Carpenters Motorcraft Pty Ltd v Novalane Pty Ltd
[2011] VCC 1458
•15 December 2011 (Revised)
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
EXPEDITED DIVISION
Case No. CI-09-01204
| CARPENTERS MOTORCRAFT PTY LTD | Plaintiff |
| v | |
| NOVALANE PTY LTD | Defendant |
| (ACN 102 559 428) | |
| and | |
| DEER PARK PROPERTY PTY LTD | Third Party |
| (ACN 131 137 347) | |
| and | |
| MERIDIAN CONCRETE AUSTRALIA PTY LTD | Fourth Party |
| (ACN 128 225 098) |
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| JUDGE: | HIS HONOUR JUDGE GINNANE |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 9 -13, 16-18, 20 May 2011 |
| DATE OF JUDGMENT: | 15 December 2011 (Revised) |
| CASE MAY BE CITED AS: | Carpenters Motorcraft Pty Ltd v Novalane Pty Ltd & Ors. |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1458 |
| [First revision 16 December 2011) |
REASONS FOR JUDGMENT
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CONTRACT – Agreement to Lease – construction of building for use of motorcar dealership – whether lessor had obligations of a builder – whether floor the equivalent of floor at other dealership – damages, whether recoverable by party that does not suffer loss – part of corporate group
CONTRACT – variations to building work – whether amendments, variations and additions to Plans and Specifications – whether requested by lessee.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Twigg | Vadarlis & Associates |
| For the Defendant and Third Party | Mr B A Shnookal | B2B Lawyers |
| For the Fourth Party | Mr A Laird | Herbert Geer |
| HIS HONOUR: |
The Issues
1 The plaintiff’s claim concerns the construction of the floor in a service and spare parts area of a building to be used as a Ford dealership in Deer Park. The defendant counterclaims in respect of work which it alleges are variations payable by the plaintiff.
2 The issues in this proceeding are, first, whether the plaintiff, Carpenters Motocraft Pty Ltd (“Carpenters Motorcraft”), which is the lessee of the new building, can sue the defendant, Novalane Pty Ltd (“Novalane”), for the condition of the floor constructed in the service and spare parts area of the building in which it operates the Binks Ford dealership at Ballarat Road, Deer Park.
3 Carpenters Motorcraft alleges that Novalane failed to carry out its contractual obligations in respect of the floor, and claims damages for the cost of rectification and loss of income in respect of its delayed occupancy, and during such rectification.
4 The second issue arises from Novalane’s counterclaim, and is whether the building works for the construction of the showroom were varied and whether Carpenters Motorcraft is liable to pay Novalane the cost of any such variations.
5 Carpenters Motorcraft’s case is that under the terms of an Agreement to Lease entered into in 2007, Novalane was obliged to build a building for it to lease to use as a Ford dealership showroom and a caryard. The floor of the service and spare parts area had to be a burnished floor, equivalent to the floor at the Etheridge Ford showroom, Ringwood, in the services, detailing and spare parts areas.
6 Carpenters Motorcraft’s case is that the floor is not equivalent to the slab finish at Etheridge Ford. It is inconsistent; it varies in shade and texture; there are areas with a lighter finish and a rougher texture, as well as a considerably lower and inconsistent density of the reflective particles. It is patched in a number of areas, has delamination and there are drummy areas. It has crazing, cracking and pitting, and has metal studs protruding. There is also evidence of spalling. There are areas of the floor in the workshop which have red/orange stains that appear to be rust.
7 Novalane denies that it had the obligations alleged by Carpenters Motorcraft and contends that it was required to enter into a contract for the construction of the building, rather than having the obligations of a builder.
8 It is important to set out at this initial part of the judgment, the terms in which Carpenters Motorcraft’s case is pleaded, which are as follows:
“By an Agreement to Lease dated 28 November 2007, the defendant agreed to construct a building on the property in accordance with the concept plans, scope of works and specifications contained in Annexure C of the Agreement to Lease (‘the building’).
By the same Agreement to Lease dated 28 November 2007, the defendant agreed to lease to the plaintiff the subject land on the property, once the scope of works and the building had been completed.
The scope of works contained in Annexure C of the Agreement to Lease, for the construction of the building, specifically included items in the workshop/spare parts area of the building.
One such item, specifically included in the scope of works, at pages 3 and 4 of the list, was ‘Reinforced concrete ground slab with burnished finish (equivalent to slab finish at Etheridge Ford Ringwood) including sand bed and polythene membrane’. (emphasis added).
In breach of the Agreement to Lease, the defendant did not construct the floor finish in the spare/parts workshop area of [the] building in this manner.”
9 At the request of the parties, I conducted a view of relevant parts of Binks Ford, Deer Park and Etheridge Ford, Ringwood. These views were conducted under s.53 of the Evidence Act 2008 and were evidence: see s.54.
The Parties
10 Since late 2008, Novalane has leased the building which is the subject of this litigation to Carpenters Motorcraft under a five-year lease entered into in November 2008 with three five-year options.
11 Novalane’s directors are Mr N Michos and Mr V Jovanovic. Companies associated with them own its shares.
12 Carpenters Motorcraft subleases the property to Binks Automotive Group Pty Ltd (“Binks Automotive Group”) for rent of about $34,000 per month.
13 Binks Automotive Group owns the registered name “Binks Ford” and operates the dealership.
14 The directors of Binks Automotive Group are Mr N Michos and his son, Mr D Michos, and Mr V Jovanovic and his son, Mr A Jovanovic. The shares are held by Mr N Michos’ and Mr V Jovanovic’s family trust companies.
15 Carpenters Motorcraft also owns a property in Footscray. It leases it to Binks Automotive Group, and that business operates a Ford dealership on it.
16 Binks Ford Deer Park is now one of the largest Ford dealerships and was named the Ford dealer of the year in 2009.
17 Companies related to Novalane operate the Le Mans Toyota dealership on the land immediately to the west of the Binks Ford dealership.
18 The directors of Novalane are Mr P Van Camp, Mr Edward Khoury and Mr J Birdseye. Mr Van Camp was the director most involved in the events relevant to this litigation.
19 Mr N Michos of Carpenters Motorcraft and Mr Van Camp have known each other for twenty years.
20 The third party, Deer Park Property Pty Ltd (“Deer Park Property”),[1] is controlled by the owners of Novalane. They created it in June 2008 to take over and complete the construction of the Binks Ford building after the original builder, Pritchard Pty Ltd (“Pritchard”), went into administration on 13 May 2008. The directors of Deer Park Property include Mr Van Camp.
[1] Also referred to in some documents as Deer Park Properties Pty Ltd
21 Pritchard built the Le Mans Toyota building in 2007.
22 On 23 November 2007, Novalane and Pritchard entered into an Instrument of Agreement which stated that a large number of annexed documents, including architectural, structural, civil, mechanical services and electrical services drawings “shall together comprise the contract between the parties”. The general conditions of contract between Novalane and Pritchard were contained in AS 4300 – 1995, the General Conditions of Contract for Design and Construct.[2]
[2] Court Book (“CB”) 292 -293
23 A critical provision for the purpose of Carpenters Motorcraft’s case was contained in the Scope of Works which was attached to the Agreement to Lease. It stated that the items specifically included, under the heading “Parts Store Area”, included:
“Reinforced concrete ground slab with burnished finish (equivalent to slab finish at Etheridge Ford Ringwood) including sand bed and polythene membrane.”
24 A burnished floor is one to which a hardening process, to make it hard and waterproof and oil proof, has been applied.[3]
[3] Transcript (“T”) 285
25 Mr M Trowell was the superintendent of the contract between Novalane and Pritchard, and also the project manager. He carried on business under the name Project Solutions which was operated by Cromwell Pty Ltd.
26 Mr R Thorley was the architect of the project. He was engaged by Mr Trowell. He prepared the concept plans and ultimately the detailed designs.[4] He had particular experience in designing car dealerships. He prepared the town planning drawings in consultation with Mr Trowell. Mr Michos and Mr Van Camp visited Etheridge Ford with Mr Michos and Mr Connor, his draftsman, in the process of preparing the drawings.[5] He ceased his involvement at about the time when the construction commenced. Mr Trowell, the project manager, then took over. The architectural drawings were dated 12 September 2007.
[4] T 272
[5] T 257
27 The structural drawings were prepared by Wayne Spencer and Partners Pty Ltd, Consulting Structural and Civil Engineers.
28 The fourth party, Meridian Concrete Pty Ltd (“Meridian Concrete”), was engaged by Pritchard to perform the concreting in the building.
29 After Pritchard went into administration in May 2008, Novalane negotiated with the unions representing the contractors working on the project and reached agreement about the money to be paid to them. Work resumed on the building about a month later. Deer Park Property became the builder and many of the same contractors resumed work. Mr Trowell continued as the supervisor of the project. Mr L Smith, who had been Pritchard’s site foreman, was engaged to continue in that role.
30 Novalane alleges in its Defence that in or about June 2008, it entered into a contract with Deer Park Property Pty Ltd, whereby it agreed to continue and complete the Agreed Development Works in a proper and workmanlike manner and in accordance with the concept plans, scope of works and specifications contained in Annexure C.
31 There was no written contract between Novalane and Deer Park, nor any terms or conditions from AS-2124.[6]
[6] T 385
32 By letter dated 11 June 2008, Mr Trowell, on behalf of Deer Park Property, appointed Meridian Concrete to provide all necessary labour, material, plant and equipment to complete all concrete work on the project for the lump sum price of $585,000 plus GST. The terms and conditions of engagement were AS2124-1992 General Conditions of Contract, the letter of appointment and the brief scope of works and Schedule of Contract Documents were both dated 23 May 2008.[7]
[7] CB 418
33 Pursuant to a Deed in relation to Subcontractor and Subcontractor works made between Novalane, Pritchard (Administrators Appointed), Deer Park Property and Meridian Concrete dated 12 June 2008, it was recited, inter alia, that:
“The parties have agreed that the Subcontract be terminated with all amounts owing to the Subcontractor thereunder being settled as set out below and the Subcontractor will enter into a new contract with Deer Park as the new head contractor for the performance and completion of the Subcontractor works”
34 The Deed set out steps and obligations to give effect to the agreement referred to in the recital.
35 Meridian Concrete’s contract with Deer Park Property did not require the slab to be the equivalent of the slab finish at Etheridge Ford Ringwood. It contended that its only obligation was to construct the slab in a workmanlike manner.
Events Prior to the Agreement to Lease
36 Mr N Michos gave evidence about the events leading up to Carpenters Motorcraft’s decision to enter into the Agreement to Lease and the construction of the Binks Ford building. In about 2006, he was approached by Mr Van Camp to discuss the possibility of building a Ford dealership on land next to the Le Mans Toyota dealership. He decided not to buy the site, but to obtain an option to buy it. Carpenters Motorcraft obtained a right of first refusal to purchase the property. Mr Michos wanted to have a building constructed that suited both Ford and Carpenters Motorcraft, with the possibility of purchasing it in the future.
37 Ford had extensive requirements for buildings and sites occupied by its dealers.
38 Mr Michos, Mr Thorley and Mr Trowell visited a number of sites to identify the requirements for the floor. Mr Michos, Mr Thorley and his draftsman visited Etheridge Ford in Ringwood, at the stage when the initial drawings were being prepared. Etheridge Ford was the most recently constructed Ford dealership. Mr Trowell attended it at a later time.
