Christmas Island Resort Pty Ltd v Geraldton Building Co

[1995] HCATrans 317

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P26 of 1995

B e t w e e n -

CHRISTMAS ISLAND RESORT PTY LTD

Applicant

and

GERALDTON BUILDING CO PTY LTD

Respondent

Application for special leave to appeal

TOOHEY J
GAUDRON J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON THURSDAY, 26 OCTOBER 1995, AT 9.32 AM

Copyright in the High Court of Australia

MR C.J.L. PULLIN, QC:   May it please the Court, with MS E.L. BLEWETT, I appear for the applicant.  (instructed by Deacons Graham & James)

MR A.R. EMMETT, QC:   May it please your Honours, I appear with my friend, MR D.M. STONE, for the respondent.  (instructed by Williams & Hughes)

BRENNAN CJ:   Yes, Mr Pullin?

MR PULLIN:   Thank you, your Honours.  Each year thousands of building contracts are signed which provide for progress certificates and progress payments and each year some of those contractors will breach the contract before completion, after some progress certificates have issued and after some progress payments have been made.  This decision of the Full Court if it stands will introduce a heresy into the proceedings to resolve those disputes when the builder seeks to assess damages.

GAUDRON J:   Does it not all depend on the contract?

MR PULLIN:   Yes, your Honour, and I know the point is made by the other side that this is a unique contract special to this case and, therefore, not a suitable vehicle for the grant of special leave but if I could deal with that at the appropriate time my submission is there is nothing in that in the case here because no question of construction turns on it and there is no doubt that the principles involved in this contract are the ones that one sees in JCC contracts and all of the standard contracts.  I will take the Court to the contract briefly just to indicate that.  I would like to spend just a few minutes explaining how the issue arose and then deal with the legal question which would be ventilated if leave were granted and deal with this point about the contract itself.

My client, Christmas Island Resort, which I will call CIR for brevity and Geraldton Building Company, or GBC, entered into a contract whereby GBC agreed to construct the casino on Christmas Island.

TOOHEY J:   You can take it that we have read the papers.

MR PULLIN:   I think it is necessary I just mention a few factors, your Honour, that is that work started, progress certificates issued, CIR paid $15.8 million under these certificates.  There was a dispute, went to court, GBC terminated the contract, and after the litigation GBC obtained a judgment for damages to be assessed and there was a hearing before the Master who assessed damages by reference to a Scott Schedule, which had been prepared by the other side, GBC, setting out their expenditure, wasted expenditure, and loss of profit which they said they were entitled to.

Now, we said right from the start what they were doing was revealing that even if all their claims were allowed they were going to prove that no more than about $13.8 million had been either expended by them in the performance of the contract before termination or profit that they had lost.  If you add it together, and even if there were no success on our part in the hearing, it would indicate that we have paid the $15.8 million and they were proving $13.8 million roughly.

TOOHEY J:   I suppose so long as that took into account future loss.

MR PULLIN:   Yes, it did.

TOOHEY J:   And future liabilities incurred in relation to other contractors and sub-contractors, but not met.

MR PULLIN:   Absolutely.

TOOHEY J:   But is it your case that the Scott Schedule reflected the entirety of the respondent’s loss?

MR PULLIN:   Yes.  And if I can just take you quickly to the Master where he recorded our argument at page 28 of the volume 1, opposite line 10:

Senior counsel for the defendant submitted that the expenditure incurred by it and chargeable to the defendant up to the date of termination is less than the sum of the progress payments made by the defendant on account amounting to $15.8 million and the loss that the plaintiff would have suffered if the contract had been fully performed -

Now, that was not established so we can ignore those words:

and therefore the plaintiff is only entitled to nominal damages.  Senior counsel submitted a statement of calculation to assist the court.....marked “annexure 1” -

And a little further down, opposite line 30:

According to senior counsel’s calculations, the expenditure incurred by the plaintiff of $12.7 million plus $1 million profit total $13.8 million.  When this sum is subtracted from the payments made by the defendant to the plaintiff to date of $15 million -

We had overpaid $2 million.  Now, if we can just take you to page 156, this is a much easier version of the Scott Schedule.  The Scott Schedule runs over many pages.  This is annexure 1 that the Master had referred to and where we had summarised all of the claims in the Scott Schedule which included, as I say, the expenditure which they said they had incurred, including all the liability for expenditure which still had not been paid.  We acknowledged that that was certainly recoverable by way of expending not just money they had paid out but also the liability that they had incurred.  Here is the full list of expenditure.  It goes over the page, to page 157.  You will see it totals $12.7 million.

