral file itself does not contain information in a form that, without more, would make a reader realise or apprehend that the information on the plan of maximum extent of excavation was wrong or needed to be re-examined. The evidence of Mr Raisbeck is, in my view, significant as an expert in the relevant field of expertise and knowledge giving evidence to the effect that a reader of the information in the Boral file would need to have that expertise and knowledge to realise the potential significance for an earthworks contractor of the information in the Boral file. It is telling that a person with specialised knowledge (Mr Raisbeck) believed that it is necessary to have that expert knowledge to appreciate and evaluate the significance for an earthworks contractor of the information in the Boral file. VicUrban was not able to point to any particular fact or matter on the face of the Boral file which would cause a non-expert in the position of a contractor to seek the assistance of a geotechnical engineer. As against this BMD had information which pointed to different natural surface levels from those actually encountered. With all the caveats and qualifications which that information may have had, it is information which had probative value to an earthworks contractor: it was detailed, professionally prepared and honestly proffered by VicUrban as being of assistance. Accordingly I do not consider that BMD should reasonably have anticipated the information which might be found in, or deduced from, the Boral file after expert investigation. More particularly, I do not consider that BMD should reasonably have anticipated that the natural surface levels were different from those shown on the maximum extent of excavation plan even allowing for the qualifications of accuracy and cautions in the materials and reports conveyed to them to assist them in their tender.
[28]Reasons, [29]–[31].
[29][2002] NSWSC 1037; (2003) 19 BCL 225, 229–230.
Counsel for the Authority argued that the judge was wrong to conclude that the matter was to be decided by reference only to what a competent and suitably qualified contractor would expect to encounter by way of physical conditions in the execution of the works. In counsel’s submission, although that was the starting point, it was necessary then to consider what would have been reasonably apparent to BMD if it had examined all information relevant to risks, contingencies and other circumstances obtainable by making reasonable enquiries. And for the purposes of that enquiry, he submitted, the point was not what a geotechnical engineer like Mr Raisbeck or Mr Mostyn might think of the significance of the Boral file but what a prudent contractor would have made of it after examination of its contents. Nor was it to the point, he contended, to have regard to the other information provided by the Authority. In counsel’s submission, it was plain from Mr Clark’s evidence that any reasonable contractor who examined the Boral file would have been alerted to the changed conditions and the judge had erred in excusing BMD from examination of the Boral file by reason of the other information provided by the Authority.
We are not persuaded by those submissions either. The judge did not err in his comprehension of the correct test. It is plain from what his Honour said in context, in particular from the passage of his Honour’s reasons earlier set out at [18] that he understood that the test was objective in the sense of what a reasonable contractor in BMD’s position would have done, and it is clear from the following passage of his Honour’s reasons that he did not ‘excuse’ BMD from examination of the Boral file or from the obligation to make any other reasonable inquiries such as would be made by a reasonable contractor in its position:
BMD contends that a consequence of the standard under clause 12 being an objective one is that it is irrelevant to consider whether or not it had the Boral file. I do not agree with that contention because it is contrary to what is an important purpose of the clause; namely, to encourage and require the making of enquiries by the contractor: VicUrban, as principal, agreed to accept an additional risk of a latent condition but only if the contractor has done all that it reasonably could or should. BMD personnel did make enquiries of others about the condition of the site and by those enquiries came into possession of a file. In my view the reasonable enquiries which a contractor would, and should, make include those enquiries which may be prompted by any previous enquiry it has reasonably undertaken and which it ought reasonably to have undertaken; indeed, the reasonable enquiries which a contractor should make extend to making reasonable enquiries about things known or discovered even if those matters had been known or discovered other than by having made reasonable enquiries or the result of reasonable enquiries (knowing something – however it came to be known - may carry the consequence of an obligation to make enquiries about it). Mr Tuttiett was the senior estimator of the project for BMD and said that he was given the Boral file by either Mr Fogarty or Mr Lynch of BMD. Mr Tuttiett explained that his purpose in reading the file was to ascertain whether it provided any further insight to assist BMD in the preparation of its tender. He then passed it on to Mr Miroshnikoff to see whether it might assist him in the detailed planning and programming of the job. It is, therefore, relevant that BMD had the Boral file to what reasonable enquiries it should have made for the purposes of clause 12.1. The contrary view urged upon me by BMD would discourage the making of enquiries which the clause has made a condition of entitlement to a claim.[30]
[30]Reasons, [25], our emphasis.
Nor did the judge decide the issue according to what a geotechnical engineer might think as opposed to a reasonable contractor in BMD’s position. The point of his Honour’s reference to Mr Raisbeck’s evidence, which it should be noted was tendered by the Authority in support of its contentions, was that, if someone as skilled in the examination and assessment of geophysical plans as a geotechnical engineer is of the view that one would need geotechnical expertise to derive anything of significance from the Boral file, it is a fair indicator that the ordinary reasonable earthworks contractor would not reasonably anticipate as a result of examining the file that the conditions were otherwise than as represented in the documents provided by the Authority.
Nor was the judge in error in coming to a view different to the opinion expressed by Mr Clark. For, as counsel for BMD submitted, the question of what a reasonable contractor in BMD’s position should reasonably have anticipated as a result of examining the file was not foreclosed by expert opinion. It was a question of fact to be decided by the judge according to his assessment of the evidence; and, although Mr Clark’s opinion was part of that evidence, it was certainly not the only expert opinion on the subject. There was also the opinion of Professor Mostyn who, although a geotechnical engineer, was experienced in contracting, and there was the evidence concerning the failure of Mr Waterson and of Mr Hawkins to perceive the significance of the file even when it was perceived that conditions might be different to what had been represented in the Authority’s documents.