39 Mr Michos was impressed with the Etheridge Ford floor. The concrete finish had a shiny appearance which appeared to be very resistant to oil spillage, and it was uniform. In evidence, he called it a “magical” floor.[8] The floor was seven years old, but was much better than he had seen anywhere else. He told Mr Thorley and Mr Trowell: “This is the floor that I want”.[9]
[8] T 90, T 97
[9] T 90
The Design of the Building
40 The process of the building design took about eight months prior to the signing of the Agreement to Lease on 28 November 2007.[10]
[10] T 299
41 Work commenced on the construction of the building early in 2008. It halted in May 2008 when Pritchard went into administration.
42 The building includes a front showroom and offices with a workshop and parts area located at the rear. The concrete slab in the workshop and parts area has an approximate area of 1,200 square metres. The workshop is about 1023 square metres and the parts storage area is about 170 square metres.
43 The floor is concrete. The hardened layer on the top of the concrete was provided by a material with the proprietary name of “Floor Rock S”, which is a silicon carbide and aluminium-based integral surface hardener for concrete. It is typically used for improving the durability and abrasion resistance of concrete surfaces. Floor Rock S is dusted into the surface to give an even appearance. It is a dry shake product applied to freshly screeded concrete surfaces by dusting on in two applications.
44 The decision to use Floor Roc S occurred as follows. At the time the contract between Novalane and Pritchard was agreed, it was not known how the floor finish at Etheridge Ford had been achieved, but a provisional sum was included for it.[11]
[11] T 258, T 432
45 On 19 February 2008, at a site meeting, Mr T Crawford, Project Manager of Pritchard, agreed to provide details of the finish applied to the workshop ground slab at Etheridge Ford and of the cost.
46 On 20 March 2008, Pritchard wrote to Project Solutions confirming that the floor finish at Etheridge Ford could be achieved at Deer Park using the Aitken Freeman Floor Roc S product, which improved the durability of the concrete by increasing the strength and abrasion resistance of the wearing surface. The letter stated that to achieve the desired finish, mechanical trowelling, similar to that used to obtain a burnished finish, was required. Pritchard stated that while it would endeavour to match the colour of the Etheridge Ford floor, natural variations in sand supply, cement colour and trowelling operations might produce slight variations to the uniform finish.
47 Pritchard provided Mr Trowell with a sample of Floor Roc S.
48 On 19 March 2008, Pritchard sent Mr Trowell a contract variation number 6 in respect of the workshop floor finish, stating:
“Application of Silicon Carbdie Surface Hardener to workshop and parts
store as specified at Etheridge using Floor Roc S.
Workshop and parts store area Approx 1180m2.”
The total cost, excluding GST, was $27,258.00.[12]
[12] CB 602
49 On 26 March 2008, Mr Crawford of Pritchard emailed Mr Trowell, stating:
“Michael, please find letter and variation details for Floor application.”
The enclosed specification described the product.
50 On 1 April 2008, Mr Trowell sent Site Instruction 7 to Mr Crawford:
“Supply and install Floor Roc S integral surface hardener to the ground slabs in the Workshop and Parts Store in accordance with Aitken Freeman’s technical data sheet dated 1 February 2008.
Note: The slab finish is to match the finish of the workshop ground slab at Etheridge Ford, Ringwood, Victoria, as detailed in Pritchard’s letter to Project Solutions dated 20/03/08.”
51 When Pritchard went into administration, Mr Trowell asked Meridian Concrete to re-quote on the contract for the balance of the works, including variations, which included the application of the Floor Roc S. He sent Mr V Sammartino, the General Manager of Meridian Concrete, information about Floor Roc S.
52 On 21 May 2008, Mr Sammartino sent Mr Trowell a letter of tender in respect of the concrete works. It included a section under the heading “Items as Discussed with Michael Trowell and issued on Drawings emailed 20/08/05”. This section of the email included six items. Item 5 was:
“Apply floor hardener to workshop, parts, warranty parts & tool room
approx. 1150m2.”
53 Mr Trowell agreed a “Brief Scope of Works” in relation to the concreting work. It was dated 23 May 2008 and included:
“6 Apply floor hardener to workshop, parts, warranty parts and tool
room ground slab (hardener supplied by others).7
Burnished finish to workshop, parts warranty parts and tool room ground slabs.”
54 Mr Trowell organised a separate purchase order with Aitken Freeman to supply and deliver the material to the site for Meridian to apply. Meridian Concrete had performed the concreting work at Etheridge Ford for Pritchard.[13]
[13] T 348
55 Meridian Concrete poured the concrete in the workshop and warranty parts storage area on 20 and 27 June 2008. Not long after, surface delaminating occurred in a number of small areas. Meridian Concrete performed repairs, including patching, to a number of those affected areas.
56 The building opened on 3 November 2008, with the exception of the workshop and service area, which opened on about 8 December 2008.
57 The lease was entered into on 7 November 2008.
58 Mr Michos gave evidence that at the final inspection with Mr A Jovanovic and Mr Trowell, he observed that there was not a consistent colour in the concrete. There were waves of colour variation. He noticed patches everywhere. He had not seen a patch at Etheridge Ford or at the Mazda showroom that he inspected. There were rust marks and little pit marks. Workmen were injecting a substance into the floor to stop it from being drummy. He considered the service area floor at Deer Park to be “absolutely shocking workmanship”.[14]
[14] T 100
Meetings Concerning the Condition of the Floor
The Meeting in October 2008 at Deer Park
59 This meeting occurred at the Deer Park building in the middle of the workshop floor. It was attended by Mr Michos, Mr Trowell, probably Mr Thorley, an engineer, Mr Van Camp and Mr B Murer of Meridian Concrete. They discussed the condition of the floor. Mr Michos stated that he was not happy with it because of the patches, that it was not an even colour and that there was pitting.[15]
[15] T 100 - T105
60 Mr Van Camp defended the condition of the floor. Mr Thorley gave evidence that it was not a perfect floor, but it was a workshop floor and he thought it was quite adequate.
Certificate of Practical Completion
61 Mr Trowell, the superintendent, certified that the date of practical completion of the building works was 3 November 2008.[16] The Certificate was backdated to that date later in November.[17] On the basis of his own assessment and the advice that he received, he formed the view that, although some minor works were still required, the floor complied with the contract.
[16] CB 456
[17] T 379
62 Mr Trowell stated that the patching and repair work had been done in a workmanlike manner. He considered the patching was a relatively minor defect in the slab and did not prevent the works from being practically complete.[18] But he agreed that it did not accord with the contract between Meridian and Deer Park.[19]
[18] T 410
[19] T 410
63 Mr Michos remained unsatisfied with aspects of the building works and refused to sign the Lease
The Meeting on 5 November 2008
64 On 5 November 2008, Mr Michos and his son, Mr D Michos, Mr Van Camp and Mr Khoury met and discussed the building. They identified six problems that the defendant was to attend to. The first was the service floor.
65 Mr Van Camp gave evidence in respect of the meetings that occurred during this period, that Mr Michos was never happy with the colour of the floor. Mr Van Camp failed to understand what was wrong with it.[20] He indicated that if the floor needed polishing, buffing or cleaning, Novalane would be happy to do that and reimburse Carpenters Motorcraft, if it required it to stop work for a day. However, the floor was never buffed because Mr Michos would not allow it.[21]
[20] T 306
[21] T 306-307
66 After Mr Van Camp attended a further meeting, he was convinced that the floor was built to the standards of any workshop floor expectations. There were a couple of drummy areas requiring to be fixed up.[22]
[22] T 308
67 Mr Khoury took notes at the meeting on 5 November 2008. Carpenters Motorcraft relied on the fact that they included the words “Service Floor – Guarantee by NL” .
68 On 6 November 2008, Carpenters Motorcraft’s solicitor wrote to Novalane’s solicitor setting out what the parties had agreed the previous day. Six specific matters were discussed. One of them concerned the floor, and stated:
“The state of the floor in the service area and workshop is a concern to our client. It seems that there have been various attempts to repair/patch the floor. The parties have agreed that in the event it needs to be repaired/resurfaced/repainted, then your client will be solely responsible for the cost of the same and for any loss including loss of income suffered to our client by its business being interrupted while this is being done.
…
A number of other matters are in issue between the parties and the parties have agreed that all such remaining matters will be referred to Mediation in accordance with the Agreement to Lease.”
The letter concluded by stating:
“That on the basis of the above, my client will:
a Execute the lease with today as its commencement date; and b Deliver the lease to you today with the required:
i Bank guarantee; and ii Insurance Certificate.”[23] [23] CB 458
69 On the same day Novalane’s solicitors responded, stating that they were instructed that the agreement was as recorded in Carpenters Motorcraft’s letter, subject to three points, the third of which was:
“Item 7: The other matters in issue are to be resolved by binding arbitration (as agreed at the meeting yesterday) rather than mediation.”
70 As previously stated, on 7 November 2008, Carpenters Motorcraft signed the Lease and took possession of all of the building, other than the workshop, and commenced to pay rent. It commenced to use the workshop on or about 8 December 2008.
71 Mr Michos gave evidence that between the signing of the Lease on 7 November 2008 and the day when they entered into possession of the workshop and spare parts area, the only work done on the floor was an attempt on behalf of Mr Van Camp to do some polishing. Mr Van Camp, or his agent, came with a polishing machine which was used at the western end of the slab to attempt to achieve an ageing look.[24]
The Meeting of 18 November 2008
[24] T 218
72 On 18 November 2008, Mr Trowell convened a site meeting, which was attended by Mr Michos, Mr B Murer of Meridian Concrete, Mr Van Camp, Mr A Jovanovic, Mr Spencer and Mr Peter Crawford of Aitken Freeman. Mr Trowell’s email convening the meeting stated:
“As you know the Workshop ground slab has been patched in a number of locations where the surface finish has lifted. This patching is not in accordance with the contract and is not acceptable to the Principal.
A meeting has been arranged for 11.00 am Tuesday (18/11) on site to inspect the slab and to discuss options to alleviate the Principals concerns.”[25]
[25] CB 495
73 Mr Michos made it clear that he would not accept the floor. Mr A Jovanovic also gave evidence about that meeting.[26] He and Mr Michos said that the floor was unacceptable, that it was not the floor that was ordered.
[26] T 246
74 Mr Trowell gave evidence that Mr Michos stated that he did not like the colour of the floor and the patching and did not like what he was being told at the meeting. Mr Spencer told him that there was nothing structurally wrong with the floor and the patches were done properly.[27]
[27] T 355-356
75 On 20 November 2008, Mr P Crawford of Aitken Freeman wrote to Mr Trowell, stating that:
“In my opinion Binks Ford has a very similar trowelled surface finish to Etheridge Ford. The concrete has been deliberately finished in this way. Etheridge Ford is slightly slippery and rubbery to feel under foot when dry. This is caused by the use of a curing compound being applied to the freshly finished concrete. This has also given the concrete a higher depth of colour. Ringwood Mazda has been finished with a rough textured type finish which is more difficult to keep clean but gives higher slip resistance. Binks Ford has high slip resistance with a polished type appearance and will be easier to clean than Ringwood Mazda, without the slippery or rubbery feel of Etheridge Ford.”[28]
[28] CB 496
76 On 21 November 2008, the solicitors for Carpenters Motorcraft emailed the solicitors for Novalane raising issues which included:
“As you may be aware, the lease in the matter commenced on 7 November 2008 and my clients took possession of the premises shortly thereafter.
Before taking possession, our clients inspected the premises and subsequently met with your clients to discuss a number of matters in dispute. Having resolved and agreed about a number of matters, my clients agreed to take possession and for the lease to commence.
One of the outstanding issues however is the state and discolouration of the floor in the service area of the premises. Our client instructs us that the floor has not been constructed and finished to the standard specified, i.e. to the same quality and condition as that of ‘Etheridge Ford’. A number of attempts have been made to rectify the floor, as is evidenced by the number of ‘patches’.