The profit which was claimed by GBC which was broken down into various components was about $1 million.  There is the $13.8 million and we were saying, “Look, even if they recover everything they will prove $13.8 million, but we have paid”, and there it is opposite line 50, “$15.8 million; take it off, we have, in fact, overpaid”.  As it turned out we had more success during the assessment, so what they established was reduced from the $13.8 million total.

Now, there was a realisation - we had said this right from the start, it was in our outline of submissions before the case started, we said it in our opening, and then, only in our case, was there a realisation that there was a bit of a problem with this from the other side’s point of view.  So what they did was to produce the last progress certificate, which was an exhibit, marked on it in green highlighter, which then became MFI 288D, some items of expenditure which that they said, “Well, look, we have already claimed for this money,” which was worth about $6 million in the highlighted version which you may seen in the book.  If you add the $6 million that we have highlighted, which we have not proved in the Court, to the $13 million expenditure and profit that we are claiming, you will see that it is more than the $15 million and, therefore, we are entitled to the difference between the $15.8 million and the $13 million‑odd that I have just referred to, plus the $6 million highlighted.

GUMMOW J:   What was the six?

MR PULLIN:   In fact, one can see it.  I can just quickly give some examples.  It was made up of items of expenditure mainly, or liability incurred by way of expenditure.

GUMMOW J:   But not part of the Scott Schedule?

MR PULLIN:   It was not part of the Scott Schedule so they did not prove that.  All they said is, “Well, look, we claimed all that and there is no need to worry about that.”  We said, “But, you’ve got to account now for your expenditure and loss of profit and set it off against the $15.8 million, and, therefore, we consider we have not had the opportunity of scrutinising this expenditure which you say you have incurred”, because all the progress certificate does is to constitute a valuation by the superintendent, who goes around the site and if he sees a room has been painted he does not go to how much has been spent on it.  He says, “About half of the room has been painted, I’ll certify the value of this amount of the work at, say, 50 per cent.”

Now, that does not mean that GBC had spent the money that he certified as being the value which the certifier put on it and, indeed, when they had to prove their claim in relation to items of expenditure we wiped off something like $1 million either by concessions or findings at the hearing, and then when we got to the Full Court we got off another half a million dollars which just shows that what they claim is not necessarily what, of course, they could prove to the court.

TOOHEY J:   But are you saying, Mr Pullin, that the progress payment could not trigger off a reference to arbitration?

MR PULLIN:   Yes, it could, and there is no difficulty about conceding that but the fact is that if they come to court to claim their damages it is all very well to say, “Well, there’s an arbitration that can be had but we’re proving our expenditure and loss of profit, our reliance loss and expectation loss.  We would like it, please, from you, the court.”  Well, if they want to do that they must, therefore, prove by leading some evidence that they had, indeed, incurred the expenditure and not simply wave around a certificate with green markings on it and say, “Well, look, it was certified and you didn’t take it to arbitration so there’s no dispute about it.”

TOOHEY J:   It is not just green markings, is it?  I take you to be saying that, really, the respondent would have to prove the entirety of its loss from beginning to end.

MR PULLIN:   Yes.

TOOHEY J:   And not be entitled to rely upon the progress payments, what, at all, or as prima facie evidence?

MR PULLIN:   Well, all progress payments are - the certificate of progress is a system of getting some money across to the building during the course of the project.  All that somebody is doing is coming in and saying, “Look, I think the work’s about half finished so you can have half the money,” rather than making a builder wait until the end.  It is a system of provisional payment which has nothing to do with proof of expenditure.  It is a means of getting money across.  It creates a debt which is enforceable by the builder, of course.

