Broadlex Services v RCR Resolve FM (No 2)
[2015] NSWSC 1514
•16 October 2015
|
New South Wales |
Case Name: | Broadlex Services v RCR Resolve FM (No 2) |
Medium Neutral Citation: | [2015] NSWSC 1514 |
Hearing Date(s): | 7 September 2015, 8 September 2015, 9 September 2015, 10 September and 11 September 2015 |
Decision Date: | 16 October 2015 |
Jurisdiction: | Equity - Commercial List |
Before: | McDougall J |
Decision: | Verdict for plaintiff for $241,378.77 plus interest on its claim. Verdict for defendant for $187,500 plus interest on its cross-claim. Verdicts to be set off. Plaintiff to have judgment for balance after set-off. |
Catchwords: | CONTRACT – claim for payment of debt in respect of unpaid invoices – where plaintiff provided cleaning services to defendant under contract – formation of the contract – whether formed by way of a written offer by plaintiff and acceptance by defendant, or, by written counter-offer by defendant and acceptance by conduct of the plaintiff – effect of an admission by the plaintiff of the latter version of formation – construction of the contract – whether particular cleaning services were within the scope of the ‘regular’ services to be performed or fell outside the scope and were performable only for an additional fee – whether defendant’s general terms and conditions were incorporated into the contract – whether services performed to the required standard – whether certain services which had been paid for were performed at all |
Legislation Cited: | Civil Procedure Act 2005 (NSW) |
Cases Cited: | Baltic Shipping Company v Dillon, (“the Mikhail Lermontov”) (1991) 22 NSWLR 1 |
Texts Cited: | Handley, Estoppel by Conduct and Election (Sweet and Maxwell, 2006) |
Category: | Principal judgment |
Parties: | Broadlex Services Pty Ltd (Plaintiff / Cross-Defendant) |
Representation: | Counsel: |
File Number(s): | 2014/69596 |
JUDGMENT
HIS HONOUR: The plaintiff (Broadlex) contracted with the defendant (Resolve) to supply cleaning services at the Villawood Immigration Detention Centre (VIDC) and a related “facility” known as Villawood Immigration Residential Housing (VIRH). It is common ground that Resolve has not paid Broadlex the value of some nine invoices for services, amounting in total to a little over $241,000.00. Resolve does not suggest that the services the subject of those invoices were not performed, or were not performed appropriately. It defends the claim by way of what might be called confession and avoidance, together with a claimed set off, and a cross-claim.
The issues
The real issues in dispute are, in substance:
(1)on the proper construction of the contract made between Broadlex and Resolve, what services was Broadlex required to perform for the fixed remuneration payable to it?
(2)If the contract is construed as Resolve submits, so that Broadlex was required to provide more services than it did (for reasons that will become apparent, I will call those the “extra charge services”), did the parties nonetheless conduct their relationship on the conventional basis that Broadlex should be paid additional remuneration for those services, so as to give rise to a conventional estoppel?
(3)If the contract is to be construed as Resolve contends, and if there is no conventional estoppel, what were the further services that Broadlex should have performed as part of its duties in exchange for the fixed remuneration?
(4)On the same assumptions, what if any loss has Resolve sustained by reason of the failure of Broadlex to provide the extra charge services without additional remuneration?
(5)Did Broadlex perform such services as it did provide to the standard required by the contract?
(6)If Broadlex did not perform its services to that standard, was that breach a material cause of the loss that Resolve claims to have suffered because its principal “abated” payments otherwise due to Resolve?
(7)Whether, on the assumption that Resolve’s general terms and conditions of contract formed part of the contract between Broadlex and Resolve, Broadlex has any entitlement to interest on any amounts that may be found owing to it having to regard to the proper construction of cl 7.6 of those general terms and its application in the events that have happened.
Background
Serco Australia Pty Ltd or the group of which it forms part (Serco) has a contract with the Commonwealth of Australia, or the relevant Minister of the Commonwealth, to “manage” immigration detention centres and related facilities throughout Australia. Resolve contracted with Serco to provide “facilities management services” at those centres. As part of that contract, Resolve was required to provide cleaning services at each centre.
In about May 2010, Resolve contracted with Broadlex for the latter to supply cleaning services at VIDC and VIRH. There were two separate contracts: one for VIDC and one for VIRH. Only the former is relevant. The parties’ contractual relationship continued up until about March 2013.
It is not contentious that, in April 2011, the unfortunate inmates of VIDC rioted, and set fire to some of the buildings within that complex. Very considerable damage was caused. Resolve and Broadlex agreed that Broadlex would undertake additional services, essentially cleaning up the damage and making good. Of course, that was for additional remuneration.
Resolve asserted that it was entitled to be paid $6.3 million by Serco for services provided “to additional assets”. It claimed, further, that Serco owed it about $1.4 million in respect of work done and invoiced, but not paid. The total claim was a little in excess of $7.7 million.
Serco defended Resolve’s claim, and filed a cross-claim. In that cross-claim, it asserted that Resolve had failed to meet “Key Performance Indicators” (KPIs) in respect of services provided at VIDC. Serco said that it “was entitled to adjust the fee to be paid by [it] to Resolve by the amount of $266,240.45”. It said that it had not deducted that amount from fees otherwise due to Resolve, and, accordingly, that the amount was due and payable. That is the “abatement” referred to in the sixth issue.
The claim between Resolve and Serco was settled on 30 June 2015. On that date, the parties executed a deed of release and settlement, under which Serco agreed to pay Resolve $3.685 million in full settlement of all claims, and the parties released each other. That sum was paid a few days later. There is no evidence as to how that sum was calculated. There is no material allocating it between the two claims that Resolve made against Serco, and the abatement that Serco claimed against Resolve.
The pleaded contract between Broadlex and Resolve
Before I turn to the contract (including, in particular, its genesis in preceding events), I should mention the way in which it was pleaded. Broadlex pleaded that the contract comprised:
(a)a written offer to supply routine cleaning services at VIDC;
(b)a clarification of the scope of the services to be provided, given by email on 22 February 2010; and
(c)acceptance of the offer as clarified by two purchase orders issued by Resolve on 23 April 2010 (one for VIDC and one for VIRH, leading to the two separate contracts to which I have referred).
In its defence, Resolve denied that the contract was so formed. It said that its purchase orders were not an acceptance of the offer that was said to have been made, and, somewhat obscurely, that the purchase orders “gave rise to a contract between [Resolve] and Broadlex to perform cleaning services at VIDC and VIRH”.
Resolve’s pleading did not condescend to explain how it was that the purchase orders gave rise to a contract. As will become apparent in a moment, that was clarified to some extent in Resolve’s cross-claim.
Resolve pleaded, further, that its purchase orders incorporated its standard “terms and conditions” (the general terms). Broadlex appears to accept, in principle, that most of those general terms were incorporated. There is however a dispute as to the extent of incorporation. Specifically, Broadlex says that a particular clause, purporting to have the effect of suspending any entitlement to interest on unpaid charges whilst a dispute remains unresolved, was not sufficiently brought to its attention to form part of the contract between it and Resolve.
Resolve’s cross-claim both complicated and simplified matters. It complicated them by pleading that, by the purchase orders, Resolve “engaged Broadlex to perform cleaning services at VIDC and VIRH”. As was the case with the somewhat similar allegation in the defence (namely, that the purchase orders “gave rise to a contract”), the pleading did not condescend to explain how the purchase orders, of themselves, could constitute an engagement rather than an offer to engage (or acceptance of an offer to be engaged).
However, that difficulty can be put aside. After pleading what Resolve said were terms incorporated into the purchase orders, the cross-claim alleged (para 15) that Broadlex commenced to supply services on about 1 May 2010 and (para 16) that by doing so, Broadlex accepted the terms of the purchase orders, including the standard terms referred to therein.
The amended defence to that cross-claim took issue with the pleading of “engagement”. However, it specifically admitted paragraphs 15 and 16.
Thus, it was admitted on the pleadings that the contracts between Broadlex and Resolve were formed by:
(1)Resolve’s purchase orders issued to Broadlex; and
(2)Broadlex’s acceptance of those purchase orders by conduct, in commencing to perform services.
When this became apparent to Mr Gration of Counsel (who appeared for Broadlex), in the course of his final submissions (and on the second day of submissions – the fifth day of the trial), he sought leave to amend. The effect of the amendments sought was:
(1)to withdraw the admission as to formation of the contract; and
(2)to allege, in substance, that the contract was constituted by an offer by Broadlex, in starting to perform services at VIDC, and Resolve’s acceptance by conduct of that offer, in taking the benefit of the services and paying for them in accordance with the quotation provided by Broadlex.
For reasons that I gave at the time, I refused that application. Thus, the submissions continued on the basis that the contract was formed in the manner summarised at [16] above.
Some days after the hearing had completed, and I had reserved my decision, Mr Gration asked for the matter to be relisted. He said that he wished to drawn the Court’s attention to two authorities on the question of admissions on pleadings. As I understand it, Mr Gration relied on those authorities for the proposition that, regardless of the admitted state of affairs on the pleadings (at least, where the admission was partly as to fact and partly as to the legal consequences of that fact), the Court should decide the point on the basis of all the evidence, and not merely on the basis of the admission.
I return to this submission at [107] and following below.
Genesis of the contract between Broadlex and Resolve
In May 2007, Ms Fitzsimmons of Resolve asked Mr Saltirov of Broadlex to provide a quotation for the provision of cleaning services at VIDC. She gave Mr Saltirov an extract from a specification of “General Cleaning Requirements” produced by the then Department of Immigration and Migration. (I shall follow the parties’ usage and refer to this department, which has undergone numerous name changes, by what I understand to be a recently current acronym, “DIAC”).
The Departmental specification stated that DIAC required the performance of both:
• Regular Cleaning and Periodic Cleaning
• Provision of Cleaning Service Manual
The second requirement can be put to one side.
The Departmental specification described what it called “Regular and Programmed Cleaning” in section 1.4. Somewhat confusingly, that section also incorporated, by way of apparent definition, a description of “Periodic Cleaning Items”. I set out sections 1.4.1 and 1.4.2:
1.4.1 GENERAL
Regular and Programmed cleaning mean any work required to ensure all major requirements or parts thereof detailed in this Clause comply with the Cleaning Performance Standards and all statutory requirements.