Our client has commenced its sales operations but has not yet commenced its service and spare parts operation at the premises and is suffering loss of income as a result.
We are instructed that our client has endeavoured to discuss this issue directly with your client but your client seems uninterested in finding a solution to the problem. We therefore request that your client take immediate steps to address and resolve the issue of the state of the service floor area and inform us by return what those steps are and a timetable of action.
In the event we do not receive confirmation of the above by 12 noon, Monday 24 November, our client will have no option [but] to exercise its rights under the lease and collateral agreement reached on or about 6 November”.
77 The solicitors for Novalane replied, stating, inter alia:
“Our client’s engineers have inspected the floor and advised our client
that:
(a) the concrete floor is to a high standard; (b) the ‘patches’ to which your client refers are typical in concrete floors; (c) there is no feasible solution for removing the ‘patches’. There is nothing stopping your client from commencing its service and spare parts operation.”
78 On 24 November 2008, Mr Trowell sent an email to Mr Murer of Meridian Concrete, stating:
“Further to our inspections last week.
Can you please provide a brief letter confirming that the slab has been constructed in accordance with the structural design and that the finish has been applied in accordance with the structural design and that the finish has been applied in accordance with the manufactured requirements. Can you also comment on the quality of the finish being typical for this product and that the finish will mellow with age and use.”
79 Mr Murer replied:
“All our works onsite have been done in accordance to structural design and the concrete finish as per manufactures requirements. The finish of the concrete to the workshop area is typical for the dry shake application and is expected to gloss up with age and use.
I am sure that the floor is a good quality floor as was voiced in the meeting onsite last week and is more than fit for the purpose of a workshop floor.”
80 On 24 November 2008, Mr Trowell received an email from Mr Spencer, the engineer, stating that:
“Based on our inspection we consider the slab generally has an above average finish. The repairs appear to have been carried out in a workmanlike manner and we consider the slab is in a sound structural condition.”
81 As stated, Mr Trowell issued the Practical Completion Certificate, backdating it to 3 November 2008.
The Defects Liability Period
82 On 24 September 2009, Mr Trowell, as superintendent, wrote to Meridian Concrete, stating:
“The defect liability period ends on the 3 November 09 and the following
work is not in accordance with the Contract:
1 Construction and saw cut joints in the Workshop area opening up
resulting joint sealant failing and spalling of joint edges.
2 Isolated spalling of floor finish in the Workshop area.
3 Repair work previously carried out to spalling joint edges in the
external paving break down.
Can you please arrange for all internal and external concrete spalling to be made good and all construction and saw cut joints in the Workshop to be resealed by Friday 9 October 2009.”
83 These items were only worth a few thousand dollars.[29] Mr Murer estimated that they would cost $3,840.[30]
[29] T 380
[30] T 532 and Exhibit M4
84 Mr Trowell did not include the patches in the Defects Notice. He considered that the defects had been rectified satisfactorily.[31]
[31] T 468
85 Mr Murer of Meridian Concrete gave evidence that it was unable to carry out the repairs, because it was not given access to the floor.[32] Mr A Jovanovic told Mr Murer that the matter was now in the hands of the Court. The repairs would not be an identical colour.[33]
[32] T 529
[33] T 547
86 Mr A Jovanovic said that no one turned up with a desire to do any repairs. He had not directly been asked to provide access to people to perform rectification work. He was approached near the end of 2009.
Obligations under the Agreement to Lease
87 The legal issues in Carpenters Motorcraft’s claim require determination of the obligations arising from the Agreement to Lease dated 28 November 2007 made between Carpenters Motorcraft and Novalane.
88 The Agreement to Lease contained, as an Annexure, a Scope of Works and concept drawings numbered TP 11 to TP 16 which were dated 12 September 2007 and had been used to obtain town planning approval.
89 The Recitals to the Agreement to Lease state:
“A Novalane is the registered proprietor of the Property, of which the
Subject Land is part.B Novalane has agreed to construct the Building on the Subject Land, including obtaining planning approval and all approvals required by any Government Authorities necessary for the Building to be erected. C The parties have agreed to enter into the Lease in respect of the Subject Land once the Building has been completed as provided in this Deed.
90 Clause 2 stated:
“2 Completion of Agreed Development Works.
2.1 Completion of the Agreed Development Works. Novalane shall enter into a building contract for the construction and completion of the Agreed Development Works in a proper and workmanlike manner (‘ Building Contract’) and shall use its best endeavours subject to the terms of this Deed to procure the Completion Certificate by the Project Due Date and may:
(a)
Appoint, remove and/or replace any or all of the Building Professionals as reasonably necessary from time to time for the commencement and completion of the Agreed Development Works;
(b) Procure the Preparatory Works; and (c)
Apply for and obtain any permits or consents from any Authorities or Government Agencies that may be required for the commencement and completion of the Agreed Developments Works (whether in whole or part), including any Planning Permit or Building Permit or amendments thereto.
2.2 Variation of the Plans and Specifications.
(a) Subject to clause 2.2(b), the layout and area of the Building on the Subject Land as shown on the Plans and Specifications existing as at the Date of this Deed shall not be materially varied without the prior consent in writing of CM which consent shall not be unreasonably withheld; (b) Notwithstanding anything in Clause 2.2(a), Novalane reserves the right to make: (i) those amendments, variations and additions to the Plans and Specifications as may be properly and reasonably required by the Brimbank Council; or
(ii) such minor amendments, variations and additions that shall be deemed reasonably necessary or desirable by Novalane (at its sole and absolute discretion) where those amendments, variations and additions will not materially affect, change or invalidate this Deed or the rights and obligations of a party to this Deed nor give rise to any claim for compensation or damages.
2.3 …
2.4 Service of the Completion Certificate Novalane shall serve a copy of the Completion Certificate upon CM within (7) days after Novalane receives it from the Superintendent
… ‘Agreed Development Works’ is defined to mean the works set out in Annexure C to be undertaken for the purposes of erecting the Building.
‘Building’ is defined to mean ‘The building to be erected in
accordance with Plans and Specifications’.”
91 Annexure C is entitled “Concept Plans and Scope of Works”. The Scope of Works specifically includes the following work in respect of the Parts Store area:
“Reinforced concrete slab with burnished finish (equivalent to slab finish at Etheridge Ford Ringwood) including sand bed and polythene membrane.”
92 Clause 3 of the Agreement to Lease is entitled “Lease” and states that:
“Novalane and the Guarantors must enter into the Lease, and the Lease
must commence, no later than 7 days after the later of:
(i) the Certification Day; and
(ii) provision by Novalane of a Disclosure Statement to CM in amendment of the Disclosure Statement already provided which is attached as Annexure E hereto, if Novalane considers it necessary to make any amendments, in its sole and absolute discretion,
and the particulars of the following items in the Schedule to the Lease
must be completed by Novalane before the Certification Day:
(3) Item 8 – the Commencement Date; and (4) Item 19 – Latest Date for exercising options. … (b) The Guarantors jointly and severally covenant with Novalane that they will procure the execution of the Lease by CM and warrant that at the date of execution of the Lease CM shall be solvent.”
93 The building works, which were to be the subject of the contract that Novalane entered into, were defined as the Agreed Development Works.
94 The Agreement to Lease had other annexures: Annexure A was the Lease to be entered into; Annexure B contained a Plan of Subdivision of the subject land; Annexure C contained the terms previously referred to and provision for “Items Specifically Excluded”; Annexure D contained the Planning Permit; Annexure E contained a Disclosure Statement under the Retail Leases Regulations 2003.
The Parties’ Submissions about Novalane’s Obligations under the Agreement to Lease
95 The parties advanced different interpretations of the obligations imposed by Carpenters Motorcraft by the Agreement to Lease.
96 Carpenters Motorcraft argued that Novalane had an obligation to construct the building works. Novalane contended that its obligation was only to enter into a contract with a builder to construct the Agreed Development Works.
97 Carpenters Motorcraft argued that the Agreement to Lease was intended to procure the construction of a building, purposely built for use by Binks Ford and to be conveyed under the Lease. The building had to accord with the plans and specifications, including the description set out in the Scope of Works.
98 Carpenters Motorcraft’s pleading states that Novalane breached its obligations to construct the floor finish in the manner agreed.
99 Carpenters Motorcraft contended that the word “burnished” had a clear meaning which could be identified by reference to the Etheridge Ford floor. The word “equivalent” meant that the standard or quality of the floor to be provided was equal in quality to the floor at Etheridge Ford, i.e. a burnished floor of equal quality and appearance.
100 In arguing that a breach of the Agreement to Lease had occurred, Carpenters Motorcraft relied on the fact that the written terms of the contract between Deer Park Property and Meridian did not require that the finish of the floor to the service and spare parts area be equal to, or the same as, the finish of the Etheridge Ford floor.
101 Novalane, for its part, relied on the terms in which Carpenters Motorcraft had pleaded its case. Novalane was not a builder and it had no personal obligation to construct and deliver a building. Its obligation pursuant to clause 2.1 of the Agreement to Lease was to enter into a building contract for the construction and completion of the Agreed Development Works in a proper and workmanlike manner. The builder had the obligation to construct the Agreed Development Works. The Agreement to Lease was not a building contract.
102 Novalane argued that it had agreed to enter into a building contract for the construction and completion of the Agreed Development Works in a proper and workmanlike manner and to use its best endeavours, subject to the terms of the Agreement to Lease, to procure the Completion Certificate by the Project Due Date. The building contract that it entered into with Pritchard did include terms as to the standard of construction and completion. It included the terms of AS-4300 – the General Conditions of Contract for design and construct – which included obligations imposed on the builder to complete the work in a proper and workmanlike manner.
103 Novalane identified four obligations under the Agreement to Lease, each of which it submitted it had met. These were:
• first, entering into a building contract; • second, that the building contract had to be for the construction and completion of the Agreed Development Works; • third, the building contract had to include terms as to the standard of construction and development; • fourth, Novalane had to use its best endeavours, subject to the terms of the Agreement to Lease, to procure the Completion Certificate by the Project Due Date. 104 The obligation to obtain a Completion Certificate did not carry with it an implicit obligation to ensure that the works were completed to a particular quality. There was no express requirement in the Agreement to Lease for any particular standard of workmanship to be achieved prior to Mr Trowell issuing the Certificate of Completion.
105 Novalane accepted that the Agreement to Lease would contain an implied term that the building to be constructed would be fit for the purpose of carrying out the business of a car dealership, as that was the fundamental nature of the Agreement to Lease, but it did not contain any term that imposed an obligation on Novalane to build the building to that standard.
106 The lease ultimately entered into by Novalane and Carpenters Motorcraft contained an obligation on the landlord to make necessary repairs to keep the structure in a condition consistent with that at the start of the lease (clauses 6.4 and 3.3.2). That obligation pointed against the implication into the Agreement to Lease of a term concerning the quality of the building.
107 The phrase “equivalent to the slab finish at Etheridge Ford” was not a statement of the standard of workmanship to be performed, but rather what was to be constructed. The word “equivalent” means “equal in value, amount, importance, et cetera” or “corresponding”.[34]
[34] Counsel for Novalane relied on the High Court decision in Helicopter Sales (Aust) Pty Ltd v Rotor Work Pty Ltd (1974) 132 CLR 1
108 Novalane submitted that the floor was constructed in a proper and workmanlike manner.
Conclusion about the obligations imposed by the Agreement to Lease
109 The instrument upon which Carpenters Motorcraft sues is an Agreement to Lease. An Agreement for a lease is a contract whereby the parties bind themselves to give and take a lease at some time in the future.[35] Carpenters Motorcraft, in its case as pleaded and opened, does not sue on any collateral contract or on any other basis. It does not, for instance, plead that Novalane had an obligation to arrange the construction of a building.