GAUDRON J:   But if it creates a debt, is not that the beginning and the end of it?

MR PULLIN:   No, your Honour.

GAUDRON J:   How was the claim formulated?

MR PULLIN:   The claim was formulated on the basis that we had breached the contract and that they were entitled to damages and went off for an assessment of damages.  Well, all you have to prove is your reliance loss, your wasted expenditure, and your loss of profits, and they did that in relation to some of it and then decided that there was about $6 million short so that they should prove that in some way.

TOOHEY J:   But when you say they did that in relation to some of it, as I understand it, there were amounts having been paid by the applicant, the respondent said in effect, “Well, we’re not going to worry about those.  We’ve been paid for those so we’ll put those to one side.  Now there is a balance left for which we’ve not yet been paid.”

MR PULLIN:   They did say that, your Honour, and that is how they have run it.

TOOHEY J:   And are you saying so far as those payments are concerned the respondent did no more than produce the progress certificates?

MR PULLIN:   That is right.

TOOHEY J:   Or in this case, I think, one progress certificate 15?

MR PULLIN:   That is right.  We always used an example, and it was used throughout the case about the tin of Taubmans paint which appears on page 252, which is the certificate itself and one of the items marked in green and being a small amount one can just look at it and wonder about it, but the certificate - you will see the green marked item is pretty hard to read on page 252, but that is a green marked item Taubmans, $566.40.  Now, a valuer has thought that Taubmans might have been - well, it has got value.  You will see award value against the top of the certificate and cumulative total and there is no award value so we do not know how much Taubmans had entered into the contract for, but the certifier has just said $566.40.

Now, how that is made up is anybody’s guess.  But if they had come along and said, “Look, we paid for a tin of Taubmans paint which was used on the job,” they would prove their loss but if, in fact, it was a tin of Taubmans paint purchased and then when the contract terminated taken back to the mainland which, indeed, a whole lot of material was, they would not be entitled to it, but during the job there would be a tin of paint on the site, the certifier would come around and say, “Well, there’s a tin of Taubmans paint, I’ll certify that at $566.”

TOOHEY J:   Well, could I just interrupt you.  On the assumption that the Court would not be asked to find its way through a Scott Schedule if special leave were granted, what is the point of law that you suggest this application gives rise to?

MR PULLIN:   Well, the point of law is - it can be either couched in either one of two ways, but whether or not the production of a progress certificate provides any evidence at all of expenditure, so we say it is a no evidence question.  If we are right there was no evidence in relation to expenditure in relation to these items and this Court would never be troubled with looking at the individual items other than to take an example.  Alternatively, there is a hint that we had some onus on us to lead some evidence and it is said there was a Scott Schedule, it was not our Scott Schedule, it was the other side’s Scott Schedule of what their expenditure and loss of profit was.  They put it up, it was our job to try and reduce it if we could.  So, in so far as there was any suggestion that there is an onus on us to disprove expenditure in a Scott Schedule, well, we would, of course, argue against that proposition of law.

Our primary submission is that we are arguing what the Master decided on page 33 and then I will take you to what the Full Court said.  Page 33, at about line 15, the Master, in dealing with our submissions, all he said was:

Insofar as it concerns work done up to the last progress claim number 15, payments to the amount of $15.8 million to 15 February 1992 had been met and that would include all the expenses incurred up to that point of time.

Now, it really just does not meet the point that we were arguing.

TOOHEY J:   Well, your point, presumably is that the payments made simply represent a credit to be set off against whatever the damages the respondent proves, but the amounts paid to date cannot be, as it were, offset against particular items of damage.

MR PULLIN:   Absolutely.  We say that of the ledger that is created - - -

TOOHEY J:   Well, I am not saying you are right.  I am saying that is the proposition.

MR PULLIN:   It is certainly our argument.  We say that if you are looking at an assessment of damages the court creates a ledger.  It puts on one side the payments that have been made and on the other side it says, “Well, now, let’s write down as the case goes along, or at the end of the case how much waste of expenditure is and how much loss profit has been suffered as a result of the breach.”  And you offset one against the other at the end and give damages for the net result.  They tried to put on the left hand side the expenditure side the green marked items on which no one had heard any evidence and whether or not there was a tin of Taubmans’ paint up there nobody today knows other than what is highlighted in green.