1.4.2 REGULAR CLEANING SERVICES
The purpose of Regular Cleaning is to provide a comprehensive cleaning service including all necessary tasks to ensure a sanitary, clean and tidy environment consistent with the function of the facility.
1.4.2.1 Periodic Cleaning Items
The Contractor is to provide and maintain a schedule programming these tasks as listed at each facility. Annual tasks such as window cleaning may be programmed on a rotational basis, however in such case, a clear program indicating proposed and actual cleaning times/dates must be maintained at the facility.
Without limiting the obligation to provide the Regular Cleaning Service, a list of periodic cleaning tasks for the facilities is listed below:
a) Resilient floors such as vinyl/Lino type floors and sealed wooden floors are to be scrubbed/stripped, polished/sealed as necessary to maintain appearance and gloss.
b) Periodical carpet cleaning is cleaning of carpets using water extraction or other suitable alternative method, As a minimum, the Contractor must carry out periodical carpet cleaning once per annum.
c) Cloth or fabric covered seating is to be cleaned as necessary to preserve appearance and cleanliness.
d) Internal/external facings of windows, including skylights are to be cleaned once per annum, this task includes removal/replacement of flyscreens or other screens except where permanently affixed. Where they are permanently affixed, the Contractor is to approach the Facility Manager to arrange removal, if necessary, for cleaning. Where security screens are permanently affixed, the windows are to be cleaned using a pressure washer. Note that both internal/external facings are to be cleaned as part of same task and not at separate times.
e) Ceiling fans and high beams/ledges, over 3 metres high are excluded from the cleaning regime.
f) Venetian and vertical blinds are to be thoroughly cleaned as a minimum once per annum, in a suitable manner to remove dust and stains. This cleaning may involve removal/installation of such blinds, which will be undertaken by the Contractor in a manner to avoid damage to the blinds.
Broadlex provided a written quotation. That quotation costed, separately, the provision of “Daily Cleaning Services” and “Periodical Cleaning Services”, and did so separately for VIDC and VIRH. Both daily and periodical cleaning services were described as “Routine & Non-Routine Cleaning Services”.
Broadlex provided a number of documents in support of that quotation. Those documents stated, more than once, that periodical tasks were included in the total cost. Further, as to the periodical tasks described at (a) to (f) in the Departmental specification, Broadlex provided some sort of schedule or program showing when those services (for obvious reasons, excluding the subject matter of para (e)) would be provided.
The amounts quoted for daily cleaning services (for both VIDC and VIRH) totalled $346,725.06. The amounts quoted for periodical cleaning services (again for both facilities) totalled $30,910.56.
The quotation also specified a figure for which Broadlex would be prepared in addition to clean individual rooms before they were occupied, or after they were vacated, or otherwise when necessary.
Nothing happened in respect of this quotation. That is to say, it was not accepted. However, in December 2009, Ms Berwick of Resolve (who appears to have been an assistant of Resolve’s then National Operations Manager, Mr Biddiscombe), contacted Mr Saltirov in connection with a proposed lunch. As it happened, the lunch was put off to the new year.
Mr Saltirov said that he and others from Broadlex met Mr Biddiscombe and Mr Hull of Resolve on 18 February 2010. He said that, at that meeting, Broadlex was asked to provide a quotation within a specified budget for “standard routine cleaning”. It was told, he said, that “periodicals and any extra cleaning will be an extra cost that we’ll issue separate work orders for”.
Mr Breakspear of Counsel, who appeared for Resolve, objected to that evidence, on the ground of relevance. I admitted it subject to relevance. As the case was pleaded, it could not be relevant to contract formation (because it was not pleaded that the contract was partly oral). On general principles, it could not be relevant to the question of construction of the contract. Whether, as the case was pleaded, it could be relevant to the question of characterisation of the conduct said to constitute acceptance of the purchase orders is a question to which I shall return.
I accept, at the level of principle, that the conversation might be relevant to establishing what were the terms of the contract that was made (as opposed to the proper construction of those terms that are proved). However, given the way in which the contract was pleaded (and admitted), that might be thought to have little practical application. Again, I shall return to this. It really seems to me that the conversation could be relevant (if at all) only to the conventional estoppel case. In that context, the conversation could provide some content to or understanding of the way in which the parties dealt with each other on and from 1 May 2010.
Regardless, after the meeting took place and on 22 February 2010 (18 February was a Friday in that year), Mr Saltirov sent an email to Mr Biddiscombe and others. He set out information that he needed:
- Number of staff
- Starting and finishing times
- Floor plans
- Type of security clearance required
Mr Hull (who had been copied in on the email) replied the same day saying, among other things:
Details as requested
2 staff per shift
Mon/Frid 12 hrs per day (2 Staff @ 6 hours per day) Between the hours of – 9am out 4:30pm
Sat/Sun 5.5 hrs per day (2 staff @ 2.45 hours per day) Between hours of 9am and midday
Security clearance required is police back ground [sic] check.
Broadlex was accustomed to using the service of a Mr Lupeski, on a contract basis, to prepare quotations. Mr Lupeski was given the information provided by Resolve. Later on 22 February 2010, he prepared a quotation.
Mr Lupeski’s quotation followed the format of the May 2007 quotation (it may be that Mr Lupeski had prepared that quotation). Relevantly for present purposes, the quotation provided:
Villawood Detention Centre
Cleaning Services
Pricing Schedule Summary
FEBRUARY, 2010
Immigration Detention Centre
Routine & Non-Routine Cleaning Services
| Daily Cleaning Services | $171,047.11 |
| Periodical Cleaning Services | not applicable |
| Total Cost Per Annum (GST Exc.) | $171,047.11 |
| A detailed breakdown of the total cost is attached A detailed labour deployment chart is attached |
Accommodation Cleaning Services
| Cost Per Room (GST Exc.) | $ 88.37 |
| (a.) before a Person in Detention occupies the room; | |
| (b.) after a Person in Detention vacates the room; | |
| (c.) when it is necessary. |
Immigration Residential Housing and Immigration Transit Accommodation
Routine & Non-Routine Cleaning Services
| Daily Cleaning Services | $214,512.39 |
| Periodical Cleaning Services | Not applicable |
| Total Cost Per Annum (GST Exc.) | $214,512.39 |
A detailed breakdown of the total cost is attached
A detailed labour deployment chart is attached
That quotation was supported, as the previous quotation had been, by other documents. One of those documents stated, as one of the “Pricing Assumptions” that had been made, that:
Periodical Tasks are NOT included in the total cost.
The quotation also included a sheet showing how labour resources would be deployed. As the previous quotation had done, that sheet referred to the five services (a) to (d) and (f) specifically described in the Departmental specification as “periodical cleaning items”. However, and unlike the previous quotation, it showed that those services would not be provided.
Mr Lupeski forwarded his quotation to Mr Saltirov under cover of an email dated 22 February 2010. Omitting formal parts, his email stated:
Further to our meeting regarding the above mentioned, I have revised the price and attached accordingly
Further to this, the following table must also be forwarded to Resolve FM:
EXCLUSIONS FROM SPECIFICATION
Note – All periodical tasks are excluded from the quotation, hence the following clauses are removed from the scope fo [sic] works:
page 207 of 350 – remove strip and seal vinyl floors MONTHLY
page 219 of 350 – remove strip and seal vinyl floors MONTHLY
page 222 of 350 – remove scrub external areas MONTHLY
page 227 of 350 – remove shampoo MONTHLY
page 228 of 350 – remove shampoo fabric surfaces MONTHLY
page 231 of 350 – remove Sanitary Bins – N/A
page 231 of 350 – remove Annual Steam Clean – N/A
page 232 of 350 – removal Waste Collection ‘from site’ – N/A
page 232 of 350 – remove Window Cleaning – N/A
In turn, Mr Saltirov forwarded that email, presumably with its attached quotation and other documents, to Mr Biddiscombe. Mr Saltirov’s email to Mr Biddiscombe read (omitting formal parts):
Hi Mike
Please accept our quote for Villawood Detention Centre as per your request outlining the changes mentioned in our meeting last Thursday.
If you have any questions please don’t hesitate to give me a call.
Please not [sic] the exclusions from the specification in Luke’s email below.
When Mr Lupeski wrote, in his email, of “exclusions from specification”, he was not referring to the Departmental specification. He was instead referring to a document, called “Part 4 – Scope”, issued by Serco for cleaning works at VIDC. It is common ground that Serco’s scope had been provided to Broadlex for the purpose of its quotation. That scope cross-referenced another Serco document, known as “Part 7 – Cleaning Standards”. The effect of the Part 4 scope was that services were to be performed to the higher of the service levels set out in those two documents. It appears to be common ground, and in any event I find, that the Part 7 standards were not supplied to Broadlex when it prepared its quotation.
The Part 4 scope provided for tasks to be undertaken daily (or several times daily), weekly and, in some circumstances, quarterly. It did not define those tasks (to the extent that they were not required to be performed at least daily) by reference to the Departmental specification. Thus, it is not possible readily to match the Part 4 scope to the Departmental specification in so far as the latter document seeks to describe periodical cleaning services.
Mr Lupeski did not give evidence. However, it is clear from his email of 22 February 2010 to Mr Saltirov that he was instructed that “periodical tasks” (whatever they might be) were to be excluded from the quotation. What Mr Lupeski appears to have done is go through the Part 4 scope and identify in it (so as to remove from the scope of the quotation) what he regarded as periodical tasks.
One of the documents that Mr Lupeski prepared in February 2010, and that was sent to Resolve, was a “Labour Deployment Chart”. That chart showed, for each area of the buildings to which the quotation applied, and for each room in each such area of those buildings, the hours of labour that would be deployed weekly in performance of the quoted services. It does not appear to show any allocation of labour for tasks of a lesser than weekly frequency.
