BMD Major Projects Pty Ltd v Victorian Urban Development Authority

[2007] VSC 409

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 6453 of 2004

BMD MAJOR PROJECTS PTY LTD	Plaintiff
v
VICTORIAN URBAN DEVELOPMENT AUTHORITY	Defendant

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JUDGE:	PAGONE J
WHERE HELD:	Melbourne
DATE OF HEARING:	31 July 2007
DATE OF JUDGMENT:	19 October 2007
CASE MAY BE CITED AS:	BMD Major Projects Pty Ltd v Victorian Urban Development Authority
MEDIUM NEUTRAL CITATION:	[2007] VSC 409	Revised 15 November 2007

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BUILDING AND CONSTRUCTION CONTRACTS – Latent condition – Requirements of notice – Meaning of forthwith – Whether identification of precise location of latent condition necessary for notice – Whether physical conditions differed materially from what the contractor should reasonably have anticipated – Objective standard – Whether reasonable enquiries made – Valuation for additional work at “reasonable rates” – Notice for delay sufficient  for contractual variation – Contractual variation for the convenience of the contractor – Payment certificate issued – Breach of duty of care

TRADE PRACTICES — Misleading and deceptive conduct – s 52 Trade Practices Act

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G Golvan QC with Mr P Kelly	Rigby Cooke with Carter Newell
For the Defendant	Mr H Foxcroft SC with Ms G Gray	Corrs Chambers Westgarth

TABLE OF CONTENTS

A.  Preliminary observations........................................................................................................... 2

B.  BMD’s contract claim for latent condition.............................................................................. 3

1.  Quarry Floor Stockpiles/Southern Stockpile claim............................................................ 5

(a)  Notification.......................................................................................................................... 5
(b)  Extent of 2 August 2002 notification................................................................................. 7
(c)  Estoppel.............................................................................................................................. 12
(d)  The latent condition.......................................................................................................... 13
(e)  Breach of contractual warranties....................................................................................... 22

2.  Avenue Stockpile, Eastern Stockpile and Northern Stockpile........................................ 23
3.  Quantum: over excavation.................................................................................................... 25

(a)  Additional placement of Type B and Type C material in “quarry floor” stockpile........... 26
(b)  Additional placement of Type A material in Eastern Stockpile........................................ 31
(c)  Additional placement of Type A in the Avenue Stockpile................................................. 32
(d)  Additional placement of Type A in the Northern Stockpile.............................................. 33
(e)  Additional wet base treatment........................................................................................... 33
(f)  Additional works as a result of a change in topography in the area of the Northern Stockpile.  37
(g)  Additional works as a result of haulage requirements in the area of the Avenue Stockpile 38
(h)  Additional costs for material processing........................................................................... 40
(i)  Value of delay claims caused by the latent conditions....................................................... 42

4.  Second latent condition: oversized rock............................................................................. 49

C.  Contractual variation................................................................................................................. 59

1.  Stockpiling of Type A material............................................................................................ 60
2.  Extra layers and tolerances in placing Type B material................................................... 65
3.  Additional tolerances at Type A/B interface..................................................................... 68
4.  Geofabric claim....................................................................................................................... 71

D.  Certificates and payments........................................................................................................ 74

E.  Trade Practices Claim................................................................................................................ 80

F.  Unjust enrichment...................................................................................................................... 91

G.  Liquidated Damages................................................................................................................. 92

H.  VicUrban’s counterclaim.......................................................................................................... 93

I.  Second Bank Guarantee............................................................................................................. 98

J.  Orders and Costs......................................................................................................................... 98

HIS HONOUR:

1. BMD Major Projects Pty Ltd (“BMD” or “the contractor”) primarily claims against the Victorian Urban Development Authority as the successor to the Urban and Regional Land Corporation (“VicUrban” or “the principal”) under a “latent conditions” clause of a contract between them dated 22 March 2002 based upon      AS 2124 1992.  The claim is also maintained on the grounds of unjust enrichment, breach of contractual warranties and breaches of the Trade Practices Act 1974 (Cth) and other claims on the contract. BMD’s main claim, however, is that it contracted to undertake extensive excavation, filling and rehabilitation works at the former Niddrie Quarry upon an expectation about the physical conditions of the site which differed materially from the physical conditions encountered. VicUrban challenges any entitlement to the claim and maintains a counterclaim, on various grounds, for loss and damage said to arise, essentially, from what it says was BMD’s failures which resulted in the capping layer across the site being lower than required.

A.  Preliminary observations

1. The proceeding occupied a total of 36 days with 23 witnesses giving evidence in long, detailed and substantial written witness statements as well as orally.  The court book is made up of 37 lever arch folders including 7 folders of written witness statements.  The transcript in the proceeding totals 3765 pages.  There is, further, a large number of additional exhibits which are not found in the court book, and written submissions from the parties.  

1. The parties dispute many of the facts and issues raised in the proceeding, and the evidence upon which they turn frequently overlaps.  Accordingly it may be easier to follow the facts and issues in my reasons for decision if I set them out where necessary to give context to the issues as I deal with them and in explanation for my conclusions. 

1. The disputes arise from a project to develop a site in Niddrie formerly used as a quarry.  The Niddrie Quarry had been used to quarry basalt rock from the 1920s to approximately 1976 and then remained vacant until around 12 April 2002.  The previous year, on 22 May 2001, Breese Pitt Dixon Pty Ltd (“BPD”), on behalf of VicUrban, invited an expression of interest from BMD for the excavation, placement and compaction of overburden and other associated materials at the former Niddrie Quarry.  BMD submitted its expression of interest on 22 May 2001.  On 12 September 2001 BPD called for tenders on behalf of VicUrban for work on the site for the filling and quarry rehabilitation for a proposed residential estate.  By letter dated 12 September 2001 Mr Breese of BPD wrote to Mr McPadden, of BMD, noting that tenders were closing on 26 October 2001, and enclosing for BMD’s “pre‑tender activities” some information partly on compact disk and partly in hard copy.  On 8 October 2001 Mr Breese wrote again to Mr McPadden enclosing further information noting that the date for the close of tenders had been extended to 7 November 2001.  A further extension of the closing date for tenders was communicated by email on 1 November 2001 extending the date to 21 November 2001.  There was further correspondence and communications between 12 September 2001 and the closing date for submission of tenders.  On 21 November 2001 BMD submitted a tender having received information on behalf of VicUrban including technical details and the proposed contracts.  

1. There were further communications between BMD and VicUrban after BMD’s tender was submitted.  On 13 December 2001 BMD and VicUrban met to discuss the tender and on 18 January 2002 there was a meeting in Brisbane to clarify BMD’s bid.  BMD was the successful tenderer and was awarded the contract.  The contract was dated 22 March 2002 but was finalised and formally executed later.  Works under the contract, however, commenced before its formal execution. 

B.  BMD’s contract claim for latent condition

1. The contract provides for payment of a lump sum price for the works but entitled BMD to claim additional amounts if it encountered “latent conditions” within the meaning of clause 12.1(a).  Clause 12.2 provides that BMD (referred to as the “contractor” in the contract) may “forthwith” give notice to the Superintendent (who was provided by the definitions clause and the annexure to be Mr Hawkins of BPD) that it has become aware of a latent condition.  Clause 12.3 provides that delay caused by a latent condition may justify an extension of time under clause 35.5.  It also provides that a valuation be made under clause 40.5 if a latent condition caused the contractor to carry out additional works, use additional constructional plant and incur extra cost.  Clause 35.5 provides that the contractor may give prompt notice to the Superintendent when it becomes evident to the contractor that any act or omission of VicUrban (referred to in the contract as the “principal” being the successor in law to the Urban and Regional Land Corporation) may delay the contractor’s work under the contract. 

1. BMD maintains that it encountered latent conditions which caused it to carry out additional works, to use additional and different constructional plant and to incur additional cost in the performance of the works in the amount of $6,972,574.  The additional work involved the excavation, processing and placement of additional quantities of overburden and the need to carry out an alteration in processing methodology involving the need to change from screening to crushing of oversized rock.  The additional quantities were located in areas on the site referred to as the Northern Stockpile, the Eastern Stockpile, the Avenue Stockpile and the Quarry Floor Stockpile.  The additional crushing was said to be necessary because all other options involving the unprocessed disposal of oversized rock contained in the additional quantities had been exhausted.  This was said to require the oversized rock from the additional excavation to be processed into Type A material by crushing before placement.  The conditions as encountered were also said to have caused delay referrable to the placement of additional material and delay costs due to the preparation of wet base. 

1. BMD contends that it gave effective notice under clauses 12.2 and 35.5 of the contract of the latent conditions.  It also claims to have given written notice of the number of days extension claimed as soon as practical following the claims for an extension of time for practical completion in respect to each of the four stockpiles.  The Superintendent has allowed some but not the bulk of these claims, leaving an amount in dispute of $6,301,816 under this claim.

1.  Quarry Floor Stockpiles/Southern Stockpile claim

(a)  Notification

1. BMD claims that it gave effective written notice pursuant to clauses 12.2 and 35.5 to the Superintendent of a latent condition found on site in what the particulars to paragraph 34 of the second further amended statement of claim (“the statement of claim”) describes as the “Quarry Floor Stockpile”.  That notification is said to have been by a letter dated 2 August 2002. 

1. The letter dated 2 August 2002 appears to have been faxed to the Superintendent, and received by him, on 6 August 2002.  VicUrban contends that this notice was not given “forthwith” as required by clause 12.2 upon BMD having become aware of the latent condition.  In this context “forthwith” may be taken to mean “as soon as reasonably practicable or as soon as reasonably possible”: see Re JW Armstrong Constructions Pty Ltd v Shire of Cook;[1] see also Hudson v Hill;[2] Hillingdon v Cutler;[3] Measures v McFayden.[4]  The evidence of Mr Waterson for BMD, its construction manager and principal witness, was that he, and therefore BMD, became aware that the level of the natural ground as encountered on site differed from that depicted in the bulk earthworks plan when test holes were being dug in the last week of July 2002.  Exploration was being undertaken by a backhoe in the Southern Stockpile on Wednesday, 24 July 2002, to locate the natural surface in the area known as the Southern Stockpile.  Mr Waterson informed both Mr Leonard, VicUrban’s Construction Operations Manager, and the Superintendent, Mr Hawkins (“the controlling person throughout”[5]), of these results.  Both were said by Mr Waterson to have observed the test holes in his presence and that Mr Hawkins said that BMD should undertake further exploration to determine the extent of additional excavation.  Deeper holes were dug on Friday, the 26 July 2002 and again later until Tuesday 30 July 2002. 