GAUDRON J:   Leaving aside those matters for one moment, if it is, in fact, a debt that is created then your major point cannot run, can it?

MR PULLIN:   No, your Honour.  It was a matter of confusion during the case at different times but all that the progress payment does - it certainly a debt.

GAUDRON J:   Well, if it creates a debt it is a recoverable debt.

MR PULLIN:   It was.

GAUDRON J:   And you do not have to prove damages, surely, unless you claim over and above the progress payments?

MR PULLIN:   Your Honour, no.  At the end of a contract I can choose - if I am facing a defaulting owner, I can say, “Look, I think I will just sue on the debt and recover the debt and not bother about trying to prove damages.”  But if I say I do not want to accept the entitlement under the contract I then go to my secondary rights which are the right to damages and then you have to explain why it is you should get more than the money that has been paid.

GAUDRON J:   But may you not have a claim for both under this contract, debt and for work over and above that since the last progress payment, or last progress certificate, a claim for damages?

MR PULLIN:   Well, there is no authority to support that proposition, your Honour, that could ever be found because you would have the best of both worlds.  You could say, “Well, I think I’ll sue for what I’m entitled to and I’ll just claim for a bit of the contract.”  What if, in fact, the contract would have returned a loss?  You could say, “Well, no, we won’t talk about what I might have won or lost earlier.  I just would like some money for this additional amount.  Maybe the $15 million we paid was for only $2 million worth of work.”  Well, that would be a terrific result for a builder to say, “Well, I think I’ll keep the $15 million.  I’ve only spent $2 million, and I’ll now have some damages for expenditure after.”

GAUDRON J:   But, again, does not the entitlement to make a claim in debt and for work done after the date of the last certificate essentially become a matter of construction of the contract?

MR PULLIN:   There is nothing in this contract which is any different from any other standard form contract in the sense that I am talking about.  There is nothing that turns on the particular construction of this job.  I see the lights come on, there are two areas I would like to deal with.  One is to just refer to what Mr Justice Staples said who was in the majority and then just take you to the contract to indicate that we think there is nothing in the argument about it being a unique contract and not a suitable vehicle for special leave.  Can I take the Court to page 314, which is Mr Justice Steytler.  Now, we have referred to this in our outline so I do not read all of this.

GUMMOW J:   Line 30, is it?

MR PULLIN:   Page 314, your Honour, line 10, is where his Honour states what we would agree with entirely, that is, just because it is:

a certified progress claim, albeit creating a debt -

this is really dealing with your Honour Justice Gaudron’s point:

creating a debt which became due.....could not be used to prove the value of any particular item of work referred to therein.  That being so, the respondent was required, in any case in which it sought damages as a consequence.....to prove, without recourse to the certificate, the amount of that expenditure or liability and the circumstances in which it was incurred.

And then he said, referring to five points that he made which, in my submission, do not advance the position or alter the position at all ‑ ‑ ‑

GUMMOW J:   Are you saying that there has been some election or waiver of these rights of debt, and a choice to simply pursue damages?

MR PULLIN:   Well, certainly, your Honour, because they simply cannot, you cannot sue in debt for part of the payment under the contract and then say, “I’d like part of my remedy in damages for what was after the debt.”  I mean, it is just impossible.  You have got to choose to have your rights by saying, “The contract has been terminated.  I will therefore enforce my secondary rights and give a credit for the contractual payments that been made,” or, alternatively, I say, “I think I’ll just take the contractual entitlement and go home.”  So that is our point.  Now, his Honour then said, opposite line 30, this is where we say the Court went wrong:

where the respondent makes no claim, or no further claim, against the appellant at all in respect of a particular trade contract, whether because it has already been fully reimbursed in respect of the amount paid or payable by it under that contract or otherwise, there is no obligation upon it to prove the amount so paid or payable by it because that amount forms no part of its claim for damages against the appellant and is simply irrelevant to that claim.