Finally, there was nothing amiss in the judge assessing the matter in the context of the documents with which BMD had been provided by the Authority. The reaction of a reasonable contractor to the contents of the BMD file would properly be informed or conditioned by the contents of the Authority’s documents. As Professor Mostyn pointed out, the Authority’s documents were manifestly based on photogrammetrical surveys taken over the whole of the period covered by the drawings in the Boral file. That was reason to be moderately confident that any apparent anomalies that might have appeared from the drawings had been taken into account in the construction of the Authority’s documents.
Admittedly, the Authority made clear that it gave no warranties as to the accuracy of its documents.[31] Even so, the fact that it gave out the documents as the basis for a fixed-price tender was something significant to weigh in the balance in determining how far a reasonable contractor should be expected to go in comprehending the effects of any other possibly relevant material in its possession or which it might obtain on reasonable inquiry.
[31]Reasons,[31].
In our view, when all the evidence opposed to Mr Clark’s opinion is weighed against it, it may be seen that it was not only open but, with respect, plainly right for his Honour to reject it in favour of that other evidence.
Cross-appeal grounds 3 – 8: Notification of Latent Conditions
Clause 12.2 of the contract was in the following terms:
Notification
If during the execution of the work under the Contract, the Contractor becomes aware of a Latent Condition, the Contractor shall forthwith and where possible before the Latent Condition is disturbed, give written notice thereof to the Superintendent.
If required by the Superintendent, the Contractor shall provide to the Superintendent a statement in writing specifying –
a) the Latent Condition encountered and in what respects it differs materially;
b) the additional work and additional resources which the Contractor estimates to be necessary to deal with the Latent Condition;
c) the time the Contractor anticipates will be required to deal with the Latent Condition and the expected delay in achieving Practical Completion;
d) the Contractor’s estimate of the cost of the measures necessary to deal with the Latent Condition; and
e) other details reasonably required by the Superintendent.
Clause 12.3 relevantly provided that delay caused by a ‘Latent Condition’ might justify an extension of time under cl 35.5.
That clause dealt with delay in reaching Practical Completion as a result of, inter alia, ‘Latent Conditions’. Provided that ‘within 28 days after the delay occurs’ the Contractor gave the Superintendent a written claim setting out the facts on which the claim was based, the Contractor would be entitled to an extension of time for Practical Completion.
Clause 36 provided that where the Contractor had been granted an extension of time under cl 35.5 for any delay caused by any of the events referred to in cl 35.5(b)(i), the Principal was obliged to pay to the Contractor such extra costs as were ‘necessarily incurred’ by reason of the delay. Importantly, ‘Latent Conditions’ fell within cl 35.5(b)(ii), and not cl 35.5(b)(i). Accordingly, cl 36 made no provision for delay costs arising out of ‘Latent Conditions’.
Clause 40.5 was expressed in general terms, and dealt with questions of valuation, in particular arising out of variations to the Contract. However, it extended beyond that subject. It commenced by stating that the procedure set out therein would apply wherever ‘the Contract provides that a valuation shall be made under cl 40.5’.
Clause 12.3 provided the link to cl 40.5. It was in the following terms:
Extension of Time and Cost
Delay caused by a Latent Condition may justify an extension of time under Clause 35.5. If a Latent Condition causes the Contractor to –
a) carry out additional work;
b) use additional Constructional Plant; or
c) incur extra cost (including but not limited to the cost of delay or disruption), which the Contractor could not reasonably have anticipated at the time of tendering, a valuation shall be made under Clause 40.5.
Clause 40.5 required the Superintendent to undertake the valuation prescribed. It also set out the basis upon which that valuation would be carried out. If the contract provided for specific rates or prices to be applied in determining the value, those rates or prices would be used. Alternatively, reasonable rates or prices would be fixed if the valuation related to extra costs incurred by the Contractor for delay. The valuation would include a reasonable amount for overheads, but not profit or loss of profit.
In order to understand how the judge came to his decision that BMD had given compliant notice, it is necessary to set out in detail at least some of the documents that were said to constitute the relevant notification. We propose to do so by focussing upon each of the four sites separately designated in dealings between the parties as variously named ‘stockpiles’.
The Quarry Floor Stockpile
BMD submitted that it gave effective written notice to Mr Hawkins, the project superintendent engaged on behalf of the Authority (described hereafter as ‘the Superintendent’), of a Latent Condition, pursuant to cls 12.2 and 35.5, by letter dated 2 August 2002, but faxed some four days later.
The letter in question was in the following terms:
Dear Sir,
RE: VALLEY LAKE – NIDDRIE
NOTIFICATION OF LATENT CONDITIONWe herewith confirm verbal advice that the extent of earthworks required in the area defined as the ‘Southern Stockpile’ differs materially from that anticipated at tender. Accordingly, we submit our notification of a Latent Condition under Clause 12 of the General Conditions of Contract as follows:-
1. Latent Condition
The extent of excavation required to expose natural surface in this area has been shown to be significantly lower than the levels anticipated at time of tender based on all information available to the contractor. This has been demonstrated by exposure of the natural surface some 10 metres below the anticipated level in one area and further confirmed by test pits excavated and surveyed showing the area affected is significant.
2. Additional Work Required
The lower excavation surface requires additional excavation of overburden material, additional placement of structural fill, additional base and possibly wet-based preparation and additional fill platform interfacing. The extent of all these items is unable to be accurately quantified until excavation is complete, however the volume of material is estimated to be approximately 35,000m3.