   [1](1995) 14 ACLR 165, 171.

   [2](1874) 43 LJCP 273, 280.

   [3][1968] 1 QB 124, 135.

   [4](1910) 11 CLR 723, 729 (Griffith CJ).

   [5]Wormald Engineering Pty Ltd v Resources Conservations Co International (1988) 8 BCL 158, 161-2.

1. The written notification dated 2 August (but faxed on 6 August) refers to previous “verbal advice” (a statement which is not disputed).  In such circumstances I consider the giving of the written notice to have been “forthwith” as contemplated by the contract:  BMD became aware of something, gave prompt oral notification, invited the Superintendent and VicUrban itself (through Mr Leonard) to assess the situation themselves, was required to undertake further investigations, made those investigations, and then sent the formal written notification.  Provisions like clause 12.2 must be construed in accordance with business common sense: see McCann v Switzerland Insurance Ltd;[6] Pacific Carriers Ltd v HBP Paribas;[7] Toll (FGCR) Pty Ltd v Alphapharm Pty Ltd;[8] Maggbury Pty Ltd v Halfele Australia Pty Ltd.[9]  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.  The learned authors of Building and Construction Contracts of Australia[10] suggest that the word “forthwith” strictly means “immediately”.  The dictionary definition of “forthwith” does give “immediately” as one meaning.  In many circumstances “forthwith” may be used to mean “immediately”, but the task of construction of contracts is not that of determining what meanings words could have but, rather, which of the possible meanings of a word is the one which the parties intended.[11]  The dictionary definition of “forthwith” also includes “without delay” as a meaning, and I think this better conveys the sense in which the word was used in this contract.[12]  Whether the notices were sent “forthwith” in this sense, is, of course, dependent upon the facts and context.  The notice dated 2 August 2002, on the facts and in the context in which it was sent, as I have set out above, was, in my view, sent “forthwith”; that is, was sent without delay and as soon as reasonably practicable or as soon as reasonably possible in all the circumstances. 

(b)  Extent of 2 August 2002 notification

[6](2000) 203 CLR 579, 589 (Gleeson CJ).

[7](2004) 218 CLR 451, 461-2 (Gleeson CJ, Gummow , Hayne , Callinan and Heydon JJ).

[8](2004) 219 CLR 165, 179 (Gleeson CJ, Gummow , Hayne , Callinan and Heydon JJ).

[9](2001) 210 CLR 181, 198 (Gleeson CJ, Gummow and Hayne JJ).

[10]Thomson Lawbook Co, Building and Construction Contracts of Australia, vol 1, [4.280].

[11]See Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 775 (Lord Hoffmann); and Australian Broadcasting Commission v Australasian Performing Rights Association (1973) 129 CLR 99, 109-110 (Gibbs J).

[12]See also Simpson v Henderson (1829) Mood & M 300, 301; 173 ER 1166, 1167-1168 (Lord Tenterden CJ); R v Worcestershire JJ (1839) 7 Dowl 789 at 790; 54 RR 902, 903 (Coleridge J); J B Saunders, Words and Phrases legally defined (3^rd edition, 1989), 272; Boyes v Bluck (1853) 13 CB 652, 673; 138 ER 1355, 1364 (Cresswell J); Hudson v Hill (1874) 43 LJCP 273, 280 (Grove J); Brown v Bonnyrigg Magistrates [1936] SC 258, 262, 265 (Lord Carmont); Measures v McFadyen (1910) 11 CLR 723, 729 (Griffith CJ).

1. The letter of 2 August 2002 makes no express mention of “the Quarry Floor Stockpile”.  It refers, rather, to an area described as “the Southern Stockpile”.  In the letter it is said that the extent of earthworks required in that area differed materially from that anticipated at tender.  The first paragraph of the letter is expressed to be a notification of a latent condition under clause 12.  The latent condition is described in the letter as being that the extent of excavation required to expose natural surface in “this area” had been shown to be significantly lower than the levels anticipated at the time of tender “based on all information available to the contractor”.  The letter goes on to describe the additional work required, namely, additional excavation of overburden material, additional placement of structural fill, additional base and possibly wet base preparation and additional fill platform interfacing.  The extent of all of these items was estimated to be approximately 35,000 cubic metres.  The letter also said that the location of the material was on “the critical path for the project” and would cause delay and disruption to the project.  It was estimated at the time that the delay would be of a maximum of four weeks but longer if significant areas of wet base were encountered.  The cost of the claim was not estimated in that letter, but was said to include the excavation, haulage and placement of the additional material. 

1. 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, by a reference notation indicated the 2 August 2002 notification.  The March 2003 letter said that the quarry base surface had been exposed “in the main quarry floor” rather than only in the Southern Stockpile.  The letter enclosed a survey plan prepared by R.E. & L.M. Gertzel Pty Ltd (“Gertzel”), surveyors, together with a table, showing volumes of fill at certain chainages across the site as marked on the survey plan, and survey cross­sections.  It is clear from the survey plan and the table that at least three‑quarters of the site shown in the survey plan cross‑section is beyond the Southern Stockpile.  It mentions “latent condition” in its title line but it does not purport to claim a separate latent condition from that notified the previous August. 

1. VicUrban contends, in effect, that such notification as may have been given by the August 2002 letter cannot encompass the quarry floor areas included in the March 2003 letter beyond the Southern Stockpile.  Mr McConville, BMD’s project surveyor who prepared the plan enclosed with BMD’s March 2003 letter, gave evidence that the plan for the claim for over excavation in the “quarry floor” area went beyond the Southern Stockpile into the Central Stockpile, the Lake Base Stockpile and the Northern Stockpile.  There is correspondence capable of being separate notification of latent conditions in the Northern Stockpile, the Eastern Stockpile and the Avenue Stockpile (which I deal with below), but none separately for the area known as the Central Stockpile and the Lake Base Stockpile. 

1. The notification obligation is found in clause 12.2 which provides:

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.

It is clear from this provision that the obligation to notify is not, and ought not to be seen as, a mere formality.  The requirement for notification serves important functions, one of which is to enable the Superintendent to evaluate the latent condition being claimed.  The first paragraph of the clause requires not only that the notification shall be made “forthwith” but “where possible before the Latent Condition is disturbed”.  The juxtaposition of “forthwith” with “where possible before the Latent Condition is disturbed” may support the view that “forthwith” accommodates the passage of some time between awareness and notification.  However, whether it does or not, the additional requirement that notification “where possible” be before disturbance of the latent condition, indicates something of the practical significance of notification.  The second paragraph of the clause identifies the kinds of matters which the Superintendent may require in writing and also reveals a purpose of the notification as being more than a mere formal requirement to be complied with for its own sake. 

1. The 2 August 2002 notification, on its terms and in the context in which it was sent and received, may fairly be construed as notification not only of the condition in the location then worked on (namely, the Southern Stockpile) but, more broadly, as notification that the natural surface levels were lower than expected on the site at least in the areas proximate or contiguous to the Southern Stockpile.  The parties’ conduct after notification in August 2002 is consistent with them having seen the notification as broader than strictly formal notification in the specific area known as the Southern Stockpile only.  The evidence of Mr Waterson is that as excavation was undertaken and areas became exposed, there were joint surveys undertaken and that at all times the supervisor was made aware that the latent conditions notified on 2 August 2002 were extending beyond the Southern Stockpile.  Indeed, that is what one would expect upon the discovery of a latent condition of this kind: namely, that its extent was a matter of discovery as works were progressively undertaken.  So much is evident also from the Superintendent’s requirement, when first notified of the latent condition, that there be further investigations. 

1. White J in Re JW Armstrong Constructions Pty Ltd v Cook[13] specifically declined to be understood as concluding that “identification of the location of the latent condition is necessary” in order to satisfy the requirement of notification under a provision such as clause 12.2.  There may be circumstances where identification of the location may be necessary to satisfy the requirement of notification but, where that is so, it is likely to be because the identification of the location is needed to convey meaning and understanding of the latent condition notified.  Clause 12.2 does not in terms say that the location of the latent condition needs to be identified, although some of the things which the Superintendent may require to be specified will, perhaps, enable the location to be determined.  The critical factor to whether there has been notification must be whether the location is a necessary ingredient to an understanding of the latent condition being notified. 

   [13](1995) 14 ACLR 165, 170.

1. In my view the latent condition notified by letter dated 2 August 2002 was of a substantial variation to the natural surface levels from those which had been anticipated on the plans.  The reference to the Southern Stockpile in the notification dated 2 August 2002 was not, nor was understood to be, nor should have been understood to have been, the locational limits of the latent conditions being notified.  It was, as I have indicated, of the nature of the latent condition which was notified that its extent might not be known at once or with precision.  The latent condition claimed was that the material surface level was below the level which had been anticipated and it was only capable of exact determination by excavation and survey: that is, that it was in the very nature of what was being notified that its extent was unknown and hidden until excavated and revealed.  In cross‑examination Mr Waterson said that the stockpile areas on the plans were arbitrary lines on a drawing which did not mean anything on site.  I accept that the notification dated 2 August 2002 was not limited to the Southern Stockpile but extended at least to the areas proximate to it, namely, the Central and Lake Base Stockpiles as claimed by BMD. 

1. Counsel for BMD also submitted, however, both in writing and orally that the written notification dated 2 August 2002 satisfied the conditions of clauses 12.2 and 12.4 for all claims and that it was the only notification of the existence of the latent condition which was required.  In other words that the 2 August 2002 notification extended beyond the Southern Stockpile area to include the areas described as the Northern Stockpile, the Avenue Stockpile and the Eastern Stockpile.  VicUrban’s counsel contended that this was contrary to the way in which the case had been pleaded and relied in particular upon paragraphs 34 and 36 of the statement of claim. 