And if I can just refer to what Mr Justice Rowland said who really identifies the point back on page 289, and this is really what happened, 289 about line 45, that paragraph:

As proof that the shortfall figure of $6.5 million was expended, the respondent relied upon the certified progress claims.  It did not rely entirely on the certified progress claims when it wished to establish that work which had been done was not included in a particular part of the claim, or where it wished to establish that work done by it or one of the subcontractors had undertaken work subsequent to the date of the claim for which the respondent was responsible,

So, his Honour is saying they did rely upon the certificate to prove the $6.5 million they had to prove if they were going to get above the $15.8 million which we had already paid, and which indicated that if they were going to claim damages they had not suffered any loss.

TOOHEY J:   Time is up, Mr Pullin.

MR PULLIN:   I see the light has come on.  Would it help if I just took you to the contract and just indicated the paragraphs of the contract which indicate there is nothing unique about this, and, indeed, it was a building contract?

TOOHEY J:    Well, perhaps we can hear what Mr Emmett has to say.  Yes, Mr Emmett?

MR EMMETT:   May it please your Honours.  Our primary submission in relation to the leave application is that this issue does not raise any matter of general importance, not because it involves the construction of particular words in the contract but the construction of the contract as a whole:  what is the net effect of this contract as between the parties?  It is not a lump sum contract; it is not even called a building contract.  The parties, for some good reason, have decided that the respondent would act as a construction manager and his duties and obligations are to be characterised in that way.  It was not a contract to build a building, it was a contract to provide services in relation to the construction of the building.

It is necessary, therefore, to look at the particular provisions of the contract in order to determine just what it was that the respondent became entitled to.  One sees, for example, that there are several ways in which the proprietor becomes liable to pay money to the construction manager.  There is a construction fee and there are two other fees which are fixed by reference to the cost of work that is done.  In addition ‑ and this is really where the issue arises ‑ the contract provided that the construction manager was entitled to be reimbursed for all of the expenses which it incurs in performing its obligations under the contract.  Those expenses were, in a sense, of two characters:  one was the expenditure that it itself incurred in the performance of its duties, its salaries and other outgoings;  the second category were those being liabilities to third parties.                   One of the obligations of the construction manager under this contract was to enter into trade contracts with building contractors to provide the works.

TOOHEY J:   How different is that from a cost plus contract?

MR EMMETT:   As a cost plus contract, it may not be very much different, but it is expressed to be a contract to provide services.  It is certainly not a lump sum contract.

TOOHEY J:   No, but I thought you were emphasising the uniqueness of this particular arrangement or how it differs from standard building contracts.  I understand how it does but, nevertheless, it has something about it of the flavour of a cost plus contract.

MR EMMETT:   It has a flavour of both, in a sense, because there is a guarantee in respect of some of those costs in that the construction manager agrees that certain of the subcontracts will not exceed a fixed amount, but not all of them.  So, it is not entirely cost plus; it has some elements of a lump sum, some elements of a cost plus, plus there is a fee.  And there are three different fees that were payable.  But, what I was leading to is that the entitlement of the construction manager was to be paid these fees.  In addition, it was entitled to be reimbursed expenses.

The proprietor, in the course of the performance of the contract, paid part of the fees on account because they were to be paid monthly and it also reimbursed for expenses incurred up to the time of the end of the fifteenth certificate.  The claim which the construction manager made, or the way in which it formulated its claim, was to say, “I want to be put in the position that I would have been in, in so far as money can do it, that I would have been had you performed under the contract”.  In other words, there is no issue at all as to the principle for assessment of damage. 

The way in which the construction manager went about doing that was to say, “I would have been entitled under the contract to be paid these fees; I’d be paid this amount, so I claim the difference.  Secondly, I was entitled to be reimbursed for all of the expenses I’ve incurred.  I have been paid some part of those and there was never any dispute about those.  There is a provision in the contract for disputing certificates, if you want to dispute them, but I’m not claiming reimbursement for what I have already received”.