3. Delay
The location of the material (below the Southern Stockpile) is on the critical path for the project and will cause delay and disruption to the project. Acceleration to alleviate this delay is difficult due to the non-availability of additional fill areas to place this material concurrently with the planned operations. We estimate this delay to be a maximum of 4 weeks, longer if significant areas of wet base is encountered.
4. Cost Estimate
Costs associated with the claim would include the excavation, haulage and placement of the additional material, additional base preparation, fill platform interfacing and delay and disruption costs.
These costs are not able to be accurately quantified until excavation is completed and the extent of additional earthworks including the condition of the base is defined.
If you have any queries regarding the above please do not hesitate to contact the undersigned.
Yours Faithfully
BMD CONSTRUCTIONS – MAJOR PROJECTS PTY LTDTERRY WATERSON
Project Manager
The Authority submitted that notification was not given ‘forthwith’ as required by cl 12.2, upon BMD having become aware of the Latent Condition. The judge considered that submission at [10] and [11] of his judgment, and rejected it.
The Authority also submitted that the letter of 2 August 2002 did not constitute compliant notification because it made no mention of the ‘Quarry Floor Stockpile’, but referred instead to an area described as ‘the Southern Stockpile’.
The first reference to the Latent Condition extending beyond the area described as ‘the Southern Stockpile’ was in a letter from BMD to the Superintendent dated 5 March 2003. That letter referred to earlier correspondence and, in particular, to the letter dated 2 August 2002.
The letter of 5 March 2003 advised that the quarry base surface had by that stage been fully exposed ‘in the main quarry pit floor’ with the exception of the ‘retention pond area’. The floor levels had been surveyed and shown to be at a lower level than those anticipated at the time of tender. The extent of additional excavation of overburden material had been quantified at 157,177 cubic metres net. Associated additional works other than excavation included wet base preparation where the lower levels placed the floor below ground water levels, additional fill platform interfacing due to increased depth of fill platforms and differing site topography, placement of structural fill back up to design excavation levels, delay and disruption costs.
It was clear from this letter of 5 March 2003 that the Latent Condition that had previously been identified in August 2002 extended well beyond the Southern Stockpile. The Authority submitted that the initial notification should be read as confined to a much smaller area than the Quarry Floor Stockpile now said to have been encompassed within the letter of 2 August 2002. The judge considered the Authority’s submission, and rejected it.
His Honour found that the letter dated 2 August 2002 would not have been read in the way for which the Authority contended as being limited to the Southern Stockpile. Rather, it would have been understood as encompassing at least those areas proximate to the Southern Stockpile, namely, the Central and Lake Base Stockpiles which together with the Southern Stockpile made up what was later described as the Quarry Floor Stockpile.
However, his Honour rejected BMD’s argument that the letter dated 2 August 2002 was a sufficient notification of Latent Conditions in three other sites, namely, the Northern, Avenue, and Eastern Stockpiles. His reasoning was that those three sites were ‘not as close to the Southern Stockpile’ as were the Central Stockpile and the Lake Base Stockpile. He added that BMD’s contention regarding the sufficiency of the 2 August 2002 letter to amount to notification of the Northern, Avenue, and Eastern Stockpiles was ‘not open on the pleadings’.
Thus, while his Honour was prepared to treat the reference to the ‘Southern Stockpile’ in the letter of 2 August 2002 as amounting to a reference to ‘the quarry floor’, and therefore to the ‘Quarry Floor Stockpile’, he was not prepared to go further as BMD invited him to do. He noted, in that regard, that BMD itself appeared to have treated the August letter as insufficient to amount to notification of Latent Condition in respect of other sites. It had, through its project manager, Mr Waterson, given separate notification, on 4 June 2003, 17 June 2003, and 17 November 2003 of Latent Conditions in the Northern, Avenue and Eastern Stockpiles respectively.
None of this mattered so far as his Honour was concerned. He said that, if necessary, he would have found that the Authority was estopped from relying upon any defect in the notification process, at least in respect of the width of the description given in the letter of 2 August 2002. That observation by his Honour, though plainly dicta, is the subject of challenge by the Authority in this appeal.
As regards the Northern, Avenue and Eastern Stockpiles, his Honour found that notification had been given ‘forthwith’, after BMD became aware of the Latent Conditions regarding those sites. The only significant point of contention regarding the notifications given in relation to these three sites was the Authority’s claim that the last of them had been given well out of time. The Authority submitted that, on the evidence, BMD must have been fully aware of the Latent Condition associated with the Eastern Stockpile by June or July 2003 at the latest, long before notice purported to be given in November 2003.
It is necessary, therefore, to consider whether his Honour was correct in reaching the following conclusions:
· the letter dated 2 August 2002 was sufficient notification, pursuant to cl 12.2, of the Latent Condition in respect of the Quarry Floor Stockpile;
· if that letter were not sufficient notification of the Latent Condition in respect of the Quarry Floor Stockpile, the Authority was, in any event, estopped from relying upon a failure on the part of BMD to comply with cl 12.2;
· the letter dated 17 November 2003 was sufficient notification, pursuant to cl 12.2, of the Latent Condition in respect of the Eastern Stockpile; and
· if that letter were not sufficient notification of the Latent Condition, the Authority was, in any event, estopped from relying upon a failure on the part of BMD to comply with cl 12.2.
Whether notice of a Latent Condition in the Southern stockpile was given forthwith
The Authority argued, in support of ground 3 of its cross-appeal, that the written notice contained in the letter of 2 August 2002 was not given ‘forthwith’ in accordance with cl 12.2. It submitted that the contract was a modified form of the Australian Standard General Conditions of Contract AS2124-1992. As such, there was a good deal of relevant case law upon the construction of many of its important terms.