1. I am unable to accept BMD’s argument that the 2 August 2002 notification was a sufficient notification of latent conditions in the Northern, the Avenue and the Eastern Stockpiles.  Those three stockpiles are not as close to the Southern Stockpile as were the Central Stockpile and the Lake Base Stockpile, nor is the contention open on the pleadings.  The latent conditions said to have been encountered were pleaded in paragraph 28 of the statement of claim more broadly than, and without reference or limitation to, the Southern Stockpile.  The same is true of the pleading in paragraph 29 about the time and place of encountering the latent conditions.  That is to say that those paragraphs are consistent with a contention that the notification of 2 August 2002 was relied upon in the pleadings to extend beyond the Southern Stockpile into what might fairly be understood to come within the “quarry floor”.  The particulars in sub‑paragraph (b)(i) of paragraph 29 in the statement of claim, for example, refer to the Quarry Floor Stockpile and not to the Southern Stockpile.  Paragraph 34 of the statement of claim, however, is the only paragraph in the pleading which purports on its face to identify the written notifications.  Written notification of a latent condition is a material pre‑condition to entitlement under the latent conditions provisions of the contract.  The particulars to paragraph 34 identify the correspondence relied upon as written notice under the contract.  Paragraph 36 of the pleading is to the same effect in relation to written notice of the number of days extension claimed under the contract.  It is clear from the pleading that the latent conditions claimed in the areas known as the Northern Stockpile, the Avenue Stockpile and the Eastern Stockpile were not contended to have been incorporated in the notification of 2 August 2002.  The evidence of Mr Waterson also shows that he sought to give separate notices in respect of latent conditions in the Northern Stockpile, the Avenue Stockpile and the Central Stockpile.  His evidence may not, of course, determine the proper construction of the statement of claim, but it may have the effect of there being no evidence to support the pleading as counsel for BMD suggested in final submissions that it should be construed. 

(c)  Estoppel

1. It is not necessary for me to consider whether, in any event, VicUrban is now estopped from relying upon strict compliance with the contract.  However, if it were necessary for me to do so, I would find that it was estopped in respect of the description of the extent of the latent condition.  A meeting occurred on 6 August 2002 between Mr Waterson, representing BMD, and Messrs Taber and Leonard, representing VicUrban.  Mr Taber was VicUrban’s General Manager and General Manager of Business Operations, and Mr Leonard was VicUrban’s Constructions Operations Manager.  Mr Waterson made notes of the meeting and recorded Mr Taber as assuring BMD, in effect, that the strict terms of the contract were to be put aside (at least in respect to the issues then under consideration).  Mr Waterson’s notes were  prepared to report to, and to inform, others within BMD and I accept the notes to have been a faithful statement of his recollection of the meeting.  The notes were contemporaneously made and were not undermined by the evidence of the other participants at the meeting or by the cross‑examination of Mr Waterson.  Mr Taber said that he had called the meeting and that one of the reasons why he had done so was to invite a renewed spirit of co-operation after some complaints had been made by BMD senior management and hopefully to get improved co-operation throughout the site.  Another reason given by Mr Taber was to emphasise to BMD that the quality criteria in the specification was absolute and would not be compromised.  His evidence concerning Mr Waterson’s contemporaneous notes was certainly not that of rejection of accuracy or such as to cause me to doubt that Mr Waterson’s was a faithful account of the matters recorded and conveyed.  I am confident that Mr Waterson would, in an internal BMD memorandum, have been more forthright and blunt if the meeting had gone less favourably than he recorded.  I am also satisfied that the outcome of the meeting, and the assurances given to BMD through Mr Waterson in the context of the meeting, were relied upon by him and by BMD.  It would be wrong in such circumstances for VicUrban to rely upon strict compliance with the notification provisions if I had not found that notification had been given beyond any strict boundary of the Southern Stockpile.[14]

(d)  The latent condition

[14]See Commonwealth of Australia v Verwayen (1990) 170 CLR 394, 412 (Mason CJ); see also Legione v Hately (1983) 152 CLR 406, 434-8 (Mason and Deane JJ); Canadian & Dominion Sugar Company Limited v Canadian National (West Indies) Steamship Ltd [1947] AC 46, 53-4; Discount & Finance Ltd v Gehrig’s NSW Wines Ltd (1940) 40 SR (NSW) 598, 603.

1. VicUrban submits that the Quarry Floor Stockpile claim does not, however, constitute a latent condition under clause 12.1 of the contract.  Clause 12.1 provides:

Latent Conditions are –

a)physical conditions on the Site of its surroundings, including artificial things but excluding weather conditions, which differ materially from the physical conditions which should reasonably have been anticipated by the Contractor at the time of the Contractor’s tender if the Contractor had –

i)examined all information made available in writing by the Principal to the Contractor for the purpose of tendering; and

ii)examined all information relevant to the risks, contingencies and other circumstances – having an effect on the tender and obtaining by the making of reasonable enquiries; and

iii)inspected the Site, its surroundings and all improvements and fixtures on the Site and its surrounds (including all physical conditions and characteristics, facilities, services and access); and

iv)all information relevant to the risks, contingencies and other circumstances having effect on the tender and obtainable by making of reasonable enquiries; and

v)all other risks, matters and things which may be relevant to the carrying out of the work under the Contract or the performance of the Contractor’s other obligations under the Contract; and

b)any other conditions which the Contract specifies to be Latent Conditions.

Clause 12.1A carves out an exception from clause 12.1 in the following terms:

Latent Conditions are not associated with the encountering of or measures required to address physical conditions or characteristics of the Site where such physical conditions or characteristics of the site;

a)have been identified or could reasonably be expected to exist, from the site investigation completed for the Site; or

b)could reasonably be expected to be associated with the Site as a result of the Site’s history, past uses and associated site conditions; or

c)have arisen as a consequence of the work practices employed by the Contractor in undertaking the Works as determined by the Superintendent.

The essence of a latent condition under clause 12.1 is that the physical conditions found on the site or in its surroundings differ materially from the physical conditions which should reasonably have been anticipated by the contractor at the time of the tender on the hypothesis of the five matters specified in sub-paragraphs 12.1(1)(i) – (v) and not excluded by clause 12.1A. 

1. VicUrban contends in particular that BMD did not make the enquiries it ought to have made as required by clause 12.1(a) because, amongst other matters, it did not examine the information contained in a file, referred to in the proceedings as “the Boral file”, which it had obtained from the quarrying division of the company which had purchased the Niddrie Quarry from Albion Reid Pty Ltd.  More precisely what is put is that BMD in fact did make reasonable enquiries at the time of tender but that it did not then examine the information in the Boral file which the earlier reasonable enquiries had produced.  VicUrban contends that an examination of the Boral file would have led BMD to the conclusion that there was a discrepancy between the plans that had been provided to it for tender purposes and the quarry as it had been excavated in 1974.  Mr Clark, an expert witness called by VicUrban, explained that the plans showed that the bench in the Southwest corner of the site had been excavated during quarrying operations.  It was his opinion that a reasonable contractor reviewing the Boral file would have been alerted to possible differences in the natural surface level to those shown in the maximum extent of excavation plan after making enquiries of Boral and examining the material in the Boral file. 

1. 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.[15]  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;[16] Hawker Noyes Pty Ltd v New South Wales Egg Corporation.[17]  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. 

   [15][2000] TASSC 51 (Unreported, 26 May 2000) [8].

   [16](1992) 39 NSWLR 468, 483.

   [17]Library No 14077 of 1988 (Unreported, 11 November 1988).

1. 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.

1. The evidence of Mr Clark is, as I have said, that a reasonable contractor would have been alerted to possible discrepancies in the natural surface level from those on the maximum extent of excavation plan after it had made enquiries and examined the material in the Boral file.  The critical question, however, is whether BMD should reasonably have anticipated the contents of the Boral file; that is, whether it ought to have examined the Boral file beyond such consideration as was actually given to it.  There is no suggestion that BMD chose to ignore the contents of the Boral file because they did not want to be affected by knowledge of its contents.  On the contrary, the evidence is that they made enquiries of Boral and indeed secured the Boral file, but that their consideration of it did not prompt them to make any deeper investigation or analysis.  That may in part have been due to the comfort which they had obtained from the extent and quality of the information which had been provided to them (and to all the other tenderers) by VicUrban and its consultants.  But, in part, it was also due to the fact that such review of the Boral file as was undertaken by BMD, and by others, did not prompt them to undertake any further analysis. 

1. Both Messrs Tuttiett and Miroshnikoff, BMD’s senior estimator and assistant senior estimator respectively, reviewed the Boral file and were not put on a chain of enquiry to look for inaccuracies in the detailed information which had been provided prior to the tender.  Mr Waterson reviewed the Boral file shortly after the commencement of the works and provided it to the Superintendent, Mr Hawkins, for his review.  Mr Hawkins’ comment was that he did not believe it was of much use.  Mr Hawkins’ evidence was that the file was initially looked at by him together with Mr Leonard of VicUrban during a meeting which lasted for half an hour to an hour but that neither saw anything in the file which was considered to be of any benefit.  Mr Hawkins took possession of the file for a period of at least some days and copied it, but returned it to BMD or to VicUrban without comment about any conclusions that they were able to make from the information in the file.  Mr Hawkins at no time made any comment to Mr Waterson to the effect that the file contained anything of particular relevance to the project and made no mention of it after returning it to Mr Waterson.  Mr Hawkins gave some evidence about a conversation with Mr Waterson concerning the absence of the south west corner bench revealed in the Boral file, but counsel for VicUrban did not press this in submissions and it is both contrary to the evidence of Mr Waterson and, in my view, improbable and likely to a faulty recollection.  Mr Waterson’s account and recollection on this issue is both more likely to be accurate and better fits the other evidence and events.  Mr Leonard of VicUrban certainly did not support Mr Hawkins on this point and, given the significance of the revelation said to be found in the Boral file, the recollection of Mr Hawkins is likely to have had corroborating evidence if it had occurred as was suggested.