TOOHEY J:   That has a certain ambiguity about it, though, has it not?  Because, are you saying that the respondent is, in effect, saying, “Well, I’ve been paid for particular items” because the applicant’s counsel says, “Well, yes, you’ve been paid money, but it’s only sums of money which have to be offset against the loss that you demonstrate”.

MR EMMETT:   That may be the issue and whether or not we have been paid for specific sums or whether we have been just paid on account, depends upon the nature of the contract and examining the nature of the contract to see just what the obligations of the respondent and the applicant are in the course of the performance of the contract.  It is there that this question of what the effect of what this particular contract might be.  The contract is by no means clear as to just what the effect of a certificate is.  There is an entitlement to be reimbursed for expenses, which is quite independent of the certificate and the question is, in a sense this:  when a certificate is produced which itemises the expenses that have been incurred up to date and the superintendent says those expenses are appropriate for payment, there could be no doubt that the payment that has been made is appropriated to particular expenses incurred to date. 

The construction manager says, “I don’t want to claim any of that; I’ve been paid all of that.  If you say I’ve been overpaid, well that’s fine, we’ll have a fight about that and that is a matter that would have to be referred to arbitration but has not been.  At the moment, I am claiming to be reimbursed the expenses for which I have not yet been reimbursed and these are the expenses for which I haven’t yet been reimbursed”.

GAUDRON J:   Were they all expenses subsequent to the date of the last progress certificate?

MR EMMETT:   Yes.  That is the point and that appears from the passage that I think my learned friend read from.  We said, subject to some qualification ‑ there were some disputes about some of it and evidence was led and those issues were set out in the Scott Schedule ‑ but the general position was we have been paid for all of these expenses, being the ones in certificate No 15 up to date and we would, of course, have been entitled to be paid those under the contract.  There is no dispute about whether those expenses were incurred or not.  We are not claiming reimbursement for those amounts; we are only claiming reimbursement for these amounts for which we have not yet been reimbursed.

TOOHEY J:   Yes, but are you not claiming for some of the amounts that form part of progress certificate 15, those that were highlighted?

MR EMMETT:   No.  The green highlighting really is, with respect, a red herring ‑ to mix metaphors, or something, a green herring, perhaps.  The highlighting was done in order to answer what is really a three thimble trick that, with respect, my learned friend engaged in, by saying, “The amounts which you’ve claimed are $13 million; we’ve, in fact, paid you $15 million, therefore you can’t possibly succeed”.  The only purpose of the green highlighting would show that he was not comparing equals; they were not all taken into account.  And the purpose of the green was to say if you were looking at that sort of formula, you have to take into account the green things which have been paid and for which there is no claim.

TOOHEY J:   It is clear, is it, Mr Emmett, that the amounts that go to make up the extra four point, whatever it was, million are all items, whether by way of expenditure or remuneration, which fall outside any of the progress certificates issued?

MR EMMETT:   Yes, and they were all proved strictly and evidence was led in accordance with each of the items in the Scott Schedule.  So they were amounts claimed over and above those that have been allowed under the Scott Schedule, up to certificate No 15.  Certificate No 15 had been paid so no claim was made in respect of any of the amounts that were covered by the payments.  It was only the expenses that were incurred after the date up to which progress certificate 15 had been delivered.

TOOHEY J:   When you say it had been paid, there was clearly a shortfall at some stage because that was the basis upon which the contract was terminated.

MR EMMETT:   The contract provided for a bank guarantee and, by the time of the trial, those amounts had been paid by calling on the bank guarantee.  But, at the time when the termination occurred, there had been a failure to pay so that the plaintiff was, in effect, saying at the trial, “We have now, as at today, the time when we are proving our damages, saying we have been paid everything up to the end of progress certificate 15 and, in fact, a bit more” ‑ I think that is right ‑ “when credit was given because, having called on the guarantee there was, in fact, an overpayment up to that point and credit was given for the overpayment under the guarantee”.  That, of course, was the subject of earlier litigation which almost came up to this Court but your Honours refused leave some time ago in relation to that matter.