A condition precedent to relief for a Latent Condition was the giving of a written notice ‘forthwith’ of the adverse conditions encountered. The Authority submitted that the judge erred in his construction of cl 12.2 in finding that the previous oral advice given, together with the written notification contained in the letter of 2 August 2002, satisfied that requirement.
It was submitted that the word ‘forthwith’ meant ‘as soon as possible’ in the circumstances, the nature of the act to be done being taken into account.[32] It was acknowledged that this was not a limitation that carried with it a precise time, but it was submitted nonetheless that it imposed a clear and intelligible restriction on the time which might be taken to perform the acts in question. It was further submitted that in the circumstances of this case, that time was short.
[32]Re Levy (1980) 50 FLR 99, 114 and JW Armstrong Constructions Pty Ltd v Council of the Shire of Cook (1995) 14 ACLR 165, 171.
According to the Authority, the evidence showed that the alleged Latent Condition in the Southern Stockpile was first encountered by Mr Waterson on 24 July 2002, which happened to be a Wednesday. At that time, BMD was conducting exploratory work in the area of the missing Southwest Corner Bench. Some discussion then took place between BMD and the Superintendent regarding the natural surface being lower than anticipated in that area. It was submitted that any such discussions could not constitute, or take the place of, the required written notice of Latent Condition. The letter dated 2 August 2002 was not sent to the Superintendent until 6 August 2006, some ten working days after the alleged discovery.
The Authority submitted that a letter sent almost two weeks after the discovery of a Latent Condition could not properly be described as having been sent ‘without delay and as soon as reasonably practicable’. BMD led no evidence to explain why written notice had not been given earlier, and the reason was plain. There was no possible justification for the delay.
BMD replied by challenging this last submission. The Latent Condition was first discovered under an area known as the Southern Stockpile. Mr Waterson gave evidence that on 24 July 2002, BMD was digging test holes in that area to locate the natural surface beneath it. The test holes did not expose the natural surface as expected. Mr Waterson told both Mr Leonard of the Authority, and Mr Hawkins, the Superintendent, on either the first or second day of the test hole excavations of BMD’s failure to expose the quarry floor where it was represented to be in the plans, and they attended to observe the excavations. Mr Hawkins told Mr Waterson that BMD should undertake further test exploration to determine the extent of the additional excavation.
In accordance with Mr Hawkins’ instruction, BMD dug further and deeper exploratory holes. On 26 July, and again on 30 July, heavier equipment was brought in for that purpose. Over the course of the following week, the larger machinery kept removing overburden, but the natural surface was still not revealed. It was only then that Mr Waterson realised that the level of natural surface was materially different from that which was expected.
BMD gave notification in writing to the Superintendent in the letter dated 2 August 2002. While there was no explanation as to why it was not faxed to the Superintendent until 6 August 2002, that four-day delay did not prevent the notification from having been given ‘forthwith’.
BMD submitted that the Authority’s contention that the judge had had regard to the oral advice provided to the Superintendent on or about 24 July 2002 was without foundation. His Honour simply reviewed the circumstances in which the written notice had been given, and found as a fact that it was given ‘without delay’. That finding of fact was open.
In addition, the judge noted in his reasons that:
… provisions like clause 12.2 must be construed with business common sense … A stricter construction would encourage, if not compel, contractors to be more concerned with anxiously satisfying a formal temporal requirement of notification rather than to explore the underlying needs and circumstances of the situation.
BMD argued that the letter made it plain that it was a notice of Latent Condition in consequence of the natural surface being significantly lower than the levels anticipated as at tender. The figure of 35,000 cubic metres of material referred to in the letter was an estimate only, and did not purport to state the full extent of the Latent Condition. Until a material difference was encountered, there was nothing to notify the Superintendent about. Merely flagging the possibility that there might be a material difference, before any such difference had been detected, would not have been appropriate, and could not have satisfied the requirements of cl 12.2.
In our view, the judge was correct in rejecting the Authority’s temporal submission that written notice had not been given ‘forthwith’. The delay of four days, from 2 to 6 August 2002, though unexplained, does not signify a failure to comply with the requirements of the notification clause.
It is unnecessary to deal with BMD’s alternative submission (para 31 of its outline of submissions in reply and in opposition to the cross-appeal) that the giving of a written notice forthwith is not a condition precedent to relief for a Latent Condition, but is merely relevant to the valuation of extra cost.
Whether excavation below levels depicted on MEEP plan was a Latent Condition
The next challenge to the notification ostensibly given pursuant to cl 12.2 was that the excavation below the levels depicted on the Maximum Extent of Excavation Plan (‘MEEP’) could not relevantly amount to a Latent Condition. The argument was that the contract was a lump sum contract for the excavation of approximately 2,400,000 cubic metres of stockpiled material and the placement of an estimated volume of 2,218,500 cubic metres of compacted fill. The risk in a lump-sum contract of that type was the risk that a greater volume of material would have to be excavated. BMD had acknowledged assuming that risk when it entered the contract.