At some stage, Mr Lupeski prepared a document called “Periodical Labour Estimates.” At some time in 2010 (on or after 22 February), that document was given to Resolve. That document effectively repeated verbatim items (a) to (f) from the Departmental scope, and quoted (with a break-up between various areas of VIDC) a price for items (a) to (d) and (f). The total quoted was $30,910.56. Someone annotated that document by hand “not included in total price”. The evidence does not reveal either the identity of the annotator or the date of annotation.
At some stage between 22 February and 8 March 2010, there were discussions between Mr Saltirov and (it would appear) Mr Hull in which, Mr Saltirov says, “we discussed and agreed to a 5 + 2 + 2 term”. That is stated in an email of 8 March 2010 that Mr Saltirov sent to Mr Hull.
The next day, 9 March 2010, Resolve gave what might be called a letter of intent to Broadlex, stating that it proposed a contract for 5 years with two two year extensions “as per submitted price”. The letter stated that one of the reasons Broadlex had been selected was the “offered best overall valve [sic] in regards [sic] to… Coverage”.
On 23 April 2010, Resolve issued its purchase orders: one for VIDC, and one for VIRH. They were not for five years. They were, rather for “twelve montlhy [sic] cleaning… as per tender submission”. They stated that:
Supply of this order is acceptance of our terms and conditions. A copy of these may be obtained from the issuer.
Also in April 2010, Mr Tarabe and Mr Fourth of Broadlex met Messrs Carroll and Hull at VIDC. This was the meeting that included what might be called the “rubbish bin episode”. Mr Tarabe’s evidence of that meeting was admitted over Mr Breakspear’s objection as to relevance, and subject to relevance. Again, it is for Broadlex to establish the relevance of that evidence. Again, as matters stand and on the state of the pleadings, it seems to me that its primary relevance is to the conventional estoppel case.
I set out in full Mr Tarabe’s account of the meeting (affidavit sworn 11 June 2015 at [14]). Before doing so, I note that Mr Tarabe said that he and Mr Gutierrez met Messrs Carroll and Hull, and that Mr Hull had a “Serco specification” (so described). With reference to that specification, according to Mr Tarabe, the following discussion took place:
14. At that meeting, I had a discussion with Hull to the following effect:
Me: (gesturing towards the Serco specification) What is it from that document that you want us to do?
Hull: You see this? (Hull gestured towards the Serco specification, then threw it in the rubbish bin).
Me: Villawood is such a big place, how are we going to do the cleaning without a specification?
Hull: Just get me two cleaners and we’ll do the rest. I will tell them what to do.
Although I had concerns as to some aspects of Mr Tarabe’s evidence, I accept as accurate this aspect of what he said. It was not challenged in cross-examination, and there was no evidence to controvert it.
The budget sheets
Resolve tendered a number of “Budget Sheets” prepared by Broadlex. Budget sheets, it seems, were documents prepared to show in some way the allocation of resources to individual cleaning jobs. Mr Tarabe said that they were prepared as part of the “handover” from those in management who had procured the work to those who were to perform it (or supervise its performance).
In this case, the budget sheets that were tendered are all dated after 1 May 2010. However, they have a number of common features. Most of them include a note at the end to the following effect (there may be minor differences, but what follows will give a sufficient indication):
PLEASE NOTE: PERIODICALS ARE NOT APPLICABLE.
IF RESOLVE FM REQUIRES ANY EXTRAS, WE HAVE TO PRICE SEPARATE [SIC] FOR:
- STRIP + SEAL. PER M2
- CARPET SHAMPOO PER M²
- SHAMPOO CHAIRS + LOUNGES (PER UNIT)
- COST FOR WINDOW CLEANING EXT/INT.
- BLINDS PER UNIT
In short, the list of things for which a separate price was required reflected items (a) to (d) and (f) of the Departmental specification.
Broadlex cleaning plans
There were in evidence a number of documents described as:
Resolve FM
Broadlex Cleaning Plan.
In form, those documents were spreadsheets which set out, for the various areas of VIDC that Broadlex from time to time was required to clean, the cleaning services that would be performed and the frequency of their performance. They are of particular significance in the conventional estoppel case, for reasons that will become apparent.
For present purposes, the salient feature of those documents is that, as well as indicating the services that were to be performed (and where, and at what intervals), they indicated services that were not to be performed.
Those documents identified a number of services as “Periodicals – Extra Charge”. Those services were (I paraphrase):
• Washing and disinfecting telephones;
• Cleaning kitchenhoods;
• Cleaning venetian blinds;
• Deep cleaning in commercial kitchens;
• Machine scrubbing floors;
• Stripping and sealing vinyl;
• Scrubbing internal areas;
• Pressure washing external areas;
• Various services (broken up) in relation to office areas;
• Pile life and shampooing of carpets;
• Scrubbing antistatic flooring;
• Shampooing fabric services;
• Washing window coverings;
• Wiping and vacuuming air vents;
• Cleaning window glass;
• Cleaning refrigerators;
• Cleaning external and internal glass.
Events on and from 1 May 2010
Broadlex commenced its provision of cleaning services at VIDC and VIRH on 1 May 2010. The affidavit of Mr Vargas, who started working for Broadlex as a leading hand at VIDC in June 2010, was that at all times, the cleaners’ performance of their work was directed by Messrs Carroll and Hull of Resolve. Mr Vargas said that at all times that he worked at VIDC, there was a copy of the current Broadlex cleaning plan on the wall of the lunch room. He observed Mr Carroll from time to time looking at that document and telling Broadlex’s supervisor at the time, Mr Canas, what if any additional tasks were to be performed. Mr Vargas said that when he succeeded to Mr Canas’ position of supervisor, Mr Carroll dealt with him in the same way.
For the reasons I give at [211] and following below, I find that from the beginning of work under the contract on 1 May 2010, whenever Resolve, through Mr Carroll or Mr Hull, wanted Broadlex to perform any of the extra charge services, it would issue a work order for those services to Broadlex. When Broadlex performed those services, it would invoice Resolve for them, in addition to the regular monthly instalments of the annual cleaning charges that had been agreed. Up until about July 2012, Resolve paid those invoices without demur or protest. Indeed, jumping ahead for a moment, even once the attention of Mr Price of Resolve had been drawn to this issue (and he thought that the extra charge services were part of the scope of works that Broadlex had contracted to perform for the agreed fee), invoices for extra charge services continued to be rendered and continued to be paid, right up until the contract came to an end.
The September consolidation
It is common ground that the scope of the tasks undertaken by Broadlex in the months from May 2010 onwards increased greatly from what had been the subject of its quotation. For example, the quotation originally applied only to a relatively small part of the complex at Villawood. The scope of works was expanded progressively to take in other parts of the complex. There is no doubt that Broadlex was entitled to charge, and did charge, for that additional work, and that Resolve paid the additional charges. (That is all “neutral” in terms of the conventional estoppel case.)
Mr Carroll asked Broadlex to revise its pricing so that it comprehended the expanded scope of works. On 22 September 2010, Mr Tarabe sent what he described as a “Consolidation of Services and Charges” that purported to answer Mr Carroll’s request. That document provided the following “pricing breakdown”:
| 1. | Original Price | ||
| a) | Immigration Detention Centre (amount reduces as per Visit Area in Point 4) | $308,447.60 | |
| b) | Immigration Housing Residential Centre | $77,111.90 | |
| 2. | Second Service to Critical Areas | $67,000.00 | |
| 3. | Periodical Work as per Initial Estimation (not included in original price) | $30,910.00 | |
| 4. | Visitors, Dorm 1, Dorm 2, Gym, Westbridge & T.A.B | $121,376.02 | |
| 5. | 3 DIAC Buildings (starting 1 October 2010 Monday to Friday) | $47,520.00 | |
| 6. | Waste & Sanitary Services (not included in above and separate prices where provided) | ||
| ● | Proposed Site Manager per annum, if approved to be added to total above | $90,000.00 | |
Please Note: All above prices exclude GST
It will be noted that the figure quoted for “Periodical Work” is identical, save for 56 cents, to the figure given for that work in the material sent to Resolve in or around February 2010.
On 5 January 2011, Mr Carroll sent an email to Mr Tarabe, informing him that the proposal to provide a Site Manager, at the quoted cost of $90,000.00 per annum, had been approved:
Please be aware that the supervisor position here at Villawood has been approved. Please also be aware that the site supervisor will be held responsible for all and any abatements incurred in the cleaning area, and that the cleaning schedule must be clearly followed along with ALL site management requirements.
It does not appear that any further purchase orders were issued, either in response to the September consolidation or, indeed, at any time from September 2010 until Broadlex ceased to provide cleaning services at VIDC. Although the purchase orders of April 2010 required only the supply of services for a 12 month period, the parties appear to have treated their contracts as continuing thereafter on whatever terms had been established following the issue of those purchase orders.
Mr Price becomes involved
Mr Price worked for Resolve from August 2011 until September 2014. He was Resolve’s National Contract Manager, apparently responsible for administering Resolve’s various contracts with Serco.
In about August 2011, Mr Price became concerned at the question of “tick sheets”. Those were sheets that DIAC and Serco required to be prepared (in the case of VIDC) by Broadlex’s staff, showing that the work for which each staff member was responsible had been performed. (It was Broadlex’s position that provision of the tick sheets was not required as part of its contract with Resolve, and that requiring its staff to complete them was a distraction from performance of cleaning work.)
In about March 2012, Mr Price became aware of concerns expressed by employees of Serco as to the quality of cleaning services provided by Broadlex at VIDC. Those concerns had been revealed in audits conducted by DIAC in conjunction with Serco. Mr Price became concerned, in particular, that there was no full time supervisor on site (despite the fact that Resolve had accepted Broadlex’s quotation for the provision of one), and that as a result the cleaners’ work was not adequately supervised. Mr Price raised his concerns with Mr Tarabe in an email.
Matters continued thus for some months, until July 2012. There were further complaints made by Serco about the quality of cleaning. Mr Price took up those complaints with Broadlex (in particular, Mr Tarabe). I say “took up” because Mr Price sent emails to Mr Tarabe. Mr Tarabe does not seem to have replied to those emails: specifically, the ones that highlighted concerns arising out of the DIAC audits.
Mr Price began to investigate why it was that (as appeared to him, from material he was receiving from Serco) certain cleaning tasks were not being performed by Broadlex. He discussed his concerns at a meeting on 6 August 2012. That meeting was attended by, among others, Mr Tarabe.