The net effect of the construction manager’s claim at the trial was, “I have been paid all of the amounts certified up to progress certificate 15; I don't want to claim any part of that.  There has never been any challenge about those items.  There was a scope for challenging those items by arbitration; nobody has taken any of those items to arbitration.  What I am saying is there are, however, some items for which I haven’t been reimbursed and the damage that I am claiming is the non‑reimbursement which I would have been entitled to under this contract, had it been performed”.

TOOHEY J:   And that, you would say, is the basis for calculating damages?

MR EMMETT:   Yes.

TOOHEY J:   What, coupled with the remuneration that had been earned?

MR EMMETT:   For the lost remuneration.  There was no claim for reimbursement of future expenses because there was no element of profit in that.  They would have cancelled each other out had the contract been performed and ‑ ‑ ‑

TOOHEY J:   When you say “future expenses”, you mean expenses not incurred?

MR EMMETT:   Yes.  Had the contract been performed, the construction manager would have incurred further expenses in the future for which he would have been entitled to be reimbursed.  There was no claim in respect of that head because it was neutral in terms of the ultimate result.  All the construction manager was saying is, “There are a number of expenses and here they are; they are identified in great detail in the Scott Schedule.  There are a number of expenses which, had this contract been performed, we would have been entitled to be reimbursed, and there they are.  There was a dispute about them all and they were laboriously proved”.  And that, coupled with the loss of the fee is what was claimed and what was allowed, subject to disallowance by both the Master and the Court of Appeal on some of the items that were sought to be recovered by way of reimbursement.

That is the approach which the Master took, in general terms and that is the approach which the Full Court took.  There is no question of relying on the certificate as giving rise to prima facie evidence, although that might be a fall-back that the construction manager would rely upon if one had to consider the matter further.  But the primary position was, “When you look at this contract, this contract enabled me to have certain benefits, namely the fees and reimbursement.  Had the contract been performed, I would have received those fees; I would have received this reimbursement.  I’m not claiming in respect of the matters for which I have already been reimbursed”. 

Reference was made, on one of the pages to which my learned friend referred, to the judgment of this Court in Dennys Lascelles that where you have a contract which is brought to an end by reason of repudiation, accrued rights are not affected.  The right to be reimbursed, which had already been performed, was not affected by the termination and there was no claim by the construction manager in respect of those items.  And that, in our submission, is what it comes down to.

TOOHEY J:   And I take it, from what you say, that none of those items ‑ that is the additional items ‑ had been the subject of any progress certificates?

MR EMMETT:   That is so.  I think that was apparent from one of the passages that my learned friend read from.

GAUDRON J:   Justice Rowland, perhaps, at 289?

MR EMMETT:   That is not quite the passage I had in mind, I do not think.  It was at page 33 in the judgment of the Master, was the passage I had in mind, at line 13 or 14:

Insofar as it concerns work done up to the last progress claim number 15, payments to the amount of $15.8 million to 15 February 1992 had been met and that would include all the expenses incurred up to that time.  The plaintiff is seeking to claim for work completed from 15 February 1992 to the date of termination.....and thereafter for further loss of opportunity to earn profit ‑

That was the claim, for the expenses incurred after progress certificate 15 plus the loss of the fee.  That was the claim and that is the claim that was upheld.  Justifying that sort of approach does involve an analysis of the contract and in that regard, in our submission, this contract is unique.  But, even if it is not, in our submission, the result is clearly correct.  May it please your Honours.

TOOHEY J:   Yes, thank you, Mr Emmett.  Yes, Mr Pullin?

MR PULLIN:   I can see this point has some attraction, the idea that it all is a claim for work done after the certificate.  But, in fact, that is not the case.  The Scott Schedule itself reveals that this is not so.  At page 185, I can just give one example.

TOOHEY J:   Are you saying that the Master has, in effect, got it wrong on page 33, in the passage that Mr Emmett took us to?

MR PULLIN:   The passage that I think that I referred your Honour to ‑ ‑ ‑

TOOHEY J:   You took it to us, as well, yes.