[35] Bradbrook, Croft and Hay, Commercial Tenancy Law (3rd ed) at page 90
110 To ascertain the meaning of the Agreement to Lease, like any contract, it has to be read as a whole. The known surrounding circumstances, including the object and purpose of the transaction, are to be taken into account. It should be given a businesslike interpretation.[36]
[36] See, for example, Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22] and Toll (FGCT) Pty Ltd Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]
111 The recitals to the Agreement to Lease do state that “Novalane has agreed to construct the Building on the Subject Land”. However, when the Agreement to Lease is read as a whole, it is clear that Novalane accepts no such obligation. The obligations that Novalane accepted, or by which it was bound under the Agreement to Lease, were:
(a) to enter into a building contract for the construction and completion of the Agreed Development Works in a proper and workmanlike manner; (b) to use its best endeavours, subject to the terms of the Deed, to procure the Completion Certificate by the Project Due Date; (c) to serve a copy of the Completion Certificate upon Carpenters Motorcraft within seven days after Novalane receives it from the Superintendent; (d) to enter into a lease with Carpenters Motorcraft no later than seven days after the later of the Certification Date and the provision by Novalane of other specified documents; (e) to provide a disclosure statement. 112 The Agreement to Lease contains provisions which extend beyond an agreement to enter into a lease in the future. It contains provisions dealing with Novalane’s obligations in respect of having the building built in accordance with Plans and Specifications. It is important to keep in mind that the building was Novalane’s. Novalane was causing it to be built. Carpenters Motorcraft was to lease it. If Carpenters Motorcraft wanted to add to the Plans and Specifications, it was required to pay for the additions. However, despite these additional provisions, the document was still an Agreement to Lease relating to land on which a building was to be built. It was not a building contract pursuant to which Novalane agreed to build a building.
113 The critical obligation is that contained in clause 2.1. This was an obligation to enter into a contract for the construction of the building and no more. There was no obligation created thereby for Novalane to build the Agreed Development Works, or to be responsible for the work of the builder.
114 Carpenters Motorcraft’s interest was safeguarded by the need for the Completion Certificate to issue before the Lease was to be entered into. If Carpenters Motorcraft considered that the building was not constructed in accordance with the Agreed Development Works, it could have refused to sign the Lease. It exercised that right for a time as has been set out above. The effect of the letter of 6 November 2008 is discussed below.
115 No written building contract was made between Novalane and Deer Park Property. The parties appear to have accepted that that “the liability flow[ed] through”, presumably meaning that the obligations created by the Agreement to Lease applied to the subsequent contract that Novalane made.[37] That reflected the reality of what occurred. About a month after Pritchard went into administration, when no work was done, most of the same contractors agreed to continue with their work to complete the Agreed Development Works. Mr Trowell remained as superintendent and project manager and issued the Certificate of Practical Completion. The parties appear to have acted as if the obligations of the Novalane-Pritchard contract had continued, with Deer Park Property replacing Pritchard.
[37] T 974 - submissions of counsel for Carpenters Motorcraft
116 Carpenters Motorcraft contended that the contract between Novalane and Pritchard initially did not contain a requirement to build a floor meeting the specifications contained in the Scope of Works. That fact reflected the initial absence of knowledge that Floor Roc S had been used. That requirement came later, following Pritchard’s letter of 20 March 2008. There was also the site instruction of 1 April 2008 from Mr Trowell to Pritchard, that the slab finish was to match that at Etheridge Ford.
117 The agreement that Deer Park Property made with Meridian Concrete did not contain a term about the quality of the floor. Carpenters Motorcraft therefore argued that, if Novalane complied with the contractual obligation in its agreement with Meridian Concrete, it did not do so when it and Deer Park Property entered into the second contract with Deer Park Property.[38]
[38] T 975 - submissions of counsel for Carpenters Motorcraft
118 However, the case pleaded and opened by Carpenters Motorcraft does not deal with the adequacy of the contract which Novalane entered into for the purposes of complying with any obligations created by the Agreement to Lease. If it had contained that pleading, different issues would have arisen which would have required considerable examination of the arrangement reached between Novalane and Deer Park Property. Those issues were not really explored.
119 Carpenters Motorcraft and Novalane entered into a commercial agreement which presumably advantaged them in different ways. It is not open to the Court to rewrite the obligations imposed by the Agreement to Lease, or to consider the case on a basis that was never raised in the pleadings.
The letter of 6 November 2008
120 I have previously set out the terms of the letter of 6 November 2008 sent by Carpenters Motorcraft to Novalane. I will repeat the key sentence:
“The parties have agreed that in the event it needs to be repaired/resurfaced/repainted, then your client will be solely responsible for the cost of the same and for any loss including loss of income suffered to our client by its business being interrupted while this is being done.”
121 In Carpenters Motorcraft’s Reply, it pleaded the fact of the issue of the Practical Completion Certificate, and then alleged that the Certificate should not have been issued because practical completion of the Agreed Development Works had not occurred. It then pleaded that the parties reached an agreement in the terms set out in the letter of 6 November 2008.
122 In its written submissions, Carpenters Motorcraft argued that following the completion of the Agreed Development Works and an inspection of the building, it refused to sign the Lease and commence the tenancy. It then recites the making of the agreement recorded in the letter of 6 November 2008 and submitted that its terms spoke for themselves.
123 Novalane argued that there was nothing contained in the 6 November 2008 agreement that suggested that either party was changing its position as to the obligations that they considered were created by the Agreement to Lease. The critical words were “in the event it needs to be repaired/ resurfaced/repainted”. The reference to “need” suggested a requirement of function rather than purely aesthetics. The agreement of 6 November 2008 did not address whether there was a need for further work to the floor, nor did it record any agreement to repair all the floor.
Conclusion about the letter of 6 November 2008
124 Carpenters Motorcraft’s case was not pleaded, nor was it argued in any real way, as alleging breach of an agreement contained in the letter of 6 November 2008. In view of the issues pleaded and argued in the case, the Court cannot determine whether Carpenters Motorcraft has any rights against Novalane arising out of that letter.[39]
[39] See, on the need to decide cases on the pleadings: Banque Commerciale SA En Liquidation v Akil Holdings Ltd (1990) 169 CLR 279 at 286-287 per Mason CJ and Gaudron J
125 However, in any event, even if the letter had been the basis of the pleading, when it is read in the context of the differing interpretations of the obligations imposed on Novalane that the parties had adopted as at 6 November 2008, it is far from clear that the words “in the event it needs to be repaired/ resurfaced/repainted” bear the meaning for which Carpenters Motorcraft argues. The parties, at that date, were maintaining divergent views of Novalane’s obligations. The letter of 6 November 2008 appears to leave undetermined how and by whom, and applying what standard, it would be decided whether the floor needed to be “repaired/resurfaced/ repainted”.
Conclusion in respect of case brought by Carpenters Motorcraft
126 I therefore find that Carpenters Novalane’s case based on the Agreement to Lease has not been established.
127 Because of the extensive evidence and submissions that were led on the condition of the floor and, in case I be wrong in my conclusion expressed in the previous paragraph, it is appropriate that I consider the other issues raised in Carpenters Motorcraft’s claim and state my conclusions on them. Although it will add greatly to the length of this judgment, I am obliged to state my conclusions on the issues argued before me.[40]
[40] See, for example, State Securities Pty Ltd v Dromi [2010] VSCA 264 at paragraph [53]
Was the workshop/spare parts room floor the equivalent of the Etheridge Ford floor?
128 Carpenters Motorcraft made it clear in submissions that it was not arguing that the floor had not been constructed in a proper and workmanlike manner within the meaning of clause 2.1 of the Agreement to Lease.[41] Despite that clear indication, much of the expert evidence led by the parties dealt with the quality of the workmanship.
[41] T 975-976
129 For the reasons given above, in case I am wrong in my conclusion about the obligations imposed by the Agreement to Lease, I will consider whether Novalane complied with an obligation to build a floor equivalent to the slab finish at Etheridge Ford.
Meaning of “Equivalent”
130 I take the word “equivalent” to mean “equal to, or corresponding to”, rather than “identical to”.[42]
[42] See The Macquarie Dictionary
131 Carpenters Motorcraft’s case was that the floor finish at Etheridge Ford was a uniform dark grey finish, with consistency of texture and density of the reflective particles in the surface of the material. In contrast, the floor finish in the service and parts area of the Deer Park building is inconsistent. It varies in shade and texture; there are areas with a lighter finish and a rougher texture, as well as a considerably lower and inconsistent density in the reflective particles. These factors, together with the patches, the delamination and the crazing, represented significant departures from the condition of the Etheridge Ford floor.
132 Novalane and Deer Park Property accepted that the Deer Park floor was different to the Etheridge Ford floor, but submitted that it had been constructed by Meridian Concrete in a proper and workmanlike manner.
Expert Evidence – the Joint Expert Report
133 Each party, other than the third party, called a witness to give expert evidence about the condition of the floor of the service and spare parts area – Mr Henry Herzog by Carpenters Motorcraft; Mr Kevin Campbell by Novalane; and Mr Richard Kingston by Meridian Concrete. Each expert prepared extensive separate reports and gave oral evidence.
134 Pursuant to Court direction, the three experts prepared a joint report addressing specific questions.
135 In the joint report, Question 1, the answers given were:
“Is the concrete floor at Binks Ford Service and Parts Area (‘Floor’)
constructed:
(a) with burnished finish R.K./H.H[43] - agree burnished finish
[43] The initials meant: “HH” Mr Herzog, “KC” Mr Campbell and “RK” Mr Kingston
K.C. - heavy trowelled finish.
(b) equivalent to slab finish at Etheridge Ford Ringwood R.K./K.C. - agree-excluding known defects
H.H – disagreed.
If not: (c) describe the differences; All agreed there is variation in texture, shade, crazing of the floor
and
(d) describe what, if anything, can be done to make the Floor equivalent to Etheridge Ford. if there are options, give particulars for each option and cost of the same.
All agreed that site trial be carried out on a delaminated area. Saw cut 1.0m x 1.0 (min) x 40mm (min) depth. All dimensions to be decided on site.
Aitken Freeman to advise on patch repair materials including Floor Roc
S for three (3) trial areas.”
136 All experts agreed that the floor was acceptable for a garage work floor, save for the need to remove protruding studs. Mr Herzog stated that although the floor was mechanically fit for its purpose, its appearance detracted from it as a showpiece. Mr Campbell stated that the garage workshop was not a showcase and noted that as an entrance to a commercial garage, it would be restricted in use to employees due to security and occupational health and safety requirements.
137 Mr Herzog, in August 2009, stated that the floor was undergoing mechanical breakdown and deterioration, which he considered would continue, allowing the flooring material to lift and come away.[44]
The Experts’ Qualifications and Experience
Mr H Herzog
[44] CB 71
138 Mr Herzog understood that he was engaged to provide an opinion on whether the floor at Binks Ford was the same or similar as that at Etheridge Ford. That was the issue raised by Carpenters Motorcraft’s case. Mr Herzog was primarily experienced in domestic building work. He did not receive written instructions, but relied on information that he received in discussions with Mr Michos. As a result, the other parties argued that this method of instruction should be seen as affecting his objectivity.