Beyond the lump-sum risk, the contract included provision for Latent Conditions. As has been noted, a Latent Condition, relevantly, was constituted by physical conditions being encountered that differed materially from those that should reasonably have been anticipated at the time of tender. A ‘material difference’ connoted a difference of ‘serious or substantial import’.[33] The material difference first notified was the missing Southwest Corner Bench in the Southern Stockpile. The evidence was that the Southern Stockpile was estimated to contain a volume of 109,000 cubic metres over an area of 26,500 square metres. The excavation depths were estimated to be up to 25 to 30 metres. In the event, the missing Southwest Corner Bench added a depth of approximately 10 metres to certain sections of the Southern Stockpile and a volume of additional material of between 35,000 and 50,000 cubic metres. The Authority accepted that this constituted a material difference in physical conditions in that stockpile, but submitted that it was not claimable by BMD as a ‘Latent Condition’ within the terms of the contract.
[33]Oxford English Dictionary (2nd ed, 1989).
By contrast, the Eastern Stockpile was estimated to contain by far the greatest volume of overburden (1,499,000 cubic metres) over the largest area (178,000 square metres). In the event, only 43,412 cubic metres of additional material was excavated in that stockpile. This was less than three per cent more than the estimated volume, and could not, on any view, constitute a material difference.
The Authority further submitted that the Northern Stockpile also contained no Latent Condition. BMD claimed 64,679 cubic metres of additional excavated material based upon excavation below the levels shown on the MEEP. However, that claim was based upon an incomplete identification of the true scope of work in this stockpile. The contract work included the work necessary to provide the finished surface levels depicted on what was known as the Finished Surface Contours plan. That meant that there were always a number of areas where the anticipated natural surface was to be excavated. This was necessary so that gentle contours could be prepared for proposed housing allotments within this particular site. Accordingly, so it was submitted, the supposedly additional excavation work in the Northern Stockpile constituted part of the original scope of work under the contract, and was in no sense ‘additional’. It could not therefore amount to a Latent Condition.
The Authority submitted that the total overall increase in volume excavated over the estimate was only 13.7 per cent (329,082 over 2,400,000 cubic metres). Indeed, there was only an increase of about 3.5 per cent (75,500 over 2,218,500 cubic metres) in the volume of processed and placed material compared with the estimated volume.
BMD now contends pursuant to grounds 17 to 19 of its notice of appeal that the Authority was estopped from relying upon the terms of the contract requiring timeous notice of delay and sought to use the evidence which led the judge to hold that the Authority was estopped from relying upon the terms of the contract relating to Latent Conditions.
The difficulty with this contention is that it does appear to have been made to the judge. His Honour did not consider estoppel in this context and we will not entertain the claim without the benefit of appropriate findings of fact.
Extra layers and tolerances in placing Type B material
BMD claimed that an instruction by the Superintendent that the surface tolerances on the placement of Type B material were required to be plus or minus 100mm, that 3-B digital terrain modelling was to be undertaken at each nominal Type B layer and that each layer was to be fully surveyed and approved before subsequent layers were placed, constituted an instruction within the meaning of cl 40.1 of the contract, which changed the character or quality of the work required to be performed by BMD and entitled BMD to additional amounts by way of direct costs and additional costs for the delay and disruption.
Clause 40.1 provides, as far as is presently relevant:
The Superintendent may direct the Contractor to –
a) increase, decrease or omit any part of the work under the Contract;
b) change the character or quality of any material or work;
c)change the levels, lines, positions or dimensions of any part of the work under the Contract;
d)execute additional work; and/or
e)demolish or remove material or work no longer required by the Principal.
The trial judge rejected the claim. He held that the specification, which provided that each lift of Type B fill for compaction was to be placed in not less than two layers of equal thickness so that the compacted fill ‘does not exceed 1.0m thickness’ meant that the thickness could not exceed one metre. His Honour said:
The natural meaning of the phrase ‘does not exceed 1.0m thickness’ in the clause is that each layer must come within that limit: it may be less, but it may not be more.
His Honour considered that the specification was clear, but if there were any ambiguity, BMD should have followed the provisions of the contract dealing with the resolution of ambiguities and discrepancies.
BMD submitted to the trial judge that the contract provided that, in the absence of any requirement to the contrary, BMD was to use ‘best industry practice’. As the specification was silent as to tolerances, BMD submitted that it was entitled to assume a reasonable tolerance based on best industry practice. This contention was rejected by the trial judge. He accepted the evidence of experts and held that the site presented a specific set of standards and requirements for achieving a higher quality of fill than might normally be achieved by reason of the particular features of the site and its intended purpose of residential development. Accordingly, he did not regard BMD’s recourse to best industry practice as being appropriate. Further, the judge did not regard the requirement of 3-B digital terrain modelling as being a relevant variation. He said that the Superintendent was able to choose the method he would accept as verification. Finally, his Honour said that the claim for delay and extra costs was some 15 months after the direction said to have been given by Superintendent and 28 days notice was required.
Under ground 20 of its notice of appeal, BMD contended that the judge should have acted upon the evidence of a number of witnesses, who said that best industry practice permitted a tolerance of plus or minus 300mm when placing and compacting material containing particles up to 600mm in size.
In our opinion, the judge was entitled to accept the evidence of those witnesses who, relying upon the nature of the site and the use to be made of the compacted ground, gave evidence that best industry practice was not appropriate. In any event the words of the specification were clear. The phrase ‘does not exceed’ appearing before the words ‘1.0m thickness’ clearly meant that the thickness was not to exceed 1 metre.
Additional tolerances at type A/B interface
On 26 May 2003 the Superintendent issued a site instruction to the effect that for all areas where type A filling would be placed at greater than or equal to five metres in depth, the required tolerance on top of the type B layer would be plus or minus 100 mm and that in all the areas where the type A layer was less than five metres in depth, the type B layer was to be finished with a ‘0+tolerance’ within the 0-100 mm range.