MR PULLIN: ‑ ‑ ‑ which is that work done up to the last progress claim had been met and included all expenses incurred up to that point of time.  We say two things:  one, it was not the case that they were claiming only expenses after the time of the certificate;  and secondly, we say, even if it is true, so what?  You cannot split your remedies and have a part contract claim and part damages.  You can only have damages or your contract entitlement.  You just cannot blend them together to give you the best result because I just give that example that I gave before.  If they got $15 million and it only cost them, they had actually expended only $1 million, then, of course, the assessment was way out and they keep the benefit of the assessment that was incorrect.  That cannot be the case that they can just choose to split it up and then say to the court, “If you’ve made a mistake in your assessment, the arbitrator will fix it up”.  In my submission, that is not right.

But, at page 185, just let me give the one example.  Here is the Scott Schedule.  You will need to turn it on its side.  Each of these subcontractors came along and, in effect, presented an Amann Aviation-type claim showing their expenditure and what they had been paid and claimed the balance.  They did it correctly.  You will see here, at 185, Gregory’s value of work completed, $1,311,010 is the total work they had done on the job, less what they had been paid to date, balance $247,000 and then materials that were on site, their demobilisation costs of getting off-site, the costs after the event.  And so they were claiming those, some of which they got and some of which they did not.  But, that was correct.  They said, “Here’s our total expenditure; here’s what we’ve been paid to date; there’s the credit showing up and there’s the balance of our claim”.  That is not what the other side did.  They brought forward Gregory’s, yes, but there are a whole lot of trade contractors we never saw or heard from because they said, “Oh, well we don’t have any demobilisation costs”. 

But the fact is, if they had come along, they would have been trying to establish that they had spent a total amount of so much on the job and been paid a certain amount.  As I say, even if there were anything in what my learned friend said, the assertion that there was a claim only for amounts after the event, the fact is that it is not right.  If the books do not let you claim part under the contract and, secondly, for enforcement of the secondary obligations which arise in the event of a contract being breached.  That is the obligation to pay damages.  You either enforce the secondary obligation or you enforce the primary obligation.

TOOHEY J:   But in a sense, the respondent may not be seeking to enforce both.  The respondent, as I understand it, is saying, “Well, for what we’ve been paid, we’ve been paid.  But, there is damage which has arisen by virtue of the failure to meet payments under the contract and we’re prepared to

prove our case in respect of those heads of damage and here’s the evidence”.

MR PULLIN:   If that is so, building contractors around the nation will take heart from this and they will say, “Well, we won’t worry about the fact we may have made a horrible profit up until the thing was terminated and if we had to reveal that, that would, of course, work a reduction in the amount of damages we’d get.  We’ll just prove the last bit of the contract that we’ve still to perform or the expenses that we’ve still got to be paid after the certificate, it’ll indicate that they’re entitled to split their remedies”.  That will be the consequence of the decision standing, in my respectful submission.

The contract is a cost plus contract and it certainly was a contract where GBC undertook to complete the contract itself and was responsible for its subcontractors.  I need not take the Court to the page references but it was certainly cost plus which would turn into a lump sum contract in circumstances where they spent more than a certain amount in relation to some elements of the job.  Then it would be a lump sum contract and, of course, the fact that it is part lump sum and part cost plus does not matter.  There is nothing unique about this contract or any special construction point which would interfere with the determination of the points that I have been raising.  They are my submissions, may it please the Court.

TOOHEY J:   Yes, thank you, Mr Pullin.  We will just take a short adjournment to consider our course of action.

AT 10.17 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.23 AM:

TOOHEY J:   The contract between the parties is of a particular nature.  Having regard to the absence of any challenge to the progress certificates as provided by the contract, the amounts paid by the applicant in respect of which no additional claim was made by the respondent and the fact that the Supreme Court was satisfied as to the claim for additional amounts paid or payable to subcontractors and, in addition, for the remuneration the respondent would have earned had the contract been performed, no question of general principle arises which would warrant a grant of special leave to appeal.     The application is, therefore, refused.

MR EMMETT:   I am instructed to ask for an order for costs, may it please your Honours.

TOOHEY J:   Any reason why costs should not be ordered, Mr Pullin?

MR PULLIN:   Not opposed, your Honour.

TOOHEY J:   The application is refused with costs.

AT 10.24 AM THE MATTER WAS CONCLUDED