1. The context in which the Boral file is said to have significance is also important.  Extensive and detailed information had been provided by VicUrban to assist tenderers in pre-tender activities.  The information had been prepared or compiled by BPD and had clearly been prepared after much work, over many months, after extensive consultation, at considerable cost, and in order to obtain an accurate cost estimate for the heavy civil works to be undertaken to enable contractors to understand the extent of the works which were to be undertaken.  In other words, the context in which the Boral file is said to have significance is that of earlier investigation thought by those retained by VicUrban to be substantial, relevant and reliable information, albeit that VicUrban did not warrant the accuracy of the information, and informed the tenderers that they should make enquiries to satisfy themselves about the accuracy of the information which had been supplied. 

1. By letter dated 12 September 2001 Mr Breese of BPD, on behalf of VicUrban, wrote to Mr McPadden of BMD enclosing materials and information for the specific purpose of assisting BMD in its “pre-tender activities”.  What was enclosed was:

(i)A compact disk containing the information shown on the attached Schedule N:\h6330\Volume\INFO.DOC.

(ii)“Compilation Report of Geotechnical Investigations and Bore Logs, Valley Lake Niddrie” prepared by Golder & Associates Pty Ltd.

(iii)Bulk Earthworks plan 6330/BE Version 2, Sheet 1 of 3.

(iv)Existing Surface Contours plan 6330/BE Version 1, Sheet 2 of 3.

(v)Finished Surface Contours plan 6330/FS Version 2, Sheet 3 of 3.

(vi)Request for Access to Site Form.

The information was voluminous, detailed and prepared by reputable and experienced experts.  The disk enclosed with the 12 September 2001 letter contained a great deal of information including, importantly, a plan setting out the maximum extent of excavation compiled from other plans contained on the disk together with two files dating from 1954.  Although the disk itself might not have been opened at this time by those at BMD, it had, amongst other information, a plan purporting to be a plan of maximum extent of excavation (“the plan of maximum extent of excavation”), a bulk earthworks plan, and a plan showing existing surface contours of the site.  More information was conveyed between 12 September 2001 and the date of execution of the contract, but the project as anticipated by all was of the maximum extent of excavation to natural surface levels being much less than they turned out to be. 

1. Mr Bollen, VicUrban’s project manager until August 2002, accepted in evidence that it was made clear to tenderers that the information provided to them had been prepared by reputable consultants for their assistance.  Mr Breese, of BPD, gave evidence of the importance of the information which had been provided to the tenderers by VicUrban.  He said that the drawings and digital information provided on the compact disk should have enabled the tenderers to make their own determinations as to the extent of the earthworks required.  Providing the information on disk and hard copies enabled the tenderers to run models for themselves to determine whether they were comfortable with the estimated volumes provided.  His evidence was supported by Mr Easton, a civil design engineer at BPD, who had been the author of the bulk earthworks plan.  His view, not unnaturally, was that the bulk earthworks plan was important to the tenderers because it enabled them to ascertain the scope of works for the project by identifying the natural surface levels to which the stockpiles were excavated.  According to him the drawings contained significant information to enable a contractor to calculate how much material needed to be excavated from the stockpiles.  The drawings themselves, as prepared by BPD, were described as setting out the “maximum” extent of excavation and the information frequently identified the reliability of the sources from which the information was determined (such as aerial photographs, photogrammetry and direct survey levels), albeit that there may have been limitations of accuracy or precision. 

1. For present purposes it may be accepted that VicUrban did not warrant the accuracy of the information and, further, that it positively urged tenderers, including BMD, to satisfy themselves about the accuracy of the information that had been supplied to them to assist them in the tender process.  In that regard I note in particular that part of the material on the disk, as explained by Mr Gilbert included words of caution.  Some doubt about the reliability of the information might also be felt by the explanations given on the drawings and conveyed with the information generally, such as that the features were derived by aerial photography which might be suitable for overall planning purposes but not any other purposes.  Similarly, the tenderers, including BMD, asked questions to which replies were given and all, both questions and answers, were circulated to all tenderers.  Of particular relevance are the questions and answers numbered 13, 15 and 24:

13.Is the guaranteed maximum lump sum price based on the schedule/estimated quantities?

Answer:Quantities are provided as a guide only – see answer to Q14.

[…]

15.Is the limit of excavation as per the provided reduced levels?

Answer:The contractors should make their own assessment.

[…]

24.Can you tell us what natural surface levels were used in computing the stockpile volumes?

Answer:Levels derived from aerial photos and photogammetry [sic] from 1954 to 1989 together with direct survey levels.  This information was supplied on disk with the tender documents.

For present purposes it may be accepted, therefore, that VicUrban made clear both that it did not proffer the information as accurate or reliable and that it stressed to the tenderers that it was for them to satisfy themselves about the accuracy of the information.  The entitlement to a latent condition does not, however, depend upon a contractor establishing error in the information conveyed by a principal or fault on the part of the principal.  BMD’s entitlement under the latent conditions clause does not depend upon the information supplied by VicUrban having been warranted as accurate or reliable; nor does it depend upon a conclusion that VicUrban was in any way at fault in what it did. 

1. 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.[18]  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.

   [18][2002] NSWSC 1037 (7 November 2002) [32]-[34], (2003) 19 BCL 225, 229-230.

1. The natural surface level was in fact lower than the levels described by the drawings such as the plan of maximum extent of excavation.  A consequence was that BMD was required to excavate, process and place 329,082 cubic metres of material more than anticipated.  This figure is comparable to that calculated and accepted by VicUrban’s representatives as the extent of extra excavation and I see no reason not to accept it. 

(e)  Breach of contractual warranties

1. BMD also puts its claim as a breach of contractual warranty.  It says that by the contract VicUrban warranted the extent of excavation required and that the warranties were breached because the quantities in fact in stockpile exceeded the quantities said to have been warranted by clauses 1.1 and 1.2 of Appendix A of the general description of works when read with the bulk earthworks plan and the plan of maximum extent of excavation.  It will be more convenient to deal with the issues raised in this contention in the context of the Trade Practices claim.  However, I should indicate here that I do not accept BMD’s arguments that there was any warranty in the terms claimed or that there was any breach of it.  Clauses 1.1 and 1.2 which are relied upon express the quantity as being “approximate” and at the end of clause 1.10 the contract states in clear and emphasised terms that the preceding “information” was not warranted as to accuracy.  VicUrban says that the word “information” appearing after clause 1.10 should be limited to only part of what appears in clause 1.10 but, in my view, “the above information” after clause 1.10 is to be understood as referring to all of the information appearing above those words wherever found in clause 1.  The caution at the end of clause 1.10 appears at the very end of clause 1 and is set out in bold type face, in larger font size and are underlined. 

1. Any fair reader of those words would be put on notice that a caution was being given that ought properly to be noticed and considered in relation to all of the matters in clause 1.  The contractor was, in that caution, not only being told that VicUrban did not warrant the accuracy of the information but, in addition, that BMD should make all enquiries and investigations necessary to satisfy itself of the accuracy of the information.  The words used are words of general application in the context of what the writer thought, and the reader should think, was a matter to take into account when assuming or assessing the economic risks of a major earthworks contract.  Furthermore, if it be relevant, I can see nothing in the contract that would enable a fair reader of it to treat a figure expressly stated as being “approximate” to be a warranty of precision.  There is nothing to indicate that actual measurement had been undertaken of what was in the stockpile, nor of agreement about the quantity.  Furthermore, since there was no warranty about where the natural surface level would be found there could have been no warranty about the quantity of the materials in the stockpile. 

2.  Avenue Stockpile, Eastern Stockpile and Northern Stockpile

1. Clause 12.2 of the contract required BMD, as I have indicated above, to give written notice of a latent condition.  It did so by letter dated 2 August 2002 when sent by fax on 6 August 2002.  The latent condition notified was that the extent of excavation required to expose natural surface was significantly lower than the levels anticipated at the time of tender.  That condition extended beyond the area initially identified and described as the Southern Stockpile: it intruded into those other areas described as the Eastern Stockpile, the Northern Stockpile and the Avenue Stockpile.  The subsequent notification to the Superintendent dated 4 June 2003 (Northern Stockpile), 17 June 2003 (Avenue Stockpile) and 17 March 2003 (Eastern Stockpile) were notifications of separate latent conditions. 

1. The letters to the Superintendent dated 2 August 2002, 4 June 2003, 17 June 2003 and 17 November 2003 were each notifications under clause 12.2 and given “forthwith” as required by the contract.  VicUrban contends that the notifications were not given forthwith because BMD was aware: of over excavation in the Avenue Stockpile from February 2003; of over excavation in the Eastern Stockpile before November 2003; and of over excavation in the Northern Stockpile from February 2003 and April 2003.  However, I do not accept that the evidence makes out those claims.  The evidence of over excavation in February 2003 was largely about work being done by another contractor.  Mr Waterson and Mr McConville were pressed about this in cross‑examination and I accept as both accurate and probable that they had insufficient awareness of the conditions exposed by the discovery of a buried fuel tank in February 2003 in works undertaken by another contractor: it was not their work at the time, the areas had not been surveyed by BMD, and it was not significant to them at the time. 

1. In contrast, evidence of Mr Waterson in relation to BMD’s awareness, and its temporal proximity to notification, is persuasive.  He was, of course, the person at BMD who was responsible to ensure compliance with the contract and who signed the notifications.  I have already referred to the evidence of his becoming aware of the conditions leading to the notification dated 2 August 2002.  His evidence concerning the subsequent “notifications” of 4 June 2003, 17 June 2003 and 17 November 2003 tell a similar story: formal written notification promptly upon becoming aware of the extent of the conditions found.  Bulk excavation in the Northern Stockpile area began in May 2003 and it became apparent to him at the end of May that there were “dramatic variations” in the levels in that area: the notification of that fact occurred by letter dated 4 June 2003.  It became apparent to him by mid June that the natural surface levels in the Avenue Stockpile were “some depth below” that expected, and notification of that fact occurred by letter dated 17 June 2003.  The area described as the Eastern Stockpile was not surveyed until late in the works.  The works methodology on the site resulted in the area not being surveyed until November 2003 (once the excavation of the overburden was complete).  In fact the survey results were provided to Mr Waterson on 17 November 2003 and on the same day were sent to the Superintendent together with notification of the fact of over excavation.  In each case the notifications were given “forthwith” as required by the contract. 