139 The other parties criticised Mr Herzog’s expertise and evidence. Mr Herzog was not an expert in colour matching.[45] He did not have much concrete experience, nor in pouring slabs. He had not been asked before to compare one slab with another. He had carried out no structural analysis. He had never been involved in a project where Floor Roc S had been used. He did not carry out any mapping or comparison of a colour chart. He did not apply the Australian Standard 3600. He did not have knowledge of the floor surface. He received that information from Finer Floor Finishers Pty Ltd, whose business was laying epoxy floors rather than concrete, and who was not called as a witness. He was not familiar with the Victorian Building Commissions Guide to Standards and Tolerances.
[45] T 616, T 619
140 Much of these criticisms had little impact on Mr Herzog’s ability to express a view on whether the Deer Park floor was the equivalent of the Etheridge Ford floor.
Mr K Campbell
141 Mr K Campbell is a Chartered Professional Engineer who has forty years’ experience in design and manufacture and erection of concrete structures. From 1966 to 1993, he was the Regional Manager of the Cement and Concrete Association of Australia, and since 1993, he has been a consulting engineer specialising in concrete technology and forensic engineering. He had considerable experience in concrete patching and matching.
142 Mr Campbell wrote the first Specifications for burnished finishes in the Melbourne Metropolitan Area in the late 1970s. He has extensive experience in colour matching and concrete repairs.
143 Mr Campbell expressed the opinion that the workshop floor finish at Binks Ford was constructed in a proper and workmanlike manner.
144 Mr Campbell relied on the Victorian Building Commission’s Guide to Standards and Tolerances in respect of colour tolerances, which although applicable to domestic houses, was applicable by way of analogy to car dealers’ workshops.
145 Carpenters Motorcraft attacked Mr Campbell’s objectivity, arguing, inter alia, that he had been asked questions directed away from the critical question of the comparison of the two floors.
146 Mr Campbell was restricted in making a proper comparison between the two floors, as the Etheridge Ford floor was too dirty at the time of his inspection to draw accurate conclusions.
The test patches
147 The joint experts’ report proposed that the parties experiment with test patches, which was to involve removing the particular patches and their replacement with a single bay of repaired concrete 40 millimetres deep, colour matched and bonded with epoxy primer.[46] Mr Campbell was to produce a specification as a result.[47] The purpose of the test patches was to ascertain how effective the matched colour process was going to be.
[46] T 755
[47] CB 290
148 Only one patch was attempted and that, at a date very close to the trial. There was limited evidence from Mr Campbell about the effectiveness of the test patch.
Mr Kingston
149 Mr Kingston has been a Structural Design Engineer since 1982. He conducts the firm of FMG Engineering. He has considerable experience with construction projects and concrete pavements and slabs. He detected the following defects in the workshop:
“Surface delamination in a number of areas, in general between grids G- H and 4-6. These areas were confirmed by FMG carrying out tap testing to areas displaying cracking/delamination.
- Concrete surface repairs using epoxy injection.
- Concrete surface repairs, including partial removal of concrete surface and installation of either epoxy or cementitous type material. These repairs were not an exact colour match to the remainder of the slab and also displayed approximately 0.25mm wide crazing type cracking.
- Approximately 3-4mm wide opening of construction joints
- Distressed concrete at corner of grid 4A
- Slab edge distress.”
150 Mr Kingston arranged an inspection of the floor by Aitken Freeman Pty Ltd, the makers of Floor Roc S. He summarised the significant parts of Mr Aitken’s report as follows:
“In his opinion, a concrete curing compound had not been applied to the Binks Ford concrete surface due to the observed extent of the shrinkage at the concrete construction joints.
The Binks Ford Deer Park slab colour is slightly lighter than the Etheridge Ford Ringwood slab colour. He advised that it is very difficult for concrete slabs to have identical colours as the final surface colour can change due to different sand and cement variation colours.
The appearance of the colour of the concrete surface becomes slightly darker with time and abrasion. Abrasion may be as a result of vehicle/ pedestrian traffic and mechanical cleaning process.
It will not be possible for the colour of local repairs to delaminated areas to match the original colour.”
151 I found Mr Kingston’s evidence on the issue of the condition of the Deer Park floor of most assistance. Mr Herzog lacked relevant experience, but had sufficient experience to express a view on whether the two floors were equivalent. Mr Campbell’s views were of significance, particularly in respect of shade and colour, but he was hampered because he had not seen the floor in a clean condition.
152 A fair reading of the total of the experts’ evidence was that the floor at Binks Ford departs, at least in some respects, from the condition of the Etheridge Floor, and is not its equivalent. As I have said, Mr Campbell and Mr Kingston concentrated primarily on issues of workmanship, rather than equivalence. However, their reports, when read with Mr Herzog’s and when read against the background of my view of the floors, leads me to the conclusion that the Binks Ford floor is not the equivalent of the floor at Etheridge Ford. I will now consider the specific issues concerning the condition of the floor that explain the basis on which this conclusion is reached.
Variation in Shade and Colour
153 Question 3 of the joint expert report and the answer to it was:
“Does the Floor vary in shade and texture? If so, does the shade and texture vary to an extent that reflects completion of the works other than in an unworkmanlike manner?
K.C./R.K agree that it is acceptable
H.H – unacceptable – foreign matter blown onto surface
154 Carpenters Motorcraft’s evidence on this issue was provided principally by Mr Herzog and Mr Michos. The effect of it was that the variations in shade and tone and texture and patches and crazing represented a significant departure from the floor at Etheridge Ford and were a reflection of a poorer quality of workmanship. They detracted from the aesthetics of the floor.
155 Novalane submitted that there was no evidence that the density of the Roc S floor at Binks Ford was different to the density of the floor at Etheridge Ford. The shade variations were caused by use and were within that permitted by AS-3610 and the Victorian Building Commission’s Guide to Standards and Tolerances. The colour of the floor had darkened over time.
156 Mr Campbell’s opinion was that there was marginal variation in finish and texture in the Deer Park floor when contrasted with the Etheridge Ford floor. The colour control on the floor complied with AS-3610, formwork for concrete, which allowed a four tonal variation for class 1 finish.[48] However, Mr Campbell could not make a comparison with the floor at Etheridge Ford, which was too dirty to consider. He noted the difference in lighting conditions.
[48] CB 78
157 Mr Kingston did not consider the floor of Binks Ford defective because of the variation of colour and texture. He considered that the only blemishes were the patches in the main bay area, some of which were a couple of tones different to the rest of the floor. Mr Kingston stated that the Binks Ford slab was slightly lighter than the Etheridge Ford slab, but that the colour would darken with time and surface abrasion wear and tear.[49]
Conclusion
[49] CB 130
158 I accept Mr Kingston’s evidence on the slight difference in shade and colour between the two floors. His evidence was consistent with my own observations. I do not consider that the variations in shade and colour were such that the Binks Ford slab was not the equivalent of the floor at Etheridge Ford.
Patching
159 Questions 8 and 9 in the joint expert report and the answers thereto were:
“8 Are there patched areas in the Floor? If so give particulars. Yes –all agreed Eight (8) in total – four (4) large (typically 1.25m x 1.25m) – four
(4) small (typically 0.6m x 0.6m)9 Has the patching been performed in a workmanlike manner? If not, can the patching work be re-done to bring the slab to an acceptable standard and how much is it expected to cost? All agreed that some repairs have been constructed poorly – not in a workmanlike manner. There is crazing occurring within existing repaired areas. All agreed crazing will not affect durability. Inspection by repair specialists to be carried out to review and agree which previous repairs are to be repaired / replaced. H.H. –says that spalling may occur at edges of cracks Cost estimation of $20,000 for eight (8) areas Christmas holidays may be suitable time to carry out repairs to
minimise disruption to the facility.”
160 The patching that appears on the Deer Park floor was a major focus of the case. These were five areas where the finished floor had been patched, averaging approximately one square metre in size. There were also four areas where there were metal studs in the floor surface, some of which were found to be protruding, with the surrounding areas having various textures. Mr Herzog measured the patched areas as including one area measuring 14 millimetres by 1000 millimetres, one approximately 1000 millimetres by 1000 millimetres, another by 12 millimetres by 1100 millimetres and another 800 millimetres by 700 millimetres. He stated that there were also four smaller areas which were part of one of the larger ones.[50]
[50] CB 69
161 There appear to have been no significant patches on the Etheridge Ford floor.
162 Mr Murer of Meridian Concrete gave evidence that the patching was performed before Binks Ford moved into the premises. He identified 70 square metres of the slab as being affected by the patches or “patchwork quilt”.[51]
[51] T 535
163 Mr Trowell gave evidence that the patches were done in a proper and workmanlike manner but said “at the end of the day you have a patch on the floor”.[52]
[52] T 355
164 Mr Herzog considered that the patchwork result produced was not acceptable, although he acknowledged that he was not an expert in aesthetics. On his visits to the site on 6 and 11 May 2011, he noticed that the patches had started to craze and had propagated into the top layer. There was more edging and the pitting had increased.
165 Mr Campbell identified nine patches. He stated that patches were common at control joints due to spacing of joints, seal and failure in concrete shrinkage. He did not consider that the patches constituted a material fault in the floor finish at Binks Ford and that the patches had been executed in a proper and workmanlike manner. Patches were a common feature of this type of floor. Lighting conditions for viewing the patches was important. His evidence was that the patches could have been colour matched. The only blemishes appeared in the patches in the main bay, some of which were a couple of tones different to the rest of the floor.[53] Mr Campbell recommended that the patches be made less visible by developing a colour match through trowel work.
[53] T 735
166 Mr Kingston noted that repairs were not an exact colour match to the remainder of the slab and also displayed approximately 0.255 millimetre-wide crazing-type cracking.[54]
[54] CB 119-120
167 Novalane submitted that the only reason the patches could require removal and reconstruction was to achieve a more exact colour match. There were no issues not commonly seen in similar slabs. Novalane agreed that it was not proper and workmanlike to construct a slab that needs patches, but once that had occurred, all that was required was to rectify that defect in a proper and workmanlike manner. The replacement of the floor would be an unreasonable rectification cost.
168 Novalane relied on the Guide to Standards and Tolerances, the effect of which is that a repair is defective if it does not, as closely as practical, match the existing work in appearance, colour and texture. Minor variations in finish may not be considered to be defective.[55]
[55] Exhibit D11, page 19
169 As an alternative, Novalane contended that the appropriate remedy was to replace the centre section of floor with one large patch using the colour match that has been developed for the trial and which has been successful.
Conclusion on patching
170 The presence of the significant amount of patching discussed above justifies the conclusion that the floor is not the equivalent of the Etheridge Ford floor. The patches represented a significant difference between the two floors. The Deer Park floor was a new floor, while the Etheridge Ford floor was seven years’ old, which makes the patches particularly significant.
Cracking and crazing
171 Questions 11 and 14, and the answers thereto in the Joint Expert Report, were:
“11 Is there substantial crazing or cracking of the surface of the Floor?
If so give particulars.K.C./R.K. – have not measured extent of crazing or cracking H.H. states substantial crazing and several long cracks
All agreed that crazing and cracking distress is not a structural
defect… 14
Are there cracks or shrinkage cracks in the Floor? If so give particulars and estimate of cost to rectify
Yes refer to question 11 Recommend trial repair using ultra fine cement broomed into
cracks and moistened. Cost $1,000.00.”
172 Crazing is very fine minor cracking, which occurs in a random manner and has an appearance similar to the lines on a map. It occurs where the finishing materials are spread too early and the material absorbs too much moisture and shrinks excessively.
173 Mr Herzog stated that there was widespread crazing and cracking of the flooring material on the south-west side of the workshop.[56] He stated that the longer cracks had probably resulted from the propagation of shrinkage cracks in the concrete below. He saw them on his second visit to Deer Park. On his visit in May 2011, he observed that the patches had started to craze considerably and the cracks had propagated deeper into the layer. There had been more spalling or breaking away at the edges where there were joins in the concrete floor. The pitting had increased as well.[57]
[56] CB 70
[57] T 593 and T 664
174 Novalane noted that Mr Herzog did not mention the presence of any cracks in his first report and seemed to be referring to cracks in the repair patches.