BMD claimed that the instruction changed the nature or quantity of the work and founded an entitlement to extra payment for increased costs and delay. On the other hand, the Authority contended that the effect of the instruction was to relax the contract tolerance requirements and accordingly, did not warrant the extra payment. Clause 2.30 of Appendix 8 of the General Description of Work provided:
Finished surface levels shall be within +- 050 mm for those shown on the approved plans or to such levels as the Superintendent may approve in writing.
The Authority contended that a consequence of the clause referring to the finished surface levels of the plans was that the depth of type A fill must necessarily have determined the levels of the type A/B interface, which could simply be ascertained by deducting the depth from the finished surface level.
The judge agreed with the Authority’s interpretation of the contract and disallowed the claim.
It was submitted on behalf of BMD pursuant to ground 21 of the notice of appeal that the construction preferred by the judge was unrealistic and incorrect. According to counsel for BMD, there was a finished surface level contemplated by the contract being the level of the surface when placement was finished but that no other levels, including the top type B layers, were provided for in the contract drawings.
In our opinion it has not been demonstrated that the judge erred. The contract did not in terms provide for a tolerance level in respect of the type B material layers. His Honour’s view gained support from the evidence of Mr Clarke, who said that in his experience, levels of layers of construction which were lower than the finished surface level were commonly determined by deducting a specified layer thickness from the finished surface level.
The Geofabric claim
In about May 2003, significant volumes of large rocks generated by BMD from operations on site could not be managed without crushing, an operation which BMD wished to avoid. Mr Waterson requested the Superintendent to approve the placement of large rocks to a depth of three metres in an area called the ‘bath tub-area’. On 27 May 2003 the Superintendent issued a site instruction that a coarse rock layer could be placed in the bath tub area. The site instruction stated that a G3 geofabric was to placed over the coarse rock fill.
The question for determination by the Court was whether the variation contained in the site instruction was one for the convenience of BMD. If it was, contract provided that the Superintendent was not obliged to approve the variation, which, if approved, entitled BMD to an extension of time and extra payment. The judge said:
The evidence satisfies me that the variations requested by BMD and the variation itself was for BMD’s convenience notwithstanding that the variation was producing work which might also ultimately benefit VicUrban.
Under grounds 22 and 23 of its notice of appeal, BMD contended that the variation was for the benefit of the Authority for, as a consequence of the variation, it would not have to pay the cost of crushing material and was able to use the available fill material in other areas of the site.
In our opinion the fact that the performance of the work might be characterised as being for the convenience of and for the benefit of the principal does not decide the matter. The critical question remained whether the work was being conducted for the convenience of BMD and in our opinion his Honour was entitled to conclude from the evidence that this was so.
Interest on repayment of the sum deducted as liquidated damages
The judge held that an amount of $672,000 was wrongfully deducted by the Authority as liquidated damages and ordered that it be repaid. His Honour also ordered that interest on the amount was to be calculated pursuant to s 60(1) of the Supreme Court Act 1986 since the commencement of the proceeding to the date of judgment.
This conclusion was attacked under ground 24 of the notice of appeal. BMD claimed that interest was payable pursuant to s 58(1) of the Act, contending that it had recovered a debt or sum certain, and accordingly interest was to be calculated from the time the amounts making up the sum of $672,000 were deducted.
In our opinion the amount claimed by BMD was properly characterised as damages and not as ‘a debt or sum certain’. BMD pleaded that the amount was wrongfully deducted and claimed the sum as damages.
It is convenient now to deal with the remaining grounds of the Authority’s cross-appeal.
Time Bar
Clause 12.4 of the contract provided:
In making a valuation pursuant to Clause 12.3, regard shall not be had to the value of additional work carried out, additional Constructional Plant used or extra cost incurred more than seven days before the date on which the Contractor gives the written notice required by the first paragraph of Clause 12.2.
The written notice required by the first paragraph of cl 12.2 was the notice to be given forthwith upon BMD becoming aware of a Latent Condition.
Pursuant to ground 11 of its notice of cross-appeal, the Authority complained that the judge failed to address the point, which was said to be a substantial bar. For example, the additional excavation in the Eastern Stockpile was claimed to have taken place in the period from January 2003 to November 2003, yet the notification of a Latent Condition was not given until 11 November 2003.
The effect of the construction of cl 12.4 advanced by the Authority, is that BMD cannot recover any costs for extra work performed while it was ignorant of the existence of a Latent Condition. We do not consider that result was intended by the parties.
In our opinion, the clause is to be construed as excluding extra costs incurred by reason of a Latent Condition of which BMD was aware. As the contract required that notice be given of a Latent Condition forthwith upon BMD becoming aware of a condition, the clause will not rule out a great deal of extra costs, but we are of the view that that was the intended scope of the clause.
Extension of time
Pursuant to ground 8 of its notice of cross-appeal, the Authority contended that the judge erred in finding that BMD was entitled to any more than the 18 days extension of time for the date for practical completion granted by the Superintendent.
It was submitted on behalf of the Authority that in assessing any claim for an extension of time, it was first necessary to determine the date sought to be extended. By an agreement made on 15 August 2002, the date for practical completion of Separable Portion figure 2[54] from 22 March 20003 to 30 June 2003. The amendment was the product of an agreement and not an extension of time granted pursuant to cl 35.5 or a variation directed by the Superintendent pursuant to cl 40.1 of the contract. The date for practical completion, therefore, became 30 June 2003.
[54]All work other than the rehabilitation of Steele’s Creek.