3.  Quantum: over excavation

1. The quantum of BMD’s claim for the latent condition concerning over excavation is $6,971,587 less the amount of $670,758 previously certified by the Superintendent and paid.  The quantum claim is made up of the following:

(a)	Direct costs claimed by BMD to be incurred as a result of the latent conditions in each of the four areas as follows:
- “Quarry floor” area		$1,018,980
- Eastern Stockpile area		$350,335
- Northern Stockpile area		$521,960
- Avenue Stockpile area		$193,962
(b)	Additional wet base treatment		$415,811
(c)	Additional works as a result of a change in topography in the area of the Northern Stockpile		$87,350
(d)	Additional works as a result of haulage requirements in the area of the Avenue Stockpile		$94,028
(e)	Additional costs for material processing		$2,907,633
(f)	Value of delay claims caused by the latent conditions:
- in the “quarry floor” area		$329,728
- in the Eastern Stockpile area		$192,007
- in the Avenue Stockpile area		$106,304
- in the Northern Stockpile area		$286,068
- and the additional wet base treatment needed in the “quarry floor” area		$467,421
$6,971,587

These figures are taken from in the plaintiff’s written submissions and the evidence in the witness statement of Mr Waterson, but they differ from those in the pleadings by $987: the amounts claimed for the quarry floor area is $627 less in the written submissions and the amount claimed for delay in relation to the placement of additional Type A material is $360 less in the written submissions.  I will ignore the additional amounts since they were not pressed. 

(a)  Additional placement of Type B and Type C material in “quarry floor” stockpile

1. BMD has claimed $1,018,980 ($1,109,607 in Schedule 2 of the statement of claim) for additional processing of Type B and Type C material in the quarry floor area.  The total additional amount of excavation claimed by Mr Waterson was 196,956 cubic metres: 156,681 cubic metres of Type B material and 40,275 cubic metres of Type C material.  These figures are based upon the survey report prepared by Mr McConville on 16 June 2003 which is sufficiently accurate to establish a basis for calculating the claim.  The process undertaken to calculate the figures was a comparison of the maximum excavation surface and the actual excavation surface surveyed after the removal of the overburden stockpiles.  This was calculated in a Gertzel survey report which was attached to a letter dated 16 June 2003.  Page 2 of the Gertzel report provides a net extra excavation figure of 196,956 cubic metres in the quarry floor area.  By “net difference” the figure took into account any areas that were actually exposed at a higher level (that is, less excavation than was anticipated, or none at all) than was indicated on the bulk earthworks plan.  The Superintendent’s surveyor also calculated this volume of additional excavation and arrived at a slightly higher figure of 199,844 cubic metres.  Accordingly, I see no reason to reject the figures upon which Mr Waterson has based his calculations. 

1. Any amount payable to BMD is to be calculated under clause 40.5(c) of the contract.  Clause 40.5 operates where the contract provides that a valuation should be made under clause 40.5.  Clause 12.3 of the contract provides that a valuation shall be made under clause 40.5 where, amongst other things, a latent condition causes the contractor to “incur extra cost”.  Clause 40.5 provides various circumstances by which to determine the amount for valuation and, by sub-clause 40.5(c) (which is applicable here), provides that “reasonable rates or prices shall be used in any valuation made by the Superintendent”. 

1. I accept BMD’s contention that the “reasonable rates” to be employed for the calculation under clause 40.5(c) of the contract are the prices in the lump sum schedule to the contract.  The schedule to the contract provides amounts in the lump sum schedule, from which it is possible to derive rates applicable to the excavation, processing and placement of Type B and Type C material.  That process has been undertaken and a rate of $4.406 per cubic metre can be determined as the pro rata rate for Type B material and $8.16 per cubic metre as the pro rata rate for the Type C material.  These were, indeed, rates comparable to those arrived at by the Superintendent in his valuation.  By letter dated 3 September 2002 to Mr Waterson, the Superintendent reviewed the latent condition claim made by letter dated 2 August 2002 and informed Mr Waterson that the additional work was considered an extension of Type B requirements and, accordingly, would be paid at the rate in Item 11 to the Schedule of Separable Portion 2, namely, $4.406 cents per cubic metre (inclusive of base preparation).  Similarly, contract variation order No. 8 dated 19 December 2003 from the Superintendent adopted rates from the schedule for Separable Portion 2 in the contract. 

1. VicUrban contends that any allowance which should be made ought to be reduced by deducting from the quantities an amount of 0.5 metres over the site.  The Superintendent had made such an assessment when initially allowing the claim.  On 29 May 2003, for example, the Superintendent wrote to Mr Waterson allowing the claim in part upon the basis that material 0.5 metres below the design maximum excavation level had been approved for payment.  Expert witnesses called by VicUrban, namely, Mr Clark and Mr Raisbeck, adopted a similar approach.  BMD contends that this reduction in the quantity allowed upon which to calculate the quantum is wrong and indefensible. 

1. The Superintendent’s initial response to BMD’s latent conditions claim did not refer to any reduction in quantity whether by 0.5 metres or otherwise.  Mr Hawkins’ letter of 3 September 2002 to Mr Waterson advised the latter that the latent conditions notice dated 2 August 2002 had been reviewed and said that the additional work was considered to be an extension of the Type B requirements and “accordingly will be paid at the rate in schedule item 11 of Separable Portion 2 (i.e. $4.406/Cm which is inclusive of base preparation)”.  The letter went on to say that the extent of the additional works would be quantified when an approved base was exposed over the area in question.  Nothing was said about any reduction in the quantity upon which the payment would be calculated.  Between September 2002 and May 2003 Mr Hawkins seems either to have changed his mind or to have decided then to express his earlier decision of reducing the quantity of material on which the claim would be allowed.  On 29 May 2003 he wrote to Mr Waterson informing him that material 0.5 metres below design maximum excavation level had been approved for payment.  A consequence of this was, of course, to reduce substantially the amount for payment.  Mr Waterson replied on the next day disagreeing with this approach and seeking a meeting with survey staff to agree to the quantity upon which the claim was to be paid. 

1. The only reason given by Mr Hawkins prior to the commencement of this proceeding for his decision to allow for over excavation only below 0.5 metres, was in a letter dated 17 July 2003 to Mr Waterson in which he said that a survey accuracy of plus or minus 0.5 metres on the estimated excavation levels was “considered reasonable”.  Mr Hawkins dealt with the reduction in the quantity allowed for over-excavation in his witness statement given in evidence in this proceeding.  There, he again stated his view that an allowance below the 0.5 metre level was considered reasonable, that is, that he would only allow the over-excavation from 0.5 metres below the design excavation base, but gave as his reason the fact that the estimates had been calculated by “aerial photogrammetry”.  The reference to photogrammetry in the witness statement might seem curious given that no reference to photogrammetry had previously been made by Mr Hawkins and indeed, that his knowledge of photogrammetry when tested in cross‑examination, might not be thought to have enabled him to make much of a reliable assessment of its impact upon levels.  In any event, he was tested on this issue in cross‑examination in some detail and in the end his opinion seemed to come down to not much more than an engineer’s general view of a fair thing.  He did say that it was his “considered opinion”, but he did not point to any consideration by him at the time of making his decision (other than perhaps the subsequent statement about the inaccuracy in photogrammetry) and was unable to explain why an allowance of an amount of 0.5 metres should be made as against any other figure at or around that, or, for that matter, why it should be 0.5 metres below rather than above the design excavation base. 

1. Each of Mr Clark and Mr Raisbeck similarly considered that an allowance of 0.5 metres below maximum excavation base was appropriate.  Mr Clark said in his witness statement that he considered “the accuracy of the natural surface levels could reasonably be expected to be within a variance of plus/minus 0.5 metres from those shown” on the maximum standard excavation plan.  Mr Clark also considered relevant the accuracy or inaccuracy of photogrammetry, although it is not clear how that consideration led Mr Clark to decide on a reduction of 0.5 metres as compared with any other amount.  Mr Raisbeck, on the contrary, expressed a positive opinion based upon his experience that variations of up to 0.5 metres in levels should have been anticipated from the known precision of aerial photogrammetry to determine the original surfaces, but, in his case also it was not clear why a variation either up or down should be made or why, on an area as large as this, the possibility of variation should not be regarded as statistically cancelled out. 

1. It was strongly argued for BMD that it was entitled to rely upon the maximum extent of excavation plan as being “the maximum” extent of excavation (as its name suggested) without having to allow any amount for variation.  I do not think that much can be made from the use of the word “maximum” in the plan no matter how important the plan was to the scope of the works.  It is unrealistic to proceed from the assumption that there was a precisely determined maximum extent of excavation beyond which BMD was entitled to additional payments.  On the other hand, it does not follow that the variability in precision either of the photogrammetry information or of the plan itself would necessarily justify a reduction in the total amount of extra excavation once a latent condition is established.  The approach taken by each of the Superintendent, Mr Clark and Mr Raisbeck would, on one view, have the effect of treating the latent condition as occurring only after the half metre of additional excavation.  Furthermore, and more importantly, the disallowance of a half metre of additional excavation across the entire area would potentially have a distorting, and capricious, impact.  If, for example, the over‑excavation in a small area was very deep whilst in an adjoining area there was none at all, then the averaging effect of allowing only over‑excavation below the half metre design level could potentially have the effect of entirely denying very substantial over-excavation in the area as a whole.  Assume, for example, that there was over-excavation of 30 metres in depth over an area of one square metre and no over-excavation at all in the adjoining 14 square metres, the effect of averaging over-excavation below a half metre over the whole of the 15 square metres would be capricious. 