175 There were two recorded shrinkage cracks in the detailed review of the slab performed by CMET. There were also several small cracks at the expansion joints.[58]
[58] The cracks are marked on the plan at CB 147
176 Mr Campbell stated that there was cracking and crazing of the concrete surfaces at both showrooms. Crazing of concrete was not a failure. High cement concrete toppings are prone to crazing, but the durability of the floor is not affected. He stated that the slab was not defective because of the shrinkage cracks, as they were less than 0.3 millimetres, which is the figure used in international codes. Crazing was an aesthetic blemish and not a defect.[59]
[59] T 735
177 The Guide to Standards and Tolerances provided that crack widths of up to 2 millimetres are considered acceptable in a floor of a domestic house.
178 Mr Campbell said that some of the patches had unacceptable crazing. He stated that the prevailing winds and climate conditions at Deer Park, which he referred to as “pleurisy plains”, meant that the surface had dried out and a false impression was created.[60]
Conclusion on cracking and crazing
[60] T 741
179 Carpenters Motorcraft has not established that the extent of cracking and crazing at Binks Ford mean that the floor was not the equivalent of Etheridge Ford. There are a limited number of cracks. The two short shrinkage cracks were within the tolerances contained in the Guide to Standards and Tolerances.
Spalling areas at construction joints, pitting and resealing of construction joints
180 Question 16 of the joint expert report, and the answer thereto, was:
“If the Floor is defective in any way what rectification works are required
and what is the estimated cost?
Minor spalling of joints, joint sealant repairs, cost $5,000.00.”
181 Spalling is the result of corrosion occurring to the reinforcement bars inside the concrete, which eventually can lead to parts of the concrete breaking off.
182 Novalane accepts the joint expert report assessment that the minor works to joints and joint sealants will cost $5,000 to repair. Mr Trowell directed that work of this nature be performed by Meridian during the defects liability period. Mr Murer gave evidence that Meridian was denied access to perform the work.
183 Mr Herzog agreed that there had been spalling in certain areas but there had been no large areas of topping material coming away.[61] Mr Herzog said that spalling may occur at the edge of cracks. The cost estimation for repairing the spalling was $20,000 for eight areas.
[61] T 670
184 Mr Campbell stated that the Etheridge Ford floor finish had extensive spalling due to the impact of metal objects and the area damaged was greater than the repairs at Binks Ford. Mr Campbell considered that spalling at joints required repair and the resealing of joints with a semi flexible epoxy sealant to protect joint edges.
Conclusion on spalling
185 Carpenters Motorcraft has not established that the presence of spalling results in the floor not being the equivalent of the floor at Etheridge Ford. There was spalling present in the Etheridge Ford floor.
Pitting
186 Question 13, and the answer thereto, in the joint expert report, was:
“Is there any pitting in the Floor? If so, give particulars
All agreed there is some pitting near workshop entry area form reception
H.H. – says that pitting was substantial.”
187 Mr Herzog, after an inspection of Binks Ford in August 2009, stated there was widespread pitting and in the area near the entrance to the reception area there was substantial pitting evident, the pits were large and there was low density of them.[62] In the centre of the floor towards the south end there was more substantial pitting with evidence of early spalling of the surface of the flooring material.[63]
[62] CB 69
[63] CB 70
188 Mr Campbell considered that the little pits should be sealed.[64] He stated that the surface pitting was caused by a lack of cement bond to the silicone carbide treatment of Floor Roc S. He said that there was pitting at Etheridge Ford.[65]
Conclusion on pitting
[64] T 729
[65] CB 94
189 Carpenters Motorcraft has not established that the pitting means that the floor is not the equivalent of the floor at Etheridge Ford. The pitting is not a major defect in the floor and does not significantly detract from its appearance and use. As previously stated, the requirement of equivalence does not necessitate that the two floors be identical.
Protruding Struts
190 In some areas of the floor metal struts protrude. They had been used to inject an epoxy into the void between the hard surface layer in the concrete. It was accepted that they should be filled in.
Conclusion
191 Minor matters readily rectified are not a basis for establishing lack of equivalence between floors. I do not consider that this feature establishes lack of equivalence.
Drummy areas
192 Question 15 of the joint expert report and the answer thereto was:
“Is there drumming chipping and/or spalling in the Floor? If so give
particulars and estimate of cost to rectify
Seventeen (17) additional drummy/delaminated areas identified by
CMET on 16 March 2010. Cost $40,000.00.”
193 Mr Kingston engaged CMET (Aust) Pty Ltd, corrosion materials engineering and testing consultants, to undertake testing of the burnished concrete floor slab, to provide information on its condition and the possible causes of the top surface spalling and delamination identified at various locations on the slab. CMET identified seventeen areas of drumminess totalling 3.5 square metres were identified in the 1,000 square-metre square concrete slab by CMET.
194 On 29 March 2010, CMET reported that:
“A total of 17 areas of delamination (not including repair areas) were detected varying in diameter from 300 mm (0.03m2) to 800m2 with total estimated affected area of 3.5m2 (refer Table 3) … .
The majority (89%) of the delamination defects was detected in the East half of the floor slab with 40% of these defects in Panel 5. This suggests that the defects may be associated with the condition of the freshly screed concrete surface of the slab when the Floor Roc S silicon carbide and alumina based surface hardener was applied.”[66]
[66] CB 171
195 The conclusion of the report was:
“Based on the results of the investigation, it appears likely that the localised areas of shallow surface delamination identified on the slab are a result of premature finishing of areas of the slab before all the bleed water has risen to the surface and evaporated. This has resulted in entrapment of the residual bleed water under the dense impervious surface layer produced by the trowelling operation and the formation of sub-surface blisters causing crazing and delamination of the top surface.”[67]
[67] CB 173
196 Mr Herzog did not investigate the drumminess in the floor. He relied on the presence of the drummy areas.
197 Mr Kingston stated that concrete delamination has occurred most likely as a result of poor workmanship.[68] He referred to CMET’s conclusions as to the causes of the delamination.
[68] CB 127
198 Novalane argued that Carpenters Motorcraft, as tenant, should pursue its right under the lease to obtain rectification of the drummy areas to insist that Novalane maintains the leased premises in good repair.
199 Mr Campbell’s opinion was that if it was desired to rectify the drummy areas, then this should occur by epoxy injection.[69]
Conclusion on drummy areas
[69] T 736
200 I am persuaded that the drumminess and delamination of the floor means that the floor is not the equivalent of the Etheridge Ford floor. It requires rectification because of this issue.[70] I accept the conclusions of the CMET report as to the extent of the drumminess. It is a significant defect, apparently not present in the Etheridge Ford floor.
[94] CB 52
238 I am not persuaded that the repairs will actually be preformed or that Carpenters Motorcraft will be required to bear the cost of them.[95] Mr Michos gave the following evidence, which supports that conclusion:
“If you were paid money in this litigation to fix the floor, would you fix the floor. It is a simple question? That’s what – won’t be my intention as of this minute.
Thank you? What am I obliged to do? I don’t know, I hadn’t thought about that at all.”[96]
[95] cf Alucraft Pty Ltd (in liquidation) v Grocon Ltd [1996] 2 VR 386
[96] T 214
239 For the reasons given, I do not consider that Carpenters Motorcraft could have succeeded in any claim for damages.
The Counterclaim - Tenancy Variations to the Contract
240 Novalane, by counterclaim, claimed the sum of $96,895.70 for the cost of variations to the contract.
241 The Agreement to Lease provided, in Clauses 2.2 and 2.3:
“2.2 Variation of the Plans and Specifications
(a) Subject to clause 2.2 (b) the layout and area of the Building on the Subject Land as shown on the Plans and Specifications existing as at the date of this Deed shall not be materially varied without the prior consent in writing of CM which consent shall not be unreasonably withheld. (b) Notwithstanding anything in clause 2.2 (a), Novalane reserves the right to make: (1) those amendments variations and additions to the Plans and Specifications as may be properly and reasonably required by the Brimbank Council; or
(2) such minor amendments variations and additions as shall be deemed reasonably necessary or desirable by Novalane (at its sole and absolute discretion) where those amendments variations and additions will not materially affect, change or invalidate this Deed or the rights and obligations of the parties to this Deed nor give rise to any claim for compensation or damages.
2.3 Request for Variations by CM
(a) Without limiting the effect of clauses 2.1 or 2.2, CM may, at any time between the date of this Deed and the commencement of construction of the Building, by notice in writing to Novalane, request any amendments, variations or additions to the Plans and Specifications. In the event the requested amendments, variations or additions are of a Material Nature, Novalane shall have the unfettered discretion as to whether to accept or reject such request (in whole or in part). In the event the requested amendments, variations and additions are not of a Material Nature, Novalane may, at its reasonable discretion, accept or reject such requested amendments, variations or additions (either in whole or in part). In either case, where Novalane accepts such requested amendments, variations or additions, it may accept them on such reasonable terms and conditions as it shall determine (including any reasonable consequential extension of the Project Due Date). (b) If any amendments, variations and additions are made to the Plans and Specifications pursuant to Clause 2.3(a), CM shall be liable to pay to reimburse Novalane for all reasonably incurred additional costs, fees and expenses (on an indemnity basis) incurred by Novalane (including, without limitation, additional construction costs, costs of delays and costs in respect of the Building Professionals) which shall be payable by CM upon 7 days notice in writing by Novalane to CM of the quantum of such costs, fees and expenses.”
242 The term “Plans and Specifications” is defined as the concept plans, Scope of Works and Specifications contained in Schedule C. That Schedule included the Scope of Works and the town planning drawings.
243 Novalane has to establish that amendments, variations and additions were made to the Plans and Specifications pursuant to clause 2.3(a) and that the amounts claimed were “reasonably incurred additional costs, fees, and expenses (on an indemnity basis) incurred by [it]”.
244 Novalane relied particularly on the evidence of Mr Trowell, the work superintendent, to establish its counterclaim. He is qualified as a quantity surveyor. He calculated the additional construction costs incurred by Novalane, by first measuring the quantities of materials that were changed as a result of variation requests made by Carpenters Motorcraft. He priced those changes using subcontractors’ rates, if available. Alternatively, he relied on his own estimates, which in turn were based on rates and information provided by contractors in their quotations and invoices. He also drew on his experience as a quantity surveyor and estimator. He did not include amounts for builders’ preliminaries and extension of time costs, builders’ margins, landlords’ administrative costs and finance or holding costs.
245 Most of the variations Novalane contended had been requested by Carpenters Motorcraft had been incorporated in the new subcontracts that were let when Deer Park Property took over the construction of the building.
246 Mr Trowell took into account whether items requested by Carpenters Motorcraft were added after the building contract was let, which in turn was after Carpenters Motorcraft reviewed the final design drawings.[97]
[97] T 417
247 Mr Trowell’s evidence was that the majority of the changes resulted from requests by Mr Michos and Mr Jovanovic at, or following, site inspections, or site set out meetings.
248 Mr Michos’ evidence was that any variation outside the footprint of the proposed building was a variation at his cost, because Council approval would be required. However, any variation to works inside the walls of the building could be adjusted at no cost to Carpenters Motorcraft as the building progressed.[98] He pointed to the fact that a contingency sum of $244,482 was included in the Feasibility Estimate for the project to pay for variations.