In our view the Authority correctly identified 30 June 2003 as the agreed date for practical completion. The extension was not one granted by the Superintendent. By letter dated 15 August 2002, Mr Whinfield, the property services manager of the Authority, stated that the Authority agreed to modify the payment milestones published under the contract. The letter also set out what was described as a ‘non production milestone’, being the date for practical completion, saying;
An amended Date for Practical Conclusion for Separable Portion 2 is to be agreed by the Principal provided the date is no later than 30 June 2003. The Date for Practical Completion for Separable Portion 1 is to be the same as for Separable Portion 2.
The letter was countersigned by Mr Waterson on behalf of BMD. In our opinion, it is clear that the date for practical completion was altered by an amendment, not by the Superintendent.
The judge determined that BMD was entitled to 130.6 working days’ extensions of time. Practical completion was certified to have actually occurred on 5 December 2003. There were only 113 working days between 30 June 2003 and the date of practical completion on 5 December 2003. Accordingly, so the Authority submitted, the maximum number of days extension of time that could properly have been awarded was 113 working days and the maximum delay costs amounted to $412,111, not the sum of $476,298.20 awarded by the judge.
In our opinion, the amended date for practical completion did not necessarily circumscribe the calculation of extra costs occasioned by the delay. The critical question was whether BMD was delayed by a Latent Condition. Without an identified delay, BMD could have completed its work earlier and would not have incurred costs during the period of delay.
Under ground 12 of its notice of cross-appeal, the Authority contended that the judge was required to find the duration of the delay caused by each of the factors that produced delay. The judge’s calculation of the delay was derived from Mr Tozer’s assessment of extensions of time. Mr Tozer’s analysis took into account concurrency between delay and appropriately deducted a period for concurrency. In our view it was not necessary to assign a specific period to each of the causes of delay. Mr Tozer proffered a detailed explanation for his measurements of the delay caused by each of the Latent Conditions. We think his Honour was entitled to act upon Mr Tozer’s calculations.
As we have held that this ground and ground 8 of the Authority’s cross-appeal have not been made out, it is unnecessary to deal with the Authority’s contention in ground 15 that the judge erred in requiring the Authority to return to BMD an amount deducted in liquidated damages for delay. The ground depends upon establishing that BMD was not entitled to the extensions of time found by his Honour.
Whether costs attributable to delay caused by Latent Conditions were recoverable
Clause 36 of the contract provided:
Where the Contractor has been granted an extension of time under Clause 35.5 for any delay caused by any of the events referred to Clause 35.5(b)(i), the Principal shall pay to the Contractor such extra costs as are necessarily incurred by the Contractor by reason of the delay except for variations under Clause 40.
Nothing in Clause 36 shall oblige the Principal to pay extra costs for delay or disruption which have already been included in the value of a variation or any other payment under the Contract; or
The sums payable under this Clause 36 shall be the Contractor’s sole entitlement to compensation for delay or disruption, including without limitation, delay or disruption caused by the Principal, whether in breach of contract or otherwise and shall be in substitution for and shall exclude the Contractor’s rights and remedies of common law (including the right to recover damages from breach of contract or otherwise).
Pursuant to ground 13 of its notice of cross-appeal, the Authority contended that BMD was not entitled to recover delay costs occasioned by Latent Conditions. Clause 36 only applied when BMD was granted an extension of time for delay caused by an event referred to in cl 35.5(b)(i), that is, delays caused by the Authority, the Superintendent or the Authority’s employees, consultants, other contractors or agents. Entitlement to extensions of time caused by Latent Conditions arose under sub-cls (b)(ii) and (b)(iii). The clause was based upon the standard form AS 2124-1992, but omitted the second paragraph of the standard form’s cl 36, which provided:
Where the Contractor has been granted an extension of time under Clause 35.5 for any delay caused by any other event for which payment of extra costs for delay or disruption is provided for in the Annexure or elsewhere in this Contract, the Principal shall pay to the Contractor such extra costs as are necessarily incurred by the Contractor by reason of the delay.
It was submitted on behalf of the Authority that the deletion of that paragraph disclosed an agreement to deny BMD any entitlement to delay and disruption costs for Latent Conditions.
The result that BMD must bear delay costs caused by Latent Conditions is surprising. While cl 35.5, which provided for extensions of time granted by the Superintendent, did not apply to a delay attributable to a Latent Condition, in our view cl 12.3 met the case. The latter clause provided for evaluation to be made under cl 40.5 where a Latent Condition ‘causes the Contractor to … incur extra costs (including but not limited to the cost of delay or disruption), which the Contractor could not reasonably have anticipated at the time of tendering’. We think that cls 12 and 36 are compatible and that each has its own area of operation. Accordingly, BMD was not denied the ability to recover costs due to delay and disruption the result of Latent Conditions.
Adjustment of amount allowed for additional excavation
The judge found that BMD was required to excavate an additional 329,082 cubic metres of stockpiled material and then process and place it. The contract required that stockpiled material was to be excavated, stockpiled, sorted, blended, carted and filled, including screening, crushing, sorting and blending, to form the required structural fill and non-structural fill compositions for placement. His Honour decided that BMD was to be compensated at rates for structural fills found in Appendix 4 to the contract, rates per cubic metre on an ‘estimated in place volume’.
Pursuant to ground 14 in its cross-appeal, the Authority contended that the judge failed to take into account three matters which ought to have reduced the sum awarded to BMD.
The first was that the correct volume was the volume in place after compaction, which the judge found was on average 23 per cent less than the stock pile volume. The second was that the work under the contract included an item for the excavation, forming and trimming of existing surface with an estimated volume in place of 50,000 cubic metres of material. The claim of 329,082 cubic metres thereby counted as additional work an item of work for which payment was already included in the contract sum. The third matter was that the applicable rate for placement of Type B and Type C structural fills under Appendix 4 already included the applicable rate payment for overheads and profit. Accordingly, the further allowance for overheads and profit in the judgment had the effect of double payment.