Mr Price confirmed his understanding of what had been discussed and agreed at the meeting in an email sent on 7 August 2012 to, among others, Mr Tarabe. Mr Tarabe did not deign to reply. Clearly, the email required him to do so, and to provide information that (according to Mr Price’s notes) Mr Tarabe had agreed to provide.
The email is lengthy. I will not set it all out. It started with a “Preamble” which stated Mr Price’s understanding of the scope of the contract between Resolve and Broadlex, and the obligations imposed on Broadlex under that contract. It sought a variation for “new building assets and services” that Serco wished to have cleaned or performed. It moved to the topic of “Cleaning Services”. Mr Price highlighted what he saw as “several and ongoing cleaning issues – relating to performance, schedule, delivery and standard”. It then provided:
Email exclusions
JT stated that Broadlex and Resolve FM agreed to exclude from the pricing a defined list of scope specifications (as indicated by email)
DP asked for this agreement documentation to be provided in full (clearly stating that list of agreed exclusions as indicated by email) – JT to provide
Schedule exclusions
JT stated that there was a second list of agreed scope specifications excluded from the pricing (as indicated by periodical schedule)
DP asked for this agreement documentation to be provided in full (clearly stating the list of agreed exclusions as indicated by periodical schedule) – JT to provide
Scope specifications
JT stated that Broadlex quoted against a Resolve FM scope (not the Serco scope that DP had at the meeting).
DP asked for a copy of the Resolve FM scope that was provided to Broadlex to quote against – JT to provide
Periodicals
JT stated that “Periodicals” are all cleaning tasks above a Fortnightly schedule – i.e. all tasks Monthly and above
DP stated that Periodicals is a subjective terms and does not have a standard meaning, as Periodicals in this context means work outside the agreed list (reactive work / non scheduled work)
DP asked for a copy the “Periodicals” definition that was agreed to be used – JT to provide
Pricing Summary
JT stated that the Pricing Schedule Summary FEB 2010 states “Periodical Cleaning Services – not applicable”
DP stated, as per above point, this has no impact on the requirements of the tasks listed in the scope of work
Cleaning Performance
DP stated that there are issues with routine daily / weekly cleaning – there must not be issues with routine daily / weekly cleaning tasks, schedules or standards
DP stated that there is clear physical evidence that cleaning is not being performed regarding non-disputed cleaning tasks – the sheet is ticked but the physical inspection highlights otherwise
JT requests access approval for a ‘cleaning camera’ to record key areas of concern once cleaning is completed – RF to organise
…
All actions to be completed by Friday 10th August.
“JT” refers to Mr Tarabe (his first name is “Joe”). I find that, at the meeting, Mr Tarabe did agree to provide the four items of information indicated as to be provided by him.
It does not matter for present purposes, but the initials “RF” refer to Mr Reynold Fasavalu, who was Resolve’s “Facilities Manager” at VIDC.
Notwithstanding Mr Price’s concerns, Resolve continued from time to time to request Broadlex to perform extra charge services at VIDC. Broadlex agreed to do so on receipt of a work order and for additional remuneration. That additional remuneration was invoiced, and was paid without demur.
DIAC, and therefore Serco, continued to be dissatisfied with the standard of cleaning services performed at VIDC. They took up their concerns with Mr Price. Mr Price passed those concerns on to Broadlex. On 28 August 2012, Mr Price forwarded to Mr Vargas and Mr Tarabe (and others) by email a DIAC audit report relating to 22 August 2012. Among other things, Mr Price asked Mr Vargas to attend to all the tasks listed for rectification or completion in the DIAC audit. That was to be done, he said, by 12 noon the following Friday.
Also on 28 August 2012, Mr Price sent an email to Mr Tarabe, copied to Mr Vargas among others, warning that he would issue a “non-conformance letter” once he had available all the information required to complete it. Three days later, on 31 August 2012, Mr Price sent an email to Mr Tarabe, copied to among others Mr Vargas, attaching “formal notice regarding multiple non-conformance issues regarding ongoing cleaning performance at VIDC”.
The email stated, further:
Additionally, attached are the notes from our ‘variation and services meeting’ held 06/08/12 with 4 x key actions highlighted with JT to provide – this information has not been provided.
Your urgent attention to all matters highlighted are required and recommended.
The “Formal Notice” raised the following non-conformance issues:
Scope of Works
The following scope tasks are not being performed by Broadlex on a scheduled basis – and when they are completed, Broadlex are invoicing Resolve FM under a chargeable work order:
• Cleaning kitchen hoods free of oil
• Cleaning of venetian blinds
• Walls, floors and ceilings must be deep cleaned in commercial kitchens
• Machine scrubbing floor and skirting
• Stripping and sealing of vinyl floors
• Scrub external areas
• Pressure washing external areas
• Office areas – dust and wipe columns to full height
• Office areas – dust air conditioning ventilation outlets
• Carpets, mats and rugs – pile lift and shampooing
• Scrubbing of antistatic flooring
• Shampooing of fabric surfaces
• Washing of window coverings – curtains, venetian blinds, vertical blinds, Holland blinds
• Damp wiping and vacuum cleaning of air vents
• Window glass, frames and ledges shall be thoroughly cleaned both sides
• Fridges & Microwaves
• External / Internal glass – wash clean to full height, polish stainless steel fixing plates above doors, clean silicone joints
Resolve FM has agreed to the costs presented by Broadlex in the ‘Consolidation of Services and Charges – incorporating Part 4 – Scope of Works’ offered and accepted September 2010.
Resolve FM has not agreed to any part of the scope to be excluded or not-completed.
Mr Tarabe did reply to this email. He did so by email dated 13 September 2012. Among other things, he said:
• Scope of Works:
- Our agreement and price with Resolve FM does not include the periodical tasks you outlined in your letter. Our initial proposal clearly identifies “periodical tasks NOT included in price”. Refer to Attachment 2.
- Our task sheet provided to Mark Carroll (Resolve FM) in July 2010, is consistent with our claim that periodicals were not part of our scope of work. Prices for these tasks are attached. Refer to Attachment 3.
- You mentioned this was approved by Resolve FM, we do not have that on record and no payment was made to Broadlex in relation to these tasks. Refer to Attachment 4.
“Attachment 2” consisted of three of the pages sent to Resolve on 22 February 2010, as part of Broadlex’s quotation. They were:
(1)the pricing document which stated, as one of the assumptions on which it was based, “Periodical Tasks are not included in the total price”;
(2)the pricing document which referred to the “detailed labour deployment chart” and stated that “Periodical Cleaning Services” were “not applicable”; and
(3)the estimate for periodical labour items which priced the five items (a) to (d) and (f) from the Departmental specification.
Mr Tarabe did not attach, among other things, Mr Lupeski’s email of 22 February 2012 (see at [39] above).
“Attachment 3” comprised emails from Mr Tarabe to, among others, Mr Carroll of Resolve attaching “the Maintenance Program and Periodical [sic]” and asking Mr Carroll, if there were “any additional information or you require to change anything on the planner”, to contact Mr Tarabe. I am satisfied that the attached documents were in the form of the Broadlex cleaning plan, or spreadsheet, identified by Mr Vargas (see at [59] above). More accurately, they were a series of such spreadsheets.
I have set out at [58] above a list of those extra charge services. They correspond substantially, if not identically, with the tasks that Mr Price had identified in his non-conformance notice as being within scope, but not being performed. Had Mr Price read Mr Tarabe’s reply (and I have no doubt that he did), he must have realised that Resolve and Broadlex had directly opposed views on whether those services were included within the scope.
“Attachment 4” was presumably intended to be a response to Mr Price’s reference to agreement to the consolidation of services charges. That attachment was, or purported to be, an updated pricing breakdown, said to have taken effect from 1 May 2011.
Mr Price remained dissatisfied with the quality and scope of services provided by Broadlex. No doubt, in part, his dissatisfaction was prompted by further DIAC audits. He conveyed his continuing dissatisfaction in emails sent to Mr Tarabe and others of Broadlex.
Mr Price convened a meeting on 12 October 2012. It was attended by representatives of Resolve and, from Broadlex, Messrs Lupeski, Tarabe and Vargas.
Mr Price prepared minutes of the meeting. He sent them out to those who had attended. There is no evidence of any of the attendees’ having questioned the accuracy of the minutes. I accept that they were accurate.
Item 1 on the agenda was to “Confirm the scope of work”. In relation to that agenda item, Mr Price recorded:
1. Confirm the scope of work
• Agree that the full scope was quoted and accepted September 2010
• JT states that even though the full scope was quoted and accepted, a specific list of ‘periodicals’ was not accepted by RFM – No documentation provided regarding this direction
• The term ‘periodicals’ is not a contract definition but a heading used by BD/Estimators regarding a list of specific tasks originally (pre Sept 10) exempt from the fixed fee to be performed and involved on a Reactive basis.
• The list of Periodicals was confirmed by LL as the nine line items listed in the original quotation of February 10:
° page 207 of 350 – remove strip and seal vinyl floors MONTHLY
◦ page 219 of 350 – remove strip and seal vinyl floors MONTHLY
° page 222 of 350 – remove scrub external areas MONTHLY
° page 227 of 350 – remove shampoo MONTHLY
° page 228 of 350 remove shampoo fabric surfaces MONTHLY
° page 231 of 350 – remove Sanitary Bins – N/A
° page 231 of 350 – remove Annual Steam Clean – N/A
° page 232 of 350 – remove Waste Collection ‘from site’ – N/A
° page 232 of 350 – remove Window Cleaning – N/A
° The periodicals refer to these nine items in the scope – no more and no less – DP to highlight the Periodical listed in the scope (attached)
° JT confirmed that Broadlex service and deliverables are back – to – back with the scope document – except for the list of Periodicals.