[98] T 148, 176 and 179
249 Mr Michos gave evidence that he would only pay for the changes to the Plans and Specifications that were re-submitted to the Council for planning purposes.[99]
[99] T 81-82
250 Mr Michos stated:
“I’m renting a place that is supposed to be purpose built for dealership for
my use with my requirements….
The only variations that I would have been responsible for in our discussions were anything that was past that footprint that they put in to both council and other – and other authorities to go and get a permit to build ”[100]
[100] T 179-180. See also Mr Michos’ email to Mr Van Camp of 3 November 2008 at CB 451
251 Carpenters Motorcraft argued that the building details were to be agreed during the design process, which was to be undertaken under the terms of the building contract after the Agreement to Lease was made.
252 Carpenters Motorcraft also argued that Novalane could only recover the cost of amendments, variations or additions with respect to the design of and scope of the town planning drawings. The only variations that fitted that description were Item 2 (up to $3,300) and Items 3, 5, 14, 15, 18 and 21. The other variations, items 9, 10, 13, 17 and 19, were not amendments or variations to the town planning drawings or Scope of Works.
253 In addition, Carpenters Motorcraft argued that Novalane’s claims for the variations had not been proved, because it had not produced copies of the variation forms and of the invoices for each variation claimed. It therefore had not proved the costs reasonably incurred. The argument concerning variation forms was not developed.
254 I consider that the appropriate interpretation to give to Clause 2.3 is that it requires determination of whether, as a result of a request by Carpenters Motorcraft, work that was an amendment of or additional to that shown in the Plans and Specifications was performed at the request of Carpenters Motorcraft.
255 I will consider each of the claimed variations in dispute in turn.
Item 2: Change to Mezzanine Floor/ Boardroom Office
256 These works occurred upstairs above the sales area and opposite the spare parts area. A folding door was inserted between the conference room and storeroom. The work involved building or installing a new wall, window, skirting, doors and a skylight. The air conditioning system was altered. The additional work gave additional storage space on the extended mezzanine floor.
257 Novalane claims the sum of $7,971. Carpenters Motorcraft admits the sum of $3,300.
258 Mr Michos gave evidence that he requested this change, but considered that Carpenters Motorcraft did not have to pay for it. The original agreement included a design of a mezzanine floor to cater for the expansion of the business. These changes were to be performed at no cost, because another area of the project land could not be used for parking cars, as had been intended.[101]
[101] T 111 – T 114
259 Mr Trowell sent an email to Mr Michos containing rough sketches of the changes. His evidence was that he discussed them with Mr Michos, who agreed to them. Mr Trowell revised the plans accordingly. He received an email from Mr A Jovanovic confirming approval to proceed with the aluminium door variation.
260 Mr Trowell agreed in cross-examination that he had not produced the documents from the window manufacturer for the additional cost. He gave evidence that the window was incorporated into the subcontract agreement and was a small component of his total contract works.[102]
[102] T 437
261 Carpenters Motorcraft argued that no separate invoice had been produced. However, the invoices for the doors and air conditioning work were proved, which is the substantial part of the claim.
262 I also accept Mr Trowell’s evidence on this item and the others claims as providing proof of the amounts claimed for each alleged variation. Mr Trowell prepared the variation claim and provided evidence justifying his calculations. He has expertise in quantity surveying and estimating.
Conclusion
263 Novalane has proved that this is an amendment, variation or addition to the Plans and Specifications made at the request of Carpenters Motorcraft. Mr Trowell’s evidence proves the cost of the claims. Novalane is entitled to recover the amount claimed, which is $7,971.
Item 3: Stainless Steel Sinks in the Workshop
264 Mr Michos requested that stainless steel sinks be installed on either side of the workshop so the workers could wash their hands. His evidence was that similar sinks were installed at Le Mans Toyota, which he took as the reference point for the design of the new building.[103] He contended that that they should have been included in the town planning drawings. .
[103] T 115
265 The quotation for the sink was produced. The hot water unit was supplied by the plumber, who also undertook the sewer and water connection. The charge for this Item was part of the plumbers’ overall contract.
266 The drawings that form part of the Agreement to Lease do not include sinks.
Conclusion
267 Novalane has proved that this work was an amendment, variation or addition to the Plans and Specifications made at the request of Carpenters Motorcraft. It has proved the cost. It is entitled to recover the amount claimed, which is $5,250.
Item 5: Telephone Room, admin stock and control room changes
268 The amount of $4,759 was claimed and $3,000 was admitted.
269 In early 2008, Mr Michos asked Mr Trowell to enclose the administration and stock control area with a wall and a door to secure the showroom from the administration. Mr Michos considered that no cost was payable.[104] On 23 June 2008, Mr Trowell sent Mr Michos an email, stating:
“Confirming your agreement to pay the variation cost to change the walls in the Telephone/ Administration area to suit your furniture layout. The estimated cost of this work is $5,000 to $6,000. This will be confirmed down the track.”
[104] T 120
Conclusion
270 Novalane has proved that this work was an amendment, variation and addition to the Plans and Specifications. It has proved the cost of the work by Mr Trowell’s evidence and the documents that he produced. It is entitled to recover the amount claimed of $4,759.
Item 9: Connect Rain Water Tank to External Front Taps and Garden
Irrigation System271 There is an external rainwater tank at the Binks Ford site. The design plans originally had it connected to a proposed car wash area. According to Mr Trowell, in February 2008, Mr Michos requested that the tank also be connected to taps at the front of the dealership to permit watering the garden.[105]
[105] T 363
272 The town planning drawings do not include a rainwater tank or details of how it was to be connected.
273 Novalane claims the additional cost of the change to connect the tank to the front garden taps.
274 Carpenters Motorcraft argued that Mr Trowell’s version of events had not been put to Mr Michos in detail in cross-examination.
275 Mr Michos stated that he did not discuss this additional work; he regarded it as part of the building. It provided water to the front to wash cars and/or water the plants[106].
[106] T 122-123
276 The plumber’s quote for the work was in evidence.
Conclusion
277 There is insufficient detail in the evidence about the request for this work to be satisfied that it is an amendment, variation or addition to the Plans and Specifications performed following the request of Carpenters Motorcraft. Mr Trowell’s evidence on this matter lacked detail. The production of a plan with the additional work marked on it does not provide that evidence. This claim has not been proved.
Item 10: Power Data and Telephone Changes
278 This claim was for additional data and power points requested by Mr Michos and Mr Jovanaovic.
279 Novalane claimed that they were in excess of those originally documented. These were detailed in the electrical drawings. Thirty two additional points were installed, making a total of one hundred and sixty nine. The thirty two were additional to the number recorded in the final electrical drawings.[107]
[107] T 125
280 The amount of this claim was proved by various electricians’ invoices[108].
[108] T 365
281 Mr Trowell stated that the original drawings were based on the position at Le Mans Toyota. A number of reviews of the drawings were performed, including reviews in which Mr Michos and Mr Jovanovic participated. The request for the additional points was made when the wiring was being installed.[109]
[109] T 365
282 Mr Jovanovic stated that there were insufficient data points. Mr Trowell asked them to comment on an electrical plan. Mr D Michos was present. They then marked out their requirements. Mr Jovanovic gave evidence that he had not been consulted previously.[110]
Conclusion
[110] T 249
283 Novalane has not proved that these power and data points were an amendment, variation or addition to the Plans and Specifications. Their installation may have been part of the fit-out and design. I accept Mr Jovanovic’s evidence that he had not been consulted previously. Novalane has not proved this claim.
Item 1: External GPO (General Power Outlet)
284 These were general power points that Mr Michos asked to be installed and attached to the light poles in the car storage area.[111]
[111] T 127
285 Mr Trowell gave evidence that an additional charge had to be paid to the electrician for these points.[112]
Conclusion
[112] T 366
286 For reasons similar to those given in respect of Item 10, Carpenters Motorcraft has not established its claim. It has not established that these points were additional to any design provided for in the Plans and Specifications, as distinct from being part of the electrical drawings developed at some different stage. This claim has not been proved.
Item 15: Parts Stores and Parts Mezzanine changes
287 The mezzanine area was extended and a couple of enclosed office areas created underneath. The mezzanine was extended through to the side wall of the parts store.[113] The effect of the change was to turn the staircase around and build a wall to separate the front counter and the store so that the customer could not see into the parts store.[114] Mr Michos considered that the design was poor.[115]
[113]
[114][115] T 128, T 367
292 288 As a result of these changes, there was a bigger floor area and more walls and doors.
289 Mr Trowell emailed details of these changes to Mr Michos on 15 February 2008. Mr Michos agreed that he discussed these changes with Mr Trowell.[116]
Conclusion
[116] T 130
290 Novalane has proved that these variations were an amendment, variation or addition to the Plans and Specifications made at the request of Carpenters Motorcraft. It has proved the cost by Mr Trowell’s evidence. It is entitled to recover the amount claimed of $14,185.
Item 16: Relocate External Washdown Area
291 Mr Michos gave evidence that he instructed Mr Trowell to change the position of the external carwash from the face of the building to an area near the middle of the rear parking area. He again considered that it was a bad design.[117] The external carwash was right in front of the exit of the automatic carwash area and the engine wash bay. This change was made before building work commenced.
As a result of the change, additional plumbing costs were incurred, including Conclusion
[117] T 132
293 Novalane has proved that this work was an amendment, variation and addition to the work required by the Plans and Specifications at the request of Carpenters Motorcraft. It has proved the cost through the evidence of Mr Trowell of his general practice in costing the variations. It is entitled to recover the amount claimed of $1,605.
Item 17: CAT 6 in Lieu of CAT 5 - $1,000
294 This work involved using a higher category of cabling CAT 6, which was more expensive. Mr Jovanovic gave evidence that this cabling was needed to operate modern electronic equipment.[119]
[119] T 250
295 Carpenters Motorcraft expected that the building would be fitted out so as to enable use of current technology. Mr Michos gave evidence that Mr Trowell had not discussed with him the cable that would be used, or the cost of particular cables.[120]
[120] T 125, T 195
296 Mr Trowell authorised this work after he had been requested by Mr A Jovanovic in emails of 12 and 15 May 2008. On 12 May 2008, Mr Trowell informed Mr Jovanovic that there would be a cost variation for the Cat 6 cabling. His evidence was that he received verbal approval for this variation.[121] He sent Mr Jovanaovic an email on 4 June 2008, stating:
“Confirmation of the variation costs you requested. Please let me know
ASAP if there is a problem.”
[121] T 368
Conclusion
297 Despite the wording of Mr Trowell’s emails, I do not consider that this was an amendment, variation or addition to the Plans and Specifications. Novalane’s claims in respect of variations depends on it satisfying that precondition. Electrical work, including cabling, was not detailed in the Plans and Specifications. As that is the basis on which the claim is made, I do not consider that it has been established.
Item 18: Upgrade Area
298 This was a major claim for the cost of the construction of a wall between the interactive bay and the café. This work was not shown on the town planning drawings.[122]
[122] T 132, T 134
299 The Ford specifications for the interactive bays required a fully enclosed space with a glass door and two hoists. Interactive bays were designed as part of a process by which customers could book a service for their car for a particular time. At that time, the car would be placed on a hoist and the customer would be shown the repairs that were required, e.g. worn tyres or the need to replace the exhaust.