1. The fact that each of Mr Hawkins, Mr Clark and Mr Raisbeck have given evidence in support of a reduction of the quantity by an average of half a metre is something I do not ignore.  They are familiar with earthworks operations and, all things being equal, I would defer to their judgment and would adopt a similar approach.  On the other hand, I am not satisfied that it is defensible in the current circumstances.  Mr Raisbeck’s evidence may support a conclusion that photogrammetry has a plus or minus half metre degree of error but that does not automatically translate into it being defensible that BMD should find itself with a disallowance of an average half a metre across the whole of the area in which a latent condition has been found to exist.  The same is true of the evidence of Mr Clark.  The evidence of Mr Hawkins would have had more weight to my mind if he was able to show how it was that his opinion was reached by considering factors that would make the averaging of half a metre appropriate in the particular case.  A bald statement such as it being a “considered opinion” is as unenlightening as if he had said “I have my reasons” without revealing them: there is no measure of reason given in his statement.  The effect of averaging produces capricious outcomes and, therefore, I cannot adopt the approach taken by Messrs Hawkins, Clark and Raisbeck.[19]  I have no reason other than to allow any variation of plus or minus 0.5 metres to be averaged across the site as a whole.  The over excavation having been established (as I accept that it has) it should prima facie be allowed in the quantity shown without reduction unless defensible reasons can be shown to reduce the actual over excavation by some amount: there are no reasons which I consider defensible for me to adopt any figure for over excavation other than the actual quantities on the evidence.  Accordingly I allow the amount of $1,018,980.00 claimed. 

(b)  Additional placement of Type A material in Eastern Stockpile

[19]See Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111.

1. The claim of $350,333 in relation to the Eastern Stockpile is for additional volume of material placed as Type A.  This calculation is based upon a rate of $8.07 per cubic metre for 43,412 cubic metres estimated as the over‑excavated amount referrable to the Eastern Stockpile.  The rate of $8.07 is the same as that adopted by the Superintendent in the contract variation order dated 19 December 2003 and, as previously explained, I consider it reasonable for the purposes of clause 40.1(c) of the contract. 

1. An issue that arises in respect of this, and also in relation to the Eastern Stockpile claim, is whether the Type A rate is to be applied for placement of the material.  VicUrban contends that the applicable rate, if any, should be that for the material that was being placed at the time of any over‑excavation.  In this respect VicUrban adopted the analysis of its expert, Mr Clark, to the effect that the material type that was actually being placed should be used to value the amount of additional excavation.  As against that, counsel for BMD contended that such an approach is wrong because it does not link the claim with the causal impact of the latent condition.  BMD’s contention is that the causal impact of the latent condition was necessarily to increase the quantity of Type A material that had to be placed “because all of the Type B and Type C were placed to the original levels required.”  There was, so the argument went, no actual adjustment of the Type B and Type C levels on the site.  That may be accepted as common between the parties (as was contended) but it does not follow that there is thereby demonstrated a causal link between the latent condition and the placement of Type A material.  Indeed, it is pertinent to recall that the Type A material placed overall was less than had been contemplated at the outset.  The logic relied upon by BMD would equally support a conclusion that the maintenance of the Type B and Type C levels were also made possible by a reduction in the Type A material consequent upon the latent condition: that is, that a causal link between the latent condition and the Type B material can be seen from the fact that the level of Type B was able to be maintained. 

1. BMD’s contention was put, perhaps differently, in part of Mr Waterson’s written witness statement when explaining the impact of the Superintendent’s directions concerning maintenance of the Types B and C layers and the reduction of the Type A level.  His conclusion was expressed by saying:

As all other types of material could be sourced from the over burden within the drawings, the effect of any additional excavated material in the Eastern Stockpile would be to directly increase the volume of material to be processed and placed as Type A capping material.  That is, if the material won from the additional excavation had not existed, then the Type A material actually processed and placed by BMD on site would have been reduced by that volume.  If the material did not exist, BMD would not have needed to place it as Type A. 

These assertions by Mr Waterson of consequences and conclusions (assuming them to be admissible) do not detract from the proposition that the lowering of the capping layer permitted the excavated material to be used as Type B or Type C material and, therefore, of establishing a sufficient causal link between any over excavation and the laying of the material as either Type B or Type C material.  In my view the temporal connection for which VicUrban contends is certain and is a more reliable guide for the determination of the value of any over excavation.  Accordingly I accept VicUrban’s contention that the rate to be applied to this claim is that referable to the Type B material, namely $4.41 per cubic metre, producing a figure of $191,446.92. 

(c)  Additional placement of Type A in the Avenue Stockpile

1. It may next be convenient to deal with BMD’s claim for additional placement at the Type A rate in the Avenue Stockpile area because it raises the same issue as those just dealt with.  That claim is for over excavation of 24,035 cubic metres at the Type A rate in the amount of $193,962.  I consider the temporal connection to be appropriate for the reasons above and, therefore, the value of the amount for additional excavation to be allowed in this area at the Type B rate is the sum of $105,994.35. 

(d)  Additional placement of Type A in the Northern Stockpile

1. BMD’s next claim is for $521,960 based upon an additional 64,679 cubic metres of excavation at the Type A rate.  The evidence in respect of this claim is not entirely satisfactory.  The written submissions rely upon a paragraph in the witness statement of Mr Waterson that does little more than identify the calculation.  The preceding paragraphs in the witness statement describe requirements by the Superintendent to carry out further additional excavation.  That evidence seems to put the claim in the same position as that considered in relation to the Eastern Stockpile and the Avenue Stockpile.  On that basis I would recalculate the figure at the Type B rate in preference to the Type A rate.  There is, however, some doubt about the actual amount of over excavation.  Mr Waterson relies upon a survey report which shows a quantity of over excavation of 64,518 cubic metres rather than the 64,679 cubic metres in the witness statement and statement of claim.  The lesser figure appears to be more reliable and in the circumstances I allow and recalculate the amount under this head at the Type B rate at $284,524.38.

(e)  Additional wet base treatment

1. BMD claims $415,811 for additional wet base costs in connection with the Southern Stockpile quarry floor area.  The claim is not put as a separate latent condition, but, rather, as a consequence of the condition notified by the notice dated 2 August 2002.  The Superintendent did allow part of the claim as a contract variation although he reduced the quantum claimed by the amount of half a metre previously discussed.  The 2 August 2002 letter described the additional work required as including “possibly wet–base preparation”.  The claim for additional wet base preparation is part of the costs pleaded in paragraph 32 of the statement of claim as having been incurred in connection with the latent conditions already considered and not as a separate latent condition in its own right.  On 19 November 2002 Mr Waterson on behalf of BMD wrote to the Superintendent confirming verbal advice given the previous Friday that the area exposed under the Southern Stockpile “continues to be below that anticipated at tender” (referring to the letter of 2 August 2002) and indicated that the area “most recently exposed” placed that section of the “quarry floor into a wet base situation”.  The letter went on to confirm previous communications that additional wet base preparation was not thought by BMD to be adequately recompensed through the schedule rate as had been suggested by the Superintendent and that BMD would be recording costs and associated delays due to this additional work.  On 18 July 2003 the Superintendent expressly rejected a claim for additional wet base preparation stating that wet base preparation was included in the schedule rates and was not accepted as a variation.  VicUrban contends that the claims for wet base preparation were correctly rejected by the Superintendent and that an allowance for the wet base preparation was made in the contract. 

1. It seems clear enough that the contract sum made some provision for wet base preparation.  Clause 5.3.1.3 of the general conditions required BMD to maintain dewatering where structural fill was to be placed over a wet natural sub grade (that is, below the natural ground water level or existing lake level).  Clause 2.42 of the general conditions provided that VicUrban (through a contractor other than BMD) would take the lake water level to RL19.0 and hold this level for 14 days after a letter of acceptance, at which time the pumping contract would be terminated.  From then the remaining water could be used as required for moisture conditioning of the fill and dust suppression at BMD’s discretion.  Mr Finlayson gave evidence that the level of water within the quarry prior to the commencement of the project was about RL25.  Mr Leonard gave evidence that the lake was handed over to BMD at or about RL19 around 8 April 2002. 

1. In the event it is unnecessary to rule on the admissibility of evidence sought to be given by Mr Fogarty concerning the state of mind of BMD, or at least, his state of mind as it may be relevant to BMD. Paragraph 14 of Mr Fogarty’s witness statement contained statements which counsel for BMD contended were admissible as “directly relevant to the question of causation which arises in the context of the [Trade Practices Act] claim and is fundamentally concerned with the subjective state of Mr Fogarty’s mind”.  BMD’s argument of admissibility relied upon what was said in Seltsam Pty Ltd v McNeill[48].  In that case evidence had been given about the kind of material which the witness had been gathering up with his hands.  In that context the witness was asked about a hypothetical situation if “there had been a warning on the fibro sheet” to which he responded “I would never have used it”.  It was that evidence which the Court considered to be relevant and admissible “about” the state of mind of a person in the context of proof of causation. 

   [48][2006] NSWCA 198 (Unreported, Bryson J, 15 December 2005, 26 June 2006) [115]-[124].

1. Essentially the same proposition was put on behalf of BMD in relation to paragraph 14 of the proposed evidence of Mr Fogarty in which he purported to give evidence in the following terms:

14.Had I not been satisfied, prior to submission of BMD’s tender, that the information on the drawings supplied by VicUrban for the information of tenderers concerning the levels of natural ground was reliable and accurate, to permit BMD to assess the volumes of material stockpiled and required to be excavated and placed, BMD would not have submitted an unconditional tender for the Project.  BMD would either not have tendered at all or would have submitted a conditional tender which contained a condition to the effect that BMD would have a right to further payment should the natural ground levels provided by VicUrban prove to be inaccurate.  The fact that the tender as submitted was not subject to such a condition reflected my reasonable belief that the information contained in the plans provided to tenderers was accurate and could be relied upon for tender purposes.