The judge dealt with a compaction factor in the course of determining an allegation by the Authority that BMD had failed to manage the materials to ensure that a five metre layer of Type A fill was available for the finished capping level. His Honour said that the need to redesign the finished surfaces arose from a shortfall in available materials, which in turn was largely due to compaction. We see no reason why compaction should be applied to reduce the compensation payable to BMD in respect of its additional excavation of quantities in each of the stockpile types. The compaction factor referred to by the judge was based upon gross volumes for the entire project, and it has not been demonstrated that it should be applied to the excavation, processing and placement of the identified additional excavated quantities. It appears that the parties accepted during the course of the project that additional excavation due to the Latent Condition was to be allowed at the rates applied by the judge.
As to the second matter, 50,000 cubic metres referred to in the appendix to the contract was for excavation in natural ground. The amount was not claimed by BMD as part of its over-excavation quantities claimed. There was no evidence led to suggest that was so. The figure of 329,082 cubic metres was based upon progressive joint surveys by surveyors engaged by both BMD and the Superintendent. The 50,000 cubic metres of excavation into natural material was work which was not surveyed or claimed by BMD as additional excavation.
The allegation that the derived rates for Type A and Type B materials also included allowance for overhead and profit is based upon assumptions made by the Authority’s expert, Mr Clark, who in turn based his opinion upon an internal document used by BMD in the course of preparing its tender. Mr Clark assumed that the rates for Type A and Type B materials excavation and placement included an allowance for overheads and margin uniformly spread over the direct cost items. In fact, the distribution of overheads and margin was not uniformly distributed. So much is clear from the evidence of Mr Tozer. There was no fixed relationship between the overheads and margin and the tender price although Mr Clark assumed there was.
In our opinion this ground has not been established.
Releases and Dilapidation Report
In its defence and counter-claim, the Authority advanced claims by way of set-off and counter-claim for an amount paid to obtain releases from land owners said to have been affected by the works and an amount paid for a dilapidation survey and report. Pursuant to ground 16 in its cross-appeal, the Authority has complained that the judge failed to deal with either claim.
It appears that counsel for the Authority did not mention the issues raised by the ground in either written or oral submissions to the trial judge and did not ask any questions as to the issues in cross-examining the witnesses called by BMD. His Honour gave judgment on 19 October 2007. On 8 November 2007 the parties made further submissions with respect to what were said to be errors or miscalculations in the judgment. No complaint was made by the Authority that the judge had not dealt with ground 16 of its cross-appeal. The judge apparently assumed that the ground had been abandoned. We think that the Authority is bound by the manner in which it conducted the trial and is not entitled to raise the issues on appeal.
In any event, it appears from the evidence led at the trial that BMD and its insurer dealt with the claims of all the neighbouring land owners. The Authority could not identify any outstanding claims.
Conclusion
For the foregoing reasons, we would allow the appeal in respect of the grounds of appeal dealing with the rate to be applied for additional wet based treatment and the value of delay caused by latent conditions. Accordingly, we would set aside the judgment made on 14 November 2007, and in lieu thereof order:
1.The defendant pay to the plaintiff the sum of $4,263,373.70 (inclusive of GST) being an amount comprised of the following sums:
(i)$2,171,896.76 on the nett claims under the contact, plus repayment of the sum of $672,000 which had been deducted as liquidated damages, a total of $2,843,896.76.
(ii)Plus interest in the sum of $1,135,088.10 calculated pursuant to s 60(1) of the Supreme Court Act 1986 on the amount of $2,843,896.76 since the date of commencement of proceedings to the date of judgment on 14 November 2007.
(iii)Plus the amount $284,389 being the GST payable on the amount of $2,843,896.76 referred to in sub-paragraph (i).
2.The defendant deliver to the plaintiff the bank guarantee it continues to hold in the sum of $762,615.80.
3.The plaintiff’s claim otherwise is dismissed.
4.The defendant’s claim otherwise is dismissed.
5.The cross-appeal is dismissed.
Costs
The final issue concerns the costs of the proceeding.
The judge ordered that the Authority pay 80 per cent of BMD’s costs of the proceeding. The order was made to reflect the judge’s impression of the time consumed by claims made by BMD which were separate from those upon which it succeeded and which, in his Honour’s view, ought not to be rewarded by a favourable costs order.
Neither party objects to this deduction. The Authority, however, has appealed against the order for costs on the ground that the judge erred in finding that a Calderbank offer made by the Authority was for a sum less than that obtained by BMD pursuant to the judgment and accordingly contends that his Honour should have ordered that BMD pay the Authority’s cost of the proceeding.
The Authority submits that, if its offer is read in the context of the circumstances existing at the time it was made, including amounts paid under the contract and liquidated damages to which the Authority was entitled, the Authority effectively offered $2,721,114 in settlement of all claims by BMD. That sum exceeded the amount recovered by BMD in the judgment in the proceeding, an amount of $2,607,986.20.
For present purposes it may be accepted that the Authority’s estimate of the value of its offer is correct. As we have decided that, as a result of this appeal, BMD is entitled to judgment in an amount that exceeds the Authority’s estimate, we will not make a special order as to costs.
Accordingly, we will add to the orders set out in paragraph [261] above, and order that the defendant pay to the plaintiff 80 per cent of the plaintiff’s costs of the proceeding.
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