300 Mr Michos visited other Ford showrooms that had interactive bays. He came up with the idea and requested a design that enabled flexibility in the use of the interactive bays. He wanted them to be capable of initial use until about 10.00 am, by which time all customers had dropped off their vehicles for servicing, and then be capable of being used as part of the showroom for the rest of the day. Mr Thorley advised him that Ford would not permit such a design. Mr Michos and Mr Thorley reached a compromise which involved the erection of a glass screen, which was intended to permit the interactive bay to display two cars next to the area in which customers could obtain coffee or tea. The customers could thereby see the cars displayed. Two glass screens and bollards were proposed to be erected at the boundary of the interactive bays to stop cars accidentally entering the showroom area.[123]
[123] T 292-293
301 Mr Thorley had two meetings with Ford, which first passed the drawings, but then in early February 2008, became unhappy with the proposal and reviewed them.[124] As a result, the design had to be changed to enclose the area with screens and doors. Additional steel framing and footing were required to support the additional wall that was installed. Mr Michos knew of and can be taken to have approved this change, which was directed at complying with Ford’s requirements[125].
[124] T 369
[125] T 134-5
302 Mr Trowell sent emails to Mr Michos in April and June 2008 outlining the details of the additional work and providing costed options.
303 Mr Michos’ evidence was that he had never required the interactive bays to be constructed without a wall dividing them from the showroom. He had instructed the architect to come up with a solution and not leave the area open.[126] He eventually instructed Mr Trowell to go back to the minimum Ford specification.[127]
[126] T 202
[127] T 205
304 Carpenters Motorcraft argued that the allegation that Mr Michos had requested the change had not been put to him. I am satisfied that the essence of the allegation was put to Mr Michos.[128]
[128] T 204
305 Carpenters Motorcraft argued that Novalane had not proved the costs of the variation.
Conclusion
306 Novalane has proved that the changes to the interactive bays were an amendment, variation and addition to the Plans and Specifications requested by Carpenters Motorcraft. The price is proved by the various quotes sent to Mr Michos and by Mr Trowell’s evidence. Carpenters Motorcraft is entitled to the amount claimed of $31,104.
Item 19: Colorbond Cladding
307 Mr Michos gave evidence that after the workshop was built, he instructed that Colorbond be added to the top section of the workshop walls. This was in place of the exposed insulation referred to as sisalation, on the back of the metal cladding above the concrete panel. Mr Michos gave evidence that he had not previously specified the material to be used. He wanted that part of the wall to be white, which was in accordance with the Ford specification.
308 Mr Trowell’s evidence was that the Plans and Specifications and the Agreement to Lease did not document Colorbond wall cladding in the workshop area. The wall finish documented was the same as at Le Mans Toyota, which was a concrete panel to a particular height, and then metal cladding in the form of insulation or sisalation.[129] Because of Mr Michos’ request, he changed the cladding for the whole of the wall to Colorbond. He emailed Mr A Jovanovic on 25 August 2008, stating:
“Novalane has agreed to install the Colorbond wall cladding to the internal walls of the Workshop as a variation under the agreement to lease, which they understand you are disputing.”
[129] T 372
Conclusion
309 Novalane has established that the installation of the Colorbond as wall cladding in the workshop area was an amendment, variation and addition to the Plans and Specifications made at the request of Carpenters Motorcraft. The cost was proved by the quotation provided and Mr Trowell’s evidence of how he costed variations.
310 The issue has to be determined in accordance with terms of the pleadings, which put in issue whether clause 2.3 of the Agreement to Lease was applicable to the work. The pleadings do not raise, or require determination of, the more general question of whether the Plans and Specifications complied with Ford’s specifications for the building.
311 Novalane is entitled to the amount claimed for this work, being $10,163.
Item 20: Floor Safe
312 This claim concerned the installation of a floor safe near the front entry.
313 Mr Trowell said that he first learned of Carpenters Motorcraft’s wish to have a floor safe installed when Mr Michos informed him during the construction phase.[130] In order to install the safe at the place that Mr Michos wished, the builders needed to break up concrete and cut the slab down to the reinforcement before installing and boxing the safe. These steps occupied a day’s work.[131]
[130] T 373
[131] T 373
314 Mr Michos gave evidence that Carpenters Motorcraft provided the safe before the concrete was poured, but that the builders or concreters failed to insert it in the floor.[132]
[132] T 137
315 The Scope of Works did not include any provision for a safe. The evidence suggests that Mr Michos directed the location of the safe during the construction phase.
Conclusion
316 Novalane has established that the work required to locate the safe securely required additional work to that contained in the Plans and Specifications. It was therefore an amendment, variation or addition made to the Plans and Specifications. It was made at the request of Mr Michos. Mr Trowell’s evidence establishes the cost of the work. Novalane has established this claim in the amount of $500.
Item 21: Additional Work Stations in the Service Area
317 These two work stations were for the service reception area. They are shown on the town planning drawings, but were expressly excluded by the Scope of Works from being the responsibility of Novalane to supply.
318 On 27 August 2008, Mr Trowell informed Mr Jovanovic that Novalane had rejected his request to make additional changes including “install 2 No. work stations in the Service area”.
319 Mr A Jovanovic emailed Mr Trowell on 4 September 2008, stating:
“Further to below, we have an expectation that the Service benches are installed. As per the drawings they have always been part of the building. The scope of works also refers to benches being installed as part of the building. These will need to be installed prior to completion.”
320 On 16 September 2008, Mr Trowell emailed the relevant contractor, confirming approval to proceed with the additional Service Reception “L” shaped benches ($2,554 plus GST) and that he would proceed with this additional cost as a variation to his contract with Deer Park Property.
321 Mr Jovanovic gave evidence that Mr Trowell asked him if he was going to pay for this work. He informed Mr Trowell that they were in the drawings that had been provided. Mr Jovanovic agreed that “what was in the drawings were workstations”.[133]
Conclusion
[133] T 252
322 The evidence supports the conclusion that the items in dispute were workstations. The Scope of Works expressly excludes these items as items which Carpenters Motorcraft was obliged to supply. I therefore consider that they were an amendment, variation or addition to the Plans and Specifications requested by Carpenters Motorcraft, in the sense that they became an additional item for Carpenters Motorcraft to provide. The cost of the workstations has been proved. Novalane is entitled to the amount claimed.
Item 22: Additional Design and Documentation Fees
323 These fees related to additional consultant’s fees associated with the tenancy variations – architectural fees, structural and service engineers’ fees to make the changes caused by the variations. Novalane claims the sum of $8,740 and Carpenters Motorcraft admits the sum of $1,100.
324 Mr Trowell’s evidence was that this claim was for design consultants’ and service engineers’ fees for making changes to the drawings to incorporate many of the tenancy variations.[134]
Conclusion
[134] T 375
325 Mr Trowell’s evidence establishes that these fees were “reasonably incurred additional costs, fees and expenses, in connection with the other variations that have been proved”.
326 Novalane is entitled to the sum of $5,854 in respect of this claim. .
Total of Counterclaim
327 I have found that Novalane has proved all items in its counterclaim except for items 9, 10, 13 and 17.
Interest on Counterclaim
328 There is a final matter in respect of the counterclaim, being the amount of interest payable on the amount found to be owing by Carpenters Motorcraft for variations.
329 Novalane relied on Clause 2.1.7 of the Lease, which, when read with the Schedule, imposed a liability for interest on any rent or other money which the tenant has not paid on the due date to be calculated daily from the due date until the overdue money and is capitalised monthly at 4 per cent more than the rate fixed from time to time by the Penalty Interest Rate Act. Novalane claims interest from 19 February 2009 at 7 per cent. That was the date on which Mr Trowell’s Tenancy Variation Report was delivered to Carpenters Motorcraft under cover of a letter from its solicitor.
330 I do not see the basis on which amounts found to be owing for variations could come within clause 2.1.7. I read that provision as referring to amounts due under, or at least having some connection with the lease. It does not apply to amounts owing in respect of variations. Therefore the higher rate of interest is not applicable and the usual rates of interest on judgments are applicable.
Third and Fourth Party Claims
331 If I had found that Novalane was liable to pay any sum to Carpenters Motorcraft I would have then been required to determine Novalane’s third party claim against Deer Park Property and Deer Park Property’s claim against Meridian Concrete as a fourth party. I will briefly express my views on some matters affecting those claims.
332 Counsel for Novalane, who also appeared for Deer Park Property, made the following submissions about the claims against Deer Park Property. If Carpenters Motorcraft succeeded against Novalane because the work of constructing the floor was defective, then Deer Park Property accepted that it was liable to Carpenters Motorcraft for the amount awarded against Novalane. Counsel accepted the proposition that there would be a transfer of liability of whatever amount Novalane had to pay to Carpenters Motorcraft to Deer Park Property. In turn, Deer Park Property would then rely on its fourth party claim against Meridian Concrete.[135]
[135] T 918-919
333 Novalane’s possible third party claim against Deer Park Property, which, of course, is an associated company, was based on an obligation to construct the building in a proper and workmanlike manner.
334 Deer Park Property’s claim against Meridian Concrete alleged that there were terms of the sub-contract that Meridian Concrete would carry out and complete the floor finishing works:
(a) using Floor Roc S; (b) in a proper and workmanlike manner; (c) in accordance with the manufacturer’s instructions; (d) in accordance with accepted standards and tolerances. 335 On the assumption that Novalane had breached the Agreement to Lease and Carpenters Motorcraft had a claim against it for damages, Deer Park Property alleged that Meridian Concrete failed to carry out and complete the floor finishing works in a proper and workmanlike manner in accordance with the manufacturer’s instructions and with accepted standards and tolerances.
336 Counsel for Novalane and Deer Park Properties relied on the terms of the subcontract between Deer Park and Meridian. These included Clause 30.1 of General Conditions of Contract of AS-2124, which required Meridian Concrete “to use the materials and standards of workmanship required by the Contract”. The Scope of Works required that the works comply with “all applicable … recommendations of suppliers/manufacturers/Standards Association of Australia”. He also submitted that it was clear from the evidence that Meridian Concrete was obliged to use Floor Roc S.
337 Meridian Concrete argued that it was only obliged to construct the slab in a workmanlike manner and not to produce a slab in the workshop and spare parts area with a finish the equivalent of the slab finish at Etheridge Ford. It argued that the slab had been constructed in a workmanlike manner and that Deer Park Property had accepted the slab as conforming with the building contract. Meridian Concrete was liable to carry out the minor works directed by the superintendent, but it had not been provided with access to do so. Its liability was limited to the reasonable cost of that work.
338 Meridian Concrete also submitted that it had no additional liability in respect of problems with the concrete occurring beyond the defects liability period.
339 I accept that Meridian Concrete’s obligations were to construct the slab in a proper and workmanlike manner. I have already noted that Novalane puts its third party claim against Deer Park Property on such a basis.
340 As a result of those findings, I consider that Deer Park Property has no possible liability to Novalane in respect of its possible liability to Carpenters Motorcraft. Equally, Meridian Concrete has no possible liability to Deer Park Property in respect of any liability it has to Novalane. These conclusions are because, as stated previously, Carpenters Motorcraft did not allege that Novalane had failed to construct the floor in a proper and workmanlike manner. It relied on the term requiring the construction of a floor equivalent to the Etheridge Ford floor. It was not established that Deer Park Property or Meridian Concrete had such an obligation.
341 In any event, I have found that Carpenters Motorcraft had no cause of action against Novalane.
342 Both Novalane’s third party claim against Deer Park Property and Deer Park Property’s fourth party claim against Meridian Concrete are dismissed.
Summary
343 I will make orders that:
(a) The proceeding by Carpenters Motorcraft against Novalane is dismissed. (b)
That there be judgment for Novalane against Carpenters Motorcraft in respect of the amount of Novalane’s counterclaim, save for items 9, 10, 13 and 17.
(c)
The third party claim by Novalane against Deer Park Property is dismissed.
(d)
The fourth party claim by Deer Park Property against Meridian Concrete is dismissed.
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| T 367 T 128, T 130, T 198 |
T 368, T 458
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