VicUrban objected to this evidence and relied upon a long line of authority of considerable force.  In Cackett v Keswick[49], Farwell J said:[50]

[I]t cannot be enough for a man to swear that he would not have entered into the contract if he had kown something that was concealed from him.  It is easy to be wise after the event, and many men can honestly persuade themselves when a company has failed that they would have been influenced by a circumstance which in all probability would have made no impression whatever on their mind.  …  The test must be, Is the omission material?  And if the Court sees that the fact omitted is of such a nature that it might reasonably deter … the ordinary investor … this is sufficient.  It is in great measure an inference of fact to be drawn … from the circumstances of the case.

In BNP Paribas v Pacific Carriers Ltd[51] Handley JA said at [46] in respect of the self‑serving evidence of what information a witness had acted upon that the “inference of reliance can and should be drawn from objective considerations rather than the ex post facto subjective of an interested witness”.[52] 

[49][1902] 2 Ch 456.

[50]Ibid, 463.

[51][2005] NSWCA 72.

[52]See also Rosenberg v Percival (2001) 205 CLR 434, 443-4 (McHugh J); JD Heydon, Cross on Evidence, (7^th Australian Edition, 2004) [37110].

1. In light of the observations in Seltsam, and the cases referred to, I would have admitted paragraph 14 in evidence but do not think I could confidently have placed much reliance upon the statement in the terms made. The proposed evidence about a hypothetical which might, but did not, occur, will often require more than its being said for it to be probative. There is nothing in the way in which paragraph 14 of Mr Fogarty’s statement was couched which gives me confidence that it was more than what he had convinced himself might have been the case if events had been other than as they were. There is, for example no objective fact, matter or circumstance which gives confidence in adopting the view that his subjective belief is likely to be what would have occurred had events been different. The assertion that BMD would not have tendered at all is not given weight or substance by reference to facts which enable me to evaluate independently of his subjective statement whether the conclusion he asserts is one which I should accept as likely, probable or independently supported by objective facts. Indeed, the hypothetical assertion that BMD might have submitted a “conditional tender” to the effect that it would have a right to “further payment should the natural ground levels provided by VicUrban prove to be inaccurate” is inconsistent with the evidence that such a tender would not have been a valid tender. The evidence in issue in Seltsam was given orally rather than through a written witness statement which had had the benefit of preparation, reflection, legal assistance and, perhaps, advice from counsel. In such circumstances a Court should expect, at very least, that statements of a state of mind such as that proffered by paragraph 14 in Mr Fogarty’s witness statement, have objective reference points which give confidence that weight should be given to the subjective evidence. The statement may be admissible, but if it is to have weight (that is, if the statement is to persuade a decision maker, with all the consequences which may flow to the rights, duties and obligations of other people) then it is desirable that the assertion of what “someone would have done” should be supported upon objectively verifiable evidence that gives the assertion force and substance.

1. It is also unnecessary for me to consider the alternative basis for the claim of loss and damage sought by BMD under the Trade Practices Act.[53]  Paragraph 116 of the statement of claim pleaded, simply, that by reason of the alleged misleading and deceptive conduct, BMD had suffered loss and damage in the amount either of $6,301,816 or, alternatively, $5,565,787.  The particulars relied upon were said to have been set out in amended schedules 2 and 3 to the statement of claim although, as became clear only on the last day of the proceedings, those particulars provided details of only the first of those two amounts.  Late on the morning of the last day of the proceeding, day 36, counsel for BMD gave, for the first time, particulars of the alternative quantum of the claim.  On 8 October 2007 a letter was sent to my associate for my attention seeking to substitute, without leave, the particulars which had been given for the first time on the last day of the proceeding (day 36) of something first pleaded some two years previously.  It is inappropriate for particulars, evidence or submissions to be given by a unilateral communication other than in open court or as directed by a judge.  The proper time and place to present evidence or argument is at the hearing.[54]  Further material should not be filed without leave;[55] although some judges might not wish to deter the practice of putting in further written submissions which are delivered expeditiously, and are of substance, after the hearing.[56]  The 8 October 2007 letter to my associate from BMD’s counsel, perhaps predictably, produced a response from VicUrban’s solicitors dated 11 October 2007 which, in my view, was also undesirable.  They wrote requesting that they be kept advised about how I proposed to deal with the earlier letter.  The 11 October 2007 letter concluded with the statement that “[s]hould His Honour be minded to take the plaintiff’s letter and amended particulars into consideration when deciding the proceeding, the defendant would wish to be heard on the matter, particularly in regard to the lack of primary evidence supporting the particulars.”  It is undesirable for litigation to be conducted in this way and particularly undesirable for there to be any suggestion of an onus to be placed upon the judge, or the judge’s associate, for any advance indication of any aspect of a reserved decision.  If a matter arises after the conclusion of a hearing that is of sufficient importance it may be necessary for formal application to be made by one of the parties to resume the hearing before judgment.[57] It is not appropriate for the parties to seek advance or conditional indications from the judge, or the judge’s associate, of a reserved decision, but for them to evaluate risks and to take such action, or make such application, as they may be advised to make. The 11 October 2007 letter prompted, again, perhaps predictably, a letter dated 15 October 2007 this time from the plaintiff’s Brisbane solicitors, purporting to explain the “Amended Particulars” and concluding with a denial of any “alleged” “lack of primary evidence” “as asserted” “giving rise to any entitlement to the defendant to be heard further on the matter.” In any event, it has not become necessary for me to decide either whether leave to file the substitute particulars should be given (notwithstanding that no leave was sought by counsel for BMD and that no explanation or reasons have been given in support of leave being granted), or whether VicUrban should be heard on the asserted lack of primary evidence (notwithstanding that no application to be heard was made), or whether it is appropriate for damages to be awarded under one or either of the bases sought under s 52.

F.  Unjust enrichment

[53]See Brown v Southport Motors Pty Ltd (1982) 43 ALR 183, 186; Kenny & Good Pty Ltd v MGICA(1992) Ltd (1999) 199 CLR 413, 460 (Kirby and Callinan JJ).

[54]Butterworths, Civil Procedure, vol 1, (at Service 206) [I 49.01.125].

[55]See Dwyer v Commonwealth Bank of Australia (1995) 31 ATR 48, 57 (Sheller JA); Carr v Finance Corp of Australia Ltd (No 1) (1981) 147 CLR 246, 258 (Mason CJ).

[56]Kuek v Wellens [2000] VSC 326 (Unreported, 18 August 2000) [98].

[57]Watson v Metropolitan (Perth) Passenger Transport Trust [1965] WAR 88; Re Australasian Meat Industry Employees’ Union (WA Branch); Ex parte Ferguson (1986) 67 ALR 491, 493 (Toohey J); Butterworths, Halsbury’s Laws of Australia (at 16 October 2007) 195 Evidence, ‘195 V (8) Re-opening a case’ [195-8150].

1. The claim for unjust enrichment was pleaded by BMD but no separate submissions were made either orally or in writing.  In Farah Constructions Pty Ltd v Say-dee Pty Ltd[58] it was said that unjust enrichment is not a definitive legal principle according to its own terms.[59]  In Coshott v Lenin[60] Mason P said:[61]

   [58](2007) 236 ALR 209.

   [59]Ibid, 444, Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ citing David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 378-9.

   [60][2007] NSWCA 153 (Unreported, 20 June 2007).

   [61]Ibid [10].

A restitutionary cause of action cannot sit on top of an effective and continuing contractual arrangement where that would subvert or undermine the contractual allocation of risk. In and around contract restitution operates in a gap-filling role (see Update Constructions Pty Ltd v Rozelle Child Care Centre Pty Ltd (1990) 20 NSWLR 251 at 275; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 545[75], 553[95], 577[166]). The statement of claim offers no clue to suggest a basis for regarding the parties' contractual arrangements as ineffective.

As in that case, BMD’s claim must depend upon the contractual arrangements between them and statutes which govern their conduct, rather than a restitutionary claim which was not articulated in the submissions.

G.  Liquidated Damages

1. BMD seeks repayment of the sum of $672,000 which was deducted by VicUrban from progress payments due to BMD as liquidated damages.  VicUrban contends that it is entitled to the amount by reason of BMD’s alleged failure to provide adequate notices for extensions of time.  I do not agree for the reasons which I have previously set out in relation to the extension of time claim.  Clause 35.6 provides for the payment of liquidated damages for delay in reaching practical completion.  Clause 35.6 provides:

If the Contractor fails to reach Practical Completion by the Date for Practical Completion, the Contractor shall be indebted to the Principal for Liquidated Damages at the rate stated in the annexure for every day or part thereof after the Date for Practical Completion to and including the Date for Practical Completion or the date that the contract is terminated under Clause 44, whichever occurs first.

If after the Contractor has paid or the Principal has deducted Liquidated Damages, the time for Practical Completion is extended, the Principal shall within 28 days of notifying the Contractor that the Date for Practical Completion has been extended, repay to the Contractor any Liquidated Damages paid or deducted in any respect of the period up to and including the new Date for Practical Completion less any costs reasonably incurred by the Principal in assessing and granting an extension to the time for Practical Completion.

The date for practical completion was extended to 23 July 2003 but BMD contends that it was entitled to extensions of time to complete the works.  I have previously considered the evidence in respect of that entitlement and agree that it was entitled to an extension of time for 161 days.  Accordingly, BMD is entitled to repayment of the sum of $672,000 which should not have been deducted.

1. It is unnecessary to consider the second basis upon which this claim was put by BMD, namely, that VicUrban was estopped from relying on the liquidated damages provision.  I should, however, say that I would reject this basis of the claim for several reasons.  First, because BMD has not made out sufficient representations to the effect that the liquidated damages provisions would not be relied upon.  BMD relies upon a statement said to have been made by Mr Taber on 6 August 2002 recorded in a note as that the “contract will now be firmly placed in the bottom drawer and not waved around as it has been”.  Whatever this might mean, it cannot be taken literally.  It is plain that the contract was intended to be performed if only to continue to effect the works.  I cannot construe the remark attributed to Mr Taber as sufficient in the circumstances to constitute a representation to a reasonable person that the contract would be disregarded in the way contended in relation to the liquidated damages provisions.  Secondly, there is no evidence of BMD relying upon a representation to the effect that the liquidated provisions would not be relied upon. 

H.  VicUrban’s counterclaim

1. VicUrban’s counterclaim is based upon the contention that BMD was contractually required to provide a five metre depth of Type A material across the site as a capping layer.  The contract does not contain a provision in such terms, although it was understood from the outset that a capping layer of a thickness of at least five metres (and in some places six metres) was required.  By letter dated 12 September 2001, BPD on behalf of VicUrban advised all tenderers to make preliminary assessments on the volume of Type A material being 744,500 cubic metres solid.  On 7 January 2002 BMD wrote to BPD referring to a possible decrease in the quantity of Type A material and was informed in response on 9 January 2002, “[t]hat the design depth of Type A material cannot change”.  That response continued by noting that “therefore the Principal reserves the right to be able to call a halt to the placement of Type B material if forward material planning is indicating a possible shortfall of Type A material”.  The significance of the last observation is in part the evidence of a realisation that there might not be sufficient Type A material to achieve the desired quantities, and is in part the indication of what was then contemplated as the option or solution which the principal would elect: namely, calling a halt to the placement of Type B material.  The BPD communication to BMD on 2 January 2002 accorded with the direct written observations from Mr Bollen of VicUrban to Mr Hawkins of BPD by fax dated 8 January 2002. 

1. The desire to have a capping layer of Type A material of at least five metres depth was reflected in contract drawings 6330/3 and 6330/4.  BMD’s facsimile to BPD dated 10 January 2002 may be seen as implicitly accepting that the design depth of Type A material would not change.  Mr Tuttiett gave evidence indicating that he understood that Item 12 in Appendix 4 of the contract provided for 564,000 cubic metres as the estimated volume in place of a five metre thickness “capping layer” of Type A structural fill.  It may also readily be accepted for present purposes that the contract required BMD to manage a quantity of material from existing stockpiles of overburden and natural materials to be sorted and blended in accordance with the materials requirements for the projects, then placed, moisture conditioned and compacted in various fill areas around the site in accordance with the requirements for those fill areas.  Clause 5.2.4 of the general conditions made BMD responsible for managing the winning, sorting, blending and stockpiling of materials as required, to ensure that the required volumes of all fill types necessary to complete the works were achieved.  Appendix 4 of the contract identified the required quantity of Type A as 64,000 cubic metres.  Clause 2.2 of the specifications to the contract made BMD responsible for ensuring that all operations and methods of construction, set out, materials and workmanship were safe, sufficient and in accordance with the contract documents. 

1. These obligations were, however, subject to the contractual entitlement of the Superintendent to alter the finished surface levels shown on the plans.  Clause 2.31 of the specifications provided that the Superintendent had reserved the right “to alter the finished surface levels shown on the plans contained in section 7 to ensure a balance between the quantity of existing overburden and proposed fill”.  This is consistent with the communications around 7 to 10 January 2002 to which I have already referred.  That, in short, is what occurred. 

1. On 18 July 2003 the Superintendent issued site instruction No. 122 to Mr Waterson confirming discussions of that day that the finished surface level for Type A areas was to conform with plans attached to that instruction.  The site instruction reduced the overall thickness of the finished surface levels from a thickness of at least five metres throughout most of the site and was expressly given in reliance upon clause 40, which permitted the Superintendent to direct variations, including, by clause 40.1 c) which permitted the Superintendent to direct BMD to “change the levels, lines, positions or dimensions of any part of the work”.  The site instruction went on to note that it was issued as a consequence of the availability of materials and that works “associated with it [would] not be a variation.”

1. VicUrban does not dispute that a site variation was made, but contends that it was made necessary because BMD had failed in its various obligations or warrantees bearing upon its duty to manage the resource so as to ensure that the minimum five metre layer of Type A fill would be available for the finished capping layer as evidenced in the drawing attached to the contract and the discussions at the commencement.  However, I am unable to conclude in VicUrban’s favour either that BMD failed in its duties or that any failure was the cause of the contractual variation effected by the Superintendent’s site instruction numbered 122.  The factual circumstance primarily occasioning the need for a redesign of the finished surface levels, and which I find relevantly to be its cause, was the shortfall of materials available to be placed.  There may have been some material dealt with other than as VicUrban, or the Superintendent, might ultimately have wished, but the primary cause for the need to redesign the surface levels was that there was not sufficient material for placement.  Essential to that circumstance was the compaction factor achieved on the site.  It was important to the project that no additional fill material be brought onto the site from outside sources.  Clause 5.2.2.1 in the general description of works in Appendix 8 to the contract provided that the importation of additional fill material from outside the site was not allowed without the prior written approval of the Superintendent and no additional fill was ever imported onto the site.  The design of the works had assumed a compaction factor in the order of 0.925 or 7.5% whilst that actually achieved was in the order of 0.77 being a difference of some 23%; that is, that the effect of the compaction factor achieved meant that there was less material available when placed.  Mr Hawkins accepted in cross‑examination that the difference between the assumed compaction factor and the compaction factor achieved was “around” 23%. 

1. By at least January 2003 there were discussions about the discrepancy between cut volumes and fill volumes as measured at that time.  On 4 February 2003 Mr Finlayson of Golders wrote to Mr Hawkins about discussions which had been taking place on this topic, noting at the start of the letter, that the earthworks balance had been carried out on the assumption of a compaction factor of about 0.925 which, as explained, would mean that “there would be a 7.5% reduction in the volume of the existing stockpiles to the volume of the placed and compacted fill.”  That letter went on to discuss computed volumes indicating that the compacted fill was some 23% smaller in volume than the same amount of material occupied in the stockpile.  Based upon the compaction factor of 0.77 then inferred, Mr Finlayson suggested that the proposed earthworks volume would encounter a deficiency in available fill material prior to the completion of fill placement.  The letter went on to propose a number of measures which could be undertaken to assess the likely compaction factor and suggested a trial to get accurate results in relation to the Type B fill which, as was noted, was “the largest volume of fill required and [was] expected to have the greatest impact on the balance of cut and fill materials.”  The letter in its conclusion expressed the view that the compaction factor of 0.77 “to be unlikely”, but that in the absence of any field measurements, Golders had no means of refuting or dismissing the figures produced by BPD. 

1. By 2 April 2003 Mr Finlayson of Golders was able to recommend confidently that the required Type A finished surface level need no longer have been a minimum of five metres.  The original assessment regarding the required thickness of Type A fill had been made in the design development stage before any full scale placement of structural fills and “as a consequence” a minimum Type A fill thickness of five metres was adopted.  But by early April 2003, Golders and VicUrban, amongst others, had had the benefit of observing the placement of Type B fill over the preceding year and the production and placement of Type A fill over the preceding five months.  Mr Finlayson’s view at the time was that the Type B fill in terms of composition, grading, stability and placement was “generally of a higher quality than had been expected” and that as “a consequence” Golders had re-assessed the requirement for a Type A capping layer over the Type B fill and at that time considered the need for a bridging layer to be less critical.  Mr Finlayson was able to conclude that the Type A fill should be the greater of either (a) at least three metres or (b) the required thickness to maintain at least two metres below the floor for a potential building platform.  On 17 November 2003 the Superintendent wrote to VicUrban after reviewing the survey data provided by BMD and set out figures showing differences between quantities actually surveyed and the base inferred from the bulk earthworks plan before commencement of works.  Mr Dempsey was taken in cross‑examination to the figures relating to the compaction factor and, assuming the figures to be correct, accepted the conclusion that the 23% compaction factor would explain the cause of the shortfall of the material.  The figures put to him are correct as is also the conclusion which he accepted would follow. 

1. I also accept BMD’s submission that the evidence discloses that there would have been sufficient material available to win the necessary quantity of Type A material for a five metre capping layer if the Superintendent had directed the lowering of the surface of the Type B fill had he preferred that option to achieve a cut fill balance based on the material available for placement.  Mr Hawkins’ evidence was that as at 6 January 2003 he had the option of giving a direction to lower the surface of the Type B layer (that is, to adjust the Type A/B interface level) if maintenance of the five metre Type A capping layer was paramount.  His evidence in cross examination was that the options available to him as at 6 January 2003 were:  to allow the finished surface level by decreasing the thickness of the Type A layer in a number of areas at the site; to excavate further into natural ground in order to obtain more material to process Type A material; or to lower the top of the Type B surface.  He accepted the proposition that the option he adopted leading to the instruction given to BMD was given by him after lengthy discussions.  6 January 2003 was the date of an aerial survey.  In cross examination Mr Hawkins said that when he became aware of the extent of the material shortfall, there was enough material in the stockpiles to enable him to have given a direction to BMD to process and stockpile 540,000 cubic metres of Type A material and, as a consequence, to lower the Type B levels. 

1. It follows that I do not accept VicUrban to have made out its counterclaim.

I.  Second Bank Guarantee

1. BMD also claims the return of the one remaining bank guarantee which had been given under the contract.  On 7 May 2002 BMD provided to the Superintendent four bank guarantees by way of security as required under clause 5.2 of the general conditions and Part A of the annexure to the contract.  The Superintendent continues to hold one bank guarantee in the amount of $762,615.80. 

1. On 7 February 2005 the Superintendent issued a final certificate which certified that BMD owed $27,990.20 to VicUrban which, in accordance with the terms of the contract, permitted the Superintendent to retain the bank guarantee.  The amount said to be owing to VicUrban related to a failure to provide clearances from adjoining owners and an amount for the removal of rubbish from the western cliff top.  In any event, it is plain from the foregoing reasons that there is no amount owing to VicUrban and, accordingly, the second bank guarantee should be returned to BMD. 

J.  Orders and Costs

1. I will hear the parties on the cost orders to be made in this judgment.  Subject to orders as to costs I make the following orders that:

A.The defendant pay to the plaintiff the sum of $2,549,850.89 on the claims under the contract plus interest pursuant to statute.

B.The plaintiff is entitled to be repaid (to the extent not included in the previous order) the sum of $670,000 which had been deducted as liquidated damages. 

C.The defendant deliver to the plaintiff the bank guarantee it continues to hold in the sum of $762,615.80.

D.The plaintiff’s claim otherwise is dismissed.

E.The defendant’s counterclaim is dismissed.

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