Item 4 concerned the requirements for and expectations of the supervision that Broadlex was to provide. Mr Price recorded the outcome as follows:
4. Supervision requirements and expectations
• Broadlex need to meet the Supervisor tasks, requirements and obligations of the scope, with or without the additional FTE on-site cleaning supervisor
• Agree that the ‘Resolve FM Supervisor’ is over and above the requirements of the scope and was included to provide direct management of Resolve FM service delivery and performance
• Agree to replace the current cleaning supervisor with an individual that will manage on-site cleaning on behalf of Resolve FM
From Mr Price’s perspective (and, it may be inferred, from the perspectives of DIAC and Serco), matters did not improve. Accordingly, on 15 October 2012, Mr Price sent yet another email to Mr Tarabe, copied to (among others) Mr Vargas. It pointed out four “Fail” items relating to a recent DIAC audit, Mr Vargas’ presence on site and Broadlex’s failure to provide an action plan. The email concluded:
If the issues were varied and or infrequent, then we could manage the issues in due course, however the matters are common and constant, and there seems to be no evidence that the site staff or supervisor understand the scope requirements – the problems seem to be systemic and will not be rectified without some serious attention.
The abatement notice
On 16 November 2012, Serco wrote to Resolve. The letter stated Serco’s intention to reduce (or “abate”) the service fee payable by Serco to Resolve by the sum of $266,240.45 (including GST). Among other things, the letter stated:
Serco have been abated by the Department of Immigration and Citizenship (DIAC) a total of six (6) times in the period March 2012 to September 2012 for cleaning performance failures at Villawood IDC (VIDC).
Abatements result from documented evidence of cleaning failures collected during weekly cleaning audits conducted by DIAC and attended by Resolve FM and Serco. Audits have consistently reported deficient performance in cleaning service delivery. Such non-compliance identifies a failure on the part of Resolve FM to meet key performance indicators (KPIs).
…
A month later, Mr Price notified Mr Tarabe of the abatement notice. He did so in an email of 18 December 2012. Among other things, he asserted that the abatement was “for the ongoing failure of cleaning performance at VIDC” and that it “covers many months”. He said, among other things:
■ I am reviewing the abatement figure above against the methodology, content and details used by Serco to ensure that the abatement figure is a true reflection of contracted poor performance.
I interpose to note that Mr Price conceded that he had never been able to satisfy himself that Serco had applied the contractual abatement methodology. Nor was there any other evidence that the abatement complied with the relevant provisions of the contract between Serco and Resolve. Be all that as it may, Mr Tarabe replied the same day expressing his “surprise and disappointment” that Broadlex was involved “in a contractual issue between Resolve FM and Serco”. The email continued.
Any minor shortfalls found in any inspection are closed off promptly as you are very well aware of, any correspondance [sic] received in relation to cleaning issues they have been addressed promptly and closed off by Broadlex and there is no outstanding issues as we are aware and there is no point talking about MARCH to SEPTEMBER.
We remind you that there is still an outstanding amount of around $400,000.00 and the weekly agreed amount has not been received this week.
Some months later, in May 2013, there was a further exchange of emails between Messrs Tarabe and Price. In an email of 28 May 2013, Mr Price referred to information provided by Mr Tarabe. He then said:
As mentioned in the meeting in March and in the minutes (and now again) I agree that the financial abatement issue is not a consideration for Broadlex.
Mr Gration relied on this statement to show that Mr Price had effectively conceded that, whatever were the problems that led to the abatement’s being imposed by Serco on Resolve, they were not to be sheeted home to Broadlex, and Broadlex should not be backcharged for the abatement. That may or may not be a correct reading of the email. However, since it may not be the only meaning, and since Mr Price was not cross-examined on it, I do not think it appropriate to accept Mr Gration’s characterisation of it.
First and seventh issues: terms of the contract and their proper construction
It is convenient to deal with these issues together.
The question of what were the terms of the contract relates to the scope of services. It is directed to identifying what were the terms that were agreed, and that formed part of the contract between Broadlex and Resolve. Once those terms have been identified, the questions of construction arise.
There are two questions of construction. The first relates to the exclusions that, on any view, form part of the contract. By “exclusions”, I mean the list of excluded services that Mr Lupeski identified in his email of 22 February 2010.
The second issue of construction arises on the assumption (and it will be seen that in my view the assumption is correct) that all of the general terms form part of the contract. The clause, the construction of which is in dispute, is cl 7.6. That is the clause which, according to Resolve, has the effect that even if any money should be found to be owing to Broadlex, there is no entitlement to interest until the “dispute” as to that claimed debt is resolved.
If that question of construction were answered in favour of Resolve, there would then be an issue as to whether cl 7.6, so construed, overrides the Court’s general discretion as to pre-judgment interest under s 100 of the Civil Procedure Act 2005 (NSW).
Some preliminary points
It might be thought that analysis of the first question should start with the proposition, agreed on the pleadings, that the contract between the parties was constituted by:
(1)Resolve’s offer in the relevant purchase order dated 23 April 2010; and
(2)Broadlex’s acceptance of that offer by its conduct in commencing to perform the work the subject of the purchase orders.
I repeat that, on the pleadings, the conversations to which I have referred above (both those occurring before 23 April 2010 and those occurring between 23 April and 1 May 2010) are irrelevant to ascertaining the terms of the contract, because the contract is not pleaded as one made partly orally, partly in writing and partly by conduct. Further, and because acceptance by conduct is admitted on the pleadings, they cannot be relevant to the question of characterisation of the conduct to see whether it amounts to an acceptance, or is a counter offer. Finally (and so much was common ground), they cannot be relevant to the question of proper construction of whatever the terms are found to be.
The parties did not address the consequences of the fact that the purchase orders commissioned only 12 months’ supply of services, whereas the performance that was tendered and accepted extended for almost two years after that 12 month period. It was of course common ground that the contract (whatever its terms might be) was from time to time varied: for example, by the requirements, accepted by Broadlex to provide cleaning services in respect of more extensive areas of VIDC, for additional remuneration. But it was not argued that any of those variations was in terms a variation which had the or an effect of extending the duration of the contract.
In those circumstances, I think, the parties should be treated as having conducted their contractual relationship on the basis that the terms of the original contract applied (subject to the asserted estoppel) throughout the duration of performance and payment, varied from time to time in respect of the areas to which services were to be supplied and, in consequence, as to the remuneration payable. On that analysis, there would presumably be a contract (strictly speaking, two contracts – one for VIDC and one for VIRH) for a term of 12 months, thereafter determinable either at will or on reasonable notice. Since no question of breach arises from the circumstances in which the contract came to an end, it is not necessary to pursue this point.
Further, although the scope of the work undertaken by Broadlex increased greatly after the riots and fires of April 2011, it does not seem that the parties concluded any express contract dealing with that enlarged scope of works. Presumably, they regarded it too as covered by the terms of the contract that they had made in about May 2010.
Further submission on the admissions as to formation of the contract
If the contracts were formed by acceptance (by conduct) of the purchase orders, their terms would be found in those purchase orders. Of course, the search for terms may and should extend beyond the verbiage of the purchase orders themselves. It must extend, at least, to documents that are expressly called up by the purchase orders.
As I have noted, Mr Gration submitted, after I had reserved my decision, that it was open to the Court to consider the question of contract formation on the basis of all the evidence before it. He submitted that the Court should not simply conclude this point on the basis of the state of affairs admitted on the pleadings. In effect (and I do not mean to be disrespectful in saying this), Mr Gration’s submissions on this point appeared to be a late reaction to the ruling referred to at [18] above on the application described at [17].
Mr Gration referred to the decision of Owen J in Bell Group Ltd (In Liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 at [4528]. In that paragraph, his Honour considered whether the defendant banks were bound by an admission on their pleadings that the directors of the plaintiff company owed fiduciary duties to it. He recorded that the plaintiff argued, in consequence, that “the banks are not now entitled to raise an issue, generally, whether the duties are fiduciary”. The answer to that, his Honour said, could be given as follows:
The question whether the proper characterisation of an obligation is or is not fiduciary is a question of law or, at the very least, a mixed question of law and fact. That being so, an admission in the pleadings does not resolve the issue and nor does it absolve the trial judge from the responsibility to ascertain the true state of the law and to apply it in accordance with findings that he or she has made.
If I may say so with respect, I can understand that approach in a case where the question is one of breach of fiduciary duties. The question requires identification and characterisation of the duties said to have been broken. The resolution of that question involves the application of a legal test to the particular facts of the case. And in answering that question, the Court must recognise that although the categories of fiduciary relationships are not closed, the class of fiduciary duties is.
If the duties, although admitted to be fiduciary, could not be so categorised on all the facts available to the Court, it would not be appropriate for the Court to rely on the admission of the fiduciary character of the duties, and thus to make a finding of breach which was not otherwise available. That is taking the role of admissions far beyond their intended purpose. More importantly, it might lend to unintended and unprincipled “development” of the law relating to fiduciary duties; more bluntly, to heresy.
The other case to which Mr Gration referred was the decision of the Court of Appeal of Queensland in Holdway v Arcuri Lawyers (2009) 2 Qd R 18. The plaintiff made a claim against a deceased estate under what appears to have been the Queensland equivalent of s 58 of the Succession Act2006 (NSW). Her pleaded case was that the deceased’s estate had been distributed when transfers of parcels of real property (from the executor in that capacity to himself as devisee) were registered. The trial judge decided the matter on the basis of the pleaded case. One of the questions before the Court of Appeal was whether the trial judge had erred in holding that the admission on the pleadings was decisive.
Keane JA gave the principal judgment. McMurdo P agreed with his Honour, although giving brief additional reasons, and Mackenzie AJA agreed with Keane JA.
McMurdo P dealt with the point at [5]. Her Honour said that an admission on the pleadings will usually narrow the issues in dispute between the parties, and restrict the calling of contrary evidence. However, her Honour observed:
… in the present case, despite the pleaded admission, the parties called evidence on that issue at trial without objection. The question whether the estate was distributed… was, despite the admission, a contested issue between the parties at trial. A court is not bound to act upon an admission where persuasive contradictory evidence called at trial demonstrates that the admission is wrong…
Keane JA dealt with the point at [60] and following. His Honour started by noting the purposes to be served by pleadings, including giving proper notice of the case to be made, and defining the issues. He cited Gould v The Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 and Banque Commerciale SA v Akhil Holdings Ltd (1990) 169 CLR 279.
His Honour then noted that both parties had called evidence on the proper characterisation of the transfers, and that the plaintiff (who had the benefit of the admission) “did not seek to suggest… that further evidence might have been called on this issue…”. In those circumstances, his Honour said at [62]:
… insofar as the purpose of a party’s pleading is to notify the other side of the case it has to meet so that any evidence relevant to that case can be addressed, that purpose would not be disserved by giving effect to the findings made by the learned trial judge on the evidence.
Further, his Honour said at [63], on the way both sides had conducted the trial, the proper characterisation of the duty was “a matter presented by the parties for determination by the learned trial judge”. Keane JA noted that the plaintiff “did not rest content with the position which it now says was established on the pleadings” but “sought to prove that the pieces of real property had been distributed”. Thus, his Honour said (again at [63]):
Insofar as the purpose of pleadings is to confine the issues to be decided by the judge at trial, that purpose would not be disserved by giving effect to the findings made by the learned trial judge on the evidence adduced by both plaintiff and defendant on the issue.
His Honour then said at [64], [65] (I omit footnoted citations):
[64] If an allegation of fact is admitted in a pleading, there is no issue as to the truth of the fact and evidence to prove the fact is unnecessary and, indeed, irrelevant. But if the parties, by their conduct of the trial, open the issue up by calling evidence upon it, then the admission does not become entirely irrelevant. It affords a basis on which the court may conclude the issue in favour of the party which has the benefit of the admission. Thus, an admission of an allegation of fact by a party in a pleading will usually suffice to establish that fact against the party making the admission; but an admission of a matter of law or of mixed fact and law will not necessarily be decisive if other evidence in the case shows that the admission was made in error and the circumstances are such that the party who made the error can advance the true position consistently with procedural fairness to the other party. Indeed, on one view, the defendant's implied admission was of no probative value at all. In Grey v Australian Motorists & General Insurance Co, Glass JA said that:
… in point of principle … a party cannot be asked to admit a conclusion depending upon a legal standard. By extorting from a party an admission that he was negligent, or that he was not provoked, or that his grandfather possessed testamentary capacity, there is added to the record something which is, not merely of dubious value, but by definition valueless, owing to the witness' unfamiliarity with the standard governing his answer.
If this absolutist view is rejected, and the admission of a matter of law or of mixed fact and law is accorded probative value, its probative value may vary: it may or may not be sufficient to support a conclusion on matters such as an entitlement to property; whether it is sufficient will depend on the circumstances of the case.
[65]Subject to the requirements of natural justice, if evidence admitted without objection demonstrates that an admission of mixed fact and law is erroneous, then the admission will not be decisive against the party making it. Usually, of course, if an allegation has been admitted, evidence tendered to prove or disprove that allegation will be irrelevant and will, upon objection being taken, be excluded on that ground. But, in this case, evidence was admitted, both to prove and to disprove, the due distribution of the two pieces of land; and that occurred without objection. Once that occurred, the question for the learned trial judge was whether the proposition that the two pieces of real estate had been duly distributed was established or not. In deciding that question, the admission was relevant but it could no longer be decisive. It is clear, though, that his Honour treated the admission as decisive. In this regard, his Honour erred in that he had come to the conclusion, applying the law to the facts as he found them to be, that, in truth, the two pieces of land had not been distributed by the transfers on 25 July 2003. (emphasis in original)
That outcome of that case depends very much on its facts. It does not establish any general rule that a party who has admitted a particular state of affairs (whether an admission of fact, or of law, or of a mixed question of fact and law) should be held entitled to resile from the admission and to grasp at evidentiary straws that might seem to support a finding, whether of fact or fact and law, contrary to the admitted state of affairs.
In this case, Resolve was given no notice, until Mr Gration’s closing submissions on the last two days of the trial, that Broadlex wished to contend that the contract had not been concluded in the manner admitted on the pleadings. If that matter had been fairly in issue during the trial, and if Resolve, having been given some notice of Broadlex’s position, had dealt with the issue as though it were one to be resolved on the evidence adduced, the position might be different. But here, the evidence on which Mr Gration relied was evidence that was properly admissible on Broadlex’s conventional estoppel case. As the pleadings stood, it was not relevant to the question of contract formation, because that question had been resolved on the pleadings. Raising the point at the end of the case, after the evidence has closed, is not consistent with the interests of justice as between the parties.
I proceed on the basis that the decision in Holdway does no more than confirm that a trial judge has a discretion to permit a party to depart from pleaded issues where it is apparent that the other party has acquiesced in this happening, and where the parties have fought the issue out on the facts. I do not accept that it goes further, and requires a trial judge to decide an issue on the facts, and contrary to a pleaded admission, in all circumstances; and, a fortiori, where to do so would (as I think is the case here) work substantial injustice to the detriment of the other party. I add that since the evidence was admissible on a pleaded issue, there can be no question of acquiescence based on irrelevant evidence being adduced without protest. On the contrary, objection was taken (see at [31], [49] above).
Further, in the present case, the evidence in support of the conclusion for which Broadlex wished (contrary to its pleading) to contend can hardly be said to be “persuasive”, let alone compelling. That may reflect in part the fact that Resolve in particular had no prior notice that the admitted state of affairs was to be disputed. Nor is there any obvious inconsistency (in a factual sense, or with established principles as to contract formation) in dealing with this question on the basis of the admission in the pleadings. The position for which Broadlex would contend is hardly so obvious that to give effect to the pleaded admission would lead to a conclusion, as to contract formation, that is manifestly absurd.
What were the terms of the contract?
It was not contentious that the “tender submission” referred to in the purchase orders comprised:
(1)Mr Saltirov’s email to Mr Biddiscombe of 22 February 2010, forwarding Mr Lupeski’s email to Mr Biddiscombe of the same date and the attachments to that email; and
(2)some at least of Resolve’s general terms, as to which, it was said, a copy “may be obtained from the issuer”.
Mr Gration’s submissions in relation to the general terms were a little difficult to follow. He accepted that at least some of them would form part of the terms of the contract that was made, simply because the general terms had been referred to expressly in the offer that was accepted. However, he submitted, not everything in the general terms would be so incorporated. Specifically, he submitted, excluding or limiting terms such as cls 7.5 and 7.6 would not form part of the contract, because Broadlex had not been given reasonable notice of them. I shall return to this question.
The parties appeared to accept that Serco’s Part 4 scope would also form part of the contract. It was, I think, common ground that Broadlex had been given that scope for the purpose of preparing its quotation in 2007, and that it also had it, and utilised it, for the purpose of preparing its quotation in 2010. It is clear that Mr Lupeski had that scope, and that he paid attention to it when he prepared his estimate. That is because the specific exclusions that he lists (for example, “remove strip and seal vinyl floors MONTHLY”) are drawn from, and expressly cross-referenced to, the Part 4 scope.
Thus, I think, to the extent that it was not excluded on the proper construction of the quotation, the Part 4 scope must form part of the contract.
The Part 4 scope incorporates Serco’s Part 7 standards. I have found at [41] that the Part 7 standards were not given to Broadlex at any relevant time. Nonetheless, someone reading the Part 4 standards carefully (as Mr Lupeski must have done, to satisfy himself as to services that should be excluded from the estimate) should have realised that there was another document that bore on either the scope or the quality of the services to be performed.
Broadlex was given the Departmental specification in 2007, for the purpose of quoting. It is apparent that Mr Lupeski paid attention to the Departmental specification in preparing his estimate. That is because one of the documents attached to his estimate, and thus to the quotations submitted to Resolve, specifically excluded services (a) to (d) and (f) referred to in the Departmental specification. And as I have said, he later costed them, and that costing was given to Resolve.
Looking at the matter objectively, it is clear, and I am satisfied, that Broadlex’s quotation of 22 February 2010 was intended to address, and should be read as addressing, the requirements of the Part 4 scope and the Departmental specification. Thus, I am satisfied that the offer comprised in that quotation should be read as an offer made upon the terms of those documents (to the extent that they can be reconciled). The position is less clear in respect of the Part 7 standards. However, since little if anything appears to turn on those standards, it is probably not necessary to pursue this point.
Returning to the actual quotation, the documents that it comprised included:
(1)Mr Lupeski’s email to Mr Saltirov of 22 February 2010, forwarded by Mr Saltirov to Mr Biddiscombe;
(2)the Pricing Schedule Summary which broke up the prices into quotations for VIDC and VIRH, which were cross-referenced to attached documents described as “detailed breakdown of the total cost” and “detailed labour deployment chart”, and which specifically stated that “Periodical Cleaning Services” were “not applicable”;
(3)another breakdown of the quotation, into labour and on-costs, fixed costs, administration and profit, which stated as one of the “Pricing Assumptions” on which it was based, “Periodical tasks are NOT including in the total cost” (one each for VIDC and VIRH);
(4)a summary of “Labour Resources” which indicated the hours at which cleaners and others would be available to perform duties and which indicated clearly (particularly by silence, when compared with the equivalent documents in the 2007 quotation) that no labour allowance was made for what were called “Periodical Cleaning Services” but were specifically described by reference to paras (a) to (d) and (f) of the Departmental scope; and
(5)a labour deployment chart which broke down the hours of labour to be provided over the various tasks; it covered services provided daily and on lesser frequencies up to weekly, but not at less than weekly frequencies.
Whatever terms may be spelled out of the various documents to which I have referred are to be regarded as terms of the contract. Further (and in connection with the second aspect of this issue), it is legitimate to have regard to those documents for whatever light they may throw on the proper construction of the terms that were in dispute: specifically, the content of the undoubted exclusion of “Periodical Cleaning Services”.
I turn to Resolve’s general terms. It might be thought that there is a simple answer to the question of whether they were incorporated into the contract: namely, “yes”; and a simple reason why this is so. The simple reason is that, since the purchase orders are admitted to have been offers available for acceptance, and that were accepted by conduct, the offers were made on the terms stated in them, including specifically that they incorporated the terms.
As I have noted, Mr Gration’s submissions accepted that some of the general terms would be incorporated, but that others would not be. He relied on what had been said by the High Court of Australia in Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197, and by the Court of Appeal of this State in Baltic Shipping Company v Dillon, “the Mikhail Lermontov” (1991) 22 NSWLR 1. Mr Gration referred specifically to observations by Brennan J in Fay at 229, to the effect that where there is no writing binding a passenger to the terms of carriage, the carrier cannot rely on an exemption clause in its standard terms of carriage unless it had done all that was reasonably necessary to bring that clause to the passenger’s notice. Kirby P expressed himself to similar effect in Dillon at 25 (although Mr Gration did not refer expressly to this section of his Honour’s reasons).
I have some difficulty in accepting the proposition that, in circumstances such as those under consideration, some parts of standard terms and conditions of contract, referred to but not expressly set out in an offer to contract (and not accepted by signature), can be incorporated into a contract made by acceptance of that offer, but that other parts may not be. The ultimate issue is whether a contract has arisen on the proved dealings of the parties. Where those dealings comprise the making of an offer by the tender of a printed form of agreement and conduct said to amount to acceptance of that offer, the test is whether an objective bystander, considering those facts, would conclude that there had been acceptance of the terms stated in the printed document.
That analysis is consistent with the view taken by Kirby P in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 531. In the same case, McHugh JA (with whom Samuels JA agreed) said at 535:
… where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms. …
The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted.
The test stated by McHugh JA in Empirnall Holdings was applied by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [82]. His Honour made the point that “it is the reaction of reasonable parties, not the actual parties, which must be analysed”. His Honour then said:
The defendant, as offeree, had a reasonable opportunity to reject the offer: indeed, initially, it did reject the offer. However, it soon took advantage of the benefit offered. It knew that the only basis on which the Council was prepared to permit the higher prices to be charged and the 1.1 cents retained as a matter of contractual right was the basis stated in the 19 September 1991 letter. The charging of the higher prices by the defendant could convey one of two possibilities, that it was acting in breach of the condition on which the benefit was being conferred, or that the defendant was accepting that condition. A reasonable bystander, and in particular a reasonable bystander in the position of the Council, would prefer the latter possibility.
The question in this case is: what would the reasonable or objective bystander make of the parties’ dealings? Would he or she conclude that they had contracted on the terms of the purchase orders and contained in the documents to which they referred? It is difficult to understand how, based purely on the facts (and terms) of the offer and the facts said to amount to acceptance in this case, such a bystander could conclude that some of the terms comprised in the offer were accepted, but that others were not. Indeed, on the orthodox or classical analysis of contract formation, if the conduct said to amount to acceptance amounted to acceptance of some only of the terms, and rejection of others, then it could not amount to acceptance at all. It could be, at most, a counter-offer.
The state of affairs admitted on the pleadings, that the offer is to be found in the purchase orders, and was accepted by conduct, makes the position for which Mr Gration argued untenable. At least, it makes it untenable when, as Mr Gration conceded, the terms of the offer expressly drew attention to, and incorporated at least some of, Resolve’s general terms.
However, there are the statements of principle in the two decisions on which Mr Gration relied. Those statements cannot be overlooked, or set aside, on the basis of what some might think to be broad-brush analysis. Accordingly, I turn to those decisions.
The ultimate question for decision in Fay was whether an action commenced by the respondent Dr Fay in this Court, for damages for injuries sustained whilst on a cruise of the Greek Islands on a vessel operated by the appellant Oceanic, should be stayed. Along the way, a question arose as to where the contract had been made, and what were its terms. Of necessity, as all members of the Court appeared to accept, there could be no final decision on that point, because the appeal was an interlocutory appeal from an interlocutory judgment.
Oceanic contended that the terms of carriage set out in its tickets (including a term that the Courts of Greece should have exclusive jurisdiction) were incorporated into the contract. All the judges in the High Court held that:
(1)the contract was made in New South Wales; and
(2)the conditions set out in Oceanic’s ticket were not incorporated into that contract.
The evidence was that the terms had been referred to in a brochure given to Dr Fay before he paid his money to the travel agent in Sydney. However, he did not receive a ticket in exchange for that payment. He received an invoice which identified the cruise that he and his wife were to take, and the cabin that would be allocated to them. He obtained also an “exchange order”, which apparently could be exchanged for a ticket when he boarded the vessel. The tickets were not made available until the travel agent collected them at Oceanic’s office in Athens. She gave them to the passengers (including Dr Fay) when they actually boarded the vessel.
In my view, the figures quoted by Broadlex for a different purpose form no basis for making an estimate of the damages that, on the hypothesis presently under consideration, must be assessed.
I conclude that Broadlex has not made good its claim to damages in respect of the additional services.
Fifth and sixth issues: standard of performance; loss
This issue relates to the period from March to September 2012. Resolve says that Broadlex failed to perform cleaning services to the required standard. In part, Resolve says, that was related to the failure to perform the extra charge services (presumably, when they were not requested, and hence were not done). In part, Resolve says, it resulted from the failure to provide a supervisor, or the failure to provide a supervisor who performed his duties to an appropriate standard of diligence. And in part, Resolve says, it resulted simply from repeated failures by Broadlex to do what it did to an appropriate standard of diligence. It is Resolve’s case that the failures that it alleges, to clean to the appropriate standards, were an effective (although not necessarily sole) cause of the issue of the abatement notice.
There is an obvious difficulty with the way in which Resolve puts its case on this issue. I have found that, because of the conventional assumption which formed the basis of the parties’ approach to Broadlex’s duties under the contract, Resolve is estopped from asserting that Broadlex was required to perform the extra charge services, even in the absence of a request or direction accompanied by a work order. Thus, to the extent that the complaints of inadequate performance relate to failure to perform the extra charge services, there can be no causal connection unless Resolve demonstrates that, in respect of the particular failure, Broadlex had been given a work order to do the work but had failed to do so either adequately or at all. Resolve made no attempt to demonstrate this.
As to the asserted failure to provide a supervisor, or a supervisor who performed his work diligently, I have found that the obligation to provide a supervisor was breached. Thus, in the first way that this complaint is put, it should succeed. However, on that approach, it would be necessary for Resolve to prove, on the balance of probabilities, that the failure to provide supervision was a material cause of the proven inadequacies in cleaning performance. Resolve’s evidence did not descend to this level of detail. It relied instead on a process of inference: namely, that the demonstrated (as Resolve would have it) failure to clean to the appropriate standard must reflect, among other things, a want of supervision. On that analysis, the second way of putting the case, based on want of supervision, is coextensive with the case on breach itself. Thus, if breach is proved, it is unnecessary to consider the question of supervision. And if breach is not proved, the want of supervision goes nowhere.
Accordingly, I turn to what, on my findings and in my view, is the only way that the case can be argued. That is, that on the evidence as a whole relating to the period March to September 2012, there is a demonstrable case of inadequacy of performance of cleaning services, and there is a demonstrated causal link between that inadequacy and the abatement.
Resolve relied on a series of audit reports (or summaries of such reports), relating to audits carried out by DIAC and Serco from March to September 2012. Those reports were detailed records of inspections carried out by representatives of DIAC and representatives of Serco. In many cases, particularly towards the end of the seven month period in question, they were sent to Broadlex for comment and action.
Individually, no doubt, the failures in the reports could be explained away. For example, as Mr Vargas and Mr Tarabe pointed out, a cleaning service required to be performed once daily might be performed at a particular time each day. The inspection might be carried out some hours later. If the particular area being inspected had been used between the time of cleaning and the time of inspection, it was not necessarily surprising that the state of cleanliness might have deteriorated.
That analysis is less than convincing where (for example) areas such as mess halls were required to be cleaned three times daily, and more convincing where the frequencies of cleaning was less than daily. More importantly, however, it cannot provide a complete answer to the complaint, for reasons that I will give.
Broadlex submitted that some at least of the deficiencies in cleaning that were highlighted related to extra charge services. It submitted that, if either its case on the proper construction of the scope of works or its case on conventional estoppel were made good, it would be necessary for Resolve to prove not only the deficiencies but also a direction (with work order) to perform the particular extra charge work. Since the conventional estoppel case has been made out, it follows that I accept this analysis, so far as it is relevant.
One of the problems that has arisen is that representatives of Broadlex were normally not present, except adventitiously, when the majority of the inspections were carried out. Broadlex had made requests for its representatives to participate in inspections. It had also made a request for the results to be recorded in some way. There is no evidence that either of these requests was accepted.
There is a record of one inspection, apparently performed in September 2012, when Mr Vargas was present. The records of that inspection contain comments by Broadlex on the defects that were noted. A number of those comments point out that the item is an “extra charge” service. Others point out that the item is “not for Broadlex” – which I take to mean, outside the scope. Another answer given in some cases is “clients’ area – extra charge” (or words to that effect). Absent any controversy, I am prepared to accept that these were sufficient answers to the particular complaints.
However, there were many items where Broadlex agreed that work was required. There were also many items where Broadlex commented “completed by Broadlex”. Mr Vargas agreed that this meant that, the defective work having been brought to the attention of Broadlex, it was subsequently rectified (T136.1-.6). As Mr Breakspear submitted , the fact that the defective work was subsequently rectified does not negate the initial breach. At most, it makes good its consequences, in terms of cleanliness.
There is however an important limitation on what I have just said. The only example put to Mr Vargas of a “completed by Broadlex” item was one which referred to overflowing garbage. It is easy enough to understand that this is likely to have been something that was not attended to earlier, and was only attended to by way of rectification. However, it is at least possible that other “completed by Broadlex” items relate to matters that were cleaned, and through subsequent use before the inspection became dirty again. Since Mr Vargas was not questioned in detail on these responses, it is not possible to do anything more than recognise the qualification. Recognising it unfortunately does not enable its impact to be assessed.
At a more general level, the submissions that Broadlex put cannot of their nature deal with complaints that reflect chronic rather than accidental lack of cleanliness: for example, complaints as to mould in bathrooms, or inground dirt on floors or fabrics. It is obvious that a condition such as mould requires time to develop. It is obvious that dirt cannot become inground unless it is left on the surface into which it was ground. In cases such as those, I do not think that it can be said that the particular defect is merely accidental, or something that might have arisen after the initial cleaning work was carried out.
This issue was approached at a level of some abstraction. Resolve relied substantially on the audit records. And Broadlex advanced answers at a level of generality. Neither side descended into the detail (this should not be taken as a criticism). Thus, resolution of this issue cannot really be undertaken by any process of fine or detailed analysis.
Looking at the audit records as a whole, I have the strong impression that, over the period in question, there were recurrent failures to clean to the appropriate standard. And that impression remains, even when extra charge items are disregarded (as, in my view of my conclusions on conventional estoppel, they must be). Thus, on the evidence as a whole, I am satisfied that, over the period March to September 2012, Broadlex did fail in some respects to clean according to the specified standard of thoroughness.
However, that is not the end of this issue. Serco’s right to “abate” depends on the terms of its contract with Resolve. That contract, dated 30 November 2010 dealt with the topic of KPIs in cl 35. That expression referred the reader to Schedule 4. If Schedule 4 was in the version of the contract that was tendered, it was difficult to find. It may be (I do not know) that it was the Schedule apparently introduced by a letter of 16 November 2010.
Regardless of the niceties, cl 35.2 provided:
35.2 If the Contractor fails to meet the Key Performance Indicators in respect of any of the Services, Serco may (without limiting its other rights under Contract or at law), apply Abatements as set out in Schedule 4.
On the assumption that Schedule 4 was the document referred to at [303], there was an item, 4.5, which dealt with “facility cleanliness”. That apparently required measurement of the “level at which the buildings are cleaned and presented compared to the cleaning benchmarks”. Those cleaning benchmarks were said to be “the scope of cleaning as outlined in the Resolve FM scope of Works” – perhaps, the Serco Part 4 scope. The target was 100% compliance, as measured by Serco and was to be achieved at a frequency of every “reporting period”. It apparently applied to “routine, reactive and special request cleaning of all buildings”.
There was then an “abatement scale” which provided:
0% degradation = 0%
2% degradation = 20%
4% degradation = 40%
6% degradation = 60%
8% degradation = 80%
10% degradation = 100%
That was apparently to be given an overall weighting of 16%, among the various other KPIs that were described.
None of that was explained. There is no way in which the Court can assess what I might call the “degradation scale”. There is no way that the degradation scale can be assessed against the defects indicated in the audit reports (to the extent that these were capable of characterisation as breaches of contract on the part of Broadlex). There is no way of assessing what, if any, the 16% “weighting” has on all this.
In short, there is simply no way of assessing whether those of the defects that are properly to be attributed to Broadlex, as breaches of its contract with Resolve, would justify a conclusion of any degradation, let alone degradation lying on the scale of 0% to 10% which apparently will lead up to 100% abatement, under Resolve’s contract with Serco.
The only evidence of the way in which Serco calculated the abatement came from the affidavit of a Ms Wilton, a senior commercial analyst employed by Serco. She had sworn an affidavit of 24 March 2015, obviously for use in the dispute between Resolve and Serco that was settled. She referred at [17] to [22] to performance measurement checklists that she received. At [23] to [27], she set out how she utilised the abatement scale set out in Schedule 4 to the Serco / Resolve contract. She said at [24] to [27]:
24. I considered that one item of non-compliance was equivalent to 2% degradation. So, if there were two items of non-compliance, this would amount to 4% degradation and 40% on the “abatement scale”, for the purposes of the scale at Schedule 4.
25. For each of March, May, June, July, August and September 2012, the number of items of non-compliance was greater than 5.
26. Accordingly, the abatement applicable, according to Schedule 4 was 100%, in respect of facility cleanliness.
27. As set out in the final column of Schedule 4, each of the various categories contained a certain “weighting”. The weighting in respect of facility cleanliness (shown in the final column of Schedule 4) was 16%.
With all respect to Ms Wilton, I do not find [27] particularly informative.
Ms Wilton then referred to “abatement calculation spreadsheets” that she completed, presumably to give effect to her assessment of abatement in the manner just set out.
Mr Price was cross-examined on this. His evidence was not illuminating (and that is not intended to be either an offensive or a critical comment).
After a number of skirmishes and objections, Mr Price gave the following evidence (T83.33-84.17):
Q. I'm asking you in your capacity as the former national contracts manager, would you have taken the view that if a phone booth appeared to have mould at a single inspection on a particular date, that that item of non conformance was not equivalent to 2% degradation across the whole of the cleaning for the whole of Villawood for that month.
A. I find that extremely difficult to answer. A phone booth with mould might, therefore, reflect all of the phone booths with mould, therefore, a significant portion of the cleaning scope, a significant portion of the cleaning day. It just depends how you roll that – roll that out mathematically.
Q. If the evidence is that a single phone booth appeared to have mould, you would agree that a degradation of 2% across the whole of Villawood for the whole of that months would be a gross exaggeration of the effect of that non conformity, wouldn't it?
A. I don't think my – my – my opinion in this matter matters. It's – it's what's in the contract. For instance, if a phone booth has mould in it, there's a good chance that it had mould in it last week, therefore, something that wasn't cleaned, again, for another week becomes exponentially more serious and more of a concern. So using the example of one thing not being done could actually be a big issue if it hasn't been done in three weeks in a row. For instance – and I would suggest that mould in a phone booth is an example of something that possibly hasn't been cleaned for some time, therefore, it gathers great weight as times goes on. This is a philosophical discussion, which I'm happy to have at another time, but not in terms of confirming whether something is unreasonable or not.
Q. Did you ever challenge Serco about the calculation of the abatement?
A. When we received the abatement notice with the documents attached I did challenge that and respond.
Q. Is that a challenge, to your knowledge, made in writing?
A. My challenge?
Q. Yes.
A. Yeah. My challenge to Serco I would have put it in writing.
Mr Price was not re-examined on the last answer. If there were in evidence any “challenge… in writing”, no reference was made to it in submissions.
The overwhelming impression that I get from the evidence of Mr Price on this topic is that he was not satisfied that the calculations of abatement carried out by Ms Wilson for Serco represented what should have been done under the contract. Whilst of course, it is really a matter for the Court rather than a witness to say whether something is done in accordance with the provisions of the contract, nonetheless the fact is that Mr Price, an experienced and in my view competent manager who applied himself carefully and thoughtfully to his duties, appeared not to accept the validity of what Ms Wilton had done.
Where the subject matter has the degree of opacity that the topic of abatement possesses (opaque both in relation to its contractual expression and in relation to the purported utilisation of the contractual right), and in the absence of detailed analysis from the party relying on the abatement, I do not feel any sense of persuasion that the abatement was rightly calculated. In essence, Resolve’s approach appeared to be that Serco applied the abatement and therefore it suffered loss. But that could only be correct, I think, if the abatement were correctly applied, both in relation to the defects that were observed and in relation to the abatement scale on its proper construction. And in the present case, that would only be relevant if the abatement were shown to be attributable to defects that in their turn were attributable to the imperfect work of Broadlex.
Ms Wilton’s application of the abatement provisions may have been correct. But it cannot be said to be so, intuitively or obviously. To the contrary: it does not seem either intuitive or obvious that (as she appears to have considered), five isolated failures to clean properly in one month, across the entirety of the complex, could justify an abatement of 100% of the charge payable for that month. But if I understand her evidence correctly, that is the outcome for which she was contending. And it is the outcome produced by her calculations that, Resolve says in these proceedings, is a proper measure of its loss, by reference to defective cleaning on the part of Broadlex.
If it could be shown that defective performance by Broadlex of its cleaning duties did give rise to a right to abate, and that the right to abate was applied correctly as a result, then I would conclude that Resolve had made good this aspect of its cross-claim. But to my mind, Resolve has failed to prove either of those conditions. The consequence, in my view, is that although Resolve has proved deficiencies in the cleaning services performed by Broadlex, it has failed to prove any causal relationship between those deficiencies and the abatement of which it complains.
There are additional difficulties with the “abatement” claim. One complication arises from the settlement that was negotiated between Resolve and Serco. I have set out sufficient of the details of Resolve’s claim, and of the compromise, at [6] to [8] above.
So far as the evidence goes, the settlement sum was not allocated between the various claims that Resolve and Serco had against each other. Mr Breakspear submitted that this did not matter; it was enough to show that, taking into account the settlement sum, Resolve had nonetheless suffered a loss in excess of the abated amount.
There was evidence of the way in which the sum in question had been treated in Resolve’s accounts, and to the effect that it had been written off once the settlement between Resolve and Serco was effected. That evidence did not show that the writing-off occurred because, for example, the amount in question had been paid in full. Nor did it show anything else of present relevance.
Another difficulty arose, Mr Gration submitted, because Resolve had not shown that, objectively, the settlement was in all the circumstances reasonable. Mr Gration referred to the judgment of Hayne J (with whom on this point Brennan CJ agreed) in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at [122], [123] (and see Brennan CJ at [8]). Mr Breakspear submitted that it was Broadlex, as the party asserting that the settlement was not reasonable, that bore the onus of so proving.
On the view to which I have come, it is not necessary to express a concluded view on those matters. They do not involve the resolution of any contested question of fact. In those circumstances, there seems little point in engaging in what is on my view unnecessary analysis.
Conclusion
Broadlex has made good its claim to be paid the value of the outstanding invoices, of $241,378.77. It has also made good its claim to interest on each of those invoices, from the date when they should have been paid up until the date of entry of judgment. It should have a verdict accordingly.
Resolve is entitled to a verdict for $187,500.00 on its cross-claim, together with interest.
The appropriate way to deal with the outcome is to direct the parties to bring in calculations of interest, and for the verdicts to be set off, with a judgment in favour of Broadlex for the balance that will be found owing as a result of those calculations. That outcome will give effect to the pleading in Resolve’s defence, where it relies on a defence by way of set off in respect of the matters the subject of its cross-claim.
In the ordinary way, costs should follow the events of the claim and cross-claim, and should be set off. I will however hear the parties on that if there is a dispute.
I make the following orders:
(1)Stand proceedings over to 10am on 3 November 2015 for entry of judgment and for submissions on costs;
(2)Direct the parties to prepare an agreed calculation of interest up until 3 November 2015, and a draft of the orders each contends should be made in pursuance of these reasons, and to exchange their drafts, and provide copies to my Associate, by 2 November 2